Purpose/participants Primary Market

Question 1

Collective Market

Answer 1

A combination of the Primary and Secondary Markets

Question 2

Primary Market

Answer 2

Government or Corporations

Question 3

Secondary Market

Answer 3

An investor who is ready to sell.

Question 4

Issuer Transaction

Answer 4

Securities sold in the primary market to the investing public.

Question 5

Primary Offer

Answer 5

When securities are sold to raise capital by taking advantage of the changes in economy.

Question 6

What allows corporations to buy equipment/build factories and expands demand for labor/creates jobs?

Answer 6

Primary offers

Question 7

How does the government use the primary market?

Answer 7

To raise money for infrastructure and to fund programs for the public.

Question 8

1933 Securities Act

Answer 8

Requires full and fair disclosure in the sale of securities to the public.

Question 9

What requires a new issue (unless exempt) to be registered with the SEC prior to purchase?

Answer 9

1933 Securities Act

Question 10

What must all investors receive prior to a securities purchase?

Answer 10

A prospectus/disclosure

Question 11

What is a prospectus?

Answer 11

A description of how assets will be used.

Question 12

What is an IPO

Answer 12

Initial public offering

Question 13

What is an APO

Answer 13

Additional public offering

Question 14

What are other terms for an APO

Answer 14

Follow-on offering or subsequent public offering.

Question 15

When is an offering a primary offering?

Answer 15

When only the issuer is receiving proceeds.

Question 16

What classifies an APO

Answer 16

Primary offerings (proceeds go to the issuer) and they come after the IPO.

Question 17

In securities, what is a ‘person’?

Answer 17

A natural person, or a legal entity (corporation or government)

Question 18

Who issues securities?

Answer 18

Corporations, municipalities, and the federal government or its agencies.

Question 19

NMS

Answer 19

National Market System

Question 20

What is a NMS security?

Answer 20

Larger corporation stocks that trade on a national exchange, or the Nasdaq system.

Question 21

What is the Nasdaq system?

Answer 21

An electronic stock exchange where investors can buy and sell on an automatic computer network.

Question 22

Municipalities

Answer 22

Governments at a state or lower level

Question 23

What is an underwriter?

Answer 23

A broker-dealer or investment banker who works with an issuer to get its securities on the market and selling to the investing public.

Question 24

How does an Investment banker help an issuer?

Answer 24

By structuring new issues and at times forming syndicates with other underwriters to facilitate the capital-raising process.

Question 25

What is a best efforts underwriting?

Answer 25

When an underwriter/syndicate sell securities from the issuer to the investor simply acting as an agent.

Question 26

When are underwriters at risk?

Answer 26

When they participate in a firm commitment underwriting.

Question 27

AON underwriting

Answer 27

All or none - the underwriter must sell all shares or cancel underwriting.

Question 28

Mini - max underwriting

Answer 28

Has a minimum amount the issuer needs to raise and a maximum amount of securities willing to be sold.

Question 29

Firm commitment underwriting

Answer 29

Underwriter contracts with the issuer to buy and resell securities to the public at a higher price.

Question 30

Syndicate

Answer 30

When group of broker-dealers share risk and profits from offerings.

Question 31

What is a selling group

Answer 31

Additional broker-dealers who assist the syndicate in the sale of securities while taking on no liability for unsold shares.

Question 32

Institutional Investor

Answer 32

An entity that pools money to purchase securities/investment assets.

Question 33

Institutional Investor Examples

Answer 33

Bank, insurance companies, or employee benefit plans (pensions, investment advisors, mutual/hedge funds)

Question 34

What is a QIB?

Answer 34

A qualified institutional buyer who owns and invests $100 million in securities on a discretionary basis.

Question 35

Retail investor

Answer 35

An investor who invests in their own assets.

Question 36

Accredited investors

Answer 36

All institutional investors and certain retail investors

Question 37

What retail investors qualify to be an accredited investor?

Answer 37

Insiders of a securities issuer (board members/major stockholders), natural persons qualified based on certain professional/accredited educational institutions certifications/credentials, holders in good standing of the Series 7, 65, and 82 licenses, or a person who meets certain financial criteria.

Question 38

What financial criteria must be met to be considered an accredited investor?

Answer 38

An income of at least $200,000 ($300,000 if in a joint account) the past two years as well as the current year or a net worth of at least $1,000,000 (not including equity in the primary residence)

Question 39

Which sales have higher communication and disclosure expectations?

Answer 39

Sales to retail investors as they tend to be less knowledgeable.

Question 40

What assumptions are made about accredited investors?

Answer 40

They have a higher sophistication level than a retail investor and will not need the same level of protection.

Question 41

Which investors are in both the primary and secondary markets?

Answer 41

Retail and institutional investors. Accredited investors are exclusively in the primary market.

Question 42

Municipal advisor

Answer 42

An investment banker who works under contract to advise on the issuing of municipal debt/other securities, and issues such as debt structure, bond features, and raising capital.