Series 79 practice questionmediumFINRA Rules Applicable to Investment Banking
In a public offering, which of the following would be considered a prohibited conflict of interest under FINRA Rule 5121?
- AThe underwriter holds a passive 4% stake in the issuer
- BThe underwriter is controlled by the issuer and participates in the offering✓ Correct answer
- CThe underwriter’s employee has a sibling on the issuer’s board
- DThe underwriter previously served as the issuer’s legal counsel
Explanation
Why B — The underwriter is controlled by the issuer and participates in the offering
A controlled underwriter presents a prohibited conflict, requiring special procedures or prohibiting participation. Passive stakes or familial relationships typically do not trigger Rule 5121.
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