SIE CH. 11

Each of the following statements are TRUE regarding Rule 144A, EXCEPT: It may eliminate the holding period requirement for Rule 144 stock. It applies to QIBs. It only applies to equity securities. It creates a more liquid market for restricted securities.

It only applies to equity securities; Rule 144A allows for the immediate sale of restricted securities to qualified institutional buyers (QIBs). A QIB is an institution that owns and invests at least $100 million in securities. Rule 144A applies to both equity and debt securities and can be used by both domestic and foreign issuers. The purpose of Rule 144A is to create a more liquid market for restricted securities.

If an underwriter agrees to purchase an issuer's entire offering, what type of agreement has been made? Best efforts Best efforts mini-maxi Best efforts all-or-none Firm commitment

Firm commitment; For a new issue, if an investment banker (underwriter) agrees to purchase the entire offering, it has made a firm commitment to the company (issuer). Best efforts simply means that the underwriter will act as an agent in selling the offering, but will not make a commitment to guarantee the sale of the entire new issue. In any best efforts agreement, any unsold amount will be returned to the issuer. All-or-none requires that either the entire issue is sold or none of it will be sold

Which of the following is used as the disclosure document for a private placement? Official Statement Offering Memorandum Statutory Prospectus Free Writing Prospectus

Offering Memorandum; Private placement offerings use a disclosure document that's referred to as an Offering Memorandum or Private Placement Memorandum (PPM). The Offering Memorandum provides details regarding the limited partnership investment, business plan, financial information, and information on the general partners

A standby underwriting arrangement may be entered into with an investment banking firm to purchase all of a company's shares that remain unsold after a(n): Execution of warrants Rights offering Initial public offering Private placement

Rights offering; When a company issues additional shares, it may be required to offer its existing shareholders the first right to purchase those shares through a rights offering. To ensure that all shares will be sold if not purchased by existing shareholders, the issuer may have an underwriter "standing by" to purchase any unsold shares after the rights offering is conducted

Public offerings that occur entirely in one state may be exempt from SEC registration under which rule or regulation? Rule 144 Regulation D Rule 147 Rule 145

Rule 147; Rule 147 provides for an exemption from federal registration if securities are issued within one state. Regulation D provides for an exemption if securities are offered through a private placement. Rule 144 regulates the sale of restricted and control securities in the secondary market. Rule 145 addresses the rules for securities that are the result of reclassifications (e.g., mergers and acquisitions).

During the underwriting of a new offering, which of the following firms doesn't assume any liability? Underwriting manager Syndicate members Selling group Co-managers of the offering

Selling group; The selling group are firms that don't assume any liability in an underwriting. Instead, they act in an agency capacity and stand ready to sell if needed.

What does it mean when a registration statement becomes effective? The SEC allows the securities to be sold The SEC has found that the registration statement is accurate The SEC has endorsed the offering The SEC has approved the final prospectus and recommends the offering

The SEC allows the securities to be sold; he SEC does NOT approve, qualify as accurate, recommend, or endorse any offerings. During the "cooling-off period," the SEC reviews the registration statement to determine whether full disclosure has been made. Remember, during the cooling-off period, only indications of interest can be accepted. No sales can be finalized until the registration is declared effective.

The final prospectus for new issues of common stock must be delivered to the client by no later than: The confirmation of the sale The trade date 10 days after the confirmation 25 days after the confirmation

The confirmation of the sale;

For a municipality, what's the purpose of the bond counsel? To provide a legal opinion as to whether a bond issue will qualify for tax-exempt status. To guarantee that a bond issue will qualify for tax-exempt status. To represent bond investors in any litigation with the issuer. To review any bids that are submitted for a competitive offering.

To provide a legal opinion as to whether a bond issue will qualify for tax-exempt status; For a municipality, the bond counsel creates the "legal opinion" which attests to the validity and tax-exempt status of the municipal offering. However, the legal opinion doesn't provide any specific guarantee related to the offering.