SIE - Securities Industry Essentials Exam

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Which of the following best describes a firm commitment underwriting agreement?

When an underwriter promises to sell as much of the new offering as possible without guarantees.
A
When an underwriter assumes all inventory risk and buys all securities of the new offering.
B
When an underwriter agrees that the offering won't be effective until a specified minimum number of securities are sold.
C
When an issuer requires to sell all of the new issue securities; and if all are not sold, the issue is canceled and funds are returned to investors.
D

Explanations

( C ) is known as Mini - Max underwriting. ( A ) is best efforts. ( D ) is all or none underwriting. The correct answer is ( B ).

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