Underwriters and Brokers :

The persons or institutions underwriting a public issue of shares or debentures are called ‘Underwriters’. The underwriters may be individuals, partnership firms or joint stock companies. But, an issue of shares or debentures is hardly underwritten by a single individual as it involves more risk and attaches greater responsibility. Generally, an issue of shares or debentures of a company is underwritten by two or more firms jointly. Some specialised financial institutions set up by the Government in the public sector are also playing an active role these days in underwriting shares or debentures of a company.

Brokers merely promise or try to procure subscriptions to the shares or debentures issued; they do not take any responsibility of subscribing to the shares or debentures of the company. They simply procure subscriptions for shares or debentures from the public on behalf of the company and in exchange of their service rendered to the company, they get remuneration called brokerage.