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SIE Chapter 2
| Term | Definition |
|---|---|
| Block Trade | A large trade or order equal to 10,000 shares of stock or a total market value of $200,000 or more |
| Consolidated Tape | an electronic system that reports the latest price and volume data on sales of exchange-listed stocks |
| Inside quote | the highest price a buyer will for pay for a security and the lowest price a seller will accept. |
| NASDAQ | National Association of Securities Dealers Automated Quotations System. Open to all firms that are members of FINRA |
| Qualified Institutional Buyer (QIB) | An institutional investor with at least $100 million in assets under discretionary management |
| Quiet Period | The period after the effective date of a public offering, during which research may not be published on the offering company |
| Public Float | The number of shares issued and outstanding that are held by the public, excluding shares held by company officers, directors, or affiliates |
| Regulation D | A regulation allowing some companies, by exemption, to sell securities without having to register the offering with the SEC |
| Restricted Security | a security that is purchased in an unregistered, private sale from the issuer |
| Rule 144A | Allows a qualified institutional buyer (QIB) to purchase restricted (unregistered) securities from overseas |
| Spread | The difference between the highest price a buyer will pay and the lowest price a seller will accept |
| Securities Act of 1933 | Established to provide purchasers of new issues of securities with information regarding the issuer. Called the "Paper Act" because it deals with the paper elements involving the issuance of securities |
| Registration Statement | Includes the amount of securities being offered, notifications of other states receiving registration statements, and ay adverse filings. Known as an S-1 |
| Final Prospectus | Also called statutory prospectus, a disclosure document given to investors when the offering becomes effective and the security is available for sale to the public. Contains the official price and effective date. |
| Cooling off period | the 20 days after the filing date of a registration statement with the SEC and the offer of the securities to the public. Neither offers nor sales may be made during this time. |
| Preliminary Prospectus | Also known as red herring. A disclosure document that includes pertinent information about the offering for prospective investors. |
| Indications of interest (IOI) | An indication that the investor might have interest when the securities are available. It is NOT a binding sale. |
| Tombstone | A notification that details important facts concerning the offering, such as probable price rage, description of the issue, and members of the syndicate. |
| Access Equals Delivery Model | The final prospectus delivery obligations of issuers and broker/dealers will be satisfied by filing the final prospectus with the SEC, rather than by delivery of copies to investors |
| Free-writing Prospectus | a disclosure document issued by a well-established company distributing shares through an add-on offering |
| Restricted Period | The period of time during which the offering participant are restricted from doing anything that may influence the price of the underwritten security |
| Tier 1 Corporations | The ADTV exceeds $1 million and the public float is values at $150 million or more. They have no restricted period because they are among the most actively-traded companies. |
| Tier 2 Corporations | Have at least $100,000 in ADTV and at least $25 million in public float. The restricted period is 1 day prior to the effective date. |
| Tier 3 Companies | Companies that do not qualify for Tier 1 or Tier 2, they are smaller companies. The restricted period is 5 days prior to the effective date. |
| Convertible bonds | Bonds that allow the holder to exchange or convert into common shares in the issuing company at a predetermined price |
| Regulation M | Places restrictions on market participants who are associated with public offerings, including IPOs. APOs, and subsequent primary offerings. The participants are restricted from manipulating the offering price of the securities |
| OTC Market | Over the counter Market, a negotiated market where one buyer negotiated with one seller. There is no physical location, takes place online or over the phone. |
| Secondary Market | consists of both the exchange markets and OTC markets. It is the trading of previously issued securities. |
| 1st Market | Trading of securities listed on an exchange, it is an auction market |
| 2nd Market | Trading of unlisted securities over the counter, It is a negotiated market |
| 3rd Market | exchange-listed securities trading OTC |
| 4th Market | Electronic trading of large blocks between institutional investors |
| Stock Exchange | A physical location where broker/dealers execute investor orders to buy and sell securities |
| New York Stock Exchange | Formed in 1792, is the oldest & largest exchange market in the USA. |
| Intercontinental Exchange (ICE) | Parent company of NYSE, operates 7 liquid markets, providing investors with access to stocks, bonds, exchange-traded funds (ETFs) and optios. |
| Liquidity | the availability to turn an investment into cash. |
| Risk | the possibility of an investment losing or not gaining in value |
| Market Makers | broker/dealers that make a market in a security by trading with customers from their own inventory |
| Electronic Communications Network (ECN) | facilitate agency cross services, taking the shares from the seller and delivering them to the buyer electronically, and provide confirmation records to each institution. |
