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31 Cards in this Set

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Subsequent or Additional Primary Offering (SPO)
offering (IPO). Usually, these kinds of public offerings are made by companies wishing to refinance, or raise capital for growth. Money raised from these kinds of secondary offerings goes to the company, through the investment bank that underwrites the offering. Investment banks are issued an allotment, and possibly an overallotment which they may choose to exercise if there is a strong possibility of making money on the spread between the allotment price and the selling price of the securities.

2. A sale of securities in which one or more major stockholders in a company sell all or a large portion of their holdings. The proceeds of this sale are paid to the stockholders that sell their shares. Often, the company that issued the shares holds a large percentage of the stocks it issues.
An underwriter's agreement to assume all inventory risk and purchase all securities directly from the issuer for sale to the public at the price specified.
Standby Agreements
A type of underwriting in which an investment bank (the underwriter) agrees to purchase the portion of the new securities issue that remains after a public offering.
Best Efforts
the underwriter agrees to use all efforts to sell as much of an issue as possible to the public. The underwriter can purchase only the amount required to fulfill its client's demand or the entire issue. However, if the underwriter is unable to sell all securities, it is not responsible for any unsold inventory.

Best effort agreements are used mainly for securities with higher risk, such as unseasoned offerings
Best Efforts - All or None
Offering is cancelled if all shares are not sold
Best Efforts - Mini-Maxi
Offering is cancelled if set minimum is not sold
Underwriting Spread
a corporation requires a certain percentage of the proceeds in order for the offering to become effective.

payout to:
Manger's Fee
Underwriter Fee
Concession-earned by BD selling the shares
Selling Group
All financial institutions involved in selling or marketing a new issue of debt or equity but not necessarily participating in the underwriting consortium.
Eastern (Undivided)
An underwriting system in which each underwriter in the group is responsible not only for selling its alloted amount of the new issue but also for selling any excess issue not sold by the underwriting group as a whole. This is also referred to as an "Eastern account", and it is the opposite of a divided account.
Western (divided)
An offering agreement in which each underwriter in a consortium of underwriters is responsible only for selling its alloted amount of the new issue. Once participants have met their previously agreed upon target allotment sale, their liability in the offering is completed.
NASD Rule 2790
On October 24, 2003, the Securities and Exchange Commission (SEC) approved new Rule 2790 (Restrictions on the Purchase and Sale of IPOs of Equity Securities), which replaces the Free-Riding and Withholding Interpretation (IM-2110-1).1 As described in detail below, Rule 2790 generally prohibits a member from selling a "new issue" to any account in which a "restricted person" has a beneficial interest. The term "restricted person" includes most associated persons of a member, most owners and affiliates of a broker/dealer, and certain other classes of persons. The Rule requires that a member, before selling a new issue to any account, meet certain "preconditions for sale," which generally require the member to obtain a representation from the beneficial owner of the account that the account is eligible to purchase new issues in accordance with the Rule. The Rule also contains a series of general exemptions.
Restricted Person
- NASD member firms and any associated person of the member firm
- An immediate family member of an employee of a member firm
General Exemptions
1. Investment companies registered under the Investment Company Act of 1940.
2. The general or separate account of an insurance company
3. A common trust fund
4. An account in which the beneficial interest of all restricted persons does not exceed 10% of the account.
5. Publicly trade entitiees other than a broker-dealer or its affiliates that engage i nteh public offer of new issues.
6. Foreign investment companies
7. ERISA account, state and local benefit plans, and other tax exempt plans under IRS code 501 (c)(3)
Issuer-Directed Securities
Entities that control or are controlled by an issuer may purchase shares of a new issues if the issuer specificically directs to them.
Green Shoe Clause
Legally referred to as an over-allotment option, a provision contained in an underwriting agreement which gives the underwriter the right to sell investors more shares than originally planned by the issuer. This would normally be done if the demand for a security issue proves higher than expected.

