Unit 1d

Which of the following calls for the underwriters to bu securities from the issuer acting as an agent, not as principal?

Best efforts underwriting In a best efforts underwriting 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.

Underwriters acting as principals and committing to purchase any unsold shares for the syndicate account would BEST to be described as being engaged in a(n)

Firm commitment In a firm commitment underwriters contract with the issuer to buy its securities, acting as principals rather than agents. They are committing to purchase any unsold shares for the syndicate account. In this type of underwriting, it is the underwriters who are at risk for any shares they cannot sell to the public, not the issuer. The issuer knows that ultimately all of the securities will be sold, and all of the capital needed will be raised.

Securities sold in an issuer-related transaction would best be described as

Primary offering When an issuer offers stock and the proceeds from the sale are added to the company's capital, it is called a primary offering. By contrast, a secondary offering is one in which one or more shareholders in the corporation sell all or a portion of their equity holdings to the public. The proceeds of a secondary offering are paid to the selling shareholder(s), not the company.

Regarding the registration of securities with the Securities Exchange Commission which of the following is TRUE?

Private securities offerings are generally exempt from registration Private placements are generally exempt from the registration requirements of the Securities Act of 1933.

Shelf offerings are covered under which if the following?

The Securities Act of 1933 The shelf offering (registration) provision under the Securities Act of 1933 allows issuers to quickly raise capital when needed or when market conditions are favorable.

An investor is viewing a company's prospectus on the Securities Exchange Commission's website. Which of the following is TRUE?

This satisfies the access equals delivery rule for a final prospectus 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

A company's board of directors has agreed that the company should be prepared to have shares of common stock ready to be issued that are intended to be distributed in the form of a one-time employee bonus. Not knowing exactly when the one-time bonus plan will be implemented and the shares will be needed, the type of registration or offering that would best suit the scenario is

A "shelf" registration The Securities Act of 1933 permits issuers to quickly raise money in the capital markets when needed via a shelf registration. This type of registration allows the company to, in essence, take the securities from the shelf without the delay of registering with the SE, because the actual registration has already been done ahead of time.

Sales for new issues of securities may be solicited

After the cooling off period Sales can only be solicited after the cooling off period (upon the effective date). Solicitations of all sales must be one with a final prospectus.

When choosing to issue additional bonds to the general public in order to raise more capital, a corporate issuer is engaging in

A primary offering A primary corporate offering is one in which the proceeds raised go to the issuing corporation. Primary offerings of bonds may be made by an issuer to the general public as an initial public offering (IPO) or, as is the case here, in an additional public offering (APO). Both are primary offerings.