Series 79 Knopman Marks Limited Representative Investment Banking Exam 8th Edition

What events could cause Statutory Disqualification?

(1) felony convictions w/in 10 years, (2) securities, fraud, or ethics-related misdemeanors w/in 10 years, (3) injunctions involving investment activities regardless of age, (4) expulsions from a SRO (self-regulatory organization), (5) bars/suspensions ordered by SEC or SRO, (6) denial of registration by SEC, (7) findings that a person made a false statement before an SRO, (8) Involvement in arbitration or civil litigation with findings of sales practice violations, (9) revocations or suspensions from an accountant, attorney, or federal contractor role, (10) filing for bankruptcy w/in past 10 years, (11) findings by SEC, CFTC, or an SRO of willful violation of securities or commodities laws. (18-473)

Nasdaq Listing Requirements

(1) minimum bid price ($4 for initial listing, $1 ongoing), (2) min number of market makers (3 for initial listing, 2 ongoing), (3) number of shareholders, (4) financial performance metrics (revenue, net income, cash flow). 2-80

New York Stock Exchange Listing Requirements

(1) minimum number of shareholders (400 shareholders w/ typically 100 shares each), (2) minimum shares outstanding (1.1M), (3) minimum stock price ($4/share). 2-79

8 things that qualify a person/entity as an accredited investor

(1) natural person with net worth of $1M, (2) natural person with income exceeding $200K or married couple with income of $300K, (3) a bank, insurance company, registered investment company, business dev company, or small business investment company, (4) an employee benefit plan, (5) a charitable organization, corp, or partnership with assets exceeding $5M, (6) a director, executive officer, or general partner of the company selling the securities, (7) a business in which all equity owners are accredited investors, (8) a trust with assets of at least $5M, not formed to acquire the securities offered, and whose purchases are directed by a sophisticated person. (14-407)

Required features of an AML (anti-money laundering) compliance program

(1) policies, procedures, and controls designed to achieve compliance with BSA, (2) policies and procedures for detecting and reporting transactions subject to report requirements, (3) ongoing AML employee training. (19-487)

Limitations to stabilization bids

(1) priority must be given to an independent bidder at the same price, regardless of size, (2) only 1 stabilization bid can be entered at a time, (3) the stabilization agent cannot bid on the stock in addition to the stabilization bid, (4) Prior regulatory notice must have been given that the entity is engaged in stabilizing. (12-383)

Regulation D limits on general solicitation or advertising

(1) prohibits any advertisement, article, notice, or other communication published in any newspaper, radio, magazine, or similar media, (2) prohibits any seminar or meeting whose attendees have been invited by any general solicitation or advertising. (14-406)

Activities not prohibited by Reg M, Rule 101

(1) publishing research/recommendations, (2) Odd-lot transactions, (3) Exercising options, warrants, rights, conversions, (4) unsolicited transactions, (5) basket transactions of 20+ securities in which the covered security is <=5% of basket value, (6) certain de minimis transactions, (7) Rule 144A transactions with QIBs. (12-380)

Order that securities are paid back after priority claims in a bankruptcy

(1) senior debt, (2) subordinated (junior) debt, (3)mezz debt, (4) preferred stock, (5) common stock (17-450)

What rules are required to be followed in order to make a private placement eligible for a Regulation D exemption?

(1) sufficient information and disclosure must be provided to the SEC and to potential buyers, (2) there must be no general solicitation, (3) the securities cannot be resold without registration or an applicable exemption, (4) all sales within a certain time period that are Reg D must be integrated (treated as one offering). (14-406)

What are the three major requirements for a Member Private offering according to FINRA Rule 5122?

(1) the member firm must provide investor disclosure through a PPM, term sheet, or other document which discloses the offering expenses and intended use of the funds, (2) the firm must file offering documents and any amendments/exhibits with FINRA's Corporate Financing Department prior to the time they are provided to any investor, and (3) the firm must commit that 85% of offering proceeds will go to business purposes, not including offering costs, discounts, commissions, and other sales incentives.

What must a registered rep do when opening an account with another firm?

(1) the member firm will notify the rep's employer, (2) the rep must provide regular account statements if requested by employer, (3) member firm must tell rep their employer is being notified. (19-488)

What are the 3 required topics to be covered with respect to a company's written procedures for fairness committee composition and procedures?

(1) the process for selecting members, (2) necessary qualifications for members, (3) how a balanced review is obtained among members. (16-435)

What information must be included in a company's written fairness committee procedures?

(1) the types of transactions for which the committee issues/approves opinions, (2) committee composition and procedures, (3) process for determining whether valuation methods are appropriate. (16-435)

What are 3 advantages of a Reg A offering?

(1)Financial statements are simpler and do not need to be audited, (2) There are no Exchange Act Reporting obligations after the offering unless the company has more than $10M in assets and more than 500 shareholders, (3) it saves the expense of filing with the SEC under the normal registration process. (14-404)

USA PATRIOT ACT Requirements for Customer Identification Programs

(1)obtain customer ID information to open account, (2) verify the identity of each customer to open account, (3) maintain record of customer ID info, (4) determine whether a customer appears US Treasury watch lists of suspected terrorists, (5) notify customers that info is being requested to verify identity. (19-488)

What are the qualifications for an offering to be considered a Private Placement?

(1)sophisticated investors, (2) ability to bear the investment's economic risk, (3) parties must have access to the type of information normally provided in a prospectus, (4) parties must agree not to resell the securities to the public. (13-395)

An issuer intending to distribute securities under Regulation A: (a) can sell no more than $5M without a registration statement, (b) must deliver a prospectus to investors for disclosure, (c) must file an offering notice with FINRO no later than 2 business days prior to distribution, (d) may sell securities only to residents of the state.

(A) (14-413)

Of the types of preferred stock listed below, which has claim to prior years' dividends if they were not previously paid? (a) participating, (b) prior preferred, (c) convertible, (d) cumulative

(D) cumulative. 2-51

EBIT margin

(EBIT margin) = (EBIT)/(sales) (5-156)

EBITDA Margin

(EBITDA margin) = (EBITDA)/(sales) (5-156)

Interest Coverage Ratio

(EBITDA, EBIT-Capex, or EBIT)/(interest expense) (5-160)

Which of the following statements about statutory disqualification are TRUE (select all that apply)

(I) AN individual or firm may be subject to statutory disqualification, (II) Certain persons may re-enter or continue in the securities industry following a SD, (III) Disqualifying events can include bats, injunctions, suspensions, and expulsions from certain activities, SROs, and exchanges. (IV) Once it becomes aware of a SD event, a member is obligated to report the event to FINRA.; All (18-475)

The cash flow statement includes which of the following sections (select two)? (I) Operating Activities, (II) Shareholders' Equity, (III) Investing Activities, (IV) Retained Earnings

(I)&(III) Operating Activities and Investing Activities. (7-235)

Parity Price of Bond (formula)

(Market value of stock) x (conversion ratio) 2-64

P/E equation in transaction analysis

(OFFER price per share)/(trailing 12 Diluted earnings per share) OR (equity value)/(Trailing 12 net income) (6-208)

Operating Leverage (Ratio Formula)

(Operating Leverage) = (fixed costs)/(fixed costs + variable costs) =~= (SG&A)/(SG&A + CoGs) 4-114

Parity Price of Stock (formula)

(Parity Price of Stock) = (Market Value of Bond)/(conversion ratio) 2-64

IN which of the following scenarios has a violation of the FINRA CE requirements occurred?

(a) A firm has defined its Firm Element program to include courses prepared internally, (b) An experienced rep has not completed Regulatory Element within 130 days of the 5th anniversary of registration, (c) A new rep has not completed firm element withint 93 days of the 2nd anniversary, (d) A firm has completed its training plan for the next fiscal year, but does not file it with FINRA before year end.; B (18-476)

Which of the following statements is TRUE regarding the annual report?

(a) The "annual report" is distinct from the "annual report to shareholders", (b) The "annual report" is synonymous with the "annual report to shareholders", (c) A registrant may elect to file Form 6-K on a semiannual basis instead of filing a form 10-K, (d) Form 10-K may not be amended.; A (The "annual report to shareholders" must be sent by a company to its shareholders when it holds an annual meeting to elect directors. It is distinct from a 10-K.) (5-144)

Convertible Bond Conversion Ratio (formula)

(conversion ratio) = (par value)/(conversion price) 2-64

Net Working Capital

(current assets) - (current liabilities) = (AR + Inventory + prepaid expenses and other current assets) - (AP + Accrued Liabilities + Other Current liabilities) (7-231)

Capitalization Ratio

(debt-to-total capitalization) = (debt)/[(debt) + (preferred stock) + (noncontrolling interest) +( equity)] (5-160)

Earnings per share (formula)

(earnings per share) = (net income)/(total shares outstanding) 4-115

Effective Tax Rate (Formula)

(effective tax rate) = (income taxes)/(earnings before tax) 4-115

Gross profit margin

(gross profit margin) = [(sales) - (CoGs)]/(sales) (5-156)

Net Income Margin

(net income margin) = (Net Income)/(sales) (5-157)

Hartt-Scott-Rodino Act

"HSR Act" of 1976 requires parties to file notice with FTC and DOJ as an antitrust measure. (8-293)

A customer provides an indication of interest in an offering, and the underwriter allocates shares to the customer. The shares are said to be. . .

"circled" (11-363)

What is the annual maximum in gifts and gratuities that a firm or associate can give to employees or reps of other firms?

$100/individual per year. (19-491)

A company has a gross profit margin of 40%, sales of $1000M, SG&A of $230M, and $10M restructuring charges. What is operating income?

$160M (NOI = $1000M x 40% = $400M - $230M - $10M = $160M) (4-252)

At the start of Year 1, a company buys a new piece of equipment for $25M. Under straight-line depreciation, how much will annual depreciation expense equal, assuming a 10 year useful life?

$2.5M (5-179)

Given the following information, calculate gross profit. Sales = $1000M, CoGs = $600M, Interest Expense = $50M, Taxes = $10M

$400M (=Sales - CoGs) (5-162)

A company had sales of $500M, OpEx of $50M, and EBITDA of $25M during the past year. At the same time A/R increased by $50M. How much actual cash did the company receive during the year from its sales?

$450M ($500M received, less $50M on credit (A/R) - 7-235)

BJM Company shows $700M Shareholders' Equity as of the beginning of 2012. During the course of 2012, BJM earns $80M in net income and declares a $5M dividend. Assuming no financing activities during the year, what is BJM's shareholder's equity at year end 2012?

$775M (4-123)

A convertible bond has a conversion price of $25 per share. What is the conversion ratio?

($1000 par*)/($25/share)=40:1 ratio. *conversion ratio is based on par value, regardless of current market price. 2-64

A bond of par value $1000 pays a 10% coupon. How much is the semi-annual payment?

($1000 x 10% x ½ = ) $50. (2-53)

WACC (calculation)

(%equity)(Requity) + (1-T)(%debt)(Rdebt) 7-237

Estimate the YTM for a bond with a 5% coupon, 10 years to maturity, and is trading at 80

((50) + (200/10))/(900) = 7.78% (2-58)

Estimate formula for YTM

((annual interest) +- ((discount or premium)/(years to maturity)))/(average of current price of bond and par value). 2-57

Institutional Account (as defined by FINRA)

(1 a bank, S&L, insurance company, or registered investment company , (2) an investment adviser, (3)any other entity (including people) w/ total assets of at least $50M (11-361)

AML (anti-money laundering) Obligations under USA PATRIOT Act

(1) AML compliance and customer identification programs, (2) prohibits transactions with foreign shell banks and persons on terrorist lists compiled by OFAC, (3) mandatory info sharing in response to federal law enforcement requests, (4) compliance with any special measures imposed by US Treasury. (19-487)

Order unsecured priority claims are paid in a bankruptcy

(1) Domestic Support Obligations payable to a government entity, (2) admin expenses from the bankruptcy, including trustee and attorney, (3) unsecured claims created after filing for bankruptcy, (4) up to 180 days back compensation to employees, (5) contributions to an employee benefit plan, (6) deposits for personal rental property, (7) taxes or gov't penalties, (8) death or personal injury claims (17-449)

Information required in an SEC Registration Statement

(1) Issuer information (identify, address, business), (2) Affiliate information (names and addresses of CEP, CFO, accounting officers and directors)), (3)underwriter and legal counsel information, (4)owner information (names and addresses of any owner holding more than 10% of any class of stock), (5)Capitalization table of the issuer, (6) Securities covered by new or existing offerings, (7) a description of funded issuer debt, (8) Estimate of proceeds and use of proceeds for proposed issue, (8) Recent certified financial statements, (9) copies of underwriting agreement and legal opinion of counsel. (9-305)

What are the 4 conditions for a Rule 10b-18 safe harbor share buyback so that the issuer is not in violation of manipulative or deceptive practices regulations?

(1) Manner of purchase (number of dealers used), (2) Timing of purchases, (3) Price of Purchases, and (4) Volume of Purchases. (15-422)

Three requirements to file an S-3

(1) Must already have a class of common stock listed on a national securities exchange, (2) must be a seasoned issuer, (3) must be up to date with filings (for at least 12 months), (4) not have sold more than 1/3 of its common stock public float under S-3 filings in the previous 12 months. (9-308)

Two requirements for offshore transactions to be exempt under rules 903 and 904 of Regulation S.

(1) No offer can be made to any person physically located within the US. (2)No directed selling efforts can be made inside the US - including no solicitation of investors or written communications to investors while they are in the US. (14-408)

Four primary toold of Fed monetary policy

(1) Open Market Transactions, (2) Discount Window, (3) Reserve Requirements, (4) Moral Suasion. (1-26)

Series 24 General Securities Principal Registration DOES NOT qualify an individual to function as what?

(1) Registered Options Principal, (2) General Securities Sales Supervisor for Options/Municipal Securities, (3) Municipal Securities Principal, (4) Municipal Fund Securities Principal, (5) Financial and Operations Principal, (6) Introducing Broker-Dealer Financial and Operations Principal (18-463)

Series 9/10 General Securities Sales Supervisor Registration DOES NOT qualify and individual to what?

(1) Supervise the origination and structuring of underwritings, (2) Supervise Market Making, (3) Determine final approval of advertisements, (4) Supervise overall compliance with financial responsibility rules. (18-463)

What limitations are placed on a Nasdaq passive market maker during the Regulation M restricted period?

(1) The market maker may not bid higher than the highest independent bid, (2) the market maker's NET PURCHASES (buys - sales) in the security may not exceed the greater of 200 shares OR 30% of the MM's avg daily volume in the security during the full 2 calendar months preceding registration. (3) The MM must notify FINRA in advance of their intention to engage in passive market making. (12-383)

Five types of Exempt Securities

(1) US Government Securities, (2) Municipal Bonds, (3) Securities issued by non-profits, (4) Commercial Paper and other short-term debt with a maximum maturity of no more than 270 days, (5)securities of (commercial) banks supervised by a federal or state authority. (14-403)

For the purposes of control securities, an affiliate/corporate insider is defined as:

(1) an officer of the company, (2) any member of the board of directors, (3) an individual owning at least 10% of voting shares. (14-409)

AAU (Agreement Among Underwriters)

(1) appoints the originating investment bank as the managing (lead) underwriter, (2) assigns each of the syndicate member a proportionate liability, and (3) authorizes the manager to allocate a portion of the issue to a selling group. (11-349)

Financial Statement Requirements under Regulation S-X

(1) audited balance sheets for the 2 most recent fiscal years, (2) audited income and cash flow statements for 3 years, and (3) pro forma financial information IF a significant business combination or disposition has occurred during a period for which a balance sheet is required. (9-307)

Organizing and offering expenses that FINRA pays special attention to in reviewing DPP&unlisted REIT organization and offering expenses

(1) bond fide issuer expenses, (2) underwriting compensation, (3) due diligence expenses connected to the offering. (12-389)

Components of a complete "deal file" for an underwriting

(1) communications with issuer, (2) correspondence with underwriting and selling groups, (3)road show material archives, (4) book building records, (5)communications with the SEC and other authorities. (11-360)

What information does a proxy include regarding reelection of Board of Directors?

(1) existing directors and committee participation, (2) compensation, (3) directors' relationships to company, and (4) names of board members who were at fewer than 75% of meetings, (5) names and ages of nominees. (13-336)

Implied share price based on equity value calculation

(share price) = (equity value)/(fully diluted shares outstanding) (7-249)

Arrange the following steps related to a firm's Firm Element training requirement from first to last: (1) Administration of Plan, (2) Written Training Plan, (3) Documentation of Program Completion, (4) Needs Analysis

4, 2, 1, 3 (18-476)

Filing Deadlines for 10-Q

40 days after Q end for large accelerated and accelerated filers, 45 days for non accelerated and smaller reporting filers. (13-335)

Research Blackout period, Syndicate manager

40 days after effective date for an IPO, and 10 days after effective date for follow-on. (12-377)

For an IPO, the "blackout period" for managers or co-managers as prescribed by NYSE Rule 472 is for what period of time?

40 days from the effective date. (12-378)

How long after the expiration of a tender offer may an offer to tender be withdrawn if shares have not yet been accepted for payment?

40 days. (15-417)

Deadline for a respondent to answer a claim with the NAMC

45 days (19-497)

Filing date for preliminary prospectus (red herring)

5 copies filed with SEC no later than the date it is first delivered to investors. (9-319)

How many bidders are typically invited to the second round of a formal sale process?

