Book - Chapter 5 ST Questions Flashcards
- What is a fiduciary duty?
A fiduciary duty is where someone who has undertaken to act for or on behalf of another in a particular matter in circumstance is which gives rise to a relationship of trust and confidence.
- Why do directors have a duty to avoid conflicts of interest?
There is a long-established position that directors must not allow any personal or outside interest to affect their duty to their company.
- A FTSE 250 company has a board that consists o-f 13 directors. How many must be independent directors?
Under the UK Corporate Governance Code at least half the board, not counting the chairperson, should be independent non-executive directors.
- What is the ‘comply or explain’ principle?
Where a company determines that applying the Code is not appropriate or there is a better alternative it must explain its reasonin9 to its shareholders.
- Who undertakes due diligence on a prospectus for the flotation of a company?
The combination of the reporting accountants and the legal advisers are said to be providing ‘due diligence’ for the prospectus - making sure the document is accurate and complies with the regulations.
- Which type of IPO method might be used where no capital is raised?
An introduction is used where an overseas company wants to obtain a listing on a UK exchange. The purpose is to have their shams more widely traded and not to raise fresh funds.
- What risks does stabilisation present?
It presents the risk of market manipulation and, therefore, requires regulatory approval and disclosure.
- What is the main issuance process used by the OMO for gilts?
The main process used is the auction process, although the OMO does also use syndicated offerings and mini-tenders to a lesser extent.
- A corporate bond is being priced at a spread of 250 basis points over the yield on the ten-year benchmark gilt. If the gilt is yielding 2.3%, what yield will the bond be issued at?
If the gilt is yielding 2.3% then the spread will be a further 2.50% so the bond will yield 4.80%.
Investor A has a 3.2% stake in a company and has just purchased further shares representing 0.6% of the issued shares. Investor B has a 3.8% stake in the same company and has increased their shareholding by 0.1 %. Investor C also has a stake in the same company of 3.6% and has increased their stake by 0.5%. Which investor needs to disclose the change in their holding?
Investor C would need to notify the change. Once an investor’s holding is above 3%, they must also inform the company if it rises ,or falls through a whole percentage point.
