Series 14 CH. 6

Well-known seasoned issuer (WKSI)

large, established issuer. 2 main reqs:

1. must be a reporting issuer.

2. the issuer must have a public float of at least $700mn.

reporting issuer or company

a company that must periodically file reports with the SEC about its financial condition and other relevant info to investors/

Most common way to become a reporting issuer is by going public or if they are private, having a large number of investors.

public float

total market value of the issuer’s outstanding common stock, except for shares held by company insiders and affiliates

seasoned issuer

a reporting issuer with a public float of at least $75 mn. may file a short-form registration like a WKSI but not enjoy other advantages of WKSI status

unseasoned reporting issuer

reporting issuer that does not qualify for WKSI or seasoned issuer

non-reporting issuer

company that is not required to file periodic SEC reports under the exchange act

inelgible issuer

an issuer that may not take advantage of certain less restrictive rules concerning communications during the cooling-off period.

Ineligible issuers include those that:

• failed to file required reports furing last 12 mos

• or have been or done any of the following in last 3 yrs:

  • issue penny stocks, blank check company, shell company, declared bankruptcy, or convicted felon/misdemeanor

emerging growth company

companies with annual gross revenue under $1.07bn

Free Writing Prospectus (FWP)

a written offer to sell or solicitation to buy the securities in an offering, made after the registration statement has been filed

SPACs or “blank check companies may not issue

FWPs

When are the UA, AAU, and SGA signed?

just before offering begins - must wait until public offering price is inserted.

when must a prospectus be provided to an investor

At time of trade confirmation, no later than when the transaction settles (no later than one business day after the trade date?

how long is an IPO considered a new issue for

25 days after the offering date

prospectus is required for anyone who buys during this time on primary or secondary market

how long are OTC IPOs considered new issues for

90 days after offering date

how long is a follow on offering for an OTC offer considered a new issue

40 days

(follow on offerings for exchanges have no prospectus requirement after offering date?)

the initial buyers of an IPO must receive what?

preliminary prospectus a min of 48 hrs prior to the offering date.

What does Regulation M do

helps draw a line between legitimate stabilizing activities and market manipulation

reference security

any security that the offered security can be converted into or exchanged for.

Tier’s of market manipulation for securities

Tier 1: Actively traded securities. Price’s of these are not easily manipulated. No restricted period on these.

• security must have an Average Daily Trading Volume of at least $1mn to qualify.

Tier 2: Medium traded securities must have ADTV of at least $100,000 and a public float of $25mn. Restricted period is 1 day prior to pricing of the security until the person’s participation in the distribution is complete.

Tier 3: Lightly traded securities have an ADTV of less than $100,000 or a public float of under $25mn. Restricted period is 5 days prior to pricing until the person’s participation in the distribution is complete.

when does restricted period start for merger, acquisition, and exchange offers

the day that offering materials are first distributed to security holders and ends when the distribution is complete

Purchase limitation

On each day of the restricted period, a passive market maker’s net purchases are limited to the greater of 30% of the security’s ADTV or 200 shares

Price limitation

a passive market maker’s bid may not exceed the highest independent bid at the time of the transaction

when is passive market making not permitted

it is not permitted for at-the-market offerings, best-efforts offerings, or when a stabilizing bid is in effect

Over-allotment option/Green shoe Option

provision in UA that required company to issue 15% more shares in the offering. Not required, but if agreed to then must be in UA> may not be granted later

syndicate short position

number of additional shares the syndicate owes due to over-allotment.

syndicate must eventually cover the short position

a purchase made to cover a syndicate short position is called

a syndicate covering transaction

stabilizing bid

a bid or purchase from an offering’s underwriter, made in an effort to prevent or slow a decline in the offering’s price.

stabilizing bid pricing

the lower of the offering price and the last independent bid

pre-syndicate bid

stabilizing bid made on Nasdaq before the effective date of a follow-on offering

stabilizing bids are only allowed for

firm commitment underwritings

Max penalties for insider trading for an individual

Civil: 3x the amt of the benefit obtained by the violation

Criminal: $5mn for each willful violation and/or 20 yrs in prison

Max penalties for insider trading for a firm

Civil: Greater of $1,000,000 or 3x the amt of profit gained or loss avoided as a result of the violation

Criminal: $25mn

Private Placement

an offering of securities to a small group of selected investors.

Regulation D

companies can offer securities to a limited group of individuals or institutions that meet certain requirements.

Filers of private placements must electronically file a Form D within

15 days of first use

Reg D Rule 504

for equity offerings of $10mn or less. no restrictions on who can purchase the security

Reg D Rule 506 B

no dollar cap and restricts non-accredited investors to 35.

non-accredited investors must be sophisticated or represented by a purchaser representative that is sophisticated.

Reg D Rule 506 C

no dollar cap and allowed to use general solicitation to advertise their issues. All investors must be accredited.

Private Investment in Public Equity (PIPE) Offering

a private placement conducted by a company that is already publicly traded

Typically, 1 or more institutional investors buy the issuer’s stock in a private placement, at a discount from the market price

restriction on reselling shares is removed

Must be reported by Form 8K within 4 business days

Form 8-K

form used by public companies to report a variety of current events.

Stock Exchange requirement for PIPE

File notification within 10 days after the transaction if the PIPE increased the company’s shares outstanding by more than 5%.

Small public offerings may bypass normal registration process by using

Regulation A;

Allows US or Canadian Issuer to sell up to $75mn in equity or debt securities over a 1 yr period.

Cannot be used by investment companies or disqualified issuers

Reg A offerings require

an offering statement (in place of registration stmt).

• more fried

• preliminary and final versions

• after filed, 20 day waiting perio. must include offering circular (similar to preliminary prospectus)

Regulation S

companies that wish to issue securities outside of US solely - exempts from SEC reg

Reg S restrictions on selling to US residents outside the country

debt securities:

• can be sold after 40 day restricted period

domestic equities:

• can be sold after a 40 day, 6 month, or 1 yr restricted period depending on type of issuer

Selling limits for an affiliate

Over 90 day period;

May sell no more than the greater of:

• 1% of the issuer’s outstanding shares

• the company’s avg weekly trading volume of the securities during the 4 weeks preceding the sale

If the sale is more than 5k shares of $50k, the affiliate must file a proposed sale with the SEC on form 144 - then becomes public info

FAST Act, Section 4a7 exemption

allow selling of restricted securities to accredited investors if certain conditions are met.

Rule 10b-18 purchase

Issuer buys back its own securities within safe harbor rules”

1. one bd per day

2. may not be first purchase odftrading day, or take place within last 30 minutes of trading (last 10 min for actively traded securities)

3. Purchase may not be higher than price of last independent purchase.

4. total purchases by the issuer and its affiliates may not exceed 25% of ADTV

Rule 145

requires that a proposed merger or acquisition be registered with the SEC if it involves the sale or exchange of assets among the companies.