Series 24 Session Three Flashcards
(145 cards)
1
Q
Name the 6 types of offerings.
A
1) primary
2) secondary
3) combination
4) IPO
5) Additional issue
6) Rule 415 - shelf registration
2
Q
Self registration is valid for how many years?
A
2 years
3
Q
Self registration is valid for how many years for well-known seasoned issuers?
A
3 years
4
Q
What are the requirements to be considered a well-known seasoned issuer (WKSI)?
A
$700 million in equity; $1 billion in debt
5
Q
All or none and mini-maxi are what type of underwriting?
A
Best efforts
6
Q
In western underwriting, how are unsold shares handled?
A
Westerns underwriting is divided. The member has liability only for their unsold share
7
Q
In eastern underwriting, how are unsold shares handled?
A
Eastern underwriting is undivided. All members shares in unsold shares according to their percentage of participation.
8
Q
When can a selling group be formed?
A
after filing a registration statement
9
Q
What are two components of the selling group agreement?
A
estimated price and concession amount
10
Q
What form is required to register a new issue?
A
S-1
11
Q
How long is the cooling-off period for a new issue filing?
A
20 days
12
Q
What are the prospectus delivery requirements for an exchange listed IPO?
A
25 days
13
Q
What are the prospectus delivery requirements for a non-exchange IPO?
A
90 days
14
Q
What are the prospectus delivery requirements for an exchange listed APO?
A
N/A
15
Q
What are the prospectus delivery requirements for a non-exchange APO?
A
40 days
16
Q
B/Ds not participating in the underwriting may publish research on a new issue if what?
A
If the report is published in the normal course of business and the firm receives no compensation directly or indirectly from any participant of the underwriting.
17
Q
B/Ds who are participating in a new issue can publish research on what type of securities?
A
nonconvertible debt/nonconvertible preferred stock
18
Q
B/Ds can publish research on additionl issue offerings (actively traded security) if
A
1) it is contained in a publication distributed regularly 2) includes a comprehensive list fo all securities being recommended 3) current recommendation is no more favorable than in the past.
19
Q
Who are considered restricted persons?
A
1) member firms and employee
2) finders and fiduciaries (CPAs, etc.)
3) portfolio managers
4) owners of 10% or more including family members
5) immediate family of any of the above.
20
Q
To testify that they are not a restricted person, a letter of representation must have been received within how many months prior to the sale?
A
12 months
21
Q
The initial affirmation must be positive affirmation or negative consent?
A
positive affirmation
22
Q
Annual re-affirmation must be positive affirmation or negative consent?
A
negative consent
23
Q
When indications of interest are low, the syndicate manager may sell to purchasers otherwise restricted. This is known as what?
A
standby purchase
24
Q
If standby purchase is allowed what two components are required?
A
1) the standby purchase must be outlined and disclosed in the prospectus
2) sale is subject to 3-month lock-up
25
The standby rule does not apply to employees of firms engaged in the sale of what two security types?
DPPs and investment company securities
26
State exemptions if what happens?
80% of business assets in the state;
80% of the revenue in the state;
80% of proceeds of the issue are in the state;
100 % of purchasers are residents of the state.;
9-month resale restriction
27
What are the dollar requirements of Reg A offerings?
$ 5 million or less in 12 months
28
What is the limit of accredited investors of a private placement?
No limit. You can rip off all the rich people you want
29
What is the limit of non-accredited investors of a private placement?
35
30
What constitutes an accredited investor?
Net worth of more than $1 million; income of more than $200,000 or income of more than $300,000 of family income
31
How long must a private placement be held before resale?
6 months
32
Private placements are exempt from registration is
1) Form D has been or will be filed.
2) Does not exceed $5 million
3) no non-accredited investors
4) no advertising
33
Private placements can be offered online. How?
online questionnaire to qualify investors; once qualified, a password is provided
34
Securities distributed off-shore by US issuers need not be registered with the SEC under what conditions?
1) the offer and sale is made in an offshore account
2) there are no directed selling efforts in the US
3) cannot sell to anyone in the US
4) must stay outside the US for 12 months
35
What are restricted securities?
securities received from other than a registered public offering.
