The New-Issue Process: Bringing Securities to Market
Chapters in this video
- 0:00 Due diligence: the underwriter's investigation
- 1:58 SEC registration statement: Part 1 vs. Part 2
- 2:22 Red herring vs. final prospectus
- 3:21 Firm commitment, best efforts, and variations
- 4:36 Matching roles: issuer, BD, agent, dealer, rating agency
- 5:21 Blue sky laws: state plus federal registration
- 6:06 Rapid-fire exam recap
What this video covers
- Why due diligence is the underwriter's responsibility, not the issuer's, and how failure to verify creates shared liability under the Securities Act of 1933
- The two parts of the SEC registration statement: which part becomes the prospectus delivered to investors and which supplemental part stays with the SEC
- How the preliminary prospectus (red herring) differs from the final prospectus, specifically the two missing fields that the exam tests repeatedly
- The four types of underwriting commitments: firm commitment, best efforts, all-or-none, and mini-max, including who bears the risk of unsold shares in each
- Why a broker-dealer acts as principal in a firm commitment but as agent in a best efforts offering
- How to match issuer, broker-dealer, agent, dealer, and rating agency to their correct responsibilities in scenario questions
- Why blue sky laws require state registration in addition to federal SEC registration, not instead of it
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