Syndicate Glossary

Adjustable Rate Preferred Stocks
Adjustable Rate Preferred Stocks have yields, which increase and decrease with interest rates and are generally pegged to the current highest rate of the three-month Treasury Bill, the ten-year Treasury Note or the twenty-year Treasury Bond rates.

• Adjustments are stated in either basis points or percentages above or below the highest rate.
• Dividends are paid quarterly.
• Corporations have 80% tax exclusion on income from dividends.

"Collar" indicates the upper and lower limit for the floating rate.
Trading that takes place in the securities of an underwritten public offering after termination of price and trading restrictions governing that offering.
Amount of securities that a firm or individual Independent Registered Representative has been given (“allocated”) to sell, or the amount of securities an end investor receives from a broker. Also, known as allotment or the “circling” of new issue securities.
Blue-Sky Laws
State laws that require issuers of securities to register their offerings with the state before they can be sold to its residents.
Closed-end Fund
A closed-end fund is an investment company that compiles and manages a portfolio of securities in order to achieve a specific set of investment objectives. In addition, Closed End Funds:

• Involve no front end load on the offering since the client pays a net price;
• Involve regular agency commission in the aftermarket;
Common Stock
A class of securities representing ownership and control in a corporation and that may pay dividends as well as appreciate in value. See also Preferred Stock.
Cooling-off Period
The period after a company’s prospectus has been filed with the Securities and Exchange Commission and before offering is made to the public.
CUSIP Number
Committee of Uniform Securities Identification Procedures number, the specific identifying code assigned by DTC to every individual class of securities to facilitate ease of clearing and settlement.
Individual or firm acting as principal rather than as agent. Typically, a dealer buys for its own account and sells to a customer from its own inventory.
Dealer Re-allowance
Largest discount from the offering price of a new issue security at which two securities dealers may trade as principal with each other.
Depository Trust Company (DTC)
The national central depository for securities certificates, which uses electronic transfers to reduce the physical movement of securities.
Relevant information both positive and negative about an issue that must be disseminated to the investors, as mandated by the SEC and various state securities regulators.
Discretionary Account
An account empowering an Independent Registered Representative or Independent Registered Advisor to buy and sell without the client’s prior knowledge and consent.
Process by which securities find their way from private hands (the issuer or its stockholders) into public hands. 
Effective (Effectiveness)
Declaration by the SEC that its review of a registration statement is complete. After the SEC declares a registration statement effective, the lead manger may release the securities for sale, commence the offering, confirm indications of interest into orders, complete the distribution on new issue terms, and terminate price and trading restrictions. 
Effective Date
The date on which a security can be offered publicly, if no deficiency letter is submitted to the issuer by the SEC. It is generally no earlier than the twentieth calendar day after filing the registration statement.
The ownership interest of stockholders in a company. Also, the excess of the market value of securities over debit balances in a margin account.
Actual filing of a registration statement by an issuer with the Securities and Exchange Commission. From 1933 until 1996, a physical event but now electronic via Electronic Data Gathering, Analysis, and Retrival System (EDGAR).
Filing Range
Price range, usually a $2 spread (but sometimes $3), appearing on the cover of a preliminary prospectus and used by underwriters as the initial starting point for valuation and by issuers as the basis for calculation of the SEC filing fee.
Final Prospectus
Formal written document that sets forth the facts concerning an existing business enterprise that an investor needs to make an informed decision. The final prospectus includes substantially all information, which the preliminary prospectus contains. It also includes the price at which the security was offered to the public, the gross concession that was allowed to the members of the underwriting group, the final symbol if it is an initial public offering, and the breakdown of amounts underwritten by the syndicate.
Firm Commitment
An agreement by the underwriter or syndicate to buy the offering from the issuer on a particular day and pay for it on settlement.
The purchase of new issued shares with a view to sell (flip) them immediately in the aftermarket.
Follow-on Offering
Primary offering of shares that already have an existing public market. See Secondary Distribution.
Free Riding
Practice of a client buying and selling a security in rapid succession so as to avoid putting up any money.
Full Disclosure
The dissemination of all financial and operating information required by the Securities Act of 1933 and the Securities and Exchange Act of 1934.
Going Public
The process whereby a private company offers a portion of its shares to the general public through an Initial Public Offering or IPO to establish a market value, raise additional capital and/or to provide liquidity for private shareholders.
Indications of Interest
Dealer’s or investor’s nonbinding interest in purchasing securities that are in registration but not yet formally offered.
Individual Investor
A person who buys or sells securities for his or her own account. The individual investor is also called a retail investor or retail shareholder.
Initial Offering Price
The price shown on the cover of the final prospectus, as contrasted with the Expected Offering Price indicated on the preliminary prospectus (Red Herring).
Initial Public Offering
Company’s first offering of stock to the public which may be all primary (new), all secondary (already issued and outstanding), or a combination of primary and secondary.
Investment Banker
A firm that acts as an intermediary between an issuer of securities and institutional and retail investors.
Investment Banking
The business carried on by a broker or dealer; that underwrites or distributes securities issues.
The organization that issues its security to the public such as corporations, municipalities, governments and their agencies, and investment trusts.
See Initial Public Offering.
Managing Underwriter
Lead manager of a syndicate formed for the purchase and distribution of a new issue of securities.
Master Limited Partnership
Master Limited Partnerships (MLPs) are companies in partnership form whose equity interests or "units" are publicly traded like shares of stock.  MLPs may be listed on the New York Stock Exchange or American Stock Exchange or traded in the over-the-counter market.

