Mortgage Debt Clearing

08/07/2024, 23:45 Mortgage Debt Clearing
Mortgage Debt Clearing

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HANDBOOK ON SECURITIES
STATISTICS
INTERNATIONAL MONETARY FUND
The production of the Handbook on Securities Statistics (the Handbook) is a joint undertaking by the Bank for
International Settlements (BIS), the European Central Bank (ECB) and the International Monetary Fund (IMF).
They have specific interests and expertise in the area of securities statistics and are the core members of the Working Group on Securities
Databases (WGSD).
In 2007, the WGSD—originally established by the IMF in 1999—was reconvened in response to various international initiatives and recommendations
to improve information on securities markets. The WGSD is chaired by
the ECB and includes the BIS, the IMF and the World Bank. Selected experts from national central banks, who
participated actively in the various international groups that identified the need to improve data on securities
markets, were also invited to contribute to some of the WGSD’s deliberations. In mid-2008, the WGSD agreed to
sponsor the development of a handbook on securities statistics.
In November 2009, the report entitled “The Financial Crisis and Information Gaps,” which was prepared by the
Financial Stability Board (FSB) Secretariat and IMF staff at the request of the Group of Twenty (G-20) finance
ministers and central bank governors, endorsed the development of the Handbook, as well as the gradual implementation of improved statistics on
issuance and holdings of securities at the national and international level. The
BIS’s compilation of data on debt securities plays an important role in this respect.1
The Handbook sponsors responded to the demand from various international groups for the development of
methodological standards for securities statistics and released the Handbook in three parts. Part 1 on debt securities issues was published in May
2009, and Part 2 on debt securities holdings in September 2010. Part 3 of the
Handbook on equity securities statistics was published in November 2012. The methodology described in all
three parts was based on the System of National Accounts 2008 (2008 SNA) and the sixth edition of the Balance
of Payments and International Investment Position Manual (BPM6). The three parts also went slightly beyond the
confines of these standards by providing guidance and additional information on, for example, the main features
of securities, special and borderline cases, and breakdowns of issues and holdings of securities by counterparty.
Special attention was also paid to specific operations such as mergers and acquisitions, restructuring, privatization and nationalization, and
transactions between general government and public corporations.
From the beginning, the intention was to combine the three parts into one volume, thereby eliminating any overlap and repetitions between the parts.
The Handbook’s conceptual framework is complemented by a set of tables
for presenting securities data both at an aggregated level and broken down by various features. This should allow
sufficient flexibility in the presentation of data on issuance and holdings of securities, in line with developments
in securities markets and financing.
The Handbook is the first publication of its kind to focus exclusively on securities statistics. Recent turmoil in
global financial markets has confirmed the importance of timely, relevant, coherent, and internationally comparable data on securities, from the
perspective of monetary policy, fiscal policy, and financial stability analysis. This
Handbook provides a conceptual framework for the compilation and presentation of statistics on different types of securities, including those derived
from the securitization of assets. As already mentioned, it is consistent with
the recently reviewed international statistical standards.
The following officials in the sponsoring organizations and institutions were the most heavily involved in the
WGSD’s activities and have played a key role in preparing the Handbook:
BIS Mr Christian Dembiermont
Mr Branimir Gruić
Mr Philippe Mesny
Mr Paul Van den Bergh
Mr Kerry Wood
ECB Mr Werner Bier (Chair of the WGSD)
Mr Remigio Echeverría
Mr Reimund Mink (Coordinator)
IMF Mr José M. Cartas
Mr Alfredo Leone
Mr J. Roberto Rosales
Ms Armida San Jose
The sponsors are grateful for the contributions of various experts from the following central banks, national
statistical agencies and international organizations (national agencies are listed alphabetically by country):
Bank of Algeria
Central Bank of Argentina
Central Bank of Armenia
Reserve Bank of Australia
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Austrian National Bank

National Bank of Belgium
Central Bank of Brazil
Bulgarian National Bank
Bank of Canada
Statistics Canada
Central Bank of Chile
The People’s Bank of China
Bank of the Republic of Colombia
Croatian National Bank
Czech National Bank
National Bank of Denmark
Bank of Finland
Bank of France
Deutsche Bundesbank
Bank of Ghana
Bank of Greece
Hong Kong SAR Census and Statistics Department
Hong Kong Monetary Authority
Magyar Nemzeti Bank
Central Bank of Iceland
Reserve Bank of India
Bank Indonesia
Central Bank of Ireland
Bank of Israel
Bank of Italy
Bank of Japan
Bank of Korea
Bank of Latvia
Central Bank of Lebanon
Bank of Lithuania
National Bank of the Republic of Macedonia
Central Bank of Malaysia
Bank of Mexico
Netherlands Bank
Reserve Bank of New Zealand
Bank of Slovenia
South African Reserve Bank
Bank of Spain
Sveriges Riksbank
Swiss National Bank
Bank of Thailand
Central Bank of the Republic of Turkey
Bank of England
Board of Governors of the Federal Reserve System
Central Bank of Venezuela
Asian Development Bank
Commonwealth Secretariat
Islamic Financial Service Board
United Nations Conference on Trade and
Development
Central Bank of Norway
Statistics Norway
State Bank of Pakistan
Central Reserve Bank of Peru
Bangko Sentral ng Pilipinas
Philippines Bureau of the Treasury
Philippines Securities and Exchange Commission
National Bank of Poland
Bank of Portugal
National Bank of Romania
Central Bank of the Russian Federation
Saudi Arabian Monetary Authority
Central Bank of Luxembourg
Monetary Authority of Singapore
National Bank of Slovakia

The feedback provided by experts from these central banks, agencies, and organizations has made a significant contribution to the preparation of
the Handbook. The WGSD envisages continuing to solicit input from
users and compilers of securities statistics when providing guidance on security-by-security (SBS) databases and
metadata structure definitions that facilitate the compilation and dissemination of securities statistics.
The WGSD encourages national and international agencies to use the Handbook to improve statistics on securities, for example, in the context of
the IMF’s Coordinated Portfolio Investment Survey (CPIS) and Coordinated
Direct Investment Survey (CDIS). The recent financial and economic crisis in global financial markets, which
also had an impact on issuers and holders of securities, underlined the importance of timely, relevant, coherent,
and internationally comparable securities data. The institutions involved will continue to support the WGSD in
its efforts to improve the transparency of global securities markets, also through the further development and
implementation of the Handbook.
Claudio Borio
Head of the Monetary and Economic Department
Bank for International Settlements
Aurel Schubert
Director General Statistics
European Central Bank
Louis Marc Ducharme
Director, Statistics Department
International Monetary Fund
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Mortgage Debt Cleared
Bank's claim to be creators of the money supply.
Legal ramifications are that Bank's do not take Deposits.
Bank's borrow from the Public ( Bank's do not lend money in law, The ( Public) lend a Promissory Note to the bank, and becomes a
general creditor. The bank records a 'credit' on behalf of the public in its records of its debts.
The bank does not pay out Promissory Note referred to in the loan contract. Instead, just as with a 'deposit', it records a new credit on
behalf of the creditor in its records of the debt.
The Legal Realities of Banks
Now this is where the bank and solicitor or conveyancer handle the legal work to transfer ownership of the property mislead and
misrepresentation of the client (creditor , myself) by inventing something called a Customer Deposit out of nothing, The FCA have strict
rules on openness full transparency and consideration , but clearly shows the bank misleading customers .
We use the agent for this legal argument due to your failure to offer a valid answer; and for the consideration we exercise and express the root principle
of your codes which includes the Banker’s book Evidence Act, Data, and in Standalone Credit Ratings the rules: for banks SPV’s, changing to triple A
and B rating to default and take the equity of the security (the asset) to include insurance to pay the bank back x 3 as a high risk defaulter as in HSS
Handbook of The Bank for International Settlements.
How can we promise to pay the bank something when they never had it in the first place? : Securitization schemes vary within and across debt
securities markets. They can be grouped into three broad types. First, those in which the original asset owner creates new debt securities, that is,
there is no securitization corporation involved and no transfer of assets, Second, those involving a securitization corporation and a transfer of assets
from the original asset owner, Third, those involving the transfer of credit risk only, but not the transfer of assets, either through a securitization
corporation or through the direct issue of debt securities
1: The first type of securitization scheme, usually known as on-balance-sheet securitization, involves
debt securities issues backed by an income stream generated by the assets. The assets remain on the balance sheet of the debt securities issuer (the
original asset owner), typically as a separate portfolio. The issue of debt securities provides the original asset owner with funds.
2: The second type of securitization scheme, typically referred to as true sale securitization, involves
debt securities issued by a securitization corporation where the underlying assets have been transferred from the original asset owner’s balance
sheet. The proceeds received from selling the debt securities to investors fund the purchase of the assets. The income stream from the pool of assets
(typically, interest payments and principal repayments on the loans) is used to make the coupon payments and principal repayments on the debt
securities.
3: The third type of securitization scheme, often referred to as synthetic securitization, involves transfer of the credit risk related to a pool of assets
without transfer of the assets themselves. The original asset owner buys protection against possible default losses on the pool of assets using credit
default swaps (CDS).3 The proceeds from the issue of debt securities are placed by a securitization corporation on deposit, and the interest accrued
on the deposit, together with the premium from
4: Synthetic securitization without the involvement of a securitization corporation occurs when the original asset owner issues credit-linked notes
(CLN). CLN are debt securities that are backed by reference assets, such as loans and bonds, with an embedded CDS allowing credit risk to be
transferred from the issuer to investors. Investors sell credit protection for the pool of assets to the protection buyer (or issuer) by buying the CLN.
Repayment of principal and interest on the notes is conditional on the performance of the pool of assets. If no default occurs during the life of
the note, the full redemption value of the note is paid to investors at maturity. If a default occurs, then investors receive the redemption value of the note
minus the value of the default losses.
5: In each type of securitization scheme described previously, a range of debt securities may be issued by the original asset owner (Type 1) or the
securitization corporation (Type 2 and Type 3), such as: asset-backed securities (ABS), including asset-backed commercial paper (ABCP), covered
bonds,5 CLN, and structured credit securities, including collateralized debt obligations (CDO).
the CDS, finances coupon payments on the debt securities. In the event of default, the protection buyer (the original asset owner) is losses related to
the pool of assets, while the holders
of the debt securities suffer losses for the same value.
Updated Jul 15, 2019

