Term
| 1. When determining fairness of compensation paid to underwriters, the Corporate Finance Department of FINRA will examine all compensation paid by the issuer to the underwriter beginning 6 months prior to the filing date of the registration statement. |
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Definition
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Term
| 2. A tail-fee arrangement requires the issuer to pay an underwriter if the issuer cancels an offering and later does a similar deal with a different underwriter. FINRA permits tail-fee arrangements for no longer than two years. |
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Definition
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Term
| 3. Two market makers would be prohibited from discussing where to price a security in the open market. |
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Definition
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Term
| 4. A company's profit margins would potentially be reduced if a competitor were spun off by a large company. It's margins would potentially increase if there was industry consolidation. |
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Definition
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Term
| 5. The creditor's committee in a bankruptcy can review motions filed with the court and can participate in the formulation of the debtor's reorganization plan. |
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Definition
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Term
| 6. The producer price index (wholesale) and consumer price index (retail) are both measures of inflation. As inflation increases, measured by either metric, interest rates are likely to go up which will drive bond prices down. |
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Definition
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Term
| 7. When comparing companies for creditworthiness, lower net debt and higher EBITDA/interest and EBIT/interest coverage ratios would indicate stronger credit. |
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Definition
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Term
| 8. A buy-side adviser for a strategic buyer would advise their client that competing bidders, if they were financial sponsors, are likely using LBO analysis to value the target. |
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Definition
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Term
| 9. An issuer would not be permitted to "park" a registration at a broker-dealer in order to be able to solicit investors itself and avoid utilizing an underwriter. |
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Definition
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Term
| 10. It is the responsibility of a sell-side banker to prepare a descriptive memorandum (i.e. CIM) and to populate the data room. It is not their responsibility to provide the source data that goes into the data room - this would be the responsibility of the seller. |
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Definition
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Term
| 11. All SEC registration statements are subject to due diligence by the underwriter. |
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Definition
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Term
| 12. An investor is required to file a statement of beneficial ownership (13D for active investors, 13G for passive investors), when their ownership of a company is 5% or higher. |
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Definition
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Term
| 13. A confidential information memorandum (i.e. CIM) is also called an information memorandum, a detailed memorandum or a descriptive memorandum. |
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Definition
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Term
| 14. A purchaser closing a merger via a tender might specify a minimum number of shares (e.g. 50% of the company) that must be tendered by shareholders in order for the tender to close. This would ensure that the purchaser does not inadvertently purchase a non-controlling stake. |
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Definition
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Term
| 15. OTC Pink Markets and OTC BB are non-exchange equity quotation systems. They can quote unlisted or delisted equity securities. |
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Definition
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Term
| 16. There is no seasoning requirement before a company can be listed on the Nasdaq Global Select, Nasdaq Global, or Nasdaq Capital Market. |
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Definition
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Term
| 17. A broker-dealer must inform FINRA of who it chooses as the anti-money laundering (AML) forms. Also, a firm's AML program is not required to be approved by the SEC. |
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Definition
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Term
| 18. The SEC never approves or disapproves of anything. |
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Definition
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Term
| 19. Anytime a control relationship exists with regard to a company (e.g. the company is a subsidiary of the broker-dealer) disclosure of the conflict must be made to a client verbally before purchasing that security and in writing sometime after execution. |
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Definition
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Term
| 20. If a company executive wanted to learn who the major institutional investors in his/her company were, and what other securities those investors own, the exec could look at the company's 13D and the institutional investors 13F's. |
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Definition
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Term
| 21. A buy side adviser might examine the target's shareholder base in order to develop a proxy strategy and to determine the likelihood of success of the vote. |
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Definition
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Term
| 22. If a company accidentally discloses non-public information it would subsequently file an 8K to disseminate the information to the public. |
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Definition
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Term
| 23. A civil lawsuit filed against a company would not trigger the filing of an 8k. |
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Definition
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Term
| 24. Institutional ownership and insider ownership are typical classifications used by a company when describing its shareholder base. |
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Definition
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Term
| 25. If a firm is underwriting a convertible bond offering it would be subject to a market making restricted period for the underlying common stock. |
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Definition
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Term
| 26. Distressed funds and special situation funds might invest in a company which had operating losses and/or pulled their earnings guidance. |
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Definition
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Term
| 27. The term public float refers to the number of shares available to trade. |
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Definition
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Term
