Series 79

How long do you have to wait if you fail a FINRA exam? How about 3 times?

once and twice - 30 days three times - 180 days

Important points about Reg A offerings

- Purchasers must be provided with an offering circular that is similar in content to a prospectus. - The securities can be offered publicly and are not restricted. - The use of general solicitation and advertising is permitted PRIOR TO THE FILING OF AN OFFERING statement with the SEC (to test the waters) - The financial statements are simpler and do not need to be audited.

What is a 13F filing?

3F filings apply to the holdings of large (institutional) investment managers (hedge funds)

A person who has purchased a new issue of securities through an underwriter, would be in violation of the 1934 Act if that person had sold short the same securities:

5 business days preceding pricing

What is the typical underwriting fee on most transactions?

7% but no set standard, except cannot be unfair and unreasonable

What is the difference between voluntary and involuntary bankruptcy?

A Chapter 11 bankruptcy may be voluntary or involuntary. A voluntary bankruptcy is filed by the debtor or company filing the plan (can be the BOD of a corporation). In most circumstances, that entity is known as the debtor-in-possession (DIP). An involuntary bankruptcy is filed by the creditors that are owed money by the debtor or company.

What do S&P bond ratings have?

+ / - signs

Regulation M-A requires that a summary term sheet be provided to investors as part of the disclosures made in a tender offer or merger and should contain:

- A brief description of the transaction - The consideration offered to security holders - The reasons for engaging in the transaction - The vote required for approval of the transaction - An explanation of any material differences in the rights of security holders as a result of the transaction - A brief statement as to the accounting treatment of the transaction, if material - The federal income tax consequences of the transaction, if material

According to Securities Exchange Act of 1934, an outside audit should include:

- Procedures designed to provide reasonable assurance of detecting illegal acts that would have a direct and material effect on the determination of financial statement amounts; - Procedures designed to identify related party transactions that are material to the financial statements or otherwise require disclosure therein; and - An evaluation of whether there is substantial doubt about the ability of the issuer to continue as a going concern during the ensuing fiscal year.

What is flipping? Is it permitted?

Flipping is a permitted activity that is defined as the initial sale of a new issue within 30 days following the date it was offered as an IPO.

What is a purchase representative?

A purchaser representative is defined under Regulation D as a person "knowledgeable and experienced in business and financial matters." There are no specific qualifications needed to act in this capacity. A purchaser representative would advise a nonaccredited investor regarding the purchase of a private placement. A purchaser representative may not be given blanket authority by a client to represent that client in all future private placements

If you realize you do business with an embargoed country, what should you do?

Any U.S. bank which has knowledge of a payment to or from one of these countries (Cuba, North Korea, Syria, Iran) is required to block the transaction and report it to OFAC within 10 days.

When does a schedule TO need to be filed?

Any person who makes a tender offer and becomes the owner of more than 5% of the outstanding shares of a company, is required to file a Schedule TO (tender offer) as soon as practical on the commencement date.

If you pled guilty to a charge, when may you enter into the securities industry?

Anyone who has been convicted of a misdemeanor related to securities, or any felony during the last 10 years, is subject to statutory disqualification. (must wait 10 years after conviction to enter)

What is a general rule for RETIS?

As a general rule, a Real Estate Investment Trust (REIT) in its second taxable year must meet two ownership tests. There must be at least 100 different shareholders and 5 or fewer individuals may not own more than 50% of its common stock during the last half of its taxable year

What is S-corp taxed at?

Capital gain

What is the difference between Chapter 7 and 11?

Chapter 11 bankruptcy is often referred to as reorganization bankruptcy. Chapter 7 is a liquidation bankruptcy.

How do you find equity value using DCF?

DCF + Cash - Debt

What is Reg S-K known for?

DISCLOSURES

Who is the first to file a reorganization plan?

Debtor in Possession. NOT the creditors' committee

What are demand registration rights?

Demand registration rights obligate an issuer to file a registration statement covering a potential sale under certain conditions. This may occur if a large holder of the company's shares would not be able to sell their securities through a 144 sale. (The size may exceed the volume limitations.)

Where do you find discussion about exec compensation?

Detailed information in the proxy statement concerning the proposed executive compensation would include potential payments to be made upon termination following the change in control.

When is arbitration used?

Disputes between members must be submitted to arbitration.

What does Rule 101 of Regulation M prohibit participants in a distribution form? What are the exceptions?

Distribution participants (syndicate members, selling group members, and any other broker-dealers helping to sell the security being offered to the public) may not bid for or purchase the subject security (the security being distributed) during the restricted period. The restricted period generally begins with the later of five business days prior to pricing, or whenever the broker-dealer becomes a participant. It ends when the broker-dealer participation is over. However, if the subject security has an average daily trading volume (ADTV) value of at least $100,000 and the issuer's public float value is $25 million or more, the five-business-day standard is reduced to one business day. Exceptions to Rule 101 include the following.

What is the dividend payout ratio / dividend yield?

Dividend payout ratio = Yearly Dividends per Share / EPS Dividend Yield = Annual dividends per share / Price per share

In an M&A transaction, when does S-4 NOT need to be filed?

Doesn't need to be filed if it's a CASH TRANSACTION. S-4 is ONLY sent out if securities are issued.

What is duration? What is positive convexity?

Duration measures price sensitivity for fixed-income securities given changes in interest rates. Positive convexity describes the condition where, as yields decline, prices increase at a faster rate for long-term bonds as compared to intermediate or short-term bonds (relationship between yield and price is not linear; the term that describes this phenomenon is convexity)

How do you calculate return of capital?

EBIT * (1 - tax rate) / (debt + equity)

What is the interest coverage ratio?

EBITDA / Interest Expense

How do you calculate earnings yield?

EPS / Current market price (reciprocal of P/E)

In a firm commitment offering, what must you do if there is a delay beyond the date specified?

FINRA rules require the syndicate manager of a firm-commitment public offering to immediately but, in any event, no later than the scheduled closing date, notify the FINRA Uniform Practice Department of any anticipated delay in the closing of an offering beyond the closing date in the offering document.

How long do you have to comply with Regulatory Element requirements of continuing education? What happens if you don't take within 120 days?

Failure to complete the Regulatory Element within 120 days of the registered person's anniversary date has negative consequences. (can't perform duties as RR / sell + trade securities) You become inactive, if you are inactive for two years, then you have to take the Series 79 exam again

Under a Chapter 7 bankruptcy, an unsecured creditor must take which of the following actions to recover funds?

File a proof of claim in a timely manner in relation to the bankruptcy filing (no later than 90 days after the first date) ONLY FOR CHAPTER 7

What documents are created after the offering? What does it include in terms of fees?

Final prospectus is created after the offering. Underwriting fees are included in the final prospectus.

How much money has to be involved in a transaction for you ti file a Suspicious Activity Report (SAR)? When does it need to be filed?

at least $5000 Needs to be filed within 30 days

How do calculate the Company's growth rate?

g = b x ROE Where: g = dividend growth rate b = earnings retention rate (1 - dividend paid per share)

What are the rules of an anti-dilution provision?

he restricted person's interest must have been held for a period of one year prior to the effective date of the offering. The amount being purchased must not increase his equity ownership percentage, and the new issue purchased may not be sold, pledged, or transferred for a period of three months from the effective date.

What is an antidilution provision for a new issue?

he restricted person's interest must have been held for a period of one year prior to the effective date of the offering. The amount being purchased must not increase his equity ownership percentage, and the new issue purchased may not be sold, pledged, or transferred for a period of three months from the effective date.

What is true of a fixed exchange ratio?

If an M&A transaction has a fixed exchange ratio, the board of directors of the buyer have agreed to purchase the seller for a fixed number of shares. This amount will not fluctuate between the announcement date and the closing. Therefore, the buyer will know how many shares it will need to issue to acquire the seller. The seller will not know the final purchase price of the transaction, since the buyer's stock may fluctuate.

How do firms approve the fairness opinion?

Most firms will use a fairness committee to approve the fairness opinion, and the firm must have a process for selecting the members and the qualifications of the persons serving on this committee.

Do hedge funds register under Investment Company Act of 1940?

NO - do not need to register with the SEC due to accredited status

Who conducts a 363 sale? What is the process?

NOT creditors committee Performed by the DIP or trustee The trustee, or debtor, must file a motion with the bankruptcy court seeking the court's approval. Opponents of the sale will have a period of time to object to the proposed sale. If approved, the debtor or trustee can proceed with the sale

From least to most stringent, how do the exchanges order?

Nasdaq Capital Market, Nasdaq Global Market, NYSE, Nasdaq Global Select

Do spinoffs have tax consequences?

No

If Canadian company listed on US stock exchange and registered with SEC, does it need ADR?

No, would be regularly listed and trade on a US exchange

What is the Best-price rule?

SEC Rule 14d-10 provides for equal treatment of shareholders in a tender offer, and is also called the BEST-PRICE RULE. A bidder is required to treat shareholders equally by making the offer open to all shareholders (retail and institutional) for the same period, and at the same price.

What is form U4 and U5?

The Form U4 disclosure must be completed by individuals when registering with a broker-dealer. The registrant must disclose his employment history for the previous ten years. He must also disclose felony convictions, or convictions for securities-related misdemeanors that have occurred within the previous ten years. By signing a U4, the registrant agrees to use arbitration as a means of resolving disputes involving the employer, other members, customers, or associated persons. The Form U5 is a disclosure document that must be provided to a registered representative by the broker-dealer within 30 days of employment termination. It states whether the termination was voluntary or involuntary and any relevant compliance data.

What SEC office reviews a Schedule TO?

