Terms 1 Flashcards
1
Q
The date established by the SEC or the Administrator as to when the underwriters may sell new securities to the buyers; a.k.a. “effective date”.
A
Release Date
2
Q
The risk that a fixed income investor will not be able to re invest interest payments or the par value at attractive interest rates. Happens when rates are falling.
A
Reinvestment Risk
3
Q
This type of corporation or trust uses the pooled capital of investors to invest in owner ship of either income property or mort gage loans. 90% of net income is paid out to shareholders.
A
REIT (Real Estate Investment Trust)
4
Q
The required minimum amount that must be taken from a retirement plan starting at a particular age to avoid IRS penalties.
A
Required Minimum Distribution (RMD)
5
Q
The % of deposits that a bank must lock up in reserve, tablished by the FRB.
A
Reserve requirements
6
Q
The right of common stockholders to claim assets after the claims of all creditors and preferred stockholders have been satisfied
A
. Residual Claim:
7
Q
A line representing the high est closing price for a security over a period of time; AKA “overbought.”
A
Resistance
8
Q
The party named in a discip linary proceeding or arbitration.
A
Respondent
9
Q
A balance sheet ac count showing accumulated net income, from which any dividends are first de clared. Can be thought of as all the profits of the business that have not been paid out as dividends but, rather, re invested into the business as reflected by other balance sheet accounts, e.g. capital equipment, new stores, etc.
A
Retained earnings
10
Q
A measure showing how much in profits each dollar of com mon stockholder’s equity generates for the company, net income / shareholder equity.
A
Return on equity
11
Q
A short-term debt obligation of a munici pal issuer backed by upcoming revenues.
A
RAN- revenue anticipation note
12
Q
A municipal bond whose interest and principal payments are backed by the revenues generated from the project being built by the proceeds of the bonds. Toll roads, for example, are usually built with revenue bonds backed by the tolls collected.
A
Revenue bond
13
Q
Short-term securities that allow the holder to buy new shares below the current market price.
A
Rights
14
Q
A feature of mu tual funds whereby a rise in account value is counted the same as new money for purposes of achieving a breakpoint.
A
Rights of Accumulation
15
Q
An additional offer of
stock accompanied by the opportunity
for each shareholder to maintain his/
her proportionate ownership in the com
pany.
A
Rights offering
16
Q
An account that has been designated a number for identification purposes in order to maintain anonymity for its owner. The owner must sign a statement acknowledging ownership.
A
Numbered Account
17
Q
An order that gives the floor broker discretion as to the time and price of execution
A
Not-held (nh) order
18
Q
An account that has been designated a number for identification purposes in order to maintain anonymity for its owner. The owner must sign a statement acknowledging ownership.
A
Numbered Account
19
Q
An intermediate-term interest-bearing security that represents an obligation of its issuer.
A
Note
20
Q
A retirement plan that does not allow contributions to be made with pre-tax dollars; that is, the retirement plan does not qualify for beneficial tax treatment from the IRS for its contributions.
A
Non qualified retirement plan
21
Q
A type of UIT that allows changes in the portfolio and traditionally invests in mutual fund shares.
A
Nonfixed UIT
22
Q
An investment strategy that concentrates its investments among a small group of securities or issuers.
A
Nondiversification
23
Q
An investment company that concentrates its investments among a few issuers or securities and does not meet the diversification requirements of the Investment Company Act of 1940.
A
Nondiversified management company
24
Q
A bid submitted for Treasury bills where the purchaser agrees to accept the average of all yields accepted at the auction. Noncompetitive tenders are always the first orders filled at the auction.
A
Non competitive bid
25
The yield that is stated or named on the security. The nominal yield, once it has been set, never changes, regardless of the market price of the security.
Nominal yield
26
A type of preferred stock whose dividends do not accumulate in arrears if the issuer misses the payment.
Non cumulative preferred
27
A fund that does not charge the investor a sales charge to invest in the fund. Shares of no-load mutual funds are sold directly from the fund company to the investor.
No load fund
28
An individual or entity registered as the owner of record of securities for the benefit of another party.
Nominal owner
29
A quote given for informational purposes only. A trader who identifies a quote as being nominal cannot be held to trading at the prices that were clearly identified as being nominal.
