Series 82

Private placements:

Issuing securities without going through a rigorous SEC registration process. The offering may be exempt from traditional registration requirements hence considered an exempt transaction.

Recordkeeping Requirements

Lifetime: Corporations > Articles, Board Minutes and Stock Certificate Books Partnerships > Partnership Articles 6 Year records - Blotters - Gen'l ledger - Stock ledgers - Ledgers: secs in transfer. divs and int and borrowed secs - New Cust a/c forms and margin Agr and open and closed a/c's 4 Years - Customer Complaints 5 years (2 years accessible place) - SAR filings - Anti-money laundering fillings - CIP docs 3 years (2 years accessible place) - Commun re to B/D's - Finan records - POA's & TA's - Ads -FOCUS reports - U-4's and U-5's and fingerprints - Customer confirms - Order tickets - Associated person's comp - Compliance & procedure manuals - Written Agr.

Trading authority

Limited: can trade, no w/dr. Full: Trade and w/dr. Discretionary: FA can trade in a/c provided dated signature by client has been granted FA - Time and Price discretion for a one day Records must be kept for up to 3 years

Filing with FINRA

W/in 10 days of first use - Adverts abt Inv Companies direct participation programs and CMO's 10 days Prior to first use - Securities Futures Bond Funds with Volatility ratings If Investment Company Adverts include performance rankings Firm's in the First year of membership must file all retail communications with FINRA

Primary Market

When a company issues and offers new securities to the public for the first time. Proceeds from the sales always go to the company that issues them.

Regulation FD (Fair Disclosure)

When issuer discloses material, non-public information to any person outside of the company: Intentional: simultaneously making public disclosure Unintentional: promptly make public disclosure All investors must receive material info at the same time. Make disclosure on Form 8-K or press release, website etc. Trading only legal after public disclosure

Secondary Market

When previously issued securities are traded among investors and the proceeds from secondary market sales goes to the party that sells the shares.

joint account holder

is equally responsible for the balance of the account along with the other person named on the account and is legally liable for any amount due JTIC - passed onto the estate JTWRS - passes to other a/c holder

Rule 147 Intrastate Offerings

offerings that take place in entirely one state are exempt from registration when: the issuer has its principal office and receives at least 80% of its income in the state at least 80% of the issuer's assets are located within the state at least 80% of the offering proceeds are used within the state the B/D acting as underwriter is a resident of the state and has an office in the state all purchasers are residents of the state For a period of six months from the investor's time of purchase, these securities may only be resold to persons or entities that reside in the State.

Private placements:

Private Placements are where new issues may be offered privately to a select group of investors without registering with the SEC. Sales of private placements in the primary market are often made by members of a selling group of broker-dealers. The terms of the agreement among selling group members are included in the Selling Group Agreement.

Transaction whose approval requires a vote or consent (as some mergers) is an offer.

Prospectus delivery is required - Delivery must be made prior to shareholder vote or, by consent, prior to earliest date action can be taken

Crowd funding can best be described as

Raising small amounts of money from large numbers of people. Crowdfunding securities usually cannot be sold within one year of purchase, unless the securities are transferred back to the issuer, to a family member of the purchaser, or to an accredited investor.

Rule 504

Small offering by a non-reporting issuer. Under 5m or less. No restrictions on who can purchase, excluding "Bad Actors" Proceeds from securities sold in an earlier Rule 504 offering will be aggregated with and count toward the dollar cap of a later Rule 504 offering, if the sale date was within 12 months of the start date of the second offering. Proceeds from concurrent Rule 504 offerings will count toward each other's dollar caps.

