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J12 - Securities Advice & Dealing > Financial Markets > Flashcards

Financial Markets Flashcards

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SIE Exam flashcards
1
Q

How many independant non-executive directors should a FTSE350 company have on its board?

A

> 50%

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2
Q

How often are FTSE350 directors re-elected?

A

Annually

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3
Q

Who must clearing houses be recognised by as ‘fit & proper’?

A

PRA

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4
Q

According to the principles of the takeover code, what cannot be created as a result of a takeover bid?

A

False markets that artificially distort the price of securities

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5
Q

True or false? The offeror company must have sufficient cash when announcing the bid.

A

True

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6
Q

What two elements make up a stock exchange?

A

Primary market - where securities first issued
Secondary market - where securities are traded

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7
Q

What are some of the benefits of listing a company?

A
  • Cash - raise finance to expand.
  • Increased profile
  • Liquidity - company’s shares can be traded more easily.
  • Places a value on the company.
  • Employees - can offer share schemes to incentivise.
  • Takeovers - easier for company to take over other companies.
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8
Q

What must be issued before a company’s listing?

A

Prospectus

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9
Q

Where must firms apply if they wish to be listed on the ‘main market’?

A

-UKLA’s Official List
-LSE’s Main MarketW

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10
Q

Name the conditions a firm must meet to be listed.

A
  • Min market cap of £30m (£700k for OEICs/ITs).
  • Min 10% of shares available to public.
  • No one shareholder can have >30% voting rights.
  • Three years’ audited accounts.
  • Shareholders must be given pre-emptive rights for any further share issuance.
  • Must have an FCA authorised sponsor.
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11
Q

What are the differences in conditions for listing on the AIM compared to the main market?

A

-No min market cap
-No prior trading history
-No min free float

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12
Q

What are the four main types of IPO?

A
  • Offers for sale
  • Offers for subscription
  • Placing
  • Introduction
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13
Q

What is the most common method of listing?

A

Offer for sale

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14
Q

On what basis can offers for sale be made, and how do they differ?

A

Fixed price offer - shares offered to investors at a predetermined price.
Tender offer basis - investors invited to bid for shares, stating minimum price they’d pay

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15
Q

How do offers for subscription work?

A

Investors are invited to bid for shares above a minimum subscription level, usually to gauge overall demand.

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16
Q

What type of IPO do investment trusts tend to use?

A

Offers for subscription

17
Q

How do placings work?

A

Issuer goes directly to institutional investors and pitches share sales to them.

18
Q

Why might a company opt for a dual listing?

A

It allows for a larger investor base

19
Q

What may the sponsor agree to do if the price of a shares following a listing falls below a predetermined level?

A

Price stabilisation - sponsor will buy back the issued shares

20
Q

What is the greenshoe option and when can it be used?

A

Allows sponsor to over-allot the issue by up to 15%.
Can only be used up to 30 days from issue & must be disclosed

21
Q

What ways could a listed firm subsequently raise further capital?

A

-Rights issue
-Open offer
-Subscriptions
-Resale with subscriptions
-Closed offer

22
Q

Who are the primary dealers for the UK Gilt market?

A

Gilt-Edged Market Makers (GEMMs)

23
Q

Under the auction process for UK Gilts, what is the minimum bid?

A

£1m

24
Q

How are conventional gilts allocated following an auction?

A

-Highest bid; then
-remainder taken up by lower bidders

25
Q

What price do all successful bidders pay at an auction for index-linked gilts?

A

Lowest accepted price

26
Q

How much of a conventional gilt auction is set aside for non-competitive bids?

A

15%

27
Q

What will the DMO regularly issue to cover any shortfall in UK Govt cashflow?

A

Treasury bills

28
Q

Categorise the three main types of corporate bond based on highest to lowest risk.

A

-Senior - lowest risk
-Subordinated
-Mezzanine

29
Q

How are corporate bonds typically priced?

A

At a yield spread to a specified benchmark i.e. SONIA

30
Q

How might a company close the funding gap between commercial paper and long-term borrowing?

A

Medium term note (MTN) programme

31
Q

True or false? There is a market in junk-rated MTNs.

A

False

32
Q

Once a holding becomes a notifiable interest, how long does the investor have to inform the company and the FCA?

A

2 working days

33
Q

In what scenarios must an investor with a notifiable interest inform the company?

A
  • Their holding goes above 3% (shares or voting rights).
  • Once above 3%, if their holding rises or falls by a full percentage point.
  • The stake falls below 3%.
34
Q

What are the thresholds for notifiable interest for collectives?

A

5%
10%
Every full % point over 10%

35
Q

When must a mandatory offer be made?

A
  • Where a shareholder acquires more than 30% of the shares/voting rights.
  • Where a shareholder increases their holding from 30% or more to less than 50%.
36
Q

How might a predator fund a takeover?

A

-Follow-on offering i.e. rights issue
-Conventional bond issuance
-Convertible bond issuance

J12 - Securities Advice & Dealing (13 decks)

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