Introduction

Welcome to New Issues and Underwriting: the process of how securities move from an issuer's idea to shares in an investor's account.

Exam Weight: Part of 7% (~9 questions across Function 1)

What You'll Learn

In this unit, you'll cover:

• The New-Issue Process: How securities are brought to market, from due diligence through the underwriting agreement
• Registration Periods: What can and cannot happen during the pre-filing, cooling-off, and post-effective periods
• Prospectus Requirements: Red herrings, final prospectuses, shelf registration, and free writing prospectuses
• Syndicate Formation: Roles, responsibilities, and how the underwriting spread is divided
• Municipal Primary Financing: Competitive vs. negotiated sales, official statements, and MSRB rules
• Exempt Offerings: Regulation A, Regulation D, and intrastate exemptions
• Resale of Restricted Securities: Rule 144 conditions for affiliates and non-affiliates, plus Rule 144A for institutional resales
• Foreign Securities and Regulation S: Offshore offerings and sales to U.S. institutions
• IPO Restrictions and Anti-Manipulation: FINRA Rules 5130/5131, Regulation M stabilization, and penalty bids
• Additional Filing Requirements: FINRA notification rules, networking arrangements, and the Trust Indenture Act

Why This Matters

Underwriting is the engine that connects companies needing capital with investors willing to provide it. As a registered representative, understanding the rules governing new issues matters because your firm will participate in these offerings and your clients will want to buy them. The exam tests this material from multiple angles: the process, the participants, the regulations, and the math behind the spread.

Let's start with the step-by-step process of bringing a new issue to market.