| 28. An issuer might choose to do a private placement because it is less costly than registering and because there is less of a regulatory delay. |
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Definition
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Term
| 29. If a public company purchases a private company by issuing stock, the terms of the transaction could be found in the public company's S-4 filing. |
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Definition
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Term
| 30. Financial metrics examined by Nasdaq to determine qualification to be listed on the global market include: income, revenue, assets, market value of publicly held shares, number of publicly held shares, and shareholder equity. There is no price/book value requirement. |
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Definition
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Term
| 31. If an investor buys a t-note and the Fed subsequently increases interest rates, the investor would be concerned with interest rate risk. |
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Definition
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Term
| 32. In investor acquiring shares of a public company in a private placement would be required to hold the shares for six months before selling them under Rule 144. |
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Definition
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Term
| 33. A fairness opinion might be used in a tender offer by the board to support its recommendation to shareholders to accept an acquisition. |
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Definition
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Term
| 34. A registered rep engaging in outside securities business who does not receive cash but does receive future deal flow (non-cash comp), would be required to give notice and wait for permission from their firm. |
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Definition
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Term
| 35. When a registered rep opens an account at another firm, the opening firm must notify the employer prior to execution of the first trade. |
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Definition
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Term
| 36. Supervisory branch offices are subject to an annual inspection. |
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Definition
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Term
| 37. If a locally owned company wants to raise capital in a private placement, it could target company executives, institutional investors, hedge funds, and other accredited investors as potential investors. It would be least likely to target exiting shareholders. |
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Definition
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Term
| 38. If you are provided with the number of outstanding shares and the stock price of a company, market cap can be calculated by multiplying the two together. It would not require use of a PE multiple, net income, or any additional data. |
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Definition
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Term
| 39. It is the decision of an underwriter to determine that they have exercised reasonable care in their due diligence efforts. The firm is not required to get an attestation from their legal counsel to confirm this fact. |
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Definition
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Term
| 40. Under Sarbanes-Oxley, an annual report (i.e. 10K) must be signed by the registrant and on behalf of the registrant by its principal executive officer, its principal financial officer, its controller or principal accounting officer, and by at least the majority of the board of directors. |
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Definition
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Term
| 41. If two companies have substantial differences in trends in net working capital, a discounted cash flow analysis would highlight this fact. |
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Definition
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Term
| 43. If a registered representative becomes aware of insider information, the rep could execute a trade on behalf of a client that was placed on an unsolicited basis (i.e. was not recommended by the rep). |
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Definition
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Term
| 43. If a registered rep was managing a piece of property being financed by family members, this would be considered outside employment and would require notification to the firm. If the employer does not receive the full details of this outside business activity it would be a violation. |
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Definition
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Term
| 44. When comparing two companies, the one with less net debt and a higher EBITDA or EBIT interest coverage ratio would be considered to be in better financial health. |
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Definition
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Term
| 45. A representative could take a loan from a customer if the rep has an outside business relationship with a customer. |
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Definition
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Term
| 46. To qualify as a REIT, 75% of the assets must be invested in real estate, or 75% of the income of the REIT must be derived from real estate investments. Also, 90% of the gains must be passed through to investors. |
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Definition
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Term
| 47. In a Subchapter S Corporation, a husband and wife are counted as a single shareholder for purposes of calculating the total number of shareholders. |
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Definition
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Term
| 48. In a Subchapter S Corporation, gains and losses are allocated to investors by ownership percentage. |
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Definition
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Term
| 49. A covenant requiring the issuer to notify security holders of a pending IPO and giving those security holders the opportunity to sell the securities at the issuer's expense is "piggyback registration rights." |
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Definition
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Term
| 50. A firm is prohibited from disclosing to a client when a Suspicious Activity Report (SAR) has been filed with regard to the client's activities. |
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Definition
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Term
| 51. Corporate equipment would not be the underlying asset in an asset-backed security. |
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Definition
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Term
| 52. If an underwriter oversells a new issue and the stock is trading below the public offering price in the secondary market, the underwriter would purchase the shares in the open market to close the oversold position. |
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Definition
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Term
| 53. If an underwriter oversells a new issue and the stock is trading above the public offering price in the secondary market, the underwriter would exercise the green shoe for up to 15% of the original deal size to close the oversold position. |
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Definition
