Underwriting Commission Law and Legal Definition
Underwriting commission is the compensation that an underwriter receives for placing a new issue with investors. It is the fee which an investment banker charges for underwriting a security issue. Even if the company does not have to buy any shares, the fee is paid as a return for the implicit risk involved in the underwriting contract.
It is calculated as a discount from the price of the new issue. For instance, an issuer may sell the underwriter a bond at $90 per bond. The underwriter will then place the issue at $100, thus allowing it to make a $10 profit. This profit is the underwriting commission. Underwriting commission is also called a concession.
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