Series 79 CH 14: Corporate Finance Rules || All Qu
Series 79 CH 14: Corporate Finance Rules || All Qu
Exam (elaborations)
Series 79 CH 14: Corporate Finance Rules || All Questions Answered Correctly.
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Course
Series 79 CH 14: Corporate Finance Rules || All Qu
Institution
Series 79 CH 14: Corporate Finance Rules || All Qu
Fairness opinion correct answers -objective and independent analysis performed for a fee by a third party
-not required by law; does not give 3rd party fiduciary responsibilities
Necessity of fairness opinions correct answers -good for large, complex transactions, that are not clearly based on ...
Series 79 CH 14: Corporate Finance Rules || All Questions
Answered Correctly.
Fairness opinion correct answers -objective and independent analysis performed for a fee by a
third party
-not required by law; does not give 3rd party fiduciary responsibilities
Necessity of fairness opinions correct answers -good for large, complex transactions, that are not
clearly based on competitive bidding or established valuations
-good for private, if you're paying a big premium, if you're buying a part of a business
Fairness opinions are necessary when a transaction involves correct answers -potential or
perceived conflicts of interest
-expectations of intangible or hard to measure benefits
-complex transaction terms
-large payments for executive terminations
-dissenting shareholders and minority shareholders who are entitles to appraisal rights
Golden parachute correct answers -gives employees certain benefits if their contract is
terminated
-if acquirer pays an exec 3x average comp over last 5 years, it is non tax deductible and
employee has to pay 20% excise tax
Factors to be considered in fairness opinion correct answers -entities or securities to be valued
-time period covered by the opinion
-reliance on information provided by management
-valuation methodologies
-public disclosures
-fairness committees
-disclose that it is relying on info provided by the company and is not independently verifying
this info correct answers How bank running fairness opinion can avoid being sued
fairness opinion letter correct answers -background of transaction
-basis of the opinion
-disclosures and limitations
-responsibility of the opinion
-details of the transaction
What typically contains these?
FINRA rule 5150 correct answers -outlines specific disclosures that must be made in fairness
opinions
-requires written procedures for developing fairness opinions
Contingent fees correct answers -have to disclose fees or other significant payments the adviser
will receive contingent on the transaction's successful completion
-actual number does not need to be
Material relationship for comp correct answers -have to disclose any material relationship that
they have had with any party to the transaction during the past two years
Independent verification correct answers -have to disclose if you independently verified this
information anywhere else
Fairness committee correct answers -have to disclose if fairness opinion was approved or issued
by a fairness committee or another group
Insider compensation correct answers -have to disclose if you are evaluating if compensation to
an insider is fair
Required written procedures correct answers -the types of transactions and circumstances a
committee issues or approves an opinion
-process for selecting committee members, qualifications for them, and how a balanced review is
obtained
-process by which valuation methods are approved appropriate
Balanced review correct answers -procedures have to promote a balanced review
-seek review from at least 2 people with no connection to deal
-these two people must review and approve
Registration of business combinations correct answers -SEC Rule 145; must file S4
-reclassification
-M&A / consolidation
-transfer
Reclassification correct answers -a change that involves the substitution of one security for
another
-except for stock split, reverse stock split, or change in par value
Merger, acquisition, or consolidation correct answers -securities of one entity are exchanged or
converted into securities of another entity
Transfer correct answers -an exchange of assets involving:
1) the issuance of securities under dissolution
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