W1-2-60-1-6
JOMO KENYATTA UNIVERSITY
OF
AGRICULTURE AND TECHNOLOGY
University Examinations 2013/2014
FOURTH YEAR SECOND SEMESTER EXAMINATION FOR THE DEGREE OF BACHELOR OF LAWS
LSC 2407 : CAPITAL MARKETS AND SECURITIES LAW
DATE: AUGUST 2013 TIME: 2 HOURS
INSTRUCTIONS: ANSWER QUESTION ONE (COMPULSORY) AND
ANY OTHER TWO QUESTIONS.
QUESTION ONE (30 MARKS)
Recently, a private company known as J & D Ltd, went public by offering its shares to the members of public through an Initial Public Offer (IPO). You missed an opportunity to participate in the initial issue. However, your grandfather, a retired teacher, has asked you to buy 2000 shares he owns in Fahari Ltd, in which he owns 90% of the shares and his wife owns 10% of the shares. You later discover that your grandfather also owns another 3,000 shares in J&D Ltd. It is your intention to acquire all the shares in both companies. Since he is your grandfather, you will get the shares at a favorable price.
Describe how the shares in both companies may be transferred from your grandfather to yourself and how your grandfather may receive his sale proceeds. [30 marks]
QUESTION TWO (20 MARKS)
BERTAL Ltd. is a privately owned company which has plans of going public in the near future. You have been hired as a legal consultant to help in the preparations.
(a) Give an opinion of the two different ways through which a private company can issue its shares to the members of the public.
[10 marks]
(b) What are the advantages and disadvantages of listing on the Securities Exchange? [10 marks]
QUESTION THREE (20 MARKS)
(a) Discuss the role of capital markets in an economy. [5 marks]
(b) Distinguish between capital markets and money markets.
[5 marks]
(c) Outline the roles and functions of the Capital Markets Authority of Kenya. [10 marks]
QUESTION FOUR (20 MARKS)
(a) Using statutory provisions, describe the dispute settlement mechanisms provided for under Capital Markets Act Cap 485 A, laws of Kenya. [10 marks]
(b) Distinguish between a stockbroker and central depository agent.
[5 marks]
(c) Describe the relationship between securities exchange, central depository and settlement bank. [5 marks]
QUESTION FIVE (20 MARKS)
Write short notes on the following:
(a) Insider trading. [5 marks]
(b) Treasury bonds and bills. [5 marks]
(c) Primary market and secondary market. [5 marks]
(d) Listing, delisting and suspension of securities. [5 marks]
