Series 99 Corporate Actions & Reorganizations 3

Question 1

What is a 'Dutch auction' tender offer?

Accepted Answer

An offer structure where shareholders specify the minimum price they will accept, and the company selects the lowest clearing price that meets its purchase target

Answer

In a Dutch auction tender offer, shareholders indicate their acceptable price within a range, and the company selects the single lowest price at which it can acquire the desired number of shares, paying all accepted shareholders that uniform price.

Question 2

When a company undergoes a bankruptcy reorganization, existing common shareholders typically:

Accepted Answer

Are the last class to receive any recovery, often receiving little or nothing

Answer

In bankruptcy, the absolute priority rule places common shareholders at the bottom of the capital structure, meaning they only receive value after all creditors and preferred shareholders have been satisfied in full.

Question 3

What is the purpose of a proxy solicitation in the context of corporate actions?

Accepted Answer

To allow shareholders to authorize another party to vote their shares at a stockholder meeting

Answer

A proxy solicitation seeks shareholder authorization for a designated party to vote on their behalf on corporate matters such as mergers, board elections, or bylaw changes at a stockholder meeting.

Question 4

In a cash merger, an operations department receives instructions to process the transaction. Which of the following actions must be taken?

Accepted Answer

Debit the target company shares from client accounts and credit cash proceeds at the merger consideration price

Answer

In a cash merger, operations must remove the target company shares from client accounts upon closing and credit each account with the agreed cash merger consideration per share.

Question 5

What is a 'rights offering standby underwriting' arrangement?

Accepted Answer

An agreement where an investment bank commits to purchase any unsubscribed shares remaining after the rights offering expires

Answer

In a standby underwriting, the investment bank agrees to purchase any shares not subscribed by existing shareholders during the rights offering, guaranteeing the issuer raises the targeted amount of capital.

(Series 99) Operations Professional Exam Practice Test

(Series 99) Operations Professional Exam Practice Test

Series 99 Corporate Actions & Reorganizations 3