FOFAP UNIT 4

Front

What is the primary market?

Back

The primary market deals with the distribution of newly issued securities by companies, governments, and other institutions to investors.

Front

What are the three main functions of investment banks in the issuance of new securities?

Back

1) Provide advice to the issuer in terms of the timing of the issue, 2) Buy securities from the issuer, 3) Distribute the securities to the public.

Front

What is an underwriter?

Back

An underwriter is an investment bank that commits its own capital to buy securities from the issuer, bearing the risk of selling the securities to investors.

Front

What is a firm commitment in underwriting?

Back

A firm commitment is a fixed price arrangement between the issuer and the underwriter.

Front

What is the gross spread in underwriting?

Back

The gross spread is the difference between the price paid to the issuer and the selling price to the investor.

Front

What is the Securities Act of 1933?

Back

The Securities Act of 1933 regulates underwriting activities in the US, requiring issuers to submit a registration statement with relevant information.

Front

What is a bought deal?

Back

In a bought deal, the lead manager or group of managers offers to purchase the securities at a given price for a given amount, usually having presold most of the issues.

Front

What is an auction process in underwriting?

Back

An auction process involves a competitive bidding exercise where potential underwriters submit bids for the entire issue, typically awarded to the highest bid.

Front

What is a pre-emptive rights offer?

Back

A pre-emptive rights offer allows a corporation to issue common stocks to its existing shareholders, usually at a discount to maintain ownership concentration.

Front

What are private placements?

Back

Private placements are the distribution of securities not through public offerings but via a selected number of investors, usually large institutional investors.