EXPLANATION OF FINANCIAL TERMS
Stock Exchange Electronic Trading
Service. The new stock exchange dealing service that handles the leading shares
on the market. It is also referred to as the order book.
The Securities and Futures
Authority (SFA) regulates about 1,300 firms involved in all the organised City
investment markets -the stock market, eurobond, financial futures, commodity futures
markets - and also corporate finance specialists and off-market traders. About
half the SFA's firms are overseas-owned.
Small self-administered pension
schemes for small businesses that can cover up to 12 members. It provides the
company with some control over the choice of investments which can include purchase
of company property and shares.
A Sipp is a personal pension
that gives the holder freedom of investment choice.
A general Pep, usually sold
by stockbrokers, that allows the investor to choose which investments to hold
in the tax shelter.
The administrative process
by which shares are transferred from the seller to the buyer. Settlement day is
the date on which you get your money after selling shares.
Also known as an equity in
Britain and confusingly called a stock in America. Shares traditionally carry
a higher level of risk but a greater possible reward than Government stocks. You
can also reduce the risk of share investment by buying unit trusts. Ordinary shareholders
are entitled to vote on company policy and to receive a slice of the company's
profits in the form of dividends.
This confers membership of
a society with all the rights and potential benefits that can arise, for example,
if it demutualises. Savers with deposit accounts, however, are not members. Any
individual who still has a deposit account should arrange for it to be converted
to a share account without delay.
£3,000 can be invested
in the shares of just one company and protected from tax through a single company
Pep. The sale of new single company Peps will stop on April 5, 1999, but existing
schemes will be allowed to continue.
Most investment business is
carried out by 6,250 firms regulated by three self-regulating organisations (SROs)
recognised by the Financial Services Authority. An SRO is a body which, once recognised
by the FSA, has the power to authorise firms to conduct investment business in
the UK (and now, under the Investment Services Directive, throughout the European
Economic Area). The SROs include Imro, the SFA and the PIA.
An investor who buys shares
in a new issue in the hope of making a fast profit when the stock begins trading.
In Britain a gilt-edged investment
in Government debt. You get a reasonable level of interest on a very low risk
investment. In America a stock is more likely to be a share.
Most unit trust companies allow
investors to switch between their various funds at a reduced charge.