Pipeline

DEFINITION of 'Pipeline'

1) An investment company whose purpose is to collect investment funds from a pool of individual investors and invest them in financial securities.

2) The underwriting procedure which must be completed by the Securities & Exchange Commission (SEC) before a security can be offered for sale to the public.

3) A type of risk most often present in mortgage transactions. It expresses the potential for change in financial factors during the time lapse between the mortgage application and the purchase of the property.

BREAKING DOWN 'Pipeline'

1) Such firms are usually exempt from normal corporate taxes, since they simply serve as an investment conduit, or pipeline, rather than actually producing goods and services as a regular corporation does. A mutual fund structured as a trust would be exempt from corporate taxes and considered an investment pipeline.

2) A new security issue must go through the SEC's pipeline before it is legally cleared for sale to the public. This practice attempts to screen out fraudulent investments and ensures security offerings are presented to the public in an accurate fashion.

3) During the time it takes for a bank to review a mortgage application and for a borrower to actually purchase their desired property (the mortgage pipeline), financial conditions specific to the application can change, which would change the amount of risk the bank incurs by lending funds to the borrower.

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