SIE practice questionhardAll-or-None Underwriting
In an all-or-none (AON) underwriting arrangement, what happens if the underwriter cannot sell the entire issue?
- AThe underwriter must purchase all remaining shares for its own account
- BThe underwriter keeps whatever shares it has sold and returns the rest to the issuer
- CThe issuer is required to lower the offering price until all shares are sold
- DThe entire offering is canceled and all investor funds are returned✓ Correct answer
Explanation
Why D — The entire offering is canceled and all investor funds are returned
In an all-or-none underwriting, the offering is canceled if the entire issue cannot be sold by the deadline, and investor funds are returned. The underwriter does not commit to buying unsold shares as it would in a firm commitment underwriting.
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