Series 79 practice questionmediumBest Efforts vs Firm Commitment
If an issuer insists on full proceeds certainty, which structure is the banker most likely to recommend, all else equal?
- AFirm commitment✓ Correct answer
- BBest efforts
- CRights offering without underwriters
- DRegulation S offshore resale only
Explanation
Why A — Firm commitment
Firm commitment Full proceeds certainty aligns with a principal underwriting in which the bank purchases the offered securities. That transfer of placement risk is precisely what the issuer is paying for.
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