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Series 79 practice questionmediumLock-Up Agreements

Who has the authority to waive or release lock-up agreements early?

  1. AThe SEC must approve any early release from lock-up
  2. BLock-up agreements cannot be waived under any circumstances
  3. COnly the company's board of directors can release insiders from lock-up
  4. DThe lead underwriter typically has sole discretion to waive or modify lock-up restrictions✓ Correct answer
Explanation

Why D — The lead underwriter typically has sole discretion to waive or modify lock-up restrictions

The lead underwriter (bookrunner) typically has the sole discretion to waive or modify lock-up agreements, as the lock-up is a contractual arrangement between the insiders and the underwriter. However, FINRA rules require that any release or waiver of lock-up restrictions must be publicly announced at least three business days before the effective date of the release. This advance notice requirement was implemented to prevent selective early releases that could disadvantage retail investors who purchased shares expecting the lock-up to remain in place.

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