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← Series 79: Underwriting & New Financing
Series 79 practice questionmediumStabilization

What must be disclosed in the prospectus regarding stabilization activities?

  1. ANothing, as stabilization activities are confidential
  2. BThe exact dates and prices at which stabilizing bids will be placed
  3. CDisclosure that underwriters may use stabilization, syndicate covering, and penalty bids✓ Correct answer
  4. DOnly the total dollar amount budgeted for stabilization
Explanation

Why C — Disclosure that underwriters may use stabilization, syndicate covering, and penalty bids

The prospectus must include disclosure that the underwriters may engage in stabilizing transactions, syndicate covering transactions, and penalty bids, along with an explanation of what these activities entail and how they may affect the market price of the securities. This disclosure is typically found in the 'Underwriting' section of the prospectus. The specific dates and amounts are not disclosed in advance, as stabilization is discretionary and depends on market conditions after the offering begins trading.

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