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Investor Handbook

Acquisition

An acquisition is when one company makes a bid to acquire control of another (called the target). It can either be hostile or friendly.

Active Shares

These are shares which are most frequently traded (bought and sold) at the NSE, as distinguished from partly active shares in which trading is not as frequent. The shares of most leading companies are active.

Agent

An agent is an appointed representative (of a stockbroker or investment bank) who is authorized to transact the business of buying and selling shares for a commission through and on behalf of the stockbroker or investment bank.

All or None (AON)

This is a restriction placed on a buy or sell order that instructs the broker to fill the order completely by the close of the market or the order should not take place.

Allotment Letter

This is the document issued by a company to its investors showing the number and value of shares allotted to the applicant after successful subscription.

Amalgamation

This is when two companies, previously independent of one another, combine to form a new company.

Annual Report

A publication issued by a company to its shareholders at the company’s fiscal year-end. The document typically includes financial statements, reports on operations, the auditor’s report and other relevant information on the company. It is mandatory for all public companies.

Annual General Meeting

This is a mandatory meeting held once a year by all public companies. The directors of the company report to the shareholders on the year’s performance and future of the company. All shareholders are invited and allowed to ask questions. Notice of such a meeting is mandatory.

Articles of Association

This is a document describing the purpose, place of business and details of a company. Every incorporated company in Kenya by law must have and submit this document to the registrar of companies and work by what it stipulates. The articles of association together with the memorandum of association form the constitution of a company.

Ask

It is also known as the offer price. It is the lowest price which a seller is willing to accept for a security. It also typically stipulates the amount of the security the seller is willing to sell.

Assets

This is anything owned by a company that has a market value. This includes land, buildings, equipment, furniture, cash, bank deposits, manufactured goods ready to be sold, goodwill, trademarks etc.

At Best Order

This is an instruction from a client to a broker authorizing the broker to use his discretion and try to execute an order at the best possible prize.

Authorized Shares (Stock)

This is the total number of shares that a company is permitted to issue according to its memorandum and articles of association. This number can only be increased if a resolution is passed to that effect by the majority of the shareholders and an application made to the registrar of companies.

Authorized Share Capital

The authorized share capital is calculated by multiplying the nominal share value with the total number of authorized shares. This is stated in the memorandum and articles of association as required by law.

Automated Trading System (ATS)

This is the online trading system software used at the Nairobi Securities Exchange to effect all trading transactions. It can be accessed through the NSE trading floor (through the Local Area Network) or from the stockbrokers’ offices (through the Wide Area Network). It is completely controlled and managed by the NSE.

Averaging Down

Buying more shares in a company at a price that is lower than the price paid for the initial investment. The aim of averaging down is to reduce the average cost per share bought.

Advocacy

Lobbying

Union

Market Growth

Investor Education

Code of Ethics

Investor Protection

Investor Education

  • Limit Order : 

    A limit order is one placed by an investor with a stockbroker to buy a specified number of shares at or below a specified price or to sell a specified number of shares at or above a specified price. A limit order ensures that an investor will not pay more for the shares than the price they have set as the limit and neither will an investor receive less than they are willing to accept. It is a very common type of order.

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  • Matching Orders : 

    This is an illegal practice that involves simultaneously entering identical buy and sell orders for a stock so as to give the impression of active trading.

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  • Open Ended Investment Company : 

    An open-ended investment company is one which keeps accepting new investors and redeems the funds of those who wish to opt out, as opposed to a close-ended investment company which has a fixed number of investors.

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  • Raider : 

    This is an individual or entity attempting to acquire enough equity in a target company to assume a controlling interest, usually through a hostile take-over bid.

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  • Unlisted Share : 

    These are shares of companies that are not listed at the Stock Exchange, usually because of their inability to meet listing requirements. They are traded in over-the-counter markets between brokers directly. 

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