Scaleback is the Corporate Action used to scale down the number of shares or rights an Investor may be entitled to. This occurs when an Issuer has oversubscribed in an issue of shares, and may need to scale down the number of shares issued per Investor. This scaleback is at the discretion of the Issuer.
Schemes of arrangements are legal arrangements between companies and their Investors or creditors to vary the rights of the parties, subject to the consent of a court. Some schemes are used to effect compromises between debtors and creditors. Others are used to effect capital repayments or other reconstructions. Schemes affecting several companies can be used to effect mergers.
Abbreviation for subscription, or a certificate that denotes entitlement to a parcel of shares. It is synonymous with Share Certificate.
An independent observer that monitors the proceedings during an annual general meeting to ensure that they have complied with legal requirements and company policy.
The trading of shares amongst investors which does not involve the company itself. When people talk about trading on the stock market, they are generally referring to the secondary market, which involves brokers, market makers and an exchange providing a technical platform for trades to take place. The companies and their shares are the subject of the trading, but they are not directly involved as participants.
The primary market refers to the situation in which a company sells newly issued shares to investors, possibly in an IPO, or places them with institutions.
A section 107B (previously Section 1091) is a form that is sent to the Executors of an Estate and is required where securities are registered in a different state to the state that the probate has been granted.
The function of the Securities Clearing House (SCH) is to facilitate the exchange and payments of securities.
It provides facilities for the electronic clearing and settlement of transactions in CHESS Approved Securities, maintains CHESS subregisters, and to encourage compliance by Issuers. The SCH is owned and maintained by the ASX Settlements and Transfer Corporation Pty Ltd (ASTC).
Securities subject to restrictions on the aggregate level of Foreign Ownership. Not all securities subject to Foreign Ownership Restrictions are included in CHESS processing.
The paper right to a (generally tradeable) asset. The term is frequently used as a loose label to refer to all shares, debentures, notes, bills, government and semi-government bonds etc, which are traded on the stock exchange.
An asset pledged to ensure the repayment of a financial obligation (e.g. loan), and forfeited in the event of default on that obligation.
A person (which can be an individual, partnership or company) who buys a portion of a public or private company’s capital. By doing so that person becomes a shareholder in that company’s assets and receives a share of the company’s profit in the form of dividends.
Securityholder Reference Number (SRN) is a unique identifying number allocated by the Issuer to an Issuer sponsored holder. This covers the Investor’s holdings in the issuing company only. If the Investor holds shares in more than one Issuer, they will be allocated a SRN for each Issuer. The SRN should be quoted whenever orders are placed and on any correspondence with the registry.
The number consists of the following components:
This is the court order given when creditors have petitioned to have a person made bankrupt. The person is bankrupt from the time of the creditors making the sequestration order.
An agreement between Link and the Issuer regarding the services available in the Standard Registry Agreement and the performance measurements agreed upon for selected services.
The completion of a transaction, whereupon securities and, where appropriate, corresponding funds are transferred.
Settlement (and Settlement Run) are also used in CHESS to refer to the operational process in Phase 2 that runs each day to effect the movement of securities and the exchange of funds.
A holder record maintained in CHESS by a participant non-broker to facilitate settlement of CHESS approved securities with other participants.
The time by which non-value settlements are to be submitted and matched in the system for the current settlement cycle.
The date on which the final settlement of securities transaction takes place and the final payment is made. It is also referred to as T+3 as the settlements must occur on (or prior to) the third business day after the date of the transaction.
Identifies the target or source holder on the subregister under which the securities of a transaction are to be delivered to or from as part of the settlement process.
Identifies the target or source holding on the subregister where the securities of a transaction are to be adjusted as part of the settlement process.
A generic CHESS term to group messages involved in the CHESS settlement process. The group comprises:
A time extension used to calculate the First Allowable Settlement Date. The Settlement Offset is an allowance to assist holders of certificated securities to discharge their delivery obligations on the due date. Currently, the offset has a value of one business day.
