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Issue management means

Issue management means

Looking for the answer to the question below related to Financial Management ?

Issue management means

 Options:

.A. instrument designing
B. underwriting support
C. Allotment of shares
D. all of these

The Correct Answer Is:

  • D. all of these

The correct answer is D. all of these. Issue management encompasses a range of activities and processes related to the issuance of securities by a company. Let’s explore in detail why this answer is correct and why the other options are not:

D. All of these:

Issue management refers to the comprehensive set of tasks and responsibilities involved in bringing new securities to the market. This includes:

1. Instrument Designing:

The process of instrument designing involves structuring and designing the financial securities that a company plans to issue. This can include determining the type of securities (e.g., equity shares, bonds, preference shares), their terms and conditions, pricing, and any special features or rights attached to them.

The goal is to create securities that are attractive to investors while aligning with the company’s financing needs and goals.

2. Underwriting Support:

Underwriting is a critical step in the issuance process. Underwriters are financial institutions or investment banks that commit to purchasing the securities from the issuing company and then reselling them to investors.

This commitment provides the issuing company with assurance that the securities will be sold, even if market conditions are unfavorable. Underwriting support can involve setting the offer price, determining the allocation of securities, and managing the issuance process to ensure a successful launch.

3. Allotment of Shares:

Allotment of shares refers to the process of allocating newly issued shares to investors who have subscribed to them. Once the subscription period is complete, the issuing company, often in consultation with the underwriters, determines how many shares will be allocated to each investor based on their orders. The goal is to distribute shares fairly and in accordance with regulatory requirements.

Now, let’s examine why the other options are not correct:

A. Instrument Designing (alone):

While instrument designing is indeed a crucial aspect of issue management, it is just one component of the broader process. Issue management involves not only designing the financial instruments but also encompasses activities such as underwriting support, allocation, and the overall management of the issuance.

B. Underwriting Support (alone):

Underwriting support is an integral part of issue management, but it does not cover all the responsibilities associated with bringing securities to the market. Underwriters play a key role in ensuring the success of the issuance by committing to purchase the securities and managing the sale to investors. However, issue management also includes activities related to instrument design and the allotment of shares.

C. Allotment of Shares (alone):

Allotment of shares is a specific task within issue management that deals with the distribution of securities to subscribers. While it is an important step, it does not encompass the full scope of issue management responsibilities, which also involve designing the securities and securing underwriting support.

In summary, issue management is a comprehensive process that encompasses instrument designing, underwriting support, and the allotment of shares, among other activities. These tasks are interconnected and critical to the successful issuance of securities by a company.

Effective issue management ensures that companies can access the capital they need while meeting regulatory requirements and investor expectations. Understanding the multifaceted nature of issue management is essential for companies, financial institutions, and investors involved in the issuance and trading of securities.

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