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Term
| 54. Debt to Capitalization = (long-term debt + short-term debt)/(long-term debt + short-term debt + shareholder's equity) |
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Definition
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Term
| 55. When a company repurchases stock, the acquisition cost of the stock is subtracted from shareholder's equity. |
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Definition
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Term
| 56. It would be more beneficial for a company to file for bankruptcy than negotiate with creditors if it is expecting to pay a large legal settlement or has poor operational issues. |
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Definition
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Term
| 57. A foreign company selling securities in the U.S. to accredited investors would not be required to file a registration statement. |
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Definition
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Term
| 58. A private placement requires the same amount of due diligence by the underwriter as a registered offering. |
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Definition
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Term
| 59. In a private placement investors should expect to receive substantially similar information as in a registered offering. |
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Definition
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Term
| 60. If a registered rep is doing an outside securities transaction and is receiving non-cash compensation (e.g. order flow/commissions), approval would be required from the firm. |
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Definition
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Term
| 61. Canadian companies do not issue ADRs to trade in the US, they issue common stock. |
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Definition
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Term
| 62. After reporting risk factors on a 10K, a company is required to report any material changes to those risk factors on its next 10Q. |
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Definition
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Term
| 63. IRS Rule 338(h)(10) allows a purchaser to treat an equity acquisition as an asset sale for tax purposes and subsequently benefit from a stepped up basis. |
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Definition
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Term
| 64. If an acquirer pays a golden parachute to an executive of the target company in excess of three (3) times the individual's average compensation for the last five years the amount of the excess payment (i.e. the amount over three times) is not tax deductible to the company. Also, the recipient will be required to pay a 20% excise tax. |
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Definition
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Term
| 65. If a new entrant enters an established industry and the company's competitors have no discernible loss of revenue or market share, it is likely that the company found a new niche market to target with its products. |
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Definition
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Term
| 66. When a broker/dealer prepares a fairness opinion for the acquirer's board of directors, the sell-side adviser and target board of directors will not preview the opinion. |
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Definition
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Term
| 67. A quote of "27.10-27.20" means the bid price is 27.10 and the offer price is 27.20. The bid is always listed before the offer. |
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Definition
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Term
| 68. A preliminary prospectus is considered neither an offer nor solicitation for securities. |
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Definition
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Term
| 69. Profits from an investment in a Subchapter C Corporation or a Subchapter S Corporation are eligible for capital gains tax rates in held for more than one year. |
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Definition
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Term
| 70. An increase in the capacity utilization index would indicate an economic recovery in the manufacturing sector. |
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Definition
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Term
| 71. When pricing an IPO, the lead manager would not consider the shares allocated to each syndicate member but would consider the number of IOIs accepted, over subscription of recent deals, and pricing of recent deals. |
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Definition
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Term
| 72. If a client is participating in a broad auction and wants to make their bid more attractive without overpaying, the company could offer shorter time to close. |
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Definition
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Term
| 73. If a rep is terminated from of firm, the rep has two years to re-associate with another member firm before being required to retake an examination (e.g. Series 79). |
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Definition
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Term
| 74. Securities issued under Regulation S can trade immediately on an offshore securities exchange. |
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Definition
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Term
| 75. An issuer would want its registration to be made effective on the day that it prices the offering. |
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Definition
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Term
| 76. 10K's include audited financial statements. 10Q's do not include audited financial statements. |
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Definition
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Term
| 77. NYSE and Nasdaq companies are required to have a financial expert on their audit committees. |
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Definition
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Term
| 78. Company executives could be investors in a Regulation D Private Placement. |
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Definition
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Term
| 79. To expand the universe of comparables for a niche manufacturer a banker might look at a supplier that distributes manufacturing products in the same line of business and a company manufacturing in a niche market but not the same one as the subject company. |
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Definition
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Term
| 80. The unsecured creditors committee does not perfect liens on assets. |
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Definition
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Term
| 81. Direct Manufacturing Costs are an example of a variable cost. |
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Definition
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Term
| 82. A registered rep will disclose 10 years of employment history on a U4, though the firm will only verify the most recent 3 years. |
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Definition
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Term
| 83. Any securities related crime is grounds for a statutory disqualification, even a misdemeanor. |