Portfolio Strategies

Strategic Asset Allocation Rebalance portfolio - passive Tactical Asset Allocation - Time market through sector rotation to increase returns indicators (fundamental & technical analysis) - Active Diversification - reducing risk & volatility Growth - longer time horizon, focus on cap gains Value - seek underpriced and undervalued stocks Income vs Capital Appreciation

Registration Process

- Pre-filing period, time before Registration statement is filed with SEC. - Registration period (cooling-off period) SEC reviews registration Roadshow to seek IOI LASTS 20-DAYS - Post-effective period Regis becomes effective, not approved Issue can be sold to investors

risk tolerance level

An investor's ability and willingness to tolerate, or accept risk

Minor Rule Violation

-MRV letter used for only small violations -Offered to avoid costly hearing -Max penalty is censure and $2500 fine -If issued, member or RR has 10 business days to accept -Signing does not admit or deny allegations - gives up right to appeal -If not accepted, Department of Enforcement will proceed with formal hearing -Possible penalties: Censure, 1 year suspension, 10 year expulsion, barred for life, fined any amount, restitution -Decision of Dept of Enforce may be appealed w/in 15 days to National Adjudicatory Counsel (NAC) -If no action taken, decision becomes final in 45 days -If appeal has merit, review must start within 45 days -Decision may be appealed to SEC and finally court system

Suitability Requirements

1) Reasonable basis: DD on nature of recommended security or strategy to determine suitability for the investor 2) Customer Specific: Suitable for a particular customer based upon their Investment Profile 3) Quantitative: Series of transactions not excessive

Discretionary Power

1) The customer has given prior written authorization to a stated individual. 2) The account must be accepted by the member, as evidenced in writing by the member or the partner, officer or manager, duly designated by the member. 3) The member or a designated individual must promptly approve in writing each discretionary order entered. 4) The member or a designated individual must review all discretionary accounts at frequent intervals.

standby agreement

A Standby Equity Distribution Agreement (SEDA) is a type of private placement in which a publicly traded company issues new stock without making a public offering. In a SEDA, a financial firm agrees to privately purchase the stock at a discount to the market price of the issuing company's outstanding shares, and the issuer chooses whether to sell all of the shares, part of the shares or none of the shares. Obligates underwriter to buy up the securities that are not purchased or unsold at a fixed subscription price. usually at a discount to the offering or market price.

finder's fee

A fee paid to a person for the services of putting together the two parties in a securities transaction. Trade confirmation must disclose that a FF was paid

follow-on offering

A follow-on offering is an issue of stock that comes after a company has already issued an initial public offering (IPO). Follow-on offerings are considered Primary Offerings.

Secondary Offering

A public sale of securities by a company after the initial public offering handled by an underwriter, who purchases shares at a discount and sells them at a fixed offering price. Proceeds will go to the shareholder, not the issuing company

Regulation A

A regulation that permits an issuer of equity for U.S. and Canadian businesses to sell $75 million (since Jan 2021) of securities over a one-year period pursuant to a simplified registration process. Tier 1: Raise up to 20M in a 12 month period Tier 2: Up to 75M in a 12 mo period with additional requirements. - Full registration statement not required, instead, an offering statement including offering price on Form 1-A after which comes a 20 day waiting period. - Part II comes the Offering Circular, sales can be made after OC becomes effective. - Before filing the Offering Statement issuer may "Test the Waters" to gauge investor interest. Reg A is considered a Public Offering and advertisements are allowed as well as may be publicly traded after purchase, it is not considered "restricted" like private placements sold under Reg D.

Best Efforts

A type of offering leaving the placement agent at no risk for unsold securities, if a required portion of issue has not been sold by the end of the subscription period, the offering will be cancelled, securities returned to the issuer, and funds returned to investors.

Aggregation

Aggregation occurs when funds raised in one exempt offering count toward the dollar cap of another exempt offering. Aggregation can occur when one exempt offering comes too soon after another. Unlike integration, aggregation does not cause the offerings to be combined into a single offering. It simply means that the issuer will not be able to raise as much money as it would have if it had spread the offerings out over a longer period of time.

