(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...

Answer Details

(a) What is a second-tier security market?

The second-tier security market (SSM) is a section of the stock exchange created to enable small and medium-sized companies, which cannot meet the strict listing requirements of the main (first-tier) market, to raise long-term capital by having their shares quoted and traded under less stringent conditions.

(b) Four advantages of the second-tier security market

1. It enables small and medium-sized companies to raise long-term capital for expansion.
2. Its listing requirements are less strict and less costly than those of the main market.
3. It allows the owners of such companies to retain a large degree of control while still raising funds.
4. It widens share ownership, deepens the capital market and encourages the growth of indigenous enterprises.

(c) Five requirements for trading in a second-tier security market

1. The company must be a public limited liability company registered under the Companies Act.
2. It must offer a minimum stated percentage of its shares to the public.
3. It must have operated and published audited accounts for a minimum number of years.
4. It must submit audited financial statements to the stock exchange regularly.
5. It must appoint stockbrokers and pay the prescribed listing fees, and satisfy the minimum number-of-shareholders requirement.