The tolerance accepted for the matchable field Settlement Amount. The tolerance value is $1, with the lower of the two settlement amounts adopted in settlement.
A transaction submitted by a Participant to cause a movement of securities from one holding on the CHESS subregister to another and which is directed to a specific settlement run.
i) A type of agreement that establishes the responsibility for selling the securities in an underwriting. Members of the underwriting group agree to buy a certain amount of the new issue severally but do not agree to joint liability for shares unsold by other members of the group.
ii) More generally, when members of a group agree to certain obligations individually, but do not share responsibility for the obligations of other members of the group.
The physical document recording ownership of shares. It contains an identifying number and states that the person named is the registered holder of securities. Certificates are no longer in general use and are also known as Scrip.
Share Purchase Plans may be offered to Investors by some Issuers. The SPP allows Investors to top-up their holdings according to specified rules. These shares are usually offered at a market-related price but free of stamp duty and brokerage.
These arrangements sometimes supplement conventional dividend reinvestment plans and sometimes take their place. These plans directly help Investors who want to top up their holding and also increases the popularity of the company in the marketplace thus probably leading to a slightly higher share price.
A share split is the subdivision of shares into a larger number of shares each with a correspondingly lower market value. The total value of any Investor’s holdings is not affected by the split. Sometimes splits are made to increase the marketability of a security.
A ShareHolder Information (SHI) Meeting is a meeting of an Issuer’s members (the Investors). A public company can hold a SHI Meeting whenever one is required such as when there are issues that need to be brought to the Investors. As there are no votes or elections and therefore no proxies to process, reports are not generated for these meetings.
The ownership of part of a company. It is a contract between the issuing company and the owner of the share, which gives the latter an interest in the management of the corporation, the right to participate in profits and, if the company is dissolved, a claim upon assets remaining when all debts have been paid. The majority of shares issued are either ordinary or preference shares. Company’s can also issue deferred shares.
The difference between the expected amount and the amount received. For example, a borrower could issue securities to the market hoping to raise $1 million, but sell enough to raise only $900,000, which leaves a shortfall of $100,000.
The method of moving shares from one register location to another e.g. NSW to ACT or NZ to NSW. Also known as Removal.
Transactions (both demand and settlement) effected by a sole delivery Participant.
A dividend paid in addition to the usual interim or final dividend. This dividend is a one off distribution and is paid at the discretion of the Issuer.
Defined in the ASX Listing Rules as a statement of transactions in an Investor’s account sent by the Issuer, at the request of the Investor.
Shareholdings on more than one register for the same Investor e.g. Victoria and NSW.
It is referred to splitting of votes when the holding is registered under joint partners.
Sponsor The broker with whom an Investor completes an agreement to establish an uncertificated holding on the CHESS subregister.
An Investor who is sponsored by a participating broking firm. The holdings and details of the Investor are kept on the CHESS subregister and maintained by the sponsoring broker. Registries are not permitted to enter selling transactions against these holdings.
Sponsoring Issuer Number was a unique identification number issued to each Issuer, which offers Issuer sponsorship. It is no longer used and has been replaced by CHESS allocated User Identifier Code (UIC).
A State Government charge that is levied on certain securities and property transactions.
A global organisation that provides services including independent analysis and information on stocks, bonds, mutual funds and many other complex investment vehicles, investment data, rating services, indices, benchmark services, valuation analysis and opinions.
The S&P/ASX indices measure the movement in share values resulting from trading on the ASX which are constructed and calculated by Standard and Poors.
Refer to ASX website for Standard and Poors indices information. Stapled Securities Two legally different instruments which under their terms of issue are coupled together for certain purposes. In particular, they cannot be transferred separately either on-market or off-market. Examples of such securities include ordinary shares and units in an associated unit trust; ordinary shares and unsecured notes; ordinary shares and options. A 'parcel' consisting of one share and one unit or note or option is traded on the stock exchange as though it were a single security.
