A flow-through share is a special type of common share issued by oil and gas or mineral exploration companies. These shares allow certain tax deductions for qualifying exploration, development and property expenditures to “flow through” from the company to shareholders.
Resource exploration and development programs are generally high risk. In addition, there is a risk that the company’s expenditures may not meet the strict requirements of the tax legislation. Tax deductions may not be allowed.
Rights and warrants give the holder the right to buy additional securities from a company at a certain price within a certain period of time. They are usually issued in proportion to the number of shares an investor owns.
Rights allow shareholders to acquire more shares. Some rights are listed on stock exchanges. They may not trade actively. In some cases, rights may have resale restrictions or holders may be subject to restrictions on their ability to exercise the rights to acquire additional shares.
Warrants allow shareholders to acquire other securities of the company. They are typically offered to investors with the sale of another security, like a common share. Rights and warrants have similar risk and return considerations as options.
This has been the ninth post in our Investments at a Glance series. Coming up next: the exciting world of investment funds.
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Tomorrow I will begin a series of posts regarding the “Top Investor Traps” as identified by the North American Securities Administrators Association (NASAA). Before we get into lengthy discussions about fraud and inappropriate investing, I’d like to remind you what your rights are, as an investor.
The Investor Bill of Rights
When you invest, you have the right to:
- Ask for and receive information from a firm about the work history and background of the person handling your account, as well as information about the firm itself.
- Receive complete information about the risks, obligations, and costs of any investment before investing.
- Receive recommendations consistent with your financial needs and investment objectives.
- Receive a copy of all completed account forms and agreements.
- Receive account statements that are accurate and understandable.
- Understand the terms and conditions of transactions you undertake.
- Access your funds in a timely manner and receive information about any restrictions or limitations on access.
- Discuss account problems with the branch manager or compliance department of the firm and receive prompt attention to and fair consideration of your concerns.
- Receive complete information about commissions, sales charges, maintenance or service charges, transaction or redemption fees, and penalties.
- Contact your provincial securities regulator in order to verify the employment and disciplinary history of a securities salesperson and the salesperson`s firm; find out if the investment is permitted to be sold; or file a complaint.
(Courtesy of the North American Securities Administrators Association. Click to download a PDF copy.)
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