Series 79 practice questionhardFINRA Rules Applicable to Investment Banking
A member firm is acting as both book-running manager and significant lender to a public offering issuer. Under FINRA rules, what additional steps must the firm take?
- ADisclose the conflict and obtain affirmative consent from the issuer✓ Correct answer
- BNo action is required if the loan is less than $500,000
- COnly notify FINRA after the deal closes
- DAct as sole underwriter to avoid appearances of collusion
Explanation
Why A — Disclose the conflict and obtain affirmative consent from the issuer
Material conflicts, such as being a lender and underwriter, require disclosure and issuer consent. The trap is assuming small loans or mere notification suffices.
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