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Definition
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Term
| 84. When a bond is called away, the investor receives par value, the call premium (if any), and the final semi-annual coupon payment. |
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Definition
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Term
| 85. An S4 registration statement will be signed by the CEO, CFO, Principal Accounting Officer (i.e. Controller), and a majority of the board of directors. |
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Definition
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Term
| 86. Duration measures a bond price's sensitivity to changing interest rates. |
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Definition
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Term
| 87. Suitability requirements for institutions are different than for individuals, but they do still exist. |
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Definition
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Term
| 88. In a proxy statement, any shareholder can submit a proposal, which the company will either recommend that shareholders accept or reject. |
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Definition
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Term
| 89. In a best efforts underwriting, the escrow account is maintained by a Qualified Financial Institution (i.e. bank), not an attorney. |
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Definition
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Term
| 90. When a company repurchases shares for a price in excess of par value, it may appear on the Balance Sheet as a reduction to capital surplus. |
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Definition
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Term
| 91. A fairness opinion must disclose that compensation will be paid to the firm writing the opinion if the compensation will be paid to the firm writing the opinion, only if the compensation is contingent on the successful completion of the transaction. |
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Definition
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Term
| 92. Nasdaq listing requirements include minimum thresholds for bid price, number of market makers, earnings, revenue, cash flow, market cap, and number of shares. There is no minimum price/book value requirement. |
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Definition
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Term
| 93. The due diligence defense can be used by an underwriter, attorney, employee of the issuer, or an accountant who consented to be named in a registration statement. The due diligence defense requires that the participant did a reasonable investigation of the issuer and found nothing misleading or untruthful. |
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Definition
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Term
| 94. When the CEO certifies a 10K it means that the filing contains, in all material respects, the financial condition of the issuer. |
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Definition
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Term
| 95. If a registered rep engages in outside business activity that is not securities related, such as managing a property, notification is required to the broker/dealer. |
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Definition
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Term
| 96. In a bankruptcy, subordinated debenture holders are paid after secured bond holders but before warrants. |
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Definition
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Term
| 97. In a voluntary bankruptcy, the company will file with the court. |
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Definition
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Term
| 98. An involuntary bankruptcy is filed by the creditors that are owed money by the debtor or company. |
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Definition
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Term
| 99. In an IPO roadshow, senior management of the issuer will typically attend and make presentations. |
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Definition
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Term
| 100. An IPO roadshow is typically organized primarily by the syndicate manager. |
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Definition
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Term
| 101. A company's EBITDA margin will always be larger than its EBIT margin. If not, it is a data entry error. |
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Definition
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Term
| 102. By signing a company's 10K, senior management is certifying that the reports are not misleading based on their knowledge and do not omit material information. |
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Definition
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Term
| 103. A prospectus will not typically include financial projections. |
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Definition
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Term
| 104. A family member of an employee of the issuer could purchase an IPO, but a family member of an employee of a FINRA member cannot. |
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Definition
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Term
| 105. If an individual is deemed CE Inactive, he is required to complete Continuing Education within two years to avoid having to retake a qualification exam (e.g. Series 79). |
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Definition
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Term
| 106. Net Operating Losses (NOLs) may be carried back two years and carried forward 20 years in order to lower taxable income. |
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Definition
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Term
| 107. FINRA could sanction, censure, or fine a registrant. FINRA cannot imprison. |
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Definition
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Term
| 108. When interest rates are rising an investor would be most concerned with interest rate risk. |
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Definition
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Term
| 109. When a registered rep opens an account at another broker/dealer, the employer must be notified prior to the initial transaction in the account. |
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Definition
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Term
| 110. Any announcement of the signing of a definitive agreement is considered a prospectus and must be filed with the SEC no later than the date of first use. |
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Definition
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Term
| 111. In a Chapter 7 bankruptcy, a creditor must always file a proof of claim in a timely fashion to be eligible to recover any funds owed. |
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Definition
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Term
| In Chapter 11, a creditor does not need to file a proof of claim if the debtor lists them on the debt schedule and the creditor does not disagree with the amount listed. If the creditor disagrees with the amount or is not listed, a proof of claim must be filed in a timely fashion. |
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Definition
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Term
