At a glance:Funding effect in the issue of certificates
The issuer receives liquidity as a result of the issue of securities. When an issuer issues certificates and warrants, there are no specific rules about how the funds have to be used. For example, they can use the funds to finance their regular business activities. Investors are exposed to the issuer’s default risk. Moreover, the investment is not covered by any protection, such as deposit insurance. Investors only have a right to repayment if they sell the instrument, or at its expiration date. In this way, the issuer obtains funding on favourable terms.
