Series 24 Investment Banking Practice Questions

Correct answer: D. Participating in the issuer's road show to market the offering to prospective investors

Rule 2241 bars research analysts from participating in road shows and other marketing on behalf of an issuer related to an investment banking services transaction. The prohibition protects research independence from investment banking pressure.

• AA. After the quiet period, the underwriter may publish research on the issuer.
• BB. Discussing published research with the sales force is an ordinary analyst function.
• CC. Updating a model for public earnings is routine research and is not tied to the offering.
• DD. Correct: analysts may not take part in marketing the offering, such as a road show.

• Source: FINRA Rule 2241, accessed October 2026

Correct answer: D. Spinning

FINRA Rule 5131 prohibits 'spinning'. Allocating new issue shares to executive officers or directors of a company, or to their family members, as a quid pro quo for obtaining or retaining investment banking business from that company. It addresses conflicts of interest in IPO allocation practices distinct from the restricted-persons prohibition in Rule 5130.

• AA. Restricted person purchasing describes Rule 5130's categorical bar on certain purchasers; the scenario describes an allocation made as an inducement for business, which is a 5131 spinning issue.
• BB. Free-riding and withholding concerns a firm improperly retaining hot-issue shares for its own account/insiders rather than making a bona fide public distribution. A related but distinct new-issue concern from the quid pro quo described here.
• CC. Front running involves trading ahead of known orders or information, not allocating IPO shares as a business inducement.
• DD. Correct. Allocating IPO shares to an executive as an inducement for investment banking business is the classic definition of spinning under Rule 5131.

• Source: FINRA Rule 5131, accessed October 2026

Correct answer: C. Promptly deposited into a separate escrow account and not released to the issuer until the all-or-none contingency is satisfied

SEC Rule 15c2-4 requires that in a contingency offering (all-or-none, part-or-none, or a minimum-maximum arrangement), funds received from investors must be promptly deposited into a separate escrow account held for the benefit of the subscribers and not released to the issuer until the stated contingency is actually satisfied. If the contingency is not met, funds must be returned to investors.

• AA. Immediate transmittal to the issuer regardless of the contingency defeats the purpose of an all-or-none offering and violates Rule 15c2-4's escrow requirement.
• BB. Holding investor funds in the broker-dealer's own operating account, rather than a segregated escrow account, doesn't meet Rule 15c2-4's safeguarding requirement.
• CC. Correct. Rule 15c2-4 requires that funds from investors in a contingency offering be promptly deposited into a separate escrow account and not released to the issuer until the specified contingency (here, all-or-none) is satisfied.
• DD. Investing customer funds in Treasuries pending closing doesn't satisfy the rule's requirement. Funds must be held in a proper escrow arrangement, not redeployed into other instruments.

• Source: 17 CFR § 240.15c2-4, accessed October 2026

Correct answer: C. 15%

The over-allotment option, commonly called the 'Green Shoe' option, permits underwriters to purchase additional shares from the issuer (typically within 30 days of the offering) to cover over-allotments, and market practice caps this at 15% of the shares in the base offering.

• AA. 5% is well below the typical maximum allowed for a Green Shoe over-allotment option.
• BB. 10% understates the customary maximum percentage for a Green Shoe option.
• CC. Correct. Underwriters may typically purchase up to 15% of the base offering from the issuer under a Green Shoe over-allotment option to cover over-allotments.
• DD. 25% overstates the customary maximum. The typical Green Shoe cap is 15% of the base offering.

• Source: Exam outline: FINRA Series 24 Content Outline, accessed October 2026

Correct answer: A. 10 calendar days

FINRA Rule 2241 restricts a manager or co-manager from publishing or distributing a research report on the subject company of an IPO for 10 calendar days following the offering date.

• AA. Correct. Rule 2241 bars a manager or co-manager from publishing research on the issuer for 10 calendar days after an IPO. The period is 3 days after a secondary offering. Emerging growth company IPOs are treated differently under the JOBS Act.
• BB. Incorrect. 25 days is not the Rule 2241 research quiet period. It matches the 25-day prospectus-delivery period under SEC Rule 174 for dealers in IPOs of exchange-listed securities, which is a separate requirement from the research restriction.
• CC. Incorrect. 40 days was the quiet period under the older NASD research rule, and it is also a prospectus-delivery period under SEC Rule 174. Rule 2241 shortened the IPO research quiet period to 10 days.
• DD. Incorrect. 90 days is a dealer prospectus-delivery period under SEC Rule 174 for certain offerings by issuers that were not previously reporting. It is not a research quiet period under Rule 2241, which sets 10 days after an IPO.

• Source: FINRA Rule 2241, accessed October 2026

Correct answer: D. Whether solicitation, pay-to-play, registration and municipal advisory rules apply to the arrangement

Paying a third party contingent on winning issuer business raises municipal solicitation, pay-to-play, registration and municipal advisor issues under MSRB and SEC rules. The principal must determine which apply.

• AA. Municipal securities activity is subject to MSRB and antifraud conduct rules; there is no broad exemption.
• BB. A personal friendship is at most a fact to examine, and marketing mentions are not the supervisory concern.
• CC. Concealing the payment in the spread would raise disclosure and fairness problems rather than resolve them.
• DD. Correct: the principal must analyze solicitation, pay-to-play, registration and municipal advisory requirements.

• Source: 17 CFR § 240.15Ba1-1, accessed October 2026
• Source: 15 U.S.C. § 78o-4, accessed October 2026

Correct answer: A. Yes, because the restricted person's aggregate interest does not exceed 10% of the account

Rule 5130 generally bars allocations to accounts in which restricted persons hold a beneficial interest, but a conditional exemption applies when the restricted persons' aggregate interest does not exceed 10% of the account. An 8% interest falls within the exemption, subject to the member's documentation.

• AA. Correct: restricted-person interests up to 10% in aggregate do not bar the allocation.
• BB. This ignores the 10% de minimis exemption in the rule.
• CC. Disgorgement is not the mechanism; the exemption turns on the size of the interest.
• DD. The threshold in the rule is 10%, not 5%.

• Source: FINRA Rule 5130, accessed October 2026

Correct answer: A. Prevent distribution participants from artificially influencing the market price of a security while it is being distributed

Regulation M's restricted period (Rule 101) is designed to prevent underwriters, issuers, and other distribution participants from engaging in market activity. Such as bidding for or purchasing the security. That could artificially inflate or support its price while a distribution is underway, which would undermine the pricing integrity investors rely on. Rule 101 is not about registration timing, guaranteed pricing, or investor eligibility. Those are governed by other rules entirely.

• AA. Correct. The core purpose of Regulation M's restricted period is to prevent distribution participants (issuers, underwriters, and others with an interest in the offering's outcome) from artificially conditioning the market or influencing the security's price while it's being distributed.
• BB. Regulation M's restricted period concerns trading activity during a distribution, not registration statement filing timing, which is governed by separate Securities Act requirements.
• CC. Regulation M doesn't guarantee a minimum offering price to protect issuer proceeds. Its restricted period is about preventing manipulative price influence, not price guarantees.
• DD. Regulation M's restricted period isn't an investor-accreditation screen. It restricts trading activity by distribution participants, not who may purchase in the offering.

• Source: SEC Regulation M Rule 101 (distribution participants), accessed October 2026