Underwriting a Securities Issue
For an open-end management company, underwriting a securities issue is a matter of registering the securities, meeting the minimum capital requirement of $100,000, distributing a prospectus and selling the shares. Closed-end companies and unit investment trusts must go through an initial public offering like any operating company. The reason for the difference is that open-end companies issue shares continuously on a day-to-day basis and any transactions involving the shares can only occur at the net asset value and must involve the issuing company. Closed-end funds and UITs are issued once and then bought and sold by investors at negotiated prices on the open market.
The underwriting process for those investment companies whose shares sell on the open market begins with the selection of an underwriter and the preparation of a registration statement. The underwriter may be the sponsor itself or an affiliate of the company. The parties will proceed to develop