The time when the full range of overnight CHESS reporting is available to the CHESS users.
A written summary of events during a period that is given to an Investor.
Investors receive a holding statement, which outlines the number of shares that they have.
There are several other types of statements:
A legally binding signed declaration made by a person to say that the statement they are making is true and correct. It is normally witnessed by a Justice of the Peace (JP).
The term stock, or stocks and shares have now become synonymous with securities.
A general term used to refer to the organised trading of securities through various exchanges and through the over-the-counter market. A "stock exchange" is a specific form of a stock market, a physical location where stocks and bonds are bought and sold, such as the ASX, New York Stock Exchange, NASDAQ or NSX.
A notification to a bank that a cheque has been lost or stolen and is not to be honoured.
Same as reserved. Once an acceptance has been received for a block of shares then those shares are flagged to be unavailable for trading.
A component of the principal register whereby securities held in different modes are segregated. There are several sub registers namely CHESS, Issuer Sponsored, Certificated, FAST, and CREST.
One who agrees to purchase securities.
A person / company which owns over five percent of a company's issued capital (and as a result, voting rights). Substantial Shareholders must advise the ASX of any purchase or sale that changes their holding.
A form of notification which must be completed by an Investor once he/she exceeds a certain proportion of the shareholdings in a company.
Also known as a derivative.
A stock exchange rule requiring both broker/broker and broker/client settlements for most stock exchange transactions to take place on the third business day after the date of the transaction.
There are penalties for both brokers and clients who miss the deadlines. This rule enables the bulk "netting" of transactions between brokers each day, thus reducing the paperwork which previously applied when individual buying and selling orders needed to be matched.
Takeovers are when one company (Offeror) makes a bid for another company (Target) through the purchase of its shares.
A Takeover can be for all or part of a company. They can offer Investors a choice of cash or securities or a combination of both. Prior to the takeover reaching the unconditional stage, the offeror can either change the offer or abandon the takeover. The term takeover is normally used to imply that the acquisition is made on the initiative of the acquirer and often without the full agreement of the acquired company, as distinct from a merger.
Takeover bids may be of two sorts; an off market, or an on market bid.
Both on market and off market bids can take place simultaneously.
Takeovers can move through four phases, entitlement, acceptance, unconditional and compulsory. Reaching the compulsory stage will be dependent upon conditions set by the offeror.
The tax deferred portion of income relates to depreciation allowance for plant and equipment. It does not need to be included in a unitholder's assessable income but needs to be brought to account when calculating a possible capital gains tax liability on sale of units (Income Tax Assessment Act - Sections 54 and 1602m).
A unique number issued by the Australian Taxation Office (ATO) to individuals and organisations to increase the efficiency in administering tax and other Commonwealth Government systems such as Income Support payments.
There are a number of categories of Investor who are exempt from quoting a TFN in relation to their investments.
These categories include:
To claim an exemption, as an organisation not required to lodge tax returns or as a pensioner, the exemption status should be advised on a Tax File Number Quotation\Exemption form.
The ownership of an asset by two or more persons collectively. On the death of one, the ownership of a designated proportion of the property (not necessarily an equal share) passes to that person’s heirs, as distinct from joint tenancy. A tenant in common is one of the co-owners and not a ‘tenant’ in the sense of ‘lessee’.
The theoretical value which a Corporate Action (such as a rights issue or a bonus issue) would have on the market, if the market were perfect and if there were no other changes in market conditions apart from a corporate action.
A service whereby a Investor's dividend cheque is forwarded to an address other than that of the Investors, i.e. Third party.
The tolerance amount is a range of amounts that is under or over the correct issue price for a corporate action that an Investor has mistakenly paid where they will not be refunded the money. The Issuer defines the tolerance amount.
