What safeguards does a shareholder have for his investment?

Apart from the normal risks involved in the ups and downs of the market, a shareholder in a listed company has the protection of a well-organized market, the DSE, CSE, and the Securities and Exchange Commission (SEC) a statutory body responsible for ensuring an orderly market and protecting the interest of investors, among other things. 

Buying in the Primary Market

In order to buy shares issued by a company in the primary market, you will have to fill out a special form, which is obtained from the brokers, the issuing company, or any branch of a commercial bank involved in the particular issue of shares. Photocopies of such forms could also be used.

In such a primary issue the minimum number of shares that can be applied for is usually 50, and applications for higher quantities must be for a multiple of hundred. 

Application duly perfected and accompanied by a check, bank draft, or cash as indicated should be sent to a branch of a bank engaged for the purpose or to a share broking company or the company issuing the shares as stated in the prospectus

In the case of the issue of new shares which have high demand, it is possible that the amount of money the company is seeking from the issue would be found or subscribed fully, before the closing date. Therefore, it is usually advisable to apply for shares in a primary issue within the stipulated times of the prospectus. 

If the issue is over-subscribed the applicant will in due course receive a refund of the money paid for not getting shares through the lottery. If your application is accepted and shares are allotted in your name you will be issued a share certificate by the company. However, you will not be permitted to withdraw your investment from the company. This is because share investments as equities have no maturity dates as with debt obligations. The company in which you have purchased shares has not incurred a debt obligation by issuing shares. Further, the Companies Act prohibits a company from buying back its own shares.

You will in time earn a dividend when the company declares dividends depending on its profitability. Or else you may be allotted bonus shares or entitled to buy more shares on a rights issue. However, if you wish to convert your shares into cash you can sell on the Stock Exchanges. 

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