Nominal quote
30
A fund that does not charge the investor a sales charge to invest in the fund. Shares of no-load mutual funds are sold directly from the fund company to the investor.
No load fund
31
A municipal bond issued to build low-income housing. NHA bonds are guaranteed by the U.S. government and are considered the safest type of municipal bonds. NHA bonds are not considered to be double-barreled bonds.
New housing authority
32
A real estate program that seeks to achieve capital appreciation by building new properties.
New construction program
33
A calculation that measures the interest cost of a municipal issue over the life of all bonds. Most competitive underwritings for municipal securities are awarded to the syndicate that submits the bid with the lowest NIC.
Net interest cost
34
The total sum of investment income derived from dividend and interest income after subtracting expenses.
Net investment income
35
A pledge from a revenue bond that pays maintenance and operation expenses first, then debt service.
Net revenue pledge
36
A measure of a municipal issuer's ability to meet its obligations. It measures the debt level of the issuer in relation to the population.
Net debt per capita
37
A measure of the issuer's ability to meet its obligations and to raise additional revenue through property taxes.
Net debt to assessed valuation
38
The total amount of general obligation debt, including notes and short-term financing, issued by a municipality or state.
Net direct debt
39
The total amount of general obligation debt, including notes and short-term financing, issued by a municipality or state.
Negotiable certificate of deposit
40
A type of demand deposit that allows the holder to write checks against an interest-bearing account.
NOW account (negotiable order of withdraw)
41
The difference between the previous day's closing price and the price of the most recently reported trade for a security.
Net change
42
An NASD publication that outlines the rules and regulations of NASD membership. Now known as the FINRA Manual.
NASD manual
43
The clearing intermediary through which clearing member firms reconcile their securities accounts.
National securities clearing corporation
44
The net value of a mutual fund after deducting all its liabilities. A mutual fund must calculate its NAV at least once per business day. To determine NAV per share, simply divide the mutual fund's NAV by the total number of shares outstanding.
NAV- Net Assessed Value
45
An index that is based on a market sector or a limited number of securities.
Narrow based index
46
The industry self-regulatory agency that was authorized by the Maloney Act of 1938 and empowered to regulate the over-the-counter market. The NASD is now part of FINRA.
NASD (National Association of Securities Dealers)
47
The rules that define the operation of the NASD and how it regulates the over-the-counter market. The four major bylaws are the Rules of Fair Practice, the Uniform Practice Code, the Code of Procedure, and the Code of Arbitration. Now known as FINRA bylaws.
NASD bylaws
48
A qualified financial institution that maintains physical custody of a mutual fund's cash and securities. Custodians are usually banks, trust companies, or exchange member firms.
Mutual fund custodian
49
The sale of a call option without owning the underlying security or the sale of a put option without being short the stock or having cash on deposit that is sufficient to purchase the underlying security.
Naked
50
A service that provides real-time secondary market quotes. Munifacts is now known as Thomson Muni Market Monitor.
Munifacts
51
An investment company that invests in and manages a portfolio of securities for its shareholders. Open-end mutual funds sell their shares to investors on a continuous basis and must stand ready to redeem their shares upon the shareholder's request.
Mutual fund
52
An independent insurance company that will, for a fee received from the issuer, insure the interest and principal payments on a municipal bond.
Municipal Bond Investors Assurance Corp. (MBIA)
53
A short-term municipal issue sold to manage the issuer's cash flow, usually in anticipation of the offering of long-term financing.
Municipal note
54
The self-regulatory organization that oversees the issuance and trading of municipal bonds. The MSRB's rules are enforced by other industry SROs.
Municipal Securities Rulemaking Board (MSRB)
55
The ability of the money supply to grow simply through the normal course of banking. When banks and other financial institutions accept deposits and subsequently loan out those deposits to earn interest, the amount of money in the system grows.
Multiplier effect
56
A bond issued by a state or political subdivision of a state in an effort to finance its operations. Interest earned by investors in municipal bonds is almost always free from federal income taxes.
Municipal board
57
A mutual fund that invests in a portfolio of municipal debt in an effort to produce income that is free from federal income taxes for its investors.
