2 - Equties, property and alternative investments Flashcards
What is an Equity
A share of company
What affects share prices long term
Fundamental economic and political factors
What affects share prices short term
Investor sentiment
What are some other factors affecting share prices
(6)
- External economic and political factors
- Investor sentiment
- Profit expectations
- Dividend expectation
- Takeover activity
- Quality and track record of management
Where are shares dealt with in the UK
London stock exchange
What must happen when shares are first issued to LSE
They must be admitted to the official list or main market or AIM
What is official list or main market
Who are they regulated by
Companies listed on LSE make up main market
Regulated by UKLA (United Kingdom Listing authority) (part of FCA)
What do the UKLA aim to do
Govern ongoing behaviour of listing companies and way in which they report to shareholders
What is AIM
LSE launched AIM to provide primary and secondary market facilities for companies too small or too new to apply to LSE (interim to ful listing)
Shares are not classified as listed (too small company)
Costs of buying and selling shares
4
Commission
Stamp duty
Stamp duty reserve tax
Panel on takeovers and mergers levy
What is commission generally for stockbrokers
tiered
When is stamp duty paid on shares
If shares transaction is > £1000
When is SDRT paid
Is there a limit?
shares bought electronically through certificateless for electronic share transfer (CREST) system
£1000 limit does not apply
What is the rate of tax for stamp duty and SDRT
0.5%
Who is stamp duty and SDRT paid by
How is it rounded
How is SDRT rounded
Paid by purchaser
Stamp duty rounded to next multiple of £5
SDRT rounded to nearest penny
What is the PTM levy
Flat rate charge of £1 applied to trade over £10,000
What is the PTM
Regulatory body that oversees all takeovers and mergers of companies listed on LSE
What are the two main classes of share capital
Ordinary shares
Preference shares
What are the features of preference shares
How is it paid? What is the priority over ordinary shares
Pay a fixed rate of dividend half yearly
Divendend is only paid if there are sufficient after tax profit
Payment of dividend on shares has priority over payments on ordinary shares
Do preference shares have voting rights?
No unless payment of dividends has fallen into arrereas
What are some types of preference shares
Cumulative preference shares
Non cumulative preference shares
Participating preference shares
Redeemable preference shares
Convertible preference shares
What is a cumulative preference share
If company has insufficient profits in one year to pay dividends, it carries forward. These shares have priority over all other shares
Non-cumulative preference shares
Lose the right to receive any unpaid divedend at financial year
Participating preference shares
Pay a fixed rate of divedend and allow holder to participate in profits of company