Glossary
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Accredited Investor: To qualify as an accredited investor for a Regulation D Private Placement, an investor must be either:
An investor not meeting one of these tests is considered Nonaccredited.
Accretion: A method of adjusting a taxpayer's cost basis of a bond bought at an original issue discount. The annual accretion is treated as interest for tax purposes. See also: Original Issue Discount; Constant Yield Method; and Straight-line.
Accrued Interest: The interest due on a bond since the last interest payment was made. The buyer of the bond pays the market price plus accrued interest.
Accumulation Account: An account used by the sponsor of a Unit Investment Trust to acquire securities for the eventual placement within the trust. See also: Unit Investment Trust.
Accumulation Period: In a variable annuity, the time when the client is contributing money into the annuity and purchasing accumulation units. See also: Accumulation Unit.
Accumulation Unit: An accounting measure that represents a contract owner's proportionate unit of interest in a separate account during the accumulation period of a variable annuity.
Acid Test Ratio: A more stringent test of a corporation's liquidity than the current ratio. It is calculated by adding cash, cash equivalents, and accounts and notes receivable and dividing that sum by the total current liabilities. It is also known as the Quick Asset Ratio.
ACRS: Accelerated Cost Recovery System: The IRS approved method of calculating depreciation expense for tax purposes. Also known as Accelerated Depreciation. See also: Depreciation.
Additional Bonds Test: A requirement that before additional bonds, which will be secured by assets or revenues already pledged to existing bonds, can be issued, specific financial requirements must be met. Generally, the main requirement is that debt service coverage for the original and new bonds must be at a specific level. See also: Open-end Indenture.
Additional Takedown: A portion of the underwriting spread for a municipal issue defined as total takedown less concession.
Adjustment Bond: See: Income Bond.
Administrator:
Ad Valorem Tax: A tax based on the assessed value of real property.
Advance Refunded Bonds: Bonds whose debt service is paid by escrowed funds. Also called Prerefunded Bonds.
Advance Refunding: A method of eliminating a bond issue as an obligation of the issuer. This is accomplished by issuing a new bond issue and using the proceeds to purchase government obligations which will be escrowed and used to provide debt service on the original issue. The escrowed funds may provide debt service until maturity of the original issue (escrowed to maturity) or until the first call date (prerefunded to the call). See also: Defeased Bonds.
Advertisement: A written or electronic communication in the public media such as newspapers, magazines, radio, and television addressed to an unknown audience. Contrast with: Sales Literature.
Advisory Fee: The fee paid to an investment adviser (portfolio manager) as compensation for managing a portfolio of securities. The fee is usually based on a percentage of assets under management or on an incentive schedule, providing compensation based on a comparison of fund performance to a particular index or average.
Affidavit of Domicile: A notarized affidavit executed by the legal representative of an estate reciting the residence of the decedent at the time of death. This document would be required when transferring ownership of a security from a deceased person's name.
Affiliate: See: Control Person.
Aftermarket: The Secondary Market. Used in reference to trading in a new issue. See also: Effective Date; Secondary Market.
Agency:
Agent: A securities firm acting on behalf of a client. The agent acts as intermediary between buyer and seller, undertaking no financial risk, and charging a commission (vs. Principal). See also: Broker.
All-or-none (AON):
Alpha: A statistical measure of a security's price volatility caused by factors other than the stock market as a whole. (vs. Beta.)
Alternative Minimum Tax (AMT): A tax designed to prevent wealthy investors from using tax shelters to avoid other (income) taxes. The calculation of the AMT takes into account tax preference items. See also: Tax Preference Item.
Ambac Indemnity Corporation (AMBAC): See: Insured Bonds.
American Depositary Receipt (ADR): A security issued by a U.S. bank in place of the foreign shares held in trust by that bank, thereby facilitating the trading of foreign shares in U.S. markets.
American Stock Exchange (AMEX): The second largest stock exchange in the United States, located in the financial district of New York City. (Formerly known as the Curb Exchange from its origin on a Manhattan street).
Amortization:
Annual Report: The formal financial statement issued yearly by a corporation. The annual report contains a balance sheet, income statement, and other information of interest to shareholders.
Annuitant: An investor who receives fixed or variable annuity payments.
Annuitize: An investor's decision to end the accumulation period and begin receiving periodic payments from an annuity.
Annuity: A contract between an insurance company and an individual. It generally guarantees lifetime income to the person on whose life the contract is based in return for either a lump sum or a periodic payment to the insurance company. A fixed annuity guarantees a specific amount of payment each month. In a variable annuity, the amount of the monthly check would fluctuate according to the value of the securities in the separate account.
Annuity Period: In a variable annuity, the time when the client is receiving benefits from the contract based on the number of units owned, payout option selected and the performance of the separate account. See also: Annuity Unit; Separate Account.
Annuity Unit: The accounting measure used to determine the amount of each payment to an annuitant during the payout period.
