Canadian Securities Course (CSC) Level 1 Practice Exam

What activities are allowed during the waiting period in relation to an underwritten offering?

1. No activities are permitted during the waiting period

2. Issuers can directly sell securities to individual investors

3. Underwriters can solicit interest and advertise the issue to potential purchasers

4. Issuers can begin trading the securities on secondary markets

The correct answer is: Underwriters can solicit interest and advertise the issue to potential purchasers

During the waiting period of an underwritten offering, underwriters are allowed to solicit interest and engage in advertising activities regarding the upcoming issue. This period typically follows the filing of a registration statement with the regulatory authority and lasts until the registration becomes effective. The purpose of these activities is to gauge market interest in the securities being offered and to initiate a line of communication with potential investors. This helps create awareness and can lead to a more successful offering when the securities become available for sale. Underwriters must, however, adhere to specific regulations that prevent misleading or incomplete information during this time to ensure that potential investors are sufficiently informed. Other activities, such as direct sales by issuers to individual investors, trading of the securities on secondary markets, or any sort of sales activities, are generally prohibited during the waiting period. This approach is designed to maintain market integrity and prevent any potential manipulation or legal issues related to the selling process before the securities are officially registered and cleared for public sale.