The SEC's Staff Office of Mergers and Acquisitions in the Division of Corporation Finance reviews the filings

What is tangible book value?

Total assets - (Goodwill + Intangible) - Total Liabilities

What are benefits of all-cash vs. all-stock?

The all-cash deal provides certainty for the seller, but the stock deal has fewer current tax implications and also offers the seller upside potential if synergies are achieved, and the buyer's stock performs well

What actions are dilutive to shareholders of a corporation?

The conversion of convertible securities into common stock and the issuance of additional shares of common stock will each result in additional shares owned by new shareholders.

In the case of a distribution regarding a merger, acquisition, or exchange offer the restricted period according to Regulation M is:

The day the proxy solicitation materials are first disseminated and ending upon the completion of the distribution.

How long does a debtor have to file a reorg plan?

The debtor normally has a 120-day period, which may be extended by the court, during which it has an exclusive right to file a reorganization plan

What securities require filing of a Regulation M?

The notice would be filed for an initial public offering, private placements, PIPE offerings, follow-on offerings, and shelf registrations. Offerings not subject to the filing requirements include investment-grade, nonconvertible debt, 144A transactions, and exempt securities such as government and municipal securities.

What does a proxy statement contain for a M&A deal?

The proxy statement relating to a merger or acquisition will contain: - a fairness opinion that provided a valuation comparison with other public companies in the same sector - amount of debt and equity used to finance the merger - description of events that may trigger the termination of the merger

What is the public float?

The public float of a company represents the number of shares held by public investors—both retail and institutional. Public float excludes any stock that is owned by affiliated persons of a company and is found by subtracting restricted stock from the number of outstanding shares.

What does the syndicate desk of a broker-dealer do?

The syndicate desk will help market (distribute) the issue, assist in the pricing of the offering and, if necessary, will place a stabilizing bid. DOES NOT PREPARE OFFERING DOCUMENTS

What do you do with syndicate expenses?

The syndicate expenses are deducted from the underwriting fees. Therefore, each syndicate member pays its proportional share of these expenses.

What is the definition of an accredited investor?

To qualify as an accredited investor, an individual must have $1,000,000 net worth or $200,000 annual income ($300,000 for a married couple) in each of the LAST TWO YEARS

What happens if an issuer / affiliate wants to buy its own stock in the secondary market?

When an issuer buys back shares under SEC Rule 10b-18, purchases may not exceed the higher of the independent bid or last independent transaction.

When must a red herring be amended and resubmitted to the SEC by an issuer?

When the financial statements are outdated. If financial statements are outdated, this would require the issuer to file an amendment which would include the updated financial statements.

How do you use dividend discount method?

When valuing a corporation using the dividend discount method, future dividends will be projected and discounted back to their present value. The projection may show a constant growth rate, a variable growth rate, or no growth at all.

What expenses are considered compensation for underwriters?

Wholesaler's fees / Finder's fees

What happens if you file an amendment before the effective date?

With the consent of the SEC, an amendment that is filed prior to the effective date is treated as part of the registration statement

Is the selling concession included in the underwriting fee?

Yes

Do you need to receive a prospectus under Rule 145?

Yes, shareholders are covered under Securities Act of 1933 and must receive a prospectus

Does Common stock amount include treasury stock?

Yes... need to deduct with treasury stock (contra-account)

What is the key number of days for communication before filing a new registration?

30 days

How long are tender offers open for?

Tender offers generally must be held open for at least 20 business days from the time they are announced to security holders.

What happens in a reverse merger?

Way for private companies to go public, typically through a simpler, shorter, and less expensive process

How is the tax treatment of payments made to employees terminated before the purchase, and to those terminated after the purchase handled?

"All termination liabilities incurred prior to the acquisition would add to the buyer's basis" Severance payments made when downsizing prior to an acquisition are generally deductible to the target company, and are considered an assumed liability (part of the purchase price) for the acquirer, since the liability exists at the time of the acquisition. Workforce reductions that occur after the acquisition are (typically) not treated as part of the buyer's acquisition cost.

What is the Quick Assets Ratio (Acid Test Ratio)?

(Current Assets - Inventories - Other Current Assets) / Current Liabilities or (Cash + Cash & Cash Equivalents + A/R) / Current Liabilities

What is Return on Common Equity?

(Net Income - Preferred Dividends) / Common Stockholders' equity

According to Corporate Financing Rule, the managing underwriter is required to file certain information with FINRA. This includes:

- An estimate of the maximum offering price - An estimate of the maximum underwriting discount, or commission, underwriters' counsel fees, maximum finders' fees, and a statement of any other type of compensation that may accrue to the underwriter - A statement concerning the affiliation with any member firm of an officer or director of the issuer, or a beneficial owner of 5% or more of the issuers securities - A detailed statement explaining any other arrangement entered into during the 180-day period prior to the filing date of the offering, where the firm received items of value, warrants, or options from the issuer - A statement demonstrating compliance with any exception from what constitutes underwriting compensation

What are some violations of Reg M?

- Any attempt to induce bids or purchases of a new issue in the aftermarket during the restricted period of a distribution.

Which conditions would permit the sale of securities outside the U.S., without registration with the SEC?

- Any offer or sale must be made through an offshore transaction - No direct selling effort may occur in the U.S.

What are the guidelines for Regulation S about selling securities outside the US without SEC registration?

- Any offer, sale, or resale is made in an offshore transaction. - No direct selling effort may be made in the U.S. in connection with the transaction.

What happens in a stock sale?

- Corporation shareholders are selling - Selling shareholders pay a tax on transaction based on difference between the shareholders' cost basis (NOT STEPPED UP) and the sale price - Selling corporation will not be required to pay tax on this transaction - Transaction is advantageous to seller Purchaser does not get step-up on basis

When preparing a fairness opinion that will be distributed to public shareholders, regulators require that any existing conflicts of interest be revealed. These conflicts may include:

- Current or prior relationships between the author of the opinion and any party to the transaction = Compensation due to the broker-dealer that prepares the report, if the compensation is contingent on the deal closing

How can one be subject to statutory disqualification?

- Has been suspended from membership in any SRO - Is subject to an order of the SEC precluding his industry activities - Was expelled from a foreign securities exchange The individual would need to be convicted of the offense to be subject to statutory disqualification.

If the SEC has entered an order temporarily suspending a Regulation A exemption, the underwriter, issuer, or the selling security holder may request a hearing within how many days?

30 days and must be held within 20 calendar days

What are prohibited forms of compensation under FINRA Corporate Financing Rule?

- Reimbursement for miscellaneous expenses - Reimbursement for salaries of investment banking personnel - Commissions paid by an issuer to a member firm prior to the commencement of the public sale of the securities being offered - The payment of any compensation by the issuer to a member firm in connection with an offering that was not completed - The receipt of a security, warrant, or option that has a duration exceeding five years and has more favorable terms than those that were offered to the public

An investment banking representative of a member firm may share in profits or losses with a customer:

- The employee has made a financial contribution to the account. - The sharing of the profits and losses is in direct relationship to the employee's financial contribution. - The employee has obtained the prior written consent of the member firm carrying the account.

Under Regulation S-K, an issuer is required to disclose the following information in its annual filing with the SEC which is usually found in the company's annual proxy statement to shareholders:

- The number of meetings held by the board of directors, including the regular and special meetings held by each committee of the board during the last fiscal year - The name and function of the board members of each committee - The name of each director who, during the last fiscal year, attended less than 75% (but not all) of the meetings

If amendments are made under certain limited conditions, it will not delay the effective date. These conditions are:

- The registration statement is for registering additional securities of the same (not a different) class as were included in the original registration statement. - The new registration statement registers additional securities in an amount and price that represent together no more than 20% of the maximum offering price included in an earlier registration statement.

What are the requirements for being a S-corp?

- There may be no more than 100 shareholders. - All shareholders must be U.S. citizens or resident aliens. - The shareholders must all be individuals, estates, or certain types of trusts. - The corporation must be domestic. - The company may not be part of an affiliated group of corporations. - The company may have only one class of stock outstanding.

Who can use a FWP?

- WKSI—may use an FWP at any time - Seasoned Issuer—may use an FWP after its registration statement has been filed, but there is no need for the FWP to be accompanied by, or preceded by, a statutory prospectus - Unseasoned and Non-reporting Issuer—may use an FWP after its registration statement has been filed provided the FWP is accompanied by, or preceded by, a statutory prospectus - Ineligible Issuer—may not use an FWP

What are the rules concerning an audit committee?

- each member of the audit committee must be a member of the BOD of the issuer and be independent. - The issuer has at least one audit committee financial expert serving on its audit committee - If the issuer has a financial expert(s) on its audit committee, it must disclose the name(s).

What is defined as a public appearance for a research analyst?

A public appearance is defined as any conference call, seminar, or public speaking engagement delivered to 15 or more persons, or with one or more representatives of the media (radio, TV, or print media) in which a research analyst makes a recommendation, or offers an opinion concerning an equity security Also could include an article where she makes a recommendation or opinion

What are criteria for WKSI?

- eligible to register on Form S-3. In order to file these forms, an issuer must have been a reporting company for the previous 12 months. - As of a date within 60 days of the date of determining eligibility, the company must have either: - A worldwide market value of outstanding voting and non-voting common equity (public float) held by non-affiliates of $700 million or more, or - In the last three years, has issued at least $1 billion aggregate principal amount of nonconvertible securities, other than common equity, in primary offerings for cash, not exchange, that are registered under the Securities Act of 1933.

When do BOD need to approve transactions?

. The board of directors must approve the other M&A transactions, whether the target company shareholders would receive cash or stocks, or a combination of the two. A tender offer by a third party to purchase shares of the company for cash can be made directly to shareholders and would not require approval by the board of directors.

