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CFA Level I · CFA Level I Exam · Equity Instrument Features

A venture capital fund invests in a start-up through privately negotiated terms. Relative to a typical public shareholder in a large listed firm, the fund is most likely to:

The fund will most likely obtain negotiated rights such as board representation and information access. Private investments are privately negotiated and ownership is concentrated, giving investors influence and tailored terms. Public shareholders in large listed firms accept standardized terms, and a start-up has no exchange-quoted price.

  1. Arely entirely on exchange-quoted prices to monitor and value its investment
  2. Bhave limited ability to negotiate terms because ownership is widely dispersed
  3. Cobtain negotiated rights such as board representation and information accessCorrect

Explanation

Private investors negotiate directly with the issuer and commonly secure board seats, information rights and protective provisions. Public minority shareholders accept standardized terms. A start-up has no quoted prices, and its ownership is concentrated, not widely dispersed, so the other options are wrong.

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