Primary Market
In a firm commitment underwriting, the investment bank takes on which role?
Firm commitment = underwriter buys ALL shares (acts as principal).
Complete Analysis & Legal Rationale
In a firm commitment underwriting, the investment bank acts as a principal, purchasing the entire issue from the company at an agreed price and then reselling to investors. The underwriter bears the risk of unsold securities, unlike best efforts where they act as agent.
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:
Does not match the governing concept in the explanation.
Matches the verified teaching point in the explanation.
Does not match the governing concept in the explanation.
Does not match the governing concept in the explanation.
Official Standard: Outline-level citation pending rule-specific upgrade. Verify against current FINRA materials.