MLPs are often considered to be high yield "asset plays", since the growth potential is based on the assets placed in the partnerships. These partnerships often distribute a high percentage of their cash flows to their investors.
Material Information
Concept describing information that a typical investor would reasonably consider important in making an investment decision.
New Issue
A security being initially offered to the public. The distribution of which is covered by the SEC rules. These include initial public offerings by previously private companies or additional stock or bond issues by companies already public.
Offering Date
The precise day on which a new securities issue becomes available for sale.
Offering Price
Price per share at which securities are offered to buyers.
Penalty Bid  
Technique to discourage flippers from operating in the immediate aftermarket of an underwritten offering. DTC facilitates this process by disclosing the seller’s identity to the lead manager through the DTC’s electronic tracking process.
Preferred stock
A security that usually pays a fixed dividend and that gives the holder a claim on corporate earnings and assets that is superior to that of holders of common stock.

Preferred stock combines certain characteristics of common stock with those of bonds. As such, the investor who wishes to reduce the risks inherent in common stock ownership, can achieve a stated rate of return, while maintaining equity ownership by investing in preferreds. Key points regarding preferred stocks are:

• Preferred stock has dividend preference over common stock.
• While preferred stock has a stated rate of return like a bond, it does not have a maturity date.
Preliminary Prospectus
Also known as a “red herring” and used to solicit pre-price interest in an underwritten offering. Gives preliminary information about the financial status of the registrant company, background of management, risk(s) of the offering, use of proceeds, etc. A preliminary prospectus is distinguishable from the final prospectus by the SEC-mandated red ink (thus “red herring”) disclaimer strip (hedge clause) printed on the left hand side of the cover page of the document indicating that the information contained therein is subject to completion or amendment; that a registration statement has been filed, but the SEC has not yet declared it effective; and that individual state securities laws govern distribution of the document. See also Final Prospectus.
Price and Trading Restrictions
The provision of the Agreement Among Underwriters (AAU) that requires all underwriters and selected dealers to offer a new issue at the identical fixed price until the lead manager terminates such restrictions.
Price Talk
It refers to the price range or yield that a security will have in an initial public offering.
Primary Distribution (or primary offering)
The sale of a new securities issue where the funds go to the issuer, as distinguished from a secondary distribution, which involves previously issued stock.
Primary Market
The market in which new issues of securities are sold and proceeds go to the issuer, as distinguished from the secondary market, where previously issued securities are bought and sold.
Primary Offering
Proceeds of sale accrue to the issuing company, contrasted with Secondary Offering where proceeds of sale go to one or more existing shareholders.
Specific portion of a registration statement filed with the SEC in a registered public offering, including the bulk of mandated narrative and financial disclosures. A preliminary prospectus (“red herring”), issued prior to SEC effectiveness, contains sections which describe the use of the proceeds; financial data; investment policies; description of company; description of offering and plan of distribution.  The final prospectus, issued after effectiveness, also includes a list of underwriters, the price paid to the company, the gross spread or underwriter’s compensation, and other non-money terms, as well as any material change(s) which may have taken place between original filing and effectiveness. 
Public Offering
The sales of a securities issue to the investment public, usually by an investment banker or a syndicate made up of several investment bankers.
Public Offering Price
Price at which securities are offered for sale to the public. The price normally includes the sales concession.
Quiet Period.
Period during which research, sales, and trading must operate under certain restrictions as relate to the secondary market securities of a company with a filed registration statement.
Largest discount from the offering price at which trading between dealers may take place in a new issue security prior to the termination of its price and trading restrictions.
Red Herring Prospectus
Industry jargon for a preliminary prospectus issued by underwriters or issuers to gauge interest in a prospective offering. It received its name from the warning, printed in red, that information in the document is incomplete or subject to change before the issue is effective and released for offering. See also Preliminary Prospectus.
The preparation of a security for public sale, governed by the Securities Exchange Acts of 1933 and 1934 whereby the SEC reviews securities that are to be sold to the public.
Registration Statement  
Formal name given to the document filed with the SEC containing mandatory disclosure of a company’s business and financial prospects in order to affect registration of securities under relevant sections of the 33 Act, the 34 Act or state securities law.
Release for Sale   
Commencement of the formal offering of an underwriting by the lead manager.
Release Wire  
Formal telegraphic/electronic announcement to underwriters and selected dealers, if any, by the lead manager announcing that the sale of a new issue may commence.
Retention is the amount of stock an underwriter is given to sell in an offering by the managing underwriter. It may be more or less than the underwriting participation.
Process whereby the book running manager arranges and then accompanies issuer senior management on a trip to meet potential investors.
Rule 5130
Designed to protect the integrity of the public offering process by ensuring that:

