Letter A

Question 1

Accredited investor

Answer 1

An individual or institutional investor who meets certain minimum requirement relating to income, net worth, or investment knowledge.

Question 2

Accredited investor exemption

Answer 2

An exemption that allows an accredited investor to purchase securities without receiving a prospectus.

Question 3

Accrued interest

Answer 3

Interest accumulated on a bond or debenture since the last interest payment date.

Question 4

Active ETF

Answer 4

ETF where the portfolio manager takes an active role in investment selection.

Question 5

Active investment strategy

Answer 5

The investor or manager employs active management with the aim of outperforming a benchmark portfolio or index on a risk-adjusted basis through active securities selection.

Question 6

Axe sheet

Answer 6

A list of products that a trader wishes to sell or buy as quickly as possible.

Question 7

Averages

Answer 7

A statistical tool used to measure the direction of the market. The most common average is the Dow Jones Industrial Average.

Question 8

Autorité des marchés financiers (Financial Services Authority) (AMF)

Answer 8

The body that administers the regulatory framework surrounding Québec’s financial sector: securities sector, the distribution of financial products and services sector, the financial institutions sector and the compensation sector.

Question 9

Audit

Answer 9

A professional review and examination of a company’s financial statements required under corporate law for the purpose of ensuring that the statements are fair, consistent and conform with International Financial Reporting Standards (IFRS).

Question 10

Authorized shares

Answer 10

The maximum number of common (or preferred) shares that a corporation may issue under the terms of its charter.

Question 11

Assigned

Answer 11

Designated to fulfill the writer’s obligation on a call or put option for an option buyer who decides to exercise the option.

Question 12

Assuris

Answer 12

A not for profit company whose member firms are issuers of life-insurance contracts and whose mandate is to provide protection to contract holders against the insolvency of a member company.

Question 13

At-the-money

Answer 13

An option with a strike price equal to (or almost equal to) the market price of the underlying security. See also Out-of-the-money and In-the-money.

Question 14

Attribution rules

Answer 14

A Canada Revenue Agency rule stating that an investor cannot avoid paying taxes at their marginal rate by transferring assets to other family members who have lower personal tax rates.

Question 15

Auction market

Answer 15

Market in which securities are bought and sold by brokers acting as agents for their clients, in contrast to a dealer market where trades are conducted over-the-counter. For example, the Toronto Stock Exchange is an auction market.

Question 16

American-style option

Answer 16

An option that can be exercised at any time during the option’s lifetime. See also European-Style Option.

Question 17

Amortization

Answer 17

Gradually writing off the value of an intangible asset over a period of time. Commonly applied to items such as goodwill, improvements to leased premises, or expenses of a new stock or bond issue. See also Depreciation.

Question 18

Analyst

Answer 18

An expert in respect to a specific company or sector. Analysts provide other front office staff with ongoing analytical coverage in their area of specialty.

Question 19

Asset mix

Answer 19

The percentage distribution of assets in a portfolio among the three major asset classes: cash and equivalents, fixed income and equities.

Question 20

Asset coverage ratio

Answer 20

A financial ratio that shows a company’s ability to cover its debt obligations with its assets after all non-debt liabilities have been satisfied.

Question 21

Asset-backed securities (ABS)

Answer 21

A short- to medium-term bond with equal claim on the principal and interest cash flows from a pool of underlying receivables.

Question 22

Asset-backed commercial paper (ABCP)

Answer 22

A type of security that has a maturity date of less than one year, typically in the range of 90 to 180 days, with a legal and design structure of an asset-backed security.

Question 23

Asset allocation fund

Answer 23

This type of fund has similar objectives to those of balanced funds, but they differ in that they typically do not have to hold a specified minimum percentage of the fund in any class of investment.

Question 24

Annual information form (AIF)

Answer 24

A document in which an issuer is required to disclose information about presently known trends, commitments, events or uncertainties that are reasonably expected to have a material impact on the issuer’s business, financial condition or results of operations. Although investors are typically not provided with the AIF, the prospectus must state that it is available on request.

Question 25

Asset allocation

Answer 25

Apportioning investment funds among different categories of assets, such as cash, fixed income securities and equities. The allocation of assets is built around an investor’s risk tolerance.

Question 26

Asset

Answer 26

Everything a company or a person owns or has owed to it. A statement of financial position category.

Question 27

Ask price

Answer 27

The lowest price a seller will accept for the financial instrument being quoted. See also Bid.

Question 28

Arrears

Answer 28

Interest or dividends that were not paid when due but are still owed. For example, dividends owed but not paid to cumulative preferred shareholders accumulate in a separate account (arrears). When payments resume, dividends in arrears must be paid to the preferred shareholders before the common shareholders.

Question 29

Annual report

Answer 29

The formal financial statements and report on operations issued by a company to its shareholders after its fiscal year-end.

Question 30

Annuitant

Answer 30

Person on whose life the maturity and death benefit guarantees are based. It can be the contract holder or someone else designated by the contract holder. In registered plans, the annuitant and contract holder must be the same person.

Question 31

Annuity

Answer 31

A contract usually sold by life insurance companies that guarantees an income to the beneficiary or annuitant at some time in the future. The income stream can be very flexible. The original purchase price may be either a lump sum or a stream of payments. See Deferred Annuity and Immediate Annuity.

Question 32

Arbitrage

Answer 32

The simultaneous purchase of a security on one stock exchange and the sale of the same security on another exchange at prices which yield a profit to the arbitrageur.

Question 33

Arbitration

Answer 33

A method of dispute resolution in which an independent arbitrator is chosen to assist aggrieved parties recover damages.

Question 34

Agency traders

Answer 34

Manage trades for institutional clients. They do not trade the dealer member’s capital, and they trade only when acting on behalf of clients. Agency traders do not merely take orders; they must manage institutional orders with minimal market impact and act as the client’s eyes and ears for relevant market intelligence.

Question 35

Agent

Answer 35

An investment dealer operates as an agent when it acts on behalf of a buyer or a seller of a security and does not itself own title to the securities at any time during the transactions. See also Principal.

Question 36

Algorithmic trading

Answer 36

The use of sophisticated mathematical algorithms to execute equity trades over electronic trading systems.

Question 37

Allocation

Answer 37

The administrative procedure by which income generated by the segregated fund’s investment portfolio is flowed through to the individual contract holders of the fund.

Question 38

Alpha

Answer 38

A statistical measure of the value a fund manager adds to the performance of the fund managed. If alpha is positive, the manager has added value to the portfolio. If the alpha is negative, the manager has underperformed the market.

Question 39

Alternative trading systems (ATS)

Answer 39

Privately-owned computerized networks that match orders for securities outside of recognized exchange facilities. Also referred to as Proprietary Electronic Trading Systems (PETS).

Question 40

Active management

Answer 40

Investment management that takes an active, as opposed to a passive, role when managing investments. Active fund managers make investment decisions based on their outlook for the markets and securities in which they invest. In almost all cases, active fund managers intend to outperform the return on a specific benchmark index.

Question 41

Adjusted cost base

Answer 41

The deemed cost of an asset representing the sum of the amount originally paid plus any additional costs, such as brokerage fees and commissions.

Question 42

After-acquired clause

Answer 42

A protective clause found in a bond’s indenture or contract that binds the bond issuer to pledging all subsequently purchased assets as part of the collateral for a bond issue.

Question 43

After-market stabilization

Answer 43

A type of arrangement where the dealer supports the offer price of a newly issued stock once it begins trading in the secondary market.