A stock exchange is a place where business men meet daily for the purchase and sale of stocks and shares.

Both the sums of money invested in the national debts of a state, properly called the funds, and the separate credits warranted by governments, town corporations, trading companies, or other corporate bodies, paying a fixed annual rate of interest for the loan, are generally described as stocks.

Shares, on the contrary, represent the equal portions into which the capital of a joint-stock company is divided, and the consequent right of the owner to a corresponding portion of the company’s profits.

The London Stock Exchange.-


The Stock Exchange belongs to a private association, whose members are either jobbers or brokers, no person extraneous to the business being ever admitted.

K jobber is a merchant who buys and sells funds, stocks or shares on his own account and risk, while a broker is merely a buyer or a seller for the account and risk of his principal.

The operations of the Exchange are transacted under the control of a special comittee elected by the members, under whose authority the official list of prices is daily published-

Issue of Stocks and Shares.-


All public and mer­cantile securities are represented by written docu­ments called certificates, and the issue of either stocks or shares actually consists in the issue of such vouchers, which are given in return for money paid by subscribers.

The practical course usually followed in such operations is nearly the same for both stocks and shares.

The first step towards the issue is the publication of a prospectus, whereby the founders, or the directors temporarily appointed by them, declare the scope of the issue, the capital required, and the number of shares in which it is divided, the conditions of sub­scription and payment, the advantages attending the operation, and the estimated profits to be derived; the interest to be paid to subscribers and the security offered, if any; besides such further information as may induce people to take part in the loan, or sub­scribe towards the capital of the undertaking.

The prospectus of the Italo-Britannica Royal Mail Steam Navigation Company, which we insert at the end of this chapter (see page 228), may be taken as a specimen of the form usually adopted for this sort of document.


Any person willing to accede to the proposed loan or subscription sends in a letter of application, where­by he requests that a certain amount of the stock, or a certain number of the shares issued, be allotted to him, supporting his request with such deposit as is required by the prospectus.

In answer to the letters of application, letters of allotment are issued, by which notice is given to the applicants as to the amount of stock or number of shares allotted to them.

The letter of allotment is afterwards exchanged for another document called the scrip, entitling the sub­scriber to receive, in exchange for it, the stock or share certificate, directly on his having paid off, either the whole amount subscribed, or a first installment according to the conditions stated in the prospectus.

A share certificate is usually set forth in the following form:-


According to new provisions, lately enacted by the Legislature, the directors of an incorporated company, publishing a prospectus for the subscription of shares, are held individually liable towards the subscribers for the truth of the statements therein contained.

Should such statements prove false, the directors are bound in law to reimburse each subscriber the sums already paid in?