• FINRA member firms make a bona fide public offering;
• FINRA member firms do not withhold securities in a public offering;
• Industry insiders do not take advantage of their “insider positions” to purchase new issues for their own benefit at the expense of public customers.
Secondary Distribution
Public sale of a large block of previously issued securities held by large investors, usually corporations, institutions, or other affiliated persons, with the proceeds going to the existing holders rather than the issuer.
Secondary Market
When securities are bought and sold among investors through an intermediary. Proceeds of secondary market sales accrue to the selling dealers and investors, not to the companies that originally issued the securities.
Selling Group
Composed of two groups: (1) an underwriter participates in selling group to the extent that its net take down exceeds its underwriting commitment; and (2) a non-underwriter participates in selling group when it takes down underwritten securities for re-sale to an investor(s).
Settlement Date (T+3)
The date specified for delivery of securities between securities firms, usually three business days after the execution of an order.
The difference between the proceeds paid to an issuer and the offering price. This spread is the fee charged by the investment banker.
The placement by the lead manager of an order to buy (a syndicate bid), for the purpose of preventing the decline in price of the offered security during the offering period in order to facilitate distribution at a fixed-price.
Ad hoc group of underwriters (dealer) who band together to underwrite (purchase from the issuer/seller), almost always at a fixed price less an underwriting discount (gross spread), and to distribute a new issue of securities or a block (usually large) of already issued and outstanding securities at a stated fixed price to investors.
When all of the stock in the syndicate is placed and sold, then the managing underwriter(s) declares the deal as "done" and wires all of the underwriters that the syndicate has terminated. At this point, restrictions on trading are ended, and the stock is free to trade. The "penalty bid" (if there is one), may still remain in effect.
An investment banker who assumes the risk of bringing a new securities issue to market. The underwriter will buy the issue from the issuer and guarantee sale of a certain number of shares to investors; this is firm-commitment underwriting. To spread the risk of purchasing the issue, the underwriter often will form a syndicate (underwriting group, purchase group) among other investment firms. If the investment firm is unwilling to buy the issue outright, other underwriting firms may be used.
Underwriting Agreement (UA)
The formal document/purchase agreement signed between the issuer/seller(s) and underwriter(s) that spell out the terms and conditions of the purchase of the securities by the underwriter(s) from the issuer/selling shareholder(s).
Similar to an option, a warrant guarantees the holder the right to purchase a stock at a set price during a defined period of time. The expiration date can be accelerated if the stock trades at a stated premium for a specified period of time. Warrants are an inexpensive method for an issuer to raise additional capital. They are often used as sweeteners to bond or equity offerings.