Definitions Flashcards
A financial institution, a private business development company, directors or officers of the issuer, or an individual with a net worth of $1,000,000, or $200,000 annual income, for the past two years. If a joint account, the income goes to $300,000.
Accredited Investor
The increase of the cost basis on a bond.
Accretion
Interest realized between interest payments
Accrued Insterest
An accounting measure used to determine the annuitant interest in a seperate account. This deposit of money in an annuity is expressed in these units.
Accumulation Unit
The Uniform Securities Act of 1933.
Act (the)
According to value; the term is used for property taxes
Ad Valorem Tax
the State securities commission, its commissioner, or secretary
Administrator
General information to the general public; it is considered an indirect audience (material used in the media)
Advertisement
When a firm effects trades for the account of others
Agency Capacity
A mutual fund that attempts to achieve the highest capital gains
Aggressive Growth Fund
A foreign security on deposit at an overseas American bank branch (used to facilitate U.S. investors trading in foreign securities)
American Depository Reciepts (ADRs)
The person receiving the payments from an annuity
Annuitant
A contract that provides for payments over the life of the contract.
Annuity
The payout period of an annuity
Annuity Period
The payments from an annuity are expressed in these units
Annuity Units
The charter granted by the state where the corporation exists
Articles of Incorporation
The lowest price a seller is willing to accept for a security
Asked Price
An assumption of a reasonable rate of return on a security.
Assumed Interest Rate (AIR)
The number of shares to be issued according to the articles of incorporation.
Authorized Share
Checks payable at a specified future date drawn on and accepted by a bank
Bankers Acceptance
The highest price that a buyer is willing to pay for a security.
Bid Price
HIghly rated issues of large, mature companies
Blue Chip Stock
The governing body of the corporation (or mutual fund) elected by the shares owned by the shareholders who establish corporate management policies.
Board of Directors
A corporate or government debt security
Bond
Used for temporary project financing that eventually will receive revenues from a bond issue
Bond Anticipation Rate (BAN)
Mutual fund that invest all of their assets in debt securities
Bond Fund
The possessors of debt instruments
Bondholder
Ownership of a bond evidenced by an accounting entry with no physical certificate.
Book Entry
A person engaged in transacting securities business for the account of others.
Broker
Firm that effects securities transactions for their own account or the account of others
Broker/Dealer
The issuer has the flexibility to retire debt prior to maturity
Call Feature
Gives the buyer of the contract the right to purchase the underlying security at a set price known as the strike price
Call Option
The right to call or repurchase the security
Callable
Appreciation of the market value of a security
Capital Gains
An investment sold for less than its cost basis
Capital Loss
The sum of all issued securities of a corporation
Capital Structure
The accumulated value of an insurance policy that will be returned to the policy owner upon surrender of the policy
Cash Value
An order preventing the continuation of an action.
Cease and Desist Order
Short term instruments issued by commercial banks
Certificate of Deposit
Engaging in the transactions solely to generate commissions (excessive training)
Churning
A liability created without willful intent against an individual
Civil Liability
Non-criminal penalties usually resulting in a fine
Civil Penalty
An investment company whose issues are not redeemable and trades on an exchange or over the counter
Closed-End Investment Company
Concerned with settling disputes between broker/dealers, associated persons, and/or the public
Code of Arbitration
Outlines procedural process in the even of securities violations
Code of Procedure
Bond issued by a corporation that owns portions of other companies and use these stocks as collateral for a bond issue
Collateral Trust Bond
Marketable securities are used as collateral to back the certificate
Collateral Trust Certificate
The collateral backing the obligation is a pool of conventional mortgages.
Collateralized Mortgage Obligation (CMO)
Promissory note issued by a corporation
Commercial Paper
Company stock that does not pay a specified dividend
Common Stock
A consideration to alleviate extra tax burdens on shareholders
Conduit Theory
An individual who obtains financial products or services from a financial institution one time only (no continuing relationship expected)
Consumer
A fund offered at NAV that will include a sales charge if the fund is redeemed within a specified period of time.
