Issue

What it is:

Issue refers to a legal entity -- i.e., government, corporation, or investment trust -- that develops, registers and sells securities to the investing public in order to finance its own operations.

How it works/Example:

The most commonly issued securities are bonds, notes, commercial paper, common stock and preferred stock.

Let's assume that Company ABC makes a public offering of shares in order to finance its business expansion. Company ABC, the issuer of the stock, must file a prospectus with the Securities and Exchange Commission (SEC) summarizing the stock offering, associated risk and financial information of the company.

Why it Matters:

Issuers are legally responsible for the securities they issue. To fulfill their legal obligations to investors, they must follow strict reporting standards as set by the SEC, including quarterly reporting of financial performance and conditions, material developments and all operational activities required by regulations in the jurisdictions of the security.

Disclosure requirements for issuing companies were outlined by the Securities Act of 1933 and became more stringent when the Sarbanes-Oxley Act of 2002 was passed into law. Annual and quarterly statements, prospectuses, press releases and other reports issued by publicly traded companies are available for download at the SEC website, www.sec.gov. Never invest in a company's debt or stock without reviewing all of the documents mentioned above.

Best execution refers to the imperative that a broker, market maker, or other agent acting on behalf of an investor is obligated to execute the investor's order in a way that is most advantageous to the investor rather than the agent.