Differentiate between sponsor, underwriter, and broker roles in a public offering?

• A. Sponsor coordinates due diligence; underwriters subscribe and distribute securities; brokers facilitate trading and liquidity
• B. Brokers coordinate due diligence; sponsor and underwriters trade
• C. Underwriters coordinate due diligence; sponsors subscribe and brokers distribute
• D. Sponsor coordinates regulatory filings; underwriters set prices; brokers create products

Answer: (A)

In a public offering, the duties are clearly separated among the players. The sponsor acts as the lead manager, steering the process and coordinating due diligence and the preparation of the offering materials, as well as handling regulatory filings with the authorities. The underwriters commit to subscribing to the issue, meaning they buy the securities from the issuer and then distribute them to investors, taking on the risk of selling them at the agreed price and managing the book-building and allocation. The brokers operate in the secondary market after the issue, facilitating trading between buyers and sellers and providing liquidity and price discovery; they don’t participate in underwriting or primary pricing.

That combination—sponsor coordinating due diligence, underwriters subscribing and distributing, brokers facilitating trading and liquidity—best fits how a public offering is structured. The other descriptions mix up which party handles due diligence, underwriting, pricing, or secondary-market activity, so they don’t align with the actual roles.