$7.$ The investment banking process

When a firm needs to raise funds in the financial markets, it usually uses the services of an investment banker. First, it must make some initial decisions regarding how much capital it needs, what kind of securities to issue, and whether to accept competitive bids or negotiate a price privately. Then it is time for the firm to select an underwriter and begin the issuing process.

However, the competitive bid agreements between underwriters and issuing firms can take a couple of different forms. In some cases, an investment bank agrees to arrange the sale of the issuing firm$$s securities and does its best to sell all shares but makes no guarantees to that effect. This is an example of:

An underwritten arrangement

A best$-$efforts arrangement

In the event that an issuer elects to use a best$-$efforts arrangement, who bears all the risk that the stock issue might be undersubscribed? In other words, who is at risk if the investment bank cannot sell all shares to investors at the time of issue?$$

A document filed with the Securities and Exchange Commission $($SEC$)$ that authorizes a firm$$s sale of securities at some future date is called:

A shelf registration

A prospectus

An underwriting syndicate

A registration statement