Research Reports

Allowed if researcher regularly issues reports on the issuer as part of their business Rule 137: does not rec compensation Rule 138: can be issued if report is about a different security Rule 139: report is issuer specific or includes issuer and the security and other comparable companies

Rule 506(c)

Allows an issuer to raise an unlimited amount of capital. All investors must be accredited or that use a purchaser representative. Under Rule 506(c) an issuer may publicly market an offering accredited investors Can advertise.

Reg D

An exempt transaction under the Securities Act of 1933 for private placements. Issuers must electronically file a Form D (within 15 days of the first sale) that describes the nature and size of the offering, exemptions to be claimed, allowable investors, minimum allowable investment, and the number of non-accredited investors. - Must be a legend on securities stating that they are restricted - Issuers must make sure investors are buying for their own accounts - All offerings and sales made within 6 months before or after offering are considered to be part of the offering. On the exam stocks purchased in a private placement may be referred to as restricted stock, legend stock, letter stock, or unregistered stock. - Rule 504 exempts from registration the offer and sale of up to 10 million of securities in a 12-month period. Must file a Form D within 15 days after the first sale of the securities offering.

Suitability

An important element in determining proper business practices. Financial professionals recommend financial products based on the client's financial, social, and emotional circumstances. Preservation of Capital - Current Income - Retirees Treasuries, Munis, and Corporates also Pref Stks, REITs, and dividend-paying stocks Capital Growth - Risk/Volatility Stocks - growth stocks - long term horizon Speculation - Greater risk Derivatives, Penny Stocks, Commodities and Margin

Institutional Communications

Any written communication that is distributed or made available only to institutional investors but does not include a member firm's internal communications. Treated like correspondence - no principal approval required or filing with FINRA

Customer Accounts

Basic Personal Information Trusted Contact Person Suitability Information (educational background not required) - All account forms must be kept up to 6 years from the closing of the account - Firm must send the client a new a/c form within 30 days - Every 3 years after that to update suitability info - Firm must send a copy to the client of updated a/c info within 30 days of making the updated change.

Arbitration

Binding - no appeals allowed - Arbitrators do not have to provide an explanation for the award - Statute of Limitations is six years from the event - Hearing and awards are public - Hearing panel renders a decision within 40 days of closing the record - Awards are to be paid within 30 days Simplified arbitration involves claims less than 50K, where a single arbitrator gives the binding decision Public Arbitrators - the majority Non-Public Arbitrators 50K < one arbitrator 50K - 100K = one arbitrator unless parties agree in writing to three excess of 100K - the panel will have 3 arbitrators unless parties agree to one Mediation - the parties select a mediator from a list

Zero-coupon bonds

Bonds that pay no annual interest but are sold at a discount below par, thus compensating investors in the form of capital appreciation. > Investor must pay tax on phantom income (discount divided by time to maturity.

Prospectus

Broadcast to sell securities - Preliminary Prospectus (Red Herring) doesn't contain offering price - SEC reviews prelim prospectus when it reviews Regis Statement by SEC (can recs deficiency letter and the 20-day clock will start over again - Will become effective

Call Risk

Call risk is the risk that a bond will be called when interest rates are declining so that the issuer can re-issue the bond at a lower rate. When this occurs, the issuer pays the bondholder a designated amount. Often this amount is a call price that is higher than the bond's principal, but this is not always the case. When a bond is called, the bondholder forfeits all future interest payments that would have come as a result of holding the bond. However, while he holds the bond he benefits from the fact that callable bonds generally pay higher interest rates than non-callable bonds.

Settlement Offers

Can be done before hearing - can be rejected

Rule 144 Control Stock

Control stock is any security owned by an insider or affiliate (officer, director, or >10% shareholder) of that company. The sale of control stock is subject to volume limitations. Affiliates or Insider can sell the greater of 1% of the outstanding shares, or The average reported weekly trading volume during the preceding four weeks. (if more than 5,000 shares or 50K, Insider must file a notice of proposed sale with the SEC on Form 144. Information is available to the public. Holding period: Reporting co's = 6 mos Non-reporting co's = 12 mos Before selling and investor must remove legend off the securities which can only be done with the permission of the issuer and by a transfer agent.

