Series 79 || with 100% Error-free Solutions.
order of events in IPO correct answers 1) Bake off
2) Win mandate
3) Sign Engagement Letter
4) File Registration Statement
5) Book build/marketing
6) Go effective (shares registered)
7) Confirm Allocations and distribute
required rate of return correct answers Another name for the discount rate.
Under Rule 144A, which of these investors would NOT be considered a qualified institutional
buyer? correct answers A financial services firm with $130mm in assets.
- QIB is defined as any institution managing $100mm in discretionary assets or any broker-
dealer with $10mm in assets
Which of these statements regarding FINRA rules for fairness opinions is NOT true? correct
answers FINRA rules require firms to incorporate a minimum number of years of experience in
their fairness committee procedures.
- FINRA rules require firms to have qualification requirements for individuals to participate on
the fairness committee, but those qualifications are not necessarily required to include minimum
years of experience.
Which of the following investment funds would most likely invest in a company that has
recently been hit with lawsuits, manufacturing difficulties and a cash crunch but whose revenue
and popularity continues to exhibit strong growth? correct answers Distressed Fund
Company ABC is in the middle of a tender offer to purchase a small competitor, at a ratio of 3
shares of ABC stock for each share of the target company. In four days, the tender will expire,
and the number of shares tendered remains below the squeeze-out threshold. What options are
available to the company to ensure the tender is fully subscribed? correct answers Extend the
tender and offer a 3.5x multiple to investors
When a company files for bankruptcy, the unsecured creditors committee will consist of the
correct answers seven largest unsecured creditors as appointed by the US Trustee
Clawback correct answers The bankruptcy court has the power to clawback funds or assets
received by a particular creditor prior to the filing of a bankruptcy petition. However, the creditor
can assert that the exchange of funds or assets were proper if it can demonstrate that it was in the
ordinary course of business operations and that the services provided additional value to the
debtor.
,In order for a bankruptcy plan to be approved, it must receive a positive vote from creditors
representing at least two-thirds of the dollar amount in claims and at least one-half of the number
of claims. correct answers
An ineligible issuer is one that correct answers can issue securities using a registration statement
In which of the following scenarios would a greenshoe clause most likely be exercised? correct
answers The share price is trading slightly above the IPO price
-The purpose of the greenshoe is to allow the underwriter to oversell a new issue and then make
delivery of the shares. The greenshoe can be exercised to increase the size of the deal by up to
15%.
In a contingency underwriting correct answers Investor funds remain in escrow (not by the
underwriter) until the contingency is met (either all the shares or the minimum threshold
depending on the transaction).
- If the contingency is not met, funds are returned to investors
Types of contingency underwritings correct answers Best efforts all-or-none and Best efforts
part-or-none
Karen is a broker who has a control relationship with the issuer of securities that she is offering.
Under Rule 15c1-5, when must she disclose this relationship in writing to avoid manipulation
and deceptive practices? correct answers Before completion of the transaction
- must be in writing, this is required of all securities sales, not just offerings or new issues
Which of the following is a prohibited activity under Reg M? correct answers Entering a
stabilization bid without notifying the SEC
- Reg M Rule 104 requires underwriters to notify the SEC prior to entering a stabilization bid
- the potential length of the restricted period is one day or five days
Regulation M correct answers The SEC restricts distribution participants (underwriters and
issuers) from bidding for or making secondary market purchases of the stock that is being
offered in a distribution.
Reg M Rule 101 correct answers Prohibits underwriters and other persons participating in a
distribution from purchasing (or inducing others to purchase) a security subject to distribution.
"Actively-traded securities," which are those with an ADTV value of at least $1 million and are
issued by a company with common equity securities that have a public float of at least $150
million, are classified as "excepted securities" to Rule 101
, A partnership wishes to participate in a private placement as an accredited investor. To qualify,
the partnership must have total assets of at least correct answers $5 million at the time of
purchase
- threshold applies to corporations, partnership or trusts
Private Placement correct answers faster and lower fees than registered issue because no
registration required
initial investors can be anyone
illiquid (cannot be sold for two years typically) --> investors demand a higher return
A private placement memorandum (PPM) is required for non-accredited investors unless the
private placement is for less than $5 million (Rule 504).
Which of the following is NOT part of the tender offer process correct answers Proxy Statement
filing by the purchaser
- In a tender offer, the purchaser files a Schedule TO and a Schedule 13D to indicate that the
purchaser may own in excess of 5% of the target after the tender offer is complete. Target
company's BOD must respond to the tender on a Schedule 14d-9 with its recommendation to its
investors.
Fairness Opinions correct answers It is never required and does not allow BOD to delegate
fiduciary responsibility.
Acquirer and buy-side advisor do not review/preview this
Can be useful when deal terms are not negotiated at arm's length or where expected synergies
between companies are hard-to-measure.
Discloses recent IBD services provided by the rank rendering the opinion to the target and
acquirer.
Does NOT disclose compensation packages for the Acquiring company's executives, only the
target company's
In a Chapter 11 filing, which of the following actions may a Debtor-in-Possession (DIP) take?
correct answers Pay debts incurred after the filing
- DIPs may not sell or transfer assets without court approval
Confidential Proxy correct answers kept confidential by the SEC until the definitive proxy is
filed
order of events in IPO correct answers 1) Bake off
2) Win mandate
3) Sign Engagement Letter
4) File Registration Statement
5) Book build/marketing
6) Go effective (shares registered)
7) Confirm Allocations and distribute
required rate of return correct answers Another name for the discount rate.
