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29 Cards in this Set
- Front
- Back
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Escrow account
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for all-or-none and mini-maxi underwritings, escrow account needs to be established for subscribers funds in event the deal is cancelled
Account collects all money raised before selling concessions and underwriting spread |
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Green shoe provision
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allows issuer to purchase up to 15% more shares than issued originally
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Market out clause
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allows underwriter to cancel the underwriting agreement if events occur making issue difficult to market
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Block trade
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when underwriting firm purchases shares at a discount from large shareholders imposing large financial risk for firm
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at-the-market offerings
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allow investors to raise capital and issue shares over a period of time. pricing is based on current secondary market for existing shares. securities not listed need an independent market
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Suitability rules
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retail - recommendation must be suitable based on financial circumstance and objectives. institutional - customer is able to evaluate risks independantly
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quiet period
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managers in ipos- 40 days
managers in secondary offerings - 10 days broker-dealer in ipo - 25 days |
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booster shot reports
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favorable reports that come out after lock up period
prohibited from release for 15 days before and after lock up period |
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Jump ball basis
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sets aside shares for institutional client to compete for orders
profit is allocated based on each members sales |
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manager's bill and deliver
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manager delivers the shares directly to institutional clients
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selling syndicate vs. selling group
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syndicate - group distributing securities that imposes financial commiment on members
selling group - group distributing securities that doesnt impose financial commitment |
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underwriter compensation
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underwriter receives = (underwriting spread-manager fee) x shares
syndicate receives = (underwriting spread-manager fee-selling concessions) x shares net managers fee = mangers fee - syndicate expense |
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selling concession
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a discount given to broker-dealers engage in investment banking activities
part of underwriting or selling group |
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qualified independent underwriter
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must be used for preparing documents in event of conflict of interest
must have experience with 3 issues of similar size. 3 years of underwriting experience needed if no disclosures are made |
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regulation M
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Restricts distribution participants and issuers from bidding on secondary market stock offered for certain period around effective date
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Rule 101
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participants are not permitted to buy or bid for security within the restricted period
Also applies to any reference security that the subject security can be converted into cannot allocate IPO on prearranged purchase to influence aftermarket price |
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Rule 102
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Prohibits issuers and selling security holder from raising price of security being distributed
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Rule 103
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Distribution participants can make a market on a passive basis
Limits on quantity – daily purchase limit is greater of 30% of average daily volume in the stock or 200 shares Falling Market - When last independent bid is below that of passive market maker, PM may maintain its bid until purchases reach the lesser of two times the minimum quote size for industry or remaining daily limit Cannot enter a bid higher than highest independent bid on Nasdaq |
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Rule 104
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Stabilization is a bid for purposes of fixing a price of the security
Max price is last independent sale price or higher bid in the market if less Permitted manipulative activity |
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Penalty Bid
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Arrangement that permits the managing underwriter to reclaim a selling concession from syndicate member in a syndicate covering transaction
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Syndicate Covering Transaction
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placing any bid on behalf of distributor or underwriting syndicate to reduce a short position
arises from overallotment. alternative is to invoke the Green Shoe provision |
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Rule 105
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It is a violation to sell short the security that is subject an offering
cannot execute short sale for 5 days prior to offering Exception: if the person was unaware of the offering |
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17a-2 Record Keeping
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Underwriter must maintain record of: % participation of each member, Names and addresses of members, Dates when penalty bid was in effect, Name and class + price date and time of stabilized security
Must report to FINRA and SEC, Other managers effecting stabilizing must give notice within 3 days |
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17a-3 Record Keeping
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Broker dealer must obtain: Name, address, SS #, starting date of employment, DOB, Business background for 10 years, Arrest or indictment of felony, denial of membership, injunction, Aliases
Must be kept for 3 years and easily accessible for 2 yrs. document of original entry held for 6 yrs |
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New Issue Rule
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member firm must make a bona fide offering and not withhold any shares for own account for IPOs
cant sell to an account that restricted person has beneficial interest. all underwriters must sell at the same price |
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Limited Partnership Rollup transaction
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involves combination and reorganization of one or more limited partnerships
Compensation can only be 2% of exchange value of new securities, paid regardless when proposal is rejected, payable in equal amounts Cannot be related to amount of investors it persuades to invest. pass through taxation |
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NYSE
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400 round lot shareholders
1.1M outstanding shares Market value of $140M Stock price $4 Majority of BOD is independent If market value is less than 10% below minimum, stockholders equity can be used as substitute |
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NASDAQ Global Select
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$4 min bid price
3 or 4 market makers subject to corporate governance Majority of BOD is independent 400 shareholders. NASDAQ Global markets - 400 shareholders NASDAQ capital markets - 300 shareholders |
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OTCBB
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electronic quotation machine
Not listed or traded ADRs and DDPs Need outside market from member firm Inside market is calculated by all 2 sided and 1 sided priced quotes |
