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FRM Part I · FRM Exam Part I · Corporate Bonds

A corporation is deciding between a public bond offering and a private placement. Which statement best describes a typical feature of a public offering of corporate bonds in the United States?

A public bond offering is registered with the securities regulator and sold to the general investing public, usually through underwriters. Private placements, by contrast, go to a small group of institutions with lighter disclosure, so the option describing registration and underwriters is correct.

  1. AIt is generally registered with the securities regulator and sold to the general investing public, often through underwritersCorrect
  2. BIt is sold only to a small group of institutional investors with no disclosure requirements
  3. CIt is issued without any involvement of an investment bank or underwriter
  4. DIt cannot be traded in the secondary market after issuance

Explanation

Public offerings are registered with the securities regulator (the SEC in the US) and distributed to the public, usually via underwriters. Private placements, not public offerings, are limited to a small group of investors with lighter disclosure. Public bonds can trade in the secondary market.

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