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Capital Markets (OFFERINGS (BLUE SKY Uniform Securities Act (USA) State…
Capital Markets
OFFERINGS
PRIMARY: pd to issuer; anytime, any amt, provided doesn't exceed total outstdg stk authorized
PUBLIC OFG: Reg under 1933 ACT, cos use IBankers and UWrs; used to raise capital; advertised to public
PRIVATE OFGS: Institutional Investors; exempt from 1933 ACT
IPO: 1st time co offers stk to public; no insider sales; no WH shares; bonafide public ofg
APO: Follow on offerings to IPO; subsequent offerings to get more cash through stock issue- primary ofg issuer receiving proceeds; Prospectus w/in 25 days if listed NASDAQ; 40 days if not NASDAQ
RESTRICTED PERSONS: Member firms; EEs of Mbr firms; finders and fiduciaries; Portfolio mgrs; 10%+ owner of member firm
2NDRY OFG: $ goes to selling SH's
UW: Best Efforts/AON / Mini Max -flr set minimum ltd liability if no sell. Firm commitment UW- UW holds the bag if doesn't sell
COOL OFF Pd 20 days
TOMBSTONE: Issuer Name, Type security, POP, # Hrs
SHELF OFG: good 2 Yrs; Can sell for up to 3 Yrs
BLUE SKY Uniform Securities Act (USA) State Registration Reqs. If ofc in state, call to state, call from state, RR reg in state. Exceptions: Infrequent trans- non issuer and no RR involved; unsolicited trans.
REGISTRATION: Coordination- issuer files with state and SEC at same time; Qualification - issuer responds to state qualifications; Notice- 1996 ACT listed stks and MF's states do not have jurisdiction over these issues
PRELIM PROSPECTUS: Red Herring; FWP-free writing. prospectus - supplemental materials
FINAL PROSPECTUS: POP, Ofg Date, description, use of proceeds, UW description, business history, risks
EXEMPT FM REGISTN: Govt secs TBills, TBonds etc. Munis, CP, BA's, Ins Policies, S & Ls, RR, nonprofit,
Economic Factors
FRB: Impacts Monetary policy through OMO, Chg Disct Rate, Chgs in Resv Rqmt
Money Supply: M1- Currency, demand deposits, chkg liquid M2: is M1 + time deposits <$100k, CD, Money Mkt, Svgs a/c M-3: = M1+M2+ time deposits >$100k; Repos >1 day
OMO; managed by FOMC- buys and sells govt t-bills to manage money supply - loosen FOMC Buys TBills; Tighten - FOMC sells T-BIlls in mkt
INTEREST RATES: the cost of money
FED FUNDS RATE: most volatile; what banks charge each othe
DISCOUNT RATE: what FRB charges member banks for ST loans
PRIME RATE: Lge US banks charge institutional customers - best
BROKER LOAN RATE: int rate banks charge BDs for margin acts
BUSNS CYCLES: Expansion, Peak, Contraction,Trough
EXPANSION: Incr Demand, Incr Stk Pxs, Incr Production, Incr GDP
CONTRACTION: incr bankruptcy, bond defaults, fall stk px, high debt, decreasing GDP, incr inventories
INDICATORS
LEADING: M-2; Building starts; Avg wkly UE claims; avg mfg work wks; new orders consumer gds; machine tool orders; stk px; inventory chgs; chgs in burns and consumer borrowing
COINCIDENT: GDP, # hrs worked; empt levels; non ag empt; personal incm; indu prod; mfg & tde sales
LAGGING INDICATORS: corp profit; ave UE; labor cost / unit output; Inventory/sales ratio; commercial and industrial loans outstdg; consumer installment cdt/personal incm.
PRICE INDICATORS:
INFLATION: gnl incr in pxs
DEFLATION- gal decline in pxs
STAGNATION: prolonged pds of slow/no growth; high UE
STAGFLATION: Combo of inflated pxs and high UE.
