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115 CFA
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115.060.01.06 Equity Investments - Reading 36 - 6. Primary Security Markets

6. Primary Security Markets

i. define primary and secondary markets and explain how secondary markets support primary markets;

What are the primary markets?
The primary markets are those in which new issues of bonds, preferred stock, or common stock are sold by government units, municipalities, or companies to acquire new capital.

What is Rule 415 (shelf registration)?
Rule 415 allows large firms to register security issues and sell them piecemeal over the following two years. Such issues are called shelf-registration.

What is Rule 144A?
Rule 144A allows corporations (including non-U.S. firms) to place securities privately with large, sophisticated investors.

Why are private placements attractive?
The issuer of a private placement reduces issuing costs because it does not have to complete the extensive registration documents.

What is an Initial public offering (IPO)?
These are new shares that a firm offers to the public for the first time.

What is a Seasoned equity issue?
These are new shares issued by firms that already have stocks outstanding.

What is a rights issue?
A rights issue is an option that a company can opt for to raise capital under a secondary market offering or by using a seasoned equity offering of shares to raise money.


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  • CFA