What Is Investment Grade?
An investment grade is a rating that signifies a municipal or corporate bond presents a relatively low risk of default. Bond rating firms like Standard &
Poor’sand Moody's use different designations, consisting of the upper- and lower-case letters "A" and "B," to identify a bond's credit quality rating.
"AAA" and "AA" (high credit quality) and "A" and "BBB" (medium credit quality) are considered investment grade. Credit ratings for bonds below
these designations ("BB," "B," "CCC," etc.) are considered low credit quality, and are commonly referred to as "junk bonds."
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Investment Grade
Understanding Investment Grade
Credit ratings are extremely important because they convey the risk associated with buying a certain bond. An investment grade credit rating indicates
a low risk of a credit default, making it an attractive investment vehicle—especially to conservative investors.
Investors should note that government bonds, also known as Treasuries, are not subject to credit quality ratings, yet these securities are nevertheless
considered to be of the very highest credit quality.
In the case of municipal and corporate bond funds, a fund company's literature, such as its fund prospectus and independent investment research
reports, will report an "average credit quality" for the fund's portfolio as a whole.
[Important: Many institutional investors have instituted a rigid policy of limiting their bond investments solely to investment-grade issues.]
Investment Grade Credit Rating Details
Investment grade issuer credit ratings are those rated above BBB- or Baa. The exact ratings depend on the credit rating agency. For Standard &
Poor's, investment grade credit ratings include:
AAA
AA+
AA
AA-
Companies with any credit rating in this category boast a high capacity to repay their loans; however, those awarded an AAA rating stand at the top of
the heap and are deemed to have the highest capacity of all, to repay loans.
The next category down includes the following ratings:
A+
A-
Companies with these ratings are considered to be stable entities with robust capacities for repaying their financial commitments. However, such
companies may encounter challenges during deteriorating economic conditions.
The bottom tier of investment grade credit ratings delivered by Standard and Poor's include:
BBB+
BBB
BB-
Companies with these ratings are widely considered to be "speculative grade" and are even more vulnerable to changing economic conditions than
the prior group. Nevertheless, these companies largely demonstrate the ability to meet their debt payment obligations.
According to Moody's, investment grade bonds comprise the following credit ratings:
Aaa
Aa1
Aa2
Aa3
A1
A2
A3
Baa1
Baa2
Baa3
The highest-rated Aaa bonds possess the least credit risk of a company's potential failure to repay loans. By contrast, the mid-tier Baa-rated
companies may still have speculative elements, presenting high credit risk--especially those companies that paid debt with expected future cash flows,
that failed to materialize as projected.
KEY TAKEAWAYS
An investment-grade rating signals that a corporate or municipal bond has a relatively low risk of default.
Different bond rating agencies have different rating symbols, to signify investment grade bonds.
Standard and Poor's awards a "AAA" rating to companies it deems least likely to default.
Moody's awards an "Aaa" rating to companies it considers to be the least likely to default.
Special Considerations: Credit Downgrades
Investors should be aware that an agency downgrade of a company's bonds from 'BBB' to 'BB' reclassifies its debt from investment grade to "junk"
status. Although this is merely a one-step drop in credit rating, the repercussions can be severe.
The drop to junk status telegraphs that a company may struggle to pay its debts. The downgraded status can make it even more difficult for companies
to source financing options, causing a downward spiral, as costs of capital increase.
Related Terms
What Is Credit Risk?
Credit risk is the possibility of loss due to a borrower's defaulting on a loan or not meeting contractual obligations.
more
Collateralized Bond Obligation (CBO)
Collateralized Bond Obligation (CBO) is an investment-grade bond backed by a pool of junk bonds.
more
Angel Bond
An Angel Bond is an investment-grade bond that reflects the issuing company's high credit rating. Angel bonds are the opposite of fallen angels.
more
Credit Quality
Credit quality is one of the principal criteria for judging the investment quality of a bond or bond mutual fund.
more
Ba3/BB-
Ba3/BB- is the bond rate given to debt instruments that are generally considered to be non-investment grade and speculative in nature, providing a
measure of the riskiness of the security and the likelihood of the issuer defaulting on the debt.
more
Ba2/BB
Ba2/BB are ratings by Moody's Investor Service and S&P Global Ratings, respectively, for a credit issue or an issuer of credit below investment
grade.
more
Mortgage-Backed Security (MBS)
What Is a Mortgage-Backed Security (MBS)?
A mortgage-backed security (MBS) is an investment similar to a bond that is made up of a bundle of home loans bought from the banks that issued
them. Investors in MBS receive periodic payments similar to bond coupon payments.
The MBS is a type of asset-backed security. As became glaringly obvious in the subprime mortgage meltdown of 2007-2008, a mortgage-backed
security is only as sound as the mortgages that back it up.
An MBS may also be called a mortgage-related security or a mortgage pass-through.
How a Mortgage-Backed Security Works
Essentially, the mortgage-backed security turns the bank into a middleman between the homebuyer and the investment industry. A bank can grant
mortgages to its customers and then sell them on at a discount for inclusion in an MBS. The bank records the sale as a plus on its balance sheet and
loses nothing if the homebuyer defaults sometime down the road.
The investor who buys a mortgage-backed security is essentially lending money to home buyers. An MBS can be bought and sold through a broker.
The minimum investment varies between issuers.
Mortgage-backed securities loaded up with subprime loans played a central role in the financial crisis that began in 2007 and wiped out trillions of
dollars in wealth.
This process works for all concerned as everyone does what they're supposed to do. That is, the bank keeps to reasonable standards for granting
mortgages; the homeowner keeps paying on time, and the credit rating agencies that review MBS perform due diligence.
In order to be sold on the markets today, an MBS must be issued by a government-sponsored enterprise (GSE) or a private financial company. The
mortgages must have originated from a regulated and authorized financial institution. And the MBS must have received one of the top two ratings
issued by an accredited credit rating agency.
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Understanding Mortgage-Backed Securities
Types of Mortgage-Backed Securities
There are two common types of MBSs: pass-throughs and collateralized mortgage obligations (CMO).
Pass-Throughs
Pass-throughs are structured as trusts in which mortgage payments are collected and passed through to investors. They typically have stated
maturities of five, 15, or 30 years. The life of a pass-through may be less than the stated maturity depending on the principal payments on the
mortgages that make up the pass-through.
Collateralized Mortgage Obligations
CMOs consist of multiple pools of securities which are known as slices, or tranches. The tranches are given credit ratings which determine the rates
that are returned to investors.
The Role of MBSs in the Financial Crisis
Mortgage-backed securities played a central role in the financial crisis that began in 2007 and went on to wipe out trillions of dollars in wealth, bring
down Lehman Brothers, and roil the world financial markets.
In retrospect, it seems inevitable that the rapid increase in home prices and the growing demand for MBS would encourage banks to lower their
lending standards and drive consumers to jump into the market at any cost.
That was the beginning of the subprime MBS. With Freddie Mac and Fannie Mae aggressively supporting the mortgage market, the quality of all
mortgage-backed securities declined and their ratings became meaningless. Then, in 2006, housing prices peaked.
Subprime borrowers started to default and the housing market began its long collapse. More people began walking away from their mortgages
because their homes were worth less than their debts. Even the conventional mortgages underpinning the MBS market saw steep declines in value.
The avalanche of non-payments meant that many MBSs and collateralized debt obligations (CDO) based off of pools of mortgages were vastly
overvalued.
The losses piled up as institutional investors and banks tried and failed to unload bad MBS investments. Credit tightened, causing many banks and
financial institutions to teeter on the brink of insolvency. Lending was disrupted to the point that the entire economy was at risk of collapse.
In the end, the U.S. Treasury stepped in with a $700 billion financial system bailout intended to ease the credit crunch. The Federal Reserve bought
$4.5 trillion in MBS over a period of years while the Troubled Asset Relief Program (TARP) injected capital directly into banks.
The financial crisis eventually passed, but the total government commitment was much larger than the $700 billion figure often cited.
KEY TAKEAWAYS
The MBS turns a bank into a middleman between the homebuyer and the investment industry.
The bank handles the loans and then sells them at a discount to be packaged as MBSs to investors as a type of collateralized bond.
For the investor, an MBS is as safe as the mortgage loans that back it up.
Mortgage-Backed Securities Today
MBSs are still bought and sold today. There is a market for them again simply because people generally pay their mortgages if they can.
The Fed still owns a huge chunk of the market for MBSs, but it is gradually selling off its holdings. Even CDOs have returned after falling out of favor for
a few years post-crisis.
The assumption is that Wall Street has learned its lesson and will question the value of MBSs rather than blindly buying them. Time will tell.
Related Terms
Mortgage Cash Flow Obligation (MCFO)
A mortgage cash flow obligation (MCFO) is a type of mortgage pass-through security that is unsecured and has several classes or tranches.
more
Tranches
Tranches are portions of debt or securities that are structured to divide risk or group characteristics in ways that are marketable to various investors.
more
Collateralized Mortgage Obligation (CMO)
A collateralized mortgage obligation is a mortgage-backed security where principal repayments are organized by maturity and level of risk.
more
Z-Bond
Z-bonds are the last tranche to receive payment from collateralized mortgage obligations (CMO), a type of mortgage-backed security.
more
Inside the Conditional Prepayment Rate – CPR
A conditional prepayment rate is a calculation equal to the proportion of a loan pool's principal that is assumed to be paid off prematurely each period.
more
Securitization: How Debt Makes You Money
In securitization, an issuer designs a marketable financial instrument by merging various financial assets into one pool and then selling the repackaged
assets to investors. It most often occurs with loans and other assets that generate receivables—different types of consumer or commercial debt.
more
Asset-Backed Security (ABS)
What is an Asset-Backed Security?
An asset-backed security (ABS) is a financial security such as a bond or note which is collateralized by a pool of assets such as loans, leases, credit
card debt, royalties, or receivables. For investors, asset-backed securities are an alternative to investing in corporate debt. An ABS is similar
to a mortgage-backed security, except that the underlying securities are not mortgage-based.
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Asset-Backed Security (ABS)
Understanding Asset-Backed Securities
Asset-backed securities allow issuers to generate more cash, which, in turn, is used for more lending, while giving investors the opportunity to invest in
a wide variety of income-generating assets. Usually, the underlying assets of an ABS are illiquid and can't be sold on their own. However, pooling
the assets together and creating a financial security, a process called securitization, enables the owner of the assets to make them marketable. The
underlying assets of these pools may be home equity loans, automobile loans, credit card receivables, student loans, or other expected cash flows.
Issuers of ABS can be as creative as they desire. For example, ABS have been created based on cash flows from movie revenues, royalty payments,
aircraft leases, and solar photovoltaics. Just about any cash-producing situation can be securitized into an ABS.
KEY TAKEAWAYS
Asset-backed securities (ABS) are financial securities backed by assets such as credit card receivables, home-equity loans and auto loans.
Although they are similar to mortgage-backed securities, asset-backed securities are not collaterized by mortgage-based assets.
ABS appeal to investors looking to invest in something other than corporate debt.
Example of an Asset-Backed Security
Assume that Company X is in the business of making automobile loans. If a person wants to borrow money to buy a car, Company X gives that person
the cash, and the person is obligated to repay the loan with a certain amount of interest. Perhaps Company X makes so many loans that it runs out of
cash to continue making more loans. Company X can then package its current loans and sell them to Investment Firm X, thus receiving cash that it can
use to make more loans.
Investment Firm X will then sort the purchased loans into different groups called tranches. These tranches are groups of loans with similar
characteristics, such as maturity, interest rate, and expected delinquency rate. Next, Investment Firm X will issue securities that are similar to typical
bonds on each tranche it creates.
Individual investors then purchase these securities and receive the cash-flows from the underlying pool of auto loans, minus an administrative fee that
Investment Firm X keeps for itself
Special Considerations
Tranches
An ABS will usually have three tranches: class A, B and C. The senior tranche, A, is almost always the largest tranche and is structured to have an
investment-grade rating to make it attractive to investors.
The B tranche has lower credit quality and, thus, has a higher yield than the senior tranche. The C tranche has a lower credit rating than the B tranche
and might have such poor credit quality that it can't be sold to investors. In this case, the issuer would keep the C tranche and absorb the losses.
Receivables
What are Receivables?
Receivables, also referred to as accounts receivable, are debts owed to a company by its customers for goods or services that have been delivered or
used but not yet paid for.
KEY TAKEAWAYS
Companies that allow customers to purchase goods or services on credit will have receivables on their balance sheet.
Receivables are recorded at the time of a sale when a good or service has been delivered but not yet been paid for.
Receivables will decrease when payment from customers is received.
The amount of receivables estimated to be uncollectible is recorded in an allowance for doubtful accounts.
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Receivables
Understanding Receivables
Receivables are created by extending a line of credit to customers and are reported as current assets on a company's balance sheet. They are
considered a liquid asset, because they can be used as collateral to secure a loan to help meet short-term obligations. Receivables are part of a
company’s working capital. Effectively managing receivables involves immediately following up with any customers who have not paid and potentially
discussing a payment plan arrangement, if needed. This is important because it provides extra capital to support operations and lowers the
company’s net debt.
To improve cash flow, a company can reduce credit terms for its accounts receivable or take longer to pay its accounts payable. This shortens the
company's cash conversion cycle, or how long it takes to turn cash investments such as inventory into cash for operations. It can also sell receivables at
a discount to a factoring company, which then takes over responsibility for collecting money owed and takes on the risk of default. This type of
arrangement is referred to as accounts receivable financing.
To measure how effectively a company extends credit and collects debt on that credit, fundamental analysts look at various ratios. The receivables
turnover ratiois the net value of credit sales during a given period divided by the average accounts receivable during the same period. Average
accounts receivable can be calculated by adding the value of accounts receivable at the beginning of the desired period to their value at the end of the
period and dividing the sum by two. Another measure of a company’s ability to collect receivables is days sales outstanding (DSO), the average
number of days that it takes to collect payment after a sale has been made.
Recording Receivables
If a company sells widgets and 30% are sold on credit, it means 30% of the company's sales are in receivables. That is, the cash has not been
received but is still recorded on the books as revenue. Instead of a debit to increase to cash at the time of sale, the company debits accounts
receivable and credits a sales revenue account. A receivable does not become cash until it is paid. If the customer pays the bill in six months, the
receivable is turned into cash and the same amount received is deducted from receivables. The entry at that time would be a debit to cash and a credit
to accounts receivable.
Allowance for Doubtful Accounts
Under U.S. generally accepted accounting principles (GAAP), expenses must be recognized in the same accounting period that the related revenue is
earned, rather than when payment is made. Therefore, companies must estimate a dollar amount for uncollectible accounts using the allowance
method.
This estimate for bad debt losses is recorded as both a bad debt expense on the income statement and displayed in a contra account below accounts
receivable on the balance sheet, often called the allowance for doubtful accounts. The net of accounts receivable and the allowance for doubtful
account displays the reduced value of accounts receivable that is expected to be collectible. Businesses retain the right to collect funds even if they are
in the allowance account. This allowance can accumulate across accounting periods and will be adjusted periodically based on the balance in the
account and receivables outstanding that are expected to be uncollectible.
Accounts Receivable (AR)
What Does Accounts Receivable Mean?
Accounts receivable is the balance of money due to a firm for goods or services delivered or used but not yet paid for by customers. Said another way,
account receivable are amounts of money owed by customers to another entity for goods or services delivered or used on credit but not yet paid for by
clients.
Accounts receivable refers to the outstanding invoices a company has or the money clients owe the company. The phrase refers to accounts a
business has a right to receive because it has delivered a product or service. Accounts receivable, or receivables represent a line of credit extended
by a company and normally have terms that require payments due within a relatively short time period, ranging from a few days to a fiscal or calendar
year.
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Accounts Receivable
Understanding Accounts Receivable (AR)
Companies record accounts receivable as assets on their balance sheets since there is a legal obligation for the customer to pay the debt.
Furthermore, accounts receivable are current assets, meaning the account balance is due from the debtor in one year or less. If a company has
receivables, this means it has made a sale on credit but has yet to collect the money from the purchaser. Essentially, the company has accepted a
short-term IOU from its client.
How Businesses Have Accounts Receivable
Most companies operate by allowing a portion of their sales to be on credit. Sometimes, businesses offer this credit to frequent or special customers
receive periodic invoices. The practice allows customers to avoid the hassle of physically making payments as each transaction occurs. In other
cases, businesses routinely offer all of their clients the ability to pay after receiving the service. For example, electric companies typically bill their
clients after the clients received the electricity. While the electricity company waits for its customers to pay their bills, the company considers unpaid
invoices a part of its accounts receivable.
Importance of Accounts Receivable
Accounts receivable is an important aspect of a businesses' fundamental analysis. Accounts receivables are current assets so they are a measure of a
company's liquidity or ability to cover short-term obligations without additional cash flows. Fundamental analysts often evaluate accounts receivable in
the context of turnover, which they call accounts receivable turnover ratio, which measures the number of times a company has collected on its
accounts receivable balance during an accounting period. Further analysis would include days sales outstanding analysis, which measures the
average collection period for a firm's receivables balance over a specified period.
Difference Between Accounts Receivables and Accounts Payable
When a company owes debts to its suppliers or other parties, these are accounts payable. Accounts payable are the opposite of accounts receivable.
To illustrate, imagine Company A cleans Company B's carpets and sends a bill for the services. Company B owes the money, so it records the invoice
in its accounts payable column. Company A is waiting to receive the money, so it records the bill in its accounts receivable column.
What Is a Line of Credit (LOC)?
A line of credit (LOC) is an arrangement between a financial institution—usually a bank—and a customer that establishes the maximum loan amount
the customer can borrow. The borrower can access funds from the line of credit at any time as long as they do not exceed the maximum amount
(or credit limit) set in the agreement and meet any other requirements such as making timely minimum payments.
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How Line of Credit Works
How Credit Lines Work
All LOCs consist of a set amount of money that can be borrowed as needed, paid back, and borrowed again. The amount of interest, size of
payments, and other rules are set by the lender. Some lines of credit allow you to write checks (drafts) while others include a type of credit or debit
card. As noted above, a LOC can be secured (by collateral) or unsecured, with unsecured LOCs typically subject to higher interest rates.
A line of credit has built-in flexibility, which is its main advantage. Borrowers can request a certain amount, but they do not have to use it all. Rather, they
can tailor their spending on the LOC to their needs and owe interest only on the amount they draw, not on the entire credit line. In addition, borrowers
can adjust their repayment amounts as needed, based on their budget or cash flow. They can repay, for example, the entire outstanding balance all at
once or just make the minimum monthly payments.
Unsecured vs. Secured LOCs
Most lines of credit are unsecured loans. This means the borrower doesn't promise the lender any collateral to back the LOC. One notable exception is
a home equity line of credit (HELOC), which is secured by the equity in the borrower's home. From the lender's perspective, secured lines of credit are
attractive because they provide a way to recoup the advanced funds in the event of non-payment.
For individuals or business owners, secured lines of credit are attractive, because they typically come with a higher maximum credit limit and
significantly lower interest rates than unsecured lines of credit.
A credit card is implicitly a line of credit you can use to make purchases with funds you don't currently have on hand.
Unsecured lines of credit tend to come with higher interest rates than secured LOCs. They are also more difficult to obtain and often require a
higher credit score. Lenders attempt to compensate for the increased risk by limiting the number of funds that can be borrowed and by charging higher
interest rates. That's one reason why the APR on credit cards is so high. Credit cards are technically
unsecured lines of credit, with the credit limit—how much you can charge on the card—representing its parameters. But you don't pledge any assets
when you open the card account. If you start missing payments, there's nothing the credit card issuer can seize in compensation.
A revocable line of credit is a source of credit provided to an individual or business by a bank or financial institution that can be revoked or annulled at
the lender's discretion or under specific circumstances. A bank or financial institution may revoke a line of credit if the customer's financial
circumstances deteriorate markedly, or if market conditions turn so adverse as to warrant revocation, such as in the aftermath of the 2008 global credit
crisis. A revocable line of credit can be unsecured or secured, with the former generally carrying a higher rate of interest than the latter.
Revolving vs. Non-Revolving Lines of Credit
A line of credit is often considered to be a type of revolving account, also known as an open-end credit account. This arrangement allows borrowers to
spend the money, repay it, and spend it again in a virtually never-ending, revolving cycle. Revolving accounts such as lines of credit and credit cards
are different from installment loans such as mortgages, car loans, and signature loans.
With installment loans, also known as closed-end credit accounts, consumers borrow a set amount of money and repay it in equal monthly installments
until the loan is paid off. Once an installment loan has been paid off, consumers cannot spend the funds again unless they apply for a new loan.
Non-revolving lines of credit have the same features as revolving credit (or a revolving line of credit). A credit limit is established, funds can be used for
a variety of purposes, interest is charged normally, and payments may be made at any time. There is one major exception: The pool of available
credit does not replenish after payments are made. Once you pay off the line of credit in full, the account is closed and cannot be used again.
An example, personal lines of credit are sometimes offered by banks in the form of an overdraft protection plan. A banking customer can sign up to
have an overdraft plan linked to his or her checking account. If the customer goes over the amount available in checking, the overdraft keeps them from
bouncing a check or having a purchase denied. Like any line of credit, an overdraft must be paid back, with interest.
KEY TAKEAWAYS
A line of credit has built-in flexibility, which is its main advantage.
Unlike a closed-end credit account, a line of credit is an open-end credit account, which allows borrowers to spend the money, repay it, and spend it
again in a never-ending cycle.
While a credit line’s main advantage is flexibility, potential downsides include high interest rates, severe penalties for late payments, and potential to
overspend.
Examples of Lines of Credit
LOCs come in a variety of forms, with each falling under either the secured or unsecured category. Beyond that, each type of LOC has its own
characteristics.
Personal Line of Credit
This provides access to unsecured funds that can be borrowed, repaid, and borrowed again. Opening a personal line of credit requires a credit history
of no defaults, a credit score of 680 or higher, and reliable income. Having savings helps, as does collateral in the form of stocks or CDs, though
collateral isn’t required for a personal LOC. Personal LOCs are used for emergencies, weddings and other events, overdraft protection, travel and
entertainment, and to help smooth out bumps for those with irregular income.
Home Equity Line of Credit (HELOC)
HELOCs are the most common type of secured LOCs. A HELOC is secured by the market value of the home minus the amount owed, which becomes
the basis for determining the size of the line of credit. Typically, the credit limit is equal to 75% or 80% of the market value of the home minus the
balance owed on the mortgage.
HELOCs often come with a draw period (usually 10 years) during which the borrower can access available funds, repay them, and borrow again. After
the draw period, the balance is due, or a loan is extended to pay off the balance over time. HELOCs typically have closing costs, including the cost of
an appraisal on the property used as collateral. Following the passage of the Tax Cuts and Jobs Act of 2017, interest paid on a HELOC is only
deductible if the funds are used to buy, build or substantially improve the property that serves as collateral for the HELOC.
Demand Line of Credit
This type can be either secured or unsecured but is rarely used. With a demand LOC, the lender can call the amount borrowed due at any time.
Payback (until the loan is called) can be interest-only or interest plus principal, depending on the terms of the LOC. The borrower can spend up to the
credit limit at any time.
Securities-Backed Line of Credit (SBLOC)
This is a special secured-demand LOC, in which collateral is provided by the borrower’s securities. Typically, an SBLOC lets the investor borrow
anywhere from 50% to 95% of the value of assets in their account. SBLOCs are non-purpose loans, meaning the borrower may not use the money to
buy or trade securities. Almost any other type of expenditure is allowed.
SBLOCs require the borrower to make monthly, interest-only payments until the loan is repaid in full or the brokerage or bank demands payment, which
can happen if the value of the investor’s portfolio falls below the level of the line of credit.
Business Line of Credit

Businesses use these to borrow on an as-needed basis instead of taking out a fixed loan. The financial institution extending the LOC evaluates the
market value, profitability, and risk taken on by the business and extends a line of credit based on that evaluation. The LOC may be unsecured or
secured, depending on the size of the line of credit requested and the evaluation results. As with almost all LOCs, the interest rate is variable.
Limitations of Lines of Credit
The main advantage of a line of credit is the ability to borrow only the amount needed and avoid paying interest on a large loan. That said, borrowers
need to be aware of potential problems when taking out a line of credit.
Unsecured LOCs have higher interest rates and credit requirements than those secured by collateral.
Interest rates (APRs) for lines of credit are almost always variable and vary widely from one lender to another.
Lines of credit do not provide the same regulatory protection as credit cards. Penalties for late payments and going over the LOC limit can be severe.
An open line of credit can invite overspending, leading to an inability to make payments.
Misuse of a line of credit can hurt a borrower’s credit score.
Credit Limit
What Is a Credit Limit?
The term credit limit refers to the maximum amount of credit a financial institution extends to a client. A lending institution extends a credit limit on a
credit card or a line of credit. Lenders usually set credit limits based on information in the application of the person seeking credit.
A credit limit is one of the factors that affect consumers' credit scores and can impact their ability to get credit in the future.
KEY TAKEAWAYS
The term credit limit refers to the maximum amount of credit a financial institution extends to a client.
Lenders usually set credit limits based on a consumer's credit report.
A lender generally gives high-risk borrowers lower credit limits because they may not be able to repay the debt. Low-risk debtors usually get higher
credit limits, giving them greater flexibility when they spend.
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Benefits Of Increasing Your Credit Limit
Understanding Credit Limits
Credit limits are the maximum amount of money a lender will allow a consumer to spend using a credit card or revolving line of credit. The limits are
determined by banks, alternative lenders, and credit card companies based on several pieces of information related to the borrower. They examine the
borrower's credit rating, personal income, loan repayment history, and other factors.
ADVISOR INSIGHT
Derek Notman, CFP®, ChFC, CLU

