HERE SHARING SOME IMPORTANT POINTS FROM JAIIB PPB UNIT 4- Role of Money Markets, Fixed Income Markets, Forex markets and FEMA
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1. Capital market is a market for long term debt and
equity shares (both are issued and traded).
2. Two types of capital market are: primary and
secondary.
In the primary market, securities (shares, bonds,
debentures) are offered to the public for subscription, for raising capital or
fund.
In the secondary market, securities are traded after
being initially offered to the public in the primary market and/or listed on
the Stock Exchange. Secondary market comprises equity markets and debt markets.
3. Corporatization is the process of converting the
organizational structure of the Stock Exchange from a non-corporate to a
corporate structure.
4. Demutualization refers to the transition process
of a Stock Exchange from a mutually owned association to a shareholders-owned
company.
5. FII can invest up to 49 % in Stock Exchange in
India.
6. No single investor can hold shares in an Indian
Stock Exchange beyond a limit of 5%.
7. A broker is registered with SEBI and is a member
of a recognized Stock Exchange and is permitted to do trading of different
Stock Exchanges.
8. Government securities are coupon bearing
instruments which are issued by RBI on behalf of Government of India.
Government securities have maturity dates ranging from less than 1 year to a
max of 30 year.
9. Debentures are bonds issued by a company. It has
fixed rate of interest usually payable half-yearly, on specific dates and the
principal amount repayable on a particular date on redemption of debenture. It
is an unsecured debt.
10. A bond is a negotiable certificate usually
unsecured. In coupon bonds, interest are paid bi-annually, in zero-coupon
bonds, interest is paid at the maturity.
11. Commercial papers are borrowing of a company
from the market. These money market instruments are issued for 90 days.
12. Treasury bills are securities issued by RBI on
behalf of Government of India for 91 days.
13. IPO refers to issue of fresh securities by an
unlisted company or an offer for sale of its existing securities or both for
the first time to the public.
14. FPO refers to issue of fresh securities by an already
listed company or an offer for sale to the public through an offer document.
15. Rights Issue is when a listed company issues
fresh securities to its existing shareholders as on a recorded date.
16. A private placement is an issue of shares or of
convertible security by a company to a select group of persons under section 81
of the Companies Act 1956.
17. Any company making a public issue or a listed
company making a RI of a value of more than Rs 50 lacs is required to file a
draft offer document with SEBI for its observations. This observation period is
only 3 months.
18. DIP stands for Disclosure and Investor
Protection guidelines.
19. Offer document means prospectus in case of
public issue.
20. Offer document means an offer for sale and
letter of offer in case of a RI.
21. Offer documents are filed with Registrar of
Companies and Stock Exchanges.
22. A draft offer document means the offer document
in a draft stage.
23. The draft offer documents are filed with SEBI.
24. The period of filing draft offer document is at
least 21 days prior to that of offer document.
25. RHP (Red Herring Prospectus) is a prospectus
which doesn’t have details of either price of number of shares being offered or
the amount of issue. But the number of shares and the upper and lower price
bands are disclosed.
26. In case of FPO, the RHP can be filed with
Registrar of Companies without the price band. The price band is notified one
day prior to the opening of the issue by way of an advertisement.
27. In book-built issue, price cannot be determined
until the bidding process is completed.
28. In a book-built issue allocation, RII: NII:
QIP::35: 15: 50 (or may be 60:10:30). RII – Retail Individual Investors. NII –
Non-Institutional Investors. QIP – Qualified Institutional Placement.
29. Retail individual investor means an investor who
applies or bids for securities of or for a value not more than Rs 1,00,000.
30. A merchant banker possessing a valid SEBI
registration in accordance with the SEBI (Merchant Bankers) Regulations, 1992
is eligible to act as a BRLM (Book running Lead Manager).
31. A QIB (Qualified Institutional Buyer) means
those investors who have expertise and financial muscle to evaluate and invest
in capital market. Examples: mutual fund, scheduled commercial banks, FII
registered with SEBI, insurance companies registered with IRDA, PF with a
minimum corpus of Rs 25 crore etc.
32. Above mentioned entities are not
required to be register with SEBI as QIB.
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