Business
Issuance of securities
"Issuance of securities" refers to the process of a company offering and selling financial instruments, such as stocks or bonds, to investors. This is a way for businesses to raise capital for various purposes, such as funding expansion or paying off debt. The issuance of securities is regulated by government authorities to ensure transparency and protect investors.
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4 Key excerpts on "Issuance of securities"
- Eric Koester, Philip A. Laplante(Authors)
- 2009(Publication Date)
- CRC Press(Publisher)
Key Considerations for Issuing Securities In general, companies should be aware that both federal and state laws regulate the offer and sale of securities, including stock, options, and warrants. Within the company, it is generally the board of directors that will approve all offers and issuances of securities, oftentimes requiring additional approval from a percentage of the stockholders. Before you issue any company securities, you should ask the following questions: Has this issuance been approved by the board of directors, if necessary? • Has this issuance been approved by the stockholders, if necessary? • Is this issuance valid under federal law? • Is this issuance valid under state law, including the state of incorporation, the state • where our headquarters is located, and the state where the stockholder will reside? Be sure that you have properly considered these key questions before issuing stock, options, warrants, or other securities to avoid costly cleanup down the road. Securities and the Startup There are a number of securities that can be used with a startup company. At various points, a company may choose to issue equity or debt securities. A security is simply a fun-gible financial instrument that represents value. The entity issuing a security is called the issuer. What qualifies as a security depends on the regulatory structure of each country. Securities laws govern the raising of capital for business purposes. There are many different types of securities to aid in the financing of an emerging busi-ness. Securities are broadly categorized as debt and equity instruments, such as bonds and common stocks, respectively. Debt instruments generally are fixed obligations to repay a specific amount at a specific date in the future, with interest. Equity instruments gener-ally are ownership interests entitled to dividend payments but carry the specific right to a return on capital.
No longer available |Learn moreSeries 7 Exam 2024-2025 For Dummies
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- Steven M. Rice(Author)
- 2023(Publication Date)
- For Dummies(Publisher)
Bringing New Issues to the Market A lot of things need to happen before securities hit the market. Not only do the securities have to be registered, but the issuer has to find a broker-dealer (like your firm) to sell the securities to the public. The Series 7 exam tests your expertise in answering questions about this process. Starting out: What the issuer does For an entity to become a corporation, the founders must file a document called a corporate charter (bylaws) in the home state of their business. Included in the corporate charter are the names of the founders, the type of business, the place of business, the number of shares that can be issued, and so on. If a corporation wants to sell securities to the public, it has to register with states Chapter 5 IN THIS CHAPTER » Understanding the specifics of registering securities » Knowing the types of offerings » Spotting exempt securities » Taking the chapter quiz 54 PART 2 Mastering Basic Security Investments and the Securities and Exchange Commission (SEC). Read on for info on how the registration process works. Registering securities with the SEC Unless the securities are exempt from registration (see “Exempt securities” later in this chapter), when a company wants to go public (sell stock to public investors), it has to file a registration statement and a prospectus with the SEC.
eBook - PDFSIE Exam 2025/2026 For Dummies
Securities Industry Essentials Exam Prep + Practice Tests + Flashcards Online
- Steven M. Rice(Author)
- 2024(Publication Date)
- For Dummies(Publisher)
The bulk of the moolah raised goes to the issuer, and the rest goes to the underwriters. Primary offering An offering of new securities from a new issuer or an issuer that has previously issued securities; a company can have an initial public offering and several primary offerings if it wants to. The proceeds of sale go to the issuer and underwriters. Secondary offering A sale of a large block of outstanding (stockholder-owned) securities or previously outstanding securities (Treasury stock, or stock the issuer has repurchased). Typically, one or more major stockholders of a corporation make the secondary offerings; new investors are essentially buying used, so the number of shares outstanding doesn’t change. The proceeds don’t go to the issuer (except with Treasury stock); they go to the big shots who sell the securities. Split (combined) offering A combination of a primary and secondary offerings, with both new and outstanding securities. A portion of the proceeds goes to the issuer, and a portion goes to the selling stockholders. CHAPTER 5 Securities Underwriting: The Process and the Team Players 59 Fixed annuities are not securities and are exempt from SEC registration because the issuing insurance company guarantees the payout. Variable annuities require registration, however, because the payout varies depending on the performance of the securities held in the separate account. For more info on annuities and other packaged securities, see Chapter 9. Exempt transactions Some securities that corporations offer may be exempt from the full registration requirements of the Securities Act of 1933 due to the nature of the sale. The following list shows these exemptions: » Intrastate offerings (Rule 147): An intrastate offering includes the 80% rule.
eBook - PDF- Rik W. Hafer, Scott E. Hein(Authors)
- 2006(Publication Date)
- Greenwood(Publisher)
As such, stock is really a security that represents an ownership claim. An important aspect of this claim to the investor is the protection offered by the corporate structure. Shareholders have limited liabilities; that is, the maximum that a stockholder can lose is his or her original investment. Should the corporation fail or be found negligent in some legal manner, shareholders cannot be called upon to put up more money than they originally invested in the corporation. Because a common stock can be viewed from two different perspectives, that of the firm and that of the investor, it is useful to examine these more carefully. From the perspective of the firm, why does a firm obligate itself by issuing common stock? Also, what factors influence the size of the stock issuance? From the perspective of the investor, why would an investor give up funds for a pro rata claim on a business? We will examine the different means by which investors can gain from owning stock. STOCK AS A FUNDING SOURCE Why would a business agree to give investors a claim against its future earnings? The answer is simply that the firm trades partial ownership in order to use the funds that it gets from the investor. When shares of stock are sold for the first time, this activity is referred to as an initial public offering (IPO). In such an offering newly created shares are being sold for the first time. As economies are growing and opportunities are being presented to exploit new technologies, businesses often need injections of funds in order to expand. Issuing stock has been a great source of funds for business growth and development. THE INITIAL PUBLIC OFFERING (IPO) An initial public offering is the first time that the general public is given the opportunity to buy stock and invest in a firm. In addition to being a first offering, an IPO is a public offering. This means that anyone willing to pay the asked price for a share is given the right to buy a share of the stock.
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