Tag: IPO

Study Question of the Month – March

This month’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 7, 24, 27, 62, 79, 82, and 99. –ANSWER POSTED– Continue reading

This month’s study question from the Solomon Online Exam Simulator question database is now available.

***Submit your answer to info@solomonexamprep.com to be entered to win a $10 Starbucks gift card.***

Study Question

Question (Relevant to the Series 7, Series 24, Series 27, Series 62, Series 79, Series 82, and Series 99):

Jenny is an employee of a broker-dealer. She is a receptionist at the firm and is not a registered representative. She would like to purchase shares in an IPO that she has recently heard about at her office. Which of the following BEST describes her participation?

Answers:

A. Jenny may purchase shares of the IPO on the same basis as other customers.

B. Jenny is prohibited from purchasing shares of the IPO, but her spouse who she supports may purchase shares on the same basis as other customers.

C. Jenny may purchase shares of the IPO as long as the purchase quantity doesn’t exceed 200 shares.

D. Jenny is prohibited from purchasing shares of the IPO.

Correct Answer: D. Jenny is prohibited from purchasing shares of the IPO.

Rationale: FINRA Rule 5130 – Restrictions on the Purchase and Sale of Initial Equity Public Offerings – prohibits a member firm (broker/dealer) from selling shares of an IPO to an account in which a “restricted person“ has a beneficial interest, subject to certain limited exceptions. All employees of a broker-dealer are considered “restricted persons“ under the rule.

Congratulations! This month’s winner is Alexandra K.

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.

Study Question of the Week: January 16, 2014 Edition

This week’s study question from the Solomon Online Exam Simulator question database is now available. Relevant to the Series 7, Series 24, Series 62, and Series 79. –ANSWER POSTED– Continue reading

This week’s study question from the Solomon Online Exam Simulator question database is now available.

Study ? of the Week

Question (Relevant to the Series 7, Series 24, Series 62, and Series 79): 

What IPO method will offer the underwriter a green shoe option?

Answers:

A. Best efforts

B. Mini-max

C. Firm commitment

D. Bought deal

Correct Answer: C. Firm commitment

Rationale: A firm commitment underwriting is an agreement that the underwriter will purchase all the securities at a discount and then sell the securities to the public at a fixed public offering price. In this type of agreement, the underwriter is responsible for the marketing and sale of the securities and assumes all the risk of the offering, including the liability of any unsold shares. An over-allotment option, also called a green shoe option, gives the syndicate the right to require the issuing company to issue up to 15% more shares in the offering at the syndicate’s discretion. Green shoe options are offered on firm commitment underwritings only.

Weekly study questions are from Solomon’s industry-leading Online Exam Simulator.

Exam Alert: JOBS Act will change standards for IPOs, securities registration

The Jumpstart Our Business Startups Act (JOBS Act) was signed into law on April 5, 2012. The act lessens regulations for the initial public offerings of certain companies and alters other federal rules. FINRA is expected to change some of its rules to reflect the new standards. Continue reading

The Jumpstart Our Business Startups Act (JOBS Act) was signed into law on April 5, 2012.  The act lessens regulations for the initial public offerings of certain companies and alters other federal rules.  FINRA is expected to change some of its rules to reflect the new standards.

 

Here is a breakdown of the changes:

-IPOs for “emerging growth companies” are subject to fewer restrictions limiting communication between research analysts and investment bankers (Chinese Walls).  An emerging growth company is defined as a company with less than $1 billion in annual revenue that had its first IPO no more than five years ago.  This has been estimated to cover as much as 90% of companies looking to go public (Source: Reuters).

-Banks are allowed to publish research reports on emerging growth companies immediately after they take them public.  The old rule required a 40 calendar day quiet period for IPOs.

-There are fewer restrictions on advertising emerging growth companies to accredited investors.

-Emerging growth companies are exempt from certain disclosure requirements.

-Startup companies can sell small amounts of shares to several investors to raise up to $1 million without being required to register the security (crowdfunding).  An investor can contribute up to at most $10,000, though the individual maximum may be lower based on the investor’s annual income or net worth.

-The Act increases the number of shareholders a non-bank company may have before it is required to go public, from 500 persons to 2000 persons or 500 non-accredited investors.

-The Act increases the amount of funds that can be raised before a company is forced to register with the SEC, from $5 million (under Regulation A) to $50 million.

-Up to 2,000 shareholders may invest in a bank holding company before registration is required (up from 500).

-Various other issuer registration requirements have been modified (see the SEC’s JOBS Act FAQ).

 

The Act itself may be found here.

 

Sources, further reading:

http://dealbook.nytimes.com/2012/04/04/wall-st-examines-fine-print-in-a-new-jobs-bill/

http://dealbook.nytimes.com/2012/04/11/regulator-seeks-feedback-on-jobs-act/

http://www.sec.gov/divisions/corpfin/cfjobsact.shtml

http://www.gpo.gov/fdsys/pkg/BILLS-112hr3606enr/pdf/BILLS-112hr3606enr.pdf

http://www.reuters.com/article/2012/04/11/us-jobsact-ipos-idUSBRE83A0Z820120411

http://www.reversemergerblog.com/2012/03/17/summary-of-jobs-bill-and-update/

http://www.csmonitor.com/USA/Politics/2012/0308/What-does-the-JOBS-Act-actually-do-Six-questions-answered/What-s-in-the-JOBS-Act

http://www.pcmag.com/article2/0,2817,2402657,00.asp

http://www.forbes.com/sites/jjcolao/2012/03/21/jobs-act/

 

This alert applies to the Series 79, Series 62, Series 24, Series 7, and Series 82.

Exam Alert: FINRA prohibits “spinning”

“Spinning” is when a broker allocates IPO shares of a hot issue to favored customers, which the customers can then sell at a profit on the Continue reading

“Spinning” is when a broker allocates IPO shares of a hot issue to favored customers, which the customers can then sell at a profit on the secondary market.  Effective May 27, 2011, FINRA has prohibited spinning.  If it looks like there is a relationship between a customer and the broker-dealer, the broker-dealer cannot sell shares of new issues to that customer.  Note that certain allocations are exempt from this rule.

http://www.finra.org/Industry/Regulation/Notices/2010/P122491