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Underwriting Securities Flashcards

1
Q

For an entity to become a corporations, they must file a _________.

A

Corporate Charter

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2
Q

If a company wants to go public, they must file what two things with the SEC?

A

Registration Statement

Prospectus

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3
Q

Three methods of state security registration are?

A
  1. Notification
  2. Coordination
  3. Qualification
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4
Q

These entities help the issuer decide what securities to issue, the selling price, how much to issue, etc.

A

Investment Bank

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5
Q

These entities purchase the securities from the issuer and sell them to the public.

A

Underwriter

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6
Q

According to this, an issuer of corporate securities must provide full and fair disclosure about itself and the offering.

A

Securities Act of 1933

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7
Q

This was enacted to protect investors by regulating over the counter market and exchanges.

A

Securities Act of 1934

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8
Q

This act prohibits bond issues valued at over $5M from being offered to investors without an indenture.

A

Trust Indenture Act of 1939

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9
Q

Brokerage firms that are not part of a syndicate but help distribute shares to the public without a financial commitment.

A

Selling Group

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10
Q

Spread Equation

A

Public Offering Price-Price paid to the issuer
AND
Syndicate Managers Fee + Takedown

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11
Q

Takedown Equation

A

Additional Takedown + Concession

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12
Q

The profit that the selling group makes when selling shares or bonds to the public.

A

Concession

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13
Q

The fee that the underwriting group pays to a securities firm that is not part of the syndicate, but that still sells shares in the offering.

A

Reallowance

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14
Q

Western (divided) account

A

Each syndicate member is responsible only for the shares/bonds originally allocated to it.

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15
Q

Eastern (divided) account

A

Each syndicate member is responsible not only for the shares/bonds originally allocated to it, but also a portion of shares/bonds left unsold by other members.

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16
Q

After the issuer files a registration statement with the SEC, this is a 20 day period during which the SEC reviews the registration statement.

A

Cooling Off Period

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17
Q

Final Prospectus will include:

A
  1. Final Offering Price
  2. Underwriters Spread
  3. Delivery Date
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18
Q

Independent entity that maintains a record of stock and bond owners.

A

Registrar

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19
Q

Maintains a record of stock and bond owners and also mails and cancels stock certificates as necessary.

A

Transfer Agent

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20
Q

This is the first time an issuer sells stock to the public.

A

Initial Public Offering

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21
Q

An offering of new securities from an issuer that has previously issued securities. Profits go to issuer.

A

Primary Offering

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22
Q

A sale of a large block of outstanding securities or treasury stock. Profits do not go to issuer.

A

Secondary Offering

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23
Q

A combination of a primary and secondary offering, with both new and outstanding securities.

A

Split or combined offering.

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24
Q

Issuing more stock will cause earnings per share to increase or decrease?

A

Decrease.

