Series 79 practice questioneasyBest Efforts vs Firm Commitment
In a firm commitment underwriting, who bears the risk that not all offered securities can be sold to investors at the public offering price?
- AThe underwriters✓ Correct answer
- BOnly the issuer
- COnly the transfer agent
- DThe SEC
Explanation
Why A — The underwriters
The underwriters In a firm commitment deal, the underwriters buy the securities from the issuer and then resell them, taking principal risk. That is the defining difference from a best efforts structure.
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