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answers 2025
Securities Act of 1933 - Law that regulates the new issue market Completeness - The SEC does not approve or disapprove. They just review the transaction for ____________. Subchapter C Corporation - Unlimited number of shareholders, exchange listed, does not pass through gains and losses, anyone can be a shareholder, and capital gains are taxed at a favorable long term rate if held for more than 1 year. Subchapter S Corporation - 100 maximum shareholders, never exchange listed, passes through gains and losses to shareholders, only domestic and individuals can be investors (no foreign investors or institutions), and taxed at a favorable rate if held for more than 1 year. Real Estate Investment Trust - Pool of capital that invests in real estate. Provides a liquid investment in real estate. To qualify: 75% f income derived from real estate, 75% of total assets invested in real estate, and 90% of income distributed to investors.
answers 2025
Can pass through gains and losses to investors. Master Limited Partnerships - Tax advantaged vehicle that allows lots of investors to participate. Can do a public offering of securities. Gun Jumping - Issuer talks about the deal before filing registration. Releasing sensitive information in the 30 days prior to an issuer filing a registration statement. Form S-1 - Long form registration for an IPO. 32 pieces of information. Form S-3 - The most simplified securities registration form used by the U.S. Securities and Exchange Commission. It may only be used by companies that have been required to report under the Securities Exchange Act of 1934 for a minimum of twelve months and have also timely filed all required reports (including annual forms 10-K, quarterly forms 10-Q and certain current forms 8-K) under the Securities Exchange Act of 1934 during the twelve calendar months and any portion of a month immediately before the filing of the registration statement. Also, the offering and the issuer must meet other eligibility tests prescribed by the form. Used for equity follow-on offerings.
answers 2025
Liable - Anyone who participates in preparing the registration statement (issuer, directors/ partners, bankers, lawyers, accountants who consent to be names) may be held ___________ for misleading information in a registration statement. (SECTION 11) Civil penalties for section 11 - Investor can recover the cost of the interest + reasonable interest if registration statement is found to have misleading information. Noisy exit - Liabilities for misleading information in a registration statement. One way to avoid liability is to withdraw from the transaction and notify the SEC. Due Diligence Defense - After REASONABLE investigation, the person believed the information to be true. Prudent man standard. Issuer - _________________ cannot use the due diligence defense. Permitted activities for cooling off period - Collect indications of interest to gauge demand and determine the offer price. And distribute the preliminary prospectus ("red herring"), publish tombstone ads, conduct road show, distribute FWP.
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Cannot sell securities or price securities, advertise, make money orders. NO effective date. NO LATER - All investors must get prospectus ______________ than the trade confirmation. Access = delivery. Modify - Underwriters cannot ___________ prospectus in any way. Quiet Period - For equity research, syndicate managers and members may not publish equity research for 10 days following an IPO. If this is a follow-on offering, the syndicate manager cannot publish equity research for 3 days. Emerging Growth Company (EGC) - Exception to the quiet period equity research rule. Research may be published immediately following an offering.
answers 2025
Free Writing Prospectus (FWP) - A written or graphic communication in connection with a securities offering, other than the full prospectus. Seasoned Issuer - $75M in public float and at least 1 year of SEC filing. Files form S-3, shelf registration is non-automatic, pay registration fees upon filing, and can only deliver FWP post-filing. Unseasoned Issuer - Less than $75M OR less than 1 year as an SEC filer. Files form S-1, shelf registration is non-automatic, pay registration fees upon filing, and can only deliver FWP post-filing. Non-reporting issuer - Private company with no SEC filings. Files form S-1, shelf registration is prohibited, pay registration fees upon filing, and can only deliver FWP post-filing. Ineligible Issuer - An issuer that is
answers 2025
- Not current w/ SEC filings
- Filed for bankruptcy w/ in the last 3 years
- Blank check company Files form S-1, shelf registration is prohibited, pay registration fees upon filing, and can never use an FWP. CEO, CFO, Controller, and majority of BOD - Who needs to sign the 10K? Class action lawsuit - What would NOT likely trigger an 8-K filing? 60 days - Large accelerated filers reporting requirements for 10K 40 days - Large accelerated filers reporting requirements for 10Q 4 days - Large accelerated filers reporting requirements for 8K 75 days - Accelerated filers reporting requirements for 10K
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Unintentional disclosure requires disclosure within the later of 24 hours or the next open of trading. Disclosure requirements are satisfied with an 8K and press release via wire service. Proxy Statement - Schedule 14A preliminary proxy - PREF14A. Only required if other than election required, executive compensation, or shareholders proposals. Always - Definitive proxy is ______ required. 10 - Preliminary proxy (PrEF14A) filed with SEC at least ___ days before definitive proxy. 20 - Definitive Proxy (DEF14A) filed with SEC and distributed to shareholders at least ____ days before the shareholder meeting.