5-10 (8-289)

How many pages is a typical M&A Confidential Information Memorandum?

50+ (8-271)

Confidential Information Memorandum

50+ page detailed written description of the target that serves as the primary marketing doc for the target in an auction. Contains information on the investment, target, sector, customers and suppliers, operations, facilities, management, and employees. (8-267)

The Securities Exchange Act of 1934 requires an issuer to register once it has reached how many shareholders? How much in assets?

500 shareholders and $10M in assets (13-343)

Minimum Holding Period for restricted securities.

6 months for companies subject to the Securities Exchange act of 1934, 1 year for those not subject. (14-409)

What is the statute of limitations to file for arbitration with NAMC?

6 years. (19-498)

Filing Deadlines for 10-K

60 days after FY end for large accelerated filers, 75 days for accelerated, 90 days for non-accelerated and smaller reporting companies. (13-335)

What is the filing requirement for definitive proxy?

8 copies to SEC and 3 with each exchange on which the registrant is traded, 20 days before shareholder meeting. (16-439)

According to FINRA Rule 11880, how long does the syndicate manager have to settle all syndicate accounts?

90 days following syndicate settlement date. (12-388)

Income Bonds

AKA Adjustment bonds. A type of debt security in which only the face value of the bond is promised to be paid to the investor. Interest is paid only if there are enough earnings to do so. 2-65

Pegging

AKA Price Fixing. Prices are artificially maintained at a certain level by manipulative activity or conspiracy. (19-482)

Securities Act of 1933

AKA the Truth in Securities Act. (1) Requires investors receive significant and material info concerning securities being offered for public sale, and (2) prohibits deceit misrepresentations, and other fraud in the sale of securities to the public. (1-13)

An alternative type of trading system that facilitates computerized trading of financial products away from an exchange is known as what?

AN ECN - Electronic Communications Network. (1-33)

When compared to a corporate debenture, a mortgage bond (select two) (I) tends to yield a lower rate of return, (II) tends to yield a higher rate of return, (III) has higher priority in corporate liquidation, (IV) has lower priority in corporate liquidation.

A

All of the following could result in a statutory DQ of a registered rep EXCEPT (a) A felony drug charge 15 years ago, (b) Conviction of a misdemeanor in the mortgage business 8 years ago, (c) a failure to supervise violation in the past 5 years, (d) Suspension from all trading activities on the PHLX 6 years ago.

A (18-477)

An individual is LEAST likely to owe a duty of trust in which of the following situations? (a) Corporate info is communicated to him by a friend with whom he often gossips, (b) He assured the communicating party that info would be kept confidential, (c) The info was learned while meeting with a client of his employer, (d) The info was shared by a neighbor who is a CEO of a corporation who regularly shares confidential info b/c the rep has earned his trust.

A (19-502)

A company or organization with no more than 100 shareholders and which elects to pass corporate income and losses to its shareholders is known as a(n): (a) S Corporation, (b) C Corporation, (c) Limited Liability Company, (d) Limited Partnership

A (3-97)

Members of a limited liability company: (a) are not personally liable for its debts, (b) are personally liable for its debts, (c) must elect a chief member to manage the business, (d) cannot manage the business

A (3-97)

A company's marginal tax rate refers to which of the following? (a) The rate at which a company is required to pay federal, state, and local taxes, (b) The actual tax amount paid by a company during a given year, (c) The rate at which a company's shareholders pay taxes on dividends received, (d) The actual tax amount paid by a company on the sale of long-term investments.

A (4-123)

Which of the following is true regarding the accounting for an issuer's repurchase of its own stock in the open market? (a) It is reflected on the balance sheet at the acquisition cost. (b) It is reflected on the balance sheet at the current market value. (c) It is reflected on the cash flow statements as an operating activity. (d) It is reflected on the cash flow statements as an investing activity.

A (4-123)

All of the following are common leverage ratios EXCEPT (a) Enterprise Value/EBITDA, (b) Debt/Total Capitalization, (c) Debt/EBITDA, (d)Debt/Equity

A (5-179)

All of the following statements regarding penalties for insider trading are correct EXCEPT: (a) Violators may be imprisoned for 30 years, (b) Violators may be subject to penalties of up to 3x damages, (c) Both the tipper and tippee can be liable for insider trading, (d) A county is payable to persons who inform the SEC of insider trading activities

A (maximum prison sentence is 20 years). (19-494)

Rule 5122 pertaining to Member Private Offerings (MPOs)

A FINRA member firm is raising capital for itself or another entity under its control. The rule is intended to prevent conflicts of interest and require sufficient disclosure to investors. (13-400)

Fixed Pot Arrangement

A certain number of shares are reserved outside of the syndicate members allotment for large institutional orders. The allocation of sales credits from this pot is pre-determined among the underwriters regardless of who originates the institutional order. More common than a jump ball arrangement in the US. (11-357)

Jump Ball Pot Arrangements

A certain number of shares are reserved outside of the syndicate members allotment for large institutional orders. The credit for institutional sales go on a first-come-first served basis to any underwriter who places institutional orders through the pot. (11-357)

Subchapter C Corporation

A chartered business entity which is owned by shareholders who are exposed to limited liability and are represented by a board of directors, and can issue stock and bonds. Income of C-Corps are "double taxed," in that the profits are taxed once at the corporate level and again at the shareholder level. 3-90

Chapter 11 Debtor-in-Possession

A debtor (company) files Chapter 11 and retains possession of all assets. (17-446)

Two-step merger

Acquirer makes a public offer to acquire shares. If acquirer achieves 90% of voting shares, the acquirer can execute a "short form" merger to squeeze out the remaining shareholders. If the acquirer only receives a voting majority of shares but not 90%, they commence with a shareholder vote as is done in a one-step merger. (8-295)

Reverse Triangle Merger

Acquiring company purchases target and combines it with a subsidiary. The subsidiary becomes part of the target. 3-103

Forward Triangular Merger

Acquiring company purchases the target company and subsequently combines it with a pre-existing subsidiary. The target becomes part of the subsidiary. 3-103

Reg M, Rule 102 applies to. . .

Activities by the issuer or selling shareholders. (12-380)

What is acceleration

A lender's right to have their principal due immediately. (17-452)

Explicit Exception to a prospectus #2

A notice, circular, ad, letter, or communication is not considered a prospectus IF it states from whom a written prospectus can be obtained, and only identifies the security, price, and how orders are executed. (9-313)

Within the context of the M&A process, what does a negotiated sale refer to?

A sale process centered on a direct dialogue with a single prospective buyer. (8-300)

Fixed Exchange ratio Stock-for-Stock Acquisition offer

A specific number of shares of acquirer stock are given to each holder of a share of target stock. More common than floating exchange ratio. (6-203)

The direct trading of exchange listed securities that takes place away from an exchange is known as what?

A third-market transaction. (1-33)

Dow Jones Utilities Average

15 gas and electric utilities stocks. (1-16)

Limitation on Organizing and Offering Expenses for a DPP or unlisted REIT under FINRA Rule 2810

15% of gross offering proceeds, 10% of which may be underwriting compensation. (12-389)

A company has a current share price of $20/share, and $150M in debt at a conversion price of $15. How many shares does this represent toward fully diluted shares outstanding, using the "if-converted" method of calculation?

150M/15 = 10M shares (5-152)

A company has a current share price of $20/share, and $150M in debt at a conversion price of $15. How many shares does this represent toward fully diluted shares outstanding, using the Net Share Settlement method?

150M/15 = 10M shares x $20/share = $200M cash payment - $150 in retired debt = 50M payment to be covered by issuing new shares. 50M/$20 share price = 2.5M shares toward fully diluted shares outstanding. (5-153)

An acquirer purchases 90% of a company's 1M shares in a tender at an offer price of $20/share. What is the implied equity value for the entire company?

1M x 90% x 20 = $18M paid in the tender/90% = $20M implied equity value for whole company. (6-202)

How many rounds does a typical auction consist of?

2 (8-299)

Registered reps are required to requalify by exam if their registrationsa re not sponsored by a member firm for a period of. . .

2 years (18-475)

Dow Jones Transportation Average

20 airline, trucking, RR, shipping stocks. (1-16)

How long must an issuer tender offer remain open under SEC Rule 13e-4

20 business days from commencement and at least 10 business days from the date of any notice increasing or decreasing the percentage of securities being sought or offered. (15-417)

What is the minimum period that a tender offer must be kept open?

20 business days from the date it is first published or sent to shareholders. (15-420)

How far in advance of a shareholder meeting must a definitive proxy be mailed to shareholders? If it is made available online, how far ahead must it be posted?

20 days for physical mailings, 40 days posted online. (13-336)

Regulation FD

2000 act that requires "fair disclosure" and prevents public companies from meeting with analysts and sophisticated investors to "guide" regarding expected results before that information has been made available to the public. (13-338)

Sarbanes-Oxley Act

2002 act requiring enhanced conflict of interest disclosures, enhanced insider transaction disclosures, and enhanced management assessment of internal controls. (13-337)

Research Blackout Period, Underwriter/Syndicate Member or Selling Group Member

25 days after effective date for IPO, no blackout period for follow-on offerings. (12-377)

Greater than $100K

3 arbitrators, unless parties agree in writing to 1. (19-498)

Statute of Limitations to bring a suit for damages if an investor is injured due to price manipulation activities

3 years of manipulative activity and one year of discovery. (19-482)

How long must firms keep records of Firm Element program requirements?

3 years, first 2 years in an easily accessible place. (18-472)

What is the deadline to update significant events to an employee's U4?

30 calendar days for most events, 10 days for statutory disqualifications. (18-467)

A broker-dealer is required to file notice to FINRA of the termination of a rep within. . .

30 days (10 if with cause). (18-475)

ABC Corp has 1M shares of common stock, of which the public float is 900K. To qualify for an S-3, what is the max amt of common that the company may have sold under S-3 in the previous 12 months?

300,000 shares. (9-327)

Formula for Current Yield

CY = (annual interest)/(market price). 2-56

A bond is issued with a 5% coupon and is trading at 120. What is the current yield?

CY=(annual interest)/(market price) = (5%x1000)/(120%x1000)=4.17%. 2-57

What is a common way bankers gauge a stock's current performance against current performance of comps?

Calculate current stock price as a percentage of its 52-week high. (5-148)

How to determine cost of debt in a company with public debt?

Calculate current yield on publicly traded bonds. (7-239)

Automatic Shelf Registration

Can be filed for WKSIs - becomes automatically effective w/o prior review by the SEC. (9-312)

Where in a company's financial statements can you find depreciation and amortization?

Cash Flow Statements. (5-178)

CRD System

Central Registration Depository containing data on all FINRA registered individuals. (18-467)

IN the event a material default is not waived by creditors, what is a borrower's typical next step?

Chapter 11 bankruptcy. (17-452)

Which type of bankruptcy filing is more common for businesses?

Chapter 11. (17-445)

Where can one find most recent data for SALES, GROSS PROFIT, EBITDA, EBIT, Net Income/EPS?

Company's 10-K or 10-Q. Alternatively 8K or press release if there have been earnings announcements or other newsworthy events. (5-139)

Form F-3

Comparable to an S-3 for foreign issuers. (9-308)

Underwriting Fee

Compensates all syndicate members (including manager) for assuming the risk of buying the securities from the issuing corporation, generally 20-30% of spread. (11-350)

Manager's Fee

Compensates the managing underwriter for negotiating and managing the offering. Diff between underwriting spread and takedown price, Generally 10-20% of spread. (11-350)

Selling Concession

Compensates the managing underwriter, syndicate member, or selling group member for the actual sale of the securities, generally 50-60% of the spread. (11-350)

A legally binding contract between the target and each prospective buyer that governs the sharing of non public company information refers to a:

Confidentiality Agreement (13-401)

Regulation S-K

Contains instructions for filing forms under the Securities Act of 1933 and the Securities Exchange Act of 1934. (9-306)

What disclosures are required in a fairness opinion that will distributed to shareholders?

Contingent fees, material relationships with any party to the transaction, independent verification, whether it was approved by a fairness committee, and whether the opinion evaluates the fairness of insider compensation. (16-433)

The government raises taxes to influence economic performance. Is this an example of Fiscal or Monetary Policy? Expansionary or contractionary?

Contractionary Fiscal Policy. (1-33)

US Treasury Securities are sold by the Fed. Is this an example of Fiscal or Monetary Policy? Expansionary or contractionary?

Contractionary Monetary Policy. (1-33)

The priority status of debt instruments at the same legal entity refers to what?

Contractual subordination. (17-452)

Certain exceptions made available to banks under the Securities Exchange Act of 1934 exempt whom from SEC registration?

Credit unions that make securities available to their customers. (18-475)

CTR

Currency Transaction report. Must be filed for any cash deposit(s) in excess of $10K in one business day. Filed with IRS within 15 days. (19-486)

Current ratio

Current assets/current liabilities. (17-451)

Form 8-K

Current report of newsworthy items. Filed within 4 business days of triggering event. (10-334)

All of the following statements are true regarding a selected dealer agreement EXCEPT (a)It is permissible to communicate terms of the selected dealer agreement by wire, (b) It is permissible to amend terms of the selected dealer agreement by wire, (c) it identifies the terms of payments between selected dealers and the managing underwriter, (d) It specified that all selected dealers must be FINRA members.

D (11-353)

All of the following statements describe a firm commitment underwriting EXCEPT (a) the underwriters purchase all securities directly from the issuer, (b) the securities are purchased from the issuer at a price below the public offering price, (c) the securities are offered to the public at a price specified in the agreement, (d) the underwriters return to the issuer the securities that cannot be sold.

D (11-353)

The underwriters have a firm commitment responsibility in which of the following: (a) all-or-none, (b)mini-max, (c) Best Efforts, (d) Standby.

D (11-353)

All of the following info is required when submitting a Form U-4 EXCEPT: (a) Employment history for past 10 years, (b) Residence history for past 5 years, (c) SSN, (d) Tax returns for past 3 years.

D (18-459)

FINRA is authorized to enforce the rules of all of the following EXCEPT (a) the SEC, (b) the Municipal Securities Rulemaking Board, (c) The New York Stock Exchange, (d) the Federal Reserve Board

D (19-502)

The risk that a security cannot be sold easily or promptly is known as: (a) systemic risk, (b) market risk, (c) financial risk, (D) marketability risk.

D (2-51)

An issuer is most likely to call a bond that has: (a) a low coupon and a call premium when interest rates are rising, (b) a low coupon and no call premium when interest rates are rising, (c) a high coupon and a call premium when interest rates are falling, (d) a high coupon and no call premium when interest rates are falling.

D (2-67)

Publicly-traded REITs refer to which of the following? (a) Those that do not file with the SEC and whose shares trade on a stock exchange. (b) Those that do not file with the SEC and whose shares do not trade on a stock exchange. (c) Those that file with the SEC and whose shares do not trade on a stock exchange. (d) Those that file with the SEC and whose shares trade on a stock exchange.

D (3-108)

Which of the following is NOT a marketing document of the M&A process? (a) Teaser, (b) Confidential Information Memorandum, (c) Management Presentation, (d) Confidentiality Agreement

D (8-271)

All of the following are typically provided access to the data room EXCEPT (a) Buyer functional specialists, (b) Buy-side advisers, (c) Acquisition financing underwriters, (d) Buyer's largest institutional shareholders

D (8-289)

The typical CIM contains all of the following data EXCEPT: (a) Target financial projections and MD&A, (b) Information on target's industry and competitive dynamics, (c) Investment highlights, (d) Preliminary valuation analysis of the target

D (8-300)

All of the following are requirements for a firm's AML training program EXCEPT (a) Notification if the persons responsible for day-to-day oversight and control of the program has changed, (b) Independent review of the program every 2 years if the firm does not hold customer accounts, (c) Implementation of internal controls to assure the program is functioning properly, (d) Anti-money laundering trainings for all employees of the firm

D (AML training is only required for "appropriate personnel", not necessarily all employees) (19-503).

The measure of how a bond's duration changes as interest rates change best describes its: (a) yield curve, (b) sensitivity, (c) structure, (d) convexity

D (Convexity.) (2-67)

A live road show is "simulcast" into an overflow room. Which version of the presentation is considered a "graphic communication" with respect to securities offering and prospectus delivery requirements? (a) The live presentation only, (b) The simulcast into the overflow room only, (c) Both, (d) Neither.

D (Neither) (9-328)

Section 363 Acquisition

Asset sale in bankruptcy. The acquirer (who has bought the company's debt instruments, making it a major creditor) signs an asset purchase agreement. (17-447)

Under what circumstances can a buyer withdraw from a sale process after it has submitted a first round bid?

At any time with no approvals necessary. (8-300)

An investor claims a prospectus contained an untrue statement. For the purposes of bringing a civil suit for liability under Section 12 of the '33 Act, the info must have been untrue at what time?