Contingent Deferred Sales Charge (CDSC)
A plan in which sales are held by a trust that allows for periodic payments
Contractual Plan
Stock acquired by an affiliated person such as officer or director
Control Stock
Market Value of a Bond = the market value of the common stock for which it is exchanged.
Conversion Parity
The number of shares that will be received for each share of preferred stock or corporate bond.
Conversion Ratio
A set price at which the preferred shareholder or bondholder can convert to common stock.
Conversion Price
Allows a preferred stock owner or bondholder to convert to shares of common stock
Conversion Privilege
Bonds that allow the holder to exchange or convert into common shares in the issuin company at a predetermined price
Convertible Bonds
The 20 days after the filing date of a registration statement
Cooling-Off Period
A legal business entity whose existence is legally distinct from the people who own or control it.
Corporation
Any written or electronic mail messages distributed to existing or prospective customers.
Correspondence
The original purchase price of a security, inclusive of sales charges
Cost Basis
The interest rate paid on a bond.
Coupon Rate
A liability created by willful violations
Criminal Liability
A provision that allows no dividend to be paid to common stockholders if preferred dividends are in arrears.
Cumulative Dividend
Number of shares (X) the number of vacancies = the number of votes
Cumulative Voting
Annual interest paid on a bond DIVIDED BY its current market value or annual dividend on a stock DIVIDED BY its current market value
Current Yield
A national bank or trust company that safeguards a mutual fund’s physical assets. Also, the fiduciary of a minor’s account (UGMA)
Custodian
An individual or entity with which a financial institution expects to have a continuing relationship.
Customer
Stock whose earnings tend to flucuate within the busines cycle of their industy.
Cyclical Stock
The date that accumulation units are converted to annuity units
Date of Annuitization
A firm that performs securities transactions for their own acount as a part of regular business
Dealer
The amount the beneficiary receives from the decedent owner of an annuity or life insurance policy
Death Benefit
A bond issue that is not secured by a pledged asset
Debenture
The date the board of directors authorizes a dividend
Declaration Date
Stocks in companies that have a resistance to recession
Defensive Stock
Payments from the annuity are delayed for a specific period of time after the deposit
Deferred Annuity
The sales charge is determined by the length of time the security is held
Deferred Sales Charge
A letter sent by the SEC to a company issuing a prospectus and it outlines recommendations and changes to the prosepctus thus postponing the issue.
Deficiency Letter
The employee is assured a specified annual benefit payment at reitrement
Defined Benefit Plan
A retirement plan where the employer is required to fund a specified contribution on behalf of each employee.
Defined Contribution Plan
The persisten and appreciable decline in general price levels
Delation
A bond that is sold at less than par value.
Discount
Securities that are purchased at below the face value and redeemed at full value
Discount Securities
The yield denotes the percentage discount from the face value and redeemed at full value.
Discount Yield Basis
The controlling influence effecting securities transactions in which the registered representative or the B/D has to determine either the Action, Amount or Asset to be purchased or sold.
Discretion
Th principal underwriter of a mutual fund
Distributor
The spreading out of investment assets to reduce volatility
Diversification
A portfolio that contains various investment vehicles and/or asset classes
Diversified Portfolio
A payment of earnings of a corporation per share of stock
Dividend
Systematic investments at fixed intervals, usually monthly or quarterly.
Dollar Cost Averaging
Proper investigating and researching of a security prior to transaction.
Due Dilligence
The date in which a registration statement becomes effective.
Effective Date
Equipment owned by the issuing corporation is used as collateral to back a debt issue.
Equipment Trust Certificate
Represents 100 shares of a specific common stock
Equity Option
the Employee Retirement and Income Security Act of 1974 establishing IRS standards for qualified retirement plans.
