Investment Company and Variable Contracts Products Representative (Series 6)Practice Exam

Disable ads (and more) with a membership for a one time $2.99 payment

Enhance your competence for the Series 6 Exam. Study with expertly crafted multiple-choice questions, each complete with hints and detailed explanations. Elevate your performance and pass the exam with confidence.

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

Which type of underwriting involves a set minimum and maximum amount of securities?

Best-efforts
Mini-max
Firm commitment
Stabilization

The correct answer is: Mini-max

The correct answer is mini-max underwriting, which refers to an underwriting arrangement where there is a set minimum and maximum amount of securities that must be sold. In this structure, the issuer specifies the least quantity of securities that must be sold for the offering to proceed (the minimum) and the maximum quantity that may be sold, depending on the demand from investors. This allows both the issuer and underwriter to manage the risk and planning around capital raised while providing a clear framework for the offering. In contrast, the other types of underwriting mentioned function differently. For example, best-efforts underwriting means that the underwriter does not guarantee the sale of all securities and will only sell as many as are sold to investors. Firm commitment underwriting involves the underwriter purchasing the entire issue from the issuer and then reselling it to the public, which does not involve a minimum or maximum set at the outset of the offering. Stabilization refers to practices used by underwriters to support the price of a new issue in the market, which also does not relate to minimum and maximum sales amounts.