| 113. Upon maturity of a bond, an investor would receive par value and the final semi-annual coupon payment. |
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Definition
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Term
| 114. An underwriter could use the due diligence defense to avoid liability for untrue information in a registration statement if it could prove it could not have known the information was untruthful. |
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Definition
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Term
| 115. Open end funds are required to register under the Securities Act of 1933. |
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Definition
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Term
| 116. If a banker is using EV/EBITDA multiples as a primary basis for valuation, it would want to increase EBITDA as much as possible for the subject company to increase its valuation. |
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Definition
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Term
| 117. During due diligence, a banker generally would not interview the target's largest shareholder. |
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Definition
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Term
| 118. Order of interest rates from lowest to highest: fed funds rate, discount rate, broker's call rate, prime rate. |
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Definition
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Term
| 119. Regulation FD is designed to protect individual investors. |
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Definition
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Term
| 120. Insider purchases in a security typically increase the stock price of the company. |
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Definition
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Term
| 121. An issuer must have at least one market maker to be quoted on the OTCBB. |
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Definition
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Term
| 122. A broker/dealer would have a conflict of interest if its employees owned 10% of an issuer, but not if its clients owned 10% of an issuer. |
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Definition
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Term
| 123. A fairness opinion does not make a recommendation to shareholders as to whether or not to vote to accept a deal. |
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Definition
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Term
| 124. A golden parachute is a package (often lucrative) given to senior management upon termination. |
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Definition
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Term
| 125. An S8 is filed when securities are offered to company employees through an employee benefit plan. |
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Definition
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Term
| 126. In a merger between two companies, the companies would file a joint prospectus on an SEC Form S4 to register securities. |
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Definition
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Term
| 127. If a company sells securities in three states, the issuer must comply with blue sky laws in all three states and the representative selling the securities must be appropriately registered in all three states. |
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Definition
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Term
| 128. Subordinated debentures are below unsecured debt but above common stock in a liquidation proceeding. |
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Definition
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Term
| 129. A free-writing prospectus does not need to include all the information in a registration statement, but must be filed with the SEC. |
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Definition
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Term
| 130. A tender offer to buy shares of an overseas company must be registered with the SEC if the offer is being made to shareholders in the US. |
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Definition
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Term
| 131. When an issuer is SEC registered it does not confirm the integrity of the issuer's dealings with investors. |
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Definition
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Term
| 132. Company A buys Company B for 2 times book value and purchases and redeems all of its outstanding debt in an all-stock transaction. The number of shares issued to execute this transaction = (2 x book value + net debt)/Company A stock price. |
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Definition
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Term
| 133. M&A Order: Teaser, Confidentiality Agreement, CIM, Initial Procedures Letter, Initial Bid (i.e. indication of interest, letter of intent, statement of interest), final bid procedures letter, final bid, and Definitive Agreement. |
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Definition
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Term
| 134. An acquisition would not be a useful strategy for a corporate executive who wishes to retire and raise cash for his family. |
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Definition
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Term
| 135. In a tender offer, the issuer generally does not file a proxy statement. |
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Definition
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Term
| 136. An SEC filer who is not eligible to use an S3 can distribute a free-writing prospectus after filing a registration statement. |
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Definition
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Term
| 137. Convertible debt would have a delayed and dilutive effect on the company's common stockholders. |
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Definition
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Term
| 138. When responding to a tender offer, the subject company can accept, reject, remain neutral, or state that it cannot take a position. It cannot recommend that shareholders purchase more shares of the company. |
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Definition
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Term
| 139. If an auditor determines that an illegal act may have occurred, the first step for the accounting firm is to report this to the audit committee or to the board of directors of the issuer. |
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Definition
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Term
| 140. Five copies of each form of the preliminary prospectus must be filed with the SEC no later than the date it is first sent to investors. |
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Definition
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Term
| 141. Ten copies of the final prospectus must be filed with the SEC prior to the date of first use. |
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Definition
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Term
| 142. The most common benchmark for fixed income securities is US Treasuries. |
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Definition
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Term
| 143. PIK interest increases interest expense on the income statement. |
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Definition
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Term