Municipal bond fund
58
A mutual fund that invests in money market instruments to generate monthly interest for its shareholders. Money market mutual funds have a stable NAV that is equal to $1, but it is not guaranteed.
Money market mutual fund
59
The total amount of currency, loans, and credit in the economy. The money supply is measured by M1, M2, M3, and L.
Money supply
60
Economic policy that is controlled by the Federal Reserve Board and controls the amount of money in circulation and the level of interest rates.
Monetary policy
61
A theory that states that the money supply is the driving force in the economy and that a well managed money supply will benefit the economy.
Monetarist theory
62
Economic policy that is controlled by the Federal Reserve Board and controls the amount of money in circulation and the level of interest rates.
Monetary policy
63
The secondary market where short-term highly liquid securities are traded. Securities traded in the money market include T-bills, negotiable CDs, bankers' acceptances, commercial paper, and other short-term securities with less than 12 months to maturity.
Money market
64
A trade in an exchange-listed security that is at a price that is lower than the previous trade.
Minus tick
65
An investing approach that looks at the overall return and risk of a portfolio as a whole, not as a collection of single investments.
Modern portfolio theory
66
An accounting method that allows the owner to recover a larger portion of the asset's value in the early years of its life.
modified accelerated cost recovery system (MACRS)
67
A firm that is a member of the NYSE, FINRA, or another self-regulatory organization.
Member firm
68
A retail order entered by a member of a municipal bond syndicate for which the member will receive all of the sales credit.
Member order
69
A type of best efforts underwriting that states that the offering will not become effective until a minimum amount is sold and sets a maximum amount that may be sold.
Mini max underwriting
70
The compensation paid to a securities dealer for selling a security to a customer from its inventory.
Markup
71
FINRA's guideline that states that the price that is paid or received by an investor must be reasonably related to the market price for that security. FINRA offers 5% as a guideline for what is reasonable to charge investors when they purchase or sell securities.
Markup policy
72
Information that would affect a company's current or future prospects or an investor's decision to invest in the company.
Material information
73
A clause in an underwriting agreement that gives the syndicate the ability to cancel the underwriting if it finds a material problem with the information or condition of the issuer.
Market-out clause
74
The risk inherent in any investment in the market that states an investor may lose money simply because the market is going down.
Market risk/systematic risk
75
The value of a security that is determined in the marketplace by the investors who enter bids and offers for a security.
Market value
76
An order that will be executed at whatever price the market is at, either on the closing print or just prior to the closing print.
Market on close
77
An order that will be executed at whatever price the market is at, either on the opening print or just after the opening print.
Market on open
78
A type of order that will be executed immediately at the best available price once it is presented to the market.
Market order
79
A regular publication, usually issued by an investment adviser, that offers information and/or advice regarding a security, market conditions, or the economy as a whole.
Market letter
80
A Nasdaq firm that is required to quote a continuous two-sided market for the securities in which it trades.
Market maker
81
A type of order that gives the floor broker discretion over the time and price of execution.
Market not held
82
The profit earned by a dealer on a transaction when purchasing securities for its own account from a customer.
Markdown
83
The ability of an investment to be exchanged between two investors. A security with an active secondary market has a higher level of marketability than one whose market is not as active.
Marketability
84
A type of arbitrage that consists of purchasing a security in one marketplace and selling it in another to take advantage of price inefficiencies.
Market arbitrage
85
The monitoring of a the current value of a position relative to the price at which the trade was executed for securities purchased on margin or on a when-issued basis.
Mark to the market
86
The department in a broker dealer that calculates money owed by the customer or money due the customer.
Margin department
87
The lead underwriter in a syndicate who is responsible for negotiating with the issuer, forming the syndicate, and settling the syndicate account.
Managing underwriter
88
The amount of customer equity that is required to hold a position in a security.
Margin
89
An amendment to the Securities Exchange Act of 1934 that gave the NASD (now part of FINRA) the authority to regulate the over-the-counter market.
Maloney Act of 1938
90
An underwriting conducted by a syndicate led by the managing underwriter.
managed underwriting
91
A type of investment company that actively manages a portfolio of securities in order to meet a stated investment objective. Management companies are also known as mutual funds.