Anti-Money Laundering Rules: Laws designed to reduce financial transactions linked to illegal activities. See also: Currency Transaction Reports (CTRs), Currency and Monetary Instrument Transportation Reports (CMIRs), and Suspicious Activity Reports (SARs).
Arbitrage: A technique employed to take advantage of differences in prices across markets. Arbitrage may also involve the purchase of rights to subscribe to a security, or a convertible security, and the sale at or about the same time of the security underlying the rights or convertible security.
Arbitration: A method of settling a dispute by using an impartial individual or individuals. All exchanges and securities associations have adopted a Code of Arbitration through which all disputes between firms, employees and firms, and firms and clearing corporations are settled.
Arrearage: A past due obligation such as interest, or dividends on a cumulative preferred stock. See also: Cumulative Preferred.
Ascending Yield Curve: See: Positive Yield Curve.
Ask: See: Offer; Bid and Asked.
Assessed Valuation: The value of real estate that is used for tax purposes.
Assets: Everything a corporation owns or is due to it. Cash, investments, accounts receivable, and materials and inventories are called current assets. Buildings, machinery, and furniture and fixtures are known as fixed assets. Patents and goodwill are examples of intangible assets.
Assignment:
Associated Person: Under NASD rules,(i) a natural person who is registered or has applied for registration under the Rules of the NASD or (ii) a sole proprietor, partner, officer, director, or branch manager of a member, or other natural person occupying a similar status or performing similar functions, or a natural person engaged in the investment banking or securities business who is directly or indirectly controlling or controlled by a member, whether or not that person is registered.
Assumed Interest Rate (AIR): Rate of growth built into an annuity table which determines payout on a variable annuity.
At-the-Close Order: An order to buy or sell at the closing price. If not executed at the closing price, the order will be cancelled.
At-the-money: An option in which the underlying stock is trading precisely at the exercise price of the option.
At-the-Opening Order: An order to buy or sell at the opening price. If not executed at the opening, it will be canceled.
Auction Market: The system of trading securities through brokers or agents on an exchange such as the New York Stock Exchange. Exchange participants compete for trade executions where the best price wins. For those looking to buy securities, the highest bidder will obtain the securities, while for those looking to sell, the lowest offer receives priority.
Authorized Shares: The maximum number of common shares which a corporation may issue. This amount is set at the time of incorporation and is part of the Corporate Charter.
Automated Confirmation Transaction (ACT©) Service: Nasdaq’s service that receives trade reports from market makers in Nasdaq Global Market securities, Nasdaq Capital Market securities, CQS issues, OTC equity securities, and Nasdaq-listed convertible bonds within 90 seconds (during applicable hours). Also referred to as the Trade Reporting Facility (TRF).
Average Life: The average length of time that a bond issue is expected to be outstanding.
Averages: Various ways of measuring the trend of securities prices. See: Dow Jones Industrial Average.
Copyright © Securities Training Corporation. All Rights Reserved.
A
Accredited Investor: To qualify as an accredited investor for a Regulation D Private Placement, an investor must be either:
| (a) | an affiliate of the issuer, | |
| (b) | a financial institution, or | |
| (c) | an individual with $1 million net worth or $200,000 annual income. |
An investor not meeting one of these tests is considered Nonaccredited.
Accretion: A method of adjusting a taxpayer's cost basis of a bond bought at an original issue discount. The annual accretion is treated as interest for tax purposes. See also: Original Issue Discount; Constant Yield Method; and Straight-line.
Accrued Interest: The interest due on a bond since the last interest payment was made. The buyer of the bond pays the market price plus accrued interest.
Accumulation Account: An account used by the sponsor of a Unit Investment Trust to acquire securities for the eventual placement within the trust. See also: Unit Investment Trust.
Accumulation Period: In a variable annuity, the time when the client is contributing money into the annuity and purchasing accumulation units. See also: Accumulation Unit.
Accumulation Unit: An accounting measure that represents a contract owner's proportionate unit of interest in a separate account during the accumulation period of a variable annuity.
Acid Test Ratio: A more stringent test of a corporation's liquidity than the current ratio. It is calculated by adding cash, cash equivalents, and accounts and notes receivable and dividing that sum by the total current liabilities. It is also known as the Quick Asset Ratio.
ACRS: Accelerated Cost Recovery System: The IRS approved method of calculating depreciation expense for tax purposes. Also known as Accelerated Depreciation. See also: Depreciation.
Additional Bonds Test: A requirement that before additional bonds, which will be secured by assets or revenues already pledged to existing bonds, can be issued, specific financial requirements must be met. Generally, the main requirement is that debt service coverage for the original and new bonds must be at a specific level. See also: Open-end Indenture.
Additional Takedown: A portion of the underwriting spread for a municipal issue defined as total takedown less concession.
Adjustment Bond: See: Income Bond.
