SIE Exam Question 251: Answer and Explanation

Question: 251

Stabilizing is a term generally used in Wall Street to refer to the practice of:

• A. price fixing of a new issue
• B. maintaining a market price at or near the POP of a new issue for the sole purpose of protecting the stock from decline during a new offering.
• C. preventing losses for investors who buy IPOs
• D. none of the above

Correct Answer: B

Explanation:

B: Stabilizing implies keeping the price steady, which SEC allows in a new issue if done in accordance with strict guidelines of SEC---anti-manipulation guidelines.