Underwriters of the security issues are required to
Take up securities not subscribed by investors
Underwriting is an agreement by which an underwriter undertakes to subscribe to, or procure subscribers for, the securities of a public issue that the public does not take up. It guarantees the issuer the minimum amount it seeks.
If the issue is fully subscribed, the underwriter buys nothing and simply earns the underwriting commission. Only when there is a shortfall does the obligation devolve on the underwriter, who must take up the unsubscribed portion in proportion to its commitment.
An underwriter is therefore not required to buy all the securities underwritten; that happens only in a firm or bought-out deal. Marketing securities as an agent is the role of brokers, and managing the issue is the role of the lead manager or merchant banker.
Hence, Take up securities not subscribed by investors.
Similar Questions
In India, NIFTY and SENSEX are calculated on the basis of :
The world’s first electronic stock market is :
ADRs’ and GDRs’ are an excellent means of investment to invest in India for
Statement I : FIIs do not invest in unlisted entities. They participate only through stock exchanges.
Statement II : FIIs cannot invest at the time of initial allotment.
Select the correct code :
Codes :
In which of the following Stock Exchanges the GDR’s are listed ?
(i) London Stock Exchange
(ii) New-York Stock Exchange
(iii) Luxembourg Stock Exchange
(iv) Bombay Stock Exchange
(v) Singapore Stock Exchange
(vi) Hong Kong Exchange
Identify the correct combination :
Assertion (A) : Investors in capital market seem to be inclined for fixed income securities.
Reason (R) : Debt instruments now have active secondary market.
Codes :
Match the various stock exchanges in List – I with the years of their establishment in List – II as follows and suggest the correct code :
List – I List – II a. National Stock Exchange (NSE) i. 1875 b. MCX Stock Exchange (MCX-SX) ii. 1992 c. Bombay Stock Exchange (BSE) iii. 2000 d. Interconnected Stock Exchange of India (ISEI) iv. 2008 Codes :
a b c d
Secondary market intermediaries for corporate securities in India are
I. Investors
II. Jobbers
III. Brokers and sub-brokers
IV. Portfolio consultants
Codes :
Examine the following statements and choose the correct answer :
Statement - I : FIIs do not invest in unlisted securities. They participate only through Stock Exchanges.
Statement - II : FIIs cannot invest at the time of initial allotment.
Codes :
Important Questions from Capital Market
The following two statements relate to receivables management. Choose the correct code for the statements being correct or incorrect.
Statement I: The major controllable decision variables for deciding the credit policy are the credit standards and analysis and the credit terms only.
Statement II : Factoring is a popular mechanism of managing, financing and collecting receivables.
The following two statements relate to financial derivatives. Choose the correct code for the statements being correct or incorrect.
Statement I: When an option is allowed to be exercised only on the maturity date, it is called an American option.
Statement II : If the option holder does not lose or gain whether he exercises his option or buys or sells the asset from the market, the option is said to be at-the-money.
The given statements are related to financial derivatives. Choose the correct code for the statements being correct or incorrect.
Statement I: A speculator will gain, if he sells foreign currency under a forward contract, when the spot price is higher than the forward price.
Statement II : In currency futures, intra currency spread exists when a speculator buys/sells the same currency for two delivery dates.
Indicate the correct code for the following two statements of Assertion (A) and Reasoning (R):
Assertion (A): Investors in the capital market now have a higher inclination for investment in debentures.
Reasoning (R): Debentures have active secondary markets now.
Authorised capital of a company is Rs. 5 lacs; 40% of it is paid up. Loss incurred during the year is Rs. 50,000. Accumulated loss carried from last year is Rs. 2 lac. The company has a Tangible Net Worth of:
