Non-Issuer Transaction
Candlefocus EditorThese types of non-issuer transactions can involve a wide range of securities, from stocks and bonds to derivatives, notes, and other complex investment instruments, and can happen both domestically and internationally. As well, these transactions are often customized and negotiated by the parties involved, such as the details of pricing, payment terms, maturity terms and other specifics.
This type of transaction does not involve the issuer of the security and no funds from the purchase reach the issuer. Non-issuer transactions are distinct from issuer transactions, whereby money from the purchase of a security directly goes to the issuer as a form of payment.
Non-issuer transactions may offer a number of advantages to the parties involved, both buyer and seller. On a practical level, parties can complete non-issuer transactions outside of regulatory regimes in place for public securities markets, and with relatively little paperwork. This can lead to quicker counterpart negotiations and a higher degree of privacy.
However, non-issuer transactions do present certain risks. If not negotiated and managed carefully, they can carry higher counterparty risks, so it is important to conduct thorough background checks and credit checks on trading partners. The lack of oversight from a regulatory oversight body can also be a challenge, so parties need to be aware of the legal, regulatory and accounting implications of such transactions in the jurisdiction of their trading partner.
All in all, non-issuer transactions can be beneficial for parties engaged in such activity, because they allow a high degree of customization and flexibility and require relatively little paperwork. It is, however, important for parties to be aware of the potential risks involved, as well as any applicable legal, regulatory and accounting implications.