ERISA
Employee Stock Ownership Plan, a profit sharing plan wherby the employer contributions are invested in the stock of the company.
ESOP
The date in which a stock trades without the right to receive a dividend.
Ex-Dividend Date
Investment companies whose objective is to achieve the same return as a particular market index.
Exchange Traded Funds (ETFs)
A security that is not required to be registered
Exempt Security
Trades that do not normally include the general public
Exempt Transaction
Establishes the maximum amount of administrative expenses for annuity or variable life contracts
Expense Guarantee
Total expenses of a mutual fund divided by the fund’s total net assets
Expense Ratio
Debt certificates that offer pre-determined interest rates
Face Amount Certificate
The Federal National Mortgage Association
Fannie Mae
Registration made effective by the SEC.
Federal Registration
The body that implements US monetary policy
Federal Reserve System
Financial Industry Regulartory Authority (formerly NASD)
FINRA
The government’s usage of taxation and expenditure programs to maintane a stable economy.
Fiscal Policy
Fixed dollar payments that remain constant
Fixed Annuity
Pricing method used by mutual funds based on the next price to be computed
Forward Pricing
The deliverate misleading of a person to effect a transaction
Fraud
The Federal Home Loan Mortgage Corporation
Freddie Mac
Same as a registered bond with the addition of semi-annual interest payments sent from the issuer. No physical bond is issued.
Fully Registered Bond
Bond issued by a policitical subdivision who has the authority to levy and collect taxes
General Obligation Bond (GO)
The Government National Mortgage Association
Ginnie Mae
Delivery of stocks and/or bonds in certain, acceptable units
Good Delivery
Funds invested in blue chip companies with a solid earnings history; minimum dividend payments as earnings are used to fund further expansion.
Growth Fund
Stock in a company that is expanding faster than the general economy and industry standards.
Growth Stock
A fund with a combination of both growth companies and companies that pay consistent dividends
Growth/Income Fund
A security which has its payment of principle, interest, or dividend assured by a third party
Guaranteed Security
The usage of a client’s fully-paid securities by a FINRA member firm as collateral for a loan
Hypothecation
Payments from the annuity begin one payment period following a lump-sum deposit into the contract.
Immediate Annuity
A fund that invests in companies that pay a high dividend in relation to their market value
Income Fund
A stock that pays a high dividend in relation to its market price
Income Stock
A contract for a corporate debt.
Indenture
Issued by municipalities but are supported by a lease agreement with a corporation
Industrial Revenue Bond
Demand for goods and services exceeds supply causing prices to rise
Inflation
A new issue that represents a corporation’s first stock distribution to the public.
Initial Public Offering (IPO)
Any non-public fact that would have an effect on the value of a security in the marketplace.
Inside Information
Anyone owning 10% or more of the issuer’s shares of a security; also includes anyone possessing information not available to the public.
Insider
Unable to meet financial obligations when due
Insolvent
The person on whose life an insurance policy is written.
Insured
A security that pays a specified periodic interest rate
Interest-Bearing Security
A person who, for compensation, engages in the business of advising others in the purchase or sale of securities.
Investment Adviser
Employee of an invewstment adivser that may be a partner, officer, director, or other associated individual.
Investment Adviser Representative
Literature providing certain information that an investment adviser may submit to customers.
Investment Advisory Brochure
Corporations or trusts in which investors are able to pool their resources for increased diversification and professional management.
Investment Company
That amount of shares that have actually been sold
Issued Shares
Any person who issues or proposes to issue a security
Issuer
Payments from the annuity are made to two people; when one dies the payments continue to the joint annuitant.
