Terms Flashcards
10-K
A comprehensive summary report of a company’s performance that must be submitted annually to the Securities and Exchange Commission. Typically, the 10-K contains much more detail than the annual shareholder’s report.
10-Q
A comprehensive report of a company’s performance that must be submitted quarterly by all public companies to the Securities and Exchange Commission. In the 10-Q, firms are required to disclose relevant information regarding their financial position.
12b-1 Fee
An annual charge against the fund’s assets covering the mutual fund’s cost of advertising and marketing.
30-Day Visible Supply
A measure of all municipal securities offerings that are scheduled to come into the marketplace in the next 30 calendar days. It is published in the Daily Bond Buyer.
8-K
A report of unscheduled material events or corporate changes at a company that could be of importance to the shareholders or the Securities and Exchange Commission. Examples are acquisitions, bankruptcy, or a change in the fiscal year.
Access Persons
An SEC-defined term referring to registered investment advisers and their directors, officers, and partners, and supervised persons who have access to non-public information.
Accredited Investors
A defined term under the Securities Exchange Act of 1934 that covers numerous types of investors. Among that list is a natural person with earned income that exceeded $200,000 in each of the prior two years, and who reasonably expects the same for the current year OR who has a net worth over $1 million (excluding the value of the person’s primary residence), either alone or together with a spouse.
Accretion
The process of increasing the basis of a security issued at a discount and maturing at face value (typically used with zero-coupon bonds).
Accrued Interest
Represents interest that has accrued from the last interest payment date up to the sale of the bond. The buyer of the bond pays accrued interest to the seller.
Accumulation Unit
An accounting measure used to determine a variable annuity contract owner’s interest in the separate account of securities. Accumulation units are converted into annuity units when the accumulation period ends and the annuity period begins.
Acid Test (Quick) Ratio
Current Assets Less Inventory/ Current Liabilities
Active Asset Allocation
Refers to active “stock picking” and market timing to constantly rebalance the portfolio to attempt to obtain returns in excess of a specific benchmark or expected return.
Additional Bond Test
Before bonds of an additional issue having the same claim or lien on pledged revenues can be issued, an earnings test must be performed and satisfied.
Adjusted Gross Income (AGI)
he starting point to calculate federal income tax liability. Gross income minus adjustments equals AGI.
Advanced Computerized Execution System (ACES)
A voluntary FINRA order routing and execution system that provides market makers with the ability to automatically execute trades for authorized order entry firms in NASDAQ/NMS and NASDAQ Small Cap securities.
Administrator
The designated person in a state who administers the securities regulations of the state and administers the Uniform Securities Act.
Advances and Declines
The ratio of advancing stock prices to declining stock prices.
Advertising
The term “advertising” refers to material designed for use through a mass medium. A Broker-Dealer using advertising material cannot control who receives it as it may be transmitted by radio, television, or newspaper.
Affidavit of Domicile
Document that attests to the residence of a deceased person. In certain states, to transfer securities in a joint tenancy on the death of a tenant, an Affidavit of Domicile, Death Certificate, and Inheritance Tax Waiver must be completed.
Affiliated Person
Defined as someone who can influence management decisions in that corporation (i.e. insiders). May include officers, directors, principal stockholders, and members of their immediate families.
After-Tax Yield
Annual Interest x (100% - Investor’s Tax Rate)
Agency Cross
An agency cross means that the same broker represents the buyer and the seller in the same transaction.
Agent
Any individual other than a broker-dealer who represents a broker-dealer or issuer in effecting or attempting to effect purchases or sales of securities. An agent acts on behalf of a customer and charges a commission on a securities transaction.
All or None Order (AON)
This is an order to buy or sell securities which must be executed in its entirety or not at all. An “all or none order” does not have to be executed immediately.
Alpha
Statistical measurement that describes the expected return of a particular security relating to the security itself rather than market conditions.
Alternative Display Facility (ADF)
Is a display-only facility that is operated by FINRA as an alternative to the exchange used to post quotes, compare, and report trades for CQS-listed securities and NASDAQ equity securities.
Alternative Minimum Tax (AMT)
A Federal Income Tax designed to prevent taxpayers from escaping taxes by investing in Tax Preference Items.
Alternative Order
This order has either of two alternatives: For example, a customer places an order to either: Buy 1000 XYZ at 40 stop GTC, or Buy 1000 XYZ at 35 GTC. The execution of either order causes cancellation of the other order. If there is a partial execution, for example, 600 shares of XYZ are purchased at 35, the remaining open order becomes: Buy 400 XYZ at 40 stop GTC, or Buy 400 XYZ at 35 GTC
American Depositary Receipts (ADRs)
Represents receipts for shares in foreign corporations. By purchasing ADR’s, American investors receive dividends in American dollars through the bank that holds the shares.
American Style Options
Type of Option Style that can be exercised at any time after purchase
Amortization
An accounting procedure or process in which the premium of a bond is written off over its remaining life. Municipal bond premiums may be amortized by an investor. Amortization of a municipal or corporate bond decreases the cost basis of the bond. If the same amount is amortized each year, it is referred to as “straight-line amortization”.
And Interest (Plus Interest)
When a security trades “and interest”, interest is added to the purchase price. When an investor buys a bond, the investor pays the purchase price plus accrued interest.
Angel Investors
High net worth individuals who invest in small or “start-up” businesses and frequently advise on the management of the business.
Annual Fund Operating Expense
A type of mutual fund expense that covers the cost of regular and recurring operating expenses.
Annualized Return
Annual rate of return on an investment. It includes appreciation, capital gains or losses, dividends or interest, and other distributions.
Annuity
A contract sold by a life insurance company that guarantees a fixed or variable payment to the investor (annuitant) at a future date in time, generally retirement.
Annuity Units
An accounting measure used to determine the amount of each payment to the annuitant. The annuity unit fluctuates according to the value of the securities kept in a separate account. Annuity units exist after annuitization, whereas accumulation units exist before annuitization.
Arbitrage
Buying securities in one marketplace and selling them in another to take advantage of a price disparity. For example, buying 100 shares of ABC at 25 on the NYSE and immediately selling 100 shares of ABC at 25.25 in the OTC market.
Arbitration
A legally binding method of handling disputes which does not involve the court system. Arbitration is less costly and more efficient than regular litigation.
Ask
In equities trading, the ask (also referred to as offer) is the price at which a market maker is willing to sell shares to a buyer.
Asset Allocation Principles
“Asset Allocation” refers to how a client’s portfolio is invested. A certain percentage of the client’s assets are invested in varying asset classes such as equity securities, debt securities, and other investments. A client’s asset allocation will be determined by the agent or adviser and will depend heavily on the client’s investment objectives and risk tolerance.
Assets
Anything that carries value for the company on a balance sheet. This category includes Current Assets, Fixed Assets, and Other Assets.
Associated Person
An associated person of a broker-dealer means any partner, officer, director, or branch manager of a broker-dealer, any person directly or indirectly controlled by or under common control of a broker-dealer, and any employee of the broker-dealer except any person whose functions are solely clerical.
At-the-Money
Describes a situation where the market price of the underlying security and the strike price of the option are the same. For example, assume a customer buys 1 ABC July 40 call. If the underlying security, ABC, is selling at $40 per share, then the option is selling at-the money.
Authorized
Represents the maximum number of shares a company may legally create for issuance. These terms are included in the Articles of Incorporation.
