Which of the following does NOT apply to a firm engaged in best efforts underwriting?

A firm engaged in best efforts underwriting does not assume all risks for unsold securities. In this arrangement, the underwriter acts as an intermediary, selling the securities on behalf of the issuer but does not guarantee the sale of all the offered securities. If any securities remain unsold, the risk is not borne by the underwriter but rather by the issuer. This structure allows the issuer to engage in a more flexible selling process, with the underwriter likely exerting effort to sell to potential investors but not bearing the entire financial responsibility for any portion that does not sell.

The concept of best efforts underwriting is particularly appealing for issuers who may not want to take on the risks associated with a firm commitment underwriting, where the underwriter buys the entire issue and assumes the risk of selling all of it. Thus, the correct answer highlights a key characteristic of best efforts deals—namely, that the underwriter’s obligation is limited to trying to sell what they can, rather than taking on complete financial liability for the securities offered.