Management company
92
A demand for additional cash or collateral made by a broker dealer when a margin customer's account equity has fallen below the minimum requirement of the NYSE or that is set by the broker dealer.
Maintenance call
93
A promise made by an issuer of a municipal revenue bond to maintain the facility in good repair.
Maintenance covenant
94
An index created by the Amex to AMEX 15 of the 30 largest stocks in the Dow Jones Industrial Average.
Major market index- XMI
95
A measure of the money supply that includes M1 plus all time deposits, savings accounts, and noninstitutional money market accounts.
M2
96
The most liquid measure of the money supply. It includes all currency and demand and NOW deposits (checking accounts).
M1
97
A measure of the money supply that includes M2 and large time deposits, institutional money market funds, short-term repurchase agreements, and other large liquid assets.
M3
98
A loss realized through the sale of a security at a price that is lower than its purchase price after being held for more than 12 months.
Long term loss
99
A capital loss realized on the sale of an asset in 1 year that is carried forward in whole or part to subsequent tax years.
Loss carry forward
100
The lowest price at which a security has traded in any given period, usually measured during a trading day or for 52 weeks.
Low
101
The interbank rates for dollar-denominated deposits in England.
London Interbank Offered Rate (LIBOR)
102
A term used to describe an investor who owns a security.
Long
103
A security that trades on one of the exchanges. Only securities that trade on an exchange are known as listed securities.
Listed security
104
A portion of the margin agreement that allows the broker dealer to loan out the customer's securities to another customer who wishes to borrow them to sell the security short.
Loan consent agreement
105
A market condition that results when the bid and the offer for a security are equal.
Locked market
106
The ability of an investment to be readily converted into cash.
Liquidity
107
The risk that an investor may not be able to sell a security when needed or that selling a security when needed will adversely affect the price.
Liquidity risk
108
A standardized option contract that is traded on an exchange.
Listed option
109
An individual who has passed the Series 26 exam and may supervise Series 6 limited representatives.
limited principal
110
An individual who has passed the Series 6 exam and may represent a broker dealer in the sale of mutual fund shares and variable contracts.
Limited representative
111
A type of general obligation bond that is issued by a municipality that may not increase its tax rate to pay the debt service of the issue.
Limited tax bond
112
The foundation of all limited partnerships. The agreement is the contract between all partners, and it spells out the authority of the general partner and the rights of all limited partners.
Limited partnership agreement
113
Legal authorization for a representative or a firm to effect purchases and sales for a customer's account without the customer's prior knowledge. The authorization is limited to buying and selling securities and may not be given to another party.
limited power of attorney/limited trading authorization
114
An annuity payout option that provides a death benefit in case the annuitant dies during the accumulation stage.
Life contingency
115
An order that sets a maximum price that the investor will pay in the case of a buy order or the minimum price the investor will accept in the case of a sell order.
Limit order
116
A protection afforded to investors in securities that limits their liability to the amount of money invested in the securities.
Limited liability
117
An annuity payout option that provides payments over the life of the annuitant.
Life annuity/straight life
118
An annuity payout option that provides payments to the annuitant for life or to the annuitant's estate for the period certain, whichever is longer.
Life annuity with period certain
119
A Nasdaq workstation service that allows the order-entry firm to see the inside market, to view the quotes entered by all market makers, and to execute orders.
Level 2
120
A Nasdaq workstation service that allows market making firms to see the inside market, to view the quotes entered by all market makers, to execute orders, and to enter their own quotes for the security. This is the highest level of Nasdaq service.
Level 3
121
The use of borrowed funds to try to obtain a rate of return that exceeds the cost of the funds.
Leverage
122
A letter signed by the purchaser of mutual fund shares that states the investor's intention to invest a certain amount of money over a 13-month period. By agreeing to invest this sum, the investor is entitled to receive a lower sales charge on all purchases covered by the letter of intent. The letter of intent may be backdated up to 90 days from an initial purchase. Should the investor fail to invest the stated sum, a sales charge adjustment will be charged.
Letter of intent
123
A mutual fund share that charges a flat annual fee, such as a 12B-1 fee.
Level load
124
A municipal bond that is issued to finance the building of a facility that will be rented out. The lease payments on the facility will support the bond's debt service.
