Welcome to Execution and Distribution: the unit that walks through what actually happens in the two-week sprint between the road show kickoff and the closing dinner. By the time a deal reaches this point, the registration is on file, the syndicate is set, and the bookrunner's job is to translate marketing into a printed transaction.
Exam Weight: Part of 27% / 20 items (Function 2)
Video Resources
What You'll Learn
In this unit, you'll cover:
- Sales Force Education and Marketing Strategy: How the lead bank arms its own internal sales force with the deal pitch before any outside investor sees a prospectus
- Road Show and Investor Targeting: One-on-one meetings, group lunches, and shareholder reviews that build the prospect list
- Building the Book and Indications of Interest (IOIs): The live ledger the syndicate manager uses to track demand at each price level
- Sizing, Pricing, and Timing: The factors (market conditions, IOIs, valuation, calendar) that translate the book into a final transaction size and offering price
- Allocation: Retail vs Institutional Demand: Pot mechanics, free retention, jump-ball, and designations
- Underwriter's Spread Components: The management / underwriting / selling-concession split that determines who gets paid for what
- New Issue Allocation Restrictions: The new-issue rule's prohibition on selling initial public offering (IPO) equity to industry insiders, plus the fixed-price offering and pre-listing transaction rules
- Greenshoe (Over-Allotment) Option: The 15% over-allotment mechanism for aftermarket price support
- Stabilization and Syndicate Covering: Stabilizing bids, penalty bids, and the recordkeeping regime
- Reg M Trading Restrictions on Participants: Restricted-period rules for distribution participants, Nasdaq passive market making, and the short-sale prohibition in connection with a public offering
- Suitability, Reg BI, and Form CRS: How retail-customer protections layer on top of distribution
- Exchange Listing and State Preemption: Initial listing thresholds for NYSE and Nasdaq plus how federal preemption of state registration works
Why This Matters
Execution and distribution sit inside the 27% Function 2 weight and pull the largest concentration of compliance-trap questions on the exam. Three families of facts cover most of what gets asked:
- Reg M trading restrictions: who can do what when, with hard rules on short selling and passive market making
- The new-issue rule and fixed-price offering rule: who can and cannot buy an IPO, and how syndicate members must price the deal during distribution
- Greenshoe and stabilization mechanics: the 15% cap, the 30-day window, and the rule that a stabilizing bid cannot exceed the lower of the offering price or the applicable stabilizing price in the principal market
These rules are tested by substance (timelines, thresholds, prohibitions), not by rule number. Memorize the numbers (5 business days, 30 days, 15%, $4 share price, 400 holders) and the trigger facts (short during the restricted period, then participate in the offering = strict-liability violation).
Let's start with the first marketing surface the deal touches: the firm's own internal sales force.