At the time of sale. (9-328)

SBA 7(a) loan program

Available to new businesses for the purchase of land or buildings, acquire PPE, or refinance indebtedness. May not be used to refinance debt likely to default, reimburse funds owed to owner, or to pay delinquent taxes. 3-100

Determination of moderately traded securities (my term) under Reg M, Rule 101

Average Daily Trading Volume of at least $100K and public float of at least $25M. (12-380)

Determination of Actively traded securities under Reg M, Rule 101

Average Daily Trading Volume of at least $1M and public float of at least $150M. (12-380)

A corporate bond that has a sinking fund provision: (a) has greater default risk than other corporate bond issues without this provision, (b) can be offered at a lower interest rate than other bonds, (c) is usually retired in whole at the discretion of the trustee, (d) is exempt from the Trust Indenture Act of 1939

B

All of the following are characteristics of American Depositary Receipts (ADRs) EXCEPT: (a) they represent ownership in shares of a non-US company, (b) they trade on exchanges outside of the US, (c) they pay dividends in US Dollars, (d) they may be sponsored or unsponsored.

B

All of the following are likely to drive economic growth EXCEPT: (a) Decrease in taxation, (b) Increase in value of the US dollar, (c) Increase in government spending, (d) FOMC purchase of US Treasury securities.

B (1-33)

All of the following statements regarding Reg M Rules 101 and 102 are true, EXCEPT (a) required notices must be in writing, (b) offering documents must accompany the notice, (c) if no restricted period applies for an actively traded security, notice must generally be made 1 business day prior to the pricing of the distribution, (d) notice of an applicable restricted period and the basis for the determination is required no later than the business day prior to the 1st complete trading session of the applicable restricted period.

B (12-386)

A Series 79 qualified rep may engage in all of the following activities EXCEPT: (a) Facilitating a debt offering through a private placement, (b) Offering to sell a customer restricted securities, (c) Advising a customer of a financial restructuring, (d) Assisting a client in a corporate acquisition

B (18-476)

All of the following persons are subject to completion of the Firm Element Training requirements EXCEPT (a) Supervisors of registered reps, (b) Sales assistants with no customer contact, (c) Investment company shareholder servicing agents, (d) Registered research analysts that deal directly with institutional customers.

B (18-476)

Statutory disqualification can result in all of the following EXCEPT (a) DQ from registration for a firm or rep, (b) A fine imposed by FINRA on the firm or rep, (c)DQ from continued activities in the business of securities for the firm or rep, (d) The filing of an eligibility proceeding

B (18-477)

All of the following activities are defined as manipulative and fraudulent EXCEPT: (a) pegging, (b) stabilizing, (c) wash sales, (d) matched purchases

B (19-494)

An individual has made a trade based on material non-public info provided by her neighbor. Which statements are true (select all that apply) (I) The neighbor who shared the info has violated insider trading rules, (II) The individual who has made the trade violated insider trading rules, (III) Violators of insider trading rules may be asked to pay criminal penalties up to $10M.

B (19-494)

Guaranteed bonds are frequently used in which of the following situations? (a) An airline uses its airplane as collateral for bondholders, (b) A parent company backs the bonds issued by one of its subsidiaries, (c) a corporation backs its own bonds with other securities it owns, (d) a corporation backs its own bonds with real estate it owns

B (2-67)

Which of the following is a characteristic of a corporate zero-coupon bond? (a) Imputed interest is not taxable at federal level, (b) Prices generally fluctuate more than other types of bonds in the secondary market, (c) They generally have short-term maturities, (d) they pay interest semi-annually

B (2-67)

Common stock is most often purchased to satisfy which of the following investment objectives? (a) Income, (b) Growth, (c) Principal Protection, (d) Tax Minimization

B (2-82)

Unlike debt securities, shares of preferred stock (a) cannot be called by the issuer, (b) have no maturity, (c) are never convertible into shares of common, (d) do not have voting rights

B (2-82)

A private offering of stock by a publicly-traded issuer is known as a: (a) hybrid security, (b) PIPE, (c) secondary offering, (d) primary offering

B (3-108)

Shares offered in a public equity offering that provide proceeds directly to selling shareholders are referred to as: (a) primary shares, (b) secondary shares, (c) dilutive shares, (d) issuer shares.

B (3-109)

REITS are required to distribut what percentage of their taxable income ot shareholders to receive favorable tax treatment? (a) 100%, (b) 90%, (c) 75%, (d) 50%

B (3-97)

GoodValueCo declares a divided in excess of its net income. How is this dividend reflected on GVC's balance sheet? (a) It reduces capital surplus, (b) It reduces retained earnings, (c) It increases long-term liabilities, (d) Public companies are prohibited from paying dividends in excess of net income.

B (4-123)

All of the following are classified as equity EXCEPT: (a) preferred stock, (b) convertible bonds, (c) warrants, (d) common stock

B (A convertible bond is a debt instrument. Although it is convertible to shares of common and its price is heavily influenced by the price of the underlying common, it remains a debt instrument until it has been converted.)( 2-51)

An increase in A/R would result in which of the following? (a) a source of cash, (b) a use of cash, (c) a decrease in a current liability, (d) no effect on cash

B (A use of cash. - 4-235)

Which of the following financial metrics is the best proxy for unlevered free cash flows? (a) EBITDA, (b) EBITDA minus capex, (c) net income plus D&A, (d) gross profit minus D&A

B (EBITDA minus CapEx) (7-253)

Which of the following would NOT be considered a current liability? (a) accrued compensation, (b) PP&E, (c)Accounts Payable, (d) Accrued Expenses

B (Property, Plant, and Equipment. - 7-235)

Which of the following items does NOT constitute a current Asset? (a) Inventory, (b) accounts payable, (c) prepaid expenses, (d) accounts receivable

B (accounts payable) (7-253)

The begin business as a broker-dealer, a firm is required to do all of the following EXCEPT: (a) File a New Member Application with FINRA, (b) Submit a list of anticipated institutional customers, (c) Submit a detailed business plan, (d) Pay the Appropriate Fees.

B. (18-459)

Debtor Conference

After filing CH 11, a debtor must attend an initial debtor conferene with the US Trustee w/in 7 business days in order to verify that pre-filing bank accounts have been closed, tax returns and financial statements have been provided, and adequate insurance exists to protect against creditor claims. (17-446)

Secondary Securities Market

After initial issue by the company, securities are traded on official markets, including NYSE and Nasdaq. 2-78

In the event the lead bookrunner of a follow-on offering seeks to exercise an overallotment option, at what point is the distribution deemed complete?

After the securities have been distributed and trading restrictions terminated. (12-392)

Which of the following are subject to completion of annual Firm Element training requirements (select all that apply): (I) salespeople, (II) traders, (III) sales assistants, (IV) investment bankers

All (18-476)

Where might one gather business, financial, and market information on a private company? (select all that apply) (I) Corporate website, (II) SEC filings for public competitors, (III) Research reports for public competitors, (IV) trade magazines and journals

All (5-137)

Which criteria are relevant for determining whether a precedent transaction would make a relevant comp? (select all that apply) (I) Target Company Sector, (II) Period during which transaction took place, (III) Size of target company, (IV) Target company domicile

All (6-214)

Which of the following are key components of the second round of a traditional auction? (select all that apply) (I) Site visits, (II)Distribution and mark-up of the definitive agreements, (III)Management presentation, (IV)Data room analysis and review.

All (8-289)

An underwriter is helping to prepare a registration statement for an issuer's IPO. The company lacks extensive operating history or performance, and the underwriter includes its own "good faith assessment" of projections of future performance. An independent review of these projections may be included provided that: (select all that apply) (I)The reviewer's qualifications are disclosed, (II) The reviewer's relationship to the issuer is disclosed, (III)The reviewer's consent is obtained.

All (9-316)

How are unexercisable in-the-money options and warrants treated when calculating fully diluted shares outstanding in a company acquisition?

All are treated as exercisable, as they will vest upon a change in control. (6-202)

Which type of offer (ie, what form of consideration) do PE firms generally make for private companies?

All cash (6-214)

What does "all holders, best price" mean in reference to a tender?

All tender offers must be open to all security holders who hold the class covered by the offer on an equal basis. Consideration must be equal, and all holders must be given an equal right to cast votes. This is referred to as "all holders, best price" (15-419)

Which of the following are key sources of capital in the equity funding lifecycle of the company? (select all that apply) (I) Venture Capital, (II) Private Equity, (III)Initial Public Offering, (IV) Follow-on offering

All. (13-401)

Rules against fraudulent manipulation or omission in the sale of securities apply to (select all that apply): (I) Pink sheet stocks, (II) US Government securities exempt from registration, (III) Private Placements

All. (19-494)

Why do sellers hire an investment bank? (select all that apply) (I)Design and execute key process points, (II) Alleviate burden from company management, (III)Legal comfort for the board, (IV)Maximize value received.

All. (8-299)

Coupon (bonds)

Amount of interest paid on an annual basis. Generally paid SEMI-annually, so coupon amount is divided in HALF for each of the two semi annual payments. (2-53)

Depreciation

An expense that approximates the reduction of book value of a company's long-term fixed assets. (7-253)

Amortization

An expense that reduces the calue of a company's definite life intangible asset. (7-253)

Qualified Institutional Buyer

An institution which controls a securities portfolio of $100M or more, or a broker-dealer with a portfolio of $10M or more. (14-407)

Wash Sales

An investor sells a stock in order to realize the loss for tax purposes and immediately buys it back. (19-482)

Well-Known Seasoned Issuer

An issuer eligible to use for S-3 AND EITHER (1) has a worldwide public float of $700M, OR (2)has issued at least $1Bin non-convertible securities over the past year. (9-308)

What limitations does an issuer face on VOLUME of purchases when buying back common stock?

An issuer may repurchase up to 25% of the ADTV of its shares, where the ADTV is the average daily trading volume over the last 4 weeks. (15-423)

Dutch Auction Tender Offer

An issuer supplies a share price range it will pay for tenders and a range of shares it is willing to acquire. Offering shareholders quote a price within the range, and the lowest bid that will allow the company to achieve its goal is selected as the "clearing bid." All accepted tenders (ie, those at the clearing bid or below) are purchased at that price. (15-417)

Best efforts private offering

An offering may continue until a minimum amount of capital is raised. (13-399)

Negotiated underwriting

An underwriter is selected and terms of arrangement are worked out between issuer and the single underwriter. (11-348)

How often must a firm's AML program be audited?

Annually, or every 2 years if the firm does not hold customer securities. (19-487)

Pre-commencement communications

Any communications preceding an issuer tender or filing such as public announcements of the tender. Must be included in an issuer's filing of all written communications concerning the tender. (15-416)

What parties must an investment bank disclose a past material relationship with when issuing a fairness opinion?

Any party in the transaction that they had a relationship with in the past 2 years, including the client as well as the other bidder/subject. (16-433)

Under Regulation S-X, financial statements included in registrations must be prepared and "attested" by auditors who. . .

Are qualified and independent of their client's interests. (9-316)

How must the firm's Chief Compliance Officer be registered?

As a Principal. (18-461)

How is an IPO normally priced by the managers or co-managers during the book building process?

As a flexible range, that may be changed. (11-363)

During the course of auditing a company's financial statements, a CPA discovers that the CFO has absconded w/ a large amount of money. As a result the company will probably have to go out of business. How is the auditor required to report this?

As a statement of "substantial doubt" about the issuer's ability to continue as a going concern. (9-327)

Time period of Corporate bonds, notes, and commercial paper

BONDS = maturity of 10 years or more, NOTES = maturity of 270 days - 10 years; COMMERCIAL PAPER = maturity of 270 days or less. 2-61

What is typically contained in a fairness opinion letter?

Background of transaction, basis of opinion, disclosures and limitations, responsibility, details of the transaction. (16-432)

ABC Corporation files a registration to go public in an IPO. The SEC then issues a deficiency letter to address incomplete information. The effective date of the offering will. . .

Be delayed until the deficiencies are addressed. (9-316)

IN which case would a buyer perform accretion/dilution analysis as part of its process for formulating a first round bid?

Buyer is public. (8-299)

Ginnie Mae, Freddie Mac, and Fannie Mae share all of the following characteristics EXCEPT: (a) They issue mortgage backed securities, (b) Investors in their products are subject to prepayment risk, (c) They structure securities that are not fully backed by the US Government, (d) Investors often purchase their products because of high credit ratings

C

Which of the following statements are true of Treasury notes and bonds, but not of T-Bills? (a) They are traded actively in the secondary market, (b) Their interest is exempt from taxation at the state and local levels, (c) They make coupon payments every six months, (d) They are direct issues of the US Government

C

Under NASD Rule 2711, a research analyst who participates in a non-deal road show is not allowed to communicate with customers (a) about equity securities, (b) about the merits of the issuer, (c) in the presence of investment bankers or representatives of the issuer, (d) using electronic or graphic media for support.

C (12-378)

According to Reg M, FINRA notice is required in all of the following circumstances EXCEPT (a) determination of the applicable restricted period for a new offering of securities, (b) determination of the price of a security for which a restricted period applies, (c)intention of an OTC market maker that is participating in the distribution to withdraw its quotes, (d) intention of the underwriters to conduct penalty bids or syndicate covering transactions.

C (12-386)

In order for a firm to begin business as a broker-dealer, it must have satisfied all of the following requirements EXCEPT (a) filed a Form BD, (b) Become a member of an SRO, (c) Received approval from the SEC to begin business as a registered broker dealer, (d) Become a member of SIPC

C (18-475)

The right of shareholders to maintain their proportionate ownership interest in a corporation is known as (a) subscription rights, (b) liquidation rights, (c) pre-emptive rights, (d) conversion rights

C (2-82)

A transaction in which the acquirer and target merge into one surviving entity is known as a(n) (a) Stock sale, (b) Asset sale, (c) Merger, (d) Material Adverse Effect.

C (3-108)

REITs must invest what percentage of their total assets in real estate to qualify for favorable tax treatment? (a) 100%, (b) 90%, (c) 75%, (d) 50%

C (3-109)

A corporate bond that is currently trading at 95 pays semi-annual interest of $25. What is the current yield?

C (5.26% = (25x2)/(95%x1000)) (2-67)

All of the following help explain why precedent transactions are calculated based on LTM earnings (rather than earnings estimates) EXCEPT: (a) Acquisition financing is typically based on LTM metrics, (b) LTM data serves as a universal standard that can be calculated from public filings, (c) Buyers are less interested in future earnings, (d) Buyers assume responsibility for future earnings.

C (6-214)

All of the following are typically included in the M&A teaser for a private company EXCEPT (a) Brief description of the business, (b) Summary historical financial data, (c) Map of plant and sales locations, (d) Investment highlights.

C (8-299)

Benefits of common stock ownership include all of the following EXCEPT: (a) the opportunity for capital appreciation, (b) the right to elect the company's board of directors, (c) preferred status in a corporate liquidation, (d) the right to receive dividends when declared.

C (Common stock is junior in claim to all other outstanding securities in a corporate liquidation.)( 2-51)

Under FINRA Rule 5141, members who participate in fixed price syndicates are not allowed to offer another member (a) An over-allocation of shares, without prior disclosure, (b) selective communication of material information, (c) a reduced offer price below the public offering price, (d) A fixed share price during the waiting period.

C (FINRA Rule 5141 requires transactions between members in a fixed price syndicate to be made only at the public offering price, until the offering is terminated.) (12-393)

Investment banks help client companies assess all of the following strategic alternatives when evaluating a potential sale EXCEPT (a) Dividend Recapitalization, (b) IPO, (c) Massive re-branding effort, (d) status quo.

C (That is the expertise of a marketing or consulting firm) (8-271)

NewPublicCo sells 100,000 shares of $0.50 par value stock for $12 per share. Which of the following is true about the money raised in excess of par value? (a) It is paid entirely to the SEC as a registration fee, (b) It represents a credit to retained earnings, (c) It represents a credit to capital surplus, (d) It represents a liability that must eventually be returned to shareholders.

C (When a company sells stock to the public, capital raised in excess of par value is represented as an increase to Capital Surplus on the issuer's balance sheet. Capital Surplus is also referred to as Additional Paid-in Capital (APIC).) (4-123)

All of the following are considered leading economic indicators EXCEPT (a) industrial production rates, (b) Changes in business inventories, (c) corporate profits, (d) S&P 500

C (corporate profits are a lagging indicator). (1-34)

An engagement letter in a private placement contains all of the following information EXCEPT: (a)the engagement of the investment bank as the underwriter, (b) the length of time of the engagement, (c) the material covenants of the offering, (d) the fees or percentage of capital raised to be paid to the investment bank.

C (the material covenants of the offering are outlined in the term sheet). (13-401)

What is the final proxy statement filed with the SEC for an ordinary annual shareholder meeting?

DEF14A (6-198)

In which SEC filing would one find a fairness opinion?

DEFM14A (also possibly a Schedule 14D-9 response to a TO). (16-442)

Days Inventory Held (calculation)

DIH = Inventory/CoGs x 365 (7-233)

Days Payable Outstanding (calculation)

DPO = AP/CoGs x 365 (7-234)

Days Sales Outstanding (calculation)

DSO = AR/sales x 365 (7-232)

What metric is used to measure the number of days it takes for a company to remit funds on its outstanding moneys owed for goods and services?

Days payable outstanding. (DPO = AP/CoGs x 365) (7-253)

A company has sales of $1B and A/R of $150M. What is DSO?

Days sales outstanding = 150/1000 x 365 = 54.75 DSO (7-252)

DIP Financing

Debtor-in-Possession financing - new loans that help the company maintain operations and rebuild working capital. (17-446)

Dividend Declaration/Payment Timeline

Declaration Date>Ex-Dividend Date>(2 biz days)>Record Date>(3 wks)>Payable Date. 2-40

A market widely used for both speculation and hedging of risk is the:

Derivatives Market (1-33)

What is in a 10-K Part 1 - General Business Information?

