Investments

This chapter deals with ideas and concepts related to investments. The primary meaning of investment is owning means of production and that primarily means being part-owners of publicly owned organizations. Investments is a vast topic, but at its core, it is related to organizations, their ownership, the accounting of that ownership, other financial products and services, and financial markets. This chapter establishes the basics and introduces the concept of Standard Investments, which is required to discuss Lending and Borrowing.

This chapter has many sections; it is indeed a long chapter. A future version of this book will reorganize the topics and break this chapter into several chapters. Here is an overview of each of the sections:

The section The Need for Investing discusses the need for investing.

The section Intuition About Investments generalizes the intuition about investments as "money earning money".

The section Money Earning Money discusses the various ways of "money earning money". That discussion leads to the notions of financial products, services and instruments, financial markets, types of investments, etc.

The section Financial Products and Services discusses that the key aspect of a financial product or a service is that it is a "product".

The section Ownership of Organizations discusses that owning some ownership shares of an organization is much different from owning a financial product or service. This distinction has consequences.

The section Ownership Share Certificates discusses the way ownership of organizations is represented and manipulated.

The section The Norm for Market Price of an Ownership Share discusses the for a "norm", what it should be and that the financial infrastructure implements it. The implementation is stock splits and reverse splits. With this implementation, we also are able to discard the notion of fractional shares.

The section No Ownership Classes for Organization Owners discusses why there should be no ownership classes for organization's ownership. It also sheds light on the voting privileges of passive investors.

The section Financial Instruments and Financial Markets discusses the idea of financial instruments. Ownership shares of an organization is one kind of financial instrument; bonds is another; units of an ETF is yet another. It introduces the fact that financial instruments are traded on a financial market. Examples of financial markets are the Capital Market, Stock Exchange and the Bonds Market. Operating financial markets for all transferable financial instruments is the responsibility of the financial infrastructure.

The section Investment Accounts discusses a citizen's interface to accessing financial markets. This is somewhat similar to our present-day brokerage accounts. An investment account is actually an entire account book and a citizen usually will have multiple kinds of such accounts each with a specific purpose.

The section Standard Investments discusses the account book for what are classified as "standard" investments. We discuss what is a standard investment.

The section Purpose of Account Categories discusses the purpose of various account categories. For example, the standard investment account, in addition to being the account that holds standard investments, serves a special purpose in a citizen's borrowing needs.

The section Fees, Charges and Taxes provides details about transaction costs associated with investments. The intent of these charges is to dissuade excessive trading. Since most citizens don't engage in excessive trading they would not pay any charges. It also compares the tax implications of investments with the current situation.

The section Providing Liquidity to Citizens discusses the nature of liquidity that financial infrastructure will provide to its citizens. Currently, societies do not provide such a facility to their citizens.

The section Capital Market discusses the Capital Market and the services that it provides to organizations. These services include Initial Public Offering, raising additional capital, distributing dividends, voting for owners on corporate decisions and many other things. One of the features of Capital Market is "social investment" and it replaces all current methods for society (that is its government) to invest in publicly owned organizations.

The section Citizens are Educated Investors introduces the concept that investing is not something to be taken lightly; that citizens need to have a provable education before they can invest.

The Need for Investing

While we are working to earn our living, the money that we spend can be thought of as being spent from the income that we earn. This is merely a convenient way of thinking about it. In reality, every dollar we earn adds to our wealth and every dollar we spend reduces our wealth. When we are not earning any money, we are not adding to our wealth. But, we still live our lives and in order to sustain it we spend money and that diminishes our wealth.

While we are working and earning money, if we spend as much as we earn, then we do not add to our existing wealth. When we stop working, we will continue consuming our wealth and at some point we will completely exhaust it. Since we are thinking about building Utopia, we will have the Utopian Payment Model to assist us in taking care of our needs even when we do not have any wealth. But there is nothing to take care of our wants. This will mean that our standard of living will reduce when compared to our standard of living when we were earning money and spending it all.

The prudent thing to do is to actively plan for a time when we would not be working and would still desire an acceptable standard of living; save some of the money while we are earning it; put that saved money to some useful work; earn profit from it; put that profit to work too; and thus grow our savings as much as possible without losing them. This is the idea of investing.

A good investment should generate profit without diminishing the investment in value. This profit when invested again would cause our initial investment to grow. We could keep reinvesting these profits as long as we do not need them to sustain any part of our life.

When we reach a point in time when we stop working, then instead of reinvesting the profits from the investments, we could spend the money represented by those profits to sustain our life. If that money is insufficient, then we could divest some of our investments to sustain our life. How long one can continue to divest depends on how much money is invested, our standard living expenses, and how long one expects to continue to live without earning money by working for it.

If the amount of time that we are not working is small (as in a vacation), then either we would use saved money (that has not yet been invested) or divest some of the investments. This is fine as this reason for consuming our savings or investments is only for a short amount of time.

If the amount of time is indefinite (as in retirement), and if our investments are not large enough, then sustaining our life at its current standard of living will be impossible.

Thus, when working, how much to save and invest depends on our age, our earning capacity, our current standard of living, our rate of savings, the rate of returns that our savings when invested can produce, and our desired standard of living in retirement.

Regardless of whether we do the math, mentioned in the above paragraph, well enough or not, we need to save and we need to invest those savings without risking them and yet earning some profit on those investments year after year.

This is the basic logic for the need for savings and investment.

Intuition About Investments

The intuition behind the word "investment" is that the investment generates "profit" without the investment itself diminishing in value. We could reinvest the profit and in this sense it is our original investment that grows. We could also keep the profit and spend it on whatever we wish; in this sense the profit is like income.

An intrinsic part of the activity of investing is the desire to do as best as we can. This translates to earning the most amount of profit possible in a year. That is the same as saying we want to maximize the returns on investment.

A part of the intuition about investment is the knowledge that the investment carries some risk and if and when that risk materializes then we may lose some or all of our investment.

A part of acknowledging the risk is quantifying it.

With the acknowledgment that there are risks in investing, the prudent thing to do with our "investment money" is that we "do not put all our eggs in one basket"; that is we need to "diversify".

The activity of investing is choosing the blend of investments that minimizes the risk and maximizes the returns.

The desire that "investments earn profit" can be summarized in a simpler language as "money earning money".

When we look at it from this perspective, we can see many ways in which we can earn money using our money. For example, lending money at some rate of interest and owning shares in organizations that pay dividends are the most predominant choices. All citizens will deal with both of these in their lifetime.

