US vs UK definitions of some terms

[Jozef Minar]

Hello,

The SA7 subject brings on the table some novel definitions of some notions familiar from the previous subjects, for example:

In chapter 4 Asset markets, subchapter 5.7, we can find that debenture is defined as an unsecured issue (as opposed to being most secured bond issue as defined in previous subjects).
Similarly, in subchapter 4.1 of the same chapter, venture capital is defined as any private equity investment, whereas in previous subject it was defined as an early stage private equity investment.

The course notes then explains the difference such that core reading definition is the US usage of terms, whereas previous subjects defined UK usage of terms.

I am little bit confused how to tackle exam questions, should the above terms appear in the question. Should I assume US usage of terms, becaise it is the definition in the SA7 core reading? Or should I check whether the question is set to UK or US enviroment and assess the term in question accordingly? What should I do if a question is set up in a different country, perhaps even entirely made up, such as Actuaria?

 

[Colin McKee]

I agree that it is a bit strange. This piece of core reading has been in SA5 for many years and never been tested so I cant really say for sure. I feel that most examiners will know a debenture as the UK concept - a secured bond. Indeed there are many earlier subject papers that test debentures as exactly that. So if you treat a debenture as a secured bond it will be hard to knock marks from you I think. Private equity and venture capital is a harder call. I feel that the term "venture capital" and "early stage" are not always the same, even in the UK. The easiest approach is just to use the terms private equity for everything, and then use early stage / development capital / MBO & MBI / restructuring capital (and also "public to private" as a fifth form of PE). Then just skip the term venture capital altogether.