If a firm is the lead underwriter for an initial public offering of an emerging growth company (EGC), the quiet period is:

0 days The quiet periods (e.g., 10, 15, 25, and 40 days) which restrict a research analyst's ability to publish a research report or make a public appearance concerning a securities offering have, been eliminated for EGCs.

How large is the golden parachute have to be for it to be non-tax deductible?

3 times the individual's average compensation. Recipient will be required to pay a 20% excise tax.

What is a Global Depository Receipt?

A Global Depository Receipt (GDR) allows an issuer to raise capital internationally. It is an offering of a security that is sold in two or more markets. The GDR may be denominated in U.S. dollars, or any other currency. If this security was being offered in the United States, it would be referred to as an American Depository Receipt.

What is a 338(h)(10)? Wh

A Section 338(h)(10) election refers to a part of the tax code which allows a stock sale to be treated as an asset sale for tax purposes if certain conditions are met. The purchaser benefits through being able to step-up (increase) the value of the target's assets to their fair value, rather than using their book value. Ultimately, it is the seller that will be required to pay tax on the difference between those two values. In many cases, the seller will demand a premium (higher) price to compensate for the tax it is required to pay on this type of transaction.

Can a series 79 rep pay for referrals?

A Series 79 representative may not offer to pay underwriting fees, or make any other financial arrangements to pay for referrals (retainers / allocate issues are NOT allowed).

What is a blank check company considered?

A blank check company is considered an ineligible issuer. A blank check company is defined as an entity with either no specific business plan, or one that has indicated that it intends to merge with an unidentified company (or companies). [HAS NOT BEGUN BUSINESS OPERATIONS)

What is a block trade?

A block trade occurs when the investment banking firm purchases shares at a discounted price from one or more of its large shareholders. This type of transaction would impose a large financial risk on the firm since it would be acting in a principal capacity. The firm would need to use its capital to purchase the shares and would need to liquidate the shares without causing the stock price to decline below the price it paid to acquire the shares. In the other transactions, the firm may act in an agency capacity and not risk its capital.

What is a branch office?

A branch office is any location where one or more associated persons of a member regularly conduct the business of effecting any transactions in, or inducing or attempting to induce the purchase or sale of, any security, or is held out as such.

What is a bring down due diligence meeting?

A bring down due diligence meeting is one held prior to the issuance of the final prospectus, attended by the underwriter, the issuer, the attorneys, and other interested parties. The term bring down refers to making sure all the parties involved in the offering (the underwriter, issuer, attorneys, and other interested parties) are brought up-to-date since the last due diligence meeting.

What happens in a contingency underwriting? What must the underwriter do?

A broker-dealer managing an offering sold as a contingency underwriting must deposit the funds promptly in a separate bank account. A contingency underwriting is one in which there are conditions to the deal closing. This requirement would apply to any best-efforts underwritings conducted on an all-or-none or minimum-maximum (mini-maxi) basis. Funds for these types of offerings must be placed promptly in a bank that would act as escrow agent.

When would you file an 8-K?

A change in control of the registrant A change in the registrant's accountant The resignation of a director A change in fiscal year Bankruptcy proceeding Acquired / disposed significant amount of assets

Who approves research analyst comp?

A committee that reports to the firm's board of directors

What happens when a Company is trying to spinoff a division? What document contains all the information?

A company that is planning a spinoff will hold a special meeting for shareholders to vote on the proposal. The important information relevant to the transition will be contained in the proxy statement.

If a comapny is subject to a tender offer, it must?

A company that is subject to a tender offer is required to notify shareholders of such an offer no later than 10 business days from the date the tender offer is made. Along with a notice of the tender offer, the subject company must also either (a) recommend that shareholders accept or decline the tender offer, (b) express that it has no opinion and remains neutral, or (c) state that it is unable to take a position on the tender offer.

What is a covered person?

A covered person is an issuer or individual that is making the tender offer, with the investment bank acting as the dealer-manager in the transaction. According to SEC Rule 14e-5, a covered person in a tender offer may not purchase the common stock or convertible securities of the same issuer during the period that the tender is open. But you can purchase the non-convertible bonds.

What is a development stage company?

A development stage company is an enterprise without any significant track record or revenues. Such companies are eligible to have a public offering of shares, based on the conditions of the '33 Act.

When are you due diligence investigations held?

A due diligence investigation is conducted by a broker-dealer in any offering of securities.

Whats is SEC Form 14A?

A filing with the Securities and Exchange Commission (SEC) that must be filed by or on behalf of a registrant when a shareholder vote is required. SEC Form DEF 14A is most commonly used in conjunction with an annual meeting proxy. The form should provide security holders with sufficient information to allow them to make an informed vote at an upcoming security holders' meeting or to authorize a proxy to vote on their behalf.

How do you use the FCFE valuation?

A free cash flow to equity projection must be made for each period of the calculation and the required rate of return must be indicated for any calculations; therefore, it is necessary to project the price multiple of the common stock at the end of the projection period

When is a free writing prospectus (FWP) offered? Who may use a FWP?

A free writing prospectus (FWP) is any document that is used in connection with an offering [OFFER TO SELL A SECURITY], but it is not a statutory prospectus. The following is a summary on the use of an FWP by the different types of issuers: WKSI—may use an FWP at any time Seasoned Issuer—may use an FWP after its registration statement has been filed, but there is no need for the FWP to be accompanied by, or preceded by, a statutory prospectus Unseasoned and Non-reporting Issuer—may use an FWP after its registration statement has been filed provided the FWP is accompanied by, or preceded by, a statutory prospectus Ineligible Issuer—may not use an FWP

What is a free writing prospectus (FWP)?

A free writing prospectus (FWP) is any document that is used in connection with an offering, but it is not a statutory prospectus.

What is lock-up period? How long does it take for a lock-up to expire?

A lock-up agreement establishes a period during which pre-IPO shareholders such as management, venture capitalists, and other insiders, must wait to sell shares of their securities after an IPO is trading in the aftermarket. Generally, a lock-up agreement will expire within six months (180 DAYS) following the closing of the company's IPO, but there is NO STATUTORY TIME LIMIT.

If taken to arbitration, the panel must be composed of?

A majority of the arbitration panel must come from outside the securities industry unless the customer requests a panel with a majority of industry arbitrators. ARBITRATION IS BINDING AND FINAL

What is a market-out clause?

A market-out clause in an underwriting agreement allows the underwriter to withdraw from the issue if certain events occur that make the sale of the issue difficult or impossible (price declining significantly).

What is spinning?

A member firm is prohibited from allocating shares of a new issue to certain decision makers, such as executive officers and directors of former, current, or prospective customers and any person who is materially supported by the executives or directors. This activity is referred to as spinning.

What does it mean to be offered-at-the-market?

A member firm that is participating in the primary or secondary distribution of a security that is not admitted to trading on a national securities exchange may not represent that the security is being offered at-the-market (i.e., priced based on the current secondary market value) unless the member firm has reasonable grounds to believe that an independent market for the security exists.

What is a Form 4?

A person must file Form 4 with the SEC within TWO BUSINESS DAYS of the date on which an insider changes her ownership position (i.e., buys or sells).

If you are convicted of a felony / misdemeanor related to funds or securities, what happens to you?

A person who is convicted of any felony or misdemeanor involving funds or securities (such as theft) is subject to statutory disqualification under SEC rules. As a general rule, a person subject to statutory disqualification may not be associated with a FINRA member firm in any capacity, even in a nonregistered capacity.

A third party is making a tender offer for the shares of BAZ Inc. The tender offer announcement appeared in the newspaper on October 15. Two weeks later, the third party wants to extend the length of the tender offer. This is permitted provided:

A press release is issued no later than the morning of the day following the scheduled expiration date of the offering According to SEC Rule 14e-1 (Unlawful Tender Offer Practices), if a person extends the length of a tender offer, they are required to issue a notice of the extension through a press release or other public announcement. This is required no later than 9:00 a.m. Eastern Time, on the next business day following the scheduled expiration date of the offer. The notice must include the approximate number of securities deposited to date.

What is a PIPE?

A private investment in public equity (PIPE) is a type of private placement where a broker-dealer acts as a placement agent for the restricted securities of an issuer that already has publicly traded securities. The restricted securities are then quickly resold in the public marketplace, which is facilitated by the issuer agreeing to file a resale registration statement.

When is a proxy statement used? When do you not need proxy statement?

A proxy statement is issued when an SEC reporting company is seeking votes from shareholders All cash offer does not require shareholder vote or proxy statement

What is stagflation vs. deflation vs. disinflation?

A reduction in the rate of inflation is known as disinflation. This should not be confused with deflation which occurs when prices and business activity decline. Stagflation is a combination of inflation and stagnation. This occurs when the economy is stagnant but prices are rising.

Who would be restricted in participating in an investment banking roadshow?

A research analyst is prohibited from participating in a road show that is connected with an investment banking service transaction.

What are the differences between WKSI and seasoned issuers?

A seasoned issuer can benefit from shelf registration, but not the automatic shelf registration afforded WKSI status, where there is no SEC staff review.

Can SROs like FINRA sentence somebody in prison?

A self-regulatory organization (SRO), such as FINRA, does not have the authority to sentence a person to a prison sentence. However, SROs do have the authority to fine, censure, suspend, or expel members.

What kind of bond will have the greatest effect / movement when yield (basis) changes?

A small change in basis (yield) has the greatest effect on the price of longer maturity bonds.

What is a standstill agreement?