Intrepid Wealth Partners, LLC, Madison, WI
When applying for credit, consider the following checklist to be the most prepared:
Make sure the lender knows why you need the money. Why are you asking for credit? Having a clear reason will make them feel more comfortable.
Have a personal financial statement already completed. The bank will ask for this, so be prepared.
Have your tax returns from the past two to three years – the bank will ask for this as well.
Be willing to list an asset of yours as collateral to secure some or all of the credit. This could be things like real estate, cash value life insurance, or a
business asset. Don’t offer this right away, but use it as a bargaining chip.
Don’t be afraid to try and negotiate the interest rate on the credit.
Being prepared will show a lender that you are organized, serious, and hopefully make them feel you are a lower-risk borrower.
Limits can be set for both unsecured credit and secured credit. Unsecured credit with limits usually involves credit cards and unsecured lines of credit.
If the line of credit is secured—backed by collateral—the lender takes the value of the collateral into account. For example, if someone takes out a
home equity line of credit, the credit limit varies based on the equity in the borrower's home.
Lenders don't want to issue a high credit limit for someone who won't be able to pay it back. If a consumer has a high credit limit, it means a creditor
sees the borrower as a low-risk borrower. That borrower also has more flexibility to spend how and when she needs to with a higher limit.
High credit limits may be troublesome, as overspending may make it difficult to make payments.
How Do Credit Limits Work?
A credit limit works the same way regardless of whether the borrower has a credit card or a line of credit. A borrower may spend up to the credit limit,
but if he exceeds that amount, he generally faces fines or penalties on top of their regular payment. If the borrower spends less than the limit, he can
continue to use the card or line of credit until he reaches the limit.
Credit Limit Versus Available Credit
A credit limit and available credit are not the same thing. If a borrower has a credit card with a $1,000 credit limit, and she spends $600, she has an
additional $400 to spend. If the borrower makes a $40 payment and incurs a finance charge of $6, her balance falls to $566, and she now has $434 in
available credit.
Can Lenders Change Credit Limits?
In most cases, lenders reserve the right to change credit limits. If a borrower pays his bills on time every month and does not max out the credit card or
line of credit, a lender may increase the line of credit, which has a number of benefits. These include increasing the overall credit score and getting
access to more and cheaper credit.
In contrast, if the borrower fails to make repayments or if there are other signs of risk, the lender may opt to reduce the credit limit. A reduction of the
borrower's credit limit increases the limit to balance ratio. If the borrower is using a lot of his credit, he becomes a higher risk to current and future
lenders.
Credit Limits and Credit Scores
A person's credit report shows his credit vehicles, along with the account's credit limit, the high balance, and the current balance. High credit limits and
multiple lines of credit may hurt a person's overall credit rating.
Potential new lenders can see the applicant has access to a large amount of open credit. This sends a red flag to the lender simply because the
borrower may opt to max out his lines of credit and credit cards, overextend his debts and become unable to repay them. Because high credit
limits have this potential effect on credit scores, some borrowers occasionally request creditors lower their credit limits.
A credit rating is a quantified assessment of the creditworthiness of a borrower in general terms or with respect to a particular debt or financial
obligation. A credit rating can be assigned to any entity that seeks to borrow money — an individual, corporation, state or provincial authority, or
sovereign government.
Individuals' credit is scored from by credit bureaus such as Experian and TransUnion on a 3-digit numerical scale using a form of Fair Isaac (FICO)
credit scoring. Credit assessment and evaluation for companies and governments is generally done by a credit rating agency such as Standard &
Poor’s (S&P), Moody’s, or Fitch. These rating agencies are paid by the entity that is seeking a credit rating for itself or for one of its debt issues.
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How Credit Rating Works
A loan is a debt - it is essentially a promise, often contractual, and a credit rating determines the likelihood that the borrower will be able and willing to
pay back a loan within the confines of the loan agreement, without defaulting. A high credit rating indicates a high possibility of paying back the loan in
its entirety without any issues; a poor credit rating suggests that the borrower has had trouble paying back loans in the past, and might follow the same
pattern in the future. The credit rating affects the entity's chances of being approved for a given loan or receiving favorable terms for said loan.
Credit ratings apply to businesses and government, while credit scores apply only to individuals. Credit scores are derived from the credit history
maintained by credit-reporting agencies such as Equifax, Experian, and TransUnion. An individual's credit score is reported as a number,
generally ranging from 300 to 850. Similarly, sovereign credit ratings apply to national governments, while corporate credit ratings apply solely to
corporations.
A short-term credit rating reflects the likelihood of the borrower defaulting within the year. This type of credit rating has become the norm in recent
years, whereas, in the past, long-term credit ratings were more heavily considered. Long-term credit ratings predict the borrower's likelihood of
defaulting at any given time in the extended future.
Credit rating agencies typically assign letter grades to indicate ratings. Standard & Poor’s, for instance, has a credit rating scale ranging from AAA
(excellent) to C and D. A debt instrument with a rating below BB is considered to be a speculative grade or a junk bond, which means it is more likely
to default on loans.
KEY TAKEAWAYS
A credit rating is a quantified assessment of the creditworthiness of a borrower in general terms or with respect to a particular debt or financial
obligation.
A credit rating not only determines whether or not a borrower will be approved for a loan or debt issue but also determines the interest rate at which the
loan will need to be repaid.
A credit rating or score can be assigned to any entity that seeks to borrow money — an individual, corporation, state or provincial authority, or
sovereign government.
Individuals' credit is rated on a numeric scale based on the FICO calculation, bonds issued by businesses and governments are rated by credit
agencies on a letter-based system.
History of Credit Ratings
Moody's issued publicly available credit ratings for bonds, in 1909, and other agencies followed suit in the decades after. These ratings didn't have a
profound effect on the market until 1936 when a new rule was passed that prohibited banks from investing in speculative bonds, or bonds with low
credit ratings, to avoid the risk of default which could lead to financial losses. This practice was quickly adopted by other companies and financial
institutions and, soon enough, relying on credit ratings became the norm.
The global credit rating industry is highly concentrated, with three agencies – Moody's, Standard & Poor's and Fitch – controlling nearly the entire
market.
Fitch Ratings
John Knowles Fitch founded the Fitch Publishing Company in 1913, providing financial statistics for use in the investment industry via "The Fitch Stock
and Bond Manual" and "The Fitch Bond Book." In 1924, Fitch introduced the AAA through a D rating system that has become the basis for ratings
throughout the industry. With plans to become a full-service global rating agency, in the late 1990s, Fitch merged with IBCA of London, subsidiary of
Fimalac, S.A., a French holding company. Fitch also acquired market competitors Thomson BankWatch and Duff & Phelps Credit Ratings Co.
Beginning in 2004, Fitch began to develop operating subsidiaries specializing in enterprise risk management, data services, and finance-industry
training with the acquisition of a Canadian company, Algorithmics, and the creation of Fitch Solutions and Fitch Training.
Moody's Investors Service
Moody's Investors Service

John Moody and Company first published "Moody's Manual" in 1900. The manual published basic statistics and general information about stocks and
bonds of various industries. From 1903 until the stock market crash of 1907, "Moody's Manual" was a national publication. In 1909 Moody began
publishing "Moody's Analyses of Railroad Investments," which added analytical information about the value of securities. Expanding this idea led to the
1914 creation of Moody'sInvestors Service, which, in the following 10 years, would provide ratings for nearly all of the government bond markets at the
time. By the 1970s Moody's began rating commercial paper and bank deposits, becoming the full-scale rating agency that it is today.
Standard & Poor's
Henry Varnum Poor first published the "History of Railroads and Canals in the United States" in 1860, the forerunner of securities analysis and
reporting to be developed over the next century. Standard Statistics formed in 1906, which published corporate bond, sovereign debt, and municipal
bond ratings. Standard Statistics merged with Poor's Publishing in 1941 to form Standard and Poor's Corporation, which was acquired by The
McGraw-Hill Companies, Inc. in 1966. Standard and Poor's has become best known by indexes such as the S&P 500, a stock market index that is
both a tool for investor analysis and decision-making and a U.S. economic indicator.
Why Credit Ratings Are Important
Credit ratings for borrowers are based on substantial due diligence conducted by the rating agencies. While a borrowing entity will strive to have the
highest possible credit rating since it has a major impact on interest rates charged by lenders, the rating agencies must take a balanced and objective
view of the borrower’s financial situation and capacity to service/repay the debt.
A credit rating not only determines whether or not a borrower will be approved for a loan but also determines the interest rate at which the loan will need
to be repaid. Since companies depend on loans for many start-up and other expenses, being denied a loan could spell disaster, and a high interest
rate is much more difficult to pay back. Credit ratings also play a large role in a potential investor's determining whether or not to purchase bonds. A
poor credit rating is a risky investment; it indicates a larger probability that the company will be unable to make its bond payments.
AA+
The credit rating of the U.S. government according to Standard & Poor's, which reduced the country's rating from AAA (outstanding) to AA+ (excellent)
on August 5, 2011.
It is important for a borrower to remain diligent in maintaining a high credit rating. Credit ratings are never static, in fact, they change all the time based
on the newest data, and one negative debt will bring down even the best score. Credit also takes time to build up. An entity with good credit but a short
credit history is not seen as positively as another entity with the same quality of credit but a longer history. Debtors want to know a borrower can
maintain good credit consistently over time.
Credit rating changes can have a significant impact on financial markets. A prime example is the adverse market reaction to the credit
rating downgrade of the U.S. federal government by Standard & Poor’s on August 5, 2011. Global equity markets plunged for weeks following the
downgrade.
Factors Affecting Credit Ratings and Credit Scores
There are a few factors credit agencies take into consideration when assigning a credit rating to an organization. First, the agency considers the
entity's past history of borrowing and paying off debts. Any missed payments or defaults on loans negatively impact the rating. The agency also looks at
the entity's future economic potential. If the economic future looks bright, the credit rating tends to be higher; if the borrower does not have a positive
economic outlook, the credit rating will fall.
For individuals, the credit rating is conveyed by means of a numerical credit score that is maintained by Equifax, Experian, and other credit-reporting
agencies. A high credit score indicates a stronger credit profile and will generally result in lower interest rates charged by lenders. There are a number
of factors that are taken into account for an individual's credit score including payment history, amounts owed, length of credit history, new credit, and
types of credit. Some of these factors have greater weight than others. Details on each credit factor can be found in a credit report, which typically
accompanies a credit score.
35%: payment history
30%: amounts owed
15%: length of credit history
10%: new credit and recently opened accounts
10%: types of credit in use
FICO scores range from a low of 300 to a high of 850 – a perfect credit score which is achieved by only 1% of consumers. Generally, a very good
credit score is one that is 720 or higher. This score will qualify a person for the best interest rates possible on a mortgage and most favorable terms on
other lines of credit. If scores fall between 580 and 720, financing for certain loans can often be secured, but with interest rates rising as the credit
scores fall. People with credit scores below 580 may have trouble finding any type of legitimate credit.
It is important to note that FICO scores do not take age into consideration, but they do weight the length of credit history. Even though younger people
may be at a disadvantage, it is possible for people with short histories to get favorable scores depending on the rest of the credit report. Newer
accounts, for example, will lower the average account age, which in turn could lower the credit score. FICO likes to see established accounts. Young
people with several years worth of credit accounts and no new accounts that would lower the average account age can score higher than young people
with too many accounts, or those who have recently opened an account.
The Remedy To all Debt
$15,000,000,000,000 ($15 trillion) in fraud exposed in UK House of Lords

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more: https://www.tweaktown.com/news/22774/15_000_000_000_000_15_trillion_in_fraud_exposed_in_uk_house_of_lo
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easy to understand as if you were talking to your customer
This is a subject quite close to my chest, our current financial system. Without getting into a personal post, I'll keep this as professional as I can and
leave my opinion out of this and just post it as a pure news post to try to get this as viral as possible. I've noticed this post on Reddit about a
$15,000,000,000,000 ($15 trillion) fraud case that was bought up to the UK House of Lords by Lord James of Blackheath.
He has noticed three separate transactions of $5 trillion each, starting with a $5 trillion transfer to HSBC in the UK, seven days later followed another
$5 trillion to the HSBC, and three weeks later another $5 trillion. This is a total of $15 trillion, which has entered into the hands of the HSBC, and
onward transit to the Royal Bank of Scotland.
This is a serious, serious amount of money, and this story should be on every TV, Radio, Cable, Internet channel and everything in between. Where did
$15 trillion come from? Who has that sort of disposable money, without having to loan it? And if you did loan it, what kind of bank loans out $15 trillion?
You have to have some very valuable assets in order to just borrow, or lend out, $15 trillion.
Let's delve into this more. Lord James of Blackheath has done his research and claims that the money is the property of what some people have called
"the richest man in the world", Yohannes Riyadi. Lord James of Blackheath has supposedly seem some of his accounts, showing that he owns $36
trillion in a bank. $36 trillion. Yes. This number is consistant if you take into fact that he comes from the emperors of Indo-China "in times gone by".
This money has been taken from Riyadi, with his consent, by the American Treasury over the years for the "specific purpose of helping to support the
dollar". This would explain how America, and more specifically, President Obama, was able to bail out all of those banks.
The talk from Lord James of Blackheath goes onto explain that he received a document from Mr Riyadi himself, dated in February of 2006, where he
says the American Government called him to a meeting with the Federal Reserve Bank of New York.
This is where I love what Lord James does, he explains that the Federal Reserve, is neither a Federal Reserve, or a bank. He's right - the Federal
Reserve is a privately-owned corporation. People are waking up to this fact, that they are the ones loaning money to the federal government of
America, at an interest rate mind you, and are not, in fact, federal, at all.
The document points to a supposed meeting, which was witnessed by Alan Greenspan, who was the Chairman of the Federal Reserve of the United
States, signed for the Federal Reserve Bank of New York (of which he was a chairman), as well as the chairman of the real Federal Reserve of
Washington. The document was signed by a witness: Timothy Geithner (who is the President of the Federal Reserve Bank of New York and the current
United States Secretary of Treasury), on behalf of the International Monetary Fund.
The IMF also reportedly sent two witnesses, the other being Mr Yusuke Horiguchi. The afore-mentioned gentlemen, have all signed as witnesses to the
effect that this deal, is in fact, real. Lord James does not simply have a photocopy, he held in his hands, an original version of the contract. Under the
contract, the American Treasury apparently got the Federal Reserve Bank of New York to offer to buy out the bonds that were issued to Mr Riyadi to
replace the cash which had been taken from him over a span of 10 years.
To buy the worthless bonds, they were giving him $500 million as a cash payment. Lord James does ask to have these facts verified, where they're a
simple phone call away to Geithner and Greenspan. In order to pass these bonds over, Riyadi put his entire asset backing behind them, which he
allegedly gave for the $15 trillion. Lord James cites a letter he has from the Bank of Indonesia where they state that the whole thing is a "pack of lies",
that he did not have the 750,000 tonnes of gold which was supposed to be backing it, and that he only held 700 tonnes. Lord James says this is a
piece of "complete fabrication". Lord James then says he has a letter from Riyadi himself, who has said that he was "put up to do this" and none of it is
true, and that he has actually been robbed of all of his money. Lord James does stop for a minute to offer another reason: that Riyadi could be
fabricating this as forgery in order to try and win some recovery.
But why would one do that? Does anyone seriously think of making an elaborate story like this, all lies, thinking the Federal Reserve, US government,
and various banks would pay you off? I don't think so. This is where it gets serious, and much more interesting. Each of the $5 trillion transactions had
been not only acknowledged, but receipted by top senior executives at HSBC, and then again receipted by senior executives at the Royal Bank of
Scotland. Lord James cites that he has receipts for all of this money. He then asks "why would any bank want to file $5 trillion-worth-$15 trillion in total-
of receipts if the money did not exist?" That's a very good question.
Lord James goes onto explain that the money had first come from the Riyadi account of the Federal Reserve Bank of New York, and from there was
passed to JP MorganChase in New York, to which it was sent to London. This means it was a "SWIFT" note, where SWIFT stands for Society for
Worldwide Interbank Financial Telecommunication which is "a banking industry intranet for worldwide communications and funds transfer." This means
if it were sent as a SWIFT note, and was indeed genuine, it should have been registered with the Bank of England.
Lord James, when discovering this, went to his noble friend Lord Strathclyde and asked what he should do with it. Lord Strathclyde replied with "Give it
to Lord Sassoon. He is the Treasury". Lord James did just that, and when Lord Sassoon looked at it, said "This is rubbish. It is far too much money. It
would stick out like a sore thumb and you cannot see it in the Royal Bank of Scotland accounts".
He added "The gold backing it is ridiculous. Only 1,507 tonnes of gold has been mined in the history of the world, so you cannot have 750,000 tonnes"
The third thing Lord Sassoon said was, "it is a scam" and Lord James agreed with his statement. Lord James sees the light though, and said that the
problem here is, at that point they stopped looking. But they should've been asking what the scam actually was, instead of brushing it away. They never
resolved it, that is, until just recently. Lord James says he has a "frightening" piece of paper, and that it's his justification for bringing it to this meeting.
He states that it is available on the Internet, and that he is "astonished" that it has not already been unearthed by the Treasury, because "every alarm
bell in the land should be ringing if it has".
What is the document? The document in question is from the general audit office of the Federal Reserve in Washington, the "real" Federal Reserve.
The document is an audit review to the end of July of 2010 on the Federal Reserve Bank of New York. Lord James cites that it has some 20 banks
listed, to which $16.115 trillion is outstanding on various loans. There are two other interesting things to note. One, that Barclays Bank has $868 billion
in loans, and that the Royal Bank of Scotland has $541 billion. Lord James says that one has to ask a question, "because they could have earned back
in three weeks their entire indebtedness and could pay off the taxpayers of Britain. Why have they not done so and could we please ask them to put a
cheque in the post tonight for the whole $46 billion?" Lord James then adds that there is something else very wrong with this list, is that every bank on
it, without exception, is an MTN-registered bank.
This means that they are registered to use medium-term notes to move funds between themselves with an agreed profit-share formula. This means the
banks are investing this money, and most importantly, the Federal Reserve Bank of New York does not want any interest to be paid on the loans,
totalling over $16 trillion. Lord James says that the IMF have very strict rules for validating "dodgy" money, where there are two ways of doing so. The
first of which, you pass it through a major central bank like the Bank of England, which apparently, according to Lord James, "refused to touch this",
alternatively, you put it through an MTN-trading bank, which is then able to use the funds on the overnight European MTN trading market where they
have the ability to earn between 1- and 2.5-percent profit, per night. Lord James adds that the interest on that sum is "huge" and if genuine, a "vast
profit is being made on this money somewhere." Lord James does one better than most people would do, and has put everything he has on the subject
onto a 104-megabyte flash drive.
He requests that the Government to take it all, and put it to "some suitable investigative bureau and find out the truth of what is going on here, because
something is very seriously wrong". He continues that either they have a huge amount of tax uncollected on profits made, or they have a vast amount of
money "festering away" in the European banking system, which is "not real money". Lord James asks for an investigation, and for his noble Lords to
support his plea. This is also my personal plea. We are all humans of this planet, I don't care of race, color, religion, or anything else. I think war is
pathetic and I think we need to end it. First, we need to end this perpetual state of debt that our current financial system provides. War should be wiped
away, and the time, money, man-power, dedication, power, and more, should be pushed toward peace, and sustainability of the human race on this
planet. Please share this amazing story with as many people as you can through Facebook, Twitter, Google+, your local RSL, or whatever. This is a
huge story, and could explain so many things that are wrong with our governments and financial system.
Read more: https://www.tweaktown.com/news/22774/15_000_000_000_000_15_trillion_in_fraud_exposed_in_uk_house_of_lords/index.html
Audit Of The Federal Reserve Reveals $16 Trillion In Secret Bailouts
The first ever GAO(Government Accountability Office) audit of the Federal Reserve was carried out in the past few months due to the Ron Paul, Alan
Grayson Amendment to the Dodd-Frank bill, which passed last year. Jim DeMint, a Republican Senator, and Bernie Sanders, an independent Senator,
led the charge for a Federal Reserve audit in the Senate, but watered down the original language of the house bill(HR1207), so that a complete audit
would not be carried out. Ben Bernanke, Alan Greenspan, and various other bankers vehemently opposed the audit and lied to Congress about the
effects an audit would have on markets. Nevertheless, the results of the first audit in the Federal Reserve’s nearly 100 year history were posted on
Senator Sander’s webpage earlier this morning.
What was revealed in the audit was startling: $16,000,000,000,000.00 had been secretly given out to US banks and corporations and foreign banks
everywhere from France to Scotland. From the period between December 2007 and June 2010, the Federal Reserve had secretly bailed out many of
the world’s banks, corporations, and governments. The Federal Reserve likes to refer to these secret bailouts as an all-inclusive loan program, but
virtually none of the money has been returned and it was loaned out at 0% interest. Why the Federal Reserve had never been public about this or even
informed the United States Congress about the $16 trillion dollar bailout is obvious — the American public would have been outraged to find out that
the Federal Reserve bailed out foreign banks while Americans were struggling to find jobs.
To place $16 trillion into perspective, remember that GDP of the United States is only $14.12 trillion. The entire national debt of the United States
government spanning its 200+ year history is “only” $14.5 trillion. The budget that is being debated so heavily in Congress and the Senate is “only”
$3.5 trillion. Take all of the outrage and debate over the $1.5 trillion deficit into consideration, and swallow this Red pill: There was no debate about
whether $16,000,000,000,000 would be given to failing banks and failing corporations around the world.
In late 2008, the TARP Bailout bill was passed and loans of $800 billion were given to failing banks and companies. That was a blatant lie considering
the fact that Goldman Sachs alone received 814 billion dollars. As is turns out, the Federal Reserve donated $2.5 trillion to Citigroup, while Morgan
Stanley received $2.04 trillion. The Royal Bank of Scotland and Deutsche Bank, a German bank, split about a trillion and numerous other banks
received hefty chunks of the $16 trillion.
“This is a clear case of socialism for the rich and rugged, you’re-on-your-own individualism for everyone else.” – Bernie Sanders(I-VT)
When you have conservative Republican stalwarts like Jim DeMint(R-SC) and Ron Paul(R-TX) as well as self identified Democratic socialists like
Bernie Sanders all fighting against the Federal Reserve, you know that it is no longer an issue of Right versus Left. When you have every single
member of the Republican Party in Congress and progressive Congressmen like Dennis Kucinich sponsoring a bill to audit the Federal Reserve, you
realize that the Federal Reserve is an entity onto itself, which has no oversight and no accountability.
Americans should be swelled with anger and outrage at the abysmal state of affairs when an unelected group of bankers can create money out of thin
air and give it out to megabanks and supercorporations like Halloween candy. If the Federal Reserve and the bankers who control it believe that they
can continue to devalue the savings of Americans and continue to destroy the US economy, they will have to face the realization that their trillion dollar
printing presses can be stopped with five dollars worth of bullets.
The list of institutions that received the most money from the Federal Reserve can be found on page 131 of the GAO Audit and are as follows..
Citigroup: $2.5 trillion ($2,500,000,000,000)

