SIE Exam Question 835: Answer and Explanation

Question: 835

Which of the following is an agreement between the issuer of a security and its underwriters stating that the underwriters are responsible for any unsold portion of the issue? This transfers the risk of the unsold portion of the issue from the issuer to the underwriters.

• A. Best efforts underwriting
• B. Standard underwriting
• C. Standby underwriting
• D. Subscription underwriting

Correct Answer: C

Explanation:

Standby underwriting is an agreement between the issuer of a security and its underwriters stating that the underwriters are responsible for any unsold portion of the issue. This transfers the risk of the unsold portion of the issue from the issuer to the underwriters.