Placing without a firm commitment

Placing without commitment is a best-efforts job. The distributor acts as agent and neither guarantees the sale nor buys any unsold securities itself. Underwriting goes further, since the institution commits its own capital to buy whatever shares or bonds go unsubscribed.

The agent sits between an issuer that wants a high valuation and investors who want an attractive return, and has to manage that tension. An overpriced placement cannot be dropped into captive discretionary client portfolios without explicit justification and solid internal governance controls behind it.