What is an issuer: explanation in human language using a simple example

What are issuers

An issuer, in simple words, is one who issues assets (securities and other payment instruments), having the right to do so. The meaning of the word issuer is slightly different for different entities. Thus, only the central bank has the right to print and put money into circulation. To better understand what issuers are, it is worth considering another example: a commercial bank regularly issues bank cards to its clients, which also makes it an issuer.

Who can be an issuer

Assets issued:

• authorities;
• legal entities that have been granted the authority to issue.

The peculiarity of government agencies is that only they have the right to issue banknotes. Issue available to issuing companies:

• valuable papers;
• payment cards;
• documents;
• traveler's checks.

The issuing organization performs the following functions:

• asset release;
• obligation to provide rights attached to assets issued into circulation.

Joint stock companies and commercial companies

Issuer option, shares are issued by JSC. Other legal entities have the right to initiate the entry of any other securities into the market.

Reliability directly depends on the state of financial and economic activities, the volume of fixed assets, and production capacity. In other words, the larger the company, the lower the risk of default.

This category of issuers is divided according to a certain classification:

1. Blue chips, or first tier, are some of the most reliable companies in the country. These are large raw materials enterprises, federal retail chains, for example, Gazprom, Sberbank, Rostelecom.
2. The second echelon consists of smaller companies with a stable financial position. As a rule, these are regional industry leaders, for example, the Mechel plant or Irkutskenergo.
3. Third echelon. Young companies, as well as long-established ones that have not reached federal scale. They have a low/no credit rating and often have unclear business plans for the future. At the same time, at the regional level, such organizations conduct advertising campaigns and can be recognized. To compensate for the risks of investors and increase demand for their securities, the third tier increases the yield above GKOs.

Why should an issuer issue securities?

The main motive for releasing assets is to obtain financial gain. But the goals may vary:

• increase in equity capital;
• formation of basic and increase in previously formed authorized capital;
• adjustment of the scope of shareholder rights;
• attracting borrowed investments;
• company reorganization;
• fragmentation or consolidation of assets of previous issues.

Income from the issue of money [edit | edit code]

Since money is a medium of exchange on which the well-being of society as a whole depends, the right to receive income from its creation, according to many [ who?

], must belong to the state. According to the American economist Herman Daly, the appropriation of this income by private entities (commercial banks) can be seen as a form of hidden subsidization at the expense of society, which raises questions about the moral justification of this type of subsidy and how it relates to the principle of fair competition. [2]

Forms of issue

There are different forms of securities issue:

• emissive/non-emissive. Issued - bonds, shares that are issued by an enterprise with the permission of an authorized regulatory body. They require state registration. Non-issued – certificates of deposit, bills of exchange, derivative securities. Approval and state registration are not provided;
• undocumented/documentary. Documentary assets are typically in paper form: certificates, promissory notes and bills of exchange. Non-documentary does not require a paper basis. They look like entries in securities accounts (stocks, bonds, derivatives);
• bearer/nominal. The owner's personal data is recorded or registered in the register of the state registrar. Bearer documents do not require identification of the owner. There is no register of holders;
• open/closed issue. Open, or public, involves a public offer to any potential investors. Closed, or private/private: an offer to purchase assets only to pre-determined possible investors.

The meaning of the words “issuer” and “issue”

The official definition of an issuer is in Federal Law No. 39-FZ “On the Securities Market”. Means a legal entity, an executive body of state power, a local government body that bears, on its own behalf or on behalf of a public legal entity, obligations to the owners of securities to exercise the rights secured by these securities.

Translated into everyday Russian, an issuer is an organization that issues securities on its own behalf and in this regard bears certain obligations to holders.

The term is associated with the concept of “emission” - this is the procedure for issuing and placing securities. For example, a joint stock company issued shares on the stock exchange. This means that it issued securities and placed them on the stock exchange, thereby receiving capital for further development or financing other tasks facing the company. And investors got the opportunity to make transactions with them (buying or selling) and thereby earn money and/or save for their goals.

The definitions are valid for issuers of shares, bonds, options, etc. But today they are used more widely. The terms are also applied to other instruments. Below we will consider what the issuer can issue in more detail.

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The main functions that the issuer performs, regardless of the type of asset being issued:

1. Issue of securities and other instruments.
2. Ensuring the rights of owners of these instruments, which are regulated by the legislation of the Russian Federation.

In addition to functions, there are rights and obligations, which we will also consider in the article separately for each type of issuer.

