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29-554: The term describes the department of a company devoted to handling inquiries from shareholders and investors , as well as others who might be interested in a company's stock or financial stability. Typically investor relations is a department or person reporting to the chief financial officer (CFO) or treasurer . In some companies, investor relations is managed by the public relations or corporate communications departments, and can also be referred to as "financial public relations" or "financial communications." In smaller companies,

58-434: A body politic , a trust or partnership ) that is registered by the corporation as the legal owner of shares of the share capital of a public or private corporation . Shareholders may be referred to as members of a corporation. A person or legal entity becomes a shareholder in a corporation when their name and other details are entered in the corporation's register of shareholders or members, and unless required by law

87-504: A company (in the United States commonly referred as common stock) is usually referred to as an ordinary shareholder. This type of shareholding is the most common. Ordinary shareholders have the right to influence decisions concerning the company by participating at general meetings of the company and in the election of directors and can file class action lawsuits, when warranted. Preference shareholders are owners of preference shares (in

116-534: A company that is being sued for damages would not include the potential legal liability on its balance sheet until a legal judgment against it is likely and the amount of the judgment can be estimated; if the amount at risk is small, it may not appear on the company's accounts until a judgment is rendered. Traditionally, banks lend to borrowers under tight lending standards, keep loans on their balance sheets and retain credit risk—the risk that borrowers will default (be unable to repay interest and principal as specified in

145-405: A corporation generally governs a corporation for the benefit of shareholders. Shareholders are considered by some to be a subset of stakeholders , which may include anyone who has a direct or indirect interest in the business entity . For example, employees , suppliers , customers , the community , etc., are typically considered stakeholders because they contribute value or are impacted by

174-417: A customer who deposits $ 1 million in a regular bank deposit account, the bank has a $ 1 million liability. If the customer chooses to transfer the deposit to a money market mutual fund account sponsored by the same bank, the $ 1 million would not be a liability of the bank, but an amount held in trust for the client (formally as shares or units in a form of collective fund). If the funds are used to purchase stock,

203-406: A figure that may include on- and off-balance-sheet items. Under previous accounting rules both in the United States ( U.S. GAAP ) and internationally ( IFRS ), operating leases were off-balance-sheet financing. Under current accounting rules (ASC 842, IFRS 16 ), operating leases are on the balance sheet. Financial obligations of unconsolidated subsidiaries (because they are not wholly owned by

232-630: Is known as the Australian Investor Relations Association (AIRA). Taiwan's professional organization is known as the Taiwan Investor Relations Institute (TIRI). The Sarbanes–Oxley Act of 2002 significantly increased the importance of investor relations in the financial markets. The act established new requirements for corporate governance and regulatory compliance, with an increased emphasis on accuracy in auditing and public disclosure. Notable provisions of

261-752: The Keeping the Promise for a Strong Economy Act (Budget Measures), 2002 in Canada, Financial Security Law of France in France, and J-SOX in Japan. The European MiFID Directive, although principally concerned with investor protection, also covers regulation and compliance for listed European companies. Shareholder A shareholder (in the United States often referred to as stockholder ) of corporate stock refers to an individual or legal entity (such as another corporation ,

290-467: The chief executive officer (CEO) and board of directors and/or president of the corporation. This means that as well as being able to understand and communicate the company's financial strategy, they are also able to communicate the broader strategic direction of the corporation and ensure that the image of the corporation is maintained in a cohesive fashion. The president or CEO of the company or corporation would have direct responsibility in relating

319-491: The corporation . A beneficial shareholder is the person or legal entity that has the economic benefit of ownership of the shares, while a nominee shareholder is the person or entity that is on the corporation's register of members as the owner while being in reality that person acts for the benefit or at the direction of the beneficial owner, whether disclosed or not. Primarily, there are two types of shareholders. An individual or legal entity that owns ordinary shares of

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348-568: The IR function is often outsourced to independent investor relations firms. Investor relations is considered a specialty of public relations by the U.S. Department of Labor. Many larger publicly traded companies now have dedicated IR officers (IROs), who oversee most aspects of shareholder meetings , press conferences , private meetings with investors, (known as "one-on-one" briefings), investor relations sections of company websites, and company annual reports . These reports are frequently self-published on

377-499: The United States commonly referred as preferred stock). They are paid a fixed rate of dividend, which is paid in priority to the dividend to be paid to the ordinary shareholders. Preference shareholders usually do not have voting rights in the company. Subject to the applicable laws, the rules of the corporation and any shareholders' agreement , shareholders may have the right: The above-mentioned rights can be generally classified into (1) cash-flow rights and (2) voting rights. While

406-736: The United States is the National Investor Relations Institute , or NIRI. In addition to numerous professional development seminars and meetings, NIRI offers a certification program, the Investor Relations Charter. In the United Kingdom, the recognized industry body is The Investor Relations Society , while in Canada, the professional association is called the Canadian Investor Relations Institute , or CIRI. Australia's professional organization

