Series 79: Chapter 12 Practice Question Answers

Chapter 12 Practice Question Answers

1. 1. Answer: D. A fairness opinion is rendered by a third party (typically an investment bank) and discusses whether a proposed transaction is fair from a purely financial perspective. A fairness opinion does not cover whether the proposed transaction is legal or represents the best possible deal. While the customer’s board of directors reviews the fairness opinion, it does not issue the opinion.
2. 2. Answer: C. The fairness opinion process typically begins with an evaluation of the proposed deal. The team working on the fairness opinion then presents its conclusions to one or more internal fairness committees. Once the committee approves the opinion, the analysis is presented to the customer’s board of directors or a special board committee. After the directors’ questions have been addressed, the directors will sign off on the fairness opinion. The fairness opinion is ultimately disclosed to shareholders in a proxy statement or prospectus.
3. 3. Answer: B. FINRA Rule 5150 requires the disclosures described in answer choice A and D, and also requires members to have written procedures in place for