A standstill agreement is a form of hostile takeover defense where an unfriendly bidder agrees to limit its holdings of a target company in exchange for consideration from the target company. An example of this consideration would be an offer to repurchase the potential raider's shares at a premium price. Standstill agreements are also used in friendly takeovers where the potential buyer agrees not to purchase shares of the target company on the open market as discussions are progressing.

What is a tail fee?

A termination fee that is a fee charged by an underwriter for financial advisory services in the event an offering is cancelled and the issuer subsequently uses a different underwriter. This addresses the risk that after agreeing in writing (signing an engagement letter), an issuer having received financial advice uses a different underwriter to execute a similar transaction in lieu of the transaction subject to the engagement letter. DURATION MUST BE LESS THAN TWO YEARS

Are LOIs binding?

Although a letter of intent is typically not binding on either party, the document does specify the terms that have already been agreed to by both the buyer and seller

Holding period applies for which stock? How long?

ALL RESTRICTED STOCK for 6 months

What things are required to be kept by a broker-dealer?

According to FINRA rules, all retail communications, institutional communications, research reports, and correspondence (including e-mail and instant messages) used by a member firm must be kept on file for a minimum of three years.

When do financial statements in a registration become stale?

According to Regulation S-X, financial statements in a registration statement become stale and may not be used based on the number of days between the date of the statements in the filing and the effective date of the registration statement. For IPO issuers, the period is 135 days and, in the case of an accelerated filer (a WKSI or seasoned issuer), the period is 130 days.

What is SEC Rule 10b-18? What are the rules around an issuer repurchasing its own securities?

According to SEC Rule 10b-18, an issuer may repurchase its securities in the marketplace provided: - The issuer purchases an amount not exceeding 25% of the average daily trading volume - The issuer uses only one broker-dealer or ECN to execute the transactions on any single day. That broker-dealer may execute transactions with any number of other market participants. - The issuer purchases the securities at a price no higher than the highest independent transaction price - After-hours trading is allowed and the issuer is permitted to use a broker-dealer that is different from the one used during normal business hours.

When the Company buys its own stock in the secondary market, at what price can it purchase?

According to SEC Rule 10b-18, purchases may not EXCEED the higher of the independent bid (bid price) or the last independent transaction

A broker-dealer is required to maintain a record of what items for a three-year period:

According to SEC rules, a broker-dealer is required to keep a record of all confirmations for a minimum of three years. According to FINRA rules, all advertisements (MARKETING MATERIALS) used by the firm (institutional communications), as well as all correspondence (including e-mail and instant messaging), and research reports must be also be kept on file for a minimum of three years and Term sheets Must be easily accessible for two years

What is a Rule 4(5) offering?

According to Section 4(5) [formerly 4(6)] of the Securities Act of 1933, an offering by an issuer may be considered an exempt transaction if certain conditions are met: - The amount of the offering may not exceed $5,000,000. - No advertising or public solicitation may be used to offer the securities, and the offering may be sold only to accredited investors. There are no document delivery requirements, but the transaction is subject to the antifraud provision of the Act.

After an initial public offering has been priced, when may a broker-dealer trade the security away from the primary market?

According to industry rules, members are not permitted to execute, directly or indirectly, any transactions in a security that is the subject of an IPO until the security has begun trading on its primary exchange.

When do acquirer's shareholders not vote on transaction? When does BOD not vote on transaction?

Acquirer's shareholders don't vote if it's an all-cash transaction; BUT ACQUIRED COMPANY STILL HAS TO VOTE BOD does not vote if its a tender off from a third party

What happens in an asset sale?

Advantageous to the purchaser (not the seller) since the purchaser is able to exclude pre-acquisition liabilities and may decide which assets of the corporation it wants to purchase Selling corporation must pay tax on the difference between the cost basis of the assets and their sale price Purchaser benefits by having a stepped-up (higher) tax basis on the assets which may produce a lower taxable gain when the assets are sold in the future

Where can you buy stabilizing bids?

After the opening of quotations in a security's principal market, stabilization may be initiated at a price no higher than the last independent transaction in the principal market if (1) the security has traded in its principal market (Nasdaq in this case) on the day stabilizing is initiated or on the preceding day, and (2) the current asked price in the principal market is equal to or greater than the last independent transaction price. Since both true, stabilizing can be initiated at a price no higher than the last independent transaction.

Does the underwriting manager fee get applied to all shares that are sold or just syndicate group? How about underwriting fee?

All shares for both

Cash vs stock deal - which one generates higher tax bill?

All-cash deal has higher tax Do all-cash because of greater certainty of value

When is the effective date?

Although there are exceptions, unless registration is delayed, the registration statement is effective on the 20th DAY (not business days) after filing.

When is a fairness opinion not used?

An IPO Can be used for tender offer, private company for sale, acquisition with stock

What is an at-the-market offering?

An at-the-market offering permits a company to raise capital and issue shares over a period of time rather than all at once Company must be eligible for shelf offering

Who makes up the compensation committee / decides on comp for execs?

An exception is granted for changes in compensation arrangements for executives of the company, provided the arrangements are approved by a majority of the independent board members. Most companies have a specific compensation committee that consists of independent members from the board of directors

What is a stalk-horse bid?

An initial bid on a bankrupt company's assets from an interested buyer chosen by the bankrupt company. From a pool of bidders, the bankrupt company chooses the stalking horse to make the first bid. This method allows the distressed company to avoid low bids on its assets. Once the stalking horse has made its bid, other potential buyers may submit competing bids for the bankrupt company's assets. In essence, the stalking horse sets the bar so that other bidders can't low-ball the purchase price

What is an insider?

An insider is defined as any person who is an officer, director, or owner of more than 10% of the equity.

What is an underwriter's free retention?

An underwriter's free retention is the amount of an underwriter's commitment that the lead manager allows the underwriter to keep for the underwriter's own sales effort. Sales to the firm's retail clients are often made from its free retention. The profit from the sale of these shares generally goes to the member who made the sale. It is not split evenly among the syndicate members.

Who has an asset sale advantageous to?

Asset sale is advantageous to the purchaser (not the seller) since the purchaser is able to exclude pre-acquisition liabilities and may decide which assets of the corporation it wants to purchase. In addition, in an asset sale, the selling corporation must pay tax on the difference between the cost basis of the assets and their sale price. However, the purchaser benefits by having a stepped-up (higher) tax basis on the assets which may produce a lower taxable gain when the assets are sold in the future.

When can a BD accept unsolicited orders?

BD may accept unsolicited orders regardless of its role in a tender or offering.

What is the order of a friendly merger?

BOD (both companies) vote to approve transaction --> 8-K filed --> (any communication about merger must be filed with SEC - Rule 165 - Form 425) --> S-4 filed (if securities issued - filed by ACQUIRING COMPANY) --> Shareholder vote on proposed merger

How do you calculate book value per share?

Book Value = (CS (B/s number) + APIC - Treasury Stock + Retained Earnings) / # of shares

How do you calculate debt to total capital?

Book Value of Debt / Book Value of Shareholder's Equity

What tax rate are PIK bonds taxed at?

Both principal and interest are taxed at ordinary income

An investment banker representing the target company in an acquisition is MOST concerned with the:

Buyer's ability to pay for the acquisition

Who do you file a controlling stake with? What is considered control?

Corporate Finance Department Control = >50%

What is the Creditors Committee composed of?

Creditors' Committee is appointed by the U.S. Trustee and ordinarily consists of the seven largest UNSECURED creditors.

How does the Green Shoe get allocated among firms?

Each underwriter is obligated to purchase additional shares based on its percentage of underwriting commitment (original percentage)

Who can write a fairness opinion?

Either the buyer's or seller's bankers may write a fairness opinion.

How do you find Net Debt if given equity value and enterprise value?

Enterprise value - Equity Value = Net Debt

Calculation for EV?

Equity + Debt - CASH (remember!)

How do you calculate equity value?

Equity Value = Enterprise Value (DCF Value) + Cash - Debt

According to the Securities Exchange Act of 1934, an institutional investment manager who trades with discretionary authority is required to file a form with the SEC if the holdings are:

Equity securities valued at $100,000,000 or more

What are securities offerings that are exempt from filing with FINRA?

Exempt securities such as municipal bonds, tender offers, nonconvertible, investment-grade bonds, mutual funds, offerings filed on Forms S-3 or F-3, exchange offers, and private placements under Regulation D

Who arranges DIP financing?

Existing management, NOT the creditor committee

How do you calculate share price using FCFE (constant growth scenario)?

FCFE / (Expected Rate of Return - Expected Growth Rate) In non-constant growth, divided FCFE by required rate of return

What is FCFF and would a change in debt pricing affect it?

FCFF is free cash flow to the firm and is the cash to all providers of capital (so change in debt pricing would not affect b/c calculation is before interest)

How long does FINRA retain jurisdiction over a RR?

FINRA retains jurisdiction over a registered representative for two years following resignation even if employee QUITS OR TERIMNATES.

What kind of security does not have a stabilizing bid?

FINRA rules prohibit a distribution participant from entering a stabilizing bid for an OTC equity security. Stabilizing bids are permitted for all exchange-listed securities.

What is the rule on rumors? How can you discuss rumors?

Generally, the circulation of rumors is prohibited by NYSE Rule 435(5). However, unsubstantiated rumors published in a widely circulated media may be discussed if the source of the information and the fact that they are unsubstantiated is disclosed.

What is Regulation M?

For any Nasdaq security that is part of a distribution subject to Regulation M, the managing underwriter must request an Underwriting Activity Report from FINRA's Corporate Financing Department. The report will identify if the security's restricted period begins one day or five days prior to pricing, or whether it is exempt as an actively traded security. For those securities that are not exempt, the manager must submit to FINRA's Market Regulations Department, no later than the day prior to the commencement of the restricted period, a Restricted Period Notification Form, indicating whether distribution participants will be excused, or designated as passive market makers.