If an Investor has overpaid, and the amount falls within the tolerance amount, the Issuer may keep the money (to absorb the cost of Investors who have underpaid) or give the money to charity. If an Investor has underpaid, and the amount falls within the tolerance amount, the Issuer will allot the number of securities that the Investor has requested (using money from Investors who have overpaid to make up the shortfall).
If the amount paid does not fall within the tolerance amount, when the Investor has overpaid, the Issuer will refund the money or request the shortfall of the money, or if they have underpaid, the Issuer will scale back the allotted shares closest to the amount that the Investor has paid.
A Top Up is when an Issuer offers Investors the opportunity to buy more securities in order to make their holding a marketable amount of shares (a marketable parcel is generally $500.00 worth of securities). For example, a holding with $450.00 worth of securities will be offered the value of $50.00 more, to ‘Top Up’ their holding.
Top Ups are usually associated with payment of Dividend Reinvestment Plan securities at the time of a dividend, or Buy Backs. For example, some companies supplement their dividend reinvestment plan with optional share purchase ("top up") plans allowing the acquisition of further shares up to some limit free of brokerage and stamp duty.
Securities transaction between two parties. A Trade may be one of:
The time by which value transactions for the current settlement cycle must be transmitted to CHESS. This time may be governed by market convention.
Advice to the Clearing House from a Participant of a trade to which it is a settlement counterparty.
A security which can be traded (bought or sold) in the market.
A temporary suspension in the trading of a particular security on one or more exchanges, usually in anticipation of a news announcement or to correct an order imbalance. A trading halt may also be imposed for purely regulatory reasons. During a trading halt, open orders may be canceled and options may be exercised.
Investment holdings in other entities held for trading or as longer term investments in the other companies. The value of trading or current investments are calculated at "net market value" (that is, the amount which could be expected to be received from the disposal of an asset in an orderly market after deducting costs expected to be incurred in realising the proceeds of the disposal). The value of long term investments is calculated at cost or valuation. In any event, the valuation must not exceed the recoverable amount.
An additional block of stock, supplementary to an existing issue.
A record of movement (selling or buying) in an Investor’s holding.
Auditing is usually done by comparing the transaction to the source document. There is no previous copy of a transaction. Examples include off market transfers and conversions, allotments, dividend payments, acceptances, removals, CHESS transfers and conversions.
A legal document used to transfer the holding of one Investor to another. It is no longer required for on market transactions.
The process by which one security turns into another. This usually happens in cases where an Issuer changes its name or when securities change their nature (e.g. becomes fully ranking instead of partially ranking).
The transfer of shares from a deceased Investor to the beneficiary/beneficiaries in accordance with estate documentation.
An account separate and physically segregated from an advisor, broker or other professional’s own funds, in which clients funds are deposited in accordance with the law.
A payment of a trust’s profit to unit holders. Under most trust deeds, trusts are not permitted to retain profits.
A deed (legal document) "signed, sealed and delivered" which sets up a trust and defines its terms; the rules by which a trust may operate.
A person or company that has legal responsibility for financial aspects (receipts, disbursement, and investment) of funds.
A trust company which acts in a capacity of trust as a fiduciary and to whom assets have been conveyed for the benefit of another party. The Trustee in this case oversees the behaviour of the manager in relation to the operation of a unit trust.
A trustee security is an investment in which a trustee can legally invest unless the relevant trust instrument specifically prevents it.
That part of the company’s issued capital which has not been paid for by the Investors.
Uncertificated Holding A shareholding where no certificates are issued eg, CHESS or Issuer Sponsored holding. Uncertificated holdings make up the majority of the shareholdings. Legislation required ASX listed Australian companies to convert share certificates to Issuer Sponsored holdings by the end of 1998. Companies that are listed in Australia but incorporated overseas continue to use share certificates.
Monies which can not be paid by the Issuer to their rightful owners and which need to be paid over to the government. The usual cause of the problem is the failure of the owner to advise the relevant organisation of a current address.
