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CISI introduction to securities and investment (3. Equities) Exam Questions and Answers
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CISI introduction to securities and investment (3. Equities) Exam Questions and Answers
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CISI: introduction to securities andinvestment (3. Equities) Exam Questions
and Answers
What 2 documents are required in order to form a company? - Answer -Memorandum of
Association & Articles of Association
What is the Memorandum of Association? - Answer -Confirms the subscriber's intention
to form a company under the Companies Act 2006.
This declares the subscriber has agreed to becoming a member of the company and to
take at least 1 share.
Legal statement signed by all initial shareholders.
What are the Articles of Association? - Answer -Details the relationship between the
company and the main sources of finance, the owners.
The articles are agreed by shareholders, directors and company secretary. Include
things such as shareholder rights and company borrowing powers.
For quoted companies, a shareholder resolution needs to be passed that meets the
standard of which authority? - Answer -UK Listing Authority (UKLA)
part of the primary market functions of the Financial Conduct Authority (FCA)
What are the 2 main types of company? - Answer -Private(ltd) & Public(PLC)
companies
What does the "limited" in private & public companies mean? - Answer -The liability of
the shareholder for company debts is limited to the total value of the shares they hold.
What is share capital? - Answer -The amount of money the owners(shareholders) have
invested in the business.
When must public companies hold an AGM? - Answer -Annual General Meetings
(AGMs) must be held by public companies within 6 months of the financial year end.
, The Companies Act provides what rights to shareholders? (in regards to AGMs) -
Answer -Shareholders have the right to attend, speak and vote at an AGM. They can
appoint a proxy to vote (not speak).
These AGMs can include matters such as appointment/removal of directors.
What is an ordinary resolution? - Answer -A matter proposed in AGMs & EGMs that
require a simple majority vote in order to be passed.
What is a special resolution? - Answer -A matter proposed in AGMs & EGMs that
require a 75% majority in order to be passed.
What is an EGM? - Answer -Extraordinary General Meeting (EGMs) are held in addition
to AGMs to deal with important issues such as takeovers or capital raising.
Since 2009, EGMs have been referred to as general meetings.
What is the capital of a company made up of? - Answer -A combination of the total
borrowed and the money invested by its owners (share capital).
What are the long-term borrowings of a company often referred to as? - Answer -Bonds
What is the money invested in a company by the owners often referred to as? - Answer
-Shares, stocks & equity
What are ordinary shares? - Answer -Provide the full risk & reward of investing in a
company.
Provides voting rights to the holder as well as access to dividends and other bonuses.
What is a preference share? - Answer -A hybrid security with elements of debt and
equity.
A company's Articles of Association detail how the preference shares differ from
ordinary shares.
What are the 3 typical characteristics of a preference share? - Answer -Non-Voting:
Unless special circumstances like unpaid dividends
Pay a fixed dividend each year:
Amount set when they are first issued and is paid before ordinary shareholder dividends
Priority rank ahead of ordinary shareholders:
Dividends and company wound-up payments paid before ordinary shareholder's
payments
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