What is Form 3?

Form 3 must be filed with the SEC within 10 TEN days of the date on which a person becomes an insider.

What is Form 5?

Form 5 is an annual filing by insiders.

What is Form D?

Form D is an SEC filing form to be used to file a notice of an exempt offering of securities under Regulation D of the U.S. Securities and Exchange Commission. Commission rules require the notice to be filed by companies and funds that have sold securities without registration under the Securities Act of 1933 in an offering based on a claim of exemption

What form do you have to file for private placement?

Form D with SEC no later than 15 days after sale of securities Exempt from SEC registration

The occurrence of a material event requires a Form 8-K to be filed within:

Four business days The occurrence of a material event that is deemed of significant interest to the public and has the potential to affect a company's financial condition or its share price, the company is required to file Form 8-K.

What is FCFF?

Free cash flow for the firm (FCFF) is used to evaluate the profitability of an entire business, rather than shareholder equity.

Daily purchasers may not exceed what?

Generally, daily purchases by issuers may not exceed 25% of the average daily trading volume (ADTV) for the previous four weeks (30 days).

What are GARP investors looking for?

Growth at a reasonable price, also known as GARP, combines value and growth investing styles. The investor is seeking companies that have good growth potential that appear to be undervalued. The investor is looking for companies with low P/E ratios, low P/E to growth (PEG) ratios, and low price to book ratios.

What is the Hart-Scott-Rodino?

Hart-Scott-Rodino requires filing with the Federal Trade Commission and the Justice Department if the size of the combined entity (among other things) reaches a certain threshold. This transaction will require filing and approval, due to the size of company test.

Do hedge funds have to register with SEC?

Hedge Funds are not generally required to register with the SEC due to the accredited status of their investors. They do not need to register under the Investment Company Act of 1940.

Who are considered accredited investors?

Hedge funds and individual investors with a net worth exceeding $1,000,000 are considered accredited investors.

When calculating how much debt you can take on in the future, pay attention to?

How long the time period is / Use cost-of-debt not WACC

How long do you have to distribute prospectuses?

IPO on exchange - 25 days IPO not listed on exchange - 90 days Not an IPO / not listed on exchange - 40 days

If a syndicate manager is underwriting securities subject to Rule 101 of Regulation M, which types of orders may be executed for the firm's customers during the distribution period?

If a broker-dealer is participating in the distribution of a security subject to Rule 101 of Regulation M, it may not solicit orders from its customers to purchase already-outstanding securities of the same issuer. This rule applies whether the firm is acting in an agency or dealer capacity. Unsolicited transactions are always permitted. A broker-dealer is permitted to solicit an offer to buy the (new) securities being distributed.

What is Form ADV?

If a firm intends to register with the SEC as an investment adviser, it must file Part 1 and Part 2 of Form ADV.

When does a member firm have a conflict of interest in a distribution? What happens if firm wants to place stock into discretionary account of a customer?

If a member firm is participating in a distribution in which a conflict of interest exists, (offering its own securities or securities of an affiliate) The member firm must obtain prior written approval from the customer before it may sell the stock to the customer.

What kind of indicator is Industrial Production / prime rate?

Industrial production - coincident Prime rate - lagging

When does control stock act like restricted stock?

If an affiliate (control person) acquires stock as a result of a private placement, this stock would be considered restricted stock rather than control stock and would be subject to the holding period. Control stock acquired as a result of an open-market purchase is exempt from the holding period (but volume limitations still apply).

An issuer has made a false statement in its prospectus. Under the Securities Act of 1933, what is the underwriter's liability? What is Section 11 defense?

If an underwriter sells a security based on an untruthful statement, or the omission of a material fact, it may be held liable to the purchaser for any monetary damages suffered. However, the underwriter will not be held liable if it can demonstrate that reasonable care (due diligence) was used, and the underwriter was unaware of the untruthful statement or omission. This is known as the Section 11 defense. In addition, directors of the issuer and any person who signed the registration statement may also use this defense. An issuer is not permitted to use this defense. Under Section 11 of the Securities Act of 1933, persons other than the issuer are exempt from liability if they can prove that they had no knowledge of the fraud and properly notified the Commission. (Issuer is most liable for fraud)

When can an analyst initiate coverage of a stock?

If not a participant of distribution, ANYTIME A research analyst of an UNDERWRITER must wait 25 days after the date of the offering to publish a research report, or make a public appearance. This quiet period is applied to members that have agreed to participate or members that are participating in an issuer's initial public offering as an underwriter or a dealer. There is a quiet period for managers or comanagers following an initial public offering for 40 calendar days and 10 calendar days following a secondary offering.

According to Reg FD, if you accidentally release information, what must you do (intentional vs. unintentional)?

If the disclosure was unintentional, the company has 24 hours to make a public announcement of the information If a company official intentionally provides such information to a securities professional, a simultaneous disclosure to the public is required.

When does a preliminary proxy statement NOT have to be filed?

If the matter being voted on relates only to the election of directors, the election or approval of the company's accountants, or a proposal that was put forth by company's shareholders under SEC Rule 14a-8 (the rule that addresses when a company must include a shareholder proposal in its proxy), then a preliminary proxy statement is not required. Abusiness combination, such as a proposal to be purchased for cash, requires the filing of a preliminary proxy

A representative may guarantee a customer against a loss

If the offer is made by the issuer and is extended to all purchasers of the security

The syndicate manager must notify FINRA if the firm anticipates an offering will not close on the settlement date:

Immediately, but no later than the closing date

Where you can find information about executive stock options?

Information on executive stock options can be found in the shareholder proxy and in the footnotes of the annual report (Form 10-K)

What is the mediation process?

Mediation is a voluntary process entered into in an effort to solve a dispute. There is a single mediator who may be any neutral third party agreed to by the participants. Parties may withdraw from mediation and pursue other remedies, such as arbitration, or civil court proceedings.

What is a floating collar agreement?

In a floating collar agreement, a FIXED-SHARE EXCHANGE RATIO exists, provided the acquirer's share price remains within a narrow range, for a specified period. Collar arrangements often have additional stipulations regarding pricing if the acquirer's share price trades outside the stipulated range.

What happens in a one-step merger process? What kind of transaction must it be (what can you use to purchase)?

In a one-step merger process the target company obtains approval from its shareholders through a vote at a special meeting. Prior to the vote, the target company would first file a preliminary proxy statement with the SEC. Once SEC approval is received, the definitive proxy statement is sent to shareholders, providing the information on the proposed transaction. In most cases a simple majority of the target company is required. PROCESS COULD TAKE MANY MONTHS Since this is a CASH transaction, the acquirer's shareholders are not required to vote on the proposed transaction. TARGET SHAREHOLDERS STILL NEED TO VOTE / HAVE PROXY (BUT IF COMPANY IS PRIVATE THAN NO NEED FOR PROXY / VOTE b/c COMPANY IS PRIVATE)

A prospectus that is filed as part of a registration statement may omit certain information regarding offering price and underwriting compensation. When the registration statement is declared effective, how is the omitted information made available?

In a post-effective amendment

What is a shareholder rights plan?

In a shareholder rights plan, (also called a Poison Pill) the target company issues rights to existing shareholders to acquire a large number of new securities, usually in the form of common or preferred shares.

What is a split-off (DIFFERENT FROM SPIN-OFF)?

In a split-off, a corporation is split into pieces. In this type of transaction, one group of shareholders will own shares in the parent, while a separate group of shareholders will own shares of the split-off entity.

What is a stock sale? An asset sale?

In a stock sale, the corporation's shareholders are selling. In a stock sale, the selling shareholders (not the corporation) pay a tax on the transaction based on the difference between the shareholders' cost basis (which is not stepped-up) and the sale price. In an asset sale, a corporation is selling its assets rather than selling shares of stock.

What is a two-step merger process?

In a two-step merger process, the acquirer offers to purchase the shares of the target for cash or proposes an exchange offer. The terms of the offer may be negotiated or unsolicited. The first step is a tender offer made directly to the target's shareholders and no shareholder approval is required from the target's shareholders. The tender offer is conditional upon receiving a large percentage of the shares tendered (for example, a minimum of 90%, which is based on Delaware Law). The tender offer must be held open for a minimum of 20 business days. The second step is a short-form merger agreement, which does not require shareholder approval. The merger agreement is a contract between the two parties to the transaction, stipulating the terms and conditions of the transaction. The two-step merger is much quicker to execute since no proxy period or SEC approval is required, but the disadvantage is that the buyer needs a large percentage of the shares tendered.

What happens in an all-or-none and mini-maxi underwritings?

In all-or-none and mini-maxi underwritings, the offering may be cancelled if a certain amount of the issue remains unsold. For this reason, any client funds that are designated for the securities must be placed into an escrow account.

What can you do in an IPO if it is significantly oversubscribed?

In order to increase the amount of capital raised by the issuer in this situation, the managing underwriter could increase both the shares offered and the price per share.

What does a bank do in a fairness opinion?

In preparing this document, the investment bank that is hired will: Review certain publicly available financial statements and other business and financial information of companies Review certain internal financial statements and other financial and operating data concerning the companies, prepared by the managements Review certain financial projections of the companies prepared by their managements Discuss with senior executives the past and current operations and financial condition and the prospects of the companies, including information relating to strategic, financial, and operational benefits anticipated to be derived from the merger Review the pro forma impact of the merger on the acquiring company's earnings per share Review the current and historical market prices and trading activity for both companies' common stock Compare the financial performance of both companies and the prices and trading activity of the shares against other publicly traded companies Review the financial terms, to the extent that information is publicly available, of comparable acquisition transactions Review a draft of the merger agreement and related documents

What is considered compensation for an underwriter?