Description of business, risk factors, and current legal proceedings. (10-332)

When are the details of the Staple provided to potential buyers?

Details are communicated verbally ahead of the first round bods, and the term sheet and/or actual financing commitments are provided ahead of the final bid submission. (8-278)

Subscription Rights

Determine how many shares an existing stockholder can buy and at what price in the case of a new stock issue. 2-40

What info is in Part III of a company's 10-K?

Directors, officers, and beneficial shareholders. (13-343)

Zero Coupon Bonds

Do not pay a coupon. They are bought at a discount from par value, generally with a long term maturity of 10+ years.

DJIA

Dow Jones Industrial Average, Price-weighted index of 30 "blue chip" stocks of industrial companies, including financial and retail companies. (1-16)

When is the data room in place?

During the second round of bidding. Access is typically granted after the first round just prior to, or at the same time as, management presentation. (8-275)

How is the equity value calculated in a combination cash and stock acquisition?

EQUITY VALUE = [cash offer per share + (exchange ratio x acquirer share price)] x Target's fully diluted shares outstanding (6-207)

Calculation of Enterprise Value

EV = (equity value) + (net debt) + (noncontrolling interests) + (preferred stock) (6-207)

Calculation of Enterprise Value

EV = (equity value) + [(Total Debt) - (Cash & Cash equivalents)] + Preferred Stock +Noncontrolling Interest (5-153)

Pink OTC Markets (Pink Sheets)

Electronic quotation system that displays quotes for many over-the counter securities. No listing requirements, and companies are not required to file with SEC. 2-81

Equity Value from calculated enterprise value

Equity Value = EV - (net debt + preferred stock + noncontrolling interest) (7-248)

Equity value from share price

Equity value = (share price) x (fully diluted shares outstanding) (5-148)

Is the Chinese Wall considered a legal or ethical barrier?

Ethical (19-503)

Regulation A

Exempts small securities from registration requirements. (14-404)

What is in a 10-K Part 4 - Exhibits, Supplements, and Signatures?

Exhibits, financial statement schedules, signatures of CEO, CFO, controller, and a majority of the BOD. (10-333)

T/F: Because a PPM is not submitted to the SEC, it is subject to different standards for accuracy.

FALSE (13-398)

T/F: Asset-backed securities issuers, registered investment companies, and business development companies can be WKSIs

FALSE (9-309)

T/F: If an issuer fails to comply with all 4 provisions of the safe harbor exemption, the share buyback is considered manipulative/deceptive.

FALSE (Although automatic safe harbor is not achieved, the SEC will consider the facts and circumstances of the particular situation.) (15-423)

T/F: An issuer buyback is a form of tender offer.

FALSE (An issuer may buy back shares through an open market transaction, or through a tender offer). (15-422)

T/F: It is acceptable to strategically withhold material facts, as long as the broker dealer does not misstate facts.

FALSE (Omissions or misrepresentations of material fact are considered fraud under the Securities Exchange Act of 1934). (19-482)

T/F: Securities offered under Regulation A are restricted, and must include a legend.

FALSE (Reg A securities are not restricted. They can be freely traded in the market after offering.) (14-404)

T/F: A bank must always independently verify information provided by a client that forms a substantial basis for the fairness opinion.

FALSE (The bank has the responsibility to disclose what information has and has not been independently verified, but many items - such as financial statements - cannot be independently verified. (16-435)

T/F: If a broker dealer has a control relationship with an issuer, the dealer must disclose this in writing at the time that shares are offered to an investor.

FALSE (The broker dealer must notify in WRITING at the time of the offer, but provide written disclosure by transaction close). (12-376)

T/F: A company can meet Reg FD disclosure requirements with a public speech to shareholders or a press conference.

FALSE (The information must be "broad" and "non-exclusionary".) (13-339)

T/F: A Target board would commission a fairness opinion in a hostile takeover as justification for their rejection of Acquirer bid(s).

FALSE (the board is attempting to reject the bid, not confirm its financial fairness) (16-430)

T/F: An issuer may distribute publicly available information at a road show, such as company profiles, press releases, and recent financial results without registration.

FALSE, any information handed out (other than the red herring) is considered a free writing prospectus and is subject to filing requirements. (12-371)

T/F: Sarbanes-Oxley prohibits an issuer from making personal loans to directors or officers in any case

FALSE, directors or officers may obtain loans at terms available to the general public (such as the CEO of a bank obtaining a loan at market terms). (13-337)

T/F: A FINRA rep must receive written consent from their employer in order to undertake outside work for compensation.

FALSE. (According to FINRA standards, the rep must simply notify employer. The outside activity will be added to the U-4. The firm may have stricter internal policies, however.) (19-489)

T/F: A FINRA member firm has the right to request arbitration as an alternative to a court hearing in a dispute with another member or employee

FALSE. (Arbitration is the standard method of dispute resolution in the securities industry. ) (19-497)

T/F: An issuer that qualifies for a Regulation A Exemption is not required to file documentation with the SEC.

FALSE. (While the issuer need not file a registration statement, they must file an offering statement consisting of a notification, offering circular, and exhibits. They must also file any publicity documents of advertising broadcast scripts promoting the offering.) (4-404)

T/F: According to Rule 433, a PowerPoint or Internet-assisted presentation is a "bona fide electronic road show" and is thus not considered a prospectus.

FALSE. A bona fide electronic road show is considered a free writing prospectus. (9-318)

Free Cash Flow Calcualtion

FCF = (EBIT) - (Taxes: at marginal rate) = (EBIAT) + (D&A) - (CapEx) - (increase in net working capital) (7-223)

NAMC

FINRA National Arbitration and Mediation Committee, who has authority over arbitration rules and proceedings. Composed of 25 neutral arbitrators from both inside and outside the industry. (19-497)

Prohibited compensation for an underwriting

FINRA prohibits (1) fees from underwriter to issuer to reimburse for overhead, (2) granting of right of first refusal more than 3 years out, (3) warrants/options/convertible securities exercisable more than 5 years from effective date or with a strike price below the offering price, or (4) any stock greater than 1% of the offering without a 180 day lock-up. (12-371)

How is the reporting requirement for an NYSE member firm opening an account with another member firm different from FINRA requirements?

FINRA rep only must notify employer they are opening account. NYSE required written employer consent to open the account. (19-488)

Reg M, Rule 101 restricted period

FOR ACTIVELY TRADED SECURITIES - no restricted period, FOR MODERATELY TRADED SECURITIES - restricted period goes from 1 business day before determination of offer price to whenever that person's participation in the distribution ends, FOR ALL OTHERS - begins 5 business days before the price is determined and ends when that person's participation is completed. (12-381)

Who must review a fairness opinion internally at an investment bank before it is sent to the client?

Fairness committee. (16-431)

A "mini tender" offer is subject to minimum filing and disclosure requirements, provided that it seeks to acquire how many shares?

Fewer than 5% of outstanding shares. (15-424)

Form MC-400

Filed by a FINRA member to apply for relief from ineligibility if the member wishes to sponsor the the association of a statutory disqualified person. (18-473)

Scheudle TO

Filed by an acquirer on commencement of a tender offer. (6-196)

FinCEN

Financial Crimes Enforcement Network. Responsible for administrating anti-money laundering obligations of the Bank Secrecy Act. (19-485)

Where can one find most recent data for SHARE PRICE DATA?

Financial information service (5-139)

Asset Backed Securities (ABSs)

Financial instruments which are securitized by a pool of underlying assets which are aggregated into financial instruments and sold to investors. 2-72

Comprehensive Statement of Income

Financial statement that reconciles income statement to account for investments made by, and distributions made to, owners of the company. 4-111

Cash Flow Statement

Financial statement that reports cash generated or used by operating activities, investing activities, and financing activities over a given period of times. 4-111

Income Statement

Financial statement that reports revenues, expenses, and net profits over a given period of time. 4-111

Where can one find most recent data for RESEARCH ESTIMATES?

First Call, IBES, Individual Equity research reports (5-139)

In what order is a Debtor in Possession required to pay obligations?

First all obligations incurred after declaring bankruptcy. They must avoid paying pre-filing debts unless approved by the courts. (17-446)

Which type of exchange ratio is most common in a stock transaction?

Fixed Ratio. (6-215)

Under what circumstances may state securities commissioners bring enforcement actions for transactions in Federal Covered Securities?

For fraud, deceit, or unlawful conduct, under antifraud provisions of state law. (12-378)

Form S-1

General SEC registration statement for all newly issued securities. (9-308)

How does the use of stock as consideration for sale affect the valuation of a potential acquisition?

Generally results in lower valuation, as shareholders of the target have potential to realize upside. (6-191)

What is the minimum number of Principals a FINRA registered firm must employ?

Generally, two principals and a Financial and Operations Principal. (18-462)

Mortgage Backed Securities

Ginnie Mae offers US government agency-backed securities representing investments in pools of mortgages. Securities issued by Fannie Mae and Freddie Mac are not backed by the government, but by the agencies themselves, which enjoy extremely high credit ratings. 2-71

SARs (Stock Appreciation Rights)

Gives management or employees a bonus is/when stock price appreciates by a specified amount. Exercised at discretion of employee once strike price is reached. 2-48

Rule 144

Governs the sale of restricted and control securities that are acquired through exempt transactions. (14-409)

What does the SEC consider when asked to accelerate a registration's effective date?

Has the issuer submitted all required information? Has the syndicate taken "reasonable steps" to inform the public of the offering terms through a preliminary prospectus (red herring)? (12-367)

A copy machine technician learned of a major recall that will have a significant impact on profits while working at the site. He contacts several friends and tells them to dump stocks in the company. Is the technician considered an insider in this situation? How, if at all, did he violate insider trading restrictions?

He is not an insider, but he has violated his fiduciary responsibility toward confidential info and is guilty of misappropriation of information. (19-502)

Do transaction comps tend to provide a higher or lower multiple range than trading comps? Why?

Higher range. They reflect a control premium paid when acquiring a full company and/or potential for synergies with a strategic buyer. (6-183)

Which of the following are the most Commonly used ratios for measuring the velocity of a company's fluctuation in products held for sale? (select two) (I) Inventory Turns, (II)Inventory Turns as a percentage of sales, (III) Inventory obsolescence, (IV) Days inventory

I&IV (Inventory Turns and Days Inventory) (7-253)

Which of the following categories of filers must file their 10-Q form within 40 calendar days? (select all that apply) (I)Large accelerated, (II) Accelerated, (III) Non-accelerated, (IV) small accelerated

I, II (5-144)

Which of the following are requirements of an issuer to purchase an exempt offering under Rule 147 (select all that apply) (I) the issuer is incorporated in the state or does significant business in the state, (II) at least 80% of the issuer's revenues must come from within the state, (III) at least 80% of the issuer's assets must be located in the state, (IV) the issuer's board of directors must all be residents of the state.

I, II, III (14-412)

Which of the following are helpful resources for creating a universe of comp companies for a given public company? (select all that apply) (I)Equity research report, (II)Fairness opinions for comparable companies, (III)Annual Proxy statement (DEF14A), (IV) Schedule 13D

I, II, III (5-137)

Which of the following are likely to accompany a trade defecit (select two) (I) Imports are exceeding exports, (II) Exports are exceeding imports, (III) A strong economy, (IV) A weak economy.

I, III (1-33)

Restricted periods under Rule 101 and 102 of Reg M apply to purchases by (select 2) (I) issuers, (II) accredited investors, (III) distribution participants, (IV) institutional buyers

I, III (12-386)

A Customer Information Program (select 2) (I) Requires verification of the identity of US and non-US citizens, (II) Requires verification of ID for non-US customers only, (III) Is a required part of Anti-Money Laundering programs for all financial institutions, (IV) Is a required part of AML programs only is an institution accepts cash.

I, III (19-503)

Issuing stock is advantageous for a company because (select 2): (I) it does not require the company to pay back the money, (II) shareholders are not permitted to influence the operations of the corporation, (III) it does not require the company to make periodic interest payments, (IV) it is less expensive to issue.

I, III (2-51)

Which of the following statements about warrants are TRUE (select two) (I) they may be sold with a bond as a sweetener, (II) they have shorter expiration periods than options, (III) they function very much like call options, (IV) they cannot trade on the secondary market.

I, III (2-82)

Which of the following is an example of a type of organizational structure (select two): (I) C Corporation, (II) Preferred Stock, (III) Limited Liability Company, (IV). American Depositary Receipt

I, III (3-97)

Which of the following are important sources of info for a public company's key business strategy, products, customers, and competitors? (select two) (I)Initiating coverage equity report, (II) Schedule 13D, (III) 10-K, (IV) Fairness opinion for a comparable company.

I, III (5-137)

Under Section 7 of the Securities Act of 1933, which of the following types of information must be included in a registration statement? (select two) (I) Identity, address, and juristicion of the issuer, (II) The specific price of the offering, (III) Capitalization of the issuer, (IV) Certified financial statements of the issuer's CEO.

I, III (9-316)

In a DPP, which of the following types of compensation paid to brokers are included in "underwriter compensation"? (select all that apply) (I)Sales commissions, (II) non-transaction compensation for clerical or ministerial functions, (III) Referral fees paid, (IV) continuing fees and trail commissions

I, III, IV. (12-393)

An "affiliate" refers to which of the following? (select two) (I) Member of senior management that does not own company stock, (II) Employee of the issuer, (III)Person, such as a director or large shareholder, in a relationship of control with the issuer, (IV) A mutual fund that owns 3% of the outstanding shares

I, III. (14-412)

For a given company, a fairness opinion for a company in the same sector serves as a source of info on: (select two) (I) Precedent transactions, (II) Market share information, (III) Customer information, (IV) Comparable companies.

I, IV

To sell securities under Reg A, an issuer: (select two) (I) must file a Form 1-A with the SEC, (II) is not required to file offering documentation with the SEC, (III) is required to provide a prospectus to investors, (IV) is required to provide an offering circular to investors.

I, IV (14-413)

Which two of the following are important sources for identifying trends in a given industry? (I) Sell-side research reports, (II) Schedule 13D, (III) Form 8-K, (IV) Company 10K

I, IV (6-198)

In an IPO, the underwriters (select two) (I)receive lower fees than the selling group, (II)receive higher fees than the selling group, (III)are listed first on the tombstone, (IV) are listed last on the tombstone

II, III (11-363)

Which of the following can influence the length of the blackout period during which an analyst employed by a participant in an underwriting may not issue research reports or engage in public appearances? (select all that apply) (I)Whether the opinion is favorable or unfavorable, (II) whether the participant is a manager/co-manager, (III)Whether the issue is an IPO or follow-on

II, III (12-392)

For which reasons might target shareholders prefer stock to cash as purchase consideration in an M&A transaction? (select 2) (I) Highest premium paid, (II) Ability to retain upside, (III) Tax planning, (IV) Fixed value.

II, III (6-215)

Which 2 of the following do buyers typically plan on bringing with them to the management presentation for a given target? (I)Outside legal counsel, (II)Operating Partners, (III) Investment bankers, (IV) Auditors.

II, III (8-289)

Which of the following are helpful sources for creating a universe of comps for a given private company? (select all that apply) (I) Company's 10K, (II)Investor presentation for a clear public comparable company, (III) Fairness opinions for comparable companies, (IV) Equity research report for a clear public comp.

II, III, IV (5-137)

Ratings may be included in a registration statement for which of the following types of securities (select all that apply) (I)Common Stock, (II) Preferred Stock, (III)Debt, (IV) Convertible Debt.

II, III, IV (because common stock has last claim to earnings, ability to pay obligations is not relevant). (9-327)

According to Reg M Rules 101 and 102, FINRA must receive notification from offering participants (select two) (I) for listed securities only, (II) for listed and unlisted securities, (III) only if a restricted period applies, (IV) whether or not a restricted period applies

II, IV (12-386)

Which of the following are "fiduciaries" covered under FINRA Rule 2060's restrictions on using information about the ownership of an issuer's securities to solicit transactions? (select 2) (I) Broker Dealers, (II) Transfer Agents, (III) Investors, (IV) Trustee

II, IV (12-393)

According to the specifications of Rule 506 of Reg D, a sophisticated investor is: (select two) (I)accredited, (II)accredited or non-accredited, (III) credentialed as a professional in the financial or legal industry, (IV)capable of evaluating the merits and risks of the prospective investment.

II, IV (14-413)

Investors typically receive restriced securities through which of the following? (select two) (I) Open market transactions, (II) Regulation D offerings, (III) Primary offerings, (IV) compensation for professional services.

II, IV (14-413)

Which two of the following are often heavily negotiated in a Confidentiality Agreement between two corporations? (I) Initial bid date, (II) Length of term, (III) Indicative purchase price, (IV) Non-solicitation

II, IV (8-299)

A corporate issuer has 1,000,000 shares of common stock outstanding to 100,000 shareholders. The issuer plans a rights offering to sell an additional 500,000 shares of stock. Which of the following statements are true? (select two) (I) The corporation will issue 100,000 rights, (II) the corporation will issue 1,000,000 rights, (III) each right will enable a shareholder to purchase 5 shares., (IV) It will take 2 rights to purchase 1 share of stock.

II, IV (In a rights offering, there is 1 right issued for each share of outstanding stock. The number of rights required per share = (total shares outstanding)/(number of new shares).) (2-82)

When must a FINRA member provide disclosures in a fairness opinion?

