Markets, Regulators & Offerings Flashcards

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Terms in this set

Primary vs. Secondary Market In the primary market, issuers sell new securities to investors and receive the proceeds; in the secondary market, investors trade existing securities among themselves and the issuer receives nothing.
The SEC The Securities and Exchange Commission — the U.S. government agency, created by the Securities Exchange Act of 1934, that regulates the securities markets, enforces the federal securities laws, and oversees the SROs.
FINRA & the SROs Self-regulatory organizations are industry bodies that regulate their own members under SEC oversight; FINRA is the SRO for broker-dealers, while the MSRB writes rules for the municipal securities market.
Broker-Dealers vs. Investment Advisers A broker-dealer effects securities transactions — as broker (agent) for customers or dealer (principal) for its own account — and is paid by commissions and markups; an investment adviser is paid fees for giving investment advice.
Market Makers Dealers that stand ready to buy and sell a security for their own account on a continuous basis, quoting a firm bid and ask price and providing liquidity to the market.
Underwriting Commitments The arrangements by which investment banks bring new issues to market: in a firm-commitment underwriting the bank buys the entire issue and resells it (acting as principal); in a best-efforts deal it sells what it can as agent, with no purchase obligation.
The Prospectus & Registration Under the Securities Act of 1933, a new issue must be registered with the SEC and sold with a prospectus — the disclosure document, drawn from the registration statement, that gives investors the material facts about the issuer and the offering.
Private Placements & Exempt Offerings Offerings excused from SEC registration: Regulation D private placements sold mainly to accredited investors, intrastate offerings under Rule 147, small offerings under Regulation A, and exempt securities such as Treasuries and municipals.