Guide to Analysing Companies

S
SAVINGS BANK
265
03 Essential Finance 10/11/06 2:22 PM Page 265

---

Scrip issue
A handout of shares to a company’s existing shareholders in
proportion to their stake in the company; also known as a
bonus issue. A scrip issue is little more than an accounting
device; it does nothing to increase the value of a company. After
it has taken place, the shareholders’ equity is worth the same.
It has simply been divided into smaller bits. For this reason,
scrip issues are often used to make a company’s shares more
marketable, since small investors are often daunted by a
company whose individual shares are worth, say, hundreds of
dollars each. Companies also make scrip issues instead of
paying a dividend; shareholders are offered new shares
instead of cash.
SDR
See special drawing right.
SEAQ
See stock exchange automated quotations.
Seat
The membership of a stock exchange or commodities
exchange, bought and sold (like the financial instruments
traded within its doors) for prices that are determined by supply
and demand. So when dealers are making lots of money the
prices of their seats usually rise, and when they are not the
reverse happens. A seat gives the holder the right to use the fa-
cilities of the exchange and to participate in its business.
S
266
SCRIP ISSUE
03 Essential Finance 10/11/06 2:22 PM Page 266

---

SEC
See securities and exchange commission.
Secondary market
A market in second-hand financial instruments. When
first issued, stocks, bonds, certificates of deposit and
other such instruments are sold in the primary market, and
the proceeds from these sales go to the companies or organisa-
tions that issued them. One of the attractions of the secondary
market is the liquidity provided by the exchanges, which
subsequently make markets in those same securities.
Secrecy
It is a fundamental duty of financial agents that they do not
disclose details of their clients’ affairs against their clients’
wishes. This duty is in direct conflict with the desire of govern-
ments and law-enforcement offices to track down the proceeds
of drug traffickers, criminal gangs, money launderers and the
like. Even jurisdictions such as Switzerland, which has traded
on its reputation for neutrality and banking secrecy, have
bowed in recent years to the demands for more information to
be shared among governments. While the threat of terrorism
remains, such conflicts are likely to increase, not diminish.
Secured loan
A loan which provides a lender with the right to take over
certain prescribed assets of a borrower should the borrower
fail to repay. The assets given as security for the loan may be
physical (such as property or goods) or they may be legal agree-
ments entitling the lender to certain payments. As a result of
their secured lending, banks have ended up owning all sorts of
strange things, from domestic appliances to car factories.