The New-Issue Process: Bringing Securities to Market
Chapters in this video
- 0:00 Due diligence and registration under the Securities Act of 1933
- 1:47 The red herring versus the final prospectus
- 3:40 Underwriting agreement and selling group concessions
- 4:03 Firm commitment versus best efforts risk allocation
- 4:51 Underwriter as principal or dealer versus agent or broker
- 5:24 Issuer, agent, dealer, and rating agency role traps
- 6:33 Blue sky laws on top of federal registration
- 7:36 Rapid-fire exam recap
What this video covers
- Why due diligence is the underwriter's responsibility, not the issuer's, and the liability exposure under the Securities Act of 1933
- The two-part registration statement: what goes into Part I (the prospectus) versus Part II (supplemental information), and which part the investor actually receives
- The preliminary prospectus (red herring): when it is used, what it omits, and how the red ink legend identifies it
- The four underwriting commitment types (firm commitment, best efforts, all-or-none, mini-max) and who bears the risk when shares go unsold
- Why a firm commitment makes the underwriter a principal or dealer, while best efforts makes the underwriter an agent or broker
- How to distinguish the issuer, broker-dealer, agent, dealer, and rating agency in role-identification scenarios
- Why blue sky laws apply on top of federal SEC registration, not in place of it, and when federal preemption matters
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