Administrator:
| (1) | A person appointed by the court to handle the assets and liabilities of a decedent, typically when the deceased died without a will (intestate). | |
| (2) | The official or agency that is empowered to supervise or conduct the Uniform Securities Act in each state. |
Ad Valorem Tax: A tax based on the assessed value of real property.
Advance Refunded Bonds: Bonds whose debt service is paid by escrowed funds. Also called Prerefunded Bonds.
Advance Refunding: A method of eliminating a bond issue as an obligation of the issuer. This is accomplished by issuing a new bond issue and using the proceeds to purchase government obligations which will be escrowed and used to provide debt service on the original issue. The escrowed funds may provide debt service until maturity of the original issue (escrowed to maturity) or until the first call date (prerefunded to the call). See also: Defeased Bonds.
Advertisement: A written or electronic communication in the public media such as newspapers, magazines, radio, and television addressed to an unknown audience. Contrast with: Sales Literature.
Advisory Fee: The fee paid to an investment adviser (portfolio manager) as compensation for managing a portfolio of securities. The fee is usually based on a percentage of assets under management or on an incentive schedule, providing compensation based on a comparison of fund performance to a particular index or average.
Affidavit of Domicile: A notarized affidavit executed by the legal representative of an estate reciting the residence of the decedent at the time of death. This document would be required when transferring ownership of a security from a deceased person's name.
Affiliate: See: Control Person.
Aftermarket: The Secondary Market. Used in reference to trading in a new issue. See also: Effective Date; Secondary Market.
Agency:
| (1) | Government securities issued by entities other than the U.S. Treasury. | |
| (2) | A transaction in which the broker-dealer acts as an agent (Broker). See also: Agent. |
Agent: A securities firm acting on behalf of a client. The agent acts as intermediary between buyer and seller, undertaking no financial risk, and charging a commission (vs. Principal). See also: Broker.
All-or-none (AON):
| (1) | A type of order where the client wants the entire order executed or none of it. | |
| (2) | A type of best efforts underwriting in which the issuer will sell the entire amount, or cancel the entire issue. |
Alpha: A statistical measure of a security's price volatility caused by factors other than the stock market as a whole. (vs. Beta.)
Alternative Minimum Tax (AMT): A tax designed to prevent wealthy investors from using tax shelters to avoid other (income) taxes. The calculation of the AMT takes into account tax preference items. See also: Tax Preference Item.
Ambac Indemnity Corporation (AMBAC): See: Insured Bonds.
American Depositary Receipt (ADR): A security issued by a U.S. bank in place of the foreign shares held in trust by that bank, thereby facilitating the trading of foreign shares in U.S. markets.
American Stock Exchange (AMEX): The second largest stock exchange in the United States, located in the financial district of New York City. (Formerly known as the Curb Exchange from its origin on a Manhattan street).
Amortization:
| (1) | Accounting procedure which gradually reduces the book value of an intangible asset through periodic charges to income; similar to depreciation for fixed assets. See also: Capitalize. | |
| (2) | Method of reducing a taxpayer's cost basis in a bond purchased at a premium. (vs. Accretion.) | |
| (3) | Reduction of debt through periodic payments of principal as in "self-amortizing" mortgages. |
Annual Report: The formal financial statement issued yearly by a corporation. The annual report contains a balance sheet, income statement, and other information of interest to shareholders.
Annuitant: An investor who receives fixed or variable annuity payments.
Annuitize: An investor's decision to end the accumulation period and begin receiving periodic payments from an annuity.
Annuity: A contract between an insurance company and an individual. It generally guarantees lifetime income to the person on whose life the contract is based in return for either a lump sum or a periodic payment to the insurance company. A fixed annuity guarantees a specific amount of payment each month. In a variable annuity, the amount of the monthly check would fluctuate according to the value of the securities in the separate account.
Annuity Period: In a variable annuity, the time when the client is receiving benefits from the contract based on the number of units owned, payout option selected and the performance of the separate account. See also: Annuity Unit; Separate Account.
Annuity Unit: The accounting measure used to determine the amount of each payment to an annuitant during the payout period.
Anti-Money Laundering Rules: Laws designed to reduce financial transactions linked to illegal activities. See also: Currency Transaction Reports (CTRs), Currency and Monetary Instrument Transportation Reports (CMIRs), and Suspicious Activity Reports (SARs).
Arbitrage: A technique employed to take advantage of differences in prices across markets. Arbitrage may also involve the purchase of rights to subscribe to a security, or a convertible security, and the sale at or about the same time of the security underlying the rights or convertible security.
Arbitration: A method of settling a dispute by using an impartial individual or individuals. All exchanges and securities associations have adopted a Code of Arbitration through which all disputes between firms, employees and firms, and firms and clearing corporations are settled.
Arrearage: A past due obligation such as interest, or dividends on a cumulative preferred stock. See also: Cumulative Preferred.
Ascending Yield Curve: See: Positive Yield Curve.
Ask: See: Offer; Bid and Asked.
Assