Series 79 practice questionmediumFINRA Rules Applicable to Investment Banking
Which fact most clearly creates a conflict of interest governed by 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
Control of the member by the issuer creates a Rule 5121 conflict. The rule generally imposes prominent disclosure and, absent an exception, qualified-independent-underwriter requirements; it does not label every conflicted offering categorically prohibited.
Turn it into reps
Reading one answer is not the same as being ready
Lucky the Banker is a free practice app with 995+ Series 79 questions, weak-area tracking, and timed mock exams. No credit card, no paywall.
Spot an error in this question or explanation? Tell us — we fix these fast.
Related Section 4 questions
- A member has a Rule 5121 conflict because at least 5% of offering proceeds will repay loans made by the member and its…
- If the SEC brings a civil action and the defendant neither admits nor denies the allegations, which outcome is possible?
- During customer due diligence for a private placement, an investment bank notes that the client is a beneficial owner…
- A managing underwriter receives a right of first refusal to participate in future offerings from an issuer. How must…
- For a non-EGC IPO, which circumstance may permit a participating member's analyst to publish during FINRA's 10-day…
- A hedge fund manager obtains MNPI about a merger from an investment banker at a conference, but the banker did not…
- Which of the following would most likely trigger a suspicious activity report (SAR) filing in an investment banking…
- Which SEC enforcement remedy can specifically prevent a person from serving as an officer or director of a public…