Joint and Last Survivor Life Annuity
A retirement plan available only to self-employed individuals
Keogh Plan (HR-10)
Allows an investor to qualify for sales discounts without initially investing the entire required amount
Letter of Intent
A levelsales charge deducted from each installment into the contract
Level Load
Any company that issues bonds and/or borrows money has leveraged their assets
Leveraged
Periodic payments will be made to the annuitant for a specified number of years
Life Annuity with Period Certain
The availability to turn an investment into cash
Liquidity
A capital gain on an asset held longer than one year
Long-Term Gain
Allows for self-regulation of organizations
Maloney Act
The most prominent type of investment company; they may be diversified or non-diversified
Management Company
The required money in an account necessary to purchase a security on margin
Margin Requirements
Securities that are approved to be purchased on margin
Marginable Security
A dealer capable of making a continuous offering to buy and sell stocks
Market Maker
The current price of a security
Market Value
A security that can be transferred to another party in a negatiated market.
Marketable Security
Security trades that essentially cancel each other
Matched Order
An essential fact needed to make an informed investment decision.
Material Fact
Mandatory distributions from an IRA at 70 1/2
Minimum Required Distribution
Statements that infer something that is not truthful
Misleading Statement
An attempt to control the supply of money and credit in the economy.
Monetary Policy
A fund that invests in short-term debt instruments
Money Market Fund
Debt instruments that trade in the money market
Money Market Instrument
An annuity guarantees payments for the life of the annuitant
Mortality Guarantee
Are collateralized by a lien or mortgage against real property
Mortgage Bond
A municipal bond
Muni
Bonds issued by political subdivisions
Municipal Bond
An open-end investment company that continually issues redeemable shares.
Mutual Fund
the National Association of Securities Dealers (currently FINRA)
NASD
National Association of Securities Dealers Automated Quotation System
NASDAQ System
A stock exchange accessible to the entire country
National Exchange
The current market, or bid price, of a mutual fund
Net Asset Value (NAV)
The investment income from securities held in a mutual fund portfolio.
Net Investment Income
The value of an individual and/or company measured by their total assets less total liabilities
Net Worth
The oldest and largest exchange market in the United States.
New York Stock Exchange (NYSE)
A fund with no sales charge and offered at NAV
No-Load Fund
The coupon rate of a bond
Nominal Yield
Security that is required to be registered
Non-Exempt Security
Insures that if an annuity payment is missed during the accumulation period that the previous investments will not be forfeited.
Non-Forfeiture Provision
Securities that do not pay periodic interest payments
Non-Interest Bearing Security
Government issues that cannot be negatiated in the marketplace
Non-Marketable Issues
The lowest price that a seller is willing to accept for a security
Offering Price
Any office designated by a member firm as directly responsible for the supervision of all persons in that office
Office of Supervisory Jurisdiction (OSJ)
An investment compnay that issues redeemable shares
Open-End Investment Company
The price of an option contract paid by the buyer to the writer
Option Premium
Contractually obligated to fullfill the option through the expiration date
Option Writer
A legally binding contract to buy or sell an underlying security at a designated price in the future.
Options
A negotiated market where one buyer negotiated with one seller.
OTC Market
The number of issed shares (-) treasury stock
Outstanding Stock
Proportionate to the number of shares owned compared to the number of outstanding shares
Ownership Interest
Participating in securities transactions only to give the apperance of securities activities
Painting the Tape
A bond’s face amount, normally $1,000
Par Value
These stocks receive a specified dividend plus additional dividends when common stock dividends exceed a certain level.
Participating Preferred Stock
The date on which the declared dividend will be paid to shareholders
Payment Date
A weekly publication for over-the-counter issues that do not trade on the NASDAQ
Pink Sheet
A consideration designed to alleviate extra tax burdens on shareholders
Pipeline Theory
Groups of persons formed to conduct transactions.
Pool
The shareholderright to purchase a proportionate amount of newly issued stock in a company.
Preemptive Right
Stock that has a preference over common stock with respect to dividends.
Preferred Stock
A bond selling above its par value.
Premium
Prohibited practices involving fraudulent transactions
Price Manipulation
Securities offered by a corporation that is already publicly traded.
