Underwriting is a contract in which an underwriter gives an assurance to the issuer that he will subscribe to the securities offered in the event of non subscription by the persons to whom they are offered. The person who gives this assurance is called an underwriter. Underwriters do not buy and sale securities. They stand as back-up supporters and underwriting is done for a Commission. Underwriting provides insurance against the the possibility of inadequate subscription. Underwriters are divided are into two categories :
- Institutions and banks.
- brokers and approved investment companies
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