Textbook Notes (368,629)
Canada (162,027)
Finance (37)
MGFC10H3 (13)
Derek Chau (13)
Chapter 20

Chapter 20 Notes

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Derek Chau

Chapter 20 Issuing Equity Securities to the Public Notes201 The Public Issuea firm issuing securities must satisfy a number of requirements set out by provincial regulations and statutes and enforced by provincial securities commissions such as in Canada where regulation is carried out by provincial commissionsregulators goal is to promote the efficient flow of information about securities and the smooth functioning of securities marketsall companies listed on the TSX come under the jurisdiction of the Ontario Securities Commission OSCin general terms the OSC rules seek to ensure that investors receive all material information on new issuesthe OSCs responsibility for efficient information flow goes beyond new issuesit continues to regulate the trading of securities after they have been issued to ensure adequate disclosure of informationinformational role is gathering and publishing insider reports filed by major shareholders officers and directors of TSX firms202 The Basic Procedure for a New Issuein general terms the basic procedure is as follows1Managements first step in issuing any securities is to obtain approval from BOD The firm must engage an underwriter2The firm must prepare and distribute copies of a preliminary prospectus to the OSC and to potential investors Thepreliminary prospectus contains some of the financial information that will be contained in the final prospectus it doesnot contain the price at which the security will be offered The preliminary prospectus is sometimes called a red herring in part because bold red letters are printed on the cover warning that the OSC has neither approved nor disapproved of the securities The OSC studies the preliminary prospectus and notifies the company of any changes required This process is usually completed within about two weeks3Once the revised final prospectus meets with the OSCs approval a price is determined and a fullfledged selling effort gets underway A final prospectus must accompany delivery of securities or confirmation of sale whichever comes firstred herringfirst document released by an underwriter of a new issue to prospective investorstombstonean advertisement that announces a public offering of securities it identifies the issuer the type of security the underwriters and where additional information is availableThe POP Systemthe POP Prompt Offering Prospectus system accessible only by large companies lets issuers file annual and interim financial statements regardless of whether they issue securities in a given yearto use the system issuers must have been repor
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