SIE Exam Question 650: Answer and Explanation

Question: 650

Which of the following describes the process in which an underwriter intervenes in the secondary market by placing a bid for securities at or below the offering price? The goal is to protect the price from dropping if there is a lack of initial interest for a new issue.

• A. Stabilizing bid
• B. Standby underwriting
• C. Subscription underwriting
• D. Underwriting bid

Correct Answer: A

Explanation:

A stabilizing bid is the process in which an underwriter intervenes in the secondary market by placing a bid for securities at or below the offering price. The goal is to protect the price from dropping if there is a lack of initial interest for a new issue.