expelled/supsended from SRO

registration denied, suspended or revoked

violating securities or commidities law

failing to supervise a subordinate fho violates rules

being convicted of felony or misdemeanor in last 10 yrs

all registed personnel of broker dealer

engaged in sale of securities

access to funds/securities

handles or processes funds/securities

people advising on or facilitating debt/equity securities through private placement or public offering

people advising on or facilitating m&a activities

(Doesn't include people working on public/municipal finance offerings or direct participation offerings)

regulation of securities in secondary market

antimanupulation rules

registration and regulation of broker dealers

SROs

regulation of companies trading in secondary market

proxy rules

insider reporting

1. Use 1 broker dealer during market hours and 1 after market hours
2. No purchases as 1st transaction or last 10 mins (actively traded) or 30 mins (not active)
3. Price cannot be higher than last independant transaction or highest independant bid
4. No more than 25% of ADTV for last 4 weeks
5. 1 block purchase (200k, 5k shares w/ 50k price, 20 round lots and 150% ADTV

Members on the floor cannot buy/sell:

1. on stop
2. at close
3. dividend
4. privileges
5. course of market

Can place order w/ specialist and act as dual agent

1. Notify employer and executing firm in writing of intention to open account
2. send duplicate confirmation to employer
3. notify personm opening account of procedures to follow

Private SEcurities Transactions

Selling Away

If compensation is received, member must approve this transaction in writing and transaction recorded on member's book

If no compensation, member must adhere to certain conditions

Not covered: personal trans. in investment company and variable annuity securities

Allowed when:

1. employee made financial contribution
2. sharing of P/L is direct relationship with financial contribution
3. obtained prior written consent of member firm

• violation of security law
• written complaint of theft or misappropriation of customer funds
• employee is defendant in proceeding of regualory organization
• denial of registration
• arrest, arraignment, indictment or conviction of criminal offense
• employment associated w another financial institution that is suspended/expelled
• civil matter >15k
• displinary action by member org. w fine >2.5k

Reported within 10 days of knowledge

Security

Issuer

Identity and background of filed (indiv. or group)

souce and amount of funds (not financial institution)

purpose of transaction

interest in securities, # of shares, % ownership of filer

contract and relationships w/ securities of issuer

material to be filed as exhibits

avg workweek for production workers in manufacturing,

avg weekly state unemployment ins claims,

new consumer goods and material order,

vendor performance,

plant and equipment orders,

new building permits,

S&P price,

Money supply,

change in credit outstanding for businesses,

interest rate spread,

consumer expectation

nonagricultural employee payroll,

income-transfer pmts,

industrial production,

manufacturing and trade sales

 duration of unemployment,

inventory to sales,

labor cost per unit of output,

prime rate changes by banks,

commercial and industrial loans,

CPI for services

Cyclical - relative P/E with normalized earnings

High Tech (high growth) - PEG

High Tech (no growth) - Price/Sale or EV/Sale

Heavy infrastructure - EV/EBITDA

REIT - Funds from Operation

Financial Service - Price to book value

Retailing (similar leverage) - Price/Sales

Retailing (diferent leverage) - EV/Sales

Positive cash flow, reasonable future estimates -DCF

1. Max 100 shareholdrs
2. Shareholders are US citizen
3. Shareholdres are induviduals, estaes, or trusts
4. Corporation is domestic
5. Cannto be part of affiliated group of corp.
6. Only one class of outstanding stock

Character of issuers business

Balance sheet not older than 90 days

Profit/loss financial statement for last 3 years

Amount of capitalization

Use of proceeds

Money paid to affiliated persons

Shareholder or officers owning at least 10%

Waiting period

can's and cannot's

Cannot:

Sell new issue

Accept payment

Can:

Discuss issue

Distribute red herring (preliminary prospectus)

Record names of interested purchasers

Due diligence meetings

Worldwide market value of 700M

In last 3 yrs, issued $1B in nonconvertible securities for cash

Automatic shelf registration

failed to file reports

blank check company

shell company

penny stock company

limited parntership not using firm commitment underwriting

filed for bankruptcy

convicted of felony or misrepresentation

suject to a refusal or stop order

Offering price

underwriting and dealer discounts

amount of proceeds to be received

conversion rates

call prices

other matter dependant on offering price

• name of issuer
•  Full title of security
•   Amount being offered
•    Brief description of issuers type of business
•    Price of security
•    Date of sale
•    Identity of underwriters
•    Indication if securities registration is effective
•    Contact information of person or organization sending communication
•    Statement of participation in the distribution of security
•    Anticipated schedule for the offering and marketing events
•    Security exchange where securities will be listed
•    Name of selling security holders 

Every person who signed registration statement

Directors or partners of issuer

Accountant, engineer, or appraiser that certified or prepared registration statement

