What is an issuer?
An issuer is a legal entity that creates, registers, and sells securities to fund their activities. Corporations, investment trusts, and governments can issue securities. According to their jurisdictions, issuers must disclose financial circumstances, material developments, and other operational operations.
Understanding Issuer
Most securities issuers issue common and preferred stocks, bonds, notes, debentures, bills, and derivatives. Other issuers provide mutual fund shares or ETFs, using investor funds.
Imagine ABC Corporation offers common shares to the public to raise funds for its business. As an issuer, ABC Corporation must disclose financial information to regulators like the Securities and Exchange Commission (SEC). ABC must also follow any local laws or regulations where it grants security. Options writers are also called issuers since they offer securities on the market.
A transaction that is not issued does not directly or indirectly benefit the issuer. A non-issuer transaction refers to any securities disposal that does not benefit the issuer.
Issuers vs. Investors
Investors buy bonds and other securities from issuers. Sometimes, the investor is a lender. On bond maturity or stock sale, the investor lends the issuer money. Thus, the issuer is also a borrower, and investors should carefully assess the borrower’s default risk before buying the instrument or lending cash to it.
Credit ratings of the issuer
As credit bureaus develop credit profiles and scores for customers, rating agencies like Standard & Poor’s and Moody’s rate debt securities issuers. Issuer scores are letters, unlike consumer credit scores. A AAA-rated company has a low default rate and a history of paying its bills. A DDD-rated object is in default. Bonds rated BB or below are trash, suggesting a substantial default risk for investors.
Credit ratings also apply to nations. Greece’s credit rating dropped to CCC+ after it missed billions in loan payments. Standard & Poor’s raised its rating to B- after the government enacted reforms, lowered expenses, and recapitalized its banks, making the company’s bonds safer.
Conclusion
- Create, register, and sell securities to fund their business.
- Corporations, investment trusts, and governments can issue.
- Issuers offer stocks, bonds, and warrants.
