A security issued in which the underwriter does not guarantee a firm price to the issuer and acts more as a placing or distribution agent for a fee is referred to as ___________________.
A) Negotiated sale
B) Competitive sale
C) Best efforts underwriting
D) None of these

Question

Quizplus · Accepted Answer

In a best efforts underwriting, the underwriter acts more as a placing or distribution agent for a fee and does not guarantee a firm price to the issuer. The underwriter will use its best efforts to sell as many securities as possible to investors, but will not purchase any unsold securities. In a negotiated sale, the issuer negotiates directly with the underwriter to determine the offering price and terms of the security. In a competitive sale, multiple underwriters submit bids to the issuer and the lowest bid wins the right to underwrite the security.

A Security Issued in Which the Underwriter Does Not Guarantee