Includes fees for a qualified independent underwriter, the underwriting discount or commission, and reimbursement of finder's and wholesaler's fees, underwriting fees, reimbursement of expenses to an underwriter, financial consulting / advisory / counsel fees for UNDERWRITER. THINGS NOT INCLUDED: THINGS REIMBURSED BY THE ISSUER (ISSUER'S FEDERAL OR STATE FILING FEES, PRINTING COSTS, ACCOUNTING FEES PAID BY ISSUER, SALARY OF IB PERSONNEL

What is an indemnification clause?

Indemnification clauses are often requested by buyers as protection against a seller's material breach of contract after the deal has closed. These clauses are used mostly in the purchase of private companies and quantify the amount of compensation that is due the buyer if officers and directors of the selling firm fail to meet their legal obligations. Examples include misrepresentation of financials and/or failure to disclose a material event such as the loss of a major client prior to closing.

What must you be to supervise representatives at a broker-dealer?

Individuals who supervise representatives at a broker-dealer are required to register as a principal. CAN'T JUST BE AN INVESTMENT BANKING REP

When does investment banking compensation need to be disclosed to FINRA?

Initial public offerings of securities, including REITs, are required to be filed, as well as offerings of direct participation programs, rights offerings, Rule 147 offerings, and Regulation A offerings. Exemptions exist for nonconvertible debt and preferred stock that is rated investment-grade, an offering of securities being registered through SEC Form S-3, F-3, F-10 (publicly traded Canadian companies) and sold on a firm-commitment basis, and an exchange offering of securities that are listed on the Nasdaq Global Market, the NYSE, or the American Stock Exchange.

How do you calculate cost of capital?

Interest / Net proceeds of the issue (Total par value - Expenses)

What is the tax treatment of CMOs?

Interest is fully taxable Principal is just return of capital

What is defined as a QIB?

Investors, generally, must pass a 3-part test in order to be considered a QIB. (1) Only certain types of institutions are eligible, including insurance companies, registered investment companies, pension plans, corporations, and registered investment advisers. (2) The buyer must be purchasing for its own account or the account of other QIBs. (3) The buyer must own and invest at least $100 million of securities of issuers not affiliated with the buyer.

What do issuers typically use Rule 144A to offer?

Issuers mainly use Rule 144A to offer corporate debt and, in some cases, equity securities.

What is an underwriting agreement?

It is a signed agreement between the managing underwriters and the issuer

What are examples of free writing prospectuses? What does the legend include?

It is considered a solicitation of an offer to buy a security. Examples include term sheets, marketing materials, and press releases whether prepared by the issuer (which is usually the case) or an underwriter. The SEC requires that a legend be included within the free writing prospectus. The legend would indicate whether the issuer will file a registration statement and how a prospectus may be obtained. Research reports and advertisements are defined and subject to FINRA requirements, and are not considered free writing prospectuses.

What is a well-known seasoned issuer (WKSI) defined as:

It is eligible to register on Form S-3 (short form registration statement) or Form F-3 (registration statement for certain foreign private issuers). - In order to file these forms, an issuer must have been a reporting company for the previous 12 months. - As of a date within 60 days of the date of determining eligibility, the company must have either: - A WKSI needs either $700 million of common equity outstanding (public float) or $1 billion of debt, but not both.

When do you use price-to-book value ratio? And what are characteristics of it?

Less volatile than earnings per share, and tends to be a positive number. Additionally, book value is more stable in times of abnormal earnings and provides for comparisons over the long term. It is a good method for comparison when looking at companies with high levels of liquid assets such as insurance and banking institutions. Equity value / book value of equity (assets - liabilities)

What documents are created prior to the offering?

Letter of intent, preliminary prospectus, S-1 registration statement?

What is the formula for levered beta?

Levered Beta = Unlevered Beta x (1 + ((1 - Tax Rate) x (Debt/Equity))) DEBT / EQUITY NOT DEBT / TOTAL CAPITAL

What tax rate should you use to calculate DTA / DTL?

Marginal tax rate

Which of the following statements is TRUE concerning a member firm's responsibility to notify FINRA regarding an underwriting of securities? Notification is required for imposing a penalty bid but not for syndicate covering transactions Notification is required for imposing a penalty bid and engaging in syndicate covering transactions, but only for Nasdaq-listed securities Notification is required for imposing a penalty bid and engaging in syndicate covering transactions, but only for OTC equity securities Notification is required for imposing a penalty bid and engaging in syndicate covering transactions for both Nasdaq-listed securities and OTC equity securities

Notification is required for imposing a penalty bid and engaging in syndicate covering transactions for both Nasdaq-listed securities and OTC equity securities

How do you calculate goodwill?

Offer Value - Company's net tangible assets (Liabilities + Tangible assets + existing goodwill)

In 75% stock / 25% cash deal, how do you find number of shares issued?

Offer price / Acquired Company's stock price Multiply by % stock in deal Use that value * # of shares outstanding of acquiring company

If an issue is oversubscribed, how do you allocate shares?

On a pro rate basis (most fair / equitable way)

What happens on the effective date?

On the effective date, the final prospectus is prepared since the red herring is no longer relevant.

A definitive proxy statement must be filed with the SEC:

On the same day it is sent to shareholders

What does Sarbanes Oxley Act of 2002 do?

One of the features of this Act is to ban personal loans from corporations to their executive officers and directors. Establish a code of ethics for its executive and financial officers, or state in its annual report why it has not done so Disclose all off-balance sheet transactions that may have a material impact on the company's financial condition Report all insider trades electronically within two business days of the transaction

A private company is planning an IPO and has decided to list its stock on the NYSE. What must the BOD be composed of?

One of the listing requirements of both the NYSE and Nasdaq is A MAJORITY of the board of directors must be independent.

What is the difference between futures and forward contracts?

One of the major differences between futures contracts and forward contracts is the ability to offset each position. In a futures contract, the investor may offset the position at any time before the contract is assigned; however, in a forward contract, the agreement between the two parties may not be assigned without the permission of the other party. But futures contract used to HEDGE OR SPECULATE typically The terms of a futures contract require the purchaser or long position to either offset the contract or take delivery of the underlying commodity if the contract is assigned for delivery.

Who must maintain a restricted / watch list?

Only firms that engage in investment banking, research, or arbitrage activities are required to maintain restricted and watch lists.

How do you calculate how much proceeds an issuer will get from a public offering?

Only gets proceeds if COMPANY sells (not if shareholders sell

What is PEG ratio?

PE ratio / growth rate

What is painting the tape?

Painting the Tape is a technique used whereby individuals, acting in concert, repeatedly sell a security to one another without actually changing ownership. This is intended to give the impression of increased trading volume

What is passive market making associated with?

Passive market making is associated with follow-on offerings by the issuer.

Who needs to take the Series 7 Exam?

People involved in general securities business (institutional sales, retail sales, or research)

Who perfects a lien?

Perfecting a lien is done by the secured creditors not the unsecured creditors' committee. A lien is not perfected until it is recorded properly with the appropriate government agency.

What are piggyback registration right?

Piggyback registration rights permit an investor to register and sell securities when the issuer conducts a public offering.

What valuation tool is not used for IPOs?

Precedent transactions (only for M&A)

During the quiet period, what may happen?

Preliminary prospectus (DOES NOT CONTAIN REVENUE FORECASTS) is sent and an invitation to attend a road show.

What does dividend yield / dividend per share equal?

Price per share

In private placements, are companies typically public or private?

Private

What is a Regulation D offering? What are the characteristics of a purchaser

Private placement under Regulation D may be offered to an unlimited number of accredited investors. Examples include convertible debt offered only to hedge funds AND Company based in China offering securities to US accredited investors A purchaser representative may not be an affiliate, director, officer, or employee of the issuer unless related to the purchaser by blood, marriage, or adoption. The purchaser representative may not own 10% or more of the stock of the issuer and must be knowledgeable and experienced in financial and business matters.

An investment banking representative wishes to sell interests in a private placement to her clients. The private placement is not being offered through her firm. If she will not be compensated for the transactions, she must:

Provide written notice to her firm The SRO rule on private securities transactions (selling away) requires an investment banking representative to provide written notice to her firm if she will be engaging in securities transactions that are not within the scope of her firm's business. If she will be compensated for the transactions, she must also receive written approval from her firm to participate. If she will not be compensated, her firm still has the right to impose conditions on her participation.

What kind of disclosure docs are needed for public / private / Reg A / 4[5] offerings?

Public - prospectus Private - private placement memorandum Reg A - offering circular 4[5] offering - none

When do member forms report customer complaints?

Quarterly basis

How do you calculate Return on Equity? Return on Invested Capital? Return on Assets?

ROE = Net Income / Shareholder's Equity ROIC = (Net Income - Dividends) / Total Capital ROA = Net Income / Total Assets

What must a registered person do if they have outside business activities (jobs)?

Registered representatives are required to notify their employer of outside business activities. This rule covers most jobs or business interests. Passive investments are exempt from the rule.

What are things not required to be kept on file by broker-dealers?

Registration statements, prospectuses, and other documents written by an issuer are not required to be kept on file by broker-dealers.

What does Reg M of SEC Act of 1934 restrict?

Regulation M of the Securities Exchange Act of 1934 restricts transactions by underwriters and issuers in the period leading up to, and during, the distribution of a new issue of equity securities. Issuers and selling stockholders may not buy shares of their company's common stock in the open market while they are in the process of selling shares.

What is Regulation S offering?

Regulation S allows U.S., not foreign, issuers to raise capital outside the U.S. without filing a registration statement with the SEC.

