Exam 13: Primary Markets and the Underwriting of Securities

A corporation can offer existing shareholders new shares in a preemptive rights offering, and using a standby underwriting arrangement, the corporation can have an investment banking firm agree to distribute any shares not subscribed to.

The ________ involves the distribution to investors of newly issued securities by central governments, its agencies, municipal governments, and corporations

Rule 415 is popularly referred to as the closet registration rule because the securities can be viewed as sitting in the "closet," and can be taken out of the closet and sold to the public without obtaining additional SEC approval.

An investment banker may merely act as an advisor and/or distributor of the new security. The function of buying the securities from the issuer is called ________.

A red herring is ________.

Which of the below statements is TRUE?

In April 1990, the SEC Rule 144A became effective and ________.

In regards to Rule 144a, which of the below statements is FALSE?

Demonstrate how a rights offering works. In your illustration, demonstrate the effect on the economic wealth of shareholders and how the terms affect an issuer's need for an underwriter.

The registration is actually divided into two parts. Part I is the ________. It is this part that is typically distributed to the public as an offering of the securities. Part II contains ________, which is not distributed to the public as part of the offering but is available from the SEC upon request.

In 1982, the SEC adopted Regulation D,which ________.

When all bidders buy the amount allocated to them, then the auction is referred to ________.

In addition to the number of rights and the subscription price, there are two other elements of a rights offering that are important. Name and briefly describe these two elements.

Depending on the type of underwriting agreement, the underwriting function may expose the investment banking firm to the risk of selling the securities to the public at a price greater than the price paid to the issuer.

A consequence of ________ is that underwriting firms need to expand their capital so that they can commit greater amounts of funds to such deals.

A rights offering ensures that current shareholders may maintain their proportionate equity interest in the corporation.

An offering of a new security cannot be made by means of an auction process.

The Securities Act of 1933 ________.

Suppose that an issuer is offering $600 million of a bond issue, and nine bidders submit the following yield bids: Which of the below statements is FALSE?

Investment banking firms assist in the private placement of securities by ________.