for all-or-none and mini-maxi underwritings, escrow account needs to be established for subscribers funds in event the deal is cancelled

Account collects all money raised before selling concessions and underwriting spread

allow investors to raise capital and issue shares over a period of time

pricing is based on current secondary market for existing shares

securities not listed need an independant market

Suitability rules

retail - recommendation must be suitable based on financial circumstance and objectives

institutional - customer is able to evaluate risks independantly

managers in ipos- 40 days

managers in secondary offerings - 10 days

broker-dealer in ipo - 25 days

favorable reports that come out after lock up period

prohibited from release for 15 days before and after lock up period

sets aside shares for institutional client to compete for orders

profit is allocated based on each members sales

syndicate - group distributing securities that imposes financial commiment on members

selling group - group distributing securities that doesnt impose financial commitment

underwriter receives = (underwriting spread-manager fee) x shares

syndicate receives = (underwriting spread-manager fee-selling concessions) x shares

net managers fee = mangers fee - syndicate expense

a discount given to broker-dealers engage in investment banking activities

part of underwriting or selling group

must be used for preparing documents in event of conflict of interest

must have experience with 3 issues of similar size

3 years of underwriting experience

needed if no disclosures are made

Restricts distribution participants and issuers from bidding on secondary market stock offered for certain period around effective date

Prohibits issuers and selling security holder from raising price of security being distributed

Distribution participants can make a market on a passive basis 

Limits on quantity – daily purchase limit is greater of 30% of average daily volume in the stock or 200 shares

 Falling Market -  When last independent bid is below that of passive market maker, PM may maintain its bid until purchases reach the lesser of two times the minimum quote size for industry or remaining daily limit

   Cannot enter a bid higher than highest independent bid on Nasdaq

Stabilization is a bid for purposes of fixing a price of the security

Max price is last independent  sale price or higher bid in the market if less

Permitted manipulative activity

placing any bid on behalf of distributor or underwriting syndicate to reduce a short position

arises from overallotment

alternative is to invoke the Green Shoe provision

It is a violation to sell short the security that is subject an offering

cannot execute short sale for 5 days prior to offering

     Exception: if the person was unaware of the offering

Underwriter must maintain record of:

  % participation of each member,   Names and addresses of members,  Dates when penalty bid was in effect,  Name and class + price date and time of stabilized security

   Must report to FINRA and SEC, 

Other managers effecting stabilizing must give notice within 3 days

Broker dealer must obtain:

Name, address, SS #, starting date of employment, DOB,  Business background for 10 years,   Arrest or indictment of felony, denial of membership, injuntion,   Aliases

Must be kept for 3 years and easily accessible for 2 yrs

document of original entry held for 6 yrs

member firm must make a bona fide offering and not withhold any shares for own account for IPOs

cant sell to an account that restricted person has beneficial interest

all underwriters must sell at the same price

involves combination and reorganiation of one or more limited partnerships

Compensation can only be 2% of exchange value of new securities, paid regardless when proposal is rejected, payable in equal amounts  Cannot be related to amount of investors it persuades to invest

pass through taxation

400 round lot shareholders

1.1M outstanding shares

Market value of $140M

Stock price $4

Majority of BOD is independent

If market value is less than 10% below minimum, stockholders equity can be used as substitute

$4 min bid price

3 or 4 market makers

subject to corporate governance

  Majority of BOD is independant

400 shareholders

NASDAQ Global markets - 400 shareholders

NASDAQ capital markets - 300 shareholders

electronic quotation machine

  Not listed or traded

  ADRs and DDPs

  Need outside market from member firm 

   Inside market is calculated by  all 2 sided and 1 sided priced quotes