What offerings do not require company information to be filed with the SEC?

Regulation S, Regulation D, Rule 144A

Which securities have a resale restriction?

Regulation S, Regulation D, and Rule 147

According to the FINRA Corporate Financing Rule, which of the following items is NOT required to be included as compensation in the Underwriting Terms and Arrangements filing with FINRA? - Wholesalers' fees - Reimbursement of registration expenses paid by the managing underwriter - Financial consulting fees expected to be received within 120 days of the required filing date of the registration statement - Advisory fees

Reimbursement of registration expenses paid by the managing underwriter The reimbursement of issuer-related expenses originally paid by the managing underwriter is not considered compensation. Registration fees and prospectus printing costs are commonly paid by the underwriter and charged back to the issuer.

What is gun-jumping?

Relating to an IPO, this period is sometimes referred to as the quiet period. One of the safe harbors, related to an IPO, refers to any communication made more than 30 days prior to the filing of the registration statement and does not make reference to the offering. The period between the filing date and the effective date is referred to as the waiting (cooling-off) period. An example of gun-jumping would be a situation where some type of written communication used by an issuer between the filing of a registration statement and the effective date was not filed with the SEC as a free writing prospectus.

Who votes / receives a proxy statement in a merger? Who issues the S-4?

Required vote / proxy statement: The ACQUIRED company S-4: Acquiring Company

Who are mutual funds (open-end investment companies), unit investments trusts, and ETFs sold to?

Retail investors

Delphi Software, a large technology concern is seeking to acquire SmartPeople Consulting, a well-respected technology integration specialist that has significant contracts with several Fortune 500 Companies. As Delphi's banker, the structure that you would recommend for this transaction is a(n):

Reverse Triangular Merger: In a reverse triangular merger the subsidiary owned by the buyer merges into the seller, with the target company being the surviving entity. Delphi Software would create a wholly owned subsidiary that would be the purchaser of the target. After the merger is completed, SmartPeople Consulting would be the surviving corporation and an indirect wholly owned subsidiary of Delphi Software. This transaction is considered a merger (not an acquisition) and would require approval only of the target's board of directors. This structure is most often used when the selling entity has significant contracts in place that would not survive an acquisition transaction. In this way, the target company's contracts with customers (and the resulting revenue) remain intact.

What is Rule 105 of Regulation M?

Rule 105 of Regulation M stipulates that it is a violation for any person to sell short a security that is the subject of a public offering, and purchase the same security from an underwriter, if the short sale was executed five business days (or less) prior to the pricing of the offering.

What does Rule 105 of Reg M stipulate>?

Rule 105 of Regulation M stipulates that it is a violation for any person to sell short the security that is the subject of an offering, and purchase the offered security from the underwriter if the short sale was executed during the period beginning five business days prior to the pricing of the offering and ending with the pricing of the issue.

What is Rule 10b5-1 on inside trading?

Rule 10b5-1 prohibits a person from buying or selling a security based on material, nonpublic information. A 10b5-1 plan allows a person to have an affirmative defense against insider trading if certain conditions are met. The following must be executed prior to the person becoming aware of the insider information. A written plan that is binding entered into to purchase or sell the security The plan instructs ANOTHER PERSON to purchase or sell the security for this person The details of the plan must describe The specified amount of securities to be purchased or sold, and the price at which and date on which the securities were to be sold or, Include a written formula or algorithm for determining the amount of securities to be purchased or sold, and the price at which and the date on which the securities were to be purchased or sold The person who created the plan is not permitted to exercise any subsequent influence over how, when, or whether to effect purchases or sales, and the individual who makes the purchase and sale decisions must not be aware of the material, nonpublic information.

What is Rule 145 / Rule 147?

Rule 145 - M&A Rule 147 - Intrastate offering

What is the Rule 147 resale restriction?

Rule 147 (intrastate offering exemption) prohibits the sale of securities to nonresidents for a period of nine months from the date of the last sale by the issuer. There is no resale restriction placed on residents. A business (broker-dealer) is defined as a resident of the state if it has its principal office in that state.

What is Rule 504 of Reg D?

Rule 504 of Regulation D allows an issuer to offer securities of up to $1,000,000 within a 12-month period. Provided the issuer complies with all the provisions of Regulation D, this private placement is exempt from SEC registration.

What is SEC rule 13e-3?

SEC Rule 13e-3 applies to going private transactions by certain issuers or affiliates. It involves transactions where an issuer (or an affiliate of the issuer) is purchasing its own common stock and this will likely cause the company to become delisted from an exchange, or to be no longer considered a reporting issuer, as well as a tender offer. ISSUER required to file a Schedule 13E-3 Form with the SEC AND shareholders must receive a summary term sheet detailing the transaction

What is Rule 147? How long do you have to hold securities purchased under a Rule 147 exemption?

SEC Rule 147 of the Securities Act of 1933 provides an exemption from registration for securities being sold on an intrastate basis. A resident of a state who acquires securities under Rule 147 is not allowed to sell the securities to a nonresident of the state for a period of nine months following the last date of sale by the issuer. If an individual intends to sell the securities prior to nine months, he may do so only to a resident of the same state.

What is Best Price Rule (SEC14d-10)?What is the exception

SEC Rule 14d-10 provides for equal treatment of shareholders in a tender offer, and is also called the Best Price Rule. A bidder is required to treat shareholders equally by making the offer open to all shareholders (retail and institutional) for the same period, and at the same price. An exception or safe harbor is granted for changes in compensation arrangements for executives of the company, provided the arrangements are approved by a MAJORITY OF THE INDEPENDENT BOARD MEMBERS.

What is SEC rule 14d-9?

SEC Rule 14d-9 concerns recommendations, or solicitations by the subject company and other parties, in a tender offer. The rule requires Schedule 14D-9 to be filed by certain persons such as: - The subject company, any officer or director, or employee of the affiliate of the subject company - Any owner of any security of the subject company, the bidder, or any affiliate of the bidder - Any other person who makes a solicitation or recommendation to shareholders on behalf of any of the above

What things are not required to be kept by the broker-dealer?

SEC registration statements (i.e., Form S-1 or S-3), prospectuses (which includes red herrings or preliminary prospectuses), and other documents that are written by an issuer are not required to be kept on file by member firms.

What is difference between 13D / 13G? When does 13D / 13G not apply?

Schedule 13D is filed by an investor that may intend to influence or control the issuer (e.g., an activist investor), while Schedule 13G is filed by an investor that has no intention of influencing or controlling the issuer. An issuer that acquires its own equity securities (treasury stock) is not subject to the filing requirements of Schedules 13D or 13G.

What is 13G?

Schedule 13G is usually filed by institutional investors (e.g., a mutual fund company) that has acquired more than 5% of an issuer's equity securities and has no intention of influencing or controlling the issuer.

What is 13D? Who must the persons must notify?

Section 13(d) of the Securities Exchange Act requires a person or group of persons that acquire more than 5% of an issuer's equity securities to notify the issuer, the exchange on which the securities are traded, and the SEC within 10 days.

Are Section 505 of Reg D / Section 506 federal covered securities?

Section 505 of Reg D are NOT federal covered securities Section 506 are federal covered securities

What is a S-1 registration? S-4? Form 144?

Securities issued under rule 145 (mergers, reclassifcations) may be registered using Form S-4. Form S-1 is used when a company files for an IPO, or is not permitted to use any other type of registration form. Form 144 is used when a person sells restricted or control stock. SEC Rule 145 (securities are offered as a result of business combinations due to mergers, acquisitions, consolidations, reclassifications of securities, or transfers of CORPORATE ASSETS)

What is Regulation A?

Securities sold under Regulation A are required to be registered with the SEC. However, since the amount of capital being raised is limited, the issuer may conduct a public offering and follow a less expensive process than a regular initial public offering. The principal advantages of Regulation A offerings include: - Simpler financial statements that are not required to be audited - No Exchange Act of 1934 reporting obligations after the offering, unless the company has more than $10 million in total assets and more than 500 shareholders - The issuer being able to choose among three formats to prepare the offering circular, one of which is a simplified question-and-answer document - The issuer being able to test the waters to determine if there is adequate interest in its securities before going through the expense of filing with the SEC - The other three offerings are exempt from SEC registration

What kind of companies do not have to file with FINRA's Corporate financing department?

Securities that are exempt from SEC registration are NOT required to be filed with FINRA

What are asset-backed securities?

Securities that are secured by mortgages, car loans, and credit card receivables are called asset-backed securities.

What is selling away?

Selling away occurs when a registered representative (including investment banking representatives) engages in private securities transactions, selling securities outside his regular scope of employment without his firm's approval.

For a tender offer, when must shareholders be notified? How long are tender offers open? If there is a change in the tender offer (it increases or decreases the percentage of class being sought, what happens)?

Shareholders must be notified within 10 days Tender offers open for 20 business days If there is a change, then it must be open for at least an additional 10 business days

What is SEC rule 415 focused on?

Shelf registration

Other than a S-4, where you can find information on mergers.

Since shareholders will need to vote on the proposed merger, a proxy statement must be issued (always issued when there is a vote). Issuers will usually hire a financial adviser to write a fairness opinion, ensuring that the price for the target company is fairly valued.

What is spinning? Is it permitted?

Spinning is a prohibited activity in which a member firm allocates shares of a new issue to certain DECISION MAKERS such as executive officers and directors of former, current, or prospective customers and any person who is materially supported by the executives or directors. These restrictions apply to both public and non-public companies that may be considering an investment banking relationship with the member firm.

What happens if a company wants to terminate research coverage of a Company

Still needs to provide a final report and a final recommendation (similar to previous reports) In the event that a final recommendation is not available, the broker-dealer must disclose its reason(s) for terminating research on the issuer/security.