Underwriters

Annual reports - internal controls

Financial dislosure

CEO and CFO certifial quarterly/annual reports

Prohibits loans to officer/directors

Disclosure of Insider Trading

Code of Ethics for Senior Executives

Section 404 - public companies have internal audits to test internal controls

Each member must be on BOD and independant

Must disclose if issuer has one audit committe financial expert

Must disclose issuer does not have financial expert

NASDAQ and NYSE requires at least 1 financial expert

US gov. securities

municipal securities

securities issued by nonprofit organizations

short term debt instruments

domestic bank and trust securities

small business investment companies

State securites exempt from registration if:

1. domiciled within state
2. 80% assets in state
3. 80% gross revenues derived from state
4. 80% of sale proceeds used within state
5. 100% shares sold in state

Issuer agres to provide business and financial information

issuer and investment bank agree not to disclose confidential information without prior approval

contain amount of cash/securities issuer agrees to pay as compensation

length and termination date of offering

which state laws govern

expenses to be reimbursed

compliance with federal and state regulations

sales contract for sale of securities in private placement

• statement that investor has sufficient knowledge and experience to evaluate risks
• annual gross income and net worth
• status of investor
• # of shares and price per unit
• statement acknowledging invsetor receive appropriate disclousre documents
• statement by investor that investor is illiquid and high speculative risk
• statement by investor that securities have not been registered and not be sold before registration
• investors state of residencty

copies of registration statemetn, offering memorandum, offering circular

copies of underwriting agreement, agreement among underwriters, consulting agreement, LOI, escrow agreement

copies of pre and post amendments to registration statment

copies of final registration declared effective

estimate of max offering price, underwriting discount and counsel fees, finders fees

statement concerning affiliation of officer/director with >5% interest

any arrangement during 180 days prior to filing date

statement demostrating compliance

Private placement

mutual funds

variable contract

muicipal securities offerings

tender offers

securities issued at result of M&A

offering proceeds

amount of risk taken by underwriters (firm commitment or best effors)

types of securities offered

• % participation of each member in syndiate
• names and addresses of each member
• date when penalty bid was in effect
• name and class of security stabilized
• price,date and time of stabilizing puchase

name, address, SS# and starting date of employment

DOB

business background for 10 year including part time job

record of denial of registration with federal/state agency

record of arrest

record of other aliases

Cant buy shares in a new issue:

• FINRA member firms and employees
• fiduciaries
• portfolio managers in their own account
• owners of broker dealer
• Immediate family of an employee
• employee give material support - 25% of income or living in same household
• employee is emplyoed by member firm selling issue
• employee has ability to control allocation

400 round lot shareholder

1.1M shares

140M market cap

$4 price

(stockholders equity can be used as alternative to market cap)

NASDAQ gloval select

$4 price

3 or 4 market makers

subject to corporate governance

anticipated pricing

reasons for price adjustments

proposed deal structure

propsed currency

time frame for due diligence

period of exclusivity

break up fees

no shop or go shop provisions

earn out provision

employment contract issues

validity of financial statemetn

disclosure agreements

nature of business

size of business

profit/loss presentation

deal timeline

reasons buyer may find business attractive

statement that all material received is confidential

antipoaching clauses

term of confidential restrictions

standstill agreements

information that can be disclosed to third parties

collusion restrictions

executive summar

overview of sellers industry

company overview

management details

manufacturing capacity

distributions channels

products/services offered

customers and market share

competitors

projected financial

press releases

Review financial statements and projections

discuss company with senior executives

review pro forma impact of merger

review prices and trading activity of stock

compare to other companies prices and activity

financial terms

review merger agreement

analysis of similar publicly traded companies in same sector to compare ratios and multiple

analysis of recent m&a transactions in same sector

analysis of premium or exchange ratio for similar transactions

DCF based of FCFF, terminal value and discount rate

sum-of-the-parts analysis

identify types of transactions to use fairness opinion

identify circumances to use fairness committee

estabilsh process to select members of fairness committee

create process to promote balanced view (some members outside deal team)

determine if valuation is appropriate

1. admin expenses and employee wages
2. unsecured claims
3. employee back wages
4. employee benefit plan
5. preferred stock
   common stock

• shareholders must be notified within 10 days
• management must give recommendation to shareholders or say they can't take a position
• held open for at least 20 business days
• if % increases or decreases, offer must remain open at least 10 more business days
• for extension, must make public announcement at latest 9AM day offer expires
• fraudulent ot make tender offer and not pay consideration for share or return securities

Exempt activites from Rule 14e-5

cannot purchase additional shares during tender offer

Purchases on an agency basis

purchases on a principal basis, provided dealer manager is not market maker

purchase of affiliate of dealer-manager, if affiliate maintain written policies and procedures designed to prevent flow of information

• brief description of transaction
• consideration offered to shareholders
• reason for engaging in transaction
• vote required for approval
• explanation of differences in rights of shareholders
• accounting treatment
• federal income tax consequences