SIE Plan

SIE practice question: Knowledge of Capital Markets

Knowledge of Capital MarketsDifficulty 3/5

An underwriter buys an entire issue from the issuer and resells it, bearing the risk of unsold shares. What is this arrangement?

  1. AA best efforts offering, in which the underwriter acts as principal and carries the risk
  2. BA shelf registration, in which the underwriter acts as principal and carries the risk
  3. CA private placement, in which the underwriter acts as principal and carries the risk
  4. DA firm commitment, in which the underwriter acts as principal and carries the risk
Show answer and rationale

Correct: D. Firm commitment means the underwriter buys the issue and resells it as principal, so unsold shares are its problem. Under best efforts the underwriter acts as agent and the issuer keeps the risk.

  • A — Under best efforts the underwriter acts as agent and returns unsold securities to the issuer.
  • B — A shelf registration is a method of registering securities for later sale, not an underwriting commitment.
  • C — A private placement describes who securities are sold to, not how the underwriter is committed.

Concept being tested

12 of the 75 scored items. Regulators and their jurisdiction, from the SEC to self-regulatory organisations, the Treasury and IRS, state regulators, the Federal Reserve, SIPC and FDIC; the market participants and what each one does; primary, secondary, third and fourth markets; monetary versus fiscal policy, the business cycle and economic indicators; and the mechanics of offerings. — 16% of the exam. Study guide for Knowledge of Capital Markets.

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Primary references

  1. Securities Industry Essentials (SIE) Examination Content Outline — Financial Industry Regulatory Authority (FINRA) · primary · retrieved 2026-09-22, verified 2026-09-22
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