There are many other financial products and services that serve as a means of "earning money using the money that one has". Are they all investments?

Money Earning Money

There are many ways to earn money using the money that one already has. The most obvious candidates are lending and owning shares of organizations.

Owning common stock or preferred shares of organizations is the most commonly found example of owning large scale organizations. Owning an organization can be as small as a sole proprietorship firm, a family business or a privately owned enterprise.

Corporate bonds and treasuries are prime examples of large scale borrowing and lending; if we are the lender, we can earn money using our money. Car loans and house mortgages are examples of borrowing by an individual from some lender; for the lender, it is a way of earning money.

The less obvious candidates are options, futures, MBSs, CDOs, and similar financial instruments. The not so obvious candidates are annuities, gambling and lottery.

Except for owning organizations (regardless of their size and number of co-owners), one can think of all other forms of money earning money as buying some financial product or service using our money and that product or service eventually pays some money; hopefully more than what we bought it for. But, every one of these products or services has some risks.

Owning part of some organization may seem like buying a financial product or service, but it is different. We will clarify the nature of this difference in this chapter.

This difference is the reason financial infrastructure picks up the responsibility of implementing and maintaining the "capital market". As a consequence of the similarity, financial infrastructure also picks up the responsibility of implementing and maintaining the "stock exchange" and many other things associated with stocks.

While discussing all that, we will classify all these ways of using our money to earn money as either "Standard Investments" or "Non-Standard Investments". The things that get classified as standard investments have a significant role to play in our financial life.

Financial Products and Services

Let us consider the simplest case: Lottery. Lottery is run by some business, and that business issues the so-called lottery tickets as a product, and on a predetermined date the business randomly draws some numbers, and any ticket that has those numbers is chosen as the winning ticket (or tickets if there are multiple such tickets). Those who have purchased the tickets that have the winning numbers can hand over the tickets and get the lottery winnings. Before the draw, everyone who has purchased the lottery ticket "owns" the ticket. Just after the draw, almost all of these tickets are worthless and a very few are worth something. The point in all this is that "what we own" when we own a lottery ticket, is not an ownership share in the lottery organization; it is merely a product sold by the lottery organization.

Gambling is very similar to buying a lottery ticket in terms of the relationship between the "gambler" and the "gambling house". The gambling house creates opportunities for gamblers to participate in "gambling games" by betting their money and some of these participants end up being the winners of the contest and win money on those games; the rest of the participants lose the money that they bet. In the long run, the gambling house pays out as the winnings less than the total money that they collected as bets and thus manage to make a profit for their owners and provide the service of "opportunity to gamble" to gamblers.

Now, let us consider the case of corporate lending: A Bond. Organizations, who desire to borrow money, sell a financial product called a "bond". The term "bond" is just corporate jargon for the term "loan". The bond has various characteristics that stipulates the term and rate of interest associated with the bond. The seller (or issuer) of a bond is selling a service contract that pays some money at some later date and for which the buyer of the service contract pays some money upfront. Typically the money paid by the buyer of these bonds to buy the bond from the seller is lower than the money that the buyer gets from the seller some time later; that additional amount is for the interest. Owning a bond is not the same as owning part of the organization that sells the bond.

Car loans and house mortgages are very similar to bonds in the sense that the idea is the same but the scale is much smaller. Conceptually, the borrower is the issuer of a bond (even though we don't think about it in this way) and the buyer of the bond is the lender.

In all three cases of borrowing (that is bonds, car loans and house mortgages), there is a principal amount, there is a rate of interest and there is a schedule of repayment. Both the principal and interest are owed by the borrower to the lender and the borrowing contract stipulates these and terms of repayment. This borrowing contract is a promise of a financial service that the borrower will render to the lender. The lender pays the borrower the charge for this promised service upfront, and then the lender expects the borrower to fulfill the promised service as per the contractual schedule. When we are the borrower, we think of the charge that we received upfront as the borrowed money. When we are the lender, we think of the payment upfront as the money loaned.

The borrowing contract is drawn up such that the inability of the borrower to fulfill the terms of repayment causes what is called as "default" and then the borrower gives up rights to some property owned by the borrower to the lender. This property is called the collateral. For a car loan, it is the car. For a house mortgage, it is the house. For a corporate bond, it is all the property of the organization that can be sold off to satisfy the repayment obligations. Inability to repay the interest or the principal associated with the bond, results in possession of the collateral by the lender and if that is insufficient to repay what is owed to the lender, then it can result in bankruptcy of the borrower.

An annuity is somewhat similar to a bond because of the kind of give-and-take that happens between the organization that sells the annuity and the buyer of such annuities. As with bonds, the buyer of an annuity pays upfront, but the amount and time-line of the money being paid back to the owner of the annuity product is different from the money paid back to a lender (that is the owner of a bond). Just like a bond, an annuity is a financial product or service. Owning an annuity product is not the same as owning the organization that sells the annuity product. The big difference between a bond and an annuity is that the collateral associated with the annuity product is a well identified set of assets (generally referred to as reserves or fund associated with the annuity); it is not the property of the annuity issuer. A pension plan is a special case of an annuity. In a pure annuity, the purchaser of the annuity pays only once and upfront and that determines the subsequent payments back to the owner of the annuity. In a pension plan, the payments by the pension plan holder into the pension plan are periodic and the value of the pension paid to the pensioner increases with the payments.

Bonds, loans, mortgages, annuities, pension plans and even lottery tickets are examples of a financial service or a financial product. There is a seller of the product or service and there is a buyer of the product or service; the seller of the product takes some money in exchange for the service (which is an obligation or a liability); optionally reserves some assets as a collateral to assure the buyer of the product's obligations; and finally delivers the promised service.

People and organizations who sell these products take on these obligations and deliver these promised services because they can make some profit (or at least derive some benefit) while doing so. The buyers of these products buy these products because it benefits them too and usually this benefit is in the form of more money than they initially paid for purchasing the service. For these buyers, it is a way of earning money by using the money that they have.

Similarly, we could outline options, futures, MBSs, CDOs and many other financial products and services. Each one of these is some kind of future obligation sold by someone in exchange for some money now. The buyers of these products or services are buying them because they believe that they will get more value out of them than what they paid to buy them.

