Syndicate
Going Out To the Market: SEC
In the norms of the SEC it specifies which information must be included in the prospect and that, among other things, it will include the following information: plans and objectives of the management, the use given to the funds obtained, financial data, and the background of all the people that form part of the management of the company. If the intention of the company is to obtain in its initial public offer the sum of 5 million dollars or less, instead of a whole prospect they will prepare a circular offer that they will present to the SEC; with this procedure they try to help small companies to have access to the capital markets. The main issue pursued is to simplify the normal process of information to the public. The circular offer, if well it must include more or less the same information as the prospect, usually gives to the information a less detailed and complexes treatment.
During the registry process, the employees of the insurance entity organize the sales operation. If the offer is small, the insurance company will be only one selling the shares. If, on the contrary, the offer is of an important quantity of shares, the usual is to form a consortium or syndicate composed of a determined number of banks or agencies under the direction of the insurance entity. The managers of accounts implied in the sales operation (also known as collegiate representatives) receive exemplaries of the preliminary prospect (also denominated red herring), if well the sales can’t be completed until the buyers receive the definitive exemplary of the prospect.
At the point of the process of subscription, the agents and the accounting managers probe possible investors to see if they show any interest for buying the shares. From the answers obtained in this probe they conclude if the offer should go on or not. If the assurance is done in the modality of (first try”, the insurance entity could at that moment retire itself from the security public offer, decision that generally is not possible if there is a true commitment of sale. The last step of a public offer consists in joining the registry phase with that of the sale. Once obtained the approval from the SEC, the definitive prospect is edited and the pertinent measures for distribution are done.
The funds received from the clients for the acquisition of the shares are kept in a blocked guarantee account, which is apart from other accounts inside the insurance company.
When the total amount of shares offered is sold and the insurance entity receives the money, you could say that the public offer is closed.
The product of the operation, minus honoraries and other burdens, is given to the shares issuing company, which, immediately, authorizes the transference agent (person in charge of the physical distribution and of the registry of the ownership of the shares) for him to put the securities on hands of the insurance company, for them to distribute the shares among the buyers. Done this the SEC is informed about the successful end of the offer, thus making possible for the company to be quoted on stock exchange market.
The ending of the shores of subscription of shares doesn’t mean that the insurance company will disappear from the scene. The insurance company keeps on working, but this time the mission is to “open the market” to the companies shares and to remind their management of their responsibilities towards public property, and among them that of facilitating financial information to the SEC and to the shareholders, as also the way in which to celebrate the annual genera shareholding meeting.