The subject can perhaps be treated most effectively by following through the natural sequence of events, starting from the time at which some publicly constituted body of persons, such as a national government, municipal authority or company decides that it desires to borrow money.

It must be explained that I have applied the term “Borrower” both to persons borrowing money by means of bonds and to those raising capital by means of shares.

The first step is to get into touch with representatives of a financial “house” who, as specialists in such matters, will assist in the technical and other problems involved. This brings us automatically and immediately to the question of underwriting which may be denned as the process by which, for a consideration known as the underwriting commission, the requisite subscription to a new issue is guaranteed. It is the process by which the borrower virtually effects an insurance policy, under which the “insurers” or “underwriters” guarantee to subscribe for that part of the issue not applied for by the general public.