36
What is the hold requirement for both control and non-control stock?
6 months
37
Volume limitations apply to what?
all control stock
38
Form 144 is good for how many days?
90 days
39
Form 144 is filed with which agency and when?
filed with SEC no later than sale date
40
Filing Form 144 is waived if amount to be sold is less than how many shared and what value during what period of time?
5000 shares or less; value of less than $50,000; in a 90-day period
41
SEC Rule 10b-13 says tender offers must be open for how many business days?
20 business days
42
While the tender offer is open, one cannot buy what three things?
stock, convertibles or options
43
No short tendering. True or False
True
44
Amendments are open for how many days following the change according to SEC Rule 10b-13.
10 business days
45
SEC Rule 10b-18 says transactions on any given day can only be effected through how many market makers?
One
46
Transactions on any given day cannot exceed what percentage of average daily trading volume (ADTV)
25%
47
Transactions cannot affect the opening or closing of a security. True or False?
True
48
Safe harbor is available if the issuer is not involved in the first trade of the day or any trade in the last half hour of trading. What is the time period for issues with ADTV value of what amounts?
$1 million or more and a public float value of $150 million or more
49
the price can be no higher than what?
the highest current independent bid or last sale
50
When member firms are selling their own securities, can employees buy? why or what not?
Yes. considered issuer directed sales
51
When member firms are selling their own securities, who is engaged to price the IPO?
an independent underwriter
52
When member firms are are selling their own securities, what type of permission is required for discretionary accounts
written permission
53
When member firms are selling their own securities, how are customer checks handled?
in escrow pending net capital computation
54
Corporate Finance Department (CFD) requires filing of information related to what?
fairness of underwriting compensation
55
The manager files information within how many business days of filing the registration statement.
Within 1 business day
56
CFD considers what type of securities as unreasonable?
1) stock, options, or warrants of more than 5 years
| 2) options or warrants with exercise prices below public offering price (POP)
57
The underwriter can be reimbursed for expenses if what?
these are typically paid by the issuer
58
With insider trading, both the tipper and tippee are liable only if what?
if the info is used to trade for profit or avoid a loss
59
What are the civil penalties for violations of insider trading?
the greater of $1 million or treble damages (amount you made or the loss you avoided)
60
What are the criminal penalties for violations of insider trading.
imprisonment for 20 years and fines up to $5 million for natural persons and $25 million for business entities
61
With insider training, contemporaneous traders can sue for up to how many years after the violation?
5 years
62
In rendering a fairness opinion, a firm must disclose what?
1) if firm was financial adviser to any party to the transaction and if it will receive compensation upon completion of the transaction
2) any relationship that existed in the past 2 years regardless of compensation
3) if the information that formed the opinion was independently verified
63
Hart- Scott-Rodina says pre-merger notification to the FTC is required for transactions of what amount?
$68.2 million or more
64
Hart-Scott-Rodino requires information to be filed by both parties in a merger for what purpose?
to determine if anti-trust laws will be violated
65
Hart-Scott-Rodino says firms must wait how many days after filing a merger request?
30 days
66
Which type of stock always has a holding period
restricted stock
67
Which type of stock can be sold immediately but has volume limits that always apply
control stock
68
Non-registered foreign and domestic securities can be sold to certain institutional investors in the US with or without a holding period?
without the 6 month holding period
69
What constitutes a qualified institutional buyer (QIB)?
A minimum of $100 million in assets
70
Rule 144 deals with the sale of what 4 types of securities?
1) legend certificates
2) control stock
3) restricted securities
4) securities received from other than a public offering
71
When selling 144 stock, a member firms must act in what type of capacity?
agency capacity unless a market maker
72
Members may not solicit buyers of 144 stock unless what 2 things?
1) customer has expressed interest in the previous 10 business days
2) member has express interest in the previous 60 calendar dayys
73
The buyer of 144 stock is subject to what holding period or volume restrictions?
None because the sale effectively registers the shares.
74
Corporate insiders are required to file information on changes to their holding to the SEC within how many days? Form 3
10 calendar days
75
Anybody is required to report a change in holdings within how many days
2 business days
76
Who are considered insiders (not insider information.)?
