Final answer:
The correct answer is option A. Agreements where a firm in a public offering commits to repurchase shares at no less than the sales price are prohibited as they are considered fraudulent and manipulative, misrepresenting the security's true market value.
Step-by-step explanation:
A firm is a participant in a public offering and has agreed to repurchase the securities from its customers at no less than the original sales price. Such agreements are typically considered prohibited as fraudulent and manipulative because they may artificially inflate the stock price by ensuring that the stock does not sell below a certain price. This can mislead investors about the security's true market value.
In an Initial Public Offering (IPO), a firm receives financial capital from selling its stock to the public, which includes individuals, mutual funds, insurance companies, and pension funds. The IPO and subsequent offerings help repay early-stage investors, like angel investors and the venture capital firms, and provide financial capital for expanding the company's operations. A venture capital firm may sell part of its ownership during the IPO to the public.
When stock is subsequently sold by investors, the firm itself does not receive any funds from these transactions. Instead, investors may earn a return on their investment in the form of dividends and capital gains. However, repurchase agreements at fixed prices can distort these returns and the perceived value of the securities.
The correct option, in this case, is A. prohibited as fraudulent and manipulative.