SIE Exam Prep 2024 Questions &
Answers 100% Correct!!
Raising Capital - ANSWER-Businesses can raises capital by selling securities
-But an offer or sale of any security must either be:
1. Registered with the SEC
2. Conducted under an exemption
Securities Act of 1933 - ANSWER-General Rule: Securities must be registered for lawful public sale,
unless exempt
-Register by filing a registration statement that provides disclosures to investors
-What's disclosed?
-The issuer's business description and details
-The issuer's insiders - the officers (eg CEO), board members, and >10% shareholders
-The underwriters and legal cousnsel
-The amount and planned use of the proceeds
-Any legal proceedings against the issuer
-Audited financial statements
Underwriting timeline - ANSWER1. Pre-registration: issuer hires UW (investment bank) that prepares
registration statement - NO gun-jumping/discussing marketing of deal
---File registration stmt w SEC---
2.Cooling off ~20 days: SEC reviews registration statement (red herring), UW market deal - NO sales
only IOIs
---Effective Date---
3. Post-Effective: UW sell shares,
Prospectus: Delivered to all investors who buy IPO (and any investors who buy on exchange for first
25 days) next morning shares trade on exchange
bake-off - ANSWERprocess begins when the organization that is looking to launch an IPO invites
potential underwriters to tour their facility to get a fair idea of the nature of the business and its
operations. Later, the organization invites bids from interested bankers.J
,Types of Offerings - ANSWERTiming
1. IPO-> The first time a company offers its shares to the general public (typically happens one time)
2. Follow-on offering -> Any subsequent offering of securities to the public (after the IPO)
----------------------------------
Proceeds
1. Primary offering -> The company is creating new shares to sell and receiving all proceeds from the
sale.
2. Secondary offering -> Existing shareholders (e.g., founders, executives, VC) are selling the shares
and receiving the sale proceeds (no cash for company).
3. Split offering -> Both the company and selling shareholders sell shares (e.g., Split IPO = Company
sells and VC exits)
Going Public-Underwriting Timeline - ANSWERTimeline:
1. Lets go public
2. Hire an investment bank to underwrite the deal
"Bookrunner"
"Lead Left"
"Managing Underwriter"
3. Other firms join the Syndicate
Syndicate members
"co-managers"
***
Selling Group
Shelf Registration - ANSWER-A shelf registration is valid for up to three years and can be used for
follow-on offerings, but not IPOs.
1. Pre-Registration (Pre-Filing/Quiet Period)
,2. Cooling Off/Waiting Period
can sit on shelf for up to 2 years
-can use for follow on offerings
3. Post-Effective
Buying Common Stock IPO Shares - ANSWER-Initial public offering (IPO) shares must be sold to the
public FINRA prohibits restricted persons from investing in common stock IPOs:
1. Broker Dealers can not buy IPO stock
2. Employees of broker-dealers
3. Immediate family member of broker-dealer employees (Spouse, siblings, parents, in-laws)
Acceptable purchasers:
1. Extended family members
Exemption from reg under Act of '33 - ANSWERIf do not want to register with SEC
Exempt Securities
1. US govt securities
2. US govt agency securities
3. Muni bonds
4. Securities issued by nonprofits
5. Commercial bank securities
6. Commercial paper (no longer 270 days)
4. Firm Commitment Financial Liability OR Best efforts No Financial liability - All or none -Part or
none
5. Underwriters sell shares
UW can stabilize at or below IPO price to prevent a decline in price.
Underwriting Syndicate Firm Commitment - ANSWERLead Manager
-Manages deal and runs process
-Directs/leads entire underwriting process
, -Due diligence on issuer
-Runs road show & marketing efforts
-Distributing & allocates shares
Syndicate Members
-Financially committed to underwrite shares (will buy/own unsold shares)
Selling Group
-Helps sell shares 9as agent)
No financial commitment to deal
Exempt Transaction
1. Reg D
2. Rule 144
3. Rule 144A
4. Rule 147
5. Reg A - small businesss
6. Reg S - overseas
Reg D (private placement) - ANSWERAn exempt transaction under the Securities Act of 1933 for
private placements
A way for companies who have already gone public to raise additional capital without registering
their securities
1. Who raises capital? Any business
2. How much? Unlimited
3. How Often? No Limit
4. Who can invest? Any accredited investors and up to 35 non-accredited investors
-Can a public company raise capital with a private placement?
Yes -> a "PIPE" (private investment in public equity)
-Who is accredited?