If it has reason to believe that it will be provided or described to public shareholders. (16-433)

When must an acquirer file a proxy statement?

If it is issuing new shares > 20% of pre-deal shares in order to fund the transaction. (6-192)

What dictates whether arbitrators are from within the securities business (non-public) or outside the industry?

If the dispute involves members/reps only, the arbitrator(s) will be from inside the industry. If the dispute involves a customer, the majority of arbitrators (or all, if requested by customer) will be from outside the industry. (19-497)

When must an investment bank disclose fees paid for a fairness opinion?

If the fees are contingent upon successful completion of the deal. (16-433)

May an offerer reneg on a tender offer?

If the offer is canceled, the offerer must either pay for stocks collected or promptly return the securities. (15-420)

All-or-None underwriting

If the underwriter is not able to sell all of the offered shares within a certain window of time, none of the shares are sold and the offering is canceled (11-347).

If the liquidation value of a company is $1B and the company has $1.5B of bank debt outstanding, the bank debt would be considered what?

Impaired. (17-453)

When are liquidity disclosures required?

In a DPP offering in which the sponsor has previously offered a program in which a goal was to liquidate the program within a given period, or by a given date. The prospectus must disclose whether these programs met the state liquidity goals. (12-391)

Stapled Financing Package

In a broad auction acquisition, it is a "pre-packaged" financing structure prepared by the investment bank (or a partner bank). (8-278)

At which point in and M&A sale process is a fairness opinion typically rendered?

Just prior to board approval and execution of the definitive agreement. (16-442)

Implied Dividend Yield

Inplied Dividend Yield = [4 x (most recent quarter dividend per share)]/(current share price) (5-158)

Disgorgement of profits

Insiders are not allowed to keep short-swing profits on issuer securities held fewer than 6 months. Must return all profits to issuing company. (13-340)

What are some situations in which a fairness opinion may be advisable for an Acquirer?

In ambiguous situations, such as if the Target is private, the Acquirer is bidding far in excess of market, Acquirer is bidding for a specific portion or division of the larger company, or if the Target is involved in controversy or litigation. (16-430)

Where can an unlisted security be traded?

In an over the counter market. (1-18)

At what stage in the M&A process do buyers start to line up financing sources?

In conjunction with formulating first round bids. (8-289)

Rule 147

Intrastate Offering Exemption. (facilitates the financing of local business operations. (14-405)

What are the two most common departments that are meant to be separated by the Chinese Wall?

Investment Banking and Retail Sales. (19-503)

For the sale of a sizeable business, who typically runs the sell-side process?

Investment bank (sell-side advisor) (8-271)

Blind recommendations

Investment banking reps may not make blind recommendations to individuals or institutions. Must have info about the suitability of the person to the securities transaction or investment strategy they are recommending. (11-360)

Suitability standards

Investor standards that must be met by individuals OR institutional investors in order for an underwriter to sell securities to them. (11-360)

Chapter 7 Bankruptcy Filing

Involuntary bankruptcy that results in the liquidation of the insovlent firm, with assets distributed to creditors. (17-445)

When must a 14D-9 be filed (deadline)

Issuer files in response to a schedule TO tender offer within 10 business days. (15-424)

What limitations does an issuer face on PRICING of purchases when buying back common stock?

Issuer may not purchase at a price greater than the greater of: (1) highest independent bid OR (2) the last independent transaction price. (15-422)

What creditors (if any) continue to collect interest during a Chapter 11 bankruptcy proceeding?

It is only possible for secured lenders. (17-?)

A company's profitability for a particular period is best measured by which financial statement?

Income Statement (5-162)

Angel Investors

Individual Investors who invest for high returns and a large percentage ownership in the very early stages of a startup business. 3-99

What is the limit on the number of shares of a control security that an affiliate may sell in a 3-month period.

No more than the greater of (1) 1% of the outstanding shares of the same class being sold, OR (2) the average reported weekly trading volume for the 4 weeks preceding the sale. (14-410)

Is an offerer allowed to purchase target securities on the open market during a tender offer?

No, they may not acquire securities other than through the tender while the offer is open. (15-421)

If a company is sold for all cash, is an S-4 required?

No. (Nor is a prospectus.) (16-436)

Continuing Education Components

Regulatory element for individuals and Firm Element for the member firm as a whole. (18-470)

OTC Markets Group

OTC Markets Group or OTC Pink is the new name of Pink Sheets as of this year. (1-15)

Third Market Transactions

OTC, negotiated price trading of exchange traded securities. For example, if a market maker provides liquidity in Disney stock, which is NYSE listed, it is said to be a third market maker. (1-15)

OSJ

Office of supervisory jurisdiction; Each member firm is required to designate as an OSJ any branch office that conducts: (1) order execution/market making, (2) Structuring of public offerings or private placements, (3) Maintaining custody of customer's funds/securities, (4) final acceptance of new accounts, (5) final approval of advertising or sales literature, (6) review and endorsement of customer orders, (7) supervising of activities of persons associated with the member at one or more branch offices. (18-467)

Corporate Insider

Officer, director, or any shareholder owning 10% voting shares. (13-339)

424B

Prospectus (6-196)

Venture Capital Financing

Provided by private investment funds that specialize in scouting promising start up companies after the Angel Investing/bank financing phase. 3-100

Non-Current Assets

On a balance sheet, assets which sustain a company's operations and cannot be easily converted into cash. Includes PP&E, goodwill, and deferred tax assets. 4-117

Current Assets

On a balance sheet, these are assets that are the equivalent of cash or can be expected to be converted to cash within one year. Includes cash, short-term investments, A/R, inventory, supplies, prepaid expenses. 4-116

How many broker-dealers may an issuer use to buy back common stock?

One broker dealer PER DAY. (15-422)

Approximately how long are prospective buyers given to craft first round bids?

One month (8-299)

A document that is used between the issuer and underwriter to indicate formal interest in the completion of the transaction is the. . .

Letter of Intent. (11-353)

Financial Maintenance covenants require the borrower to do what?

Maintain its credit profile buy paying debt or growing cash flow. (17-452)

The limitations on restricted payments covenants prohibits a borrower from doing what?

Making certain payments such as dividends, investments, and prepayments of junior debt. (17-452)

Targeted Auction

Only a select group of potential buyers are approached. (8-257)

Who can remove a legend from a restricted security?

Only a transfer agent, and with consent from the issuer. (14-411)

Under FINRA Rule 2060, under what circumstance may fiduciaries use information about the ownership of securities to solicit purchases, sales, or exchanges?

Only at the request of the issuer. (12-392)

An issuer of corporate bonds includes Moody's current rating for the bonds in its registration statement. The bonds are also rated by S&P. Must the S&P rating be included?

Only if the S&P Rating is materially different. (9-327)

Will changes to the preliminary proxy require a restart to the 10-day waiting period to definitive proxy?

Only if the changes are material or constitute fundamental changes. (16-439)

Allowed communications in a pre-filing period

Only normal communications unrelated to a potential offering. (9-310)

Derivatives and bonds are most typically traded in what type of market?

Over-the-counter market (AKA off-exchange) (1-18)

Four sections of a 10-K

PART 1 - General Business Information, PART 2 - Financial Information, PART 3 - Directors, Officers, and Beneficial Shareholders, PART 4 - Exhibits, Supplements, and Signatures.(10-332)

What are the sections of a 10-Q?

Part 1 - Financial Information, Part 2 - Other Information. (10-333)

Current Liabilities

Payments, debts, and obligations due within one year. Includes AP, notes, interest payable, and taxes. 4-117

When is precedent transactions analysis used v. comparable companies analysis?

Precedent transactions is primarily used in M&A, and comparable companies is primarily used in IPOs. (6-183)

Info regarding an impairment charge that a company recorded during the past year would best be located in what section of the financial statements?

Management's Discussion and Analysis. (5-179)

Full Spread

Manager's Fee + Underwriting Fee + Selling Concession. Can only be achieved by the syndicate manager.

A term in a credit agreement that requires prepayment of term loans with cash generated or received from some of the event refers to what?

Mandatory Prepayments. (17-453)

Painting the Tape

Manipulative transactions are reported to the Consolidated Tape and impact transaction decisions of other investors. (19-482)

Concluding document of a mediation, drafted after parties have come to agreement

Memorandum of Understanding. (19-500)

Highest Credit Ratings for Moody's, S&P, Fitch

Moody's = Aaa, S&P = AAA, Fitch = AAA (5-161)

Highest Ratings that are "Non-Investment Grade" for Moody's, S&P, Fitch

Moody's = Ba1, S&P = BB+, Fitch = BB+ (5-161)

Lowest Ratings that are still "Investment Grade" for Moody's, S&P, Fitch

Moody's = Baa3, S&P = BBB-, Fitch = BBB- (5-161)

Lowest Ratings Available for Moody's, S&P, Fitch (ie, in Default)

Moody's = C, S&P = D, Fitch = D (5-161)

For a public company with 200 M basic shares outstanding, should one expect to pay more, less, or the same per share for 110M shares vs. 110 shares?

More per share for 110M shares, due to the control premium and the challenge of collecting a large block of shares. (6-214)

PREM14C/DEFM14C

Preliminary/Definitive information statement (not a proxy) filed relating to M&A. (6-196)

What step should be taken to ensure each attendee at the road show presentation receives a red herring?

Prepare a signature log and have each attendee sign for receipt of the red herring. (12-378)

Consensus Estimates

Primarily found through IBES and First Call, consensus research estimates can be found for selected financial statistics as the basis for calculating forward-looking trading multiples and trading comps. (5-139)

Competitive Bid underwriting

Multiple underwriters submit sealed bids to purchase the offered securities, and the issuer awards the contract to the party with the best price/terms. Most common in municipal bond deals. (11-348)

Form 144

Must be filed by an affiliate if they propose to sell more than 5,000 shares or more than $50,000 worth of shares in any 3 month period. (14-411)

What is a FINRA Firm's reporting requirement with respect to customer complaints?

Must be furnished to FINRA by the 15th day of the month following the calendar quarter in which the complaint was received. (19-492)

What does the "Capital Resources" section of the MD&A cover?

Must describe (1) the registrant's material commitments for CapEx at the end of the fiscal period, and indicate its general purpose, (2) any known favorable or unfavorable trends in the registrant's capital resources (3)any expected material changes in the mix and relative cost of such resources. (5-180)

Series 39

Principal Registration for DIRECT PARTICIPATION PROGRAMS Limited Principal (18-463)

Series 27/28

Principal Registration for FINANCIAL AND OPERATIONS Principal (18-463)

Series 24

Principal Registration for GENERAL SECURITIES Principal (18-463)

Series 9/10

Principal Registration for GENERAL SECURITIES SALES SUPERVISOR (18-463)

Series 26

Principal Registration for INVESTMENT COMPANY PRODUCTS/VARIABLE CONTRACTS Limited Principal (18-463)

Series 51

Principal Registration for MUNICIPAL FUND SECURITIES Principal (18-463)

Series 53

Principal Registration for MUNICIPAL SECURITIES Principal (18-463)

Series 4

Principal Registration for REGISTERED OPTIONS Principal (18-463)

Long-term liabilities

Principal due in a company's long-term debt structure. Includes loans, mortgages, notes, bond principal repayable beyond one year.4-117

PPM

Private Placement Memorandum - the disclosure document prepared for circulation to potential investors in a private placement. (13-397)

As part of a private placement, the financial advisor prepares an offering document, which is distributed to potential investors. This document is known as a:

Private Placement Memorandum. (13-401)

What are the different types of transaction in which a holder can acquire a restricted security?

Private Placement, Regulation D offering, Regulation S offering, Employee Stock Benefit Plans, as compensation for professional services, or in exchange for providing seed money or start-up capital to the company. (14-409)

Private Investment in Public Equity (PIPEs)

Private placements sold to investment funds and accredited investors by public companies. 3-102.

FINRA Rule 5151

Prohibits any member engaged in a fixed price offering from selling securities to a related person at a discount. (12-373)

Reg M, Rule 101

Prohibits underwriters and other persons participating in a distribution from purchasing (or inducing others to purchase) a security subject to distribution. (12-380)

Under Reg FD, if a selective disclosure is unintentional, when must it be broadly disclosed?

Promptly following the unintentional selective disclosure. (13-338)

Regulation A authorizes the SEC to exempt registration for:

Public offerings not to exceed $5M in any 12 month period. (14-412)

What limitations does an issuer face on TIMING of purchases when buying back common stock?

Purchases may not be made in the opening half hour or last half hour of trading. For high volume stocks with average daily trading volume of $1M and public float of $150M, end of day restriction is limited to 10 mins. (15-422)

What is the OTC Bulletin Board?

Quotation facility (not a trading platform) for non-exchange listed securities. Unlike pink sheets, OTCBB requires quoted companies to submit financials to SEC and have at least 1 market maker. (1-34)

Funded debt to EBITDA

Ratio indicating leverage. Funded debt is borrowed money, notes and bonds, deferred purchases, and capitalized leases. (17-451)

CAPM

Re = Rf + (beta)*(Rm - Rf) (7-240)

Series 11

Registered Rep exam for ASSISTANT REPRESENTATIVE - ORDER PROCESSING (18-461)

Series 62

Registered Rep exam for CORPORATE SECURITIES Limited Representative (18-461)

Series 22

Registered Rep exam for DIRECT PARTICIPARTION PROGRAMS Limited Representative (18-461)

Series 86/87

Registered Rep exam for EQUITY RESEARCH ANALYST (18-461)

Series 55

Registered Rep exam for EQUITY TRADER Limited Representative (18-461)

Series 7

Registered Rep exam for GENERAL SECURITIES Representative (18-461)

Series 72

Registered Rep exam for GOVERNMENT SECURITIES Limited Representative (18-461)

Series 79

Registered Rep exam for INVESTMENT BANKING Limited Representative (18-461)

Series 6

Registered Rep exam for INVESTMENT COMPANY PRODUCTS/VARIABLE CONTRACTS Limited Representative. (18-461)

Series 52

Registered Rep exam for MUNICIPAL SECURITIES Representative (18-461)

Series 82

Registered Rep exam for PRIVATE SECURITIES OFFERINGS Limited Representative (18-461)

What are the two levels of FINRA qualifications and registrations?

Registered Representative and Registered Principal. (18-461)

Form S-11

Registration Statement filed in an offering of real estate investment companies, including REITs. (9-308)

Form S-8

Registration Statement filed in an offering of securities to company employees through an employee benefit plan. (9-308)

Regulation D

Registration exemption for private placements. (14-405)

S-4

Registration statement for shares issued in connection with a merger. (6-196)

Form S-4

Registration statement used in a merger, acquisition, or exchange offer. (9-308)

Rule 504

Regulation D exemption applicable on offerings of up to $1M. (14-406)

Rule 505

Regulation D exemption applicable on offerings of up to $5M. (14-406)

Rule 506

Regulation D exemption applicable to very large offerings. Can be used for offerings of any size, but is the only exemption available for offerings in excess of $5M. (14-406)

Distribution Compliance Period re: Regulation S

Regulation S Securities cannot be resold in the US within the distribution compliance period of 40 days for debt instruments and 1 year for equity instruments. (14-409)

Subchapter S Corporation

Similar to C-Corps, except S Corps are not taxed at the corporate level. All profits are passed directly on to shareholders, who pay taxes on proceeds at the ordinary income tax rate. To qualify, businesses must (1) be domestic entities with only one class of common stock, (2) have 100 or fewer shareholders, (3) not have any shareholders who are non-resident aliens. 3-91

Standby Commitment Underwriting

Similar to a firm offering, except that shares are first offered to current shareholders with pre-emptive rights in a rights offering. The underwriter purchases for resale any shares not subscribed to during the rights offering. (11-347)

Pool Activity

Similar to matched orders. A group is formed to act in collusion for the same purpose in securities price manipulation. (19-482)

The timing of public disclosure under Regulation FD is required when?

Simultaneously if disclosure was intentional, promptly if the disclosure was unintentional. (19-503)

Under Reg FD, if a selective disclosure is intentional, when must it be broadly disclosed?

Simultaneously with the selective disclosure. (13-338)

SBA Financing

Small Business Administration Financing, typical early source of capital in startups. The SBA's role is to facilitate financing from banks and other commercial lenders by establishing guidelines and guaranteeing loans. 3-99

Schedule 14D-9

Solicitation/Recommendation statement. Must be filed by target company to announce its response to the tender offer. (15-415)

Treble damages

Someone engaged in insider trading can be liable for up to 3x the profit gained or loss avoided. Supervisors who should have known about or could have prevented the activities could be liable as well. (19-484)

Reg M, Rule 104 applies to. . .

Stabilization activities. (12-380)

T/F: If a corporation is issuing securities in connection with a merger on which the shareholders must vote, a prospectus must be delivered to each shareholder prior to their vote

TRUE (12-368)

T/F: FINRA reviews any item of value being traded between an issuer and underwriter to determine if compensation is fair.

TRUE (12-369)

T/F: An issuer cannot give any statements at a road show with details that go beyond what is provided in the red herring.

TRUE (12-371)

T/F: Any account of a road show presentation published or distributed by the media can constitute a free writing prospectus.

TRUE (12-371)

T/F: Research analysts are prohibited from communicating with customers in the presence of investment bankers or reps of the security's issuer.

