Guide to Analysing Companies

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SOURCES OF FUNDS
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Specialist
A member of a stock exchange who makes and maintains
a market in the shares of a number of companies by buying
all such shares that are offered and selling all that are requested.
In the United States, specialists are expected to buy and sell
within a narrow price range in order to maintain orderly
markets. In certain circumstances, therefore, specialists can buy
and sell on their own account to preserve liquidity in the
market.
Special-purpose vehicle
Companies or legal entities set up specifically to hold assets
and (where permitted by regulators) to isolate the liabilities
associated with them. Such companies are often used by insur-
ers to protect part of their cash surpluses from claims in the
event of a catastrophe or natural disaster. banks set them up to
hold pools of financial assets, such as financial leases or re-
ceivables from consumer credit, which in turn support
bonds or other forms of asset-backed securities.
The special-purpose vehicle (spv) buys the loans to be se-
curitised and then issues new securities to investors, whose
income and capital are repaid out of the proceeds of the
loans. So the spv has on its balance sheet securities as assets
and loans as liabilities. Banks can therefore use spvs to help
them reduce the burden on their balance sheets. This gives them
more leeway with regulators when they have to meet rules on
capital adequacy. spvs are also employed by the trust and
private-banking arms of banks to hold and ring-fence invest-
ments in low-tax jurisdictions such as the Cayman Islands.
Since the collapse in 2002 of Enron, an energy-services firm in
the United States, regulators have become concerned about the
way some companies have used spvs to distance themselves
from potential liabilities.