Unit 7

Tombstone advertisements

- Not Mandatory - can be placed by the issuer or the underwriters - name of the issuer and underwriters, type of security, number of shares to be offered, and the offering price or expected price range - All must have a disclosure or advisory that the ad is not an offer to sell or solicit sales for the shares

A private securities transaction

- is exempt from registration under the Act of 1933 - generally sold to institutional investors - can be sold to individual accredited investors

Restricted Persons

1) Member firms 2) Employees of members 3) Finders and fiduciaries acting on behalf to managing underwriter (includes attorneys, accts, ect) 4) portfolio managers, including person with authority to buy or sell for bank, savings and loan, insurance etc 5) person owning 10% or more 6) immediate family member of any mentioned person (aunts, uncles, grandparents excluded) 7) prohibited from purchasing a new issue (IPO) at the public offering price

A follow-on public offer (FPO)

an issue of shares by a public company [registered and reporting to the Securities and Exchange Commission (SEC)] that is currently listed on an exchange and has previously gone through the IPO process

restricted

anyone being provided financial support and/or living under the same roof as a restricted person (as is the case here) is also

exempt

Purchases and sales that are unsolicited (unsolicited transactions) are ______ under the blue-sky (state securities) laws

shelf registration

Regarding a _____________ filed with the Securities and Exchange Commission (SEC) - Supplemental prsopectus must be filed with each sale - registration lasts 3 years

1 and 4 *As long as an investment club has no restricted persons as members, it may purchase new equity issues at the public offering price. An investment club that has restricted persons as members may still participate in an initial public offering (IPO) so long as the total ownership of the club's assets by restricted persons does not exceed 10%. A registered representative is a restricted person under the rules regarding the purchase of new equity issues. In III the registered representative owns 12 ½ % (100% ÷ 8 = 12 ½) of club's assets. In IV the registered representative owns 8 1/3% (100% ÷ 12 = 8 1/3), under the 10% maximum allowed.

Regarding the purchase of new equity issues by restricted persons, which statements are true? - An investment club is permitted to buy a new equity issue at the offering price. - An investment club is not permitted to buy a new equity issue at the offering price. - An investment club that has eight members with equal ownership, one of which is a registered representative, is permitted to buy a new equity issue at the offering price. - An investment club that has 12 members with equal ownership, one of which is a registered representative, is permitted to buy a new equity issue at the offering price.

D) the accuracy and adequacy of the registration documents is the responsibility of the underwriters.

Regarding the registration statement filed with the Securities and Exchange Commission (SEC) when new securities are to be issued, all of the following are TRUE except A) underwriters may assist the issuer in preparing and filing the registration statement. B) a description of how the proceeds raised from the sale will be used must be disclosed. C) the names and addresses of company officers and directors, their salaries, and a five-year business history of each must be shown. D) the accuracy and adequacy of the registration documents is the responsibility of the underwriters.

Securities Exchange Act of 1934

The Exchange Act is the ______________________ and covers the secondary markets

Securities at the state level

The Uniform Securities Act (USA) provides a legal framework for the registration of

the final prospectus and aftermarket delivery obligations

The access equals delivery rule applies to

0 days

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

90 days

The aftermarket prospectus requirement for the IPO of nonlisted securities is

capital market

The issuance of stock or bonds by corporations to raise new funds takes place in the ....

the final prospectus has been filed with the Securities and Exchange Commission (SEC) and is available on the SEC's website for investors to see

The prospectus delivery requirement, access equals delivery, is satisfied when

A prospectus

____________ will be deemed to precede or accompany a security for sale if the final prospectus has been filed with the SEC and can be viewed on the SEC website - The access equals delivery model applies to the final prospectus and aftermarket prospectus delivery obligations but not to the preliminary prospectus delivery obligations

Private placements

__________________ occurs when the issuing company sells securities that are exempt from registration to private investors - These investors tend to be institutional investors and small groups of wealthy individuals who meet certain net worth and income criteria

The Securities Act of 1933

______________________ covers the primary market and requires full and fair disclosure on new issues by providing a prospectus to the investor

preliminary prospectus (red herring)

is a prospecting tool used to gauge indications of interest - It is made available to those who request it between the registration date and the effective date (cooling-off period)

the effective date

When the Securities and Exchange Commission (SEC) clears securities for sale to the investing public, this is

For an additional issue if the security is non-Nasdaq there is no delivery requirement *For an additional issue, if the security is non-Nasdaq the delivery requirement is 40 days.

Which of the following prospectus delivery requirements for negotiable securities sold in the secondary markets is not accurate? - For an initial public offering (IPO) if non-Nasdaq the delivery requirement is 90 days. - For an IPO if listed on an exchange or Nasdaq the delivery requirement is 25 days. - For an additional issue listed on an exchange or Nasdaq there is no delivery requirement. - For an additional issue if the security is non-Nasdaq there is no delivery requirement.

the issuer

While underwriters can assist with preparation and filing, the accuracy and adequacy of these documents is the responsibility of

An additional public offering (APO)

A company with previously issued shares outstanding wants to issue more shares to the public. These new shares are issued in what is known as

never exceed the number of shares authorized

A corporation increases capitalization by selling shares of stock which can either come from a new issue or previously authorized but unissued shares. Total stock outstanding must

20-(calendar)day cooling-off period

During the __________________, 1. solicitations of sales may not be made 2. deficiency letters, if issued, are sent to the issuer

Listing/Exchange: 25 days Non-exchange: 40 days specifically quoted on OTCBB or electronic OTC Pink: 90 days

For new issues, the prospectus delivery requirement period in the aftermarket (after the effective date)....

best efforts underwriting

In a _____________________ the underwriters (syndicate) buy securities from the issuer acting simply as an agent, not as principal. This means that the underwriter is not committed to purchasing the shares and is therefore not at risk. The underwriter acts as an agent contingent on its ability to sell shares in either a public offering or a private placement

sell securities

In capital markets, both public and private sectors ____________ in order to raise funds - These securities can be bought and sold (traded) in the capital markets by individuals and institutions alike

spouses, parents, siblings, in-laws, and children

Rules regarding restricted persons define immediate family as ......

Regulation A+, Regulation D, Rule 147 and Regulation S

Securities offerings may qualify for exemption from the registration statement and prospectus requirements of the Securities Act of 1933 under

The Securities Act of 1933

Shelf offerings are covered under

a written representation

When receiving an order to buy a new equity issue, a member must obtain ____________________ that purchasers are in compliance with rules regarding sales of new issues to restricted persons (i.e., they are not restricted persons)

Primary Offerings

There is no limit to the number of ___________ a corporation can issue - only one IPO, there is no limit to the number of SPOs or APOs it can issue

underwriters

Tombstone advertisements can be placed by either the issuer or the ______________

exempt securities include

U.S. government securities - municipal bonds - commercial paper and banker's acceptances that have maturities of less than 270 days - insurance policies and fixed annuity contracts (but not variable annuities) - charitable, religious, educational, and nonprofit association issues and more

Shares issued by a U.S. government bond fund

Under the Securities Act of 1933, which of the following is a nonexempt security? - Commercial paper - Shares issued by a U.S. government bond fund - Municipal bonds - U.S. government bonds *This is a mutual fund. Mutual funds are not exempt securities under the Securities Act of 1933.

Market makers

broker-dealers who sell out of their own account in the secondary market.