TRUE (12-376)

T/F: Under Regulation M, Rule 105 it is prohibited for ANYONE from purchasing a security in a public offering and simultaneously selling it short.

TRUE (12-385)

T/F: A registered person is employed by the issuer. Their compensation counts against the 10% underwriting compensation limit for a DPP or Unlisted REIT.

TRUE (12-390)

T/F: A company can meet Reg FD disclosure requirements with a conference call that is announced ahead of time and broadly available through transcripts or replays.

TRUE (13-339)

T/F: Any person with access to material non-public information is prohibited from trading in the subject security during a tender offer.

TRUE (15-420)

T/F: a business combination is considered an offer to sell securities, whether or not a security holder takes action to buy, sell, or exchange securities.

TRUE (16-435)

T/F: An equity holder can file a "proof of interest" with the courts during a Chapter 11 bankruptcy in order to vote on the restructuring plan.

TRUE (17-446)

T/F: If a firm approves a registered rep to participate in a private securities transaction, the firm must record the transaction on its books as though the rep is acting as though the transaction were part of the firm's business.

TRUE (19-490)

T/F: Firms are required to maintain a SEPARATE FILE for ALL written complaints from customers

TRUE (19-492)

T/F: Participant presentations in a mediation proceedings are not sworn-in testimony, and the parties are not corss-examined.

TRUE (19-500)

T/F: The SEC is authorized to require additional information after an issuer's initial registration submission, thereby delaying the effective date of the registration.

TRUE (The SEC may issue a deficiency letter addressing any info it feels is missing. Effective date of registration will be delayed until info is provided). (9-306)

T/F: If a firm is an underwriter for a given offering and ALSO a Nasdaq market maker for that security may continue to make a market in that security during the restricted period.

TRUE (under reg m, rule 103). (12-382)

T/F: A registered rep may not participate in a private securities transaction for which he is to receive compensation without written approval from employer

TRUE, (19-489)

Terminal Value (Perpetuity growth method)

TV = (FCF in terminal year) x (1+g)/(r-g) where g is perpetuity growth rate and r is WACC (7-245)

Terminal Value (Exit multiple method)

TV = EBITDA in terminal year x exit multiple (based on current multiples) (7-244)

One-step Merger

Target shareholders receive a proxy statement describing the proposed transaction and vote whether to approve at a formal shareholders' meeting. (8-294)

An individual may be subject to statutory disqualification if he or she has committed a securities-related felony w/in the past. . .

Ten years. (18-475)

The outline of the material provisions and conditions of the offering is known as a:

Term Sheet (13-401)

How is an "annual report to shareholders" different from a 10-K "annual report"?

The "annual report to shareholders" must be sent by a company to its shareholders when it holds an annual meeting to elect directors. It is distinct from a 10-K filing. (5-145)

Regulatory Element

The Continuing Eduction requirement under which registered reps must complete an online training program within 120 days of the 2nd, 5th, 8th, . . . anniversary of registration. (18-470)

What should a member of the NYSE do if it comes into contact with any rumor or unsubstantiated information?

Report to NYSE (19-482)

Balance Sheet

Reports company's financial position - assets, liabilities, and shareholders' equity - at a given point in time. 4-111

Schedule 13E-3

Reports going private transactions. (6-196)

Schedule 13D

Required by anyone who acquires more than 5% of a voting class of a public company's common stock. (15-415)

Schedule 14(d)

Required under '34 Act, provides public information about entities involved in tenders, other than the acquirer. (15-415)

SEC Rule 15c2-4

Requires broker dealers engaging in best efforts or mini-max offerings to maintain an escrow account with the funds from scheduled sales to ensure monies are returned if the offering is canceled. (11-348)

Regulation S-X

Requires that financial statements included in a REGISTRATION STATEMENT are prepared and attested by independent auditors.

ROA

Return on assets = Net Income/(average total assets) (5-158)

ROE

Return on equity = (Net Income)/(Average Shareholders' Equity) (5-158)

ROIC

Return on invested capital = (EBIT)/[(average net debt) + (equity)] (5-157)

Gross Profit

Revenues minus CoGs. 4-112

Rule 144 provides for what?

Rule 144 provides a safe-harbor permitting the sale of restricted and affiliate securities without requiring registration. (14-412)

The SEC rule that provides an exemption from the registration requirements of the Securities Act of 1933 for intrastate offerings is:

Rule 147. (14-412)

Three exemptions under Regulation D

Rule 504, Rule 505, Rule 506. (14-406)

The Registration Statement that may be used for all newly issued securities under the Securities Act of 1933 is:

S-1. (9-327)

What financial database is used to screen for precedent transactions?

SDC Platinum. (6-198)

Regulation M

SEC Regulation preventing manipulative conduct by persons with an interest in the outcome of a securities offering. Covers underwriters, issuers, and selling security holders. (12-380)

What is a code system for screening companies by sector?

SIC, NAICS (5-137)

Rules 903, 904

Safe harbor rules of Regulation S that apply to offers or sales made in an offshore transaction. (14-408)

Purchase group agreement

Same as "agreement among underwriters", "master underwriting agreement", or "syndicate contract" establishes lead underwriter, gives managing underwriter authority to allocate shares among the group, and describes responsibilities and liabilities of each member of the group. (12-368)

Tender Offer statement

Same as Schedule TO required under '34 Act for entities that expect to own more than 5% of a class of the target company's securities. (15-416)

Purchase agreement

Same as underwriter agreement, sets terms between managing underwriter and issuer. (12-368)

When a person acquires beneficial ownership of greater than 5% of a registrant's voting class stock, what form are they required to file?

Schedule 13D (15-424)

What is the difference between a Schedule 13D and a Schedule 13G?

Schedule 13D is for active investors, whereas 13G is for passive. (13-343)

Which SEC document is files in response to a Schedule TO?

Schedule 14D-9 (15-424)

What filing document typically contains a fairness opinion for a tender offer?

Schedule 14D-9, filed in response to a Schedule TO tender offer. (6-192)

Following an initial offering, the subsequent trading of stocks occurs in what market (general term)?

Secondary market. (1-34)

SIPC

Securities Investor Protection Council, a nonprofit created by an act of Congress to protect the clients of firms forced into bankruptcy. (18-456)

The pledge of, or lien on, collateral that is granted by the borrower to the holders of a debt instrument is known as. . .

Security (17-452)

The agreement that specifies rules for the group of financial institutions who assist an underwriter in the sale of new securities issue but do not have responsibility for any unsold securities is a(n)

Selected Dealer Agreement. (11-363)

A non-underwriter that participates in an underwriting only to take down underwritten securities for re-sale to an investor is a(n)

Selected Dealer.

What is in a 10-K Part 2 -Financial Information?

Selected financial data, MD&A, disclosures about market risk, and audited financial statements (balance sheet, income statement, cash flow statement). (10-332)

The largest portion of the underwriting spread is the

Selling Concession. (11-363)

STRIPS

Separate Trading of Registered Interest and Principal Securities, T-Notes, T-Bonds, and TIPS whose interest and principal portions (ie, coupon and payment at maturity) have been separated or stripped. The government does not directly issue STRIPS. They are structured by investment banks or brokerage firms. 2-70

Reg M, Rule 105 applies to. . .

Short selling in connection with a public offering. (12-380)

Schedule 13G

Short-form version of 13D. Made by a beneficial holder of >=5% of a company's stock if they do NOT intend to influence the company (ie, passive investor). Must file within 45 days of the end of the year when the 5% level is reached. If the holder reaches 10%, must file w/in 10 days of the month when the level is reached. If the company hits 20% or changes intention to influence the company, they must file a 13D. (13-341)

If a stock has been delisted from Nasdaq, and investor can conclude what?

The company is out of compliance with Nasdaq requirements. (Although delisting may be a sign of a troubled company, it does not mean the company has gone under, filed for bankruptcy, or is out of compliance with SEC or US Gov't). (1-18)

How does a public company announce the intent to buy shares not through a tender, but through a share buyback?

The company issues an 8K. (15-422)

How does a company qualify for a Rule 147 Exemption?

The company must: (1) be incorporated in the state where the securities are offered, (2) carry out a significant amount of business in that state, (3) make offers and sales only to residents of that state. (14-405)

The 20 largest debt holders form a group after the filing of a Chapter 11 petition. This committee is known as what?

The creditors' committee. (17-453)

(Dividend) Payable Date

The date when a dividend payment is made, generally 3 weeks after the record date. 2-40

What is the proper procedure if one of the reviewers dissents to the valuation process or final opinion shared in an opinion letter?

The firm should at minimum not the dissent in the letter. Ideally, they should address and cure the deficiencies cited by the reviewer. (16-435)

Stabilization agent

The firm that stabilizes on behalf of the underwriting syndicate. (12-383)

A CPA certified a valuation of corporate assets, and it is included in the registration statement. The registration must contain. . .

The firm's written consent. (9-316)

Firm Element

The firm-based formal training program portion of Continuing Education requirements. (18-471)

Ex-Dividend Date

The first day that a buyer will not receive rights to collect dividend when purchasing the stock. Because it takes 3 days for a transaction to settle, this date is 2 days before the record date. 2-40

What are the transaction limitations (volume, time) for a company to qualify for a Regulation A registration exemption?

The issuer may not offer more than $5M in securities in any 12-month period. Existing shareholders may resell up to $1.5 M in securities, but these sales count against the $5M total. (14-404)

XYZ corp wants to take advantage of a Rule 163A exemption for communications made by or on behalf of an issuer >30 days before filing of a registration statement. The issuer does not communicate during the 30 days just prior to filing. What add'l requirement(s) must be met?

The issuer must nor reference the security offering about to be registered. (9-328)

Who is responsible for notifying FINRA of the restricted period in the distribution of securities?

The managing underwriter. (12-386)

A Treasury Note is quoted at 95:07 or 95-07. What does this mean?

The note is trading at a discount of 95 7/32%. IE, a $1000 par value note is trading at $952.19. 2-70

Floating Exchange Ratio/Fixed Price stock-for-Stock Acquisition offer

The number of acquirer shares that will be exchanged for target shares will fluctuate based on share prices so as to ensure a fixed value for the target shareholders. (6-203)

What is the maximum prison sentence applicable for a person who violated insider trading rules but had no knowledge of the rule or reg which was broken?

The person cannot be subject to imprisonment. (19-484)

Takedown price

The price at which syndicate members purchase stocks from the lead underwriter. This is greater than the price the underwriter paid the issuing company (the difference there constitutes the manager's fee) and is less than the POP (the difference constitutes the full takedown). (11-350)

A registrant's description of its business in the 10K must describe what?

The primary products and services rendered by the registrant. (5-178)

A registered rep has been asked to serve on the BOD of a local corp. What notice, if any, is the rep required to give to employer? What approval is required from the employer?

The rep must provide written notice, but permission is not required. (19-502)

Pre-emptive rights

The right given to common shareholders to buy newly issued shares of stock before they are sold to the public. Prevents dilution. 2-39

Yield to Maturity (bonds)

The IRR of a bond held to maturity, considering the purchase price, coupon, and face value. 2-57

Stablization bid price

The LOWER of (1) the public offering price, OR (2) the highest bid in the open market. (12-384)

The regulation that required registration of all trading venues and the persons that trade on them is. . .

The Securities Exchange Act of 1934. (18-459)

In a fixed exchange ratio transaction, who assumes the risk of fluctuations in the acquirer's share price?

The Target, as they will receive the same number of shares regardless of current price. (6-205)

Who assumes risk for share price movements in a floating exchange ratio?

The acquirer. (6-215)

What does the control premium refer to in an M&A transaction

The additional amount paid per share because the purchase will allow the acquirer to control the target's business. (6-214)

How does a subject company respond to a tender?

The target MUST release a Form 14D-9 statement w/in 10 days stating whether it recommends acceptance, rejection, remains neutral, or cannot take a position. (15-420)

How are Regulation A securities reported to the SEC?

The total shares sold are aggregated and reported every 6 months. (14-404)

Under SEC Rule 15c1-8 a broker dealer is not allowed to claim that securities are offered "at-the-market" unless which conditions exist?

There must be a clear public market, that is not made exclusively by the broker-dealer. (12-378)

When a firm files for Chapter 11 bankruptcy, what happen with creditor's collection efforts?

They are required to cease efforts outside of court. (17-446)

How can an offerer extend an offer?

They must announce via a press release no later than 9AM EST on the day after the expiration. (15-420)

How can a public corporation continue to communicate as normal with the public during the public offering period?

They must stick to normal format/content, not make any forward projections (whether or not the projections are related to the offering), they cannot mention the offering or terms, and they may not speculate on whether or when a registration may become effective. (12-371)

How does a company ensure independence with the fairness committee?

They should have at least 2 independent people with NO CONTACT with a given deal review the opinion. The independent reviewers also should not work directly under or be significantly influenced by anyone on the deal team. (16-435)

Form D

This form must be filed with the SEC within 15 days after the first sale of Regulation D Securities. (14-406)

What transactions must a firm review and report to the relevant exchange?

Trades made by the firm, employees of the firm, or family members of the employees of the firm. (19-485)

In transaction analysis, financial statistics from what time period are used to establish valuation multiples?

Trailing 12 months. (6-208)

TIPS

Treasury Inflation-Protected Securities, Inflation-Indexed bonds issued by the US Treasury. Principal is adjusted semi-annually based on CPI. 2-70

Inventory Turns (calculation)

Turns = CoGs/Inventory (7-233)

How long after termination must a registered person keep FINRA updated of address changes or potentially other activites?

Two years. (18-467)

What is the timeline for an HSR filing?

Typically made directly following the execution of a definitive agreement. If there are minimal antitrust concerns, the parties can consummate the transaction after a waiting period of 15 days for tender offers or 30 days for mergers. Parties with antitrust issues may take longer or the deal may be blocked all together. (8-293)

The form that a broker-dealer must submit to FINRA ro sponsor a candidate for registration is. . .

U-4. (18-459)

The form that a broker-dealer must submit to FINRA to sponsor a candidate for registration is Form. . .

U-4. (18-475)

Series 17, Series 37/38

UK and Canadian qualification exams for general securities activities. (18-463)

Series 66

UNIFORM COMBINED STATE LAW EXAMINATION

Series 65

UNIFORM INVESTMENT ADVISER STATE LAW EXAMINATION

Series 63

UNIFORM SECURITIES AGENT STATE LAW EXAMPINATION

Treasure Bonds

US Government bonds issued with a maturity of 30 years. Pay coupon semi-annually. 2-70

Treasury Notes

US Government bonds that mature in 2-10 years. Pay interest semi-annually and are quoted on the secondary market at percentage of par in 1/32s of a point. 2-70

Treasury Bills

US Government bonds that mature in one year or less. Many regard T-Bills to be the least risky investment available to US Investors. 2-69

FINRA notification requirements re Reg M

Underwriter must notify FINRA with respect to Rules 102, 102: (1) length/starting date of restricted period, no later than the business day before the first trading session of the applicable restricted period, (2) pricing of the distribution, security and symbol, shares offered, and offering price, no later than the close of business the next day following pricing, (3) cancellation or postponement of any distribution for which prior notification has been made, must be done immediately. (12-382)

Full Takedown/Total Takedown

Underwriting fee + Selling Concession; can only be achieved by the manager or syndicate member (selling group is only eligible to receive selling concession). (11-350)

Chapter 11 Bankruptcy Filing

Voluntary bankruptcy in which the company itself files for bankruptcy and establishes a plan for reorganizing/rehabbing the business. (17-445)

How can target shareholders mitigate risk of fluctuations in the acquirer share price?

a COLLAR on the exchange ratio will stipulate a min and max value at which the stock will be exchanged, (with the difference made up in cash or adjustments to ratio?). (6-204)

Central Bank

a banking institution that controls a nation's money supply. In the US, this is the Federal Reserve Board. (1-25)

Broad auction

a business sale structure in which the Target company reaches out to as many potential interested parties as possible (8-257)

Greenshoe

a contractual arrangement that allows underwriters to issue up to 15% more shares than originally agreed, at the underwriters' option and at the public offering price. Can generally be exercised in full or in part at any time within the first 30 days of trading. (11-359)

Restricted list

a current list within an investment bank of all securities in which proprietary, employee, and certain solicited customer transactions are restricted or prohibited. Includes the date/time the security was added to or deleted from the list and the name of a contact person who could answer questions about the addition or deletion. (19-484)

Watch list

a current list within an investment bank of securities that generally do not carry trading restrictions, but whose trading is subject to close scrutiny by the firm's compliance department. Includes the date/time the security was added to or deleted from the list and the name of a contact person who could answer questions about the addition or deletion. (19-485)

All-or-none private offering

a defined date for the termination of the offering has been predetermined. If the minimum amount of capital has not been raised by that time, the offering is terminated. (13-399)

Minority Freeze-out

a going-private transaction in which a controlling shareholder bids for the remaining minority interest in a firm. (15-418)

Limited Liability Companies (LLCs)

a hybrid structure that combines characteristics of partnerships and corporations. 3-92

Guarantee against loss

a member firm promises to buy back bad investments or indemnify a customer against loss. This is strictly prohibited. (19-490)

Confidential proxy

a preliminary proxy entitled to be kept confidential until filing of definitive proxy. (16-439)

"Reasonable Basis" suitability

a rep must have a reasonable basis to believe, based on adequate due dili, that the recommendation is suitable for at least some investors. (11-360)