A greenshoe option can provide additional price stability to a security issue, since the underwriter has the ability to increase supply and smooth out price fluctuations if demand surges too high.
An intervention in the secondary market where the managing underwiter bids for the securities at or below public offering price.
Tender Offer
An offer to purchase some or all of shareholders' shares in a corporation. The price offered is usually at a premium to the market price.
The Registration Process
Preregistration Period
Waiting Period (cooling off)
Post-Effective Period
Preregistration Period
Prepare registration statement
No Discussions with customers
Waiting Period (cooling off)
Last 20 days from Last Amendment, Unless Accelerated
Issue Prliminary Prospectus
Blue Sky the Issue
Hold Due Diligence Meeting
Accept Indications of Interest (No Sales0
Post-Effective Period
Issue Final Prospectus
Confirm Sales
25/40/90 - Days After-Market Prospectus Requirement for dealers
Blue Sky Law
State regulations designed to protect investors against securities fraud by requiring sellers of new issues to register their offerings and provide financial details. This allows investors to base their judgments on trustworthy data.

The term is said to have originated in the early 1900s when a Supreme Court justice declared his desire to protect investors from speculative ventures that had "as much value as a patch of blue sky."
Exempt Securities
U.S. Government and US. government agency securities
Municipal Securities
Securities issued by nonprofit organizations
Short-term corporate debt instruments that have a maturity not exceeding 270 days
Securities issued by domestic banks and trust companies
Securities issued by small business investment companies
Exempt Offerings
Rule 147
Regulation A
Regulation D
Rule 144
Rule 144A
Rule 145
Rule 147
A rule that can be used by a company to raise funds without actually registering with the Securities and Exchange Commission (SEC). This rule usually only applies to small companies that wish to raise a small amount of money without incurring the expensive fees associated with registering with the SEC.

More specifically, this rule applies to Section 3(a)11 of the Securities Act of 1933, or the interstate offering exemption. To qualify for this exemption, the company must meet requirements such as:

- The company must be incorporated in the state in which it is offering the securities.
- The company must carry out a significant portion of its business in that state, which is defined as at least 80% of its operations.
- The company must only sell the securities to individuals residing in the state of incorporation.
Regulation A
An SEC regulation that governs offerings of $5,000,000 or less, which qualify for simplified registration (an exemption).
Regulation D
A Securities and Exchange Commission (SEC) regulation governing private placement exemptions. Reg D allows usually smaller companies to raise capital through the sale of equity or debt securities without having to register their securities with the SEC.

1. The issuer must have reason to believe that the buyer is a sophisticated investor, that is, experienced enough to evaluate any risks involved.
2. The buyer must have access to the same financial information that would normally be inclued in a prospectus. This informaiton is provided in a document known as an offering memorandum.
3. The issuer is assured that the buyer does not intend to make a quick sale of the securities.
4. The securities may not be sold to more than 35 nonaccredited invesotrs.
Rule 144
A Securities and Exchange Commission rule that sets the conditions under which restricted, unregistered and control securities can be sold. These are the five conditions that must be met for these securities to be sold:

1. The prescribed holding period must be met.
2. There is an 'adequate' amount of current information available to the public regarding the historical performance of the security.
3. The amount to be sold is less than 1% of the shares outstanding and accounts for less than 1% of the average of the previous four weeks' trading volume.
4. All of the normal trading conditions that apply to any trade have been met.
5. If wishing to sell more than 500 shares or an amount worth more than $10,000, the seller must file a form with the SEC before the sale.

Holding Period
Year 1: no resale
Year 2: Volume restrictions
Year 3: No restrictions to Non-Affiliates
Rule 144A
A Securities & Exchange Commission rule modifying a two-year holding period requirement on privately placed securities to permit qualified institutional buyers to trade these positions among themselves.
Shelf Registration
A term used for the SEC rule 415, which allows a corporation the ability to comply with registration requirements up to 2 years before doing a public offering. The corporation must still file the required annual and quarterly reports to the SEC.
Rule 145
Defines certain types of reclassifications as sales that are subject to the registration and prospectus requiremetns of the SA of 1933
Subject to Rule:
Transfers of assets

Not subject:
Stock splits
Reverse stock splits
Change in par value