Corporate and Partnership

Corporate resolution states who has trading authority Partnership Agr. states who has TA

Communications with the Public

Correspondence: written or electronic commun sent to 25 or fewer cust. in a 30-day period - no principal approval needed unless it promotes a product or a recommendation - Must retain correspondence records for at least 3 years Retail Commun: Must be approved by a principal before first use Record must be retained for 3 years Ads, Radio, TV, Signs, billboards and movies Sales literature: research reports, form letters, correspondence sent to over 25 cust over 30 day period, telemarketing scripts, reprints, circulars all must be approved by gen sec principal before use.

Taxation of Equity and Debt

Cost Basis - Purchase price of secs plus commish Sale proceeds - proceeds from sale less commish Gain or loss - Sale Proceeds - Cost Basis

Gifted Securities

Cost basis is original owner's/giver cost basis if it has appreciated, if market price is less than owner's cost than cost basis is the market price (FMV) at time of gift. Holding period is past along with with securities (same holding period as giver) Charitable gifts - if held over a year, donor can deduct FMV at the time of donation. If held less than a year, donor can deduct cost of securities rather than FMV

Rule 144A regulates:

Customers who wish to buy or sell restricted securities under Rule 144A will need to be certified qualified institutional buyers (QIBs). QIBs must be institutions, rather than individuals, that have at least $100 million of assets under management.

Electronic Prospectus Access

Evidence of delivering the equivalent of the paper prospectus must obtain customers consent to receive electronically

Member Private Offerings

FINRA member or controlled entity - 50% A member firm must provide disclosure and file with FINRA prior to providing the document to the prospective investor. PPM, Term Sheet must be filed with FINRA's Corporate Finance Dept - At least 85% of the MPO offering must be used for business purposes - use of proceeds must be consistent with disclosures

tax rules

First must offset short terms gains with short term loss Then long term gains with long term losses If there are short or long term losses remaining, these can be offset with any remaining losses Any further losses, $3,000 of losses can be deducted from taxable income each year If there are still losses may be carried over to the following year Dividends: Qualified = taxed at investors Cap Gains Rate Non-qualified = Taxed at investors ordinary tax Rate Stocks Divs or Rights or Merger: Non-taxable event

Laddering

Fixed Income Investor Save for a target date and reduce interest rate risk by spreading out reinvestment risk, avoid being locked into a single rate and a single maturity timed to mature when an investor needs cash

Additional Prospectus Rules

For IPO's, must deliver preliminary prospectus to buyers at least 48 hours before sending confirmation of sale.

Corporate Bonds Tax

For a premium bond there are two choices: the owner can take a loss at the time of maturity or amortize over each year For a discount bond - > can report a capital gain in the year he sells bond for a higher price or > he accretes the discount over the life of the bond and that amount will be subtracted from the cost basis of bond. At maturity, the bond cost basis will be equal to its par value

POA

General power of attorney: broad and substantial powers, includes finances, contracts, tax filing, employment, and the right to delegate. Usually done when the grantor is unable to take care of his/her affairs or some reason (extended travel, medical/incapacitation). Limited power of attorney: specific powers. Authorizes agent to do something narrow, like sell a house or collect a debt, or buy/sell a stock. Again, motivation for this is when grantor cannot do something and needs help, perhaps due to extended travel or medical/incapacitation. A durable power of attorney differs from a traditional power of attorney in that it remains in operation even after the incapacity of the grantor/principal. A durable power of attorney may take effect as soon as it is executed or it may not become operative until the grantor's disability.