Negotiated sale

a single party is approached by a Target company for acquisition. (8-257)

Mediation

a voluntary, less expensive alternative to arbitration in which a neutral facilitator attempts to assist parties in coming to agreement. (19-500)

Taking securities in trade

accepting securities from an investor as payment for an offered security. This is prohibited unless the security is exchanged at fair market value. (11-356)

Restricted Securities

acquired in an unregistered, private sale. (14-409)

Section 363 Stalking Horse

acquirer in section 363 sale. (17-447)

A company has $150M EBITDA, $50M Net Income, and a 40% tax rate. Assuming the company reports a one-time, pre-tax restructuring charge of $20M, what are adjusted EBITDA and adjusted net income?

adjusted EBITDA = 150M + 20 = $170M, adjusted net income = 50M + (20 x 60%) = $62M (5-179)

Synergies adjusted EV/LTM EBITDA

adjusted ratio = (enterprise value)/[(LTM EBITDA) + (synergies)] (6-211)

Information a representative should know about a client's suitability in order to legally recommend/sell a security to them

age, financial needs, existing investments, tax bracker, investment experience, and liquidity needs. (11-360)

Non-exempt transactions

all public offering transactions that are subject to the SEC filing and registration process defined under the Securities act of 1933. (14-403)

Underwriting compensation

all types of compensation, from any source, paid to underwriters, broker-dealers, or their affiliates. Limited to 10% in a DPP or unlisted REIT offering. (12-390)

Statutory Voting Rights

allows a shareholder to apply all share's votes for each director position in an election. For example, if an investor owns 10 common shares and 2 members are up for election, the investor has up to 10 votes for each position. 2-38

Cumulative Voting Rights

allows a shareholder to pool votes and allocate as desired. For example, if a shareholder has 10 shares and there are 2 director positions up for election, the shareholder has 20 votes to allot between the two positions. 2-38

Free-Writing Prospectus

allows an issuer to distribute written communications to prospective investors other than the red herring. Generally permitted ONLY AFTER a registration is effective, except for WKSIs. (9-314)

Shelf Registration

allows an issuer to make an offer on securities on a delayed or continuous basis, at varying times and prices. (9-311)

Participating Preferred Stock

allows holder to receive an extra dividend distribution under specified circumstances, generally predicated on common stock exceeding a specified yield. 2-45

Minimum-maximum underwriting (mini-max)

also referred to as contingency offerings. Functions as an all-or-none underwriting until a threshold is reached, and then becomes a traditional best efforts underwriting. (11-347)

Difference between OSJ, Branch Office, Non-branch office

an OSJ is a main or regional head office that is headed by a principal, Branch offices are not registered as OSJs but have registered reps working there, and Non-branch offices are tertiary locations including admin, rep's home/location of convenience (such as Starbuck's), or an off-site disaster recovery location. (18-470)

Offering Circular

an abbreviated version of a PPM often used to provide preliminary info in summary form to potential investors. (13-397)

Sticker

an amendment to the prospectus after the registration has become effective. (9-311)

Chinese Wall

an information barrier that prevents the free flow of material non-public information within a company. Also required physical separation of departments receiving insider info and sales/trading depts. (19-484)

Piggyback Registration Rights

an investor holding Rule 144A securities obligates the issuer to include the investor's securities in the prospectus at the owner's expense, thus registering the heretofore unregistered/restricted securities. (14-408)

wash trade

an investor simultaneously buys and sells a security (therefore there is no change in beneficial ownership) in order to manipulate the price.

Accelerated Share Repurchase Program (ASR)

an issuer agrees to repurchase a quantity of desired shares from an investment bank over a stated period of time, usually brief. The investment bank will satisfy the sale buy buying shares on the open market up front, or by going short and buying on the market after. (15-423)

Mini-tender

an offer to acquire less than 5% of outstanding shares of target. Subject to minimum filing and disclosure requirements. (15-415)

Issuer tender offer

an offer, request, or invitation for tenders of any class of equity security made by the issuer or an affiliate of the issuer. (15-416)

Road show

an offering (other than a prospectus) delivered in the form of a presentation made by members of the issuer's management and the underwriters. (9-318)

Rumor list

an optional list that can be maintained as part of the Chinese Wall monitoring system when the issuer becomes the subject of rumors about a significant impending deal. (19-485)

Best Efforts Underwriting

an underwriter is under contract to sell securities, but is not responsible for unsold shares. Most common in high-risk securities. (11-347)

SEC Form 5

annual statement covering transactions not included in a Form 4 (ex, shares received directly from issuer, private market transactions, derivative securities received, gifts). Deadline is 45 days from FY end. (13-340)

A broker-dealer must develop and deliver a Firm Element training plan by when?

annually. (18-476)

Explicit Exception to a prospectus (#1)

any communication sent after the effective date of registration is not considered a prospectus IF it is sent along with or after a valid written prospectus. (9-313)

Gun Jumping

any discussion of a public offering before registration is filed. (9-310)

Corporate insider

any person who has knowledge of or access to meaningful non-public information about a company. Includes corporate officers and directors, shareholders owning more than 10% of voting shares, board of directors. (19-483)

Soliciting material

any written communication distributed to security hodlers before the proxy. (16-440)

What is the filing deadline for a preliminary proxy?

When it is sent to shareholders, 10 days before definitive proxy. (16-439)

When is a floating exchange ratio typically used in a stock-for-stock acquisition?

When the acquirer is significantly larger than the target. (6-206)

In all of the following scenarios when are fully diluted shares outstanding equal to basic shares outstanding?

When there are no convertible securities or exercisable warrants or options in the money. (5-178)

Is the purchaser of a Rule 147 security allowed to resell the security to someone residing out of state?

Yes, after a 9 month holding period. (14-405)

An underwriter presents a series of bona fide electronic road shows to potential investors. Each pres covers the same general areas. The underwriter is not required to file each presentation IF

it makes one copy of the graphic version of the road show available to any potential investor, without restriction. (9-328)

Leverage Ratio

leverage ratio = (debt)/(EBITDA) (5-159)

Limit on non-accountable underwriting expenses in a DPP or unlisted REIT offering

limited to 3% of offering proceeds. (12-390)

Default events

loan terms that include non-payment of timely interest, inadequate reserves, transfer of assets, failure to maintain specified debt coverage or other ratios. (17-450)

Restrictive covenants/negative covenants

loan terms that prohibit borrowers from using corporate capital for purposes that may be harmful to creditors. (17-450)

Schedule 13D

made by beneficial holder of >= 5% common if the intent is to influence or control the decisions of the company. Must be filed within 10 calendar days of reaching 5%, increasing by 1%, or change of intention. (13-341)

Allowed communications during the cooling -off period

no written materials unless they contain all prospectus disclosures. Written communications limited to: (1) a preliminary prospectus ("red herring"), (2) a tombstone ad or limited press release in a prescribed format, (3) road show presentations. (9-310)

Ineligible Issuers

not current in SEC filings, filed for bankruptcy or insolvency during the previous 3 years, blank check companies, shell companies, or penny stock issuers. (9-309)

What special scaled reporting requirements are available to smaller reporting filers?

not required to provide risk factor disclosures, and modified financial statement requirements per Reg S-X. (10-335)

Duty of Trust

occurs when 2 people have a history of sharing sensitive information in confidence. This allow an individual to avoid liability for insider trading if the recipient of the info SHOULD HAVE KNOWN that non-public info was being shared. (19-483)

Outstanding Shares

of total authorized stock, the shares that have been issued and are still held by the public. 2-37

Dividends are typically paid how often?

on a quarterly basis. (5-179)

Seasoned Issuer

one who meets requirements to use an S-3, AND has a worldwide non-affiliate market cap of $75M

Refreshing of Automatic Shelf Registration

only if 3 years or less since initial effective date. Refreshing requires issuer to refile in full, including all required prospectus disclosures. (9-312)

Implicit exception to a prospectus

oral communications are not considered a prospectus. An oral offer may be made during a cooling off period, provided that no sales are completed. (9-313)

Required records that a FINRA member firm must maintain

order tickets, reps' employment and disciplinary history, customer account records, signatures granting discretionary authority in a discretionary account, indication of responsibility of associated persons and principals indicated to new accounts, customer complaints, non-monetary compensation paid to associates, compliance oversight documentation, listing of principals and responsibilities, state examination records. (19-500)

Constructive insiders

outside counsel, consultants, and other contractors. Liable of insider trading violations if the corporation expects info they access to remain confidential. (19-483)

What does a rep do if he/she learns of a person on the OFAC list of terrorist organizations is involved in a transaction

block the transaction and report to OFAC w/in 10 business days. (19-488)

In an offering for a DPP, fees paid to transfer agents and fees paid for legal and accounting services are examples of

bona fide issuer expenses. (12-393)

Leading Economic Indicators

bond yields, building permits, stock market indices and averages, unemployment insurance claims, changes in business inventories. (1-27)

Tangible net worth

book value less intangible assets. (17-451)

Syndicates with severall committed underwriters are said to have. . .

breadth. (11-363)

Misappropriation Theory

broadens liability for insider trading violations to include persons that misappropriate info from employers and trade on that info in ANY stock. (19-483)

Transactions requiring an S-4

business combinations, mergers that require a vote of acquirer shareholders, exchange offers, public re-offering through a business combination. (16-437)

Callable Preferred Stock

can be repurchased by issuer at its discretion. 2-46

Where in a company's financial statements is D&A typically located?

cash flow statement (7-235)

Sanctions that FINRA has authority to impose

censure, fines, suspension/expulsion from FINRA, barring of association with all members, Cease and desist orders, retaking of an examination. (19-496)

Call protection refers to what?

certain restrictions on voluntary prepayments (of bank debt) or redemptions (of bonds) during a specific time period. (17-452)

Arbitration timeline

claimant files Submission Agreement>(up to 45 days)>respondent files answer>notification of hearing>disclosure among parties>(at least 20 days)>hearing>(30 business days - attempted deadline)>panel renders decision>(30 days)>deadline to pay monetary awards. (19-498)

Stalking Horse Provisions

clarifyies terms an acquireer will receive in a reorganization, including: (1) a break-up fee if the acquisition is not approved, (2) accelerated deadlines for submitting bids, (3) reimbursement of due dili expenses incurred in making the SH bid, (4) additional restrictions/requirements on outside bidders. (17-447)

Preferred Stock

class of stock that is different from common stock in that: (1) it has no voting privileges, (2) has priority over common stockholders in liquidation (3) receives a regular quarterly dividend, expressed as a percentage of par value. 2-45

Split offering

combination of primary and secondary offerings, as in a piggyback offering. (11-346)

GARP Investing (Growth at a Reasonable Price)

combines key theories of growth and value investing. 2-75

How is equity value calculated differently for precedent companies analysis v. precedent transactions analysis?

company analysis is announced based on price per share AT CLOSE ON A GIVEN DAY. Transaction analysis is based on ANNOUNCED OFFER price per share. Both are multiplied by fully diluted shares outstanding. (6-202)

Lock-up agreements

contract between shareholders and underwriter that prohibit sale of a company's securities for a defined period (typically 180 days) after the completion of an IPO. (11-359)

Guaranteed bond

corporate bond in which interest and principal are guaranteed to be paid by a firm other than the issuer. Generally, the guarantor is a parent company. 2-63

Mortgage Bonds

corporate bonds backed by a mortgage on one or more assets, typically real estate holdings or other real property. 2-62

Coverage ratios are so named b/c they measure a company's ability to. . .

cover annual interest expense and potentially other fixed charges. (5-178)

Cumulative Preferred Stock

gives shareholders the rights to receive dividends in arrears if a payment is skipped. At the next dividend, will receive missed payments in addition to current before common stock is paid. 2-45

Convertible Preferred Stock

gives the holder to exchange preferred shares for common according to a defined ration based on par value. Based on fixed conversion ration as multiple of par value, regardless of current market value. For example, a preferred stock with par value of $100 and conversion ratio of 5 can be exchanged at a price of $20 per share. 2-45

SEC Rule 13e-3 covers what type of transaction?

going private. (15-418)

Securities Exchange Act of 1934

governs secondary market. Regulates US financial markets and participants, and requires that they are registered. (1-13)

Teaser

initial M&A marketing document, with 1-2 page synopsis of target, including company overview, investment highlights, and summary financial information. (8-267)

SEC Form 3

initial filing when an investor becomes a corporate insider (ie, obtaining 10% of stock, becomes CEO, elected to BOD). Must be filed w/in 10 business days. (13-339)

What is the primary market?

initial offerings of stocks and bonds to investors. (1-18)

A ratio of earnings before interest, taxes, depreciation, and amortization to interest expense would be referred to as what ratio?

interest coverage ratio (5-162)

Fed Funds Rate

interest rate charged by banks lending money to one another on an overnight basis. (1-26)

Discount Rate

interest rate charged on credit available to institutions through Federal Reserve's Discount Window. Higher than Fed Funds rate. (1-26)

Current Yield (bonds)

interest rate stated as a percentage of the current price of the bond. 2-56

Lagging Economic Indicators

interest rates (particularly prime rate), unemployment rate, corporate profits, labor cost per unit output, commercial and industrial loans outstanding. (1-27)

Prospectus

investor disclosure document used in a public offering and provided to potential investors before the time of the sale. (1-13)

Most common uses of Rule 144A

issuance of high yield debt and issuance of pre-IPO shares. (14-408)

Adjustable-rate preferred stock (ARPs)

pays dividends that are determined by an underlying benchmark - usually the US treasury bill rate. 2-46

Rule 144A

permits companies to buy and sell unregistered securities through a broker dealer or among themselves as long as they are classified as "Qualified Institutional Buyers". (14-407)

Book-building

pre-marketing of public offerings to gauge interest and determine appropriate price. (11-353)

A company has issued 5% preferred stock with a par value of $100, what does this mean?

preferred stock with par value of $100 that pays 5% of that (100x5% = $5) in ANNUAL dividends (paid on a quarterly basis). 2-45

Caucuses

private meetings between a mediator and each party that allow each side to be open and candid regarding the case. (19-500)

FINRA Rule 5141

prohibits taking securities in trade for an offered security unless it is exchanged at fair market value, assumed to be between the bid and offer for the purposes of this rule. (11-356)

SBA Venture Capital Program

provides venture capital to new businesses through Small Business Investment Companies. 3-100

Non-Accelerated or smaller reporting company

public float of less than $75M or less than $50M in revenue (10-335)

Hoovers IPO Calendar

publishes expected offering dates and pricing for announced upcoming IPOs. (11-346)

A company has sales of $2B and an EBITDA margin of 15%. Assuming a 10% sales growth rate and a 50 bps improvement in EBITDA margin, what is EBITDA in the following year?

sales = $2B x 110% = $2.2B x 15.5% EBITDA margin = $0.341B EBITDA (7-252)

Subscription agreement

sales contract between the investor and the company in a private placement. (13-399)

Collateral Trust Bonds

secured by a financial asset owned by the corporation, such as stock or other bonds. 2-62

Control Securities

securities held by an affiliate (AKA corporate insider) of the issuing company. (14-410)

Exempt Transactions

securities that are legally allowed to be offered and sold WITHOUT registration with the SEC. (14-403)

Hard asset lenders

senior secured lenders (17-448)

Debt service coverage ratio as a loan covenant

sets specified cash-flow to debt service ratios. If a borrower does not meet the minimum, they are in default. (17-451)

Treasury shares

shares that were issued to the public and subsequently repurchased by the issuer. 2-37

Private Placements

sold to accredited investors under SEC Regulation D to raise capital through the sale of equity, preferable, or convertible securities. 3-101

The conducting of a roadshow in connection with an IPO would be considered a . . .

special selling effort. (Drafting and distributing a prospectus, making sales calls, and conducting a roadshow are all considered special selling efforts by the SEC). (12-392)

FINRA Rule 5150

specifies disclosures that must be required in fairness opinions and written procedures for developing fairness opinions. (16-433)

Blue sky laws

state securities laws (18-455)

SEC Rule 10b-9

states that issuers and broker dealers must be truthful about which type of underwriting agreement is in place (best efforts, firm commitment, etc). (11-347)

Form S-3

streamlined "short-form" registration statement often used for follow-on offerings of seasoned issuers. (9-308)

Reclassification

substitution of one security for another (ex, swapping one class of debt for another). (16-435)

Insider Trading Sanctions Act of 1984, Insider Trading and Securities Fraud Enforcement Act of 1988, and Sarbanes Oxley

successive acts that expanded on Securities Act of 1933 to stiffen penalties for insider trading. (19-484)

When calculating premium paid in a transaction, what day's closing share price is typically considered to represent the unaffected share price?

the day prior to the official transaction announcement. (6-209)

Underwriting Spread

the difference between the price that the underwriter pays the issuer for securities and the POP (public offer price) that they sell the securities for. (11-348)

How is offer price per share calculated in a fixed ratio transaction?

the exchange ratio is multiplied by the acquirer stock price, typically 1 day prior to announcement. (6-203)

Initiating Coverage Equity Report

the first equity report published by an equity research analyst beginning coverage on a particular company. This report often provides a comprehensive business description, sector analysis, and commentary. (5-136)

Book-Runner

the lead manager in an underwriting. (11-358)

Open Market Operations

when the Federal Open Markets Committee of the Fed controls money in circulation by buying and selling Treasuries (1-26)

Filing Deadline for 8-K

within 4 days of triggering event. (13-335)

