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Series 79 practice questioneasyIPO Process

What is the 'cooling-off period' in the context of an IPO?

  1. AThe period between filing the registration statement and its effective date✓ Correct answer
  2. BThe period after the IPO when insiders cannot sell shares
  3. CThe period after the roadshow before pricing
  4. DThe period when the SEC reviews the company's financial statements
Explanation

Why A — The period between filing the registration statement and its effective date

The cooling-off period (also called the waiting period) is the time between the filing of the registration statement with the SEC and the date it becomes effective. During this period, oral offers may be made but no sales can be completed, and the preliminary prospectus (red herring) can be distributed. This period typically lasts a minimum of 20 days but often extends longer.

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