Spinning Refers to the Practice Whereby an Underwriter Sells Shares

question 62

True/False

Spinning refers to the practice whereby an underwriter sells shares in a hot new issue to a CEO-for the CEO's personal benefit-for the purpose of the underwriter gaining future business from the CEO's firm.

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Definitions:

Prefiling Period

The timeframe before an official document or lawsuit is formally filed in court.

Issuer

An entity that develops, registers, and issues financial instruments like stocks, bonds, or credit cards for the purpose of financing.

Negotiations With Underwriters

Discussions and arrangements concerning terms and conditions between the issuer of a security and the financial entities responsible for selling it to the public.

Underwriters

Professionals or companies that assess and take on financial risk, as in the issuance of insurance policies or investment securities.