BSE Back To Basics - The Definitions

BSE Back to Basics – 2015 - 2016

The Definitions

What is a Stock Market? • The Stock Market is an integral component in the economy of a country. It is a central marketplace that brings companies seeking capital for growth and expansion closer to persons or parties who have income they are wish to invest. The stock market is a highly mechanism which assists g y efficient and regulated g both companies and individual investors to attain their goals.

What is a Stock Exchange? • A stock exchange is simply a virtual marketplace where securities - shares and bonds - are bought and sold. To help in compliance with trading and settlement rules, intermediaries or Brokers are given access to the stock exchange so that they can represent buyers and sellers and execute the trades.

What is the Role of the Barbados Stock Exchange? • The Barbados Stock Exchange Inc. facilitates the trading of shares in those companies listed on its board. It maintains records of the orders entered by each stockbroker and ensures that all orders are queued d based b d on price i and d time ti entered. t d To T help h l in i compliance with trading and settlement rules, intermediaries or brokers are given access to the stock exchange so that they can represent buyers and sellers and execute the trades. Anyone trading in or advising you on securities must be a Registered Broker with the Barbados Stock Exchange Inc. (BSE) and the Financial Services Commission (FSC).

What is the Barbados Central Securities Depository Inc Inc. (BCSDI)? • The Barbados Central Securities Depository Inc. (BCSDI) is the wholly owned subsidiary of the BSE that facilitates the immobilization of securities, the clearance of trades and settlement of funds through the Central B k off Barbados Bank B b d and d also l offers ff services i as Registrar R i t of public and listed companies as well as mutual funds. • It is a facilityy for holding g securities and enables share transactions to be processed by book entry. A Book Entry System facilitates the change of ownership of Securities electronically, electronically without the need for the movement of physical documents, i.e. the BCSDI is an electronic means of recording the ownership of shares.

What is the Financial Services Commission?

• The Financial Services Commission (FSC) is an g regulatory g y bodyy responsible p for supervising p g integrated and regulating non-bank financial institutions in Barbados, particularly those entities licensed or registered under the following Acts of Parliament: – – – – – –

Exempt Insurance Act, Cap. 308A, Insurance Act, Cap. 310 Occupational Pension Benefits Act, Act Cap. Cap 350B Securities Act, Cap. 318A Mutual Funds Act, Cap. 320B Co operati es Societies Act, Co-operatives Act Cap. Cap 378A

What is the Financial Services Commission?

• FSC’s main functions include those previously discharged by the former Securities Commission, Commission Supervisor of Insurance and Pensions, and the Cooperatives Department, in so far as it relates to credit unions. i Th organization The i ti is i therefore th f responsible ibl for: f – administering specified enactments, including the licensing or registering of financial institutions – supervising i i and d regulating l ti the th operation ti off financial fi i l institutions i tit ti – establishing standards for institutional strengthening, for the control and management of risk in the financial services sector and for the protection of consumers and creditors of financial institutions – promoting stability, public awareness and public confidence in the operations of financial institutions

What is the Registered Broker? • A Registered Broker, Broker stock broker or broker, broker is the direct link between you the investor and the Company whose shares have been listed on the stock exchange.

The stockbroker provides investment advice, where possible, and will help you decide if the purchase of shares is the kind of investment yyou want. When choosing a stockbroker you need to have confidence in, and be comfortable with both the stockbroker and the company who will handle your investment investment.

What is a Share?

• A share represents a single unit of ownership interest in a company. When an individual purchases or acquires shares they become a part owner or shareholder of the company.

• There are two types of shares: – Common Shares – Preference Shares

What is a Common Share? • A security that represents ownership in a corporation. corporation Holders of common shares (stock) exercise control by electing a board of directors and voting on corporate policy. Common shareholders (stockholders) are on the bottom of the priority ladder for ownership structure.

In the event of liquidation, q , common shareholders have rights to a company's assets only after bondholders, preferred shareholders and other debt holders have been paid in full full.

What is a Preference Share? • Shares in a company which give their holders an entitlement to a fixed dividend but which do not usually carry voting rights.

What is the Difference between Common Shares & Preference Shares?

•

The dividend on ordinary shares is uncertain and variable (high when the company does well, poor or non-existent when it does badly). Preference shareholders get a fixed dividend which, if not paid, usually accrues until it can be.

• Each ordinary share usually carries a vote. Preference shares do not usually carry a vote unless dividends fall into arrears.

• In the event of a winding up, preference shares are usually repayable at par value, and rank above the claims of ordinary shareholders (but behind bank and trade creditors).

• Preference shares may be issued with the right of conversion into ordinary shares. These are called convertibles.

What is a Shareholder? • A shareholder is any individual, individual company or other organization that owns at least one share in a company.

What is a Share Certificate? • A share certificate is a written document signed on behalf of a corporation, and serves as legal proof of ownership of the number of shares indicated.

What is a Bond?

• A bond is an “IOU” IOU in which an investor investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period of time at a variable or fixed interest rate.

• Bonds are used by companies, municipalities, states and sovereign governments to raise money and finance a variety of projects and activities.

• Owners of bonds are debt holders, or creditors, of the issuer.

• Currently only Government bonds are traded on the board of the BSE. BSE

What is a BCSDI Statement of Account? • A BCSDI Statement of Account is a written document which serves as legal proof of ownership of the number of shares indicated held in a dematerialized (electronic) state. • The Statement of Account is issued once per year and lists the name of the security held, the number of shares held at the close of the yyear,, the closing g p price of the security and the value of the shares held (number of shares held x closing price).

BCSDI Statement of Account

What is a Record Date? • The date established by an issuer (Listed Company) of a security for the purpose of determining the holders who are entitled to receive a dividend or distribution (usually notices ti f AGMs). for AGM ) he h record d date, d t a company looks l k to t see who its shareholders or "holders of record" are.

Essentially, a date of record ensures the dividend cheques or distributions get sent to the right people.

What is an Annual General Meeting (AGM)? • A mandatory, public yearly gathering of a publicly traded company's company s executives executives, directors and interested shareholders. At the annual general meeting, the CEO and directors typically speak, and the company presents it its annuall report, t which hi h contains t i i f information ti f for shareholders about its performance and strategy. • Shareholders with voting g rights g vote on current issues,, such as appointments to the company's board of directors, executive compensation, dividend payments and auditors. auditors Shareholders who do not attend the meeting in person are asked to vote by proxy, which can be done online or by mail.

What is a Voting Right? • The right of a stockholder to vote on matters of corporate policy and who will make up the board of directors. Voting often involves decisions on issuing securities, initiating corporate t actions ti and d making ki substantial b t ti l changes h i the in th corporation's operations. • Shareholders do not necessarilyy need to be p physically y y present at the site of the company's annual meeting in order to exercise their right to vote. It is common for shareholders to voice their vote by proxy by mailing in their response.

What is a Proxy Vote? • A ballot cast byy one p person on behalf of another. One of the benefits of being a shareholder is the right to vote on certain corporate matters. Since most shareholders cannot or do not want to attend the annual and special p meetings g at which the voting occurs, corporations provide shareholders with the option to cast a proxy vote. • Shareholders receive a proxy ballot in the mail along with an informational booklet called a proxy statement describing the issues to be voted on. Shareholders return a form by mail agreeing to have their vote cast by proxy. proxy

What is a Dividend? • A dividend is a distribution of a portion of a company company's s earnings, decided by the board of directors, to a class of its shareholders. In Barbados, dividends are issued as cheque h payments t or by b electronic l t i funds f d transfers t f (EFT) (EFT).

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