Series 79 – Investment Banking Representative Exam Capital Markets & Underwriting

Question 1

In an IPO, what is the role of the 'bookrunner'?

Accepted Answer

The lead underwriter responsible for building the order book and allocating shares

Answer

The bookrunner is the lead investment bank that manages the IPO process, conducts the roadshow, builds the investor order book, and determines final pricing and share allocation.

Question 2

What is the primary purpose of the SEC's 'quiet period' (or 'lock-up' on communications) surrounding an IPO?

Accepted Answer

To restrict promotional communications that could constitute an illegal offer of securities before the registration is effective

Answer

The quiet period prevents issuers and underwriters from making promotional statements that could be deemed an illegal offer or sale of securities before the SEC declares the registration statement effective.

Question 3

In a 'firm commitment' underwriting, the underwriter:

Accepted Answer

Purchases all the offered securities from the issuer and bears the risk of reselling them

Answer

In a firm commitment underwriting, the investment bank buys the entire offering from the issuer at a discount and assumes the full risk of selling the securities to the public.

Question 4

What is a 'greenshoe option' (overallotment option) in an IPO?

Accepted Answer

An option allowing underwriters to sell up to 15% more shares than originally planned to support the stock price

Answer

The greenshoe option gives underwriters the right to sell up to 15% additional shares; if the stock rises they exercise it, and if it falls they buy shares in the open market to provide price support.

Question 5

Under SEC Regulation S-K, a company's IPO prospectus must include:

Accepted Answer

Audited financial statements for the prior two to three years plus interim unaudited financials

Answer

Regulation S-K requires IPO prospectuses to include audited financial statements for the most recent two or three fiscal years plus unaudited interim period financials.

Series 79 – Investment Banking Representative Exam Practice Test

Series 79 – Investment Banking Representative Exam Practice Test

Series 79 – Investment Banking Representative Exam Capital Markets & Underwriting