Legal Definitions - strict underwriting

Strict underwriting is a type of underwriting where the underwriter agrees to buy any unsold shares remaining after a public offering. This is also known as standby underwriting.

For example, if a company is offering 1,000 shares to the public and only 800 are sold, the underwriter will buy the remaining 200 shares. The underwriter charges a fee for this service.

This type of underwriting provides a safety net for the issuer, as they are guaranteed to sell all of their shares. It also provides a level of security for investors, as they know that the underwriter will step in if there is a lack of demand for the shares.