Capital Markets & Underwriting Flashcards
6 cards from real Series 79 – Investment Banking Representative Exam practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Capital Markets & Underwriting flashcards as text
Under Rule 144A, privately placed securities can be resold to:
Answer: Qualified Institutional Buyers (QIBs) without SEC registration
Rule 144A allows privately placed securities to be freely resold among Qualified Institutional Buyers (QIBs) — institutions with at least $100 million in securities — without requiring SEC registration.
A company filing a shelf registration statement (Form S-3) benefits primarily because it can:
Answer: Issue securities on short notice over a three-year period without filing a new registration for each offering
A shelf registration pre-registers a large amount of securities, allowing the issuer to 'take down' tranches quickly as market conditions permit over a three-year period.
What is the primary distinction between 'investment-grade' and 'high-yield' (speculative-grade) bonds?
Answer: Investment-grade bonds are rated BBB-/Baa3 or higher; high-yield bonds carry lower ratings reflecting greater default risk
Investment-grade bonds are rated BBB-/Baa3 or above by major rating agencies, indicating lower credit risk, while high-yield (junk) bonds carry speculative ratings and compensate investors with higher coupons.
In capital markets, a 'bought deal' refers to:
Answer: An underwriter committing to purchase an entire securities offering from the issuer before marketing it to investors
In a bought deal, the underwriter agrees to purchase the entire offering at a fixed price before conducting any investor marketing, bearing full market risk in exchange for a higher fee.
The 'gross spread' in an underwritten public offering represents:
Answer: The underwriting discount paid to the syndicate, expressed as a percentage of gross proceeds
The gross spread is the underwriting discount — the difference between the price the underwriters pay the issuer and the public offering price — divided among managers, underwriters, and selling group members.
Under FINRA Rule 5110, investment bankers are prohibited from receiving 'underwriting compensation' that is:
Answer: Unfair or unreasonable in amount relative to the size and risk of the offering
FINRA Rule 5110 (the Corporate Financing Rule) requires that underwriting compensation be fair and reasonable, limiting total compensation as a percentage of offering proceeds.
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- finra.org — Test delivery, test dates, score validity, eligibility · verified Oct 2026