Legal Definitions - best-efforts underwriting

Best-efforts underwriting is a type of underwriting where an investment banker agrees to help sell a new issue of securities to the public, but does not guarantee the sale of all the securities. The underwriter acts as an agent for the issuer and any unsold securities are not issued.

• An investment bank agrees to help sell a new issue of stocks for a company. The bank will use its best efforts to sell the stocks to the public, but does not guarantee that all the stocks will be sold.
• A municipality wants to issue bonds to finance a new project. An investment bank agrees to help sell the bonds to investors, but does not guarantee that all the bonds will be sold.

These examples illustrate how an investment bank can help an issuer sell securities to the public through best-efforts underwriting. The investment bank will use its expertise and resources to market and sell the securities, but the success of the sale ultimately depends on market conditions and investor demand.