| 144. The fees that a broker/dealer is receiving for advisory work can be found in the engagement letter. |
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Definition
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Term
| 145. When the sell-side adviser is doing due diligence in an all cash transaction, it is concerned only with the buyer's ability to pay. |
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Definition
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Term
| 146. An individual who is CE inactive could still work in a clerical role but could not be paid commissions or perform the duties of a registered person. |
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Definition
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Term
| 147. Corporate bonds can trade under Rule 144A, but open-end funds, UITs (Unit Investment Trusts), and ETFs would not. |
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Definition
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Term
| 148. Transaction comps analysis would generally not be used when pricing an IPO. |
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Definition
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Term
| 149. If 3 shareholders each owning 3% of the voting shares of a company agree to vote their shares together, they would need to file a 13D. |
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Definition
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Term
| 150. Gun jumping is a violation if the company discusses a new issue after deciding to proceed with an IPO but prior to registration of its shares. |
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Definition
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Term
| 151. An open-end fund (i.e. mutual fund) must be registered with the SEC. |
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Definition
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Term
| 152. If an issuer sells shares on a delayed or continuous basis at various times and prices it is a shelf registration. |
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Definition
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Term
| 153. An increase in the Producer Price Index would have an adverse impact on the stock price of a manufacturing company. |
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Definition
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Term
| 154. A fairness opinion is most likely to be used when a target company's board is recommending that shareholders vote to accept a transaction. |
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Definition
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Term
| 155. A fairness opinion is typically prepared by the sell-side adviser and reviewed by the target company's board of directors. The buy-side adviser will not have a chance to review the fairness opinion. |
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Definition
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Term
| 156. In order to stabilize, the underwriter must make disclosure of its intention to do so in the prospectus. |
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Definition
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Term
| 157. If a firm cannot record instant messaging communications between its employees and clients, IMs are not permitted. |
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Definition
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Term
| 158. Regulation A offerings are not aggregated with other offerings made more than six months after the completion of the transaction. |
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Definition
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Term
| 159. A married couple with $300,000 in net income or $1,000,000 in net worth is an accredited investor. |
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Definition
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Term
| 160. A trader using a quantitative investment strategy would look at numerical data, such as a 10-day moving average. |
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Definition
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Term
| 161. An Asset Purchase Agreement would not include debt covenants. |
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Definition
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Term
| 162. In order for a rep to borrow money from a customer, the member firm must have written procedures in place and the customer must be a bank, family member, or have an outside relationship with the rep. |
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Definition
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Term
| 163. Written disclosure of a conflict of interest must be made no later than completion of a transaction. |
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Definition
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Term
| 164. A 10Q does not include a list of company shareholders. |
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Definition
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Term
| 165. The total takedown might also be referred to as the "underwriting concession" or "underwriting allowance." |
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Definition
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Term
| 166. Regulation S securities can be sold immediately on an SEC designated offshore securities exchange. |
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Definition
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Term
| 167. The creditor committee in a bankruptcy does not perfect liens for secured creditors. Perfecting liens requires that unsecured creditors be notified of a secured lender's claim. This is typically done by registering the debt with a state office or court. |
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Definition
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Term
| 168. In a forward triangular merger (where the target becomes part of a subsidiary of the purchaser), as long as at least 50% of the consideration is stock, only the cash consideration is taxable to the TargetCo shareholders. |
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Definition
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Term
| 169. In a reverse triangle merger (where the subsidiary of the purchaser becomes part of the target), as long as at least 80% of the consideration is stock, only the cash consideration is taxable to TargetCo shareholders. |
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Definition
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Term
| 170. A proxy statement must be provided to shareholders at least 20 days prior to the annual shareholders meeting. |
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Definition
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Term
| 171. Following an IPO, a security can trade away from its primary exchange (e.g. NYSE or Nasdaq) only after the shares have traded on the primary exchange. For example, an NYSE stock can be traded on the third market after it has traded on the NYSE. |
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Definition
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Term
| 172. The possibility of a stabilization bid must be disclosed in the prospectus. |
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Definition
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Term
| 173. If two companies have a similar P/E but one company has a higher EV/EBITDA, a difference in taxes might account for the difference. |
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Definition
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Term
| 174. A list of a company's largest shareholders can be found in a proxy statement. |
