Series 79 practice questioneasyBest Efforts vs Firm Commitment
Which structure generally provides an issuer more certainty of proceeds at closing?
- ABest efforts underwriting
- BPrivate placement memorandum only
- CFirm commitment underwriting✓ Correct answer
- DA selling group agreement without an underwriter
Explanation
Why C — Firm commitment underwriting
Firm commitment underwriting Because the underwriters commit capital in a firm commitment deal, the issuer has greater certainty the securities will be purchased. That certainty often comes with a higher spread or more extensive diligence and documentation.
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