Primary Offering
A person actively engaged in the management of the member firm’s business
Principal
A firm effecting securities transactions for their own account.
Principal Capacity
Regulation D defines as no more than 35 non-accredited investors, with unlimited number of institutional or accredited investors
Private Placement Offer
A document containing a security’s information regarding objective, capitalization, sales charges, operating expenses, etc.
Prospectus
A limited power of attorney that allows voting by someone not in attendance.
Proxy
A contract giving the buyer the right to sell the underlying security at the strike price
Put Option
Sophisticated investor
Qualified Purchaser
A retirement plan eligible to receive favorable tax treatment.
Qualified Retirement Plan
Certificates where real property and mortgages are the underlying investment.
Real Estate Investment Trust Certificate (REIT)
A slowing of economic activity.
Recession
The date a shareholder must officially own shares to be entitled to a dividend
Record Date
A prospectus with a red border on the cover page denoting a registration statement has been filed but not yet effective.
Red Herring Prospectus
The issuance of a bond for the express purpose of eliminating another bond issue
Refunding
A security that has filed a registartion statement with the state and has become effective
Registered
Has the name of the owner on the bond and recorded on the issuer’s books.
Registered Bond
A sales representative that is registered with an SRO
Registered Representative
Normally banks or trust companies that have responsibility to prevent a company from issuing more shares than authorized.
Registrar
Filed by the issuer in connection with a new offering.
Registration Statement
Settlement in three business days after the trade date
Regular-Way Settlement
To qualify, an investment company must distribute at leas 90% of its net investment income to shareholders.
Regulated Investment Company
Registration ecemptions for private placements
Regulation D
Stock that has no right of transferability, usually acquired through a private placement.
Restricted Stock
A bond obligation that has been met in full.
Retired
The non-taxable or cost basis portion received from a sale.
Return of Capital
A bond issued to finance a distinct project.
Revenue Bond
Stockholders ability to view corporate books and records.
Right of Inspection
The right to dispose of shares through gift or resale.
Right to Transfer
Allows investors the right to receive cumulative quantity discounts when purchasing mutual fund shares.
Rights of Accumulation
The possibility of an investment losing or not gaining in value.
Risk
A combination of factors regarding objectives and liquidity of an investment.
Risk Tolerance
An IRA funded with after-tax dollars and disbursed tax free after five years.
Roth IRA
A contract to dispose of or sell a security, or interest in a security, for value.
Sale
Dollar levels at which the sale charge is discounted or reduced.
Sales Breakpoint
The portion of the purchase price used to pay commissions or fees.
Sales Charge
the Securities and Exchange Commission
SEC
A statement required on the front page of a prospctus that the SEC does not pass on the merits of the security.
SEC no-approval clause
Consists of both the exchange markets and the over-the-counter markets.
Secondary Market
Established to provide purchasers of new issues of securities with information regarding the issuer.
Securities Act of 1933
Responsible for the enforcement of securities laws.
Securities and Exchange Commision
A protection authority established to protect investors from loss due to failed broker/dealer.
Securities Investor Protection Corporation (SIPC)
An investment in an enterprise for profit, with anothercomapny performing the management
Security
Bonds and preferred stock of a corporation.
Senior Securities
An acount established and maintained by an insurance company for their variable contracts under which income, gains, and losses are charged agasint the account.
Seperate Account
The date in which purchased securities must be paid for or securities sold must be delivered.
Settlement Date
The hoices a beneficiary has upon the death of the insured.
Settlement Options
Represents an undivided interest in a unit of designated securities in a Unit Investment Trust.
Shares of beneficial interest
A capital gain for a security held less than one year
Short-Term Gain
Allows self-employed individuals to contribute to their retirement in amounts greater than traditional IRA’s
Simplified Employee Pension Plan (SEP)
A mutual fund that concentrates a major portion of its assets on a specific industry or geographic region
Specialized Fund
A mutual fund’s principal underwriter.