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Definition
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Term
| 175. Pre-IPO shares will have a legend attached confirming they are not registered. |
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Definition
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Term
| 176. If a registered rep participates in a securities transaction outside the jurisdiction of their firm, but does not receive compensation, written notice is still required to the firm but permission is not. |
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Definition
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Term
| 177. In an all cash transaction, the proxy statement is not required to include pro forma financials. |
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Definition
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Term
| 178. If corporate insiders buy stock, the price of the stock will generally rise. |
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Definition
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Term
| 179. A proxy statement must be provided to shareholders at least 20 days prior to the annual shareholder's meeting. |
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Definition
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Term
| 180. When an issuer files an amendment to the registration statement, it will delay the effective date of an offering as the 20-day cooling off period will restart. |
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Definition
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Term
| 181. Any transaction involving a transfer of funds from a country with whom the US does not do business or has embargoes or sanctions in place (e.g. Cuba, North Korea, Iran, etc.) must be blocked and reported to OFAC within 10 days. |
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Definition
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Term
| 182. A cross default clause in a bond indenture will trigger a default on a specific tranche of debt if the issuer defaults on any of its debt obligations. |
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Definition
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Term
| 183. In a distribution of securities related to M&A activity, the Regulation M restricted period begins the day proxy materials are distributed to shareholders. |
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Definition
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Term
| 184. In a bankruptcy proceeding, administrative claims (e.g. lawyer's fees, trustee expenses) are paid before any recently unpaid wages. |
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Definition
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Term
| 185. A distribution of an S Corp that reduces an investor's basis is considered a non-taxable return of capital. If it does not reduce the investor's basis, it is taxable as ordinary income. |
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Definition
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Term
| 186. In a registration statement for WKSIs and seasoned issuers, financial statements become outdated if they are more than 130 days old at the time of filing. |
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Definition
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Term
| 187. In a registration statement for unseasoned, non-reporting, and ineligible issuers, financial statements become outdated if they are more than 135 days old at the time of filing. |
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Definition
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Term
| 188. A trustee is not always appointed to manage a firm in bankruptcy. In a Chapter 11 filing, the debtor will typically continue to operate the business and prepare a reorganization plan (i.e. "debtor in possession"). |
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Definition
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Term
| 189. Any material non-public information learned during the due diligence process should be reported to a firm's compliance department. |
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Definition
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Term
| 190. A minimum price-to-book ratio is not a listing requirement for Nasdaq. |
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Definition
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Term
| 191. A lock-up period is designed to prevent immediate flipping of a new issue and to force company management to continue holding shares. |
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Definition
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Term
| 192. When an issuer requests to accelerate the effective date of an SEC filing, the SEC will review the information to ensure the issuer has submitted all the required data. |
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Definition
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Term
| 193. In a two-step merger, shareholders of the TargetCo do not actually approve the merger. The first step is to sell shares in the tender, and the second step is to squeeze out remaining shareholders with a short-form merger agreement. |
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Definition
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Term
| 194. "Piggyback" registration rights allow investors to sell previously unregistered shares at the issuer's expense when the issuer registers a public offering. |
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Definition
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Term
| 195. A company files 10Qs for the first three quarters and a 10K at the end of its fiscal fourth quarter. |
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Definition
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Term
| 196. If an issuer updates the financial statements in a preliminary prospectus (i.e. red herring), it must be refiled with the SEC. |
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Definition
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Term
| 197. In a M&A cash transaction, AcquirerCo shareholder approval is not required. |
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Definition
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Term
| 198. If an issuer pays PIK interest ("payment in kind") it appears on the income statement as interest expense, just as if interest were actually paid in cash. |
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Definition
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Term
| 199. Regulation SK requires an issuer to disclose the name of each director who attended less than 75% of board meetings during the previous year. |
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Definition
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Term
| 200. An SEC filing issuer who is not permitted to file an S3 (i.e. they are unseasoned) may still publish a free writing prospectus after the registration statement has been filed. |
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Definition
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Term
| 201. A broker/dealer underwriting a new issue for a company whose largest shareholders own a significant percentage of the company's stock would be most concerned with a block trade that would flood the market with shares and possibly reduce demand for the new issue. |
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Definition
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Term
| 202. In a tender offer where shareholders offer more than the number of shares being purchased, tendered shares are accepted on a pro rata basis from only those shareholders who offered their shares. |
