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Finding Capital in ‘Dark Pools’ and Angel Investors

March 3rd, 2011 at 08:43am Under News

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This is the VOA Special English Economics Report.

Big stock exchanges in the United States are linked in what is known as the national market system plan. The idea is to process deals and report the best available prices to the public as quickly as possible.

But there are other ways of investing that operate outside the national market system.

In the late nineteen nineties, the Securities and Exchange Commission wanted to make room for new ideas in financial trading. The commission developed new rules for exchanges and for what are known as alternative trading systems.

Alternative trading systems are operated by brokers or dealers. They mainly serve big investors like retirement funds, universities and financial companies.

These systems trade the same public stocks as other market players do. But they do not publicly report their trades. This secrecy explains why they also have another name: “dark pools.”

As of October, there were eighty-six alternative trading systems registered with the Securities and Exchange Commission.

A buy or sell order for a large amount of stock can move markets. It can influence other investors to try to buy or sell shares of that same stock. Supporters of alternative trading systems say the secrecy reduces the risk of a disorderly market.

But the International Monetary Fund has concerns about alternative trading systems. It says they limit the ability of the investing public to price a security effectively. Also, the IMF says the activity of these trading systems is largely outside the reach of market regulators.

Another alternative to the investing methods that most people know is the work of so-called angel investors. These are individuals who invest in new projects — and not just Internet startups that hope to become the next Google or Facebook. They could also be small, local businesses.

Steve Moore made a lot of money in the software business. After he retired he made an interest-free loan to Crystie and Keith Kisler. The couple operate a small organic farm in Washington state. They could not get a bank loan to build their business.

CRYSTIE KISLER: “This notion of an angel investor seemed just that to us. It seemed miraculous.”

In return, Mr. Moore received a minority share of their business.

STEVE MOORE: “I started thinking about where else can I get some kind of reasonable rate of return where return can actually be defined more fully than just how much money did I make.”

The Center for Venture Research at the University of New Hampshire says angel investing fell more than six percent nationwide in the first half of last year. Still, angel investments during that period totaled eight and a half billion dollars.

And that’s the VOA Special English Economics Report. I’m Steve Ember.

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Contributing: Tom Banse and Mario Ritter

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A Quick Lesson in Ways Businesses Are Organized

October 25th, 2010 at 12:11am Under Economy Report

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This is the VOA Special English Economics Report.

Businesses are structured in different ways to meet different needs.

The simplest form of business is called an individual or sole proprietorship. The proprietor owns all of the property of the business and is responsible for everything.

For legal purposes, with this kind of business, the owner and the company are the same. This means the proprietor gets to keep all of the profits of the business, but must also pay any debts.

Another kind of business is the partnership. Two or more people go into business together. An agreement is usually needed to decide how much of the partnership each person controls.

One kind of partnership is called a limited liability partnership. These have full partners and limited partners. Limited partners may not share as much in the profits, but they also have less responsibility for the business.

Doctors, lawyers and accountants often form partnerships to share their risks and profits. A husband and wife can form a business partnership together.

Partnerships exist only for as long as the owners remain alive. The same is true of individual proprietorships.

But corporations are designed to have an unlimited lifetime. A corporation is the most complex kind of business organization.

Corporations can sell stock as a way to raise money. Stock represents shares of ownership in a company. Investors who buy stock can trade their shares or keep them as long as the company is in business.

A company might use some of its earnings to pay dividends as a reward to shareholders. Or the company might reinvest the money back into the business.

If shares lose value, investors can lose all of the money they paid for their stock. But shareholders are not responsible for the debts of the corporation.

A corporation is recognized as an entity — its own legal being, separate from its owners.

A board of directors controls corporate policies. The directors appoint top company officers. The directors might or might not hold shares in the corporation.

Corporations can have a few major shareholders. Or ownership can be spread among the general public.

But not all corporations are traditional businesses that sell stock. Some nonprofit groups are also organized as corporations.

And that’s the VOA Special English Economics Report, written by Mario Ritter. You can learn more about business and economics on our website, voaspecialenglish.com. We’re also on Facebook, Twitter and YouTube at VOA Learning English. I’m Barbara Klein.

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