Customer Complaints

Grievance involving activities of persons associated with a member firm. The firm's principal must follow up in a timely manner The record must be kept at OSJ A written resolution must be kept in the file and signed by the Principal Filed with FINRA w/in 15 days of the end of the quarter Records must be kept for 4 years Certain complaints must be reported to FINRA no later than 30 days of the member firm learning of the complaint - forgery, theft, or misappropriation of funds - Statutory disqualification - Securities law or regulation violations - Any claim exceeding 15K for an associated person and 25K for a member firm

Inherited Securities

Heirs cost basis is FMV at deceased time of death if securities have gone up in value If shares have gone down in value since the deceased purchased them, an heir may use the deceased cost basis Any cap gains are considered LT, whenever Heir decides to sell securities regardless of how long securities were held.

Wash Sale

If someone buys back shares that were sold at a loss within the last 30 days it is called a wash sale. A wash sale is a permitted transaction, but the IRS does not allow the investor to use the loss to offset gains. Instead the amount of the loss will be added to the cost basis of the newly purchased shares.

Integration

If the SEC decides that multiple exempt offerings are really a single offering, then the combined offering must meet all of the conditions of a single exemption, or the offering will lose its exempt status. Similarly, if a registered offering is integrated with another offering, then the combined offering will not match the information disclosed in the registration statement, which means the offering cannot go forward. In addition, there may be consequences for the registered persons involved. Rule 152. This rule offers several safe harbors against integration, as well as clarifying language about how to avoid integration if no safe harbors apply.

Advanced Refunding

In an advance refunding, the old issue remains outstanding for a period longer than 90 days after the issuance of the new (i.e., refunding) bonds. The refunded bonds may remain outstanding until maturity or some future call date. The funds needed to pay the old debt are kept in an escrow account, and as long as those funds are sufficient to pay off the debt, the account and the refunded bonds cancel each other out for accounting and legal purposes. While the funds to pay off the refunded bonds must be kept in an escrow account, they do not need to be kept in a sinking fund account.

Charges for services performed

Include a collection of monies due for: - Principal, dividends, Interest, Transfer of securities, Appraisals and safekeeping and custody

Final Prospectus

Includes all material information about the offering company

Penalties for insider Trading

Indivs: Max Civil Penalties: 3x's profit gained or the loss avoided Criminal: 5M and 20 years Firms: Greater of 1M or 3x's profit gained or losses avoided Criminal: 25M Statute of limitation is 6 years from violation

Municipal vs Corporate Bonds

Munis: Triple tax-free if investor resides in the State where the bond was issued. after tax yield for corp bond = coupon x (1 - tax rate) corp equiv yield for a muni bond = muni coupon rate / (1- Tax Rate)

Rule 506(b)

No limit on the dollar amount that can be sold. Sale can be to an unlimited number of accredited investors but no more than 35 unaccredited investors and they must be sophisticated investors or represented by a purchaser representative who is sophisticated. Regulation D requires that non-accredited investors be given access to the same organizational and financial information concerning the issuer as would appear in an SEC registration statement. Under Rule 506(b) an issuer may not publicly market an offering and it may only solicit investors it already knows An investor cannot resell for 1 yr. after purchase

Supervision and Communication

OSJ - Office of Supervisory Jurisdiction Branch Office - Asso. employee in the business of soliciting or effecting (but not executing) purchase or sale on securities - Supervising activities of employees at one or more non-branch locations of member firm excludes: Primary residence vacation home used for less than 30 days Back-office functions where no sales are conducted - at least one OSJ regis principal respon for each OSJ and regis rep or principal for non- OSJ branch office - OSJ's and supervisory branch offices must be inspected annually for compliance - Branch offices that do not supervise other Branch Offices inspected every 3 years

FINRA Code of Procedure

Office of Hearing Officers presides over disciplinary hearing - Accused has 25 days to respond after receipt of the complaint - admit deny or claim insufficient information - If accused does not reply, a second notice will give them 14 days to respond

Investigations, Violations and Resulting Sanctions

Once FINRA's Dept of Enforcement or Market Regulation believes there is a violation, the representative can either fight allegation or admit guilt - Admit = AWC (Acceptance, Waiver, and Consent) can be filed before a formal complaint has been issued - Consents to sanctions and waives the right to an appeal - Includes a fine - Reported to Broker check and publicly seen

PIPE Transaction

PIPE transaction occurs, a company typically files a Form 8-K to alert its shareholders, the public, and the SEC of the transaction. A PIPE transaction can have a dilutive effect on earnings per share of the company's common stock, NASDAQ requires issuers to file a notification form within 10 days of the closing of the transaction if the transaction has increased the number of shares outstanding by 5% or more.

PP Documents

PPM 50+ pages, not required but nearly always is provided to prospective investors - Investors screened for suitability - Teaser provided - Confidentiality Agreement (CA) _ Term Sheet - Subscription Agreement - Sent to Escrow Agent - Issuers must fulfill requirements for updates for non-accredited

Private Placement Agreement

Placement Agent place securities with investors with a Private placement agreement that details agent's fees.

Placement Agent and Compensation

Placement Agent runs the private placement process and acts like a deal manager of the offering and is typically paid on a percentage basis, while employing a selling group that's paid on the basis of the securities they sell. Unlike an underwriter, the Placement Agent have no obligation to purchase the securities, ensure a successful placement or procure other financing

No coordination of prices, trades or

Price coordination is strictly prohibited

Regulation S

Regulation S exemption: These issuers do not need to register their securities with the SEC - Cannot sell to U.S. residents even if they are citizens of another country - Can sell Reg S shares on foreign exchanges immediately after IPO Can sell Reg S shares to U.S. Citizens Debt- After a 40-day restricted period Domestic Equities - 1 year

Moving to a new firm

Rep's New Firm must provide an educational document describing costs and complications of transferring assets to a new firm - Must be sent in writing within 3 days - New Firm Must provide Educational Info when it provides an account transfer form - The requirement to supply Edu info applies for 3 mos from the rep's first day of employment with the new firm

Suitability Information

Required to attempt to collect info necessary to make suitable investment recommendations (income, net worth, tax status, dependents, financial situation, holdings, risk tolerance, investment objectives) -Broker/dealers may complete transactions w/o all info if directed by client (not advising client) - B/D's may accept unsolicited orders without suitability -Investment advisors must deny account if client refuses to furnish information (cannot make informed decisions) Institutional Clients: Banks, Savings & Loans, Ins Co's Registered Inv Co's, Inv Adv or any other person with at least $50M - If B/D believes inst, independently evaluates risk, then suitability requirement is fulfilled.

Regis Period

Restrictions on Communication - All sales and offers not accompanied by prelim pros are prohibited - IOI are allowed - Commun are allowed -Tombstone ads: Price, descrip of amt, and type of Secs expected ticker where it will be listed address

Safe Harbor

Safe Harbor for Private Placements Sold Directly from the Issuer without use of a private placement agent, broker-dealer, or underwriter in connection with the offering. For these types of transactions, the SEC created a "safe harbor" allowing employees and other representatives of the issuer to sell the issuer's securities without having to register as a broker. Rule 3a4-1 applies to "associated persons" of the issuer, which includes officers, directors, or employees of either the issuer or a company under common control with the issuer. Threshold requirements: •The associated person must not be subject to statutory disqualification. •The associated person must not be compensated in connection with her participation in transactions in securities. •The associated person must not be associated with a broker or dealer at the time of his participation in the sale of the issuer's securities.

Restricted Securities

Securities issued under Regulation D are unregistered and therefore restricted. They cannot be sold unless registered with the SEC or sold under an exemption like Rule 144 or 144A.

The Paper Act

Securities registered with Federal Government prior to sale with the Registration Statement. Details about companies business operation, management, description of securities being offered for sale and financial statements.

