Best Efforts
An agreement an underwriter makes to act as an agent between an issuing company and investors. Investopedia Says:
In a best efforts agreement, the underwriter agrees to use all efforts to sell as much of an issue as possible to the public. The underwriter can purchase only the amount required to fulfill its client's demand or the entire issue. However, if the underwriter is unable to sell all securities, it is not responsible for any unsold inventory.
Best effort agreements are used mainly for securities with higher risk, such as unseasoned offerings. Related Terms:
Agent
Best Practices
Bought Deal
Firm Commitment
Initial Public Offering - IPO
Mandatory Mortgage Lock
Negotiated Underwriting
Standby Underwriting
Underwriting
Unseasoned Security |