What is price-to-book value?

Stock Price / (Total Assets - Intangible Assets / Liabilities)

What is the Gordon Growth model formula

Stock Value = D1 / (k - G) Where: D = Expected dividend per share one year from now k = Required rate of return for equity investor G = Growth rate in dividends (in perpetuity)

What is an advantage of a stock appreciation right (SAR)? Similarities and differences to employee stock option (ESO)?

Stock appreciation rights do not require employees to put up funds. The employee has the right to receive the difference between the current market value of the company's stock and a fixed price. Employee stock options require the payment of funds in order to acquire the stock. Both types of securities are similar in that the instrument has a strike price or grant price, a vesting schedule, and an expiration date

Given projected dividend, cost of capital and growth rate, how do you calculate the implied value of a stock?

Stock price = Dividend / (cost of capital - growth rate)

If you were getting bought out, what kind of sales create tax liabilities and what do not?

Stock swap would not create an immediate tax liability A stock sale, asset sale, or enhanced royalty stream would each create current tax liabilities.

When is Schedule TO filed?

TO as soon as practical on the commencement date

What is in an annual proxy statement?

The annual proxy statement contains the names of the members of the board of directors, executive compensation (STOCK OPTION compensation for senior execs), ownership of securities by holders of five percent or more of the company's common stock (based on 13D and 13G filings), the name of the independent public accounting firm performing the audit, and other information related to any other matter that will be voted on at the annual shareholder meeting. Can also show votes from last years vote DOESN'T INCLUDE FINANCIAL STATEMENTS

What is the main purpose of Regulation A?

The business entity must be organized under the laws of the United States, Canada, or any district, territory or possession of the United States or Canada. In addition, the principal place of business must be in the U.S. or Canada. Doesn't work for Mexico

If a member of a syndicate, other than the manager, effects a stabilizing bid: Who normally stabilizes a bid?

The firm is required to notify the manager within three business days of any stabilizing transaction Normally the syndicate manager places a stabilizing bid (must be disclosed in the prospectus), or conducts the syndicate's short covering transaction.

What are safe harbors from gun-jumping provisions?

The first allows the issuer (or someone acting on its behalf) to continue to publish or disseminate regularly released factual business information and the second one allows forward-looking information at any time (forecasts).

What are the two types of proxy statements filed with the SEC?

The first is a preliminary proxy statement that must be filed with the SEC AT LEAST 10 CALENDAR days prior to the date on which the definitive proxy is sent to shareholders. The second type, the definitive proxy, is provided to shareholders to ensure that they have the appropriate information to make an informed voting decision.

In a private placement memorandum (PPM), what is in the confidentiality agreement?

The investor agrees not to disclose confidential information found in the PPM, unless it is to provide information to his financial adviser. The adviser may be an accountant, attorney, banker, or other financial professional and would use the PPM to evaluate the offering. The confidentiality agreement normally contains a provision that requires the return of the disclosure documents, if the securities are not purchased. Another acknowledgement by the investor is that the issuer is under no obligation to complete the offering.

What may a Well-Known Seasoned Issuer (WKSI) do in terms of registration?

The issuer must file an S-3 registration form (SHORT FORM REGISTRATION STATEMENT) for a specified dollar amount and type(s) of securities that it is planning to offer. Each time the issuer offers securities, it will file both a preliminary and then a final prospectus supplement with the SEC (for the specific securities being issued). According to SEC Rule 433, the issuer is permitted to use a term sheet for each offering, provided it is filed as a free writing prospectus. WKSI can also you pay-as-you-go registration (WKSI is able to register an unlimited amount of securities and then file a prospectus supplement when it sells the actual securities. The issuer pays the filing fee at the time the prospectus supplement is filed.)

What are the size limitations of Reg A?

The maximum size of an offering under a Regulation A exemption is $5,000,000 as an AGGREGATE offering, with no more than $1,500,000 of the $5,000,000 being sold on behalf of existing shareholders.

What is the most typical valuation metric for REITs?

The most frequently used valuation metric for a REIT is Funds from Operations (FFO), which is determined by taking the net income plus depreciation, and subtracting gains from the sale of assets.

In an M&A transaction, which of the following would benefit from the cost basis of the transaction being increased?

The purchaser The purchaser or acquirer benefits the most if the cost basis of the transaction is increased. The cost basis is not the same as the purchase price since the purchaser (not the seller) receives the benefit of a stepped-up (increased) tax basis. Therefore, the benefit to the purchaser is that it will have a lower tax on the gain when it sells the assets or the stock.

According to the Sarbanes-Oxley Act, the signing officers of the company's annual report are certifying which of the following statements?

The reports are not misleading based on their knowledge and do not omit material information

For broker-dealers, what are on restricted and watch lists? Who does it apply to?

The restricted and watch lists include securities that employees are either restricted or prohibited from trading, or issues that are subject to closer scrutiny by the member firm. The restrictions or limitations associated with the lists apply to both employees and to solicited transactions with customers.

What is a placement agent in a private offering?

The term placement agent refers to a firm, usually a broker-dealer, that agrees to find institutional investors who, in turn, will purchase securities of an issuer in a private placement. The firm agrees to act in an agency (rather than a principal) capacity and will receive a fee for selling the securities. Since the term is used in connection with private placements, only accredited or institutional investors may purchase the securities. The offering will not be made available to nonaccredited investors.

What are the requirements of a best-efforts underwriting?

The type of offering described is a best-efforts underwriting. This type of offering is permitted if the numbers of units, the price, and the completion date of the offering are specified

What is the relation of the US dollar and interest rates?

The value of the dollar typically moves in the same direction as interest rates. When rates go up, the dollar goes up. When rates go down, the dollar falls.

Who is not exempt from Rule 504 of Reg D?

There are three types of issuers that are not permitted to use this exemption: a company subject to the SEC's reporting requirements (a reporting company), an investment company, and a development stage company that has no specific business plan or purpose (e.g., a blank check company).

What are trading restrictions placed on a director of a publicly traded company?

There is no limit placed on the number of registered shares an insider may purchase. According to Rule 144, there is a restriction on the sale of both restricted and control stock.

What are some Nasdaq Global Select initial listing requirements?

These include, but are not limited to, the public float, stockholders' equity, bid price, revenue, number of market makers, the number of shareholders, and cash flow from operations. Price-to-book is not one

What is the engagement letter in a M&A process?

This document authorizes the banker to conduct the auction on behalf of the seller. An engagement letter defines the legal relationship between the investment banker (or other professional firm) and the issuer. This document defines the terms and conditions of the relationship by detailing the scope of the engagement and the compensation paid to the professional firm.

In a private placement, the inclusion of a teaser is used

To provide an executive summary of the private placement memorandum

Who likes the asset sale vs. the stock sale?

Typically, a buyer prefers to purchase the assets of a corporation's business, while the seller prefers a stock sale. The benefit to the buyer of an asset purchase is the ability to exclude preacquisition liabilities from the purchase. Therefore, it can (generally) acquire only those assets (and liabilities) it desires. In effect, this technique allows the buyer to cherry-pick the target's business. The buyer would also have a stepped-up cost basis against which it could take increased depreciation and amortization deductions. Alternatively, sellers usually prefer to sell stock rather than assets, since this process would transfer all of the acquired firm's liabilities (including contingent liabilities) to the buyer. Also, in a stock sell, seller pays less tax b/c it is taxed at a lower capital gains rate

How is a golden parachute taxed? What is an excessive golden parachute?

Under Internal Revenue Service rules (IRC Section 280G), companies paying excess golden parachute payments (defined as those GREATER THAN THREE TIMES the individual's average annualized compensation as computed over the prior five years) could potentially lose the corporation's tax deduction for such payments, and expose the recipient to an excise tax of 20%.

What is the rule on who you can offer private placements to?

Under Regulation D, a private placement may be offered to an unlimited number of accredited investors but only 35 nonaccredited investors.

Who needs to be fingerprinted?

Under SEC Rule 17f-2, unless an exception is available, fingerprints are required of any employee of a registered broker-dealer. An exception would be available if the employee is not engaged in the sale of securities, does not have access to funds or securities, and does not handle or process funds or securities.

What is the Section 11 defense under the Securities Act if 1933?

Under Section 11 of the Securities Act of 1933, persons other than the issuer are exempt from liability if they can prove that they had no knowledge of the fraud and properly notified the SEC. This would include an accountant or other professional who resigned, or refused to sign or certify any of the documents used to prepare the registration statement.

In terms of investment banking, where may research analysts participate?

Under industry rules, research analysts may participate in due diligence meetings and the screening of potential investment banking clients; however, they may not participate in or attend meetings for the purpose of soliciting investment banking business (pitches). The rules are intended to separate the research department from the investment banking function of member firms.

When is a class of claims deemed to be accepted?

Under the bankruptcy code, an entire class of claims is considered to have accepted the plan if creditors that hold at least two-thirds of the dollar amount, and represent more than one-half of the total number of creditors in that class, agree to the plan

What kind of fees does an underwriter receive?

Underwriters receive selling concession (selling concession fee) and underwriter risk fee Doesn't get manager fee

What is the breakdown in the underwriting spread?

Underwriting spread: maximum amount paid in a syndication The spread is typically 20% manager's fee, 20% underwriting fee, and 60% selling concession.

Do you use offering price or current market price to calculate EV?

Use offering price

What is the order a friendly merger transaction?

Vote by respective BOD to approve -> Form 8-K filed -> press release issued (Form 425 for SEC) -> S-4 filed (if new securities being issued) -> Shareholders vote on proposed merger