Unit 7: The Securities Act of 1933 & The Primary Markets
Regarding primary and secondary offerings, which of the following are true?
An offering can be a combination of primary and secondary | An additional primary offerings (APO) is a primary offering.
A corporation needs to build a new manufacturing facility costing several hundred million dollars. In which of the following markets could this new capital be raised?
Capital market
During the cooling-off period, underwriters may not
distribute sales literature or advertising material.
During the cooling-off period the disclosure document that may be delivered to interested parties is called the
preliminary prospectus.
The primary purpose of the Securities Act of 1933 is to
require full and fair disclosure in connection with the sale of securities to the public.
Which of the following would be allowed during the cooling off period?
Placing a tombstone ad.
Which of the following offerings is most likely exempt from the registration requirements of the Securities Act of 1933?
Private (nonpublic) securities offerings
Which of these may be found in the final prospectus that is not in the preliminary prospectus?
Public offer price | Release date
Which of the following would be allowed during the cooling off period?
Taking indications of interest
All of the following names describe the Securities Act of 1933 except
The Exchange Act.
The Big Shoe Sneaker Company is a small manufacturer of athletic shoes. It is selling $100 million of its stock. This will be its first public offering. It will use the money to enhance both marketing and production with a plan to grow the business and obtain a Nasdaq listing in two or three years. After the initial sale of the new shares, buyers of the stock in the over-the-counter market should expect to receive the final prospectus for how many days?
90
Sales for new issues of securities may be solicited
after the cooling-off period.
Modulux, Inc., a NYSE listed manufacturing company, was founded by Clarence Mod. Clarence is now 82 years old and is looking to divest his significant interest in Modulux to capitalize the Mod Family Foundation, a charity. He has enlisted the help of Seacoast Securities, a FINRA member broker-dealer based in Seattle, to run the sale. Seacoast Securities is acting as
an investment banker.
An indication of interest given by an investor during the cooling-off period is
an investor's declaration of potential interest in purchasing some of the issue after the security comes out of registration.
A preliminary prospectus is used to solicit
indications of interest before the effective date.
Mrs. Jones is an employee of a member firm and as such is a restricted person regarding the purchase of new issues. She belongs to an investment club and has a 1% interest in the club's brokerage account. The investment club
is not a restricted account and will be allowed to purchase equity shares of an initial public offering (IPO).
Assets offered and traded in the securities markets can include all of the following except
life insurance.
Each of the following may be traded on an exchange except
life insurance.
The statement "These securities have not been approved or disapproved nor have any representations been made about the accuracy or the adequacy of the information" is
mandated to be in the final prospectus by the Securities and Exchange Commission (SEC).
In the capital markets, securities such as stocks and bonds can be
offered by both public and private sectors.
If it finds that the registration statement needs revision, expansion, or to have corrections made, the Securities and Exchange Commission (SEC) may suspend the review of the new issue and issue a deficiency letter. Once the issuer submits a corrected registration statement, the 20-day cooling-off period
resumes where it had left off.
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
the accuracy and adequacy of the registration documents is the responsibility of the underwriters.
A corporation seeking to raise funds in order to expand its manufacturing capacity would do so in
the capital market.
Seacoast Securities is a syndicate member for the initial public offering of WeariTech, Inc., WeariTech is a hot new issue in the wearable technology space. The S-1 registration statement has been filed but the effective date has not yet been released. This is
the cooling-off period.
The access equals delivery rule applies to
the final prospectus and aftermarket delivery obligations.
For a new issue that qualifies for Nasdaq listing, a prospectus must be provided to all purchasers within how many days after the effective date?
25 days
For a new issue that qualifies for listing on an exchange, a prospectus must be provided to all purchasers for how many days after the effective date?
25 days
For nonlisted and non-Nasdaq securities, a prospectus must be provided to all those who purchase securities for how many days after the effective date?
40 days
Which of the following is true regarding the primary market?
Issuer transactions occur in the primary market.
All of the following are exempt issuers except
Modulux, Inc., a home manufacturer. A for-profit corporation is not exempt.
Primary market transactions would include which of the following?
