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25 Cards in this Set

  • Front
  • Back
Securities exchange act of 1934
- addresses secondary trading of securities, personnel involved, and fradulent trading practices
- created the SEC to oversee the industry
Registration statement
- issuer must file this statement disclosing material about the issue
- must contain description of business, name and addresses, salaries and five year history of officers, amt of company securities officers own, company's debt and equity, and any legal proceedings
20 day cooling off period
- occurs after the issuer files registration statement
- 20 days before registration becomes effective
- during this period underwriters may not make offers, take orders, or distribute sales literature or advertising material
- however they may take indications of interest, distribute preliminary prospectuses, or publish tombstone advertisements
preliminary prospectus
- red herring - issued as a prospecting tool allowing underwriters to guage investor interest
- no final price or effective date
- cannot alter any prospects in any way for any reason
tombstone advertisement
- simple statement of facts regarding the issue
- does not offer for sale
due diligence
- studies, investigations, research, meetings and compliation of info about corp are all due diligence
- investment bankers must: examine the use of proceeds, perform financial analysis and feasibility studies, determine company stability, determine whether risk is reasonable
prospectus delivery requirement period
- for initial public offerings this period is:
- 90 days if it is to be quotes in the pink sheets or OTC
- 25 days if security is to be listed on an exchange or quoted over nasdaq
- for additional issues it is as follows: if non nasdaq the prospectus delivery period is 40 days, if nasdaq must be delivered in connection with purchase at POP
the issuer
- responsible for :
- filing registration statement wiht SEC
- filing reg. statement wiht the states in which it intends to sell securities
- negotiating the securities price and the amount of the spread wiht the underwriter
the underwriter
- responsible for:
- stocks or bonds
- tax consequences of the offering
- money market financing
- capital market financing
forming the syndicate
- may be assembled either before or after the issue is awareded to the underwriter
- in competitive bidding syndicate is assembled first
- in negotiated underwriting syndicate may be formed after issuer and underwriting manager have negotiated terms of the offering
The process of issuing securities
- issuer needs long term capital
- underwriter (BD) retained by issuer to sell securities to public
- public investors must be provided full disclosure
- SEC allows but does not approve securitiy to be offered
Securities act of 1933
- Governs registration with SEC by issuer - full disclosure, cool off period, effective date, final prospectus
Final prospectus
- used in primary and secondary market
- if non nasdaq must be offered for 90 days for IPOs and 40 days for APOs
- listed IPOs must be offered 25 days
- listed APOs no requirement
deficiency letter
- anytime there are alterations to a prospectus there will be a deficiency letter required
underwriter commitments
- there will be an agreemtnt among underwriters signed to confirm the commitment
- best efforts - two types: all or none and mini/maz (set a minimum sales to move forward)
- Firm commitment - standby commitment - only for APOs - ensures distribution of shares by buying them if not sold
selling group
- agreemtnt to sell with other broker dealers - always best efforts contracts
- no liability for unsold securities
underwriter compesation
- the underwriter spread consists of the managers fee (10-20%), underwriting fee (20-30%), and selling concession (50-60%)
Exemptions from securities act of 1933
- securities issued by US government, Municipal, charitable organizations, banks, commercial paper, bankers acceptances, regulation A transactions, Rule 147 offerings, Regulation d offerings, Rule 144 sales, and rule 144A sales
regulation A transactions
- offering circular to SEC
- corporate offerings that are 5 mil or less per 12 months
Rule 147 transactions
- intrastate offerings
- issuer has 80% of assets and business in teh state
- prove residency by where you vote
- offering comes to rest (last new share has been sold) for next 9 months can only sell to state residents
regulation D transactions
- private placements with:
- institutional investors
- officers or directors of the issuer
- can be placed with a max of 35 individual nonaccredited investors - which are individuals with 1 mil min net worth or 200k annual income
- must accompany an investment letter or lettered stock - buyer doest sell for 1 year (holding period) - restricted offering
rule 144 transactions
- sales of control (owned by insiders who oen 10% or more) or restricted securities
- after 1 year holding period on restricted securities the investor may sell the greater of 1% of the total outstanding shares of the same class or the average weekly trading volume in the stock cover over the past 4 weeks
- control stock - no hold but volume limits apply
- no short sales of anykind allowed
- family is also considered to be insiders
144A transactions
- unregistered foreign securities
- stocks sold to institutionsl customers only are exempt
- no holding period
rule 145 transactions
- covers reclassifications, mergers (consolidation) and transfer of assets
- also includes any stock splits or stock dividends (no registration with SEC needed)
NASD rule 2790
- anyone wiht tie to the industry not allowed to buy IPO on 1st day of trading
- does not apply to AOPs
- restricted persons include:
- BDs and any family
- portfolio managers and family
- fiducisries (attorneys, accountants, trustees) and family
- family consists of parents and parents in law, spouse, sibblings and siblings in law, children and children in law, and anyone financially dependant
- grandparents, aunts and uncles not included