2. Underwriting is frequently done in investment banking, insurance
company, commercial banking and provided by financial
institutions, banks, brokers, etc. Generally, underwriting means
receiving payment for willingness to cover a potential risk.
The person who give assurance is called as “Underwriter” and the
person who take assurance is known as “Underwriting”.
The Underwriter give guarantee for the public subscription and in
turn they receive the commission.
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3. Types of underwriting
Syndicate Underwriting :- Is one in which, two or more agencies or
underwriters jointly underwrite an issue of securities.
Sub Underwriting :- The responsibility is on the head and there are
sub – head under the one head. This is done to diffuse the risk involved in
underwriting.
Firm Underwriting :- Is one in which the underwriters apply for a
block of securities.
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4. ROLE OF UNDERWRITERS 4
•The primary role of the underwriter is to purchase securities
from the issuer and resell them to investors.
•Underwriters act as intermediaries between issuers and
investors, providing for an efficient of capital.
•The underwriters take the risk that it will be able to resell the
securities at a profit.
•The underwriter is the organization that is actually responsible
for pricing, selling, and organizing the issue, and it may or may
not provide additional services.