The questions below are the frequently asked questions by investors
and the answers that accompany them are designed to provide you
with some basic answers and tips to help you as you make an investment
decision either during an Initial Public Offering (IPO) or in the
secondary market (when the shares are listed on the stock exchange).
What is a Collective Investment Scheme?
Collective Investment Schemes are private financial arrangements that pool the resources of many savers, generating a large pool of resources, which they then invest in variety of investments with the objective of maximizing returns and minimizing risk
What is an IPO (Initial Public Offering) and a Secondary Market?
An IPO is the first time a company’s shares are offered to the public. If you do not get a chance to buy shares during the IPO, you can always buy the shares through the stock exchange
which is referred to as the secondary market.
How do I Invest in Shares Listed on the
Stock Exchange?
You can only buy or sell shares that are listed on the stock exchange
through a brokerage firm. Therefore look out for the following:
Ask if the brokerage firm is regulated by the CMA. Request to see a copy of the
CMA license.
Beware that the only stock exchange that has been licensed by the
CMA is the Uganda Securities Exchange.
Always ask your broker for a Contract Note each time you buy or
sell shares listed on USE. You should carefully read the information
contained in this document.
Do not be afraid to ask questions where you do not understand.
The broker has a duty to ensure that you understand. Therefore go
ahead and ask.
Be honest when the broker asks for information about your investment
objectives and personal finances. They will rely on this information
to make appropriate investment recommendations for you. The broker
is required to keep this information confidential.
How Do I Make An Investment Decision?
Never invest in a product that you don’t fully understand.
Consult information sources such as business and financial publications.
Always read the USE reports that appear in the newspapers and look
out for information on the companies in which you have invested.
Check with licensed investment advisers or other professionals
such as accountants, lawyers or bankers to get a second opinion about
a particular investment you are considering.
Keep good records of all information you receive, copies of forms
you sign, and conversations you have with your broker.
If I Have A Problem, What Do I Do?
• If the problem is with your broker promptly talk to the manager of the brokerage
firm.
• Confirm your complaint in writing.
• Ask for written explanations.
• If the problem is not resolved to your satisfaction, contact
the CMA.
As a wise investor, you should know your rights and responsibilities.
Be aware of the rules that protect you and your investments, and
the legal recourse if things go wrong. You can report abuses in
the industry to the Capital Markets Authority, whose mission is
to ensure the development of a fair, efficient, secure and transparent
securities market. CMA has the ultimate responsibility to protect the investor
through market supervision and ensuring that its securities laws
and regulations are complied with.
Always remember:
Nobody invests to lose money. However, investments always entail
some degree of risk. Be aware that:
• The higher the expected rate of return, the greater the
risk;
• The value of shares could go up or down.
• Past success of a particular investment is no guarantee
of future performance.
