Banking and Securities

Lecture 3

 Does every investor need to be individual provided the information? They

don’t need all the info because you only need the material info.
 Material information???? If it is not material it won’t reach the 5%
threshold.
 Sophisticated or unsophisticated investors? Sophisticated, but that’s not
enough.

 Is real estate investment a security? It could become a security because

they can be registered, traded in the market and because people can be
informed about it. It will depend on the investment contract.
 Depending on the security, do we need different levels of disclosure? YES.
 Who holds liability for disclosure in the IPO’s procedure??? QUESTION
FOR NEXT CLASS!!! (The issuer is ultimately liable).

Precise and exact disclosure

 The level of disclosure is proportional to the level of sophistication of the
investor.
 The material disclosure is with the board. If a director is guilty of a
liability, then he’ll be responsible for all loses. That’s also the reason why
directors are given incentives.
 Disclosing negative info: what type of info will you not disclose
immediately in order to avoid terrible effects? When they themselves act
opportunistically.
 Capital expenditures: two types:
o Day to day: the ones you spend on the regular basis. People can
argue that and day it is “waste”, and then you’re liable.
o Lb

 Are “in the money” options a form of fraud? No, they’re not.
  Whistleblowers: some people as lawyers are obligated to do so, although
there’s no clear line on this.

Lecture 4: Initial Public Offerings

 IPO’s go on ways: they vary in time according to the economy. There are
season of purchasing shares.
 Could there be a trend of keeping high number of transactions on
securities? Yes, because global markets are now “the thing”. The idea
would be that investor believe they’re going to get their money back.
Why do firms go public?
 Life cycle theories: it is a cycle where you fid more diversified investors
whoy may pay a higher price, but also it involves costs. The cycle of a
company would be starting private and then, when ready, going public.
 Two methods for the procedure of IPO’s: first commitment (the
underwriter will buy the securities in a lower price and resell them at the
real value), best efforts (not a commitment to buy, just the best effort to
do it as some kind of agent), dutch auction (an auction of the securities in
order to realize about the real price of the shares and be secure to be able
to sell them).
 There`s a problem on underwriting costs: the fees are to high at least in
USA.
How do firms go public?
 Book building: the bank chooses which investors are going to invite.
Investors invited submit indications of demand. Final price and
allocations of shares determined with an underpricing as reward for
participating in the process.
 Reknown underwriters have the possibility to choose, not the opposite, as
they have to keep their reputation.
 Registration statement: Allow to provide exact and accurate information
for the possible investors, in order to protect their inversion.
Lecture 7
 Why cross line in different markets? 1) Bonding;
 Depository receipt: represents a given number of underling shares of
foreign firms and enabling it to list in the US.
o Should be perfectly arbitraged with the price on local market.

Lecture 8
 Info about the exam
 Season offerings as oppose to IPO’S.
 Moral hazard information problems
 Do we really need that kind of restrictions any longer, or we could just
transform the minimum requirements? Show trade offs and benefits for
the position you take during the exam; not limit just to explain the
possibilities.
 Show the tension! Explain the argument of both sides and then choose
your options. ALWAYS COUNTER-ARGUMENT!!!
 Categorize in an excel sheet: ex. Institutional investors,
 Disclosure, shareholders, remedies, 10b-5, ipo’s,
 1) Issues spoting: for example, explain who can sue and also how’s
excluded
 2) Standar: put the minor rule and the elements for such exclusion
 3) Then the facts
 4) Balance: why if fits or it doesn’t
 Think outside the box!!!