1) officers
2) directors
3) or shareholders with more than 10% of shares
77
Non-affiliates (outsiders) are required to report (using form 13-D for individuals) when what occurs?
when an investor, investor group or other entity acquires a 5% or more interest in an issuer
78
Non-affiliates (outsiders) are required to report (using form 13-G for mutual funds and pensions) when what occurs?
when an investment company acquires a 5% or more interest in an issuer
79
Who gets the reports (three entities) when outsiders acquire more than 5% of an interest
1) SEC
2) Issuer
3) market where the securities trade
80
Who does not get the report when outsiders acquire more than 5% of an interest?
it does not go to shareholders
81
When are Forms 13-D and 13-G related to reporting 5% interest are due when?
within 45 days of the end of the year
82
Form 10-k (audited financials) are due when?
within 90 days of the end of the year; 60 days plus a 30 day extenstion
83
Form 10-q (quarterly financials) are due when?
within 45 days of the end of the quarter; 30 days plus a 15 day extension
84
Form 8-K (news events) are due when?
within 4 business days of the event
85
Rule 10b-18 applies to an issuer buying their own stock (IBM buys more IBM stock). Transactions cannot exceed what % of the average daily trading volume (ADTV)?
25%
86
Rule 10b-18 applies to an issuer buying their own stock (IBM buys more IBM stock) do block purchases count against the daily purchase limit?
yes
87
Rule 10b-18 applies to an issuer buying their own stock (IBM buys more IBM stock) there can be how many market makes or DMM on any given day?
one
88
Rule 10b-18 applies to an issuer buying their own stock (IBM buys more stock) and the purchase cannot affect opening or closing of the security. Give more detail.
1) issuer cannot be the first transaction of the day
| 2) issuer can't trade during the last half hour. Except WKSI - 10 minutes before close and at least 1 millions shares
89
Rule 10b-18 applies to an issuer buying their own stock (IBM buys more stock) and the purchase cannot affect opening or closing of the security. The price can be no higher than what?
the highest independent bid or last sale, whichever is highest
90
Rule 10b-13 applies to tender offers. How long must the offer remain open?
20 business days
91
The target company of a tender offer has how many business days to provide a statement to shareholders?
10 business days
92
You cannot short a tender offer. True or False
True
93
Regulation M deals with what
additional issues
94
With Reg M (additional issues) the restricted period is what
1 to 5 business days
95
Reg M (additional issues) allows unsolicited orders. True or False
True
96
Rule 103 says if a market maker who is a syndicate member elects to function as a passive market maker during the restrcited period under what conditions?
1) only if a firm commitment underwriting
2) an independent market must exist
3) notification one business day in advance 4) bids no higher than the highest independent bid
97
Rule 104 - stabilizing bids says these bids can be used in certain conditions. What are they?
1) stabilizing bids are disclosed in the prospectus 2) used when secondary trading of a new issue falls below POP 3) only for fixed price, firm commitment underwritings 4) no higher than at or below POP 5) must indicate whether or not it is a penalty bid
98
Under SEC Rule 10b-13, a target company has how many business days to provide shareholders with a statement regarding acceptance, rejection, or no opinion?
10 business days
99
Blue Sky refers to what?
state registration
100
What are the three Blue Sky state registration types?
1) coordination (most common) 2) notification (filing - simplest) 3) qualification - most difficult
101
What is Chinese Wall?
separation between departments to prevent insider trading
102
What is the definition of insider
anyone who has access to inside information
103
Obtaining insider information is not a violation. True or False
True - disclosing the information and using it for gain or to prevent loss is a violation
104
What is the bounty amount available to informants?
up to 10% of the civil penalty
105
If a representative possesses material inside information about a publicly traded company, under what circumstance may be communicate this information to a customer?
Under no circumstance
106
Sarbanes - Oxley was enacted in 2002 in response to what?
major accounting firm scandals
107
Sarbanes-Oxley enhanced standards for the board of directors, the management, and public accounting firms. It requires what three things?