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25
What are the two reasons a security might be exempt from the registration requirements of the Securities Act of 1933?
1. The issuer has a high level of creditworthiness | 2. Another government agency has jurisdiction over the issuer.
26
Name the 6 types of securities that are exempt from the registration requirements.
1. Issued by US gov't or federal agencies. 2. Municipal Bonds 3. Issues by banks and credit unions 4. Public Utility stocks or bonds 5. Issued by religious, educational, or non-profit organizations. 6. Notes, bills of exchange, bankers acceptances, and commercial paper with an initial maturity of 270 days or less.
27
Name the 4 types of transactions that are exempt from the full registration requirements.
1. Intrastate offerings. 2. Regulation A offerings 3. Regulation D offerings 4. Rule 144
28
Covers the sale of restricted, unregistered, or control securities.
Rule 144
29
According to Rule 144, sellers of these securities must wait from ______to_____ to sell. Additionally, the most an investor can sell at one time is _______, whichever is greater.
6 months to 1 year. | 1 percent of the outstanding shares or the average weekly trading volume for the previous 4 weeks
30
Intrastate offerings are exempt from registering with the SEC under this rule.
Rule 147
31
This regulation exempts offering of securities worth $5M or less from being registered with SEC.
Regulation A
32
This regulation exempts offerings to no more than 35 unaccredited investors per year from registering with SEC.
Regulation D - Private Placements
33
A process in which both the purchase price and the offering price for a new issue are negotiated between the issuer and a single underwriter
Negotiated Underwriting
34
A step in the initial public offering process whereby an underwriter submits a sealed bid to a company that is making its first issue of stock.
Competitive bid
35
The issuing corporation has determined that it wants an agreement outlining that the underwriter must either sell all of the shares or cancel the underwriting.
All or None Underwriting
36
SEC provision that allows an issuer to register a new issue security without selling the entire issue at once.
Shelf Offering
37
Issued by SEC and will indicate a significant omission or problem with a registered statement or prospectus.
Deficiency Letter
38
Practice used by underwriters to even out the secondary market price of a new security after an IPO.
Stabilizing Bid
39
This will be levied if syndicate members turn in shares on a stabilizing bid after the issue is sold out.
Penalty Bid
40
Practice in which investors avoid purchasing shares underlying a put option
Pegging.
41
This rule regulates private placement of unregistered securities to qualified institutional buyers.
Rule 144A
42
This rule prohibits member firms from selling a new issue to any account where restricted persons are beneficial owners.
Rule 5130
43
Provision contained in an underwriting agreement that gives the underwriter the right to sell investors more shares than actually planned by the issuer by up to 15%.
Green-shoe option
44
Corporate entity that falls within the accredited investor category.
Qualified institutional buyer
45
Term for an ethical barrier between different divisions of a financial institution to avoid conflicts of interest.
Chinese Wall
46
Issue of additional securities from an established company whose securities already trade on the secondary market.
Seasoned Issue
47
What is another term for the preliminary prospectus?
Red Herring
48
If the registration statement needs review or expansion, the SEC may suspend the review and issue a _____________.
Deficiency Letter
49
This may be issued by the SEC if the requirements of the Securities Act of 1933 have not been met or if fraud is suspected in the underwriting process.
Stop Order
50
What are the two items that must not be included in the preliminary prospectus?
Offering Price | Effective Date
51
What are the three things underwriters may not do during the cooling off period?
1. Offer to sell the securities 2. Take Orders 3. Distribute ads
52
What are the three things that an underwriter may do during the cooling off period?
1. Take indications of interest 2. Distribute the red herring 3. Publish tombstone advertisement
53
Near the end of the cooling off period, the underwriter must conduct _________.
A formal due diligence meeting.
54
The Maloney Act of 1938 amended the 1934 act to provide for __________________.
Establishment of self-regulatory bodies.
55
This act covers new issues sold to the public.
Securities Act of 1933
56
This act covers the secondary securities market.
Securities Act of 1934
57
This is a best efforts underwriting with a floor and a ceiling on the $ amount of securities the issuer is willing to sell.
Mini-Max Offering
58
This is when the underwriter takes on financial risk by actually purchasing the shares and is acting in a principal capacity.
Firm Commitment
59
In this type of underwriting, the underwriter sells as much as possible but is not liable for unsold shares and is acting in an agency capacity.
Best Efforts
60
When a company's current stockholders do not exercise their preemptive rights in an additional offering, the corporation will engage an underwriter to purchase whatever shares remain unsold when the rights expire.
Stand-by Offering
61
These are owned by directors, officers, or persons with a 10% or greater interest in voting stock.
Control securities
62
These securities are acquired in some way other than a registered public offering.
Restricted securities
63
In any 90 day period, an investor may sell the greater of ________ or __________ regarding restricted stock.
1% of total outstanding shares | Average weekly trading volume in the past four weeks
64
Requires shareholder approval for mergers, acquisitions, and re-organizations. They must also be sent a full disclosure statement.
Rule 145
65
Rule 145, which protects stockholders of any major restructuring, applies to which three situations?
1. Reclassification 2. Merger or consolidation 3. Transfer of assets
66
This regulation excludes offers and sales made outside the US from having to register with the SEC.
Regulation S
67
This rule regulates the sale of control and restricted securities.
Rule 144
68
Accredited investor
Net worth of $1M or more excluding primary residence, and $200,000 or more in the last two years or $300,000 jointly with a spouse.
69
Priority or orders for syndicate to fill.
Presale Group Net Designated Member
70
Takedown
Profit made by syndicate members
71
Is a prospectus required for Regulation A offerings?
No.
72
Prospectus delivery requirement for IPO quoted on OTC Pink or OTCBB (non-NASDAQ).
90 days
73
Prospectus delivery requirement for IPO listed on exchange or quoted on NASDAQ.
25 days
74
Shelf offering registration lasts ____ years and the securities can be sold up to ___ years
2, 3
75
Stabilizing price bids may be placed (at or below/at or above) the public offering price.
At or below
76
Three items in spread allocation.
Managers fee Syndicate fee Selling concession
77
Under Intrastate Offering Rule 147, resident purchasers may resell securities to a nonresident after ____ months from the end of distribution.
9

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