The key aspect of a financial product or a service is that the organization that creates the product and offers it (or conceptualizes the service and offers it) uses the money obtained from the customers to provide the product or service to its customers. Financial service providers charge their customers the money first and then provide the service. When the products or services are non-financial, they are produced first and its price is charged at the time of availing the service or shortly thereafter. For financial products and services, the capital required to create the organization's infrastructure is relatively small compared to the actual value of the product or the service. The main raw material for these financial products and services is the price that the customer pays for them.

Ownership of Organizations

When we own some part of an organization, we are neither owning a product nor a service. When we sell our shares of ownership of some organization, we are giving up the ownership in exchange for money; we are not creating a future obligation for ourselves. Similarly, the buyer of our shares is not obliged to us in any way just because the buyer bought our ownership shares. Even when we own shares of an organization, it does not oblige us, the owner, to do anything for anyone just because we are the part owner of that organization.

Ownership of an organization is not a future obligation.

Ownership of an organization is a way to put our money to some productive use, produce something or offer some service, in return earn some money, and after paying for all expenses be left with some profit. It is a way to use our money to earn some more money (ideally, without losing our original money).

Ownership of an organization seems similar to bonds (or other financial products or services) sold by some organization because they have the same purpose of "earning money using one's money" and they can be bought and sold in a financial market.

From this perspective, they both are financial instruments. A bond can either be considered as a financial product or a financial service. But, ownership shares of an organization are neither a product nor a service. When we buy a product (like a can of soup), or a service (like a bond), or some ownership shares of some organization, we exchange some of the money we have for the thing that we buy. From this perspective, a can of soup, a bond and ownership of some organization are indistinguishable.

The distinction between a financial product or a service and an organization is in how they get created. Let's explore this aspect.

When a child paints a picture, it is a product created by the child and thus the child owns the picture. The creator and the owner of the painting are the same. When an organization creates a can of soup, it is one more instance of a product that the organization has created and even in this case the creator and the owner of the can of soup are the same.

In both cases, some raw materials were consumed in order to create the finished product. Thus both entities lost the value associated with the raw materials and gained a product. Because they created it, they claim ownership. Why? Because our ideas of private ownership and associated property rights allow citizens and organizations to transform the things that they own to other things. Of course, both citizens and organizations must do this kind of product creation within a legal and regulatory framework that forbids harm to others, the society and the environment.

Thus, freshly created products are owned by their creators. Because the creators own it, they can sell it. This is also a consequence of our idea of our property rights.

While the child may paint a painting for unspecified reasons, an organization creates the can of soup to eventually sell it and make a profit.

Regardless of the purpose of creating it, if the creation needs to be sold, then its ownership needs to be transferred over to the buyer. However, for that transfer to occur, the creation needs to be first registered. Thus, the creators must register their creations as products in Product Registry and register themselves as the owners of the products that they created in their account book. This registration occurs through the interfaces provided by the financial infrastructure. Note that this is merely a registration of the current owner of the product; the product was already created and by our ideas of property rights, the product is owned by those who created it even before the product was officially registered. Thus, when products are created and when the creator registers their ownership, the act of registering the freshly created product does not alter the ownership of anything; it merely records the fact in a database intended to record such facts.

When a buyer buys the product, the value of the product in the buyer's account book is the same as the price the buyer paid for the product. After that, it depreciates as per the depreciation schedule of the product. All products work this way.

Services are accounted somewhat similarly; their value in the account book of the buyer is based on the value characteristics of the specific service. This value may or may not be related to the price that was paid to acquire the service. For example, buying the service of "getting a haircut" has no residual value whereas buying a bond has.

Creating an organization is quite different from establishing the ownership of that same organization.

To create an organization, we definitely need to create an entity of the type "organization". For that we have to "fill out some forms". Some socially appointed authority needs to accept these forms, scrutinize them and if they are found satisfactory based on some regulations, then actually "create" the organization as a record somewhere. Usually a branch of the government does this creation and in our conceptualization, it is the financial infrastructure. And thus, a new entity is created in the Entity Registry.

Conceptually, at this point, no money was ever transferred over to the organization to serve as its capital. Transferring money over to an organization to serve as its capital means taking entire or part ownership of an organization. This too needs to be accepted and recognized by some authority. If we as a society are to protect people's property rights (which includes ownership of organizations), we need to know what that property is. When taking up the initial ownership of an organization or additional ownership of an organization, we are discussing new owners of the organization. There was never a prior owner who is transferring ownership to the new owner. This is the act of creating ownership of the organization.

Since an organization is neither a product nor a service, an organization cannot sell its own ownership.

Just like we don't ask a painting or a can of soup to be an authority on who its owner is, similarly we cannot ask an organization to be an authority on who all its owners are; because an organization is still just a thing. This authority needs to reside with the society and that implies that the authority needs to reside with some branch of the government of the society and in our conceptualization it is the financial infrastructure.

With this authority, the financial infrastructure can conduct the transaction of transferring some money from some entity (usually a citizen) to the organization as capital in exchange for granting the giver of the money some or all of the ownership of that organization.

This transaction of establishing ownership of an organization takes many forms depending on the type of the organization, and depending on whether there were previous owners, and depending on the "wishes of the current owners of the organization" as expressed by its management.

In this transaction, the new owner is said to be investing in the organization; the organization is said to be raising capital. An owner of some part of an organization, can decide to sell their stake in that organization to someone else willing to buy it. In this situation, the current owner is said to be divesting from the organization and the buyer is said to be investing in the organization.

In the past, when the accounting for all these aspects was conceptualized, the work of doing the actual accounting was entrusted to the organization itself. This was because of the fact that the work was accomplished entirely manually, and society was not interested in doing the accounting work. At that time, society was just interested in ensuring that the accounting was done right; hence society created all the rules and regulations associated with this accounting work.

With the advent of computers, the Internet, advances in database technologies and advances in robust software development methodology; all aspects of this accounting and record keeping can be automated with just minimal work required on part of humans.

Even today, all this work is being automated by all these individual organizations as they are still responsible for following the regulations. These organizations have operational authority and society has regulatory authority. Contrast this with police, judiciary and defense; society has both operational and regulatory authority over these. Considering the fact that a significant part of police, judiciary and defense is to protect people's property ownership and associated property rights, society should take on the operational responsibility of keeping and maintaining the ownership records.

We have reached a point in time where society can take on the responsibility of doing this accounting and record keeping. We have accomplished sufficient technological advancement that we can build a system that can encode all the rules of accounting and book-keeping and thereby maintain the ownership records of organizations. We have reached a point in time when we can transfer responsibilities over to such systems and relieve humans from following regulations. We have reached a point in time that humans can merely use the system with the assurance that the system will enforce all the rules with some oversight by competent authority and auditors.

