Unit 1

Question 1

Who are the participants in the primary market?

Answer 1

Issuers, Underwriters, and Investors

Question 2

Who are the participants in the secondary market?

Answer 2

Exchanges, Over-the-counter, Fourth Market and Third Market

Question 3

Issuers are in what type of Market?

Answer 3

Primary Market

Question 4

Underwriters are in what type of Market?

Answer 4

Primary Market

Question 5

Investors are in what type of Market?

Answer 5

Primary Market

Question 6

Exchanges are in what type of Market?

Answer 6

Secondary Market

Question 7

OTC?

Answer 7

Over-the-counter

Question 8

OTC is in what type of market?

Answer 8

Secondary Market

Question 9

What is a primary market?

Answer 9

Securities are sold by the issuer (a corporation or the government)

Question 10

What is the Securities Act of 1933?

Answer 10

Also called the Paper Act. requires that a new issue be registered with the SEC before public sale.

Question 11

Primary Market securities come in two types called?

Answer 11

IPOs and APOs (Initial Public Offerings and Additional Public Offerings)

Question 12

IPO?

Answer 12

Initial Public Offering, the first time an issuer distributes securities to the public.

Question 13

APO?

Answer 13

Additional Public Offering, subsequent offerings of already offered securities (not new issues)

Question 14

Who can be an “issuer”?

Answer 14

Corporations, Municipalities, Federal Government or Agencies

Question 15

NMS?

Answer 15

National Market Securities, stocks that are listed on NYSE (exchange)

Question 16

Underwriter

Answer 16

Broker-Dealer and Investment bankers, works with an issuer to bring its securities to market and sell them to the public.

Question 17

Best Efforts Underwriting

Answer 17

Acts as an agent between the issuer and investor. Not as risk themselves. Middle man.

Question 18

Two types of best efforts underwriting

Answer 18

AON (all-or-none) and Mini-max

Question 19

AON?

Answer 19

All-or-none underwriting. Issuer indicates must sell all shares or cancel the underwriting. Investors funds held in escrow

Question 20

Mini-max

Answer 20

Mini-max underwriting, minimum amount the issuer needs to raise to move forward with underwriting, then can expand to maximum amount

Question 21

Firm commitment underwriting

Answer 21

Underwriters buy shares from issuers, collecting on the “spread”

Question 22

POP?

Answer 22

Public Offering Price

Question 23

Syndicate

Answer 23

type of joint venture where BDs share both risk and profits

Question 24

Types of Investors

Answer 24

Institutional, Retail, Accredited

Question 25

Institutional Investor

Answer 25

Entity that pools money to purchase investment assets. Ex. Banks, Insurance companies, Pensions, Hedge Funds, Mutual Funds

Question 26

QIB?

Answer 26

Qualified Institutional Buyer. Owns and Invests 100 million in securities on a descretionary basis

Question 27

Retail Investor

Answer 27

Investing their own assets for personal gain

Question 28

Accredited Investors

Answer 28

Made up of Retail and Institutional investors who meet a range of criteria

Question 29

SEC?

Answer 29

Securities and Exchange Commission. Primary Federal Regulator in securities industry.

Question 30

Steps to take before new issue is brought to Market?

Answer 30

Distribution of a registration statement (S-1). Cooling-off period. Final filing of the prospectus.

Question 31

Registration Statement

Answer 31

First step in filing new issue with SEC. Also called S-1.

Question 32

Cooling-off period

Answer 32

Occurs after fiiling registration statement to SEC. Requires a minimum of 20 calendar days.

Question 33

Tombstone Advertisement

Answer 33

limited information about new issues allowed to be distributed during the cooling-off period. Must contain advisory statement disclosure.

Question 34

Red Herring

Answer 34

Preliminary Prospectus. Allows issuers and underwriters to gain investor interest.

Question 35

Blue-Sky Filings

Answer 35

The process of coordinating the federal and state registrations

Question 36

The Final Prospectus

Answer 36

Released after cool down period on effective date. Includes the POP and release date.

Question 37

SEC disclaimer

Answer 37

Must be included on the tombstone advertisement.

Question 38

Primary offering

Answer 38

If the issuer is getting the investment money, it is a primary offering.

Question 39

Shelf Offering

Answer 39

SEC filing is good for two years on an issue. Allows issuer to sell portions over 2 years without having to reregister the security. However, a sublemental prospectus must be filed before each sale.

Question 40

WKSI?

Answer 40

Well-known seasoned issuer. Can extend shelf offering up to 3 years.

Question 41

Secondary Market: Final Prospectus entitlement? IPOs of NMS securities

Answer 41

25 days

Question 42

Secondary Market: Final Prospectus entitlement? APOs of NMS securities

Answer 42

0 days

Question 43

Secondary Market: Final Prospectus entitlement? IPOs of non-NMS securities

Answer 43

90 days

Question 44

Secondary Market: Final Prospectus entitilement? APOs of non-NMS securities

Answer 44

40 days

Question 45

Nonexempt Securities

Answer 45

Not exempt from registration and must be registered with SEC

Question 46

Exempt Issuers

Answer 46

Government, Municipalities, Banks (not holding companies), Building and Loan and Savings and Loan, Nonprofit, Common carriers (railroad)

Question 47

Exempt Issues (Securities)

Answer 47

Commerical Paper, maturities of 270 days or less, Insurance policies, and fixed annuities. (Variable MUST be registered)

Question 48

Regulation A

Answer 48

Ability for small and medium companies to raise capital Tier 1: $20 million offerings Tier 2: $75 million offerings

Question 49

Rule 147

Answer 49

Except from registration if all offerings occur within the state. Issuer and Purchaser Securities cannot be resold out of state of 6 months