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25 Cards in this Set
- Front
- Back
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Securities exchange act of 1934
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- addresses secondary trading of securities, personnel involved, and fradulent trading practices
- created the SEC to oversee the industry |
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Registration statement
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- 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 |
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20 day cooling off period
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- 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 |
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preliminary prospectus
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- 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 |
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tombstone advertisement
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- simple statement of facts regarding the issue
- does not offer for sale |
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due diligence
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- 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 |
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prospectus delivery requirement period
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- 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 |
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the issuer
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- 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 |
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the underwriter
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- responsible for:
- stocks or bonds - tax consequences of the offering - money market financing - capital market financing |
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forming the syndicate
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- 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 |
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The process of issuing securities
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- 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 |
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Securities act of 1933
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- Governs registration with SEC by issuer - full disclosure, cool off period, effective date, final prospectus
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Final prospectus
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- 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 |
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deficiency letter
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- anytime there are alterations to a prospectus there will be a deficiency letter required
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underwriter commitments
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- 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 |
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selling group
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- agreemtnt to sell with other broker dealers - always best efforts contracts
- no liability for unsold securities |
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underwriter compesation
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- the underwriter spread consists of the managers fee (10-20%), underwriting fee (20-30%), and selling concession (50-60%)
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Exemptions from securities act of 1933
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- 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
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regulation A transactions
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- offering circular to SEC
- corporate offerings that are 5 mil or less per 12 months |
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Rule 147 transactions
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- 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 |
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regulation D transactions
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- 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 |
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rule 144 transactions
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- 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 |
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144A transactions
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- unregistered foreign securities
- stocks sold to institutionsl customers only are exempt - no holding period |
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rule 145 transactions
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- covers reclassifications, mergers (consolidation) and transfer of assets
- also includes any stock splits or stock dividends (no registration with SEC needed) |
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NASD rule 2790
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- 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 |
