Underwriting Corporate Securities

Once a business has decided that it needs to raise capital to meet its organizational objectives, they must determine how to raise the needed capital. Most corporations at this point will hire an investment banker, also known as an underwriter, to advise them. The underwriter works for the issuer and it is their job to advise the client about what type of securities to offer. The issuer and the underwriter together determine whether stocks or bonds should be issued and what the terms will be. The underwriter is responsible for trying to obtain the financing at the best possible terms for the issuer. The underwriter will:

  • Market the issue to investors
  • Assist in the determination of the terms of the offering
  • Purchase the securities directly from the issuer to resell to investors

The issuer is responsible for:

  • Filing a registration statement with the SEC
  • Registering the securities in the states in which it will be sold, also known as blueskying the issue
  • Negotiating the underwriter’s compensation and obligations to the issuer
TYPES OF OFFERINGS

Related Articles
  1. Insurance

    Is Insurance Underwriting Right For You?

    If you have excellent analytical skills and an eye for detail, this may be your calling.
  2. Investing

    The Road To Creating An IPO

    Through an Initial Public Offering, or IPO, a company raises capital by issuing shares of stock, or equity in a public market. Generally, this refers to when a company issues stock for the first ...
  3. Insurance

    What Prequalification and Underwriting Do

    Learn now prequalification and underwriting can help you buy the policy that best meets your needs.
  4. Trading

    Greenshoe Options: An IPO's Best Friend

    Find out how companies can save or boost their public offering price with these options.
  5. Insurance

    The Rise Of The Modern Investment Bank

    Get to know a little bit about the institutions whose actions help to guide free markets.
  6. Insurance

    Brokerage Functions: Underwriting And Agency Roles

    Learning about these various activities can give insight into how securities are issued and traded.
  7. Investing

    Basics Of Federal Bond Issues

    Treasuries are considered the safest investments, but they should still be analyzed when issued.
  8. Investing

    What is Spread?

    Spread has several slightly different meanings depending on the context. Generally, spread refers to the difference between two comparable measures.
  9. Investing

    Municipal Bond Tips For The Series 7 Exam

    Learn to distinguish between general obligation and revenue bonds to ace the municipal bonds portion of the Series 7 Exam.
Frequently Asked Questions
  1. What is a good annual return for a mutual fund?

    Learn the key factors that determine if a mutual fund's return is "good" for you and your needs?
  2. How are industrial goods different from consumer goods?

    Understand the difference between industrial goods and consumer goods, and learn the different types of industrial goods ...
  3. What causes inflation, and does anyone gain from it?

    In this article, we will examine the fundamental factors behind inflation, different types of inflation and who benefits ...
  4. What is the difference between a buy-side analyst and a sell-side analyst?

    The main difference between a buy-side analyst and sell-side analyst is the type of firm that employs them and the people ...
Trading Center