The Issuer will remove the relevant Investor's details after seven years and forward to the appropriate office of state revenue.
The rightful owners can reclaim the amounts concerned. Typically the assets affected include inactive bank accounts; matured fixed deposits, debentures, notes or life insurance policies; dividend or interest payments; repayments of share capital; liquidators’ distributions; the cash consideration in compulsory acquisitions under takeovers.
During a takeover bid, Investors in the target company must choose to either:
If a predetermined percentage of Investors accept the offer, then the takeover will proceed as the offeror will have a controlling interest in the target company. The unconditional level is this predetermined percentage (%) of acceptances required for the takeover bid to proceed.
If the takeover has reached the unconditional level, the remaining Investors (who have not responded to the offer) no longer have any choice over whether they will accept or reject the takeover offer. The takeover has now become unconditional. They can still keep the shares of the target company (unless compulsory acquisition occurs), or sell them on the market. The Offeror must fulfil their obligation to settle the takeover offer with all Investors who have accepted the bid by paying them cash, shares, or a combination of both.
The unconditional phase occurs when the takeover has reached the unconditional level.
The shares subject to purchase on the exercise of an option.
An organisation that, for a fee, guarantees to the Issuer a minimum level of subscriptions to a share or debt issue. f public subscriptions fail to reach this minimum level then the underwriter takes up the shortfall and ensures that the funds will be available at a specific time. Underwriters often have sub-underwriters who share the risk.
A bank or other financial institution's guarantee to a company that it will buy a certain number of shares in a company's new issue or rights issue, should the issue not be fully subscribed by other investors.
From the company's point of view, having its new issue underwritten is a form of insurance. It means that if it has priced an issue too high and the market shuns it, the company can still be sure that it will get money from the new issue.
Of course, security comes at a price. Underwriters charge a fee for the back-up they provide. If the new issue is very popular, it will pocket that fee and make a handsome profit. Occasionally, they get badly burned. New issues underwritten immediately before the 1987 stock market crash lost a lot of money.
Sometimes companies do a rights issue at a deep discount to reduce the underwriting fees.
Unfranked Dividend Dividends without attaching franking credits under the dividend imputation system. These Investors will be required to pay tax on the full amount of the dividend that they receive.
A shareholding which is not Issuer Sponsored or CHESS but for which no certificate has been issued.
An organisation which invests funds subscribed by Investors in securities, and in return issues units which it will repurchase. These units, which represent equal shares in the trust’s investment portfolio, produce income and fluctuate in value according to the assets the unit holds. The trustees which hold the securities are usually banks or insurance companies and are distinct from the management company.
The subscriber to a unit trust does not receive any of the profits of the company managing the trust.
The trust managers derive income from a regular service charge. Unit trusts are directed particularly at the Investor with small sums at his/her disposal. Units are easily purchased and resold, and risks are widely spread. The Investor benefits from expert management. Trusts may specialise in different areas such as blue chip securities, small companies, or foreign companies.
A Company and/or shares that are not available for purchase or sale through the sharemarket.
Historically, a number of shares less than a marketable parcel was said to constitute an odd lot or an unmarketable parcel. These parcels were not able to be bought or sold easily.
The concept of a marketable parcel has now been abolished, so a marketable parcel now consists of a single share. The terms marketable parcel, or unmarketable parcel, are still widely used for ease of trading shares. Any parcel of shares with a market value of below $500 is considered an unmarketable parcel.
A loan made by the note holder to an Issuer for a fixed period of time at a fixed rate of interest. The loan is not secured by the Issuer against any of its assets. The notes offer a higher rate of return than a debenture of the same maturity but they do not carry the security of the debenture.
A User Identifier Code (UIC) is a unique, 5 number code allocated by the Securities Clearing House (SCH) to all Issuers of CHESS approved securities for the purpose of identifying the source and destination of messages. The UIC may be: