(a) What is second-tier security market?
(b) Discuss four advantages of the second-tier security market.
(c) State five requirements for trading in a second-tier security market.
Explanation
a. A second-tier security market is a market where securities of companies that cannot be traded in the first-tier security market are quoted.
b. Advantages of the second-tier market
i. It is an avenue for companies to raise more capital.
ii. It assists and compliments the efforts of the stock exchange market by buying/ selling the shares of companies which cannot be traded on the stock exchange market.
iii. It ensures the survival and development of companies without fear of liquidation in the short run.
iv. It provides financial advices to companies in areas of profitable investments.
v. It helps companies to save advertising cost when shares are floated.
c. Requirement for trading in a second-tier security market
i. The company must be incorporated as a public limited company.
ii. The shareholders must not be less than 100.
iii. The company must sign a general undertaking with the stock exchange market.
iv. It must make available at least 10% of its equity share to the investing public.
v. The financial statement of the company for three years must be submitted to the stock exchange.
vi. A shareholder will not be allowed to either directly or indirectly acquire more than 75% of the issued capital.