In stabilizing a new issue, the manager may make a "syndicate penalty bid". This means that:
A)the underwriter will be penalized his profit on any securities repurchased from his clients
B)all stock purchased will be returned to the issuing corporation
C)the manager will charge the syndicate the value of the shares
D)any shares repurchased are added to the treasury stock of the issuing corporation

Question

Quizplus · Accepted Answer

the underwriter will be penalized his profit on any securities repurchased from his clients. Since clients sell shares back to the syndicate shortly after the offering, the underwriter has not made a proper distribution. The underwriter therefore may be penalized any profit.

In Stabilizing a New Issue, the Manager May Make a "Syndicate