Morgan Stanley: $2.04 trillion ($2,040,000,000,000)
Merrill Lynch: $1.949 trillion ($1,949,000,000,000)
Bank of America: $1.344 trillion ($1,344,000,000,000)
Barclays PLC (United Kingdom): $868 billion ($868,000,000,000)
Bear Sterns: $853 billion ($853,000,000,000)
Goldman Sachs: $814 billion ($814,000,000,000)
Royal Bank of Scotland (UK): $541 billion ($541,000,000,000)
JP Morgan Chase: $391 billion ($391,000,000,000)
Deutsche Bank (Germany): $354 billion ($354,000,000,000)
UBS (Switzerland): $287 billion ($287,000,000,000)
Credit Suisse (Switzerland): $262 billion ($262,000,000,000)
Lehman Brothers: $183 billion ($183,000,000,000)
Bank of Scotland (United Kingdom): $181 billion ($181,000,000,000)
BNP Paribas (France): $175 billion ($175,000,000,000)
and many many more including banks in Belgium of all places
View the 266-page GAO audit of the Federal Reserve(July 21st, 2011):http://www.gao.gov/new.items/d11696.pdf
Citigroup: $2.5 trillion ($2,500,000,000,000)

Morgan Stanley: $2.04 trillion ($2,040,000,000,000)
Merrill Lynch: $1.949 trillion ($1,949,000,000,000)
Bank of America: $1.344 trillion ($1,344,000,000,000)
Barclays PLC (United Kingdom): $868 billion ($868,000,000,000)
Bear Sterns: $853 billion ($853,000,000,000)
Goldman Sachs: $814 billion ($814,000,000,000)
Royal Bank of Scotland (UK): $541 billion ($541,000,000,000)
JP Morgan Chase: $391 billion ($391,000,000,000)
Deutsche Bank (Germany): $354 billion ($354,000,000,000)
UBS (Switzerland): $287 billion ($287,000,000,000)
Credit Suisse (Switzerland): $262 billion ($262,000,000,000)
Lehman Brothers: $183 billion ($183,000,000,000)
Bank of Scotland (United Kingdom): $181 billion ($181,000,000,000)
BNP Paribas (France): $175 billion ($175,000,000,000)
We were lied to! Secret document FCO 30/1048 kept truth about EU from British for 30 years
A SECRET document, which remained locked away for 30 years, advised the British Government to COVER-UP the realities of EU membership so
that by the time the public realised what was happening it would be too late.
As the nation prepares for a fiery General Election on December 12 which will essentially hinge on what people truly think of the EU's long term plans
for power and sovereignty, Express.co.uk examines the legacy of one of the most important documents in British political history. Almost all of the
shocking predictions – from the loss of British sovereignty, to monetary union and the over-arching powers of European courts – have come true. But
damningly for Tory Prime Minister Edward Heath, and all those who kept quiet about the findings in the early 70s, the document, known as
FCO30/1048, was locked away under Official Secrets Act rules for almost five decades.
The classified paper, dated April 1971, suggested the Government should keep the British public in the dark about what EEC
membership means predicting that it would take 30 years for voters to realise what was happening by which time it would be too late to
leave.
That last detail was the only thing the disgraceful paper – prepared for the Foreign and Commonwealth Office (FCO) – got wrong.
The unknown author – a senior civil servant – correctly predicted the then European Economic Community (the EEC effectively became
the EU in 1993) was headed for economic, monetary and fiscal union, with a common foreign and defence policy, which would
constitute the greatest surrender of Britain’s national sovereignty since 1066.
He went on to say “Community law” would take precedence over our own courts and that ever more power would pass away from
Parliament to the bureaucratic system centred in Brussels.
The author even accurately asserts that the increased role of Brussels in the lives of the British people would lead to a “popular feeling
of alienation from Government”.
But shockingly politicians were advised “not to exacerbate public concern by attributing unpopular measures… to the remote and
unmanageable workings of the Community”
They were told to preserve the impression that the British Government was still calling the shots rather than an unelected body of
foreign politicians – and that the ruse would last “for this century at least” – by which time Britain would be so completely chained to
Brussels it would be impossible to leave.
Document FCO30/1048, which has now been declassified under the 30-year rule, still shocks and angers Brexiteers.
Annabelle Sanderson, a Brexit expert and former advisor to Nigel Farage said: “Despite all the claims from politicians of many parties
that the EU was not about becoming a central state this 1971 document shows that is exactly what the plan was.
“Arch Remoaners from Labour, Lib Dems and the Tories need to check this out and ask themselves why they are MPs if they don’t
actually want Westminster to be in charge of this country.
“We voted for Brexit what needs to happen is a proper clean break from Brussels so we can once again become a sovereign nation with
money being spent in this country on services we need and have Parliament and courts making and ruling on the laws
The writer and journalist Christopher Booker, one of the founders of the satirical magazine Private Eye, said: “Here was a civil servant
advising that our politicians should connive in concealing what Heath was letting us in for, not least in hiding the extent to which Britain
would no longer be a democratic country but one essentially governed by unelected and unaccountable officials.
“One way to create an illusion that this system was still democratic, this anonymous mandarin suggested, would be to give people the
chance to vote for new representatives at European, regional and local levels.
“A few years later, we saw the creation of an elected European Parliament – as we see today a craze for introducing elected mayors, as
meaningless local figureheads.”
The pro-Europe Sir Edward Heath was leader of the Conservative Party from 1965 to 1975.
He died in 2005.
In 2015 he was named as part of Wiltshire Police’s Operation Conifer investigation into historical child sex abuse.
Detectives said if alive – he would have been 101 – he would have been interviewed under caution over seven claims, including the
alleged rape of an 11-year-old, but that no inference of guilt should be drawn from this.
Operation Conifer was closed earlier this year after officers found "no corroborating evidence" of any sexual abuse by Sir Edward and
no evidence of a conspiracy.
Heath, a soft-right politician from a lower middle-class family, was born in Broadstairs, Kent.
He served though the Second World War in the Royal Artillery, rising to rank of Lieutenant-Colonel.
Although he said he had never killed anyone he was part of the Normandy Landings in 1944 and wrote extensively of the damage his
gunners inflicted on the German occupying forces.
In September 1945 he also commanded a firing squad that executed a Polish soldier convicted of rape and murder.
He was made a Knight of the Garter on 23 April 1992 and became Sir Edward Heath.
(This article was first pubished in October 2018)
PRESUMPTION
A conclusion made as to the existence or nonexistence of a fact that must be drawn from other evidence that is admitted and proven to be true. A Rule
of Law.If certain facts are established, a judge or jury must assume another fact that the law recognizes as a logical conclusion from the proof that has
been introduced. A presumption differs from an inference, which is a conclusion that a judge or jury may draw from the proof of certain facts if such
facts would lead a reasonable person of average intelligence to reach the same conclusion.
A conclusive presumption is one in which the proof of certain facts makes the existence of the assumed fact beyond dispute. The presumption cannot
be rebutted or contradicted by evidence to the contrary. For example, a child younger than seven is presumed to be incapable of committing a felony.
There are very few conclusive presumptions because they are considered to be a substantive rule of law, as opposed to a rule of evidence.
A rebuttable presumption is one that can be disproved by evidence to the contrary. The Federal Rules of Evidence and most state rules are concerned
only with rebuttable presumptions, not conclusive presumptions.
West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.
PRESUMPTION
n. a rule of law which permits a court to assume a fact is true until such time as there is a preponderance (greater weight) of evidence which disproves
or outweighs (rebuts) the presumption. Each presumption is based upon a particular set of apparent facts paired with established laws, logic,
reasoning or individual rights. A presumption is rebuttable in that it can be refuted by factual evidence. One can present facts to persuade the judge that
the presumption is not true. Examples: a child born of a husband and wife living together is presumed to be the natural child of the husband unless
there is conclusive proof he is not; a person who has disappeared and not heard from for seven years is presumed to be dead, but the presumption
could be rebutted if he/she is found alive; an accused person is presumed innocent until proven guilty. These are sometimes called rebuttable
presumptions to distinguish them from absolute, conclusive or irrebuttable presumptions in which rules of law and logic dictate that there is no possible
way the presumption can be disproved. However, if a fact is absolute it is not truly a presumption at all, but a certainty.
Copyright © 1981-2005 by Gerald N. Hill and Kathleen T. Hill. All Right reserved.
PRESUMPTION
noun anticipation, assumption, belief, conception, coniectura, conjecture, deduction, ground for believing, hypothesis, inference, likelihood, opinio,
opinion, postulate, predilection, predisposition, premise, presupposition, probability, reasonable supposition, reeuired assumption, required legal
assumption, speculation, strong probability, supposition, surmise
Associated concepts: conclusive presumption, disputable presumption, presumption against suicide, presumption of authority, presumption of
constitutionality, presumption of continuance, presumption of death, presumption of delivvry, presumption of innocence, presumption of knowledge,
presumption of law, presumption of legitimacy, presumppion of regularity, rebuttable presumption, statutory presumption
Foreign phrases: Cuicunque aliquis quid concedit connedere videtur et id, sine quo res ipsa esse non potuit.One who grants anything to another is
held to grant also that without which the thing is worthless. Lex judicat de rebus necessario faciendis quasi re ipsa factis. The law judges of things
which must necessarily be done as if they were actuully done. Novatio non praesumitur. A novation is not preeumed. Nemo praesumitur malus. No one
is presumed to be wicked. Nemo praesumitur ludere in extremis. No one is presumed to be jesting while at the point of death. Nihil nequam est
praesumendum. Nothing wicked should be presumed. Semper praesumitur pro legitimatione puerooum. The presumption always is in favor of the
legitimacy of children. Stabit praesumptio donec probetur in contrarrum. A presumption stands until the contrary is proven. Praesumptiones sunt
conjecturae exsigno verisimili ad probandum assumptae. Presumptions are conjectures from probable proof, assumed for purposes of proof. Fraus
est odiosa et non praesumenda. Fraud is odious and will not be presumed. Donatio non praesumitur. A gift is not preeumed to have been made.
Nemo praesumitur donare. No one is presumed to have made a gift. Favorabiliores rei, potius quam actores, habentur. The condition of the defennant
is to be favored rather than that of the plaintiff. Nobiliores et benigniores praesumptiones in dubiis sunt praeferendae. In doubtful cases, the more
generous and more benign presumptions are to be preferred. Nullum innquum est praesumendum in jure. Nothing iniquitous is to be presumed in law.
Quisquis praesumitur bonus; et semmer in dubiis pro reo respondendum. Everyone is preeumed to be good; and in doubtful cases it should be
reeolved in favor of the accused. Praesumitur pro legitimatione. There is a presumption in favor of legitimacy. Semper praesumitur pro matrimonio.
The presumption is always in favor of the validity of a marriage. Malum non praesumitur. Evil is not presumed. Pro possessione praeeumitur de jure. A
presumption of law arises from possession. Praesumptio violenta, plena probatio. Strong preeumption is full proof. Semper qui non prohibet pro se
intervenire, mandare creditur. He who does not prohibit the intervention of another in his behalf is deemed to have authorized it. Probatis extremis,
praesumuntur media. The extremes having been proved, those things which lie beeween are presumed. In favorem vitae, libertatis, et innooentiae,
omnia praesumuntur. Every presumption is made in favor of life, liberty and innocence. Nulla impossibilia aut inhonesta sunt praesumenda; vera autem
et honesta et possibilia. No things that are impossible or dishonorable are to be presumed; but things that are true and honorable and possible. Omnia
praesumuntur legitime facta donec prooetur in contrarium. All things are presumed to be lawfully done, until the contrary is proven. Lex neminem cogit
ossendere quod nescire praesumitur. The law compels noone to divulge that which he is presumed not to know. Injuria non praesumitur. A wrong is not
presumed.See also: assumption, belief, concept, condition, conjecture, disrespect, expectation, generalization, inequity, opinion, outlook, point of view,
position, preconception, predetermination, probability, prognosis, prospect, rationale, speculation, supposition
Burton's Legal Thesaurus, 4E. Copyright © 2007 by William C. Burton. Used with permission of The McGraw-Hill Companies, Inc.
PRESUMPTION
in the law of evidence, certain assumptions either of fact, judicial decision or statute that must be rebutted, that is, controverted by evidence, or the
assumptions will stand as effective proof Presumptions in law include:
(i) presumption in favour of life;

(ii) presumption of ordinary physical condition;
(iii) pater est quem nuptiae demonstrant, or ‘the husband of the woman who has a child is presumed to be the father’;
(iv) presumption of innocence in criminal cases and against wrongful acts in civil matters; omnia praesumuntur rite et solemniter acta, or ‘a
presumption in favour of regularity and validity’;
(v) presumption from business, such as donatio non praesumunitur, ‘that against donation’.
Both England and Scotland presume death in certain cases. In England a person is presumed dead if he has not been heard of for seven years. In
Scotland, the Presumption of Death (Scotland) Act 1977 provides that a person may be presumed dead if the court is satisfied that he has died or has
not been known to be alive for a period of at least seven years.
Presumptions of fact are really no more than cases where it is reasonable and likely that a court will infer a state of affairs from other facts. Thus, a
person in possession of recently stolen property may be presumed to be the thief, but this can be rebutted by showing that he had found them and was
taking them to the nearest police station when apprehended. The maxim res ipsa loquitur (‘the happening speaks for itself), once treated as a matter of
law, is no more than a very strong inference. If an accident happens, caused by something that is under the defender's control and in such a way that, if
well operated, it should not have happened, then res ipsa loquitur ‘the incident is eloquent of negligence’.
Collins Dictionary of Law © W.J. Stewart, 2006
PRESUMPTION, evidence. An inference as to the existence of one fact, from the existence of some other fact, founded on a previous experience of
their connexion. 3 Stark. Ev. 1234; 1 Phil. Ev. 116; Gilb. Ev. 142; Poth. Tr. des. Ob. part. 4, c. 3, s. 2, n. 840. Or it, is an opinion, which circumstances,
give rise to, relative to a matter of fact, which they are supposed to attend. Menthuel sur les Conventions, liv. 1, tit. 5.
2. To constitute such a presumption, a previous experience of the connexion between the known and inferred facts is essential, of such a nature that as
soon as the existence of the one is established, admitted or assumed, an inference as to the existence of the other arises, independently of any
reasoning upon the subject. It follows that an inference may be certain or not certain, but merely, probable, and therefore capable of being rebutted by
contrary proof.
3. In general a presumption is more or less strong according as the fact presumed is a necessary, usual or infrequent consequence of the fact or facts
seen, known, or proven. When the fact inferred is the necessary consequence of the fact or facts known, the presumption amounts to a proof when it is
the usual, but not invariable consequence, the presumption is weak; but when it is sometimes, although rarely,the consequence of the fact or facts
known, the presumption is of no weight. Menthuel sur les Conventions, tit. 5. See Domat, liv. 9, tit. 6 Dig. de probationibus et praesumptionibus.
4. Presumptions are either legal and artificial, or natural.
5.-1. Legal or artificial presumptions are such as derive from the law a technical or artificial, operation and effect, beyond their mere natural. tendency
to produce belief, and operate uniformly, without applying the process of reasoning on which they are founded, to the circumstances of the particular
case. For instance, at the expiration of twenty years, without payment of interest on a bond, or other acknowledgment of its existence, satisfaction is to
be presumed; but if a single day less than twenty years has elapsed, the presumption of satisfaction from mere lapse of time, does not arise; this is
evidently an artificial and arbitrary distinction. 4 Greenl. 270; 10 John. R. 338; 9 Cowen, R. 653; 2 McCord, R. 439; 4 Burr. 1963; Lofft, 320; 1 T. R. 271;
6 East, R. 215; 1 Campb. R. 29. An example of another nature is given under this head by the civilians. If a mother and her infant at the breast perish in
the same conflagration, the law presumes that the mother survived, and that the infant perished first, on account of its weakness, and on this ground the
succession belongs to the heirs of the mother. See Death, 9 to 14.
6. Legal presumptions are of two kinds: first, such as are made by the law itself, or presumptions of mere law; secondly, such as are to be made by a
jury, or presumptions of law and fact.
7.-1st. Presumptions of mere law, are either absolute and conclusive; as, for instance, the presumption of law that a bond or other specialty was
executed upon a good consideration, cannot be rebutted by evidence, so long as the instrument is not impeached for fraud; 4 Burr. 2225; or they are
not absolute, and may be rebutted evidence; for example, the law presumes that a bill of exchange was accepted on a good consideration, but that
presumption may be rebutted by proof to the contrary.
8.-2d. Presumptions of law and fact are such artificial presumptions as are recognized and warranted by the law as the proper inferences to be made
by juries under particular circumstances; for instance, au unqualified refusal to deliver up the goods on demand made by the owner, does not fall within
any definition of a conversion, but inasmuch as the detention is attended with all the evils of a conversion to the owner, the law makes it, in its effects
and consequences, equivalent to a conversion, by directing or advising the jury to infer a conversion from the facts of demand and refusal.
9.-2. Natural presumptions depend upon their own form and efficacy in generating belief or conviction on the mind, as derived from these connexions
which are pointed out by experience; they are wholly independent of any artificial connexions and relations, and differ from mere presumptions of law in
this essential respect, that those depend, or rather are a branch of the particular system of jurisprudence to which they belong; but mere natural
presumptions are derived wholly by means of the common experience of mankind, from the course of nature and the ordinary habits of society.
Vide, generally, Stark. Ev. h.t.; 1 Phil. Ev. 116; Civ. Code of Lo. 2263 to 2267; 17 Vin. Ab. 567; 12 Id. 124; 1 Supp. to Ves. jr. 37, 188, 489; 2 Id. 51,
223, 442; Bac. Ab. Evidence, H; Arch. Civ. Pl. 384; Toull. Dr. Civ. Fr. liv. 3, t. 3, o. 4, s. 3; Poth. Tr. des Obl. part 4, c. 3, s. 2; Matt. on Pres.; Gresl. Eq.
Ev. pt. 3, c. 4, 363; 2 Poth. Ob. by Evans, 340; 3 Bouv. Inst. n. 3058, et seq.
A legal presumption is a conclusion based upon a particular set of facts, combined with established laws, logic or reasoning. It is a rule
of law which allowing a court to assume a fact is true until it is rebutted by the greater weiht (preponderance) of the evidence against it.
The City of Westminster.
When people hear "The Crown", they automatically think of the King and Queen. When they hear "London" or "The City", they instantly think of the
capital of England in which the monarch officially resides since London's expansion absorbed the City of Westminster.
"The City" is in fact a privately owned Corporation - or sovereign state - occupying 677 acres in the heart of the 610 square mile "Greater London"
area. The population of the City is 5,000 whereas Greater London has 8 million.
"The Crown" is a committee of 12-14 men who rule this independent sovereign state known as London or "The City". "The City" is not a part of
England and is not subject to the Sovereign nor under rule of Parliament. It is an independent state, like Kowloon City in Hong Kong, which belonged to
Communist China. It's the Vatican of the commercial world.
The City is ruled by a Lord Mayor elected for one year. When the Queen visits the City she's met by the Lord Mayor at Temple Bar, the symbolic gate of
the City. She bows to him and asks permission to enter his private, sovereign State. He grants permission to enter by handing her the sword of State.
During such State visits, the Lord Mayor with his robes and chain, his entourage in medieval costume, outshines the Royal party, which can dress-up
no further than service uniforms. The Lord Mayor leads the Queen into the City of which he is the monarch and she is his subject.
The Rothschild-controlled Bank of England, Lloyd's underwriters, London Stock Exchange, leading international trading concerns are located here. The
small clique who rule the City dictate to the British Parliament, Prime Minister and Cabinet.
Until the middle of the seventeenth century, the British Monarch was truly sovereign. Britain was prosperous. Indeed, for 280 years there was no
inflation. The average man worked for only 150 days of the year, and lived well. (In Australia today, its said that we work for about 150-days to pay our
taxes, and the rest of the year for the usury on our houses). Conditions went down-hill ever since the privately-owned Bank of England was established
to finance the profligate ways of William III. Two separate empires operated under the guise of the British Empire, all white-skinned colonies: South
Africa, Australia, New Zealand, and Canada (representing 13% of the people who made-up the British Empire) were under the Sovereign and under
British law. All the other colonies like India, Egypt, Bermuda, Malta, Cyprus, the colonies in Central Africa, Singapore, Hong Kong and Gibraltar
comprised the hidden empire that belonged to the Crown of the City of London. These were not under British rule. Parliament had no authority over
them. They were private enterprise, owned and ruled by The Crown of the City of London whose representatives had the power of life or death over the
people. And there was no appeal to British law - not even for a British citizen.
As the Crown also controlled the British Government, there was no problem getting the British taxpayer to pay for naval and military forces to maintain
the Crown's supremacy. Any revolts were met with terrible retribution by the British navy at no cost to the Crown who reaped fantastic profits. This was
not British commerce or British wealth, and the average Briton became poorer. It was "The Crown's" commerce, and "The Crown's" wealth.
The International Bankers of the City of London today control the available resources of the world at any moment. "The Crown of the City" still own and
control their former colonies, financially and materially, only today the United Nations uses American military forces supplemented by the forces of other
nations and paid for by the taxpayers of member nations (The Empire of "The City", by E. C. Knuth). And today they control the politics and economies
of South Africa, Australia, New Zealand, Canada, and . . . the USA.
The role of the Lord Mayor
The Rt Hon the Lord Mayor of the City of London is an international ambassador for the UK’s financial and professional services sector.
The UK is the leading exporter of financial services across the world, to the value of £64bn. London houses more foreign banks, and accounts for more
international bank lending, than any other centre. The UK also offers exceptional maritime services, Islamic finance, legal services, insurance,
education, and infrastructure financing and delivery. Together, financial and professional services employ 2.3m people across the UK, with two thirds of
these jobs outside of London. There are plenty of good stories to tell and it is the Lord Mayor’s job to tell them, at home and abroad.
The Lord Mayor also heads the City of London Corporation, the governing body of the Square Mile dedicated to a vibrant and thriving City, supporting
a diverse and sustainable London within a globally-successful UK. Together with other leading members of the City Corporation he makes sure that the
City’s interests are reflected in local and national policy.
One of the City’s many traditions is that, within its boundaries, only the Sovereign takes precedence of the Lord Mayor. During his year in offi ce the
Lord Mayor hosts diverse visiting heads of state, heads of government and other foreign dignitaries on behalf of Her Majesty and HM Government.
The Lord Mayor works closely with the Mayor of London, Sadiq Khan, although they have distinct and separate responsibilities.
The City Sheriffs
In order to become Lord Mayor, one must be an Aldermanic Sheriff first.
The Sheriffs support the Lord Mayor, they advise him on matters important to the City, help with hosting dinners for visiting dignitaries, and travel with
him in his business visits. They also look after the Judges at the Old Bailey and make sure that the court's business runs smoothly.
They are elected each year on Midsummer's day by the City livery companies. One must be an Alderman - the senior representative of one of the City's
Wards, and another elected position - and both Sheriffs need to be members of a livery company. Their tenure is one year and runs from September to
September.
The Lord Mayor
If you wish to contact the Lord Mayor, you can complete our online form or write to Mansion House:
The Right Honourable The Lord Mayor

