Reallowance refers to the fee that an underwriting group pays to a securities firm that is not part of the syndicate but still sells shares in a securities offering. Essentially, it acts as a commission for the firm that facilitates the sale of these shares, compensating them for their efforts in marketing and distributing the securities.
Reallowance is commonly used in the context of securities underwriting, which is a key aspect of capital markets. It is particularly relevant in transactions involving initial public offerings (IPOs) and bond issuances. This term is important for legal professionals and financial advisors who work in corporate finance, securities law, and investment banking. Users may manage related forms and procedures using resources like US Legal Forms, which provides templates drafted by experienced attorneys.
Here are a couple of examples of abatement:
For instance, if a company is issuing shares through an IPO and engages several underwriters, a non-syndicate firm that sells a portion of these shares may receive a reallowance fee as compensation for their sales efforts. This fee incentivizes broader distribution of the shares.
| Term | Definition | Difference |
|---|---|---|
| Underwriting fee | A fee paid to underwriters for their services in a securities offering. | Reallowance is specifically for non-syndicate firms, while underwriting fees are for those in the syndicate. |
| Commission | A payment made to an agent or broker for facilitating a transaction. | Reallowance is a specific type of commission related to securities sales by non-syndicate firms. |
If you are involved in a securities offering and need to understand reallowance, consider consulting with a financial advisor or legal professional. You can also explore US Legal Forms for templates that may assist in preparing necessary documents related to underwriting and reallowance agreements.
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Reallowance compensates non-syndicate firms for their role in selling securities, encouraging wider distribution.