Sponsor
A sales charge plan wherby no more than 20% of any payment may be applied to the sales fees
Spread-Load
Attached to an becomes part of a prospectus and provides additional disclosures.
Statement of additional information
A period of time for which liability for actions is in effect
Statute of limitations
One vote per vacany per share owned.
Statutory Voting
A document establishing physical evidence of security ownership
Stock Certificate
The annuitnat receives payment as long as he/she lives, then pamynets end.
Straight-Life Annuity
Have junior claims to that of ordinary debentures
Subordinated Debenture
An order which requires a person to testify.
Subpoena
The offering price of a stock to shareholders exervising preemptive rights
Subscription Price
The investment ocjevtive, risk tolerance, and investment experience of a securities customer.
Suitability
Available to respondents who do not dispute charges and waive their right to a hearing.
Summary Complaint Procedure (minor rule violation)
The current value of assets held in a variable contract less the surrender charges, if applicable.
Surrender Value
Changing from one fund family to another where another sales charge may be incurred.
Switching
A section in the Investment Company Act of 1940 that allows sales literature expenses to be carried by the mutual fund.
12b-1 fee
Calculated by dividing the municipal yield by the compliment of the investor’s tax bracket
Taxable Equivalent Yield
The coupon rate on a corporate bond multiplied by the investor’s tax bracket.
Taxable Yield
Qualified plans available to employees of certain non-profit organizations under the IRS code
Tax-Deferred Annuity
A telephone call or message for the purpose of encouraging the purchase, rent, or invest in property, goods or services (also known as telephone solicitation)
Telemarketing
Syndicate’s advertisment of a new issue in financial periodicals.
Tombstone Advertisement
The recorded date of a securities transaction; this is also time at which the price and the quantity are determined.
Trade Date
An individual retirement account that is funded with tax-deferred contributions.
Tranditional IRA
Record keeper on all registered owners of a security
Transfer Agent
Government issued debt with maturities of one year or less
Treasury Bills (T-Bills)
Government issued debt with maturities greater than ten years.
Treasury Bonds
Government issued debt with maturities of two to ten years.
Treasury Notes
Stock that has been reaquired by the corporation.
Treasury Stock
Zero-coupon bonds issued by the US government.
Treasury Strips
Bonds that are exempt from federal, state and local taxation.
Triple Tax Exempt
An investment banker who sponsors the sale of an issue.
Underwriter
Instrument through which the underwriter agrees to sell an issue to the public, outlining conditions and commission schedule.
Underwriter Contract
The difference between what the issuer received and the public pays for a new issue.
Underwriter Spread
A group of investment bankers.
Underwriting Syndicate
Establishes procedures for securities to be purchased for a minor.
Uniform Gift to Minor’s Act (UGMA)
Relates to dealings between FINRA member firms.
Uniform Practice Code
Investment contracts which invlude either a fixed investment portfolio or is front-end and spread-load contracual plans.
Unit Investment Trust
Periodic payments are made during the annuitant’s lifetime, and any unused portion may be paid in a limp sum to the beneficiary.
Unit Refund Life Annuity
Values are based on the performance of the annuity’s investment portfolio in the seperate accounts
Variable Annuity
Stipulates how much money an employee is allowed to keep upon withdrawal from a qualified retirement plan, based on an approved schedule.
Vesting
The amount or degree of a securities fluctuation
Volatility
The right to purchase securities at a specified price referred to as the subscription price for a long period of time at issurances.
Warrant
An investor repurchases substantially the same security withing 30 days of previously selling it
Wash Sale
Security trades that essentially cancel each other out.
Wash Trade
The seller in an call option contract.
Writer
The overall return an investor will receive from a bond
Yield-to-Maturity
Bonds purchased at a deep discount from face value and redeemed at par at their maturity date; they pay no periodic interest.
Zero-Coupon Bond