1. Officers and directors of the issuer
Answers 100% Correct!!
Raising Capital - ANSWER-Businesses can raises capital by selling securities
-But an offer or sale of any security must either be:
1. Registered with the SEC
2. Conducted under an exemption
Securities Act of 1933 - ANSWER-General Rule: Securities must be registered for lawful public sale,
unless exempt
-Register by filing a registration statement that provides disclosures to investors
-What's disclosed?
-The issuer's business description and details
-The issuer's insiders - the officers (eg CEO), board members, and >10% shareholders
-The underwriters and legal cousnsel
-The amount and planned use of the proceeds
-Any legal proceedings against the issuer
-Audited financial statements
Underwriting timeline - ANSWER1. Pre-registration: issuer hires UW (investment bank) that prepares
registration statement - NO gun-jumping/discussing marketing of deal
---File registration stmt w SEC---
2.Cooling off ~20 days: SEC reviews registration statement (red herring), UW market deal - NO sales
only IOIs
---Effective Date---
3. Post-Effective: UW sell shares,
Prospectus: Delivered to all investors who buy IPO (and any investors who buy on exchange for first
25 days) next morning shares trade on exchange
bake-off - ANSWERprocess begins when the organization that is looking to launch an IPO invites
potential underwriters to tour their facility to get a fair idea of the nature of the business and its
operations. Later, the organization invites bids from interested bankers.J
,Types of Offerings - ANSWERTiming
1. IPO-> The first time a company offers its shares to the general public (typically happens one time)
2. Follow-on offering -> Any subsequent offering of securities to the public (after the IPO)
----------------------------------
Proceeds
1. Primary offering -> The company is creating new shares to sell and receiving all proceeds from the
sale.
2. Secondary offering -> Existing shareholders (e.g., founders, executives, VC) are selling the shares
and receiving the sale proceeds (no cash for company).
3. Split offering -> Both the company and selling shareholders sell shares (e.g., Split IPO = Company
sells and VC exits)
Going Public-Underwriting Timeline - ANSWERTimeline:
1. Lets go public
2. Hire an investment bank to underwrite the deal
"Bookrunner"
"Lead Left"
"Managing Underwriter"
3. Other firms join the Syndicate
Syndicate members
"co-managers"
***
Selling Group
Shelf Registration - ANSWER-A shelf registration is valid for up to three years and can be used for
follow-on offerings, but not IPOs.
1. Pre-Registration (Pre-Filing/Quiet Period)
,2. Cooling Off/Waiting Period
can sit on shelf for up to 2 years
-can use for follow on offerings
3. Post-Effective
Buying Common Stock IPO Shares - ANSWER-Initial public offering (IPO) shares must be sold to the
public FINRA prohibits restricted persons from investing in common stock IPOs:
1. Broker Dealers can not buy IPO stock
2. Employees of broker-dealers
3. Immediate family member of broker-dealer employees (Spouse, siblings, parents, in-laws)
Acceptable purchasers:
1. Extended family members
Exemption from reg under Act of '33 - ANSWERIf do not want to register with SEC
Exempt Securities
1. US govt securities
2. US govt agency securities
3. Muni bonds
4. Securities issued by nonprofits
5. Commercial bank securities
6. Commercial paper (no longer 270 days)
4. Firm Commitment Financial Liability OR Best efforts No Financial liability - All or none -Part or
none
5. Underwriters sell shares
UW can stabilize at or below IPO price to prevent a decline in price.
Underwriting Syndicate Firm Commitment - ANSWERLead Manager
-Manages deal and runs process
-Directs/leads entire underwriting process
, -Due diligence on issuer
-Runs road show & marketing efforts
-Distributing & allocates shares
Syndicate Members
-Financially committed to underwrite shares (will buy/own unsold shares)
Selling Group
-Helps sell shares 9as agent)
No financial commitment to deal
Exempt Transaction
1. Reg D
2. Rule 144
3. Rule 144A
4. Rule 147
5. Reg A - small businesss
6. Reg S - overseas
Reg D (private placement) - ANSWERAn exempt transaction under the Securities Act of 1933 for
private placements
A way for companies who have already gone public to raise additional capital without registering
their securities
1. Who raises capital? Any business
2. How much? Unlimited
3. How Often? No Limit
4. Who can invest? Any accredited investors and up to 35 non-accredited investors
-Can a public company raise capital with a private placement?
Yes -> a "PIPE" (private investment in public equity)
-Who is accredited?
1. Officers and directors of the issuer
