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CWM - Fin Mar > Fin Mar 8 - 1 to 5 > Flashcards

Fin Mar 8 - 1 to 5 Flashcards

1
Q

As a recognised investment exchange, the LSE is responsible for:

A
  • Providing a primary and secondary market for securities
  • Supervising members
  • Regulating the market
  • Recording transactions
  • Disseminating information through a RNS

registered news service

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2
Q

What are the four markets which comprise the LSE

A

1) Main Market
2) AIM
3) Professional Securities Market
4) International Securities Market

1900 listed companies between them

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3
Q

What securities trade on the LSE?

A

1) Corporate Bonds
2) Muni Bonds
3) GILTS and UKTs
4) ETFs
5) Domestic Equities
6) International Equities

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4
Q

What are the four primary areas that the LSE operates in?

A

1) Equity markets and primary issuance
2) Trading services
3) Information services (live price data)
4) MTFs and Derivatives

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5
Q

Regulatory structure of UK:
Top to Bottom

A

HMT & Parliament
Bank of England
FPC
PRA & FCA & POTAM
Firms

FPC and PRA are part of BoE

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6
Q

Who are the FCA dircetly accountable to?

A

Parliament and HMT

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7
Q

What remit of regulation do the PRA and FCA have?

A

PRA: Prudential
FCA: Conduct & Prudential

A firm covered by both is “dual regulated”

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8
Q

What regulation are UK companies expected to comply with?

A

1) FCA Regulations
2) HMT Supervision
3) LSE Membership Rules
4) POTAM
5) Companies Act 2006

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9
Q

What are the key areas of the companies act?

A

1) Company Name
2) Memorandum of Association
3) Directors Duties
4) Publish and Audit Account

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10
Q

What reponsibilities does the FCA have for the LSE? And how does the LSE govern itself?

A

1) FCA designate as a RIE
2) FCA set listing requirements
3) FCA ensrue sufficient systems
4) LSE day to day running of exchange

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11
Q

What does the FPC do?

A

Part of the BoE
Macro-prudential regulator
Monitor and respond to risks

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12
Q

What does the POTAM enforce?

A

The EU takeover directive

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13
Q

What is the investment association?

A

A trade body for UK investments - they have created many classification systems

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14
Q

What is the association of investment companies?

A

A classify of trusts

classify via region and sector e.g. UK smallers or European EM

both must invest 80% in named sector

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15
Q

What is the CISI?

A

Chartered institute for securities and investment

Professional body who offer qualifications, resources, ethics.

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16
Q

What are the CISIs objectives?

A

1) Promote the advancement and dissemination of knowledge
2) Develop high ethical standards
3) Act as an authority for matters of education and public interest

all above relate to securities and investments

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17
Q

What is PIMFA?

A

Personal IM and FA association

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18
Q

What is PIMFAs goal?

A

Create an opearting environment that llows best service for clients and their savings and investments

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19
Q

What are PIMFAs 6 goals?

A

1) Represent the diverse range of firms with a unified voice
2) Be leaders througk their knowledge and expertise
3) Laed debate to create optimal operating environment
4) Be a catalyst to develop culture of savings and investment
5) Transform the way people save and invest
6) Faciliate dialogue across stakeholders to create a best practice

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20
Q

What is primary issuance?

Why is it done

Give two examples

A

Securities issued for the first time

Raise Capital

IPO & Bond Issue

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21
Q

What two ways can an IPO be done?

A

1) Underwritten
2) Best effort basis (no guarentee all securities are sold)

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22
Q

Who carries out the IPO? and why?

A

A syndicate of banks with a “lead underwriter”

Comission for selling securities

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23
Q

What are secondary issues?

A

Further issues of already public stock

Dillutive and non-dillutive

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24
Q

What is a dillutive and non-dillutive secondary issue

A

Dillutive - company create new shares
Non-dillutive - existing shareholder sells large amount of shares (can often be a founder or long term employee)

25
Q

Give 3 advantages of a public listing?

A

1) Raise public profile
2) Marketability and liquidity
3) Easier and less costly access to financing

26
Q

Give 3 disadvantages of public listing?

A

1) Increases costs of compliance and reporting
2) Lose some control of business
3) Become a takeover target

27
Q

What is techMARK?

A

A section of the LSE for tech companies

28
Q

What is a dual listing?

A

A company listed on two exchanges either internationally or domestically (e.g. many american are domestic and regional)

29
Q

What are common examples of dual listing

A

China and Hong Kong
UK and US

30
Q

What do dual listed companies in the US have to comply with.

