Rights Warrants
To offer shareholders a privilege to obtain shares at a fixed price, a corporation issues:
Rights = short-term (30-45 days), below market price. Warrants = long-term, above market price.
Complete Analysis & Legal Rationale
Rights (also called preemptive rights or subscription rights) give existing shareholders the privilege to purchase additional shares at a fixed subscription price, typically below market value, to maintain their proportionate ownership.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Puts give the holder the right to sell, not buy shares.
Matches the verified teaching point in the explanation.
Futures are contracts to buy/sell commodities or indices at future dates.
Preferred stock is a class of equity, not a right to purchase shares.
Official Standard: Outline-level citation pending rule-specific upgrade. Verify against current FINRA Series 7 outline.