1) auditor independence
2) corporate governance
3) financial disclosure
108
Firms must disclose conflict of interest when issuing a fairness opinion. What must be disclosed?
1) a prior existing relationship with any party to the transaction for the previous 24 months
2) financial arrangements
109
What is gun jumping?
soliciting orders or conditioning the market prior to the effective date of the offering
110
A reporting issuer, in a follow-up offering, is allowed to publish what?
factual business information and forward looking information
111
A non-reporting, in an IPO, is allowed to publish what?
factual business information
112
A road show is designed to provide information regarding a prospective public offering. A live show is considered what type of communication?
oral communication
113
An electronic road show is considered what type of communication?
written communication
114
What are the Reg A dollar requirements for affiliates?
$1.5 million
115
How often are reports required for Reg A offerings?
twice per year
116
Under Reg A a circular must be submitted how many hours before confirmation?
48
117
Under Reg A when does circular sales literature and information have to be filed with the SEC?
10 days prior
118
An offering in which one or more major stockholders in the corporation are selling all or a major portion of their holdings is a called a what offering?
secondary
119
What securities are exempt from filing with the Corporate Financing Department for fairness of underwriters compensation?
1) non convertible debt/ preferred stock
2) redeemable investment co. securities (mutual funds)
3) exempt securities
4) Reg D offerings
5) shelf offerings
120
What securities are not exempt from filing with the Corporate Financing Department?
1) closed end funds
2) Reg A offerings
3) 147 offerings, DPPs and rights
121
Even if I participate in an underwriting, I can publish research on what kind of securities?
nonconvertible debt and nonconvertible preferred stock
122
The prospectus delivery requirement for an additional offerings (APO) of an exchange listed stock is how many days?
0
123
What is the number of shares and total proceed amounts to be a
deminimis exemption?
5,000 shares or $50,000 in sales proceeds are permitted without filing form 144
124
Issuer directed sales allow the sale to employees of the issuers. What at the restrictions?
1) accounts where employees of members have an interest
| 2) accounts where finders and fiduciaries have an interest
125
Reg S offerings are those distributed offshore by US issuers. What three rules apply?
1) the offer and sales must occur in an offshore transaction
2) no directed selling efforts in the US
3) stays outside the US for at least one year
126
What does PIPE stand for?
Private Investments in Public Equity
127
In a PIPE, what is purchased?
restricted securities directly from the issuer in a private placement
128
What is Rule 144?
Rule 144 governs the sales of restricted and control stock?
129
Who is considered an affiliate of an issuer?
1) director
2) officer
3) shareholder with 10% or more of voting stock
130
Restricted stock has a holding period. Control stock can be sold immediately. What applies to control stock and restricted stock?
volume limits
131
when you become an insider, you must file form what? and when are you required to file it?
Form 3: initial report within 1- days
132
Once you are an insider, you must file what form to report changes in holdings and when are you required to file it?
Form 4 - within two business days
133
13-D is filed when who acquires 5% or more interest in an issuer? and when is it required to be filed?
an investor or investor group; 10 days
134
13-G is filed when who acquires 5% or more interest in an issuer? and when are you required to file it?
an investment company; 45 days after year end
135
Reg M deals primarily with additional issues. what is the restricted period?
1-5 business days - syndicate members that are not MM are restricted from making a bid or inducing purchases during the restricted period.
136
An offer of rescission for unsuitable or illegal sales must be accepted or rejected within how many days?
30 days
137
What amount can be paid in bounty to informants?
up to 10% of the civil penalty
138
What are contemporaneous trading rules?
It says the person you took advantage of has the right to sue in civil court for what they lost - nothing more
139
What is PCOAB?
Public Company Oversite Account Board
140
Rule 168 allows a reporting issuer, in a follow-up offering, to publish what?
factual information and forward-looking statements
141
Tule 169 allows a non-reporting issuer, in an IPO, to publish what?
factual business information
142
A recorded electronic road show is considered oral communication or written communication?
written communication
143
a live electronic road show is considered oral communication or written communication?
oral communication
144
If a road show is for an IPO, does it need to file with the SEC?
yes
145
If a road not is not for an IPO, does it need to file with the SEC?
no