answers 2025
Sarbanes-Oxley Act - Legislation that was created to strengthen corporate governance Independent - The BoD must be a majority of _____________ directors. The audit committee must be 100% _____________. Financial experts - Required for listed issuers on the audit committee. But not required for other issuers (but must be disclosed if there is one). Form 3 - Filed if someone becomes a corporate insider, Must be filed within 10 days. Form 4 - Insider changes ownership in the open market and must file this within 2 days, post trade. Form 5 - Insider changes ownership not in the open market (may donate shares to a trust). Must be filed within 45 days of issuer's fiscal year end.
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13F - Institutional investment manager (>$100M) must disclose long positions through this form 45 days after quarter end. Engagement Letter - A letter that formalizes the contract between the issuer and the underwriter and outlines the responsibilities of both parties. Qualified Financial Institution (QFI) - Who holds funds in escrow accounts during a contingency best efforts underwriting? Noon - Contingency satisfied in a best efforts underwriting, release the funds by ______ the next business day. Agreement Among Underwriters (AAU) - Gives syndicate manager power of attorney, confirms size of offering and spread, and underwriting obligations. Signed between syndicate manager and syndicate members. Does not - The syndicate desk (does/ does not) prepare offering documents, run road shows, collect IOI's, and stabilize.
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tie-in arrangement - When an underwriter sells shares of a new issue to a client contingent on the client purchasing additional shares in the secondary market from the underwriter. PROHIBITED. Spinning, 3 - When an underwriter sells shares of a new issue to executives of private companies that the underwriter hopes to do business with in the next _____ months. (Include the answer, # of months) Underwriting Agreement (UA) - The contract that establishes the relationship between the issuer and the underwriters, setting forth their respective rights and obligations and the terms and conditions upon which the issuer is required to sell and the underwriters are required to purchase the securities. Not signed until book has been built. MAC Clause - Kill the deal under exceptional circumstances. Will be outlined in the underwriting agreement. Underwriting concession - Underwriting fee (20-30%) + Selling Concession (50- 60%). Also known as the total takedown.
answers 2025
Submission Documents for FINRA - Registration Statement / Prospectus Underwriting Agreement Agreement Among Underwriters Non-cash compensation received Reimbursed expenses Fair and reasonable - Corporate finance department makes determination of nature of compensation to be "______ ____ _________" legal fees and marketing expenses - Two things that are added to the syndicate fee expenses. Does not include printing costs, blue sky fees, or accounting fees for audited financials (bona fide expenses) Prohibited Compensation - Options and warrants with an expiration greater than 5 years Options and warrants with a strike price below the offer price
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Any right of first refusal for future underwriting business for more than 3 years Any tail fee arrangement for more than 2 years 6 month - Holding period for all shares received as compensation by the underwriter, unless the number of shares is no more than 1% of total deal size. One (1) - Syndicate manager must notify FINRA within ____ business day of the deal being declared effective. SEC does not just tell FINRA. Rule 5130 - Restricted persons cannot invest in IPOs. Restricted Persons - FINRA member firms and employees Finders and fiduciaries (like accountants and attorneys) of the managing underwriter Portfolio managers for their personal accounts Immediate family members of restricted persons Permitted Persons - Restricted persons who can buy into IPOs.
answers 2025
Restricted Periods - Part of Reg M. Small issuers have a restricted period of 5 days before pricing. Medium issuers are 1 day before pricing. Actively traded securities (ADTV > $1M and public float > $150M). No bidding, no purchasing, and no soliciting others. You can:
- dissemination of research reports (ongoing)
- Unsolicited brokerage transactions
- Exercise rights, warrants, and options
- Bona fide basket transactions
- Rule 144A transactions
- Passive market making Passive Market Making (PSMM) - Rule 103 of Reg M. Allows market maker to bid and purchase at the best independent bid during the restricted period.
answers 2025
Stabilization - Rule 104 of Reg M. Allows underwriters to support the price a new, fixed-price offer after it begins trading in the secondary market. Must be one firm making bids at a time. Daily - During stabilization, notice to the SEC & primary exchange is given _______. Penalty Bid - A syndicate member who loses its selling concession for shares sold to flippers has been assessed a ________ _____. Must be imposed uniformly on all syndicate members and requires prior notice to FINRA. Flippers - Purchasers who sell into the stabilizing bid Rule 105 - Part of Reg M. A new issue cannot be used to cover a short position established in the five business day period preceding the determination of the offer price. Applies to follow-on offerings, as short sellers cannot invest in IPOs.