| FINRA Rule 5130 | prohibits broker/dealers and their employees from buying the IPO from the syndicate. The IPO shares must be offered to the public in order to avoid any misdealing's by member firms and their associated persons. |
| Rule 145 | SEC rule that allows the transfer of a certain securities without first registering them, specifically those acquired through mergers, acquisitions, consolidations, and substitytions of one security for another. |
| par value | a bond's face amount, normally $1000 |
| spinoff | occurs when a publicly traded company separates one of its divisions into an entirely ew entity. Funding for this activity often comes from the parent company, through a debt or equity position. |
| Tender offer | a formal offer to the existing shareholders to purchase their stock at a price above the current market value (CMV). May be conditioned upon a certain minimum number of percentage of shares being tendered. |
| Secondary offering (Secondary Distribution) | The sale of already issued and outstanding shares. The proceeds go to a party other than the issuer, such as a shareholder or another corporation. Also used when an employee with stock options exercises them to purchase the underlying stock. |
| Shelf Offering (Shelf Registration) | Allows firms to file 1 registration statement covering several issues of the same security prior to a public offering. It is typically used for primary offerings, but may also be used for secondary offerings. |
| Net long | The investor has the ability to deliver the shares |
| Form S-1 | Required to be filed when a corporation issues securities through a shelf distribution. Ensures that the company filing is not a shell company for another company and that the issue is not a penny stock |
| Base prospectus | discusses the necessary information of the securities in the shelf distribution |
| Regulation A | Available for a new issue of less than $5 million during a month period. Also known as the small issue or small dollar exemption. Allows small companies to raise capital from the general public in an offering that is exempt from registration. |
| Regulation A+ | Amendment to Reg A that increased the amount of money that may be raised in an exempt offering. |
| Non-accredited investor | investor that must have a purchaser representative to conduct a transaction |
| Offering memorandum | a document provided to a customer that contains the same information found in a prospectus |
| Restricted Stock | stock that has no right of transferability, usually acquired through a private placement. |
| Purchaser representative | designated for each offering to buy securities for non-accredited investors. Must not be associated with the issuer unless realated to the purchaser by blood, marriage or adoption. |
| Regulation D Rule 504 | allows for a private placement that can raise up to $10 million withing 12 consecutive months. Limited disclosure documents are required as well as a signed subscription agreement |
| Rule 506(b) | allows for an unlimited # of accredited investors and up to 35 sophisticated, but non-accredited investors in a 90 day period |
| JOBS ACT | Created by the SEC, created a new category of Reg D private placements called the 506(c) |
| Rule 506(c) | all investors must be accredited investors, and the issuer must take reasonable steps to verify that they are accredited in order to qualify for the 506(c) exemption. The issuer is allowed to advertise the offering. |
| Regulation D Rule 506(d) | Companies are required to inform purchasers that the securities offered are restricted securities, which means they cannot be sold for at least 6 months without a registration. |
| Bad actors provision | Disqualifies an offering if the issuer or any person associated with the offering has a disqualifying event that occurred, i.e. criminal conviction, regulatory or court action. |
| Form D | a notice of sale that includes the names & addresses of the company's promoters, executive officers & directors, and some details about the offering. |
| Accredited investor | an investor who can buy unregistered securities, by virtue of an exception in the rules. |
| Regulation Crowdfunding (Reg CF) | Allows small businesses to raise capital from a large number of investor using the internet, provided that the investments on the part of individual investors are limited. |
| Funding portal | a broker acting as an intermediary in a transaction involving the offer or sale of securities that does not offer investment advice, solicit purchases, compensate employees, or handle investor funds or securities. |
| Control securities | stocks owned by an affiliate of a corporation (such as an executive officer, a director or large shareholder) i a control relationship, with the power to direct the management and policies of the corporation. |
| Rule 144 | Allows public resale of restricted and cotrol securities under certain conditions. |
| Underwriter | a broker/dealer that helps an issuer sell securities to the public. also known as an investment banker. |
| Underwriting agreement | a contract between the issuer and the managing underwriter that specifies the terms and conditions under which the underwriter may sell the shares to the public. |
| Syndicate | a team of broker/dealers who sell the securities to the public on behalf of the issuer. Members share the risk of executing the underwriting. |
| Firm Commitment | Syndicate buys the shares from the issuer and the reoffers the shares to the public. The syndicate takes the risk for any unsold shares. |
| Standby underwriting | ensures that all shares being offered through the stock rights will be sold. |
| Best efforts underwriting | the syndicate applies its best effort to selling the shares on behalf of the issuer |
| All or none underwriting (AON) | the entire issue must be sold or the deal is canceled. |
Created by:
emulligan
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