Underwriting or placing on a firm commitment basis
Guaranteeing to buy whatever is left unsold in a securities issuance, firm commitment underwriting, needs an investment firm licence or a banking licence under MiFID II Annex I, Section A(6). The underwriter holds substantial regulatory capital to absorb inventory risk during a large distribution, and can passport syndicated offerings across the EEA.
Definition
Guaranteeing the sale of an issue of financial instruments by committing to buy what is not sold to investors.
- MiFID II, Annex I, Section A(6): official text
Which licence you need
Licence families that typically permit this activity:
- IF · Cyprus
Cyprus Investment Firm (CIF) authorisation
CySEC
- IF · Czech Republic
Investment Firm licence
CNB
- IF · Estonia
Authorisation as an investment firm
FI
- IF · Germany
Investment firm licence
BaFin
- IF · Ireland
Investment Firm Authorisation (MiFID II)
CBI
- IF · Italy
Investment firm licence (SIM)
CONSOB
- IF · Latvia
Investment firm licence
LB
- IF · Lithuania
Financial brokerage firm licence
LB
- IF · Luxembourg
Investment firm authorisation
CSSF
- IF · Malta
Investment services licence (Category 1, 2, or 3)
MFSA
- IF · Netherlands
Investment firm licence
Investment firm licence (Vergunning beleggingsonderneming) under Wft Article 2:96 and MiFID IIAFM
- IF · Poland
Brokerage House licence (dom maklerski)
KNF
- IF · Slovakia
Investment firm licence
NBS
Where it can be licensed
Frequently asked questions
What is the main operational risk in firm commitment underwriting?
The underwriter agrees up front to buy all unsold securities from the issuer at a set price. If demand falls short, that inventory lands on the underwriter's own balance sheet, and so does any valuation loss that follows.
How do capital adequacy rules impact underwriting firms?
Underwriting puts the firm's own balance sheet at risk, so prudential regulators charge a specific underwriting risk capital add-on under the Investment Firms Regulation (IFR) or CRD. The firm has to hold enough liquid capital to absorb a market downturn during the syndication period.
Sources
- MiFID II Annex I, Section A(6) · retrieved 2026-09-24
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