Unit V the securities market and regulation

Glossary

сash наличные деньги

suffice быть достаточным, хватать

to retail продавать в розницу

at retail в розницу

at wholesale оптом

to issue выпускать

holding вклад, пакет (ценных бумаг)

lack of smth. недостаток, нехватка

to lack smth. испытывать недостаток

to encourage поощрять, поддерживать

pending рассматриваемый,

находящийся на обсуждении

to disclose освещать, раскрывать

claim иск, претензия

to underwrite гарантировать выкуп ценных бумаг

outstanding нереализованный,

выпущенный в обращение

remuneration вознаграждение

transaction сделка

Ex.1 Building your business vocabulary is very important. Some new business terms introduced in this unit are printed below, along with definitions. Please match each with its proper definition after reading the texts of this unit.

a) securities exchange

b) bear market

c) cash dividend

d) securities market

e) bull market

f) brokerage house

g) speculative trading

h) prospectus

1. The millions of people and organization that buy stocks and bonds and the securities intermediaries who bring buyers and sellers together.

2. A cash payment to shareholders.

3. A firm that buys and sells securities on behalf of its investor-clients.

4. An institution set up by brokers at a permanent location for buying and selling securities.

5. A summary of the securities registration statement that is filed with the SEC; it contains information about the firm’s operation and management, the purpose of the proposed issue, and anything else that would be helpful to potential buyers of securities

6. The buying and selling of securities in the hope of profiting from near term changes in their prices.

7. A stock market in which prices are falling, and there is pessimism among speculators.

8. A stock market in which prices are rising and there is much optimism.

Assignments to text 1:

1. Read the text and write down into your notebook the English equivalents for the Russian “потенциальный акционер/покупатель”.

2. Read the first paragraph and try to formulate the main idea, give the subtitle to it.

3. Read the second paragraph, and explain how the main idea of the first paragraph is developed.

4. Look through the 3^rd paragraph and explain in what connection non-financial terms “retail” and “wholesale” are used.

5. Translate the text.

Text 1 Investment Banks

When a corporation is established by a small group of investors, the owners merely contribute cash or property to the newly chartered company in exchange for shares of stock. When funds are to be raised from a large number of people, however, this informal arrangement will no longer suffice. The people founding or promoting the corporation do not know who the would-be shareholders are. Nor can the prospective buyer of only a few shares of stock afford to spend time and money hunting for a company in which to invest. Bringing would-be investors and investment opportunity together is the job of the specialized financial institution called an investment bank.

Investment banks are what might be called "retailers" of corporate securities. They take blocks of stocks or bonds from the corporation "at wholesale" and break them into smaller holdings to sell "at retail" to the final owner. The investment bank collects a commission for performing this service. The same procedure is followed when an existing corporation issues new shares to increase its capital by expanding its ownership. Advertisements by investment banks announcing the availability of new issues of securities are often seen in the financial pages of newspapers.

Investment banks help small companies “go public”. That is, they help businesses that want to sell shares of stock to the public. The investment bank must decide whether it will underwrite the new public offering of stock. Underwriting means that the investment bank guarantees to purchase the stock. The investment bank then contacts various brokerage houses. Brokerage houses are firms that buy and sell securities on behalf of their investor-clients. They explain the offering to them. So, investment banks deal with both individuals and brokerage houses.

Thus, an investment bank is a financial institution that does not accept deposits from the general public but instead helps firms sell new issues of stocks and bonds. They also help firms to acquire other firms or to be acquired.

Assignments to text 2:

1. Look through the 1^st paragraph and explain what the word combination “blue sky laws” means.

2. Read the second paragraph. Find the word "these" in it; indicate the nouns it stands for.

3. Read the text and prove by the facts that information has a high price.

4. Find and translate the paragraph in which the functions of SEC are described.

5. Read the text once more and say if the securities market is safe in the USA.

Text 2 Securities Regulation

State and federal laws in the USA regulate both the insurance and the trading of securities. At the state level there exist blue-sky laws. Blue-sky laws are state laws that force corporations to give potential investors certain facts about the securities. Their purpose is to prevent corporations from issuing worthless securities to unsuspecting investors (selling them “the blue sky”). At the federal level the Securities Act of 1933 protects the public from interstate sales of fraudulent securities.

The Securities and Exchange Commission. The buyer of a security invests his wealth to become one of the owners of the firm. Yet he is often remote from the actual operation of the company, and may lack the information necessary to make a sound judgement concerning the investment. Frequently all he knows about the company and its prospects is what the management or the investment banker tells him. Since these have special interest in encouraging him to buy the stock, he needs some assurance that he is being told everything he needs to know.

Making sure that perspective stockholders are fully informed is one of the duties of the Securities and Exchange Commission (SEC), a federal agency established by the Securities Exchange Act of 1934. Before a corporation can offer a new issue of securities for sale to the public, it must file a registration statement and a prospectus with the Commission. The registration statement must disclose such matters as “the names of the persons who participate in the management or control of the business; the security holdings and remuneration of such persons; the general character of the business, its capital structure, past history and earnings; underwriters' commissions; payment to promoters made within 2 years or intended to be made; the interests of directors, officers and principal stockholders in material transactions; pending or threatening legal proceedings; the purpose to which the proceeds of the offering are to be applied; and financial statements certified by independent accountants." The prospectus is part of the registration statement and embodies the more important of the required disclosures.

The SEC staff examines the registration statement and prospectus for accuracy and completeness. Unless it is found to be misleading, inaccurate, or incomplete, the registration becomes effective, and the security can be offered for sale.

Assignments to text 3:

1. Read the text.

2. Find the key sentences in every paragraph.

3. Find answers to the following questions.

· What is the function of a stock market?

· What are the main players in a stock market?

· What stock markets are described?

· What is the difference between the two types of the stock market?

4. Identify all the definitions in the text.

5. Find the sentences which explain regulations for stock exchanges.

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