9.15 : Functions of Underwriter

Underwriters are vital in the financial sector, performing several critical functions beyond risk assessment and pricing. They also ensure that companies comply with regulatory requirements while issuing securities. This includes preparing and filing the necessary documentation with financial authorities, such as the Securities and Exchange Commission (SEC), which is crucial for maintaining transparency and investor confidence.

Additionally, underwriters are instrumental in creating the prospectus, which details everything investors need to know about the company and the issuance. This document contains financial statements, details about the company's operations, management background, and any potential legal issues, all essential for informed investment decisions.

Another key function of underwriters is market stabilization. After the initial sale of securities, underwriters often engage in market-making activities to ensure liquidity and stabilize market prices. This can involve buying back shares if the market price falls significantly below the issue price, thus providing a safety net for new investors and helping to maintain market confidence.

Overall, underwriters facilitate a crucial connection between raising capital and fulfilling regulatory and market expectations, ensuring the issuing company’s and the investor’s interests are well served.