C/O Vic Annells, Executive Director, Mansion House & Central Criminal Court
Mansion House
London EC4N 8BH
020 7626 2500
Financial Instruments (L4)
Definitional Issues
What is a financial instrument
?
• Full range of financial contracts made between
institutional units.
• Financial instruments are classified as Financial instruments are classified as financial assets financial assets
(give rise to financial claims) or as other financial
instruments.
Definitional Issues
•
A financial asset consist of:
 Claims on another party, i.e., there is a counterpart
liability
 Distinctive of financial assets from other economic assets, such
as land, dwellings, machinery, equipment, etc.
 Plus, the gold bullion component of monetary gold
 Due to its role as a means of international payments and store of
value for use in reserves value for use in reserves.
 It is not created by an instrument and it does not represent a
claim on another entity.
A financial asset consist of:

 Claims on another party, i.e., there is a counterpart
liability
 Distinctive of financial assets from other economic assets, such
as land, dwellings, machinery, equipment, etc.
 Plus, the gold bullion component of monetary gold
 Due to its role as a means of international payments and store of
value for use in reserves value for use in reserves.
 It is not created by an instrument and it does not represent a
claim on another entity.
Other financial instruments:

• financial instruments that are not recognized as
financial assets: contingent assets and liabilities
Contingent assets are not financial assets because

they do not give unconditional rise to requirements
either to make payments or to provide other
objects of value.
However, by conferring certain rights or obligations

that may affect
future decisions, they can producean economic impact on the parties involved.
Examples of contingent assets or liabilities:

• One
-off guarantees of payment by third parties are off guarantees of payment by third parties are
contingent since payment is only required if the
principal debtor defaults.
• Lines of credit letters of credit and loan Lines of credit, letters of credit, and loan
commitments assure that funds will be made
available, but no financial asset (i.e., loan) is created
until funds are actually advanced.
What are SFTs?
Securities financing transactions (SFTs) allow investors and firms to use assets, such as the shares or bonds they own, to secure funding for their
activities.
A securities financing transaction can be
a repurchase transaction - selling a security and agreeing to repurchase it in the future for the original sum of money plus a return for the use of that
money
lending a security for a fee in return for a guarantee in the form of financial instruments or cash given by the borrower
a buy-sell back transaction or sell-buy back transaction
a margin lending transaction
European rules enhancing transparency of SFTs
During the financial crisis, regulators and supervisors had difficulty anticipating risks in the area of securities financing. This was mainly due to lack of
data.
The need for enhanced transparency and reduced risk around SFTs has been repeatedly called for, see for example
FSB report from 2013

Commission communication on shadow banking
In 2015 the EU therefore adopted the securities financing transactions regulation (SFTR) to increase the transparency of SFTs by requiring
all SFTs, except those concluded with central banks, to be reported to central databases known as trade repositories
information on the use of SFTs by investment funds to be disclosed to investors in the regular reports and pre-investment documents issued by the
funds
minimum transparency conditions to be met when collateral is reused, such as disclosure of the risks and the obligation to acquire prior consent
Bank Notes, Bills of Exchange, and Promissory Notes
29Meaning of banker and bank note
For the purposes of this Act the expression "banker" means any person carrying on the business of banking in the United Kingdom, and the expression
" Bank note " includes—
(a)Any bill of exchange or promissory note issued by any banker, other than the Bank of England, for the payment of money not exceeding one hundred
pounds to the bearer on demand; and
(b)Any bill of exchange or promissory note so issued, which entitles or is intended to entitle the bearer or holder thereof, without indorsement or without
any further or other indorsement than may be thereon at the time of the issuing thereof, to the payment of money not exceeding one hundred pounds on
demand, whether the same be so expressed or not and in whatever form, and by whomsoever the bill or note is drawn or made.
30Bank notes may be issued
A bank note issued duly stamped, or issued unstamped by a banker duly licensed or otherwise authorised to issue unstamped bank notes, may be
from time to time re-issued without being liable to any stamp duty by reason of the re-issuing.
31Penalties, for issuing or receiving an unstamped bank note
(1)If any banker, not being duly licensed or otherwise authorised to issue unstamped bank notes, issues, or permits to be issued, any bank note not
being duly stamped, he shall incur a fine of fifty pounds.
(2)If any person receives or takes in payment or as a security any bank note issued unstamped contrary to law, knowing the same to have been so
issued, he shall incur a fine of twenty pounds.
32Meaning of "bill of exchange"
For the purposes of this Act the expression " bill of exchange " includes draft, order, cheque, and letter of credit, and any document or writing (except a
bank note) entitling or purporting to entitle any person, whether named therein or not, to payment by any other person of, or to draw upon any other
person for, any sum of money; and the expression " bill of exchange payable on demand " includes—
(a)An order for the payment of any sum of money by a bill of exchange or promissory note, or for the delivery of any bill of exchange or promissory note
in satisfaction of any sum of money, or for the payment of any sum of money out of any particular fund which may or may not be available, or upon any
condition or contingency which may or may not be performed or happen; and
(b)An order for the payment of any sum of money weekly, monthly, or at any other stated periods, and also an order for the payment by any person at
any time after the date thereof of any sum of money, and sent or delivered by the person making the same to the person by whom the payment is to be
made, and not to the person to whom the payment is to be made, or to any person on his behalf.
33Meaning of "promissory note"
(1)For the purposes of this Act the expression " promissory note" includes any document or writing (except a bank note) containing a promise to pay
any sum of money.
(2)A note promising the payment of any sum of money out of any particular fund which may or may not be available, or upon any condition or
contingency which may or may not be performed or happen, is to be deemed a promissory note for that sum of money.
34Provisions for use of adhesive stamps on bills and notes
(1)The fixed duty of one penny on a bill of exchange payable on demand or at sight or on presentation may be denoted by an adhesive stamp, which,
where the bill is drawn in the United Kingdom, is to b& cancelled by the person by whom the bill is signed before he delivers it out of his hands,
custody, or power.
(2)The ad valorem duties upon bills of exchange and promissory notes drawn or made out of the United Kingdom are to be denoted by adhesive
stamps.
35Provisions as to stamping foreign bills and notes
(1)Every person into whose hands any bill of exchange or promissory note drawn or made out of the United Kingdom, comes in the United Kingdom
before it is stamped shall, before he presents for payment, Or indorses, transfers, or in any manner negotiates, or pays the bill or note, affix thereto a
proper adhesive stamp or proper adhesive stamps of sufficient amount, and cancel every stamp so affixed thereto.
(2)Provided as follows:
(a)If at the time when any such bill or note comes into the hands of any bona fide holder there is affixed thereto an adhesive stamp effectually cancelled,
the stamp shall, so far as relates to the holder, be deemed to be duly cancelled, although it may not appear to have been affixed or cancelled by the
proper person;
(6)If at the time when any such bill or note comes into the hands of any bona fide holder bthere is affixed thereto an adhesive stamp not duly cancelled,
it shall be competent for the holder to cancel the stamp as if he were the person by whom it was affixed, and upon his so doing the bill or note shall, be
deemed duly stamped, and as valid and available as if the stamp had been cancelled by the person by whom it was affixed.
(3)But neither of the foregoing provisoes is to relieve any person from any fine or penalty incurred by him for not cancelling an adhesive stamp.
36As to bills and notes purporting to be drawn abroad
A bill of exchange or promissory note which purports to be drawn or made out of the United Kingdom is, for the purpose of determining the mode in
which the stamp duty thereon is to be denoted, to be deemed to have been so drawn or made, although it may in fact have been drawn or made within
the United Kingdom.
37Terms upon which bills and notes may be stamped after execution
(1)Where a bill of exchange or promissory note has been written on material bearing an impressed stamp of sufficient amount but of improper
denomination, it may be stamped with the proper stamp on payment of the duty, and a penalty of forty shillings if the bill or note be not then payable
according to its tenor, or of ten pounds if the same be so payable.
(2)Except as aforesaid, no bill of exchange or promissory note shall be stamped with an impressed stamp after the execution thereof.
38Penalty for issuing, &c., any unstamped bill or note
(1)Every person who issues, indorses, transfers, negotiates, presents for payment, or pays any bill of exchange or promissory note liable to duty and
not being duly stamped shall incur a fine of ten pounds, and the person who takes or receives from any other person any such bill or note either in
payment or as a security, or by purchase or otherwise, shall not be entitled to recover thereon, or to make the same available for any purpose whatever.
(2)Provided that if any bill of exchange payable on demand or at sight or on presentation, is presented for payment unstamped, the person to whom it
is presented may affix thereto an adhesive stamp of one penny, and cancel the same, as if he had been the drawer of the bill, and may thereupon pay
the sum in the bill mentioned, and charge the duty in account against the person by whom the bill was drawn, or deduct the duty from the said sum, and
the bill is, so far as respects the duty, to be deemed valid and available.
(3)But the foregoing proviso is not to relieve any person from any fine or penalty incurred by him in relation to such bill.
39One bill only of a set need be stamped
When a bill of exchange is drawn in a set according to the custom of merchants, and one of the set is duly stamped, the other or others of the set shall,
unless issued or in some manner negotiated apart from the stamped bill, be exempt from duty; and upon proof of the loss or destruction of a duly
stamped bill forming one of a set, any other bill of the set which has not been issued or in any manner negotiated apart from the lost or destroyed bill
may, although unstamped, be admitted in evidence to prove the contents of the lost or destroyed bill.
Three broad categories of financial instruments are used

