Series 79 practice questionmediumStabilization
According to Regulation M, which of the following is true regarding stabilization bids after an IPO?
- AStabilization bids must be placed above the offering price to encourage demand.
- BStabilization bids may only be placed at or below the public offering price and must be disclosed in the prospectus.✓ Correct answer
- CStabilization activity is permitted indefinitely after the offering until trading normalizes.
- DStabilization is not permitted under any circumstances for listed securities.
Explanation
Why B — Stabilization bids may only be placed at or below the public offering price and must be disclosed in the prospectus.
Stabilization bids may only be placed at or below the public offering price and must be disclosed in the prospectus or offering documents. Stabilization activity is permitted only for a limited time after the offering. The trap is believing that stabilization can push prices higher or that it is always prohibited.
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