What transactions are likely to be most relevant in a transaction comps analysis?

the most recent transactions. (6-183)

Authorized Stock/Capital Stock

the number of shares approved for sale. 2-37

Breadth

the number of syndicate members in a an underwriting. (11-358)

Conversion Parity (bond)

the point at which neither a profit or loss is made in converting the bond to common stock. Can refer to either the parity price of the stock, or the parity price of the convertible bond. 2-64

Underwriting proceeds

the price paid from underwriters to the issuer for stocks to be sold in an offering. (11-350)

Country Risk

the risk that a country could default on its financial obligations and harm the performance of other financial obligations. (1-30)

CE Inactive

the status of an individual who does not complete Regulatory Element within 120 days of the 2 year anniversary of registration. A person who is CE Inactive cannot engage in or receive compensation for the activities of a registered rep, other than trailing commissions for business conducted before the inactive period. (18-470)

Syndicate desk/capital markets desk

the team within a broker dealer that markets, sells, and (possibly) stabilizes a new issue. The syndicate desk is generally not the same people that prepare the offering docs. (11-349)

What registration requirements must be fulfilled by Foreign Associates of a FINRA member firm?

they must fulfill all registration requirements except the qualifying examination. (18-463)

According to SEC rules, fingerprinting is required for all broker dealer employees EXCEPT

those not engaged in the sale of securities, or do not regularly have access to the keeping, handling, or processing of securities, money, or original books and records relating to securities or money. (18-459)

Returned shares

those shares that are allocated to investors ("circled") but not purchased by customers. (11-356)

Covered Persons

those that Firm Element requirements apply to. Includes registered persons and others who have direct contact with public customers in the conduct of securities sales, trading, or investment banking. (18-472)

Record retention requirements under NASD 3110(a)

three years, in an easily accessible place for 2 years. Trade blotters, cash receipts, and general ledger, and customer account records must be kept for 6 years. (19-501)

Cooling-off Period (AKA "waiting period")

time between filing and when SEC declared registration effective. (9-310)

What information must be included in a definitive proxy?

time/place of meeting, shareholder proposals w/ issuer recommendations, a list of directors officers and beneficial owners. (13-336)

The Bond Buyer

tracks new bond issues coming to market. (11-346)

Items of value

underwriting spread, reimbursement for underwriter's counsel (typically deducted from underwriting fee), finder's fees, securities credited to the underwriter's investment account, or right of first refusal for future transactions. (12-370)

How many accredited and how many non-accredited investors may purchase Regulation D securities under Rules 505, 506?

unlimited accredited investors, and up to 35 non-accredited. Under rule 506, non accredited investors must still be sophisticated investors. (14-406)

Debenture

unsecured corporate debt, 2-62

Maximum criminal penalties for insider trading

up to $5M in fines and up to 20 years in prison. (19-484)

Fiscal Policy

use of government spending and taxation to influence the economy. (1-24)

SEC Form 4

reports changes in ownership by corporate insiders as a result of trades on the open market. Must be filed w/in 2 business days of transaction. (13-340)

ADRs (American Depositary Receipts)

represent ownership in shares of non-US companies. Vehicle for trading international stocks on US markets. Can be sponsored by parent company with voting and other rights, or unsponsored, which are issued without the cooperation of the foreign company and may only trade on over-the-counter markets. 2-48

Section 341 Meeting

required meeting between debtors and creditors in which creditors have the right to examine records of debtor's compliance with DIP rules. (17-447)

Schedule TO

required under '34 Act for entities that expect to own more than 5% of a class of the target company's securities. (15-415)

Quantitative Suitability

requires an underwriter or rep who has "actual or de facto control" over a customer account to have a reasonable basis for believing that recommended transactions are not excessive or unsuitable. (11-360)

The Securities Act of 1933

requires registration of securities offerings (primary market) with SEC. (9-305)

Rule 101

rule of Regulation S that establishes that offerings occurring outside the US are not subject to registration. (14-408)

Forward exchange rate

exchange rate that is quoted and traded today, but for delivery and payment of a foreign currency at a later date. (1-12)

Number of arbitrators in a claim of $25K-$100K

1 arbitrator, unless parties agree in writing to three. (19-498)

Difference between GDP and GNP

GDP = Gross domestic product, total market value of goods and services produced within the borders of a country, GNP = Gross National Product, total mkt value of goods and services produced by the residents of a country, even if they are living abroad. (1-18)

Syndicate settlement date

the date on which corporate securities of a public offering are delivered by the issuer to the syndicate members. (12-388)

Coincident Indicators

GDP, employees on non-farm payrolls, personal income, consumer spending, inventory/sales ratio, retail sales, manufacturing sales. (1-28)

What parties generally pay more for an acquisition - strategic buyers or financial sponsors?

GENERALLY strategic buyers, as they have potential for synergies. (6-190)

How long must a tender offer be kept open after any revision of >2% to the offer price?

10 business days (15-420)

Filing date for final prospectus

10 copies filed with SEC prior to date of first use with public. (9-319)

The annual report filed to meet ongoing reporting requirements

10-K (10-343)

Annual Reports must be filed on Form

10-K (5-144)

A company's most basic shares outstanding are typically sourced from the front page of the latest. . .

10-Q (10-K if it is the last Q of the fiscal) (5-179)

Quarterly reports are filed on form

10-Q. (5-178)

A company has 100M shares outstanding at a current price of $20/share. It also has 5M exercisable options outstanding with an exercise price of $18. Using the treasury stock method, what are the fully diluted shares outstanding?

100M shares + 5M in the money options = 15M shares, LESS (18x5 = 90M in proceeds)/($20 current share price) = 4.5M shares bought back. >>>> 100+5-4.5=100.5M fully diluted shares outstanding. (5-150)

A company has EBITDA $250M, D&A $50M, Tax Rate 40%, CapEx $45M, Increase NWC $10M. What is FCF?

115M (FCF = $250M - 50M = $200M EBIT x (1-40%) = 120M EBIAT + 50M - 45M - 10M = 115M) (7-252)

How many potential buyers are typically contacted in a broad auction?

>25 (8-271)

Nominal Yield (bonds)

equal to coupon rate. 2-56

What is net working capital (descriptive)

A measure of how much cash a company needs to fund its operations on an ongoing basis. (7-252)

A member firm's AML compliance program must be approved by whom?

A member of the firm's senior management team. The compliance program outline is not submitted to the Treasury, SEC, or FINRA. (19-504)

Who assumes the share price movement risks in a fixed exchange ratio?

Both. The target runs the risk of receiving less money if shares drop in value, acquirer assumes risk of paying more if shares increase in value. (6-215)

When is the management presentation completed in a broad auction structure?

Before the start of the second round, when actual meetings with buyers begin. (8-275)

A schedule 13D is commonly referred to as a

Beneficial ownership report. (15-424)

What process stirs up interest in an IPO among large institutions and helps to determine the public offering price?

Book-building. (11-363)

An underwriter preps the financial statements for inclusion in the registration of an issuer w/ only 2 yrs operating history. Statements have been audited for both years. At minimum, which audited statements are included?

Both years. (9-327)

What is the primary use of Form 8-K?

For registrants to report the occurrence of any unscheduled material events or corporate changes which could be deemed important to investors or security holders and previously have not been reported by the registrant. (5-144)

Typically, required public disclosure of sensitive information is made by the filing of which SEC Filing document?

Form 8K (19-503)

What types of organizations are exempt from ongoing reporting requirements of the 34 Act?

Fraternal, educational, religious, benevolent, or charitable organizations OR separately regulated insurance companies. (10-343)

Fully diluted shares outstanding

Fully diluted shares outstanding = (Basic shares outstanding) + (exercisable options and warrants) + (exercisable convertible securities) (5-148)

Intrinsic Value

Fundamental value implied by DCF (as opposed to current market value) (7-217)

What type of ratio would be used to measure a company's ability to meet its short-term obligations?

Liquidity ratio (such as current ratio or quick ratio) (5-162)

A stipulation whereby a specified shareholder is prohibited from selling his/her shares to another party is known as a. . .

Lock-up agreement. (11-363)

Where can one find most recent data for CASH BALANCE, DEBT BALANCES, SHAREHOLDERS' EQUITY?

Most recent 10K, 10Q, 8K, press release - balance statement (5-139)

Where can one find most recent data for DEPRECIATION, AMORTIZATION, CAPITAL EXPENDITURES?

Most recent 10K, 10Q, 8K, press release - cash flow statement (5-139)

Where can one find most recent data for BASIC SHARES OUTSTANDING?

Most recent 10K, 10Q, or proxy statement, whichever is most recent (5-139)

Where can one find most recent data for OPTIONS AND WARRANTS DATA?

Most recent 10K, 10Q, whichever is most recent (5-139)

How often are Firm Branch offices required to be inspected?

every 3 years in general, every year if the branch supervises a non-branch office. (18-467)

Research Blackout Periods

NYSE Rule 472 that prohibits analysts employed by syndicate managers from issuing research reports or engaging in public appearances for the securities immediately following the registration effective date. (12-377)

What is the most significant difference between Nasdaq and the NYSE?

NYSE trading may take place in a physical location through an auction market. Nasdaq trading takes place though telecom networks only in a negotiated market. (1-18)

What is on the cover page of a 10-K?

Name of Issuer, market value of voting and non-voting shares held by non-affiliates, number of common shares outstanding. (10-332)

Reg M, Rule 103 applies to. . .

Nasdaq passive market making (12-380)

What does the colloquial term "bottom line" refer to?

Net income (5-162)

Selected Dealer Agreement

Stipulates the terms for the selling group in an underwriting. (11-349)

ESOP (Employee Stock Ownership Plan)

Stock is set aside for employees in a trust fund, and are vested once a given employee reaches specified years of service. 2-47

How does a firm become a member of FINRA?

Submit form BD and a New Member Agreements (NMA) to FINRA. (18-456)

U5 Notice

Submitted when a registered person's association with a member firm is terminated. Must be filed within 30 days, unless it is a termination with cause which must be filed within 10 days(18-467)

SAR

Suspicious Activity Report. Filed if it seems a customer's actions indicate they may be engaging in money laundering or otherwise violating federal laws. Filed with FinCEN w/in 30 days of learning of the activity. (19-486)

Record keeping requirements for stabilization and penalty bids

Syndicate manager must maintain records for THREE years of: (1) the name an class of security stabilized or subject to penalty bid, (2) the price, date, and time at which the stabilizing purchase was affected and whether penalties were assessed, (3) the names/addresses of syndicate members and selling group, (4)the commitments of each member of group, (5) dates when any penalty bid was in effect. (12-385)

Which of members of the underwriting syndicate could receive the full spread when securities are sold to the public?

Syndicate manager only. (11-363)

Treasury stock method for calculating options and warrants

assumes that all in-the-money options and warrants are exercised at their weighted avg strike price w/ the proceeds used to repurchase outstanding shares of stock in order to minimize dilution. (5-149)

Depression

at least 6 consecutive quarters of negative GDP growth OR a real decline in GDP exceeding 10%. (1-24)

Spot Exchange rate

current exchange rate on a given foreign currency. (1-12)

Current Ratio

current ratio = (current assets)/(current liabilities) (5-163)

(Dividend) Record Date

date on which a stockholder must be a registered owner of a stock to receive a declared dividend. 2-40

Divided Declaration Date

date on which the BOD declares a dividend. 2-40

Equipment Trust Obligation

debt instruments that are secured by equipment or physical assets. 2-62

Recession

decline in GDP for 2 or more consecutive quarters. (1-23)

Fourth Market

direct trading of large blocks of securities between institutions and/or retail investors. Transacted off the exchange floor through Electronic Communications Networks (ECN) (1-15)

Accredited investor

eligible to purchase regulation D securities in unlimited numbers (Rules 505, 506). (14-406)

Warrant

entitles holder to buy stock of the issuer at a specified price for a specified period of time. Frequently attached to bonds or preferred stock as a sweetener. 2-47

Regulation S

exempts offshore offerings from SEC registration requirements. US companies can also use this exemption to raise capital in offshore markets without a registration statement. (14-408)

Thomson Reuters SDC Platinum

financial transactions database used in building a universe for comps analysis. (6-188)

When an investor purchases shares in an offering and then sells them right after the effective date, often on the first day of trading, this is called. . .

flipping. (11-363)

Simplified arbitration

for claims less than $25K. Personal appearances are not required, and the case will be decided by a single arbitrator. (19-498)

Syndicate account

formed by members of the selling syndicate for the purpose of purchasing and distributing the corporate securities of the public offering. (12-388)

What is in a 10-K Part 3 - Directors, Officers, and Beneficial Shareholders?

identification of board members and executives, executive compensation, securities held by officers, directors, and beneficial owners. (10-333)

Short-form merger

if an acquirer obtains 90% of outstanding common stock, they can squeeze out the remaining 10% and do not have to meet an "entire fairness" test on behalf of the remaining minority shareholders. (15-419)

Flipping

immediately selling IPO shares allocated through the syndicate, usually on the first day of market trading. (11-358)

Penalty Bid

imposed against a syndicate member if shares allotted to them are flipped. The syndicate member forfeits all concessions and the broker involved in the trade is not paid. (12-384)

Firm Commitment Underwriting

managing underwriter makes commitment to purchase all shares to be offered to public. Any losses for unsold shares are distributed to the syndicate. (11-347)

Large accelerated filer

market cap of $700M (10-334)

Accelerated Filer

market cap of $75M-$700M (10-334)

Money Markets

market facilitating trade of short term debt financing and investment. Securities include CDs, bankers acceptances, US Treasury Bills, commercial paper, municipal notes, federal funds, and repurchase agreements (repos) (1-11

A willful attempt by a broker-dealer to support the price of a security by interfering with fair market operations is referred to as. . .

market manipulation. (12-392)

Refreshing of Non-Automatic Shelf Registration

may only be offered for 3.5 years (180 days after the 3rd anniversary). A new registration must be filed after that. (9-312)

Bond Convexity

measures the change in the duration of a bond with change in interest rate. Second derivative measurement. 2-61

Bond Duration

measures the sensitivity of a bond's price to interest rate movements. The duration is the approx. percentage by which the value of the bond will fall for each 1% increase in market interest rate. A bond with a duration of 7 would fall approx. 7% in value for each 1% increase in the annual interest rate. 2-61

Needs Analysis

must be conducted by a member firm annually to determine appropriate content for Firm Element training. (18-471)

Training Plan

must be created by the firm after the Needs Analysis to describe in detail how the Firm Element will be conducted in the upcoming year. (18-471)

Submission Agreement

must be filed by a claimant with the NAMC in order to initiate arbitration. (19-497)

For the purposes of the Rule 147 Intrastate Exemption, how is an issuer deemed to be doing business within a state?

must meet the following 4 requirements: (1) principal office w/in the state, (2) derived at least 80% gross revs in the past 6 mo from the state, (3) had 80% of assets located in that state, (4)uses at least 80% of the net proceeds from the Intrastate offering in connection with operating a business, purchasing property, or rendering services within the state. (14-405)

When/why is a committee of unsecured creditors formed?

n a Chapter 11 proceeding to represent unsecured creditors and provide input on the restructuring plan. (17-446)

An alternative to the competitive bidding process for establishing the purchase price is a

negotiation. (11-353)

Schedule 13F

quarterly statement by institutional investment managers (any entity w/ $100M discretionary assets). Must be filed w/in 45 days of each Q end. (13-341)

Quick Ratio

quick ratio = [(current assets) - (inventory)]/(current liabilities)

Spinning

quid pro quo arrangement in which an underwriter allocates shares to executives of other companies in order to build a relationship. (11-353)

Monetary Policy

raises and lowers supply of money to control inflation and economic growth. Most common tools are interest rates and the amount of money in the money supply. (1-25)

Rights Offerings

raises new equity capital for a company by giving existing shareholders the right to acquire additional shares, proportionate to their current holdings, at a stated price. 3-101

Where can one find most recent data for CREDIT RATINGS?

rating agencies' websites, Bloomberg (5-139)

An underwriter plans to offer a DPP to a select group of sophisticated investors. Prior to participating in the offering, the underwriter must file specified information with FINRA and

receive a "no objections" opinion from FINRA. (12-393)

Schedule 14D-9

recommendation from target board on how shareholders should respond to tender. (6-196)

OTCBB (Over the Counter Bulletin Board)

regulated "over-the-counter" quotation service for securities that do not trade on national markets, including ADRs and Direct Participation Programs (DPPs). Participants must remain current with SEC filings and must have a market maker. 2-80

FINRA Corporate Finance Rule

regulates underwriting terms of most public offerings conducted by member firms, including shelf offerings. Requires managing underwriter to file registration statement and underwriting agreements with FINRA's corporate finance department within one day of filing with SEC and receive the department's opinion of "no objection" in order to proceed. (12-369)

Trust Indenture Act of 1939 (TIA)

supplements the securities act of 1933 in the case of the distribution of debt securities. Provides for a trustee to represent bondholders in case of insolvency, with a written TRUST INDENTURE agreement between issuer and trustee on behalf of bondholders. 2-62

Prepayment and early refinancing debt terms

terms under which a borrower may prepay or refinance. May specify restriction or penalties for this. (17-450)

Par Value/Face Value (bonds)

the amount of money the holder will receive at maturity. (2-53)

Matched Orders

two persons act in collusion for the same purpose in securities price manipulation. (19-482)