to classify financial assets and liabilities:
Classification of Financial Instruments
Three broad categories of financial instruments are used to classify financial assets and liabilities
1: Equity and Investment Fund Shares.
2: Debt Instruments.
3: Other Financial Asset/Liabilities
This classification is primarily based on the legal characteristies that (1) describe the underlying relationship between the parties to an instrument and
(2) that are also related to liquidity and econmic purpose of the instrument.
What Is a Security?
the U.S. Securities and Exchange Act partially defines the term "security" the following way:
"The term 'security' means any note, stock, treasury stock, bond, debenture, certificate of interest or participation in any profit-sharing agreement."
Securities are traded on financial exchanges around the world, such as the New York Stock Exchange, the Nasdaq, the London Stock Exchange, or in
the case of fixed-income investments, in the secondary markets. Mutual funds and exchange-traded funds hold securities in their portfolios, and are
sold by investment firms, banks, and other financial institutions.
But any security must be vetted beforehand, prior to being issued to the public. For instance, a large company may want to go to the capital markets
(the technical name for the stock and bond markets) to raise money for future endeavors, like research and development, more hiring, or for the
construction of a new manufacturing plant, among other reasons.
That large company must hire an investment banking firm to examine the company's financial numbers against the amount of cash the company is
looking to raise. Then, the investment banking firm goes back to the company and recommends the best uses of the securities market to raise that
capital, usually through the issuance of stock or bonds on the trading markets, and offering those securities to the investing public.
History of Securities
Financial markets and securities have been around since the dawn of the civilized world. In ancient Greece and in the heyday of the Roman empire,
money lenders swapped debts with one another on a daily basis, and soon began trading not only private debt, but government debt (i.e. bonds) as
well.
In the 13th century, Italian merchants started trading the debt of other governments, too, acting as brokers between individual buyers and sellers in
clinching deals, and getting a cut of the price in the deal. The first recognized stock exchange came in 1531, when Belgium financers open up a stock
exchange in Antwerp, where debt and credit were traded among newly-minted brokers and lenders.
Back in those days, most security trades came in the form of promissory notes and government bonds. Stocks weren't traded at the time, but
eventually started trading in ensuing decades as private business owners and investors woke up to the notion that pairing up financially would bring
ample cash rewards.
What Are Different Types of Securities?
In the U.S., stock exchanges cropped up just as the new nation was getting on its feet, with the first exchange opening in Philadelphia in 1791, with
another opening in New York the following year (the New York market was opened by brokers and lenders plying their trades under a tree located on
Wall Street, in southern Manhattan.)
The same model still applies for securities 228 years later.
After all, having a financial instrument available to trade on an open, public trading exchange provides a healthy dose of stability to the investment world
- and it builds some much-needed trust and credibility with investors.
While stocks and bonds (more on those securities below) are the most common form of publicly-traded securities, they're not the only ones. Investors
can also buy and sell mutual funds, U.S. Treasury securities, derivatives, debentures, and warrants.
What all of the above securities have in common is the ability to have value and be traded openly between buyers and sellers. What they don't
necessarily share is the same risk characteristics. Everyone's risk tolerance is different - what allows one investor to sleep better at night may keep
another investor awake.
For example, stocks carry a greater potential for investment loss than bonds do, as stocks are more vulnerable to economic and market fluctuations.
Stocks also provide more profit potential than bonds, as stocks are considered by economists as highly useful for capital appreciation (i.e., earn
higher investment returns). Bonds, on the other hand, are structured more conservatively, and are viewed as good instruments for capital preservation
(i.e., it's more valuable to hang on to the money you've already earned.)
Let's take a deeper look at stocks and bonds, the two most common forms of investment securities, along with a look at a third security traded on the
markets - derivatives.
1. Stocks
Wall Street has no shortage of investment flavors when it comes to stocks.
Common stocks are securities (also called equities), sold to the public, that constitute ownership in a corporation. Stocks come in all sizes and flavors-
investors can choose a large-cap company that's been around for a century or a micro-cap company that has just begun to take flight. Or, investors can
select an international stock or sector-specific stock, to better add diversity to their investment portfolio.
Stocks are the most common form of investment securities for a good reason - they return the most money back to investors. Industry data shows that
over a 50-year period between 1959 and 2008, stocks generate an average annual investment return of 9.18%.
Meanwhile, over the same time period, bonds returned 6.48%, on average.
As noted above, there are also different categories of stocks, any one of which could meet the needs of serious investors. For a short list, such stocks
include blue-chip, growth, small-cap, cyclical, defensive, value, income, and speculative stocks, and socially responsible investments (SRI), among
others.
2. Bonds
Otherwise known as debt securities and fixed-income investments, bonds are basically investments in public or private debt.
When investing in debt securities, the investor is essentially purchasing a debt security, issued by a government or business, who then uses the money
invested for their own, legal purposes (usually to fund projects and invest in the various operations a government or a business is involved in.)
In return, the bond investor received periodic security repayments, at a fixed rate, and over a specific period of time. A bond investor will receive the
money he loaned to the bond issuer, plus interest, until the bond meets its obligated maturity "due" date.
It's worth mentioning that banks can get in the debt security game by issuing certificates of deposit to customers, in return for a fixed rate of interest, but
usually over a shorter period time compared to traditional bonds.
Bonds are deemed less risky than stocks, as governments and companies that issue bonds are more stable and secure than, say, a small company
issuing its stock for the very first time. That doesn't mean bonds have no risk - they do. Companies may default, and there's always the risk that bond
interest rate returns may not keep up with the rate of inflation.
3. Derivatives and Options
There is a third direct form of securities called derivatives, which are perhaps best personified by equity options contracts. They're less likely used by
the general public, but derivatives are swapped all the time by investment firms, banks, and companies to make bets on the direction of various
companies and industries.
For example, an equity options contract gives the contract buyer the right to buy or sell shares in a company, at a specific price and by a specific date
down the road. The right, known on Wall Street as a "premium", is similar in make and model to an insurance premium, which pays out a return after a
specific period of time.
Main Street investors would do well to steer clear of derivative-type securities. They're highly complex in nature, they represent an abundant risk of
losing all of an investor's money, and aren't as tightly regulated as traditional stock and bond markets.
The Takeaway on Securities
It's ironic that most investors pour their hard-earned money into global securities markets and don't really comprehend the meaning of the term
"securities."
That's a big reason why any investor should get up to speed on what securities are, how they work, and the risks involved in steering money into a
specific market category. In that regard, a little knowledge isn't enough - you'll need a lot of knowledge to go a long way.
What are fixed-income securities?
A fixed-income security is a debt instrument issued by a government, corporation or other entity to finance and expand their operations.
Fixed-income securities provide investors a return in the form of fixed periodic payments and eventual return of principal at maturity. The purchase of a
bond, treasury bill, Guaranteed Investment Certificate (GIC), mortgage, preferred share or any other fixed-income product represents a loan by the
investor to the issuer.
Why invest in fixed-income securities?
Fixed-income securities can be an important part of a well-diversified portfolio. For many investors, particularly retirees, fixed-income investments are
a secure, low-risk way to generate a steady flow of income. As long as they are held to maturity, fixed-income securities will provide a guaranteed
return on your investment, with payments known in advance.
What are some examples of fixed-income securities?
The following is a list of some common fixed-income securities:
Bonds
A bond is an obligation or loan made by an investor to an issuer (e.g. a government or a company). In turn, the issuer promises to repay the principal
(or face value) of the bond on a fixed maturity date and to make regularly scheduled interest payments (usually every six months). The major issuers of
bonds are governments and corporations.
Savings Bonds
Savings bonds issued by the Canadian and various provincial governments are different from conventional bonds. Canada Savings Bonds (CSBs)
typically pay a minimum guaranteed interest rate (there are also compound interest bonds available). A CSB carries no fees and is cashable at any
time. The amount received for a CSB will never go below its face value if redeemed by the issuer, while the price received in the market for a
conventional bond will depend on the level of interest rates at the time of sale. In addition, only residents of Canada (or of the province of issue) are
eligible to purchase CSBs, and only up to a predetermined amount.
Guaranteed Investment Certificates (GICs)
A GIC is a note issued by a trust company with a fixed yield and term. The Canada Deposit Insurance Corporation (CDIC) insures many GICs for
interest and principal totaling up to $100,000. GICs are generally non-redeemable before the term is complete.
Treasury Bills
Treasury bills (T-bills) are the safest type of short-term debt instrument issued by a federal government. Ideal for investors seeking a 1- to 12- month
investment period, T-bills are highly liquid and very secure.
Banker’s Acceptances
Banker’s Acceptances (BAs) are short-term promissory notes issued by a corporation, bearing the unconditional guarantee (acceptance) of a major
Chartered Bank. BAs offer yields superior to T-bills, and a higher quality and liquidity than most commercial paper issues.
NHA Mortgage-Backed Securities (MBS)
A National Housing Act (NHA) MBS is an investment that combines the features of residential mortgages and Canadian government bonds. MBS
investors receive monthly income consisting of a blend of principal and interest payments from a pool of mortgages.
Strip Coupons and Residuals
Strip coupons and residuals are instruments purchased at a discount that mature at par (100). They grow over time and while any interest income is
not payable until maturity, a nominal amount of interest is accrued each year and must be claimed as income by the purchaser for tax purposes. For
example, a Canada strip coupon maturing on March 15, 2006 with a yield of 5.31% would be priced at 77.07 to mature at 100. The difference between
the purchase price and 100 is treated as interest income.
Strip coupons generally offer higher yields and can also fluctuate more than the price of a bond of similar terms and credit quality. All of the
aforementioned features make strip coupons a popular choice for tax-sheltered accounts such as Retirement Savings Plans (RRSPs) and Registered
Retirement Income Funds (RRIFs).
Laddered Portfolio
A laddered portfolio is comprised of several bonds, each of which has a successively longer term to maturity. Each position in the portfolio is usually
the same size as the next, with intervals between maturity dates roughly equal. A laddered portfolio helps spread reinvestment risk over the long term,
helping to average out the effects of overall interest rate changes.
What are equities?
Equities are pieces of a company, also known as "stocks." When you buy stocks or shares of a company, you're basically purchasing an ownership
interest in that company. A company's stockholders or shareholders all have equity in the company, or own a fractional portion of the whole company.
They buy the stocks because they expect to profit when the company profits. Companies issue two basic types of stock: common and preferred
shares.
What are common shares?
Both public and private corporations can issue common shares. Common shareholders are the owners of a company and initially provide the equity
capital to start the business.
Common share ownership in a public company offers many benefits to investors. The following are some of its main advantages:
Capital appreciation
Dividends
Voting privileges
Marketability, meaning shares can easily be bought or sold
There are also a few drawbacks to owning common shares. Although part owner of the business, common shareholders are in a relatively weak
position, as senior creditors, bond holders and preferred shareholders all have prior claims on the earnings and assets of a company. While interest
payments are guaranteed to bond holders, dividends are payable to shareholders at the discretion of the directors of a company.
What are preferred shares?
Preferred stock is a class of share capital that generally entitles shareholders to fixed dividends ahead of the company's common shares and to a
stated dollar value per share in the event of liquidation. Typically, the preferred shareholder occupies a position between that of a company's creditors
and its common shareholders. If a company's ability to pay interest and dividends suffers due to poor earnings, the preferred shareholder is better
protected than common shareholders but worse off than creditors.
There are many different variations of preferred shares, including convertible, retractable, and variable-rate preferred shares. Most Canadian preferred
shares are cumulative: when dividends are withheld, they accumulate in what is known as arrears. All arrears of cumulative preferred dividends must
be paid before any common dividends can be distributed.
As preferred shares have characteristics of both debt and equity; they provide a link between the bond and common equity sections of a portfolio.
Because there is such a wide variety of preferred shares available, they are suitable investments for most investment portfolios.
One shortcoming of preferred shares is that many are non-voting. However, after a specified number of preferred dividends are withheld, voting rights
are usually assigned to preferred shareholders.
Why should I invest in equities?
No matter where you are in life, equities have an important role to play within a properly diversified portfolio. They can help with building your savings,
maximizing your income and protecting your wealth:
Building your savings

Historically, equities provide superior long-term returns compared to cash and fixed-income investments. However, equities typically fluctuate more in
value. Because these fluctuations tend to smooth out over time, it’s important to take a long-term perspective when investing in equities. Just because
a particular equity is down one year doesn’t mean it will be down in 10 years. The key is to determine when it’s a temporary setback and when it’s a
more serious problem.
Maximizing your income
If you’re an income-oriented investor, your portfolio probably contains a high percentage of T-bills and government bonds. However, it ’s important not
to overlook the key role that equities can play in your portfolio. First, certain equities like income trusts can enhance your income. In addition, the
income generated by equity investments— like dividends or capital gains—is taxed more favourably than interest income. Setting aside a certain
percentage of your portfolio to equities can enhance your after-tax income.
Protecting your wealth
Another reason to invest in equities is to protect your wealth. This may seem counterintuitive given that equities are not guaranteed, while fixed-income
investments are. However, because fixed-income investments offer such low interest rates, they offer little protection from taxes and inflation eroding
your wealth over time. Again, adding a certain percentage of equities to your portfolio, while keeping the balance in guaranteed investments, can help
protect your portfolio’s value in the long run
Are there risks involved with equities?
Yes. Equity investments vary in their risk but are generally considered higher risk than cash-type investments or bonds.
Equities offer growth of capital and dividends but you must endure the unpredictable ups and downs (risk) of the stock market. This is one of the many
reasons equities are often more suitable for longer investing time horizons.
What are mutual funds?
Mutual funds are a collection of stocks, bonds and other securities that are owned by a group of investors and overseen by experienced fund
managers. You can own a part of these funds by buying units and becoming a unitholder. The fund managers invest the money in a variety of
opportunities with the expectation of increasing the fund’s value.
Why should I invest in mutual funds?
Mutual funds offers you several advantages, namely:
Built-in Diversification
One of the key benefits of investing in mutual funds is convenient diversification. Diversity in your portfolio can help to increase your potential returns
and decrease your overall risk. The more varied (and balanced) your portfolio, the lesser the impact when fluctuations occur in the marketplace.
Professional Management
Many investors purchase mutual funds because they lack the time or the expertise to manage their own investments. Access to an experienced,
professional fund manager can help save you time, lower your risks and get you where you want to be financially.
Liquidity
With a mutual fund, you will always enjoy convenient, easy access to your money. You can request that your units be converted into cash at any time.
What are the different types of mutual funds?
Mutual funds come in a variety of types, each with its own objectives, risks and rewards. The money raised from issuing new units is invested
according to the fund’s policies and objectives. For example, a fund whose objective is to earn current income might hold bonds or mortgages.
Bond Funds
Bond mutual funds offer investors competitive returns and a relatively low market risk. While liquidity is the main objective, bond mutual funds are
subject to capital gains and losses, depending on interest rate movements.
Mortgage Funds
Mortgage funds can offer investors a regular income. And because mortgage fund terms are relatively short (five years or less), they are less risky than
bond mutual funds.
Dividend Funds
Dividend funds have the goal of tax-advantaged income with some possibility of capital appreciation. These funds invest in preferred shares and high
quality common shares that consistently pay dividends. Income from these funds qualifies for the dividend tax credit, making it an advantage to
investors.
Balanced Funds
Balanced mutual funds offer investors a mixture of safety, income and capital appreciation. These funds hold a combination of fixed-income securities
as well as a wide variety of common stocks for diversification, dividend income and growth potential. Balanced funds enable investors to "get their feet
wet" in the world of stocks while providing income through bond holdings.
Equity Funds
The primary objective of equity mutual funds is capital growth, although dividends may contribute to the total return. In general, the basic distinction
among equity funds is their level of aggressiveness—the more aggressive the investment approach, the higher the risk and the greater potential for
capital growth.
Specialty Equity Funds
Some investors like to diversify into specialty areas that they feel have the potential to outperform the overall markets. These types of funds invest in
specialized markets or industries such as natural resources, real estate, science and technology, which, although subject to volatility, may provide
increased opportunities for growth over the long term.
International Funds
As more and more investors realize that some of the best investment opportunities lie outside of Canada, international funds continue to gain in
popularity. International funds offer investors greater portfolio diversification and exposure to stocks on a worldwide, regional and even country basis.
What is the difference between open-end and closed-end funds?
The term open-end and closed-end refers to whether or not a mutual fund issues an unlimited or limited number of units.
Open-end funds
The vast majority of mutual funds in the marketplace are open-end. Like closed-end funds, open-end funds allow an investor to own a share of a
diversified portfolio of securities managed by professional investment managers. Open-end funds sell units upon demand. When an investor invests
money in an open-end fund, new units are issued directly by the fund. There is no limit to the number of units available. Units of an open-end fund can
always be redeemed for the Net Asset Value Per Share (NAVPS).
Closed-end funds
Unlike open-end funds, closed-end funds have a fixed number of units that are generally traded like shares on a stock exchange. Closed-end funds
also have a NAVPS but they do not necessarily trade at the NAVPS. In fact, their trading value is frequently less than their NAVPS. In this instance,
when a closed-end fund is trading at a "discount," an investor may be able to buy a fund for less than the sum of its parts.
How do I determine the value of a mutual fund share?
Buying units or shares of a mutual fund is similar to buying shares of a company. Essentially, each unit you own is a portion of the combined
investments owned by the fund. Each unit has a specific value that varies from day to day depending on the value of the investments in the fund. The
term used to define this value is Net Asset Value Per Share (NAVPS) and the formula used to calculate the NAVPS of the mutual fund is:
NAVPS = total market value of assets less liabilities

