Shareholders

Question 1

List five sources of the power and rights of shareholders

Answer 1

1. Legislation
2. Regulations
3. Case law
4. Corporate governance codes
5. Articles of association
6. Resolutions passed at general meetings
7. Shareholder agreements

Question 2

List four rights of shareholders

Answer 2

1. Ownership and the transfer
2. Equal Treatment
3. Share in the profits
4. Receipt of information
5. Attend meetings, request meetings and vote
6. Enfranchising indirect shareholders

Question 3

List four common abuses of shareholders rights

Answer 3

1. Market abuse and insider dealing
2. Dilution
3. Tunnelling
4. Related Party Transactions

Question 4

Under the Criminal Justice Act 1993, what are the three insider dealing offences

Answer 4

1. dealing in securities on the basis of inside information;
2. encouraging another to engage in such dealing; and
3. disclosing inside information otherwise than in the proper performance of one’s employment, office or profession.

Question 5

List three defences to the offence of Insider dealing.

Answer 5

1. that the defendant did not, at the time of the disclosure, expect any person to deal because of the disclosure or
2. alternatively that he did not expect any such dealing to result in a profit attributable to the price sensitivity of the information.
3. that the defendant would have dealt in the same way even if he had not had the information.

Question 6

What is the definition of a PDMR

Answer 6

A Person Discharging Managerial Responsibility (PDMR) is defined as a person within an issuer who is:
1. a member of the administrative, management or supervisory body of that entity (e.g. a director)
2. a senior executive who is not a director but has regular access to inside information

Question 7

What are the three ways that an investor might pursue a Socially Responsible Investment (SRI) approach? (3 marks)

Answer 7

1. Engagement Strategy
2. Investment Preference Strategy
3. Screening Strategy

Question 8

List three limitations of an annual general meeting

Answer 8

1. Only held once a year
2. The location may make it difficult for shareholders to attend
3. Limited time duration

Question 9

List 3 benefits of electronic communication between companies and shareholders (3 Marks)

Answer 9

1. Cheaper
2. Environmental
3. Faster and more reliable
4. Enables better engagement with Foreign shareholders
5. Improves voting participation

Question 10

What are the three types of market abuse
s.123 of the Financial Services and Markets Act 2000 (FSMA)

Answer 10

1. Engaging or attempting to engage in insider dealing, recommending that another person engage in insider dealing, or inducing another person to engage in insider dealing.
2. Unlawfully disclosing inside information.
3. Engaging in or attempting to engage in market manipulation - artificially affecting the supply or demand for a security, causing stock prices to rise or to fall dramatically

Question 11

What is the purpose of the UK Stewardship Code?

Answer 11

It was implemented with the objective of enhancing the quality of engagement between asset managers and companies to help improve long-term risk-adjusted returns to shareholders.