435-491: The act which apply to investor relations include enhanced financial disclosures and accuracy of financial reports, real-time disclosures, off-balance-sheet transaction disclosures, pro forma financial disclosures, management assessment of internal controls, and corporate responsibility for financial reports. More specifically, Sarbanes–Oxley sections 301, 302, 404, and 802 have been of particular interest to companies improving corporate compliance. Similar to Sarbanes–Oxley are

464-404: The balance sheet, because securitization involves selling the loans to a third party (the loan originator and the borrower being the first two parties). Banks disclose details of securitized assets only in notes to their financial statements. A bank may have substantial sums in off-balance-sheet accounts, and the distinction between these accounts may not seem obvious. For example, when a bank has

493-457: The company will be with that person. Shareholders may have acquired their shares in the primary market by subscribing to the IPOs and thus provided capital to the corporation. However, most shareholders acquire shares in the secondary market and provided no capital directly to the corporation. Shareholders may be granted special privileges depending on a share class . The board of directors of

522-404: The company's balance sheet . Total return swaps are an example of an off-balance-sheet item. Some companies may have significant amounts of off-balance-sheet assets and liabilities . For example, financial institutions often offer asset management or brokerage services to their clients. The assets managed or brokered as part of these offered services (often securities ) usually belong to

551-457: The company's overall posture directly to the shareholders or the investors. Due to the potential impact of legal liability claims awarded by courts, and the consequential impact on the company's share price, IR often has a role in crisis management of, for example, corporate downsizing, changes in management or internal structure, product liability issues and industrial disasters . The professional member organization for investor relations in

580-418: The corporate website, though in the past, external services were more commonly used for mandatory disclosures. The investor relations function also often includes the transmission of information relating to intangible values such as the company's policy on corporate governance or corporate social responsibility . Recently, the field has trended toward an increasingly popular movement for "interactive data", and

609-399: The corporation is not required or permitted to enquire as to the beneficial ownership of the shares. A corporation generally cannot own shares of itself. The influence of shareholders on the business is determined by the shareholding percentage owned. Shareholders of corporations are legally separate from the corporation itself. They are generally not liable for the corporation's debts, and

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638-502: The individual clients directly or in trust , although the company provides management, depository or other services to the client. The company itself has no direct claim to the assets, so it does not record them on its balance sheet (they are off-balance-sheet assets), while it usually has some basic fiduciary duties with respect to the client. Financial institutions may report off-balance-sheet items in their accounting statements formally, and may also refer to " assets under management ",

667-409: The loan contract). In contrast, securitization enables banks to remove loans from balance sheets and transfer the credit risk associated with those loans. Therefore, two types of items are of interest: on balance sheet and off balance sheet. The former is represented by traditional loans, since banks indicate loans on the asset side of their balance sheets. However, securitized loans are represented off

696-433: The management of company filings through streaming-data solutions such as XBRL or other forms of electronic disclosure have become prevalent topics of discussion amongst leading IROs worldwide. The investor relations function must be aware of current and upcoming issues that an organization or issuer may face, particularly those that relate to fiduciary duty and organizational impact. In particular, it must be able to assess

725-538: The parent) may also be off-balance-sheet. Such obligations were part of the accounting fraud at Enron . The formal accounting distinction between on- and off-balance-sheet items can be quite detailed and will depend to some degree on management judgments, but in general terms, an item should appear on the company's balance sheet if it is an asset or liability that the company owns or is legally responsible for; uncertain assets or liabilities must also meet tests of being probable , measurable and meaningful . For example,

754-450: The shareholders' liability for company debts is said to be limited to the unpaid share price unless a shareholder has offered guarantees. The corporation is not required to record the beneficial ownership of a shareholding, only the owner as recorded on the register. When more than one person is on the record as owners of a shareholding, the first one on the record is taken to control the shareholding, and all correspondence and communication by

783-474: The stock is similarly not owned by the bank, and do not appear as an asset or liability of the bank. If the client subsequently sells the stock and deposits the proceeds in a regular bank account, these would now again appear as a liability of the bank. As an example, UBS has CHF 60.31 billion Undrawn irrevocable credit facilities off its balance sheet in 2008 (US$ 60.37 billion.) Citibank has US$ 960 billion in off-balance-sheet assets in 2010, which amounts to 6% of

812-474: The value of shares is mainly driven by the cash-flow rights that they carry (" cash is king "), voting rights can also be valuable. The value of shareholders' cash-flow rights can be computed by discounting future free cash flows. The value of shareholders' voting rights can be computed by four methods: Off-balance-sheet In accounting , " off-balance-sheet " ( OBS ), or incognito leverage , usually describes an asset , debt , or financing activity not on

841-479: The various patterns of stock-trading that a public company may experience, often as the result of a public disclosure (or any research reports issued by financial analysts ). The investor relations department must also work closely with the Corporate Secretary on legal and regulatory matters that affect shareholders. While most IROs would report to the chief financial officer, they will also usually report to

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