Give examples:

A

Sarbanes Oxly - SOX
HSBC, Vodafone, BP

31
Q

What are the 5 listing requirements for the LSE?

A

1) Market cap of £30m+ & 10% free float
2) Value of bonds at least £200,000
3) Securities freely transferable
4) 3yr trading history
5) Going concern for next 12 months

32
Q

If a UK PLC cannot meet LSE requirements, what can they do?

A

List on AIM

Aim features less stringent requirements

33
Q

What are the requirements for AIM?

A

Appoint NOMAD (advise on complying with rules and prospectus)
Appoint broker
Subject to continuing FCA obligations

34
Q

What are the FCA continuing AIM obligations?

A

1) make public price sensitive info
2) Issue annual reports within a set time frame

35
Q

What is AQSE?

A

Aquis stock exchange

Trades AIM and Main on its own exchange

36
Q

Examples of succesful and unsuccesful IPOs

A

1) Apple, Msft etc
2) 90s dot com bubble failures

the prospect of large gains attracts many to IPOs

37
Q

What are the three stages of the IPO process?

A

1) Decision - Weigh up pros an cons of undertaking IPO
2) Prepare prospectus (involves IBs, accountants, lawyers)
3) Sale of securities - syndicate manage and sell securities

38
Q

What is a broke issue?

A

Debut price falls below seller’s set level for IPO

39
Q

How do banks guard against broke issues

A

Oversell issue by 15%
Effectively shorting and purchasing back to support price

40
Q

What is a greenshoe option?

A

Syndicate can buy up to an additional 15% of shares is demand exceeds expectation or price exceeds

Can help provide stability for excess demand issue

41
Q

Underwritten vs Best effors?

A

1) Underwritten = full guarentee from bank
2) Best effort = no guarentee all securities will be sold

42
Q

Why can best effort be risky for a bank?

A

Can hurt repuation if they fail to sell all securities

43
Q

What is price stabilisation?

A

Lead manager purchases shares in market to support price if it falls below an agreed value

Creates stability for issue

44
Q

What are the 3 MAR guidelines for price stabilisation?

A

1) Disclosed before offer that its an option
2) Can’t exceed 30 days
3) Must disclose transactions after process concludes

45
Q

3 ways of issuing shares

A

1) IPO
2) Placings
3) Introductions

46
Q

Two types of IPO and the differences

A

1) Offer for sale - Price decided by public - cannot pay more than that price
2) Offer for subscription - public given a price at which they can purchase

47
Q

What is a placing?

A

Offered to specific individuals. (usually investors with specific interest)

48
Q

Why would a company choose to do a placement?

A

1) less expensive
2) less prospectus requirements

49
Q

What 3 things must be included in a prospectus?

A

1) Risks
2) Business plan showing use of funds raised
3) Owners and directors

50
Q

What offerings do not need prospectuses?

A

1) To sophisticated investors
2) Private placements

51
Q

What regulates prospectus requirements?

A

Prospectus Regulation (2019 replaced Prospectus directive)

52
Q

6 things PR introduced:

A

1) Summary no more than 7 pages - clear concise language
2) 10 groups of risks - on material risks listsed (severity and probability)
3) Frequent issuers get universal regulation document - speed up approval
4) SMEs issue growth prospectus - less rigorous
5) Existing listings (18 months) simplified prospectus
6) Exempt if offering to sophisticated investors

53
Q

How will UK PR differ from EU PR?

A

1) FCA will have overall responsibility
2) FCA have greater flexibility over necessity of prospectus
3) Prospectuses won’t be a requirement for all public offerings

54
Q

What is passporting?

A

Allows EEA to passport in to UK to conduct business

Passporting is the foundation of the EU single market

55
Q

How could EEA firms still operate in the UK post Brexit?

What did it grant them?

A

“Temporary Permissions Regime” (TPR)

Part 4A Permission - authorsied to carry on regulated activities

56
Q

What passporting rules must be complied with under TPR?

A

1) Show how FCA conditions will be met
2) How UK business will be structured
3) SM&CR takein into account

57
Q

After 31st Dec 2023 - what happens to EEA firms without full authorisation?

A

Wound down by the Financial Service Contracts Regime (FSCR) - ensures an orderly exit from the UK market.

58
Q

What was the temporary marketing permissions regime?

A

Allowed EEA funds to be marketed in the UK

CWM - Fin Mar (54 decks)

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