Before beginning this course of lectures on Stock Exchange Securities, at the request of the Society of Chartered Accountants, the Institute of Accountants and Actuaries in Glasgow, and the Institute of Bankers, I should like to mention that when your Committee asked me to undertake the duty I explained to them that my acquaintance with investments is, to some extent, confined to those which come before me in the ordinary way of business. You are aware that life assurance offices have large sums of money to invest, and therefore in my capacity of manager of such an institution it has been my duty to study the Stock Exchange Official List of Stocks and Shares in order to be able to suggest to the directors investments for their consideration which appear suitable for the funds of the office. The requirement in such a case is that the security should be undoubted, and consequently my experience is limited mainly to what are called "gilt-edged" investments. Of course in the search for these, other classes may also come under review; but you will understand that by the expression "Stock Exchange Securities," as dealt with in these lectures, speculative securities are either excluded or are only referred to when their circumstances throw light on others of a higher class.

In selecting investments the two important points to be kept in view are: (1) Will your capital be secure if placed in the proposed investment? and (2) What annual return will the investment yield on the capital invested? The first is immeasurably the more important of the two; but assuming you are satisfied as to security, you will naturally desire to have as high a rate of interest as possible. It is well, however, to remember that, as a rule, high interest means weak security. In the Stock Exchange list there are all classes - good, bad, and indifferent. It will doubtless fall to your lot in future to guide others in the selection of investments; and while I do not propose to advise you as to the class in which you should place any particular investment, I wish to give you a few hints as to the points to be kept in view in forming your judgment.

It will probably be convenient, as a preliminary, to take up a little of your time with an explanation of some Stock Exchange methods, and of some technical terms adopted in connection with securities.

When a stockbroker has bought stock or shares for a client he sends him a contract note stating the price and date of settlement. In each month there are two settlement dates for all stocks and shares except British funds and the Metropolitan and London County stocks - one at the middle of the month and the other at the end. In the case of the British funds and the Metropolitan and London County stocks there is only one settlement day in each month - at the beginning.

Broker's Commission

For his trouble in making the purchase or sale the broker charges a commission, which is fixed by the rules of the Stock Exchange to which he belongs. The rate varies according to the class of the stock, but the following are examples of the rates charged:-

1. On stock and shares (including debenture stock): 1/2 per cent on the price when £10 or upwards.

2. On stock, annuities, or funded debts of municipal corporations in the United Kingdom: 1/4 per cent on the price.

3. On bonds, debentures, or mortgages of railway or other companies or public trusts in the United Kingdom: 1/2 per cent on the price when the unexpired currency is over five years. 1/4 per cent on the price when the unexpired currency is two years and not over five years. 1/8 to 1/4 per cent on the price when the unexpired currency is under two years.

4. On British and British India Government funds and Exchequer and Treasury bills, also on European Government funds: 1/8 per cent on nominal par value when the price is 25 per cent or upwards. 1/16 per cent on nominal par value when the price is under 25 per cent.

5. On British, Colonial, United States, and Foreign Government funds; also on bonds of railway or other companies out of the United Kingdom : 1/4 per cent on nominal par value when the price is 50 per cent or upwards. 1/8 per cent on nominal par value when the price is under 50 and not under 25 per cent. 1/16 per cent on nominal par value when the price is under 25 per cent.

6. On ordinary or deferred stock of railways in the United Kingdom: 1/4 per cent on the price.

Stamp Duties

When stock is purchased or sold the purchaser has in most cases to pay stamp duty, which therefore forms an addition to the cost of the investment. The stamp duty, when exigible, is practically 1/2 per cent on the purchase-price. There are, however, certain stocks on which no stamp duty is payable - such as Government or Parliamentary stocks or funds, the bulk of the Corporation or County stocks quoted on the Stock Exchange, and bonds payable to the bearer on which stamp duty has already been paid. In addition to this, companies may enter into an agreement with the Commissioners of Inland Revenue for the composition of the stamp duties chargeable on transfers of their shares and stocks, on payment of the duty of 6d. per cent half-yearly on the nominal amount of all the shares and stocks of such companies; and in all cases where this provision has been taken advantage of no stamp duty is payable.

Registration Fee

A small charge is generally made for registering the name of the purchaser.