Market stabilization is:
A) disallowed under the Securities Act of 1934
B) permitted for underwriters if the market price falls below the offering price
C) prohibited by the Securities Exchange Commission
D) required by the Securities Act of 1948

Question

Quizplus · Accepted Answer

Market stabilization is allowed for underwriters if the market price falls below the offering price. Underwriters may purchase additional shares in the market to support the price and prevent it from falling too low. This is a common practice in initial public offerings where the underwriters want to ensure a successful offering and maintain investor confidence. However, this stabilization must be disclosed in the offering prospectus and must be done in compliance with SEC regulations.

Market Stabilization Is