Disclosure of information by issuers

The rules for publishing information are established by law. Issuers regularly and in an accessible manner publish information about their work. Compliance with this rule is mandatory for public and non-public companies.

Publication is subject to quarterly, annual, accounting reports, development stages, affiliates, as well as other information that may affect the value of assets.

Reputable public issuers are happy to disclose information about themselves, increasing the confidence of potential shareholders in order to successfully sell securities.

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Issuing bank function

The functions of the issuing bank differ from the functions of the issuer of other assets. The bank, like any other organization, is vested with the powers of the issuer. It also issues assets (bonds, certificates of deposit and savings, shares).

But the bank also issues money supply into circulation (first-tier bank - central bank), as well as bank payment cards (second-tier bank - savings/commercial bank).

The issuing bank, in simple terms, is a financial company that issues securities, money and other assets used for settlements and payments.

When working with bank payment cards, the bank performs the following functions:

• emissions;
• delivery to clients;
• authorization (when making a payment or withdrawing cash, after a request for the availability of funds - acceptance or rejection of a request for the possibility of performing a transaction);
• debiting funds from the cardholder's account;
• ensuring card security;
• reporting to holders (statement of movement on the account to which the card was issued, or on the card itself);
• providing information about the holder to other credit institutions;
• Constant interaction and cooperation with clients, analysis of their requests or complaints.

Municipal authorities and business entities

Local government bodies - administrations, municipalities are also low-risk issuers, although they are inferior in reliability to the government.

As a rule, they issue bonds to finance targeted projects - construction, improvement, road repair work, etc.

Business entities include unitary enterprises, associations, charitable foundations, and consumer cooperatives.

As legal entities, they issue securities to attract free funds and finance activities.

How bank cards are issued

During the process of issue and use, the card goes through several stages:

• execution of the contract;
• opening a card account;
• making a map;
• delivery to the client;
• maintaining payment cards;
• conducting card account transactions;
• account closure;
• withdrawal of the card from circulation;
• destruction.

The issue includes the following features:

• a coloring composition is applied to A3 format PVC sheets in accordance with a pre-approved image;
• lamination - applying a special coating to the surface of a sheet in order to fix the paint and give additional wear resistance;
• card cutting: the card is cut using a special machine.
• implantation – implantation of a microchip into a card. It contains information that can be read;
• pressing of a magnetic stripe – connection of a transparent film with a card blank;
• embossing (personalization) – placing raised letters on a card with the holder’s name and a 16-digit number.

Comments: 14

Your comment (question) If you have questions about this article, you can tell us. Our team consists of only experienced experts and specialists with specialized education. We will try to help you in this topic:

Author of the article Anatoly Darchiev

Consultant, author Popovich Anna

Financial author Olga Pikhotskaya

1. Kunzada
   03/30/2021 at 17:31 Hello, I fell into a scam and lost 8,000 thousand soms. It's not just me alone; there are about 50 of us. And we were deceived by the same person. We have a photo of his passport and details of his bank cards (MasterCard). We contacted this bank and they told us that we would contact you. Can I get my money back? If so, how? We have all the evidence.
   Reply ↓ Olga Pikhotskaya
   03/30/2021 at 17:37

   Kunzada, good afternoon. You need to contact the bank that issued your card (this bank is called the issuer) from which you transferred money to the fraudster. You also need to contact law enforcement agencies with a statement. Brobank.ru service is not a bank and does not issue payment cards.

   Reply ↓

Central Bank as the largest issuer

The state is considered the largest issuer, since the Central Bank has monopolist rights when issuing banknotes.

Additional issue of money is strictly controlled by the state in order to maintain price levels and inflation within acceptable limits.

Money may be withdrawn from circulation depending on the economic situation in the country. The authority to make the relevant decision belongs to the Ministry of Finance.

The central bank is closely connected with the state, but they do not fulfill each other's obligations regarding obligations with third parties. Therefore, it is endowed with partial independence in development matters.

Investments in which issuers are profitable?

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Specific points of entry into the market and exit from it with a profit can be seen on chart d1 with prompts from 3 proprietary Masterforex-V tools (out of more than 30) - levels of order accumulation (resistance and support), AO_ZOTIK and WPR_VSMARK.

Tell me, is it easier to understand the valuable securities and financial instruments of issuers, which are extremely profitable to buy on the stock exchange? And it’s absolutely not difficult, as I hope you’ve already noticed.

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