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Definition
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Term
| 203. A preliminary proxy statement is required for any shareholder votes involving a proposed merger. A preliminary proxy is not required for shareholder votes for the election of directors or accountants. |
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Definition
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Term
| 204. Rule 144A allows issuers to sell securities to Qualified Institutional Buyers within the US. |
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Definition
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Term
| 205. Regulation S allows US issuers to sell securities to non-US residents. |
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Definition
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Term
| 206. If a new issue is significantly oversubscribed, the lead manager may increase the number of shares offered and may increase the offering price. |
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Definition
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Term
| 207. If a new issue is not expected to close on the settlement date, the lead manager must notify FINRA no later than the expected closing date. |
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Definition
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Term
| 208. A definitive proxy statement must be filed with the SEC at the same time it is sent to shareholders. |
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Definition
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Term
| 209. A P/E ratio is not an effective valuation metric for a company with recent operating losses and significant earnings volatility. |
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Definition
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Term
| 210. Fraud may include an omission or intentional failure to state material facts, knowledge of which would be necessary to make other statements not misleading. |
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Definition
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Term
| 211. When switching from FIFO to LIFO in an inflationary environment, COGS will increase and income tax would decrease. |
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Definition
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Term
| 212. Personnel in investment banking and research could have a conversation in the presence of a chaperone, but an investment bank rep could not attend an analyst teach-in (forum). |
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Definition
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Term
| 213. A company with higher fixed costs would have greater operating leverage. |
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Definition
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Term
| 214. If a company repurchases stock for treasury, cash and shareholders' equity will decline. |
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Definition
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Term
| 215. The calculation of treasury stock = par value + capital surplus + retained earnings - shareholders' equity. |
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Definition
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Term
| 216. A proxy to elect the board of directors would include attendance at last year's meetings, compensation, a list of nominating and compensation committee members, but not last year's votes. |
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Definition
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Term
| 217. A list of a company's largest shareholders could be found in a proxy. |
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Definition
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Term
| 218. A manufacturing company in a perfectly competitive market could achieve organic growth by introducing a new product in a different market or increasing market share. Acquiring another business would not be organic growth. |
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Definition
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Term
| 219. Municipal bonds, treasuries, commercial paper, commercial bank securities, and securities issued by non-profits are exempt securities. |
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Definition
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Term
| 220. An investor who wants to purchase securities for growth but doesn't want to overpay would use a Growth at a Reasonable Price (GARP) strategy. |
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Definition
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Term
| 221. Stabilization can be initiated at the lower of the last transaction price or the public offer price. |
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Definition
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Term
| 222. A company repurchasing its own shares could bid the greater of the current bid or the last sale price. |
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Definition
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Term
| 223. If a rep is busted for shop lifting but not yet charged, it would be reported to compliance. |
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Definition
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Term
| 224. The syndicate desk does not participate in the drafting of offering documents, but does help plan a road show, stabilize and identify investors. |
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Definition
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Term
| 225. A broker/dealer does not need to keep a record of prospectuses, red herrings, and registration statements. It must keep a record of complaints, correspondence, and trade confirmations. |
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Definition
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Term
| 226. There is no price/book value requirement to list on Nasdaq. |
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Definition
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Term
| 227. A company seeking control via a tender offer would set a minimum limit to ensure that the tender is cancelled if they cannot acquire a majority of the shares. |
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Definition
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Term
| 228. If a company is willing to pay a certain multiple of EBITDA to make an acquisition but can recognize expense synergies, the effective multiple recognizing the synergies would be (EBITDA multiple x TargetCo EBITDA)/(EBITDA + synergies). For example, if Company S is willing to pay 9.6x EBITDA for Company Y, which has EBITDA of $17mm, but can recognize $3mm in synergies, the effective EBITDA multiple would be (9.6 x $17mm)/($17mm + $3mm) = 8.16x. |
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Definition
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Term
| 229. A capitalization table is included in a prospectus. |
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Definition
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Term
| 230. 5 year projections are not required in a prospectus. |
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Definition
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Term
| 231. An unseasoned issuer can use a free-writing prospectus only after the registration statement has been filed. |
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Definition
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Term
| 232. A section 363 sale is an asset sale in bankruptcy. |
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Definition
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