Question 1

What defines a primary market transaction?

Accepted Answer

A primary market transaction is one in which the issuer sells new securities directly to investors for the first time, with proceeds going to the issuing company or entity.

Question 2

What is an Initial Public Offering (IPO)?

Accepted Answer

An IPO is the first sale of a company's equity securities to the public, transitioning the company from private to publicly traded status and raising capital through the primary market.

Question 3

What is a seasoned or follow-on offering?

Accepted Answer

A seasoned or follow-on offering is a subsequent issuance of new securities by a company that is already publicly traded, raising additional capital through the primary market.

Question 4

In a primary offering, who receives the proceeds from the sale of securities?

Accepted Answer

The issuer (the company or government entity) receives the proceeds from a primary offering, which are used to fund operations, expansion, or other corporate purposes.

Question 5

What is the role of the managing underwriter (book-running manager) in a new issue?

Accepted Answer

The managing underwriter leads the underwriting syndicate, coordinates due diligence, structures the offering, builds the order book, allocates securities, and stabilizes the aftermarket price.

Primary & Secondary Markets – Series 7 Exam Flashcards

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