What Does Issuer Mean? Here Are Its Functions and Roles in the Investment World

 When investing, you'll likely encounter the term "issuer" frequently. Yes, "issuer" is an important term for investors and capital market players to understand because it relates to the party issuing a particular investment instrument. However, many capital market players remain confused about the meaning of this term.

In fact, some investors don't fully understand the role and function of issuers in the investment world. To learn more about what an issuer means, its functions, and the securities it transacts, see the following guide.

What Does Issuer Mean? Here Are Its Functions and Roles in the Investment World

Definition of Issuer

Quoting from the Financial Services Authority (OJK), an issuer is the term for the party carrying out the public offering process. A public offering conducted by an issuer is an offer of securities sold to the investing public in accordance with statutory procedures.

Another definition of an issuer is an individual, company, corporation, or group of organizations offering securities or debt instruments. Issuers can also offer securities in the form of commercial paper, bonds, shares, debt instruments, Collective Investment Contracts (KIK), derivative securities, and so on.

Issuers also offer Sharia-compliant securities, namely sukuk, whose issuance method must comply with Sharia principles in the capital market. Issuers typically offer securities via the capital market, including bonds, sukuk, and shares.

According to the Big Indonesian Dictionary (KBBI), an issuer is a business entity that issues securities for trading. Therefore, it can be concluded that an issuer is a company whose shares are traded on the capital market.

Differences Between Issuers and Public Companies

According to the Indonesian Dictionary (KBBI), a company can be considered an issuer if it has conducted an IPO, or Initial Public Offering. This means the issuer has offered shares to the public, which can be traded by investors on the capital market. However, there are still several differences between issuers and public companies.

Returning to the OJK's explanation, a public company is a Limited Liability Company (PT) in accordance with Article 1 number 1 of the General Provisions of Law No. 40 of 2007 concerning Limited Liability Companies. A PT has shares held by at least 300 investors and has a minimum paid-up capital of 3 billion rupiah.

Meanwhile, issuers are required to submit a Registration Statement during the public offering process, and public companies must submit a registration statement to become a public company. Regarding this registration statement, the OJK issues an effective statement as an indicator of the completeness and fulfillment of all registration statement requirements and procedures, a mandatory step in accordance with applicable laws.

Therefore, the significant difference between an issuer and a public company is that the issuer is the party currently undergoing the IPO process. Meanwhile, a public company is a Limited Liability Company or PT that has carried out the IPO process.

The Function of Issuers in the Investment World

After understanding what an issuer is, you also need to understand the function and role of issuers in the investment world or capital markets. In general, issuers play a role in providing opportunities for companies and business owners to obtain funding or additional capital.

The presence of issuers can also open up opportunities for investors to invest. Thus, investors can improve their financial condition by investing in securities issued by issuers.

Furthermore, the primary function of issuers is to offer securities to the public. They are also responsible for managing public capital optimally by providing evidence of their accountability through the issuer's quarterly financial reports.

By offering their shares to the public, investors or those who purchase shares will acquire a portion of ownership in the company in question. This also opens up the opportunity for investors to receive dividends.

Furthermore, issuers also have several specific objectives related to issuance, which are generally determined at the GMS (General Meeting of Shareholders), including:

Expanding business opportunities because capital obtained from investors can be used for business expansion, market coverage, or increasing production capacity.

Transferring shareholders from existing investors to new ones.

Improving the funding or capital structure, namely by balancing equity and foreign capital.

Understand the Meaning of Issuer to Understand the Types of Investment Products They Issue

That explains what an issuer is, as a company or party that issues certain investment securities. By understanding the meaning of issuer, you'll be much more informed about the types of investment products they issue. Depending on your needs, you'll be able to consider the best type of product to maximize your investment returns.