FREQUENTLY ASKED QUESTIONS (FAQ)

FREQUENTLY ASKED QUESTIONS (FAQ)
WHAT IS A RIGHT ISSUE?
A right issue is an issue of new shares to existing shareholders in proportion to the number of shares already held by each share holder. A right issue is often used to reduce floatation time or costs, to avoid diluting the ownership right of the existing shareholders.
The price of which right issue are issued below the current market price of the shares rank pari-passu (equally with all other shares of the same category once the issue is completed.

WHO IS A STOCK BROKER?
A Stock broker is a firm or person who sells and buys securities on behalf of investors for a commission known as brokerage.

WHO IS AN ISSUING HOUSE?
It is a firm that helps to prepare prospectuses and sell share offered to the public by companies and government, as a member of the stock exchange.

WHAT ARE SECURITIES?
Securities are written or printed documents by which the claims of holders in specified property are secured they could be stock, bond, debentures and shares.

WHAT ARE STOCK AND SHARE?
They represent ownership in business.

WHAT ARE BONDS AND DEBENTURES?
Bond s and debentures are other kinds of securities. They are legal document which represent a promise by the government or the company (in case of bond) to pay back a loan, plus a certain amount of interest over a definite period of time.

WHO IS AN INVESTOR?
An institution or a person like you and me that uses his savings or borrowings to buy securities.

WHY DO PEOPLE BUY STOCK?
Some people buy stocks with the hope to increase their capital, to share in the futures of the companies, but keeping pace with inflation has always been the investor’s primary objective.

HOW CAN I BOUGHT STOCKS AND SHARES ON THE STOCK EXCHANGE? Stock and share are bought and sold on the stock exchange through dealing members known as stock brokers on behalf of investors.

WITH HOW MUCH MONEY SHOULD I VENTURE INTO THE STOCK MARKET?
Most income levels can venture into stock market some wealthy institutions and people invest thousands or even millions of money, but low income investors can participate with as little as one hundred of money depends on your currency value.

WHICH STOCK SHOULD I CHOOSE?
It depends on what you want from your investments about 262 stock are quoted (or listed) on the stock exchange, they range from government stocks, to ordinary shares and their dividends vary from high to low. The important thing is to determine your own objectives first, discuss with a stock broker and them invest accordingly.
By filling an application form contained in a prospectus or through mandate to a stockbroker the requested shares will be purchased for you.

WHAT IS THE PROOF OF OWNERSHIP OF SHARES AND STOCKS?
A certificate of stock holding or share certificate with the owners names, the number of shares, his account number etc. written on it. Also in an automated securities market for the countries that has obtained it, a statement of shareholding issued to shareholders by the clearing house is evidence of shareholding.

HOW QUICKLY IS STOCK CERTIFICATE OBTAINED AFTER THEY ARE PURCHASED?
It depends on the mode of purchase. Purchase through public issue takes time to complete, purchase through a stock broker on the floor of the exchange takes about four days T+3 (Transaction day plus three working days).

WHAT DOES A STOCKBROKER CHARGE FOR HIS SERVICES?
A stockbroker charges a commission called brokerage. The charges vary depending on the types of services rendered. However, stockbroker charges are negotiable. Their charges are controlled by the council or a country.

WHAT DOES AN INVESTOR GAIN BY BUYING SHARES?

1. Dividend, which is part of company’s profit.
2. Bonus share i.e. Extra chares fully paid out of reserves which are distributed to existing share holders in proportion to their existing holding.
3. Use of shares as collateral to obtain loan.
4. Capital appreciation as market prices of shares increases.
5. Right to attend shareholders meeting and participate in its deliberation as voting members.

CAN AN INVESTOR COME TO BUY AND SELL ON THE STOCK MARKET?

NO, he can only do so through a stock broker who is licensed to represent investors and trade on the stock exchange.

WHAT SERVICES DO STOCKBROKERS PROVIDE?
 Provide professional advice on the selection and management of investments.
 Assist project sponsors to raise money on the capital market.

WHY ARE STOCKBROKERS ACTIVITIES REGULATED?
Regulation of stockbroker’s activities are done to protect the investing public and maintain confidence in the buying and selling of securities.