Lease rental bond
125
A list of securities that have been approved by certain state securities regulators for purchase by fiduciaries.
Legal list
126
An opinion issued by a bond attorney stating that the issue is a legally binding obligation of the state or municipality. The legal opinion also contains a statement regarding the tax status of the interest payments received by investors.
Legal option
127
A measurement of economic activity that changes prior to a change in economic activity. Leading economic indicators are useful in predicting a coming trend in economic activity. Leading economic indicators include housing permits, new orders for durable goods, and the S&P 500.
Leading indicator
128
An event where the broker on the sell side of the transaction fails to deliver the security.
Fail to deliver
129
An event where the broker on the buy side of the transaction fails to receive the security from the broker on the sell side.
Fail to receive
130
The agency that oversees all of the activities of the banks in the Federal Farm Credit System.
Farm Credit Administrator
131
The government insurance agency that provides insurance for bank depositors in case of bank failure.
Federal Deposit Insurance Corporation
132
An organization of banks that is designed to provide financing to farmers for mortgages, feed and grain, and equipment.
Federal Farm Credit System
133
The rate banks charge each other on overnight loans.
Federal funds rates
134
A publicly traded for-profit corporation that provides liquidity to the secondary mortgage market by purchasing pools of mortgages from lenders and, in turn, issues mortgage-backed securities.
Federal Home Loan Mortgage Corporation (FHLMC; Freddie Mac)
135
Provides short-term financing to farmers for equipment.
Federal Intermediate Credit Bank
136
A publicly traded for-profit corporation that provides liquidity to the secondary mortgage market by purchasing pools of mortgages and issuing mortgage-backed securities.
Federal National Mortgage Association (FNMA; Fannie Mae)
137
The committee of the Federal Reserve Board that makes policy decisions relating to the nation's money supply.
Federal Open Market Committee
138
A seven-member board that directs the policies of the Federal Reserve System. The members are appointed by the President and approved by Congress.
Federal reserve board
139
The nation's central banking system, the purpose of which is to regulate money supply and the extension of credit. The Federal Reserve System is composed of 12 central banks and 24 regional banks, along with hundreds of national and state chartered banks.
Federal reserve system
140
A quote that is not representative of an actual bid or offer for a security.
Fictitious quote
141
A bond that must be posted by all broker dealers to ensure the public against employee dishonesty.
Fidelity bonds
142
The official offering document for a security that contains the security's final offering price along with all information required by law for an investor to make an informed decision.
Final prospectus
143
Guarantees the issuer all of the money right away. The underwriters purchase all of the securities from the issuer regardless of whether they can sell the securities to their customers.
firm commitment underwriting
144
A quote displayed at which the dealer is obligated to buy or sell at least one round lot at the quoted price.
Firm quote
145
Government policy designed to influence the economy through government tax and spending programs. The President and Congress control fiscal policy.
Fiscal policy
146
FINRA's guideline that requires all prices paid by customers to be reasonably related to a security's market price. The 5% policy is a guideline, not a rule, and it does not apply to securities sold through a prospectus.
5% markup policy
147
An insurance contract where the insurance company guarantees fixed payments to the annuitant, usually until the annuitant's death.
Fixed annuity
148
Assets used by a corporation to conduct its business, such as plant and equipment.
Fixed assets
149
A term used to describe a bond that trades without accrued interest, such as a zero-coupon bond or a bond that is in default.
Flat
150
An individual member of an exchange who may execute orders on the floor.
Floor broker
151
A schedule of expenses and interested parties that prioritizes how payments will be made from the revenue generated by a facility financed by a municipal revenue bond.
Flow of funds
152
The calling in of convertible bonds at a price that is less than the market value of the underlying common stock into which the bonds may be converted.
Forced conversion
153
An option to purchase or sell a specified amount of another country's currency.
Foreign currency option
154
An annual report filed by a corporation detailing its financial performance for the year.
Form 10-K
155
A quarterly report filed by a corporation detailing its financial performance for the quarter.
Form 10-Q
156
A letter sent out by a brokerage firm or a registered representative to more than 25 people in a 90-day period. Form letters are subject to approval and
Form letter