Under Rule 144A, which of these investors would NOT be considered a qualified institutional
buyer? correct answers A financial services firm with $130mm in assets.
- QIB is defined as any institution managing $100mm in discretionary assets or any broker-
dealer with $10mm in assets
Which of these statements regarding FINRA rules for fairness opinions is NOT true? correct
answers FINRA rules require firms to incorporate a minimum number of years of experience in
their fairness committee procedures.
- FINRA rules require firms to have qualification requirements for individuals to participate on
the fairness committee, but those qualifications are not necessarily required to include minimum
years of experience.
Which of the following investment funds would most likely invest in a company that has
recently been hit with lawsuits, manufacturing difficulties and a cash crunch but whose revenue
and popularity continues to exhibit strong growth? correct answers Distressed Fund
Company ABC is in the middle of a tender offer to purchase a small competitor, at a ratio of 3
shares of ABC stock for each share of the target company. In four days, the tender will expire,
and the number of shares tendered remains below the squeeze-out threshold. What options are
available to the company to ensure the tender is fully subscribed? correct answers Extend the
tender and offer a 3.5x multiple to investors
When a company files for bankruptcy, the unsecured creditors committee will consist of the
correct answers seven largest unsecured creditors as appointed by the US Trustee
Clawback correct answers The bankruptcy court has the power to clawback funds or assets
received by a particular creditor prior to the filing of a bankruptcy petition. However, the creditor
can assert that the exchange of funds or assets were proper if it can demonstrate that it was in the
ordinary course of business operations and that the services provided additional value to the
debtor.
,In order for a bankruptcy plan to be approved, it must receive a positive vote from creditors
representing at least two-thirds of the dollar amount in claims and at least one-half of the number
of claims. correct answers
An ineligible issuer is one that correct answers can issue securities using a registration statement
In which of the following scenarios would a greenshoe clause most likely be exercised? correct
answers The share price is trading slightly above the IPO price
-The purpose of the greenshoe is to allow the underwriter to oversell a new issue and then make
delivery of the shares. The greenshoe can be exercised to increase the size of the deal by up to
15%.
In a contingency underwriting correct answers Investor funds remain in escrow (not by the
underwriter) until the contingency is met (either all the shares or the minimum threshold
depending on the transaction).
- If the contingency is not met, funds are returned to investors
Types of contingency underwritings correct answers Best efforts all-or-none and Best efforts
part-or-none
Karen is a broker who has a control relationship with the issuer of securities that she is offering.
Under Rule 15c1-5, when must she disclose this relationship in writing to avoid manipulation
and deceptive practices? correct answers Before completion of the transaction
- must be in writing, this is required of all securities sales, not just offerings or new issues
Which of the following is a prohibited activity under Reg M? correct answers Entering a
stabilization bid without notifying the SEC
- Reg M Rule 104 requires underwriters to notify the SEC prior to entering a stabilization bid
- the potential length of the restricted period is one day or five days
Regulation M correct answers The SEC restricts distribution participants (underwriters and
issuers) from bidding for or making secondary market purchases of the stock that is being
offered in a distribution.
Reg M Rule 101 correct answers Prohibits underwriters and other persons participating in a
distribution from purchasing (or inducing others to purchase) a security subject to distribution.
"Actively-traded securities," which are those with an ADTV value of at least $1 million and are
issued by a company with common equity securities that have a public float of at least $150
million, are classified as "excepted securities" to Rule 101
, A partnership wishes to participate in a private placement as an accredited investor. To qualify,
the partnership must have total assets of at least correct answers $5 million at the time of
purchase
- threshold applies to corporations, partnership or trusts
Private Placement correct answers faster and lower fees than registered issue because no
registration required
initial investors can be anyone
illiquid (cannot be sold for two years typically) --> investors demand a higher return
A private placement memorandum (PPM) is required for non-accredited investors unless the
private placement is for less than $5 million (Rule 504).
Which of the following is NOT part of the tender offer process correct answers Proxy Statement
filing by the purchaser
- In a tender offer, the purchaser files a Schedule TO and a Schedule 13D to indicate that the
purchaser may own in excess of 5% of the target after the tender offer is complete. Target
company's BOD must respond to the tender on a Schedule 14d-9 with its recommendation to its
investors.
Fairness Opinions correct answers It is never required and does not allow BOD to delegate
fiduciary responsibility.
Acquirer and buy-side advisor do not review/preview this
Can be useful when deal terms are not negotiated at arm's length or where expected synergies
between companies are hard-to-measure.
Discloses recent IBD services provided by the rank rendering the opinion to the target and
acquirer.
Does NOT disclose compensation packages for the Acquiring company's executives, only the
target company's
In a Chapter 11 filing, which of the following actions may a Debtor-in-Possession (DIP) take?
correct answers Pay debts incurred after the filing
- DIPs may not sell or transfer assets without court approval
Confidential Proxy correct answers kept confidential by the SEC until the definitive proxy is
filed
