Information furnished by the underwriters: Overview, definition, and example
What is information furnished by the underwriters?
Information furnished by the underwriters refers to the details and disclosures provided by investment underwriters in connection with a securities offering. This information typically includes pricing details, financial projections, risk factors, and other material facts that investors rely on when deciding whether to invest.
Underwriters play a key role in public offerings, ensuring that accurate and legally compliant disclosures are made to potential investors. They provide this information to issuers, regulatory bodies, and the public as part of the underwriting agreement.
Why is information furnished by the underwriters important?
This information is critical in securities offerings because it ensures transparency and compliance with securities laws. Investors need accurate data to make informed decisions, and regulators require full disclosure to prevent misleading or fraudulent activities.
For issuers, ensuring that the underwriters’ disclosures are complete and accurate helps mitigate legal risks. If inaccurate information is provided, both the underwriters and the issuing company could face regulatory penalties or investor lawsuits.
Understanding information furnished by the underwriters through an example
Imagine a technology company planning to go public through an initial public offering (IPO). The underwriters, typically investment banks, prepare a prospectus containing:
- The offering price of the shares
- Financial statements and future earnings projections
- Potential risks associated with the investment
- Market conditions affecting the company’s valuation
- Disclosures required by securities regulators
This information helps potential investors assess whether to buy shares in the IPO. If any material fact is omitted or misrepresented, the company and its underwriters could be held liable for securities fraud.
Similarly, in a bond issuance, underwriters provide key details such as interest rates, repayment terms, and the issuer’s creditworthiness, allowing investors to evaluate the risk and return of the investment.
An example of an information furnished by the underwriters clause
Here’s how a clause like this might appear in an underwriting agreement:
“The Underwriters represent and warrant that all information furnished by them for inclusion in the Issuer’s registration statement, prospectus, or other disclosure materials is true, complete, and accurate in all material respects, and complies with applicable securities laws.”
Conclusion
Information furnished by the underwriters plays a vital role in securities transactions by ensuring investors receive accurate and legally compliant disclosures. This transparency helps build investor confidence, protects issuers from legal risks, and upholds regulatory standards in the financial markets.
Companies engaging underwriters should ensure that all furnished information is carefully reviewed to avoid compliance issues and potential liabilities.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.