INDU's
DEFENSIVE: least impacted by normal cycles- food Pharma tobacco, nondurable consumer gds
CYCLICAL: sensitive to bus cycles - Durable Goods, raw materials. in recession demand declines **Countercyclical does opposite
GROWTH: indu growth faster than economy; stks pay little/no divs
SPECIAL SITUATION: Profit potential fm non recurring activity
THEORIES
KEYNESIAN: Govt chg level of spending and taxes ; Govt fiscal policy determine economic health
MONETARIST: qty of M-2 major determinant of px levels; px stability key; FRB controls money policy
SUPPLY SIDE ECON: govt should allow mkt forces to determine px of gds
US BAL OF PMTS: Surplus- more $ into US Econ - incr exports /Deficit- $ flowing out of US- incr imports ;BALANCE OF TDE is Lgst component
GDP/GNP: GDP- place based- domestic product - foreign co opens plant in US.
GNP ownership based- us co opens plant abroad impacts GNP
EXCHANGE RATES: value of one currency against another US $ weak, more exports cause other countries can buy more. US $ Strong- imports in US increase impacting bal of tde deficit.
REGULATORY
SEC Primary Regulatory Body
BD Reg & Compliance: Censure, Activity limits, Suspension of registration, Revocation of Registration , Fines
ACTS
1933 New Issues, Primary mkt, Capital raising; Issuers register securities ; FULL FAIR disclosure; criminal penalties for fraud
1934 Act Tdg Mkts Reg, BD Regs, Xchg Regs
1940 Investment Co Act Regulate firms that provide investment advice for fees
1970 Act SIPA Protections for customers if BD files CH 11; created SIPC- All SEC registered BDs must be members of SIPC $500k Coverage (1 or Jt A/C) in insolvency
1988 Insider Tdg Fraud Enforcement Act Penalties for insider info use
2001 US Patriot Act AML BD procedures for act opening
SROs: Oversite by SEC, enforce Fedl Sec Law; Suoervision of Securities entities in jurisdiction
FINRA: Regulates I-Banking, OTC Mkt, NYSE, Ltd Partnerships, Investment cos and member firms using CONDUCT RULES, Uniform Practice Code(UPC), Code of Procedure (COP) Code of Arbitratration (COA)
CBOE Chicago Bd of The: Options exchange
MSRB Municipal Securities RuleMaking Board- No Enforcement authority uses FINRA
US Treasury Dept / IRS
State Regulators:NASAA - North American Securities Admn Assn
FRB: Fedl Rsv - agent of treasury, regulates M-1
FDIC Created in 1930s after run on banks; $250k per account
INVESTORS:
Retail
Institutional; Co;s,
QIB: NW $1miln, annl incm $200k + for 2 yrs or $300k jt
Accredited Investors: Officers, Gnl Partners, Directors of Corp
BDs: Membership w/FINRA or other SRO
FULL SVC , BDs proprietary trade and market makers, Retail and Institutional
CARRYING FIRM Accepts fds and sec fm customer- higher net capital rqmts
INTRODUCING/ FULLY DISCLOSED FIRM - have correspondent firms; intro customers to clearing firms- accept cks to clearing firms
PRIME BKR: Institutn finds firm for custody etc, and other firms (exercising brokers) handle trans; centrl acct w/ many tdg firms best execution.
INVESTMENT ADVISORS (IA): provides investment advice for comp (fee).
MUNI ADVISORS: provides advice on behalf of muni, incl structure, timing, terms, etc And undertakes solicitation of muni
ISSUERS: Offer securities - Corp or Muni
UNDERWRITERS: BDs or IBankers who work with issuer to bring securities to market
TSFR AGNTS : Issue in Name, Cancel old, Maintain ownership rcds, resolve cert issues
CUSTODIAN/TTEE: responsible for investment dcsns- FBO named minor or legally appointed ttee in a trust acct
CLEARING CORP: intermediary btwn buy & sell sides
DEPOSITORIES: DTCC (Fed Rsv not retail) lgst provides custody & clear'g for all securities except restricted stk. NSCC Natl Sec Clrg Corp
OCC:Options Clearing Corp- determines Strike Px and Exp Mo. ; maintain liquidity in Mkt
Market Structure
PRIMARY MKT- New Issues
2ND MKT- Investor to investor sales NYSE is 2ndry Mkt
3RD MKT: OTC NASDAQ
4th MKT: Institutional mkt block tdes listed and non listed securities ECN's open 24 hrs
EXEMPT TRANS: Reg A+ - sm/md co ofgs; Reg D- Pvt plcmts; Rule 147- intrastate sales; Reg S- sold/bot outside US by US issuers