- CFA Exams
- CFA Level I Exam
- Study Session 12. Equity Investments (1)
- Reading 36. Market Organization and Structure
- Subject 6. Primary Security Markets
CFA Practice Question
An underwriter makes a minimal commitment to an issuer if a transaction is handled ______.
A. as a competitive bid
B. on a best-efforts basis
C. as a Rule 144A transaction or as a Rule 415 transaction
Explanation: The best-efforts basis is where the underwriter sells the new issue for a fee, only promising to do its "best" to sell the securities. Thus the underwriter is minimizing its risk exposure. Rule 144A refers to private placements and Rule 415 refers to shelf registrations. Neither of these provisions affects the risk of the underwriter.
User Contributed Comments 3
| User | Comment |
|---|---|
| Shelton | be-min, 1(p)44a, 4(s)15 |
| roxy143 | Rule 144A- private placements Rule 415 - Shelf regis |
| emmkuu | 144A is often a public placement... |