Series 79 practice questionmediumSyndicate Formation
How does a selling group differ from the underwriting syndicate?
- ASelling group distributes shares without underwriting risk✓ Correct answer
- BSelling group members have an underwriting commitment and assume financial risk
- CSelling group members set the offering price
- DSelling group members are required to participate in the roadshow
Explanation
Why A — Selling group distributes shares without underwriting risk
Selling group members are broker-dealers who agree to help distribute (sell) the securities to investors but do not assume any underwriting risk. Unlike syndicate members, who commit to purchasing a specified portion of the offering, selling group members simply receive a selling concession for shares they successfully place with investors. If they cannot sell their allocated shares, those shares are returned to the syndicate without any financial obligation from the selling group member.
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