Textbook Chap 11 (SIE)

Under Reg. D, securities may be offered to an unlimited number of _______ investors

accredited

Though some securities are exempt from registration, nothing is exempt from the _______ provisions of the Act.

fraud

May an RR modify a prospectus?

No. The underlining, photocopying, or highlighting of a prospectus is prohibited

T/F: Registration provisions apply when securities are offered through a private placement

False. Private placements are exempt from registration

Rule 144A allows for the sale of restricted stock to _____________________.

qualified institutional buyers (QIBs)

At the federal level, with whom must securities be registered?

The SEC

True or False: There are no restrictions regarding the purchasers of securities that are issued privately.

False. Securities issued privately may be purchased only by select investors.

Reg. D exempts __________________ from the registration requirements of the Securities Act of 1933.

private placements

What is the document that establishes the agreement between the issuer and the underwriter?

Underwriting Agreement

True or False: Mutual funds and ADRs are required to register their securities with the SEC.

True. Mutual funds and ADDRs are non exempt from the SEC’s registration requirements

Rule 144A exempts sellers from the holding period and volume limitations of Rule 144 if trading is done with a _____.

QIB

Identify the acronym: PIPE

Private Investment in Public Equity

A statutory preliminary prospectus is also referred to as a _____________.

red herring

Under Reg. D ____ is the maximum number of non-accredited investors allowed in a Private Placement.

35

When an investor buys a municipal bond in the primary market, what's on the confirmation?

The underwriting spread, agent fees, and the initial reoffering price for each maturity in the offering

True or False: The SEC judges an offering’s investment merit and provides approval.

False

Complete the following statement: The SEC requires a securities offering to register unless it is _______.

exempt

True or False: Unless it is exempt, a security must be registered before it may be sold publicly.

true

Who is expected to apply for a CUSIP number on a new municipal bond?

The underwriter(s)

For how long may a new issue be sold under a shelf registration?

Up to 3 years

A company is incorporated in OH, but does its principal business in NJ, will Rule 147A allow it to sell to NJ residents?

Yes, since its principal business is in NJ, it may sell to NJ residents.

When acting in an ________ capacity, firms assist customers, but do not assume risk.

agency

What is the primary purpose of the Securities Act of 1933?

Provide investors with full and fair disclosure regarding new issues (prospectus)

A company went public five years ago. Today, it wishes to raise additional capital publicly. What offering may be used?

A secondary (subsequent or follow-on) offering

True or False: Shelf Registration gives flexibility to the issuer by allowing delayed or continuous sales.

true

The aftermarket prospectus delivery requirement for listed IPOs is ___ days.

25

What is a nonexempt security?

A security that is subject to the registration provisions of federal law

An investor has a net worth of $2 million and annual income of $100,000 per year. Is she an accredited investor?

Yes, she is accredited since her net worth exceeds $1 million.

All securities sold in the primary market must be sold with a _______________.

All securities sold in the primary market must be sold with a final prospectus.

What rules govern the registration of an issue in any state in which it will be offered?

Blue-Sky Laws

Under Reg. D private placement, ___ is the maximum number of non-accredited investors allowed.

35

True or False: If a registration statement has not been filed with the SEC, BDs may not discuss new issue information.

true

Securities offered publicly must satisfy all applicable _____________ requirements.

registration requirements

To issue securities under Rule 147, an issuer must satisfy how many of the four "doing business" requirement?

It must satisfy only one of the four "doing business" requirements.

What stipulation in the registration statement relieves underwriters of their contractual obligations?

Market out clause

True or False: Public securities offerings may be sold only to a select type of sophisticated investor.

False. Public securities offerings may be sold to all types of investors.

The total spread consists of what three parts?

Manager's fee, underwriter's fee, and selling concession

True or False: Form 144 must be filed within 90 days of selling restricted or control stock.

False. Form 144 must be filed concurrent with the placement of a sell order.

QIBs are financial institutions that have at least $_________________ invested in securities of non-affiliated issuers.

$100 million

What is the name of the offering of additional shares after a company has conducted its initial public offering (IPO)?

A follow-on offering or additional issuance

True or False: During the pre-filing period, certain issuers may be prohibited from communicating with the public.

true

For an exchange-listed follow-on offering, how long must a prospectus be made available in the secondary market?

No prospectus requirement exists for an exchange-listed follow-on offering.

Underwriters operating under a best-efforts agreement with an issuer are acting in a ________________ capacity.

agency/broker

What is an exempt security?

A security that is not subject to the registration provisions of the Securities Act of 1933

True or False: There is no aftermarket prospectus delivery requirement for listed follow-on offerings.

True. No prospectus requirement applies to follow-on offerings.

True or False: The Syndicate Letter is also referred to as the Agreement Among Underwriters.

true

The ____________________ will not appear in a red herring.

final offering price

List the securities that are exempt from registration.

Government/municipal bonds, commercial paper, bankers' acceptances, bank issues, non-profit and small business issues

The holding period for unregistered (restricted) securities under Rule 144 is __________.

6 months

The maximum number of non-accredited investors in a Reg. D offering is _____.

