State what is meant underwriting commission and distinguish it from brokerage
ANSWER
Underwriting Commission
This is the amount or sum paid the company to a person who agrees to underwrite the company’s shares i.e. take up all the shares or a specified number of the shares not taken up the public. It’s payable whether the person (Underwriter) takes up the shares or not. It must be disclosed in the company’s prospectus.
Brokerage
This is an amount paid the company to a person or persons who agrees to place the company’s shares i.e. exhibits the company’s prospectus in their premises or send copies to their clients, but without incurring any liability on the shares.
It is an amount only payable to brokers.
It must be disclosed in the company’s prospectus.