Quick Answer
A public offering runs three phases (pre-filing, waiting, post-effective); underwriters defend it through due diligence. Everything else is exemptions (Regulation D, Regulation S, Regulation A), FINRA compensation review, allocation, conflict rules, Regulation M anti-manipulation, information barriers, mergers-and-acquisitions mechanics, periodic reporting, bankruptcy waterfall.
The whole unit on one sheet: registration, private offerings, underwriting, allocations, distribution, and creditor priority.
The One-Liners That Win Points
- Three phases: pre-filing (no offers), waiting (oral offers, red herring, no sales), post-effective (sales, final prospectus).
- The Securities and Exchange Commission (SEC) does not approve securities: review is disclosure, not merit; it only declares registrations effective.
- Strict liability falls only on the issuer; directors, signatories, underwriters, and experts share the due-diligence defense (reasonable investigation, not just good faith).
- Shelf registration is a registered offering, not an exemption, taken down by a well-known seasoned issuer (WKSI).
- Regulation D securities are restricted; Regulation A securities are freely tradable ("mini-initial public offering (IPO)" via offering circular Form 1-A).
- The institutional-resale exemption registers nothing; it lets qualified institutional buyers (QIBs) trade unregistered securities among themselves.
- A conflict of interest needs prominent disclosure plus an unconflicted lead manager, a bona fide public market, investment grade securities, or a Qualified Independent Underwriter (QIU), which does due diligence, not pricing.
- Restricted persons (broker-dealers, associated persons, materially supported family) may not buy new-issue equity (not debt).
- Spinning (new-issue shares to executives of a banking client or expected client) is banned; flipping is legal (concession loss possible, customer held harmless).
- Stabilization is legal manipulation: no more than one bid per market at the same price, at or below offering price, disclosed in the prospectus.
- Watch list = confidential surveillance only; restricted list = firm-wide prohibition. Names move watch-then-restricted as the deal goes public.
- A tender offer has a minimum open period and target response deadline.
- Bankruptcy waterfall: secured, administrative expenses, priority unsecured, general unsecured, subordinated debt, preferred, common.
Numbers to Lock In
| Item | Value |
|---|---|
| Default effectiveness | 20th day after last amendment (unless SEC accelerates) |
| Shelf registration term | Up to 3 years from effective date |
| Accredited investor income | Over $200,000 single / $300,000 joint, last two years |
| Accredited investor net worth | Over $1 million, excludes primary residence |
| Reg D non-accredited cap (no solicitation) | Up to 35 sophisticated purchasers |
| Reg D small-offering exemption | $10 million in 12 months |
| Reg A Tier 1 / Tier 2 cap | $20 million / $75 million in 12 months |
| Form D filing | Within 15 days of first sale |
| QIB threshold | $100 million+ securities managed |
| Corporate-financing filing | 3 business days of regulator filing, or 15 business days before sale if none |
| Compensation-securities lock-up | 180 days from offering sales start |
| Right-of-first-refusal cap | Prohibited beyond 3 years |
| Conflict-of-interest trigger | 5%+ of net offering proceeds to member |
| New-issue eligibility representation | Renewed every 12 months |
| Regulation M restricted period | 1 business day (ADTV $100,000+, float $25 million+); 5 business days otherwise |
| Actively-traded exemption (no restricted period) | Average daily trading volume (ADTV) $1 million+ AND float $150 million+ |
| Syndicate-account settlement | Within 90 days of syndicate settlement |
| Tender-offer minimum period | 20 business days (+10 if price/amount changes) |
| Target-company response | 10 business days, Schedule 14D-9 |
| Beneficial-ownership 5% report | Schedule 13D within 5 business days |
| Schedule 13D amendment trigger | 1% change of class, within 2 business days |
| Form 13F threshold | $100 million+ discretion, quarterly |
| Form 8-K | Within 4 business days of trigger |
| Regulation FD unintentional disclosure | Later of 24 hours or next NYSE opening |
| Exchange Act size trigger | Assets over $10 million AND 2,000+ holders |
Top Gotchas
- Regulation D tiers: small-offering (no accreditation, capped), accredited-plus-up-to-35-sophisticated (no solicitation), and accredited-only-with-verification (solicitation OK, self-certification NOT enough).
- Regulation S is separate from Regulation D; a "U.S. person" includes U.S.-resident individuals and U.S.-domiciled entities; selling to one abroad destroys the exemption.
- Regulation M's restricted period needs BOTH thresholds met, or the 5-business-day window applies; issuers face stricter rules (fewer exceptions) than distribution participants; reference security is covered too.
- Watch vs. restricted list: watch-list entries are surveillance only; desks below the wall trade normally, unaware; restricted-list entries are a firm-wide prohibition.
- The tender-offer disclose-or-abstain duty needs NO fiduciary breach (unlike insider trading); anyone with material nonpublic information (MNPI) about it must disclose or abstain.
- The 5% conflict test is on NET, not gross, proceeds; becoming an affiliate from the offering is a conflict.
- Preferred stock is equity, junior to every debt class; subordinated bondholders outrank all equity. Undersecured creditors split across two priority buckets.
- Form 8-K is 4 business days; Regulation Fair Disclosure (Reg FD) unintentional disclosure has a later-of-24-hours-or-next-NYSE-opening limit.
One-Breath Recap
A public offering runs pre-filing (no offers), waiting (oral offers, red herring, no sales), post-effective (final prospectus, sales begin); effectiveness defaults day 20 after last amendment; underwriters get due-diligence defense. Private deals use Regulation D (accredited thresholds, 35 non-accredited cap, Form D 15 days), Regulation S offshore, or Regulation A, resold via restricted-securities or QIB safe harbors. FINRA reviews compensation (corporate-financing rule), requires disclosure plus QIU or other route for conflicts (5% net proceeds), bars restricted-person new-issue buys and spinning; allows flipping. Regulation M sets restricted period for disclosed, price-capped stabilization; watch lists confidential, restricted lists firm-wide. Tender offers run 20+ business days; a 5% crossing triggers Schedule 13D within five business days. 10-K, 10-Q, 8-K reports; Reg FD guards disclosure; bankruptcy pays secured first, common last.
Need more than the recap? Read the full Investment Banking Activities unit.