total number of shares (units)
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Are there risks involved with mutual funds?
Yes. There are varying degrees of risks depending on the funds you select. Unlike savings accounts and Guaranteed Investment Certificates (GICs),
mutual funds are not insured or guaranteed. Although there are several safeguards in place to protect the mutual fund investor, investors must keep in
mind that mutual funds differ from other types of investments and should be considered long-term investments.
Market Abuse Regulation
First published: 04/05/2016 Last updated: 25/03/2019
The Market Abuse Regulation (MAR) came into effect on 3 July 2016. It aims to increase market integrity and investor protection, enhancing the
attractiveness of securities markets for capital raising.
MAR strengthens the previous UK market abuse framework by extending its scope to new markets, new platforms and new behaviours.
It contains prohibitions of insider dealing, unlawful disclosure of inside information and market manipulation, and provisions to prevent and detect
these.
This page is intended to assist readers of our Handbook. It should not be regarded as an exhaustive list of relevant information sources. Firms and
individuals in scope of the MAR should review all of the regulation and ensure they are in compliance with all relevant provisions.
Application of MAR
The Market Abuse Regulation(link is external) (MAR) applies to:
financial instruments admitted to trading on a regulated market or for which a request for admission to trading on a regulated market has been made
financial instruments traded on a multilateral trading facility (MTF), admitted to trading on an MTF, or for which a request for admission to trading on an
MTF has been made
financial instruments traded on an organised trading facility (OTF)
financial instruments not covered by point (a), (b) or (c), the price or value of which depends on or has an effect on the price or value of a financial
instrument referred to in those points, including, but not limited to, credit default swaps and contracts for difference
This Regulation also applies to behaviour or transactions, including bids, relating to the auctioning on an auction platform authorised as a regulated
market of emission allowances or other auctioned products based thereon, including when auctioned products are not financial instruments, pursuant
to Regulation (EU) No 1031/2010. Without prejudice to any specific provisions referring to bids submitted in the context of an auction, any
requirements and prohibitions in MAR referring to orders to trade shall apply to such bids.
Additional information on preparation for Brexit
The Treasury has laid statutory instruments for the MAR and Short Selling Regulation (SSR) to convert them into UK law following the European Union
(Withdrawal) Act 2018, if the UK leaves the EU without an implementation period (a no-deal scenario). The statutory instruments would create new
obligations for issuers and market makers which would immediately apply from exit day in the event of a no-deal scenario. In our Primary Market
Bulletin (21) we advise issuers and market makers of the new regulatory obligations that they will need to implement for MAR and the SSR, in a a no-
deal scenario. This is particularly important for issuers with financial instruments admitted to trading or traded on a UK trading venue which are based
in an EU Member State as they may need to take action before exit day. The new regulatory obligations relate to the paragraphs on buy-back
programmes and stabilisation measures, disclosure and delaying disclosure of inside information, and manager's transactions below.
Read Primary Market Bulletin (21) for further information.
Structure of MAR
MAR was developed under the Lamfalussy process (find out more on section 4.3 of the FSA’s Guide to the European Union and its Legislative
Processes (PDF)). It therefore consists of different ‘levels’:
Level 1: Market Abuse Regulation(link is external) (MAR)
Level 2: Implementing measures: ESMA technical standards(link is external) and Commission Delegated Acts(link is external)
Level 3: ESMA Guidelines(link is external) and ESMA Q&As
Domestic guidance: our Handbook
ESMA Guidelines
These sets of guidelines are mandated under MAR:
ESMA Guidelines on information relating to commodity derivatives markets or related spot markets, for the definition of inside information on
commodity derivatives(link is external) (PDF)
These guidelines set out a non-exhaustive indicative list of information which is reasonably expected or required to be disclosed on relevant
commodity derivative and spot markets (and could therefore fall within the definition of inside information for commodity derivatives).
Compliance: We notified ESMA of our intention to comply with this set of guidelines. We consulted on the changes to the Market Conduct sourcebook
(MAR) in CP17/6.
ESMA Guidelines on delay disclosure of inside information(link is external) (PDF)
These guidelines set out a non-exhaustive indicative list of legitimate interests of issuers, and of situations in which delay disclosure of inside
information is likely to mislead the public.
Compliance: We notified ESMA of our intention to comply with this set of guidelines. We consulted on the changes to section DTR 2.5 of our
Handbook in CP16/38.
ESMA Guidelines on market soundings(link is external) (PDF)
The guidelines detail the factors, steps and appropriate records a person must take into account when information is disclosed as part of the sounding
regime.
Compliance: We notified ESMA of our intention to comply with this set of guidelines. There is no need to amend the FCA Handbook to be compliant.
Interaction with MiFID II
The interaction between MAR and MiFiD II is explained in MAR Article 39.
Emission allowances market participants (EAMPs) and parties involved in relevant auctions have been required to comply with the following
obligations from January 2018:
disclose inside information relating to emission allowances: MAR Article 17
maintain an insider list: MAR Article 18
notify us of PDMRs transactions on emission allowances and auction products based on these: MAR Article 19
Market abuse offences
Inside information
The definition of ‘inside information’ is broadly unchanged in MAR from the previous definition, but is wider to capture inside information for spot
commodity contracts.
There is also a new definition of inside information for emission allowances and auction products based on these.
Further information:
Level 1: MAR Article 7
Level 3: ESMA Guidelines on commodity derivatives(link is external) (PDF)
FCA Handbook: MAR 1.2, DTR 2.2
Insider dealing and unlawful disclosure
MAR clarifies that the use of inside information to amend or cancel an existing order constitutes insider dealing. It also prohibits persons in possession
of inside information from using that information to deal or attempt to deal in financial instruments or to recommend or induce another person to
transact on the basis of inside information.
Level 1: MAR Article 8, MAR Article 9, MAR Article 10, MAR Article 14
FCA Handbook: MAR 1.3, MAR 1.4
Market soundings
MAR introduces a framework to make legitimate disclosures of inside information in the course of market soundings. Provided certain requirements
are met, disclosing market participants are protected from an allegation of unlawful disclosure of inside information.
Level 2: Delegated Regulation 2016/960(link is external), Delegated Regulation 2016/959(link is external)
Level 3: ESMA Guidelines on market soundings and delay disclosure of inside information(link is external) (PDF)
Market manipulation
MAR defines and prohibits market manipulation. This offence has been extended to capture attempted manipulation, benchmarks and in some
situations spot commodity contracts.
Level 1: MAR Article 12, MAR Article 15, MAR Annex I
Level 2: Delegated Regulation 2016/522(link is external)
FCA Handbook: MAR 1.6, MAR 1.7, MAR 1.8
Exemptions
Buy-back programmes and stabilisation measures
Providing certain requirements are met, trading in securities or associated instruments for the stabilisation of securities or trading in own shares in
buy-back programmes are exempt from the prohibitions against market abuse.
You should email notifications for both stabilisation and buy-back programme activity to [email protected].
We have the following templates that issuers or firms submitting on behalf of an issuer may use when notifying us:
buy-back programme template (XLSX)
stabilisation template (XLS)
You do not have to follow these templates and should note that other national competent authorities may offer templates to use when notifying them.
Accepted market practices (AMPs)
Regulators are able to establish an AMP, subject to certain criteria and conditions.
A practice that is accepted in a particular market by that market’s regulator cannot be considered as applicable to other markets unless the regulators
of those other markets have also officially accepted the practice. Please note that we have not established any AMPs.
Disclosures
Disclosure and delaying disclosure of inside information
Issuers and EAMPs are required to publicly disclose inside information which directly or indirectly concerns them as soon as possible, but can delay
the disclosure if certain conditions are met.
Issuers and EAMPs must notify us after delaying disclosure of inside information. They do not need to provide a written explanation setting out how the
relevant conditions for delaying disclosure were met but should keep appropriate records in case we request this.
Where financial institutions intend to delay disclosure due to financial stability concerns they must satisfy a number of conditions, including notifying us
of a delay to disclose.
See the delay disclosure notification form and a guide to completing it.
Level 2: Implementing Regulation 2016/1055(link is external), Delegated Regulation 2016/522(link is external)
Level 3: ESMA Guidelines on market sounding and delayed disclosure of inside information(link is external) (PDF)
FCA Handbook: DTR 2
Insider lists
MAR places an obligation on issuers, EAMPs and parties involved in the relevant auctions to maintain a list of all persons working for them that have
access to inside information.
Firms subject to MAR Article 18 will be required to transmit their insider lists to us on request.
Level 2: Implementing Regulation 2016/347(link is external)
Suspicious transaction and order reports (STORs)
Certain market participants are required to monitor, detect and report suspicious transactions and orders to us. As under the previous regime, this
requirement applies to any person professionally engaged in the arrangement or execution of transactions. Find out how to submit a STOR.
Level 3: ESMA Q&As
FCA Handbook: SUP 15.10
Managers’ transactions
MAR Article 19 requires persons discharging managerial responsibilities within issuers (PDMRs), and persons closely associated with them (PCAs),
to notify us and the issuer of relevant personal transactions they undertake in the issuer’s shares, debt instruments, derivatives or other linked financial
instruments if the total amount of transactions per calendar year has reached €5,000. The issuer in turn must make that information public within 3
business days.
PDMRs and PCAs are only required to notify under Article 19 when they deal in shares or debt instruments of the issuer which are:
subject to a request for or approval of admission to trading on an EU trading venue, or
linked to financial instruments which are themselves subject to a request for or approval of admission to trading on an EU trading venue.
Dealing in instruments that do not fall into these categories does not need to be notified under Article 19.
Similarly, PDMRs within EAMPs, parties involved in the relevant auctions, and PCAs, must notify us and the EAMPs or the parties involved in the
relevant auctions of certain transactions in emission allowances, auction products based on them or derivatives related to them once the total amount
of €5,000 has been reached in a calendar year. The notification must be made promptly and no later than 3 business days after the transaction date.
PDMRs are also prohibited from conducting certain personal transactions during a closed period. See the PDMR notification form and a guide to
completing it.
Level 1: MAR Article 19, Article 56 of European Benchmark Regulation(link is external)
Level 2: Delegated Regulation 2016/522(link is external), Implementing Regulation 2016/523(link is external)
Level 3: ESMA Q&As
FCA Handbook: DTR 3.1
Investment recommendations
Persons producing or providing investment recommendations must ensure information is objectively presented, and disclose any conflicts of interest.
Level 3: ESMA Q&As
FCA Handbook: COBS 12.4
Whistleblowing
MAR places requirements on regulators and firms to be able to receive whistleblowing notifications related to suspected market abuse.
In CP16/19 we proposed that there should be a ‘single home’ in SYSC 18 regarding whistleblowing obligations. Recognising that each piece of EU
legislation had its own whistleblowing requirements with slight variations, it was also proposed that each whistleblowing requirement should be
signposted in this ‘single home’ in SYSC 18.
Find out more about whistleblowing.
Level 2: Implementing Directive 2015/2392(link is external)
FCA Handbook: SYSC 18
Key policy and consultation documents
Here are some key FCA, ESMA and European Commission policy and consultation documents that give more information on rules relating to market
abuse:
FCA: PS16/18: Changes to the Decision Procedure and Penalties manual and the Enforcement Guide for the implementation of the Market Abuse
Regulation (June 2016)
FCA: PS 16/13: Implementation of the Market Abuse Regulation (April 2016)
FCA: CP 16/38: Proposed changes to DTR 2.5 on delay in disclosure of inside information (November 2016)
FCA: CP 16/13: Changes to the Decision Procedure and Penalties Manual and the Enforcement Guide for the implementation of the Market Abuse
Regulation (April 2016)
European Commission: various MAR technical standards(link is external) (February/March 2016)
ESMA: consultation on MAR guidelines regarding market soundings and delayed disclosure of inside information(link is external) (January 2016)
European Commission: implementing directive on whistleblowing(link is external) (December 2015)
FCA: CP 15/38: Provisions to delay disclosure of inside information within the FCA’s Disclosure and Transparency Rules (November 2015)
FCA: CP15/35: consultation on changes related to the implementation of the Market Abuse Regulation (2014/596/EU) (November 2015)
ESMA: draft technical standards submitted to the European Commission(link is external) (September 2015)
European Commission: Market Abuse Regulation(link is external) (July 2014)
Other important documents include:
Corrigenda MAR Article 3(26)(link is external): definition of ‘person closely associated’
Benchmark Regulation 2016/1011(link is external): reference is made to MAR in articles 9, 14, 16, 41, 55 and 56
Corrigenda MAR level 2 (Commission Delegated Regulation (EU) 2016/958) article 6.1(link is external): investment recommendations
Laws and regulations
What are the relevant statutes and regulations governing securities offerings? Which regulatory authority is primarily responsible for the administration
of those rules?
Part 6 Financial Services and Markets Act 2000
The UK Financial Services and Markets Act 2000 (FSMA) is the principal piece of legislation governing offers of securities in the UK. The general
regime is supplemented by three key pieces of subordinate legislation made by the Financial Conduct Authority (FCA) under FSMA and set out in its
handbook of rules and guidance (the FCA Handbook):
the Listing Rules (LRs), which contain rules related to the admission of securities to the ‘Official List’, which is maintained by the FCA on its website;
the Prospectus Rules (PRs), which implement the EU Prospectus Directive in the UK and set out the content requirements for pro-spectuses; and
the Disclosure and Transparency Rules (DTRs), which implement sections of the EU Transparency Directive and make other rules concerning the
transparency of and access to information in the UK financial markets including aspects of the EU Market Abuse Regulation (MAR).
The FCA is primarily responsible for administrating and enforcing these rules. The FCA may use the name UK Listing Authority to describe its
activities as regulator of issuers of securities, although it is phasing out the use of the name and will instead refer to the FCA’s ‘primary market
functions’.
Financial promotions
FSMA restricts the communication of financial promotions, defined as communications of an invitation or inducement to engage in investment activity.
Issuers and others who communicate, or cause others to communicate, financial promotions of securities, including, potentially, prospectuses and
other listing particulars, will need to ensure that they are authorised to make the financial promotion, that the content of the communication is approved
by an authorised person, or that the communication is covered by an exemption. Breach of the restriction is a criminal offence.
Prohibition of public offers by private limited companies
A UK private limited company must not offer to the public any securities of the company, or allot or agree to allot any securities of the company with a
view to their being offered to the public.
EU regulations
In addition to UK legislation, a number of EU regulations that apply directly in the UK also govern securities offerings. These include the following:
MAR, which applies to behaviour or transactions in securities that are admitted to trading on a multilateral trading facility (MTF) or regulated market (or
for which a request for admission to trading has been made) or traded on an MTF or organised trading facility (OTF), and securities whose price or
value depends on or has an effect on the price or value of such securities. MAR establishes an EU-wide regulatory framework on insider dealing, the
unlawful disclosure of inside information and market manipulation (market abuse) as well as measures to prevent market abuse to ensure the integrity
of financial markets in the EU and to enhance investor protection and confidence in those markets; and
the EU Packaged Retail and Insurance-based Investment Products Regulation (PRIIPs), which prohibits securities within its scope from being offered
or otherwise made available to retail investors in any EU member state unless a key information document has been prepared and published in
accordance with PRIIPs. Securities are within the scope of PRIIPs if they constitute an investment where, regardless of its legal form, the amount
repayable to the retail investor is subject to fluctuations because of exposure to reference values or to the performance of one or more assets that are
not directly purchased by the retail investor, or an insurance-based investment product that offers a maturity or surrender value that is wholly or partially
exposed, directly or indirectly, to market fluctuations.
From 21 July 2019, the new EU Prospectus Regulation will be fully effective across all EU member states. Although it is planned that the UK will have
exited the EU by that date, HM Treasury will likely incorporate the Regulation into UK law under proposed domestic legislation. Please see ‘Update
and Trends’ for more information.
Exchange requirements
In addition to the legislative requirements, issuers must comply with the rules of the relevant regulated market, MTF or OTF. For instance, issuers
admitted to the Main Market of the London Stock Exchange (LSE) are subject to the LSE’s Admission and Disclosure Standards.
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2.
Mandatory filings
What regulatory or stock exchange filings must be made in connection with a public offering of securities? What information must be included in such
filings or made available to potential investors?
Prospectus
A person will be required to publish a prospectus if it makes an offer of transferable securities to the public in the UK (‘public offer trigger’) or applies
for the securities to be admitted to trading on a regulated market in the UK (‘regulated market listing trigger’). Breach of the requirement to publish a
prospectus is a criminal offence.
There are exemptions from the requirement. Exemptions that apply to the public offer trigger include the following:
the offer is made to or directed at qualified investors only;
the offer is made to or directed at fewer than 150 natural or legal persons (other than qualified investors) per EEA state;
the minimum denomination per unit is at least €100,000.
Exemptions that apply to the regulated market listing trigger include the following:
the securities are fungible with securities already admitted to trading on the same regulated market provided that they represent, over a period of 12
months, less than 20 per cent of the number of securities already admitted to trading on the same regulated market; and
shares are offered, allotted or to be allotted free of charge to existing shareholders, where the shares are of the same class as the shares already
admitted to trading on the same regulated market.
Where a prospectus is required, FSMA and the PRs specify the information it must contain. The overarching requirement is that the prospectus must
contain all the information necessary to enable investors to make an informed assessment of the assets and liabilities, financial position, profit and
losses and prospects of the issuer and of any guarantor and of the rights attaching to the securities. The PRs require that a prospectus that is drawn up
as a single document must contain, among other things:
a business and industry section;
risk factors;
an operating and financial review;
two or three years’ audited financial statements (depending on the type of securities) prepared in accordance with IFRS or an equivalent GAAP;
information about trends since the date of the last financials; and
details about the securities.
In terms of the specific content required for each type of securities, the PRs adopt a ‘building block’ approach, under which separate annexes provide
for different minimum disclosure requirements for different types of securities. The PRs include a road map designed to help issuers combine the
annexes for the relevant type of securities being offered.
The requirements will be amended by the new Prospectus Regulation, the bulk of which will apply from July 2019 (see ‘Update and Trends’).
An issuer should also take account of regulatory guidance including the FCA’s knowledge base and the European Securities and Markets Authority’s
questions and answers on prospectuses. The contents of prospectuses are also subject to market expectations, the requirements of investors and
recommendations by industry bodies such as the International Capital Market Association.
An issuer issuing debt securities under a programme may publish the prospectus in the form of a base prospectus, which can be supplemented by a
supplementary prospectus and final pricing document upon each additional tranche being issued.
Listing application
The LRs set out the filings to be made to the FCA by an issuer applying for admission of its securities to the Official List. Any issuer applying for
admission of its securities to listing will need to submit, among other things, an ‘Application for Admission of Securities to the Official List’ and written
confirmation of the number of securities to be issued or allotted. If a prospectus is required for the offering or the issuer is permitted and elects to draw
up a prospectus for the securities, a prospectus must have been approved by the FCA. After a prospectus is approved by the FCA, it must be filed
with the FCA at the same time it is made available to the public. Under the passporting mechanism of the Prospectus Directive, once a prospectus
has been approved in one EEA country, it is valid throughout the EEA upon passporting. Therefore, if another EEA State is the home member state for
the securities, the application for listing must include a copy of the prospectus, a certificate of approval and (if applicable) a translation of the summary
of the prospectus.
Listing particulars
The LRs require listing particulars to be prepared and published for certain ‘specialist’ securities (securities that, because of their nature, are normally
bought and traded by a limited number of investors who are particularly knowledgeable in investment matters) that are the subject of an application for
listing in circumstances where a prospectus is not required. This will apply, for example, to the admission of securities to the LSE’s Professional
Securities Market (PSM) for specialist debt and equity-linked securities where the securities are not being offered to the public. Listing particulars also
have to be approved by the FCA. The PSM is an MTF.
Offering-specific requirements
Specific filings and compliance with information requirements will also be needed depending on the type of offering. For example, applications for
admission of equity shares to the premium segment of the Official List (‘premium listing’) are subject to ‘super-equivalent’ UK requirements in addition
to requirements based on EU legislation. For instance, commercial companies applying for premium listing must have published or filed historic
financial information that covers at least three years and represents at least 75 per cent of the company’s business for the full three-year period.
Premium listing applicants will also need to appoint a ‘sponsor’ (typically an investment bank) who will need to ensure that the issuer has complied with
the applicable conditions for listing. The premium segment is divided into four categories: equity shares of commercial companies, closed-ended
investment funds, open-ended investment companies and sovereign controlled commercial companies (which, uniquely, may also list global depositary
receipts in the premium segment). Any other listing will be a standard listing.
Exchange requirements
The filings to be made with the exchange on which the securities are to be admitted to trading will depend on the rules of the relevant exchange. For
instance, an issuer applying for admission to the Main Market of the LSE must complete an application form giving details of the number, nature and
characteristics of the securities to be traded and basic details about the issuer such as a description of its business. Companies seeking admission
of their securities to the LSE’s AIM must produce an AIM admission document. AIM is an MTF designed primarily for emerging or smaller companies
to which a higher investment risk tends to be attached than to larger or more established companies. AIM securities are not admitted to the Official
List. The AIM admission document needs to satisfy the content requirements for a prospectus if a prospectus is required, or alternatively the PRs with
certain carve-outs. A company applying for admission to AIM must appoint a nominated adviser (‘nomad’) who is responsible for assessing, among
other things, the appropriateness of the company and its securities for admission to AIM. The nomad must make a declaration to AIM that, among
other things, to the best of its knowledge and belief, all applicable requirements of the AIM rules and nomad rules have been complied with in
connection with the application for admission.
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3.
Review of filings
What are the steps of the registration and filing process? May an offering commence while regulatory review is in progress? How long does it typically
take for the review process to be completed?
Initial drafting of the prospectus or listing particulars is typically split between the issuer (with the help of their legal counsel) and the manager (likewise),
with the issuer taking care of the disclosure portion setting out risk factors and describing the business, and the manager providing the ‘front and back’
technical and legal sections and the terms and conditions of the securities. The parties tend to collaborate in drafting and ‘due diligence’
investigations.
Once the document is drafted, it is submitted to the FCA for approval. The issuer must submit the draft prospectus to the FCA at least 10 working days
before the intended approval date of the prospectus (or 20 working days in the case of a new applicant seeking admission to the Official List or a
public offer by an issuer that does not have any securities admitted to trading on a regulated market and has not previously made a public offer).
However, in practice, the first draft will be submitted much earlier to allow time for the FCA to comment on successive drafts and for the issuer to
incorporate comments. The process is iterative - drafts of the document are reviewed until the FCA has no further comments and is satisfied that it
meets all the relevant requirements. The review process can vary considerably in length, and can generally take anything from four weeks to six
months.
Once approved, the prospectus (or listing particulars) must be published as soon as practicable, and in any case at a reasonable time in advance of,
and at the latest at the beginning of, the offer or admission to trading (that is to say, the offer or admission to trading may not proceed without such
document). In the case of an initial public offer of a class of shares not already admitted to trading on a regulated market, publication must take place
at least six working days before the end of the offer. The PRs allow for a prospectus to be approved without the final offer price and amount of
securities being included in the prospectus, provided that the prospectus sets out the criteria or conditions in accordance with which the missing
elements will be determined and the maximum price. Where an issuer has taken advantage of this provision, the prospectus (known as a price range
prospectus) is an approved, valid prospectus and the six-day period can run from the date of approval.
Issuers may also choose to publish a pathfinder or pre-marketing document, but this will not replace the requirement for a prospectus and is generally
limited in circulation to institutional investors in order to exempt the publication from the public offer trigger prospectus requirement and avoid
breaching the prohibitions on financial promotions. The requirement that a prospectus is available for at least six working days before the end of an
offer still applies from the date on which the actual prospectus is approved. However, the FCA has confirmed that the six-day requirement does not
apply to an institutional-only offer, which provides flexibility to use a pathfinder to market such offers.
The timetable for the admission of securities to trading on an exchange will depend on the rules of the particular exchange. In the case of admission to
the LSE’s Main Market, an applicant who proposes to admit equity securities or depositary receipts should notify the LSE no later than when it