Sale of $10 million of corporate bond by a broker-dealer acting as an underwriter
For nonexempt securities being offered to the public for the first time by a corporate issuer, which of the following would be applicable?
Securities Act of 1933 regulating issues that must be offered by prospectus
Which of the following would be applicable to nonexempt securities (those that must be registered) being offered to the public by a corporate issuer?
Securities Act of 1933 | Prospectus
The ABC Chemical Corporation wishes to advertise its upcoming offering of common stock in a tombstone advertisement that they, the issuer, will place. When placing the tombstone advertisement, which of the following would be least likely to appear?
The names of the investment bankers underwriting the issue
If an officer of a bank with the authority to purchase and sell securities on behalf of the bank wants to purchase new issues, which of the following statements is true?
The officer may not purchase a new issue because he is considered a restricted person.
An issuer that is already a publically traded company wants to register new securities without selling any of the shares until later when it anticipates it will be retooling all of its existing manufacturing plants. Which of the following applies?
This can be accomplished by utilizing a shelf registration specifically designed to register shares presently to be sold later.
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.
Modulux, Inc., a NYSE listed manufacturing company, was founded by Clarence Mod. Clarence is now 82 years old and is looking to divest his significant interest in Modulux to capitalize the Mod Family Foundation, a charity. He has enlisted the help of Seacoast Securities, a regional investment banker based in Seattle, to run the sale. This is an example of
a secondary offering.
Each of the following provides for an exemption from the registration requirement of the Securities Act of 1933 except
access equals delivery rule.
During the cooling off period, underwriters would be allowed to do all of the following except
advertise the issue.
During the cooling off period, underwriters would be allowed to do all of the following except
take orders.
Cypress Care Nurseries, Inc., owns and operates a chain of nurseries and is headquartered in Cypress, California. The company is considering selling shares of the company to the public in California. In order to be exempt from registration with the SEC, under Rule 147 it would need to meet several criteria. Which of these is not a listed criterion under Rule 147?
80% of the issuer's customers must be located in the state of California.
The SEC has established rules regarding delivery of a prospectus when a secondary market transaction occurs after the effective date. Which of these comply with those rules for initial (IPO) and additional (APO) public offerings?
An IPO of a stock to be listed on the NYSE requires delivery for a period of 25 days | An APO of a stock that will not be listed nor quoted over Nasdaq requires delivery for a period of 40 days.
GEMCO Oil and Gas, a non-NMS stock, wishing to sell up to $100 million of convertible debt as market conditions permit, files a shelf registration statement with the SEC. Which of these statements are true?
For securities offered via a shelf registration, a supplemental prospectus must be filed with the SEC before each sale. | Shelf registration allows the issuer to sell portions of a registered shelf offering over a 2-year period without having to reregister the security.
The preliminary prospectus for the IPO of the Big Shoes Sneaker Company indicates that the number of shares sold may be increased as much as 15% if market demand is sufficient. This is called a
Green Shoe option
An investor requests a preliminary prospectus for a new issue. Regarding the document which of the following is true?
It is made available between the registration date and the effective date.
The XYZ Company is looking to offer shares of its common stock to the public. Which of the following laws enacted by Congress would have the most relevance to the issuance of these securities?
The Securities Act of 1933
Modulux, Inc., a NYSE listed manufacturer, is offering 5,000,000 shares to the public, which will raise capital to build a new plant. The new technology and design should allow Modulux to increase market share significantly in the modular home business. This offer is
an APO.
Rules regarding restricted persons state that each of the following is considered immediate family except
an aunt or an uncle.
The Mod Family Foundation is a $500,000,000 charitable foundation headed by Clarence Mod. The foundation is seeking to purchase a large block of WeariTech, Inc., a Nasdaq listed company, for the foundation's portfolio. Seacoast Securities is assisting with this secondary market transaction. In this example, the Mod Family Foundation is
an institutional investor.
A preliminary prospectus (red herring)
may be used to gather indications of interest.
In an underwriting where fixing a minimum dollar amount to be sold in order to move forward with the entire offering is most commonly referred to as
mini-max.
Indications of interest taken during the cooling-off period are
nonbinding on the issuer and underwriters | nonbinding on the investor.