35

Underwriters that have made a firm commitment to an issuer are acting in a ________________ capacity.

principal/dealer

What is the difference between what the syndicate pays the issuer for the new issue and the public offering price?

The underwriting spread

The final ________ _____ will not appear in a red herring.

offering price

In the after-market, a prospectus must be provided for ____ days following a non-exchange follow-on offering.

40

When registering securities, what is the minimum time for the cooling-off period?

20 days

What is the disclosure document, similar to a prospectus, that is used for municipal bonds?

Official Statement

Rule 144 allows for the sale of __________ stock and _______ stock.

restricted, control

Define restricted security.

A security acquired directly, or indirectly, from the issuer or an affiliate, and not from a public offering

For how long must a prospectus be provided in the after-market for a non-exchange follow-on offering?

40 days

A BD that is a part of the selling group (not a syndicate member) would only be entitled to the ____________________.

sales concession

What is the purpose of a Tombstone Ad?

It calls attention to the new issuance of securities and members of the syndicate.

In a firm commitment underwriting, unsold securities are retained by ________________.

the syndicate

What is the difference between a syndicate member and a firm in the selling group?

Syndicate members assume liability, while firms in the selling group do not.

Restricted stock has a ____ month holding period.

six

True or False: Securities offered through a Reg D private placement are considered unregistered.

True. The unregistered (restricted) stock may be sold publicly only if registered or sold under a suitable exemption.

For what offerings is there no after-market prospectus requirement?

For follow-on offerings of exchange-listed stocks

True or False: Securities exempt from registration are also exempt from the antifraud provisions of the Act of 1933.

False. The securities are only exempt from the registration provisions.

An offering of shares with the proceeds being directed to the issuing corporation is called a ________ offering.

primary

May an RR summarize a prospectus?

No. Any prospectus summary (profile) must be produced by the fund's sponsor.

In the after-market, a prospectus must be provided for ____ days following a non-exchange IPO.

90

True or False: 100% of investors must be state residents to qualify for the Rule 147 intrastate exemption.

true

For how long are securities restricted if received by the syndicate as compensation?

six months

True or False: A prospectus is not required to be delivered if a buyer received the red herring.

False. All purchasers of a new issue must receive a copy of the final prospectus.

What two types of offerings are issued in the primary market?

Initial public offerings (IPOs) and subsequent public offerings

What advertises that municipal bonds are available and invites underwriters to bid on a new competitive issue?

Notice of Sale

Public offerings of securities require the delivery of a ___________.

prospectus

True or False: In a private placement, investors are not required to be provided with information disclosure.

False. Investors must receive a disclosure that is similar to what is received for a registered offering.

Securities received from a private placement are called ___________ securities.

restricted

For an unlisted IPO, how long must a prospectus be made available in the secondary market?

90 days

In the sale of a new issue, what is the purpose for including a selling group?

To increase the number of potential purchasers

Identify the acronym: IPO

Initial Public Offering

What is a combined offering?

One in which the proceeds will be split between the issuing company and selling shareholders

How is the underwriter determined for a Competitive Sale?

The issuer invites syndicates to bid on the issue, with the best bid (lowest interest cost) winning the competition.

Define control security.

A security received or purchased by an affiliate of the issuer, such as a director, officer, or major shareholder

What is the after-market prospectus requirement for the follow-on offering of an exchange-listed stock?

No requirement exists for the follow-on offering of an exchange-listed stock.

For how long must a prospectus be provided in the after-market for a non-exchange IPO?

90 days

In the after-market, for how long must a prospectus be provided following an IPO of a stock to be listed on an exchange?

25 days

True or False: Both U.S. government and municipal securities are subject to registration provisions.

False. U.S. government and municipal securities are exempt from registration.

How is the total spread calculated?

Total Spread = Manager's Fee + Underwriter's Fee + Selling Concession

A financial commitment is made in which type of underwriting?

A firm-commitment offering. In a firm-commitment, the BD is acting as a principal.

The aftermarket prospectus delivery requirement for non-listed IPOs is ___ days.

90

True or False: The placement agent for a private placement is not required to perform due diligence.

False. Although private placements are exempt, the placement agent is still required to perform due diligence.

Where can investors get access to official statements for new municipal bond issues?

Electronic Municipal Market Access (EMMA), a database that's run by the MSRB.

What is another name for a preliminary prospectus?

The Red Herring. This document is distributed during the 20-day cooling-off period.

Define public securities offering

A securities issue placed with the public by an investment bank (underwriter)

If a company has never issued securities before, what offering would it conduct to raise capital publicly?

An initial public offering (IPO)

In a best-efforts underwriting, unsold securities are retained by ______________.

In a best-efforts underwriting, unsold securities are retained by the issuer.

Describe a Private Investment in Public Equity (PIPE) offering.

A private sale (i.e., exempt) by an issuer that has previously sold registered (i.e., publicly traded) securities.

Once Form 144 is filed, owners have __________ to sell their securities.

90 days

An investor has a net worth of $100,000 and had annual income of $1 million last year. Is he an accredited investor?

No. Although his income exceeds $200,000, it has not been at that level for the last two years.