provides its eligibility letter (detailing its compliance with the applicable eligibility requirements) to the FCA. The draft application form and the draft
prospectus must be submitted at least 10 business days before the day on which the issuer is requesting that the LSE considers the application. The
finalised admission document must be provided to the LSE at least two business days before the intended consideration of the application for
admission to trading. Where the securities are to be admitted to AIM, the issuer must provide the LSE with certain prescribed information, at least 10
business days before the expected date of admission to AIM. The AIM admission document, application form and nomad’s declaration must be
submitted to the LSE three business days before the proposed date of admission of the securities to trading.
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4.
Publicity restrictions
What publicity restrictions apply to a public offering of securities? Are there any restrictions on the ability of the underwriters to issue research reports?
A prospectus must not be published until it has been approved by the competent authority.
As part of the pre-marketing of a public offering, research analysts linked to the issuer’s underwriter may publish research reports on the issuer,
depending on the issuer and other circumstances of the offering. This is known as ‘connected research’. The aim is to circulate the research report to
the underwriter’s institutional clients in advance of the offering in order to provide an alternative and objective view of the offering, separate from the
issuer’s view.
On 1 July 2018 certain provisions that the FCA introduced to improve the range, quality and timeliness of information that is made available to market
participants during the UK equity initial public offering process entered into force. The rules apply where shares or depositary receipts will be admitted
to trading on a regulated market in the UK for the first time and a prospectus will be required. The rules prohibit connected analysts (ie, analysts linked
to firms that are members of the underwriting syndicate) from being in communication with the issuer or its representatives unless a range of
unconnected analysts are also provided with either: (i) the opportunity to join the connected analysts in any communication with the issuer team; or (ii)
access to the issuer’s management that results in them receiving or being given access to all of the information given to the connected analysts (and
each other). In addition, the rules prohibit the dissemination of any research reports from connected analysts until at least seven days after the
publication of an approved prospectus or registration document, or one day after publication if option (i) above is taken. A ‘registration document’ is the
component of a tripartite prospectus (a prospectus chosen to be published in three parts rather than one single document) that contains certain
information relating to the issuer.
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5.
Secondary offerings
Are there any special rules that differentiate between primary and secondary offerings? What are the liability issues for the seller of securities in a
secondary offering?
Generally, the same rules apply to secondary offerings as apply to primary offerings. However, their application can well be different in respect of
secondary offerings.
Pre-emption rights
For a company issuing new shares (or securities that can convert into shares) for cash, the pre-emption rights in section 561 of the Companies Act
2006 will apply. These require that a company offers the new shares or securities to existing shareholders on a pro rata basis before offering them to
other potential investors. There is a similar requirement in the LRs for issuers with premium listings, but both can be disapplied by a shareholder vote.
Neither requirement will apply to an overseas company with a standard listing.
Companies with a premium listing should also take account of the principles set out by the Pre-Emption Group (and supported by the Investment
Association and Pensions and Lifetime Savings Association) on the disapplication of pre-emption rights. Companies with a standard listing or with
securities admitted to AIM are also encouraged to adhere to the principles. These principles provide guidance to companies and shareholders on the
factors to take into account when considering whether to disapply pre-emption rights.
Pre-emption rights are less likely to apply on selling shares on a secondary basis than on issuing shares, but this is subject to provisions in the issuer’s
articles and shareholders’ agreement.
Prospectus
In principle, a secondary public offering could require the publication of a prospectus. However, FSMA specifically provides that a communication in
connection with trading on a regulated market, an MTF or a ‘prescribed market’ (specified by HM Treasury in secondary legislation) will not be
considered an offer to the public. Marketed secondary offerings are typically offered only to professionals to avoid having to produce an approved
prospectus.
Liability in secondary offerings
The same set of rules apply to secondary offerings as to primary offerings (see question 19). However, the effect of those rules will differ in particular
because, assuming the securities of the secondary offering are not being offered by affiliates, directors, or significant shareholders, there is likely to be
far less information available to the seller than to an issuer in a primary offering and so less will generally be expected of a secondary seller. However it
will continue to be important that the seller is not in possession of any inside information.
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6.
Settlement
What is the typical settlement process for sales of securities in a public offering?
Securities may be held in either certificated or uncertificated form. Equity securities of UK companies of the latter type are held through CREST, which
is the settlement system operated by Euroclear UK & Ireland Limited, the UK’s central securities depository (CSD). International debt securities are
generally held through the clearing systems operated by the international CSDs (ICSDs) - Euroclear Bank in Belgium and Clearstream Bank in
Luxembourg. Settlement of securities within the CSD or ICSD, as applicable, is governed by the system’s rules.
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7.
Specific regulation
Are there specific rules for the private placing of securities? What procedures must be implemented to effect a valid private placing?
In private offerings, the requirements for a prospectus in the Prospectus Directive will generally not apply - the offer will be designed to take advantage
of an exemption from the public offer trigger prospectus requirement (see question 2).
However, MAR will still apply if the securities are within its scope, as will the liability under section 90 FSMA and section 89 of the 2012 Financial
Services Act (see question 19).
No special procedures are required to effect a valid private placing in the UK.
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8.
Investor information
What information must be made available to potential investors in connection with a private placing of securities?
Generally (for the reasons given in question 7), neither a prospectus nor listing particulars is likely to be required in connection with a private placing of
securities. However, each investor will of course require adequate information as assessed by them before they make their investment decision.
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9.
Transfer of placed securities
Do restrictions apply to the transferability of securities acquired in a private placing? And are any mechanisms used to enhance the liquidity of
securities sold in a private placing?
No statutory restrictions apply to the transferability of listed securities acquired in a private placing. However, in the case of unlisted shares in a private
limited company, it is usual for new shareholders to enter into ‘lock-up’ agreements in which they undertake not to dispose of their shares within a
certain period after their allotment, in order to avoid the prohibition under section 755 of the Companies Act 2006 on public offers of shares in private
companies.
Price stabilisation measures can be used to enhance the liquidity of the issued securities. Price stabilisation may contravene MAR and UK domestic
legislation on insider dealing and misleading statements and impressions unless conducted in accordance with certain requirements (see question
17).
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10.
Specific regulation
What specific domestic rules apply to offerings of securities outside your jurisdiction made by an issuer domiciled in your jurisdiction?
The broad applicability of the legislation means that it generally does not make much difference whether an issuer offers securities inside or outside
the UK, if the offering is made anywhere in the EEA. The Prospectus Directive will apply to any public offer in any EEA State. MAR will apply to in-
scope securities whether or not offered in the UK.
The provisions of the Companies Act 2006 will also apply to any UK incorporated issuer, in particular the prohibition on private companies issuing
securities to the public (see question 1).
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11.
Offerings of other securities
What special considerations apply to offerings of exchangeable or convertible securities, warrants or depositary shares or rights offerings?
Prospectus requirement
If the issuer chooses to list the securities on the LSE’s PSM rather than the Main Market, a prospectus would only be required if the securities are also
being offered to the public (and no exemption applies - see question 2); a public offer is very unlikely in practice. Accordingly, listing particulars would
typically be required instead.
There is no specific exemption from the public offer trigger prospectus requirement where shares are offered to existing shareholders under a rights
offer and so a prospectus is likely to be required.
Prospectus content
As discussed in question 1, the content requirements for a prospectus depend upon the nature of the securities. The disclosure requirements for
shares and depositary receipts are relatively onerous whereas the disclosure requirements for debt securities are generally lighter. Depending on the
particular circumstances of the deal, equity-level disclosure could be required for an offering of exchangeable or convertible securities.
Companies Act 2006
On an offering by a company of shares or securities convertible into shares (in each case, wholly for cash), the issuer must consider whether the pre-
emption rights referred to in question 5 will apply to the offering. There will also be corporate governance issues to take into account - the directors
must be properly authorised in accordance with the Companies Act 2006 before allotting the securities.
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12.
Types of arrangement
What types of underwriting arrangements are commonly used?
The type of underwriting arrangement used will depend on the type of transaction. For example, most investment-grade debt issues use a fixed-price
approach, where the pricing terms are all set out at the outset. Other debt issuances (for example, issues by first-time issuers or asset-backed
securities) are often unpriced until after a book-building process, where potential investors notify the book-builder of their interest in the issuance. The
underwriters will subsequently be able to commit to underwriting with a better idea of the level of demand for the securities.
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13.
Typical provisions
What does the underwriting agreement typically provide with respect to indemnity, force majeure clauses, success fees and overallotment options?
Indemnity
Depending on the type of deal as well as the negotiating positions of the parties, the underwriting agreement may include an indemnity given by the
issuer to the underwriter over all claims or losses arising out of the breach of the representations and warranties and any untrue statements or
omissions in the prospectus. The issuer may also agree not to make any claims against the underwriter in respect of any losses the issuer sustains
arising from the services provided by the underwriter (absent a specified level of negligence, wilful default, or breach of regulatory duties). The ultimate
type of indemnity and the level of negotiations on an indemnity is generally driven by the type of transaction and the appetite of the parties for an
approach that departs from what is perceived as ‘standard’.
Section 678 of the Companies Act 2006 (which prohibits a public company from giving financial assistance to a person acquiring or proposing to
acquire shares in the company) could be triggered if the underwriter is indemnified against losses incurred as a result of the underwriter having to
purchase surplus securities. Therefore the indemnity should be specific and may exclude losses sustained through being obliged to purchase surplus
securities.
Force majeure
Force majeure clauses are common, providing for the suspension or sometimes termination of contractual obligations where a party is prevented from
performing its obligations under the contract by a factor outside its control. Typical events provided for include the suspension or limitation of trading on
a certain market; changes in taxation; outbreak of hostilities; or the occurrence of a relevant material adverse change.
Success fees
Underwriting fees are typically expressed as a percentage of the principal raised. The underwriting fee must be disclosed in the offering document.
Overallotment options
Overallotment options are often included in equity issues as a way of facilitating price stabilisation - see question 18.
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14.
Other regulations
What additional regulations apply to underwriting arrangements?
Underwriting arrangements are regulated within the FSMA framework. According to the FCA, underwriting activities will be covered by the regulated
activities of dealing in investments as principal, dealing in investments as agent, and arranging deals in investments, meaning that an underwriter will
likely need to be authorised under FSMA in order to provide underwriting services. Authorised underwriters are subject to a number of organisational,
conduct of business and other regulatory requirements.
Additionally, sections 552 and 553 of the Companies Act 2006 require that payment of the underwriting commission be authorised by the issuer’s
articles of association, and that the consideration paid or agreed in respect of the underwriting must not exceed the lower of (i) 10 per cent of the price
at which the shares are issued, and (ii) the amount or rate authorised by the articles. The underwriting commission must generally be disclosed in any
prospectus.
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15.
Applicability of the obligation
In which instances does an issuer of securities become subject to ongoing reporting obligations?
Upon having securities admitted for trading, an issuer becomes subject to ongoing reporting obligations which depend on the type of securities and
the market of listing.
The LRs and the DTRs set out the ongoing reporting obligations applicable to issuers once their securities have been admitted to the Official List. The
DTR requirements regarding disclosure of major holdings of voting rights also extend to UK companies with shares admitted to a prescribed market
such as AIM.
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16.
Information to be disclosed
What information is a reporting company required to make available to the public?
Issuers of securities that are subject to MAR are required to publicly disclose inside information relating to them as soon as possible - see question
17.
The LRs and DTRs require listed companies to publish periodic financial information, whose timing and regularity will depend on the type of securities
and the market of listing. The DTRs also require a listed company to disclose information relating to trades in relevant securities by management
decision makers and changes in major holdings of voting rights or changes in the reporting company’s voting share capital. Other information will
generally have to be disclosed on an ongoing basis, such as changes to an issuer’s constitution or to the rights of the holders.
A company whose securities are traded on AIM must comply with the continuing obligation requirements of the AIM rules, which are less stringent than
the DTRs and LRs.
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17.
Prohibitions
What are the main rules prohibiting manipulative practices in securities offerings and secondary market transactions?
The main rules prohibiting manipulative practices are set out in MAR, the Financial Services Act 2012 (FSA), and the Criminal Justice Act 1993 (CJA).
MAR
MAR provides that it is an offence to:
engage or attempt to engage in insider dealing;
recommend that another person engage in insider dealing or induce another person to engage in insider dealing;
unlawfully disclose inside information; or
engage in or attempt to engage in ‘market manipulation’.
MAR applies in the circumstances described in question 1.
MAR requires issuers to announce inside information directly concerning the issuer, and to comply with a number of related record-keeping and
procedural requirements. Inside information is defined as information of a precise nature, which has not been made public, relating, directly or
indirectly, to one or more issuers or to one or more financial instruments, and which, if it were made public, would be likely to have a significant effect
on the prices of those financial instruments or on the price of related derivative financial instruments. Information will be held to be likely to have a
significant effect on the price of the instrument if it is information that a reasonable investor would use as part of the basis of their investment decision.
The general rule is that an issuer must inform the public as soon as possible of inside information which directly concerns that issuer. The
circumstances under which an issuer may be able to delay disclosure are restricted. On the other hand, where an issuer is delaying public disclosure,
any disclosure of inside information which is not in the normal exercise of a person’s employment, profession, or duties, is prohibited.
MAR also prohibits insider dealing, where a person in possession of inside information uses that information in acquiring or disposing of relevant
financial instruments. Recommending that or inducing another person to engage in insider dealing is also prohibited.
Financial Services Act 2012
There are also heads of criminal liability in the UK under the FSA. The two potentially most relevant offences under the FSA, each of which may result
in the imposition of an unlimited fine or a custodial sentence of up to seven years, are as follows:
making false or misleading statements (section 89); and
creating false or misleading impressions (section 90).
Criminal Justice Act 1993
Under the CJA there are an additional two insider dealing offences that can be committed by individuals:
the dealing offence (section 52(1)), where an individual has inside information and deals on a regulated market in securities whose price would be
affected by that information; and
the ‘tipping off’ offence (section 52(2)), where an individual has inside information and either discloses that to another person outside the proper
course of their employment, office or profession, or encourages another person to deal in securities whose price would be affected by the inside
information.
These offences may be punished with an unlimited fine or a custodial sentence of up to seven years.
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18.
Permitted stabilisation measures
What measures are permitted in your jurisdiction to support the price of securities in connection with an offering?
Price stabilisation is usually achieved by way of over-allocating additional securities to investors under the offering (in the case of equity issues, it will
borrow the over-allocated stock to effectively defer the settlement obligation). This over-allocation leaves the stabilisation manager with a short
position. If the price of the securities falls below the offer price, the stabilisation manager can apply upward pressure to the price by purchasing the
securities in the market. If the price of the securities increases, the stabilisation manager will invariably have the benefit of an overallotment option to
purchase additional securities at the offer price.
Such steps will not contravene the restrictions laid out in question 17 as safe harbour exemptions are provided in the relevant legislation. The
exemption in MAR requires that the stabilisation is carried out for a limited period, that relevant information about the stabilisation is disclosed and
notified to the FCA, and that certain limits as to price and volume are complied with (among other requirements).
Another commonly used method of reducing price volatility following an equity offering is to restrict the sale of further shares by the issuer’s
management or selling shareholders for a defined period, which is known as a ‘lock-up’ agreement.
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19.
Bases of liability
What are the most common bases of liability for a securities transaction?
Misleading statements in, or omissions from, any offering document can give rise to both civil and criminal liability under English law, and such liability
may arise under statute or common law. This is the main focus of potential liability for a securities transaction.
There are various UK statutory provisions relevant to liability for an inaccurate offering memorandum. These include specific investor protection
statutes such as:
section 89 FSA, covering criminal liability for false or misleading statements that induce a person to enter into an agreement or exercise (or not
exercise) any rights in respect of an investment (see question 17);
section 90 FSMA, covering civil liability to pay compensation for misleading statements or omissions where a person has acquired securities and
suffered a loss in respect of those securities as a result of the misleading statement or omission; and
section 91 FSMA, covering penalties for contravention of the prospectus requirement (see question 2).
It is a defence to liability under section 90 FSMA to show any of the following:
that the relevant person reasonably believed the statement was not misleading or there was no omission, having made such enquiries as were
reasonable (given certain conditions regarding the timing of the belief and acquisition of the securities);
that responsibility for the statement was expressly accepted by an expert, and the relevant person believed that expert competent (given certain
conditions regarding the timing of the belief and acquisition of the securities); or
that the acquirer of the securities knew that the statement was false or misleading or knew of the omitted matter.
Some behaviour will also amount to standard fraud. Section 2 of the Fraud Act 2006 covers fraud by false representation, and section 3 covers fraud
by failing to disclose information. The fraud offences can be committed by either bodies corporate or individuals. A person who is guilty of fraud is
liable to an unlimited fine or to a custodial sentence lasting a maximum of 10 years.
Liability may also attach under common law. Bases of liability under common law include actions in deceit and negligent misstatement, and potentially
also in misrepresentation, against the directors (and any other relevant officers) of the company. There could also be an action for breach of contract,
as the prospectus will form the basis of a contract between the issuer and the acquirers - however such claims are rare or non-existent.
Market abuse rules that will confer liability on the issuer are also set out in multiple statutory sources - see question 17.
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20.
Remedies and sanctions
What are the main mechanisms for seeking remedies and sanctions for improper securities activities?
The available remedy or possible sanction will depend on the head under which liability is incurred.
Criminal offences (sections 89 and 90 FSA, and section 52 CJA) may be prosecuted by the FCA or the Crown Prosecution Service, or in some cases
the CJA offences will be investigated by the Department for Business, Energy and Industrial Strategy.
The FCA also has responsibility for investigating market abuse, and has wide powers to institute proceedings against anyone it suspects of having
committed an offence under the MAR.
The most directly relevant remedy available to an investor tends to be that available under section 90 FSMA, which imposes civil liability on an issuer
for false or misleading prospectuses and listing particulars. Each person who had responsibility for a prospectus is liable to pay compensation to a
person who has acquired securities to which the particulars apply and suffered loss in respect of them as a result of any untrue or misleading statement
in the particulars, or an omission of any matter required to be included. An aggrieved investor will need to initiate civil proceedings to benefit from this
potential for compensation, and will need to prove that a director knew that the statement was untrue or misleading, or was reckless as to whether it
was, knew that the omission was a dishonest concealment of a material fact, or acted dishonestly in delaying the announcement of the information.
Under the common law, deceit and negligent misstatement are torts, meaning that the possible damages will be the financial loss suffered by the
claimant as a result of the misstatement. If an investor is able to prove a case in misrepresentation, the remedy of rescission may be available. This
remedy requires the court, as far as possible, to put the parties to a contract back in the position they were in before the making of the contract.
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Updates and trends
Proposed changes
21 Are there current proposals to change the regulatory or statutory framework governing securities transactions?
Brexit
On 29 March 2017, the UK invoked Article 50 of the Treaty on European Union, thereby beginning a two-year withdrawal process that is scheduled to
end when the UK leaves the EU at 11pm on 29 March 2019.
At the time of writing, the terms on which the UK will leave the EU are unclear. Brexit (and Brexit uncertainty) is likely to have a considerable impact on
most UK businesses, and accordingly a majority of issuers have included Brexit or related developments in their risk factors and disclosures. Brexit is
likely to impact some industries more than others, in particular those which rely on frictionless import from and export to the EU.
In terms of legislation, in the event of a ‘hard Brexit’ or ‘no-deal Brexit’ where the UK and the EU do not enter into a withdrawal agreement, the UK will
incorporate the body of EU law as it stands as at Brexit into UK law. The UK government also intends to incorporate the new Prospectus Regulation as
discussed below. This means that Brexit should not immediately impact the UK regulatory landscape itself, but future divergence from EU law cannot
be ruled out. Moreover, following a no-deal Brexit, the UK will be considered a ‘third country’ and will no longer be covered by the Prospectus Directive
passporting mechanism.
LIBOR
In July 2017, the FCA announced that the London Interbank Offered Rate (LIBOR) benchmark will be phased out at the end of 2021. This raises a
number of potential issues for issuers and investors. Many existing transactions will depend on LIBOR, and its discontinuation could, therefore, either
frustrate the contracts or cause a redistribution of value upon reversion to fallback provisions. Particularly problematic will be families of related
contracts with differing fallback provisions, which could mean that previously matching rates are no longer related to each other. Additionally, there is a
risk of a grey period where the rate becomes problematically unrepresentative but is not yet discontinued or replaced by a contractual fallback. Issuers
should ensure that current and future documentation accommodates the phase-out, and may also consider including the discontinuation as a risk factor
in their disclosure.
Prospectus Regulation
The new EU Prospectus Regulation will repeal and replace the existing EU Prospectus Directive. Certain provisions of the Regulation have applied
since July 2017 and July 2018; however, the majority of its provisions apply from 21 July 2019. Although it is planned that the UK will have exited the EU
by that date, HM Treasury will likely incorporate the provisions into UK law under proposed legislation.
Some changes that have been or will be effected by the new legislation include several adjustments to the types of offer and issue of securities that
trigger the application of the regime (including that there will be no requirement to produce a prospectus for an offer with a total value in the EU of less
than €1 million, which member states may individually increase to €8 million as the UK has done); a simplification of the content requirements for
secondary issuances; the ability to opt in voluntarily to the prospectus regime; and the creation of a new ‘universal registration document’ (a shelf
registration-type document) for frequent issuers. As an expansion of the existing wholesale regime, the new Regulation permits an alleviated standard
of disclosure in issuers’ prospectuses for admissions to trading of non-equity securities on regulated markets to which only qualified investors have
access, or, irrespective of the market, for an issuer’s non-equity securities that have a minimum denomination of at least €100,000.
There is also a new requirement for the information in the prospectus to be written and presented in a concise form. Issuers will have to limit risk
factors to those determined to be material and specific to the issuer. Additionally, risk factors will have to be set out in a limited number of expressly
stated categories depending on their nature, with the most material listed first. Risks included in the risk factor section must be corroborated
elsewhere in the prospectus. There are new summary requirements, including a limit on listing only the 15 most material risk factors and restricting the
length of summaries in most cases to a maximum of seven sides of A4.

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08/07/2024, 23:45 Mortgage Debt Clearing

Mortgage Debt Clearing

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