Types of Risk

Systematic Risk: not diversifiable Systematic risk is the risk that the whole system (i.e., market) will drop, causing a drop in the performance of the portfolio Market Risk: overall market decline hedging: Puts on S&P 500 or short Broad Market ETF's Interest Rate Risk: the rise in rates reduce the value of Bonds Long-term bonds more susceptible to I rate risks Inflation Risk = purchasing power risk especially for bonds that have fixed payments - stocks behave more positively - bonds best choice during a contraction phase

Financial Exploitation

Taking advantage of an older person for monetary or personal benefit. - Reasonable belief can be in regard to past, present, or future exploitation. - Firm can put a temporary hold for 15-day business days for an internal review - Can extend for 10 more business days if the review is found to be reasonable

Fast Act

The FAST Act amended the Securities Act by inserting Section 4(a)(7), which made it easier for early stakeholders and investors to sell their unregistered shares in a new company. Section 4(a)(7) imposes no volume limits on resales by affiliates of the company (which this investor is since he owns over 10%). In addition, the FAST Act exemption allows reseller access to a wider pool of investors than Rule 144A, since Section 4(a)(7) is limited to accredited investors rather than the mega-money QIBs. Under the FAST Act exemption, unregistered securities can be sold to accredited investors as long as each of the following conditions are met: -The securities have been authorized and outstanding for at least 90 days -No general solicitation or advertising is used when offering of selling the securities -The seller is not the issuer, a subsidiary of the issuer, or an underwriter -The seller is not a 'bad actor' as defined under Regulation D -The issuer is not a blank check, blind pool, or shell company -The sale is not part of an unsold allotment to an underwriter -The seller provides the buyer with information about the issuer, specified under Securities Act Section 4(a)(7) If these conditions are met, the unregistered securities can be sold to accredited investors at any time.

US Patriot Act

The USA PATRIOT Act requires member firms to use the name, address, date of birth, and Social Security or tax ID number to independently verify the identity of the customer. This verification can be done with a current driver's license, passport, or another government-issued identification (a Social Security card is not acceptable). The verification must be done within a reasonable amount of time after opening the account. This is referred to as the firm's Customer Identification Program (CIP).

Unsystematic risk

Unsystematic risk is risk can be mitigated through diversification. - Default risk/Credit Risk: Credit Risk of Treasuries = 0 - Business Risk: Company underperforms expectations - Regulatory Risk: Foreign Investment: - Political Risk - Currency Risk

mini-max commitment

Underwriter commits to sell a minimum number or the offering will be cancelled. Escrow agent may only invest in safe investments - T-bills, bank accounts, bank money market accounts or short term CD's.

All-or-none

Underwriter sells all shares of the issue or offering is voided. All monies returned to investors if voided and all purchased shares cancelled.

Securities Act of 1933

The first major federal law regulating the securities industry. 1) It requires firms issuing new stock in a public offering to file a registration statement with the SEC. Requires companies to disclose relevant financial information about their securities prior to offering them for sale and 2) to prohibit fraud and and deceit in the marketing of securities

Customer Identification Program (CIP)

The policies and procedures of an institution that aim to identify and verify the identity of its customers. Social Security Card not accepted. - Must check if client is on a terrorist list from OFAC - Detect and deter money laundering - Records relating to CIP must be kept for at least 5 years

Know Your Customer Rule

The rule that requires a broker-dealer to obtain essential info regarding each one of its customers: - Identities - Investment histories - Investment Objectives - Sources of Funds Effectively service cust a/c Carry out special instructions Who has trading authority Comply with Securities laws, regs, and rules Must review every 3 years (though BD's may be required to update more frequently)

firm commitment underwriting

The type of underwriting in which the underwriter buys the entire issue at a discount, and offers at a fixed offering price assuming full financial responsibility for any unsold shares.

The Syndicate (not used in Private Placement)

Underwriter/Syndicate/book runner/book manager

Accredited Investor

an organization or individual investor who meets certain criteria established by the SEC and so qualifies to invest in unregistered securities. - Large Institutions - Corp, trust or partnerships with more than 5M -Indiv. with 1m NW or 200K/ea. of last two years indiv or 300K for a couple