Lesson 1.1: New Issues and the Primary Market

An underwriter is placing a tombstone advertisement for a company's new issue. A prospective investor might expect to see all of the following information on the advertisement except

the names of the company's officers.

All of the following issuers are exempt issuers except

ABC Railroad Power Systems, Inc

• The hint that leads to the correct response is "Inc." A for-profit corporation is not likely to be an exempt issuer. Common carriers (railroad), charities, and S&Ls are exempt issuers.

An officer of a broker-dealer firm would be categorized as a restricted person if that individual attempted to purchase

call or put options on a stock in the secondary market

• As restricted persons, officers of broker-dealer firms or other institutional investors are prohibited from purchasing a new issue (IPO) at the public offering price.

Indications of interest taken during the cooling-off period are

nonbinding on the issuer and underwriters

nonbinding on the investor.

• Indications of interest are binding on neither buyers nor sellers.

The aftermarket prospectus requirement following an APO for exchange-listed securities is

0 days

• For exchange-listed additional public offerings, there is no aftermarket prospectus requirement.

Each of the following may be traded on an exchange except

life insurance

• All types of financial assets and investment instruments are traded among buyers and sellers on securities exchanges. Stocks (equity securities), bonds (debt securities), options (derivative securities), currencies, and more are traded on exchanges and other securities markets every business day. Life insurance is not a security and may not be traded.

kk