SIE Exam Question 397: Answer and Explanation

Question: 397

In the business of underwriting, when a firm adopts a firm commitment, it is acting as a:

• A. wholesaler
• B. broker
• C. distributor
• D. dealer

Correct Answer: D

Explanation:

D: Firm commitment implies the syndicate is purchasing the new issue from the issuer with a view to retailing it to the investing public….this is acting in a principal/dealer capacity. Best efforts underwritings are being done on an agency/brokerage basis.