Ownership of any part of an organization is represented by an Ownership Share Certificate. An ownership share certificate contains the following:

ID of the organization.
Certificate Number. This is the unique identification number of the Certificate.
Ownership Version Number for that organization. This is explained below.
Number of shares.

The number of shares per certificate could be as low as one; it could be a larger number which is some multiple of 10. Owning shares of an organization means one possesses some number of these certificates that together represents the exact number of shares owned.

The ownership version number encodes the capital structure of the organization. Capital structure specifies the total number of shares that can potentially be owned. Some of these are actually owned and the remaining stay "unused". The unused shares can be used to raise additional capital.

In current terms, one can think about the ownership version number as representing the number of authorized shares of an organization. For example, an organization may have 10 billion ownership shares and of these only about 4 billion may have been used to raise capital. The remaining 6 billion can be used to raise additional capital and till such time that they are used, these unused shares reside in the database marked as "unused". When this organization raises capital (initial or additional), one could think of that act as selling some of these unused shares for some money. After such a sale, the number of shares in use increases and so does the capital of the organization.

All ownership share certificates are tied to the ownership structure that they belong to by the ownership version number; that is the ownership version number is part of the information embedded in an ownership share certificate.

Every time the capital structure of an organization changes, conceptually, it changes the ownership version number for that organization. Share splits and reverse share splits are the primary examples of a change to the capital structure of the organization.

When the capital structure of an organization changes, financial infrastructure, for each owner, swaps out the pre-change certificates with post-change certificates.

The fact that "someone in a society owns some part of an organization" is handled and recorded by the financial infrastructure in terms of these ownership share certificates.

Thus, citizens and other entities in a society can own parts of an organization. When they do, they are owning some number of shares across a fewer number ownership share certificates. For example, Person A could own 144 shares of Organization B and this information could be in the form of 1 certificate comprising 100 shares, 4 certificates each comprising 10 shares and 4 more certificates each comprising one share. This is very similar to the way we currently physically hold money; in the form of coins and notes of various denominations.

Owners can sell any number of shares and if the certificates that they possess need to be changed to denominations that enables selling the exact number of shares that the owner wishes to sell, then that kind of "change" is done automatically by the financial infrastructure. This is somewhat similar to what we have to do with our "high denomination cash notes".

Buying and selling ownership shares of an organization gives rise to the notion of the market price of a share.

Currently, we find that the market price of a single share of some organization is so high that a poor or average citizen cannot purchase even a single share of such organizations. Quite obviously these are very successful organizations.

To counter that, in current times, the idea of fractional shares was floated and implemented. It was needed because currently organizations are in charge of stock splits and some very successful organizations refuse to do it, thereby keeping the price of each share of their ownership so high that it is not affordable for a citizen of about average wealth. This is both arbitrary and discriminatory. From an organization's perspective, its main concern is to have access to capital and hence the existence of the idea of a capital market. An organization's secondary concern should be that its owners should have access to a stock market so that they can liquidate their holdings if they wish to. What specific price each one of the ownership shares has is of no concern to the organization.

Then there are the so-called "penny stocks": these are the organizations that are on a decline and the value of each of their shares has declined to very small value.

Financial infrastructure addresses both these problems by taking charge of stock splits and reverse stock splits for publicly owned organizations and implementing them automatically (with due notice, of course). It does so, by establishing a "norm" for the market price of each share of ownership of every publicly owned organization. This "norm" is a reasonably small number; for example it could be 10 or 20 dollars, whatever is deemed as reasonably small.

To deal with stock splits and reverse stock splits, the "norm" is used as a reference and compared with the current price of a single share. If the current price rises above 4 times the norm, then a "4-for-1" stock split would get it back closer to the norm. Similarly, if the current price drops below one-fourth of the norm, then a "1-for-4" reverse stock split would get it back closer to the norm.

Thus, there is no need for the concept of fractional shares and we will not have any penny stocks.

When society establishes and enforces the "norm" for the market price of a single ownership share of a publicly owned organization, society makes it affordable and possible for every citizen to own at least one share of any organization that they wish to be a part owner of. It eliminates one of the basic barriers to investment.

No Ownership Classes for Organization Owners

At any given point in time, each ownership share in an organization is worth exactly the same in terms of the privileges of that ownership. These privileges include the rights to sharing the profits of the organization and decision making authority in the affairs of the organization.

It does not matter if the share is owned by the founder of the organization or a new owner. All that matters is who owns how many shares and that determines the actual authority that person possesses.

Thus a single individual possesses these ownership privileges in proportion to the number of shares the person owns. There is no other way of distinguishing differences in these privileges. The most important of the privileges are communication from organization's management about anything that goes to all owners, the voting privileges in proportion to shares owned and the privilege to receive dividends in proportion to shares owned.

Specifically, there is no such thing as a "preferred share".

Specifically, there is no such thing as a "class of ownership share".

By mandating that each ownership share has exactly the same ownership privileges as any other share, the financial infrastructure eliminates yet another barrier in choosing the direction that one's investments should follow.

All the information above warrants one clarification as it relates to the notion of passive investing. A passive investor, by the intuitive meaning of the word "passive", does not wish to influence the decisions of the organization that the investor "passively" owns. A passive investor is primarily interested in the monetary benefits of the ownership.

If an individual owns even a single share of some organization, then that individual is not a passive investor. This individual can participate in the decision making of that organization in proportion to the number of shares owned.

If an individual owns some sort of "fund" and that fund owns shares of various organizations, then the individual is an owner of that fund and not an owner of the holdings of that fund. Considering the fact that "what is being owned" is a "fund", that fund will be managed by someone and that someone holds the responsibility and authority of exercising the decision making privileges associated with the shares owned by the fund. An owner of a share of a fund can exert one's decision making authority on managers of the fund ... that too is possible only if the fund is itself an organization ... not if the fund is a financial product. In the present day, the financial instruments that we know as ETFs and mutual funds are financial products being sold by some organization and hence the managers of that organization are at their sole discretion in exercising the decision making authority. These managers may take into consideration the opinions of their customers, that is the owners of the units of these ETFs or Mutual Funds. Calling these "units" of these funds as "ownership shares" is misrepresenting the reality.

Thus, from a passive investors perspective, owning a ownership share of a fund is owning decision making authority over the fund. In this case, the fund purchases its holdings by using its capital.

Similarly, from a passive investors perspective, owning a unit of a fund is just being a customer of the organization that sells those units and associated privileges. In this case, the fund purchases its holdings by using the reserves associated with the product.

Financial Instruments and Financial Markets

Ownership shares in an organization is just one kind of financial instrument. One buys these shares from others from what is commonly known as the Stock Exchange; but that is just buying it from someone else who wants to sell their shares.

When a privately owned organization, that is its management, wants to invite the public to invest in that organization, the organization conducts what is known as an Initial Public Offering (abbr. IPO). The financial infrastructure does all the record keeping of ownership shares and money transfer associated with the IPO. One could consider the IPO as occurring on the Capital Market.

A publicly owned organization may desire to raise a small amount of additional capital. The organization expresses this desire to the financial infrastructure and financial infrastructure arranges for that by converting some of the unused number of shares, selling them on the Stock Exchange and transferring the money obtained to the organization as capital.

A publicly owned organization may desire to raise a large amount of additional capital. As in the previous case, the organization expresses this desire to the financial infrastructure and financial infrastructure arranges for that using a process similar to the IPO process. This activity can be considered to be occurring on the Capital Market.

When we buy ownership shares of a specific organization, we are making the decision to own that particular organization and this kind of investing is generally referred to as Actively Managed Investing or Active Investing.

Citizens can do active investing in organizations whose business model they understand and hence see opportunities for gain from their investing in those organizations.

While investing in a few organizations that one understands has merits, diversification also has merits. One can implement diversification on one's own or one could buy a financial instrument that packages diversification. In present-day, Mutual Funds and ETFs are prominent financial instruments for diversification. More specifically, they are financial products created and sold by some financial institution.

Financial Infrastructure will provide active and passive investment managers tools and interfaces to manage and even automate the trading activity associated with the investment funds that they manage as long as these funds deal with direct ownership shares of organizations.

Thus, from most citizen's perspective, they will find equivalents for present-day actively or passively managed ETFs. We can call these kinds of instruments "Investment Funds".

Some of these investment funds may offer very low cost passive investment opportunities (very similar to some of the present-day ETFs) by exclusively investing in ownership shares of organizations. Some of these will be based on broad market indexes. We will call these specific kinds of Investment Funds as "Passive Investment Funds"

As is the case in present-day, these can be bought and sold on the Stock Exchange.

Bonds are yet another kind of financial instrument. These are also financial products. An organization can make them and sell them. However, organizations must abide by regulations associated with making and selling such financial products and must sell them on the Bond Market. The "Bond Market" is just a notion; it is really an interface created by the financial infrastructure for organizations to create and sell such products and then later for owners of these products to resell them to others.

Futures and Options are two more kinds of financial instruments. They are financial contracts with standardized terms. These are not financial products; they are financial services. Creators of such contracts have to follow relevant regulations and sell these services on the Futures Exchange and the Options Exchange respectively. As with the bond market, these exchanges are just notions. Really they are interfaces created by the financial infrastructure for entities to create and initially sell these contracts. Anyone who purchases these contracts can decide to resell and these exchanges provide that interface too.

The point is ... these financial instruments are bought and sold on some financial markets and these markets may have a very special name, but in reality, they are just interfaces created and maintained by the financial infrastructure.

Another point is ... we may think of all these financial instruments as "investments", but only the ownership shares of a publicly owned organization control some means of production and have any direct impact on our well-being by providing us with some product or service. Passive Investment Funds mentioned earlier also invest in organizations and hence that investment controls some means of production. Most other financial instruments are merely a means to use our money to make some more money.

Investment Accounts

The interface to the financial market will be somewhat similar to our present-day interfaces to our brokerage accounts.

Our present-day brokerage account can be considered as an independent book of accounts where we may deposit money, buy and sell financial instruments using that money and may withdraw money. This account book maintains an inventory of all the assets and provides facilities to represent its current market value. An individual could have several such brokerage accounts with the purpose of separating different kinds of investing activity or for spreading the risk of a single brokerage firm going bankrupt and any adverse consequences of such a situation.

Financial Infrastructure adopts this concept of several independent books of accounts for dealing with our investments; more accurately for dealing with everything that we own.

From a citizen's perspective, a citizen has many account books and each such account book contains money, an inventory of things owned within the context of the account book, a journal of transactions that records changes to the inventory and financial accounts that record the monetary changes associated with the transactions as per standard accounting principles. The kinds of things that can be owned within a single account book are determined by the intent of the account book. Hence, account books have a type that restricts what can be owned within that account book.

Following are the types of account books and associated with each type, every citizen has one account book of that type:

Real Estate
Standard Investments
Non-Standard Investments
Personal Belongings

Everything that can be owned is classified into exactly one of the above types.

Any piece of earth, any fixed structure on such a piece of earth, and any right associated with it is classified as Real Estate. Land, houses, apartments, factory buildings, physical stores, warehouses, and such things are also real estate. Farming and mining rights are also real estate.

The following are classified as Standard Investment:

Ownership shares in publicly owned organizations.
Units of individual precious metal ETFs. e.g. gold, silver and platinum.
Units of Passive Investment Funds (abbreviated as PIFs).

A Non-Standard Investment, intuitively, is any financial product or service that is created in a way that is independent of who owns it (and hence has no explicit ties to the buyer and hence owner) and is independent of everything owned by the owner. Most financial instruments are in this category.

Any financial product or service that does not qualify as a real estate or a standard investment or a non-standard investment is a Personal Belonging. Any non-financial product or service is a Personal Belonging. When organizations or self-owning entities own something that is classified as a personal belonging, then intuitively it is a corporate belonging.

Of these, we mentioned Passive Investment Funds earlier. PIFs are very similar to what we know in the present-day as passively managed market index based ETFs for stocks. PIFs represent passive investments that are based on ownership of publicly owned organizations that are part of some market index.

The intuitive basis of standard investment is that it should represent ownership of some publicly owned organization or some publicly tradable precious metal ETF. We will discuss this intuition and its underlying reasons in the next section.

Some examples of non-standard investments are: corporate bonds, options, futures, leveraged derivatives, inverse derivatives, units of actively managed investment funds and units of hedge funds.

Ownership shares in privately owned organizations are classified as non-standard investments.

Every physical product or general consumption service is obviously classified as a personal belonging. Most things in houses and factory buildings are not permanently attached to the physical structure and hence are personal belongings.

A life insurance policy that is dependent on the buyer's personal information is just a personal belonging. Similarly warranties on anything are personal belongings.

Ownership of a sole-proprietary organization is classified as a personal belonging.

Coming back to the type of accounts, corresponding to each type, every entity has an account associated with that type and can hold things of that type only. The only exception is that a Non-Standard Investments account can also hold any Standard Investment.

Each such account book has some amount of money and other things in its inventory. We can buy stuff using the money and that reduces the amount of money and adds something to the inventory. Even services availed are added to the inventory and one can consider this as storing a record of all the services availed (even though most of them become worthless soon after they are availed).

For most of us, from our day-to-day perspective, when we buy stuff and avail various kinds of services, we are operating our Personal Belongings account. When we do most of our investing activity, we are operating our Standard Investments account; and sometimes we operate the Non-Standard Investments. Very rarely we operate our Real Estate account.

Entities can create additional account books for any of these types for any purposes that they desire. There is an upper limit to how many such account books an entity can create and it will be chosen such that almost all individuals and organizations would find that limit reasonable.

Each type of account book has a separate interface to operate it. This includes taking actions with the kinds of things that would be in those account books and view the state of things within it and view the relative compositions of the kinds of things in these accounts.

For investment kinds of accounts, the interface would be appropriate for the kinds of activities that are done with investments and that includes placing buy and sell orders; examining the prices of various stocks, bonds, etc.; charting price histories; viewing composition of our holdings by asset classes; etc.

For viewing the contents of these accounts, this interface can give either a per account perspective or an aggregated view of some of these accounts or all these accounts aggregated as a whole.

Since the account books contain all the underlying data, what kind of interface we desire is entirely up to us to decide. The financial infrastructure will implement our desires about these interfaces.

Standard Investments

In the previous section we mentioned that standard investments can either be ownership shares in organizations or units of precious metal ETFs or units of PIFs. We mentioned that the intuitive basis for this is that standard investments should represent ownership of some organization or some precious metal. This section expands on that intuition and also on Standard Investments.

When we use the word "investment", at its core, we mean owning a means of production. Since it is a means of production, it is expected to generate some profits. These profits may be retained by the managers of production to further increase production or these profits may be returned back to the owners of the means of production as dividends. In the first case, the value of the investment grows and in the second case the investment generates an income. Organizations that manage these means of production may choose to do both: retain some profits and return some profits.

We also use the word "investment" as in "putting in significant effort to acquire something that is hard to acquire and is of significant value". At a personal level, it can mean gaining some knowledge or skill with which we can do something useful to others and thus find employment. In the physical world this translates to owning those natural resources that are scarce. There are many natural resources that are scarce, however precious metals have several properties that makes possessing them far more convenient and still represents the notion of acquiring and possessing a natural resource of significant worth.

A part of that intuition is that we should be able to divest (that is sell our investment) whenever we choose to and hence these investments should have a market. A standard investment needs to be publicly traded so that it is easily possible to "free up" the money that we have invested, if we so desire and when we desire.

Yet another part of that intuition is that the risk of holding an investment is at most the price that one pays to own the investment. This intuition rules out "shorting stocks".

Nothing other than ownership is implied in a standard investment. Thus things that are pure assets qualify as standard investments and things that have some component of liability do not qualify. Owning some part of some organization that is engaged in productive activities and owning precious metals are definitely owning assets without any liabilities attached.

Since, nothing other than ownership is implied, any financial instrument that is a derivative does not qualify. Hence, no options and no futures. Similarly, no leveraged instruments and no inverse instruments.

What we currently know as common stock of a publicly traded enterprise, qualifies as standard investment. But, ownership of privately owned organizations does not qualify. The reason being lack of liquid market to sell (for divestment purpose) the private ownership shares.

Similarly, ETFs that represent ownership in physical precious metals are also "standard"; not because one "invests" in some productive venture, but because one owns some natural resource that is scarce and of significant value.

Including PIFs in standard investments allows one to hold a "portfolio" of standard investments that are based on easily understandable objective criteria. From an investment perspective, a portfolio is preferable to an investment in a single enterprise as it diversifies the risks associated with a single investment.

The financial infrastructure is solely authorized to conduct operations as the ETF manager for some specific precious metals (e.g. gold and silver). It assures safekeeping of these precious metals and allows citizens and organizations to own them without having to deal with their safekeeping. In addition, it allows mining organizations to convert their mined stock of precious metals into units of these ETFs so that they can conveniently own their mined metals and sell them later at an opportune time and price. Then there are some organizations that use precious metals as their raw materials. These organizations can conveniently acquire these precious metals without having to deal with the miners of such metals. For these organizations, in order for them to take physical delivery of the precious metals, they must first buy adequate units of ETFs and then take possession of the underlying physical metals from the financial infrastructure, at some later time.

All three kinds of standard investments are traded on the stock exchange. When citizens (and other entities) trade stocks and PIFs, they "make the stock market". When these participants trade precious metal ETFs, they "make the precious metals market". There may be entities that have so much money that they may choose to use it for market-making activities as their way of using their money to make more money; and that is fine.

Purpose of Account Categories

Classifying accounts, or more accurately account books, into real estate, standard investments, non-standard investments and personal belongings has a purpose. Each category serves as a collateral for a specific kind of risk. There are differences in what citizens can risk and what organizations can risk.

For organizations and self-owning entities, the things owned in all categories of accounts can serve as a collateral. The simplest example is when organizations borrow money by selling bonds. If such organizations cannot fulfill their repayment terms for the bonds that they sold, then the lenders can report that to the society and ask society to intervene and make the organization fulfill all their obligations. This can result in the society allowing the organization some additional time to manage to do so on their own and after that time, society will simply liquidate and shutdown the business, sell all the assets that can be sold and fulfill the bond obligations as best as can be accomplished with the money obtained by liquidating the assets of the organization.

Society can do such a thing as shutting down and liquidating organizations (and self-owning entities) because these entities were created by choice and they are expected to be managed well and if that management fails to fulfill the organization's obligations, then the organization does not deserve to have continued existence.

The account books also serve to partition all the assets so that the assets in one specific account book can be used as reserves to ensure the fulfillment of a restricted set of obligations in an automatic way. This applies to non-standard investments. For example, "selling options" means the seller takes on some obligations and hence the seller needs to dedicate assets as collateral to substantiate their claim that they can fulfill their obligations if the need arises. These "sold" options are financial instruments classified as non-standard investments and hence held in such an account book and all other assets in that account book serve as a collateral for the sold options. The owner of that account book has an upper limit to the amount of options that they can sell depending on the assets in the account.

For citizens, the account books serve to partition citizen's assets and mark some categories of account books as "never for collateral". Specifically, personal belongings and real estate of citizens can never serve as a collateral for any routine business obligations. Why? The next chapter will clarify.

For citizens, the standard investments serve the purpose of collateral for citizen's borrowing and this is discussed extensively in the next chapter.

For citizens, the non-standard investments can serve as collateral for that citizen's risky "investments" (like the option seller situation mentioned above). Most citizens will not bother with non-standard investments and very few citizens will bother with selling obligations (as in the case of selling options).

Citizens can always invest in publicly owned organizations and that itself is taking some level of risk. It can be easily argued that this risk is small if the citizens invest in a well-diversified portfolio.

Citizens can always create their own organizations, transfer their money to that organization and then explicitly start taking risks with such wealth. In fact, all citizens always have one such sole-proprietary organization. When citizens explicitly risk something and lose it, they can use it as a learning experience.

Citizens are the primary concern of a Utopian society. In all this categorization, classification and partitioning of assets into separate account books, we are creating mechanisms to prevent inadvertent, uneducated, unanticipated or accidental risks from impacting all of a citizen's wealth.

Fees, Charges and Taxes

Previous discussion mentioned investment accounts. There are no account fees, since it is your account. Even for organizations, investment accounts have no fees. However, there is an upper limit to the total number of investment accounts that an entity can have. For almost all individuals this upper limit will be more than adequate. This upper limit is to prevent people and organizations from complicating their investments in a single account.

If some entity (individual or organization) desires more than this number, they can have more by creating a new organization and transferring some money over to that new organization and working with the accounts in that organization.

There are many ways in which we can interact with the capital markets, financial markets and stock exchange. The cost of different kinds of interaction are different.

For illustration, here are some of the possible charge categories

cost of each transaction
cost to trade 10 dollars worth of stock
cost for queries that consume computational resources of the financial infrastructure in units of 1 second of compute time.
cost of returning data in response to a query in units of 1 MB of returned data.

The intent of financial infrastructure regarding charging these costs to entities who engage in those interactions is as follows:

Using financial infrastructure, should be free for all entities whose usage is less than "2 standard deviations above the annual norm".
When the usage of an entity is at or more than "2 standard deviations above the annual norm", only this excess incurs charges and the charges are the same as the cost of that excess usage.

Financial infrastructure measures and publishes these costs. For each kind of interaction, there is a threshold below which there are no charges and above which there are charges per usage.

Regardless of which specific cost category your particular usage is in, there are no charges, as long as the number of interactions in that category are below 2 standard deviations from the average number of interactions conducted by all entities.

The reason to measure and potentially charge for a single transaction both on the number of transactions and on the dollar amount of the transactions is as follows: Rich people, in a single transaction, can conduct a trade worth plenty of dollars. Poor people are limited by the total amount of dollars they can trade in a single transaction. Thus, if transaction costs were solely on the basis of number of transactions, then the poor get an unfair treatment. On the other hand, if dollar amount was the sole basis of transaction costs, then the rich get an unfair treatment.

There are no capital gains taxes. Profit from selling investments is not treated as income and hence taxed as income. There is no need to buy or sell based on tax implications. There is no need to not sell based on tax implications. This is because all taxes are based on wealth; so whether you hold an investment or sell it and hold the money does not make any difference to your wealth-based taxes. Decisions about buying, holding or selling investments do not need to be influenced by tax considerations.

One can freely give away the investment assets that one has to others. It is a one-way transfer of an asset that one owns. There are no tax implications associated with the act of giving away any standard investment asset to either the giver or the receiver. However, giving away one's wealth to others will reduce the quantity of taxes that the giver has to pay and will increase the quantity of taxes that the receiver has to pay; though the rate of taxes remains exactly the same for both the receiver and the giver.

Providing Liquidity to Citizens

Financial Infrastructure provides citizens, and citizens only, with limited but assured liquidity for ownership shares of organizations and PIFs.

For each stock, after the end of a trading day, the stock exchange computes and publishes, for each publicly owned organization, a volume weighted average price for all trades that occurred in the day. This price is called the liquidation price and it is a fair representation of the price of each of the stocks on that day.

When a citizen wants to sell some ownership shares in any organization after the end of a trading day, then financial infrastructure will buy these shares from the citizen, at the liquidation price for that particular organization for that day and dispose of them later. The liquidation facility should be used only when one needs the money and one has missed the opportunity to liquidate some of the holdings during the trading day and one needs the money for some urgent matter or for some emergency.

Similarly, financial infrastructure also computes and publishes the liquidation price for each PIF and also allows citizens to liquidate some or all of their holdings of PIFs.

Similarly, financial infrastructure also computes and publishes the liquidation price for each precious metal ETF and also allows citizens to liquidate some or all of their holdings of such precious metal ETFs.

The total value of ownership shares or units of PIFs or units of precious metal ETFs that financial infrastructure will buy from citizens to provide them liquidity is limited to 100 percent of the average wealth of citizens in a single calendar year. With this limit, this facility that provides citizens liquidity for their emergencies, cannot be effectively used as part of a "strategy" to maximize the worth of one's investments.

Some or all standard investments can be liquidated, within the limits mentioned above, 30 minutes after the close of a trading day and up to 30 minutes before the beginning of the next trading day. There will be a few minutes of gap in this timeframe when the liquidation cannot be done as these minutes will be required to do the End-of-Day processing for the citizen.

The presence of such a liquidation facility, eliminates the liquidity concern for citizens, in general. It also minimizes the liquidity concern for some emergencies. The presence of Utopian Payment Model already mitigates many such emergencies; this liquidation facility is in addition to that; and hence the limits on this facility.

Society being a monetary sovereign, its financial infrastructure can provide such liquidity by creating money to buy these assets at their liquidation price. The financial infrastructure will sell the assets bought through liquidation by citizens on the stock exchange at a later time. Conceptually, any profits that such sales generate will reduce the tax burden on all citizens. Similarly and conceptually, any losses that such sales generate will be written off. Statistically, such profits and losses will almost balance each other over a larger period of time.

Capital Market

One can think of the Capital Market as a department of the Financial Infrastructure that mostly facilitates raising of capital for publicly owned organizations. We will outline the important facilities and functions in this section.

Capital Market facilitates a privately owned organization to be converted to a publicly owned organization through a process that we currently know as Initial Public Offering, abbreviated as IPO. This process will be very similar to what exists today.

Capital Market facilitates the society investing in publicly owned organizations. Today, the government of the society takes discretionary decisions about investing or lending to organizations. That discretion will be replaced with a standard method to provide deserving and needy organizations with capital. It will work in conjunction with an IPO. If an organization fails to raise 100% of the capital that they desired from an IPO, but manages to raise at least 80% of their desire, then this organization is considered as "deserving and needy". It is deserving because the general investors think it is a worthy endeavor. It is needy because it raised a lot, but not enough to cover all the desired capital. In such situations, society will invest the difference by creating money and taking ownership of the deficit in raising capital. Thus society leaves it to the judgment of investors to judge if the organization is deserving and only when investors fall short does society step in.

Capital Market facilitates publicly owned organizations to raise additional and "small amounts" of capital by letting investors directly invest in the organization. We will define "small amount" in the above sentence as a small percentage of the existing capital of the organization; perhaps 5% of book value to be raised over a month can be considered small. Presumably the "small amount" is required for the working capital. The organization must publicly announce this intent. Every day, after the end of the trading day, financial infrastructure will allow entities to buy ownership shares in such organizations, up to a daily maximum limit, at the day's liquidation price (which we mentioned a few sections ago). If at least 80% of the daily objective in raising additional capital is met, then, by the "deserving and needy" criteria, society will buy the remaining ownership shares up to the daily maximum limit.

Capital Market facilitates publicly owned organizations to raise additional and "large amounts" of capital by letting investors directly invest in the organization. We will define "large amount" as anything larger than the threshold we set for "small amount" as mentioned in the previous paragraph. This additional capital will go through the same kind of process as the IPO process. The purpose of such a subsequent IPO can include "acquisition of unspecified organization". Further, if the organization fails to raise 100% of their objective, but manages to raise at least 80% of their objective, then society will treat this additional attempt of raising capital as "deserving and needy" and will invest the amount of deficit in raising additional capital by creating it. In this case too, society leaves it to the judgment of investors to identify "deserving and needy" organizations.

Capital Market provides privately owned and publicly owned organizations a standard mechanism for the organization and organization's management to communicate with the organization's owners. The first kind of communication is to make current owners aware of additional investment opportunities. The second kind of communication is for gathering the owners' votes on high-level decisions. Both these will be channeled through the Digital Home of both the organization and the citizens and other entities. The concept of Digital Home is discussed in the chapter on Other Topics.

Capital Market provides publicly owned organizations a standard mechanism to distribute dividends to their owners. Remember that an organization does not know who its owners are. Thus the management of a publicly owned organization needs to decide the total amount of profits it desires to distribute as dividends and inform the financial infrastructure about that decision. Coupled with this decision, the management moves that money to a separate account. The financial infrastructure implements that decision by taking all the money in the specified account and distributes it to all the owners in proportion to their ownership.

Capital Market provides organizations a mechanism to reduce their capital when they have excess capital that they cannot use fruitfully. The most predominant way in which organizations find themselves with excess capital is when extremely profitable organizations retain all their profits and do not give out dividends. Another way in which an organization can find itself with excess capital is when they buy some liquid asset and that asset appreciates considerably. Yet another way in which an organization can find themselves with excess capital is when they raise a large amount of money for a large project and then that project gets scaled back or scrapped. Regardless of how an organization ends up with excess capital, the underlying thought is that the capital is for a purpose and if it is not needed for that purpose, then the organization's management should not treat it as their play money, and hence that excess capital should be returned to the owners. A return of excess capital is very similar to dividends in the fact that all existing owners get back some money for each share. There will be regulations against an organization accumulating excess capital for too long; they cannot just hold all that capital in the form of some liquid assets; it needs to be returned when not needed. Returning capital is not a problem because capital can be raised again when needed.

Capital Market facilitates the society to gradually divest its investments in publicly owned organizations. The period over which society divests is the same number of years as is indicated by the policy parameter "Return to Normal Period" mentioned in the Monetary Policy chapter in Building Utopia book. When society divests, it does it on the Stock Market and someone buys those ownership shares. When society divests, it gets some money and it destroys it, since originally all those ownership shares were bought with created money. Any dividends that society receives for investing in these organizations are used to reduce the overall taxes.

Each one of these facilities and functions should be viewed as a policy statement. Each one of them is intended to handle some situation or solve some problem. There will be rules and regulations associated with each of these functions and there will be implementation details.

With these Capital Market functions, the Utopian Financial Infrastructure enables publicly owned organizations to raise capital in small or large amounts as long as investors continue to have confidence in the organization's ability to use the capital well. Society even helps out deserving and needy organizations with some capital. This will reduce or even eliminate the need for publicly owned organizations to borrow money. This reduced need for corporate borrowing comes into play in the next chapter.

Citizens are Educated Investors

When a citizen is not yet an adult, the Standard Investments and Non-Standard Investments account books are left unused.

Citizens have to move some money from their Personal Belongings account book to one of these investment account books before they can start "investing" and that cannot be started until they become adult and have acquired sufficient and provable knowledge during their education to operate at least the Standard Investments account book. Normal education will impart this knowledge and enough "dummy practice" before testing the citizen's knowledge and certifying the citizen's competency in operating standard investments.

Most financial instruments cannot be purchased with money in the personal belongings account. Very few kinds of financial instruments that are personal in nature can be purchased in personal belongings account (e.g. life insurance, auto insurance, house insurance, extended warranties). Any financial instrument that can be freely traded on the financial market cannot be purchased in the personal belongings account.

Similarly, to acquire any kind of non-standard investment, citizens have to prove sufficient knowledge in that kind of non-standard investment.

This Standard Investments account is activated once a citizen completes relevant education that includes learning about various kinds of investments, how those investments work, and how to operate the Standard Investments account. There will be a test to demonstrate the learning from that education. More than 95% of people should be able to pass the test easily as it is relatively simple to learn this. There will be a department of financial infrastructure that oversees the integration of this kind of education in our education system. The same department will be responsible for certification.

For organizations, only those employees who have passed a more intensive version of this same test are allowed to operate the Standard Investments account. Most small organizations would rarely have to use this. Organizations can declare the level of certification that they require their employees to have to operate their Standard Investments account and only those individuals that have those certifications are allowed to operate it, regardless of any authorization that they may have been given by the organization's officers. For organizations, there is much more to this than just authorization plus certification.