1.

Capital market, a term used interchangeably with securities market, refers to a segment of the
broad banking and financial industry where companies can borrow or invest large amounts of
money for medium to long-term periods.

2. Features of a capital market

1. Negotiability
2. Security
3. Alternative source of raising funds, different from bank finance

3. Capital markets are divided into:

 Primary
 Secondary

4. The basic objective of the capital market is to bring together the suppliers of funds (investors)
and users of funds (issuers) at a market place in order to generate financial resources that would
help business to grow, create more wealth and jobs, enhance people’s living standards and
accelerate economic development.
 to generate capital for issuers,
 distribute securities to investors, and
 Provide a market place for trading in securities.

5. The Capital market

 Equity market
 Money market, and
 Bond market

6. Financial instruments
 These are in three types. Debt, Equity and hybrid

7. The key features of debt instruments include:

 Obligation of issuer or borrower to repay the investor or lender the principal on maturity
date and interest on specified dates.
 Holder of debt instrument takes precedence over holder of equity in claims during
liquidation of the borrowing company.
 Bond instruments are often guaranteed and this give investor some comfort.
 The debt may be secured or unsecured.
 Debt instrument may be issued in bearer or registered form.
 The certificate may be all note (which has shorter term tan bond) or bond which has longer
term.
 The debt instrument prospectus states that governing law which in turn determines the
country whose law is applicable in the event of dispute.
  All bonds must be accompanied by prospectus or offer document. The prospectus contains

The complete terms and conditions of the issue particularly

 the amount,
 interest rate,
 payment date,
 registrar or transfer agent,
 security backing the issue and
 how funds will be used by the issuer.

8. Equity vs debt
Equity:
 Has no maturity dates;
 Confers the right to dividend if declared on shareholder;
 Could attract greater profit if the company performs well but shareholders right during
liquidation of the company is subordinated to that of the bondholder.

9. Principal players
 Investors such as individual savers, fund managers, insurance companies etc
 Issuers or borrowers such as banks, insurance companies, investment companies,
companies, government etc.
 Intermediaries such as stock exchanges, mutual funds, stock brokers, investment advisors

10. What investors look at

 The sources of risk
 The return (yield) offered on securities currently held; and
 The balance between risk and return

11. Regulators: SEC

12. DOCUMENTATION

In typical primary market issues (whether bond or shares) bond issues for example, the various
matters that are documented include

 Mandate letter-from issuer to an investment bank authorizing the mangers to arrange

the issue
 Information memorandum
 Prospectus or offering circular giving information about the issue and the issuer
 Subscription agreement between managers and the issuer setting out the terms upon
which the mangers agree to purchase or procure purchasers for the bonds.
 Managers agreement-between the managers delegating the organization of the issue to
the lead manager
  Trust deed between the issuer and a financial institution in order to protect their
interest

13. Main Laws

 1992 Constitution, article 181 on Government borrowing;
 The Loans Act, 1970 (Act 335) on borrowings by Government and Government agencies
 Securities Industry Act, 1993 (PNDCL 333)
 Securities Industry (Amendment) Act, 2000 (Act 590)
 Ghana Stock Exchange Rule Book, 2006

14. STOCK EXCHANGE

In ordinary language, a stock exchange may be described as a market where share and bond
securities are traded.

Ghana stock exchange was established in 1971 but officially started in1990

There are 21-licensed stock banking firms registered on the exchange

15. The main role of the stock exchange is to provide the facilities and framework where credit gap
in the society can be filled for the benefit of businesses and the Government.

16. Before 2006, the Stock Exchange Listing Regulations, 1990, governed the listing of securities at
the Ghana Stock Exchange. The GSE Rule Book following the approval of the latter by the
Securities and Exchange Commission (SEC) replaced this law.

17. Computer based data recording system now used was facilitated by:
 The Central Securities Depository Act, 2007 (Act 733) and
 The Securities Industry (Amendment) Act, 2000 (Act 590) with its accompanying Securities
and Exchange Commission Regulations, 2003 (LI 1728)

18. Intermediaries
 Stock Brokers: A stockbroker or a licensed Dealing Member is a company that buys and sells
securities on behalf of investors for a fee or commission.
 Investment advisor: carries on a business of advising others concerning securities. Does not
include banks, insurance company, a lawyer, proprietor of a newspaper
 Collective investment schemes: Collective investment schemes are arrangements by which
pools of funds are contributed by investors and are managed by professional managers on
behalf of the investors. The two common collective investment schemes in Ghana are unit
trust and mutual funds.
 Central Securities Depository: A CSD is a system that eliminates physical certificates or
documents of title that represent ownership of securities so that securities exist only as
accounting records in electronic form.
19. Under the laws of Ghana, participation in the securities business is open to not only people
resident in Ghana but also foreigners (non-residents) and Ghanaians resident abroad.

20. Before 2006, the repealed Exchanged Control Act, 1961 (Act 71), and Bank of Ghana Notice
concerning permission required by external residents to deal in securities listed on the Ghana
Exchange Notice No. BG/EC/93/1 fundamentally controlled foreign participation in the securities
market. Under the BOG Notice, no one external resident portfolio investor could hold more
than 10% in one security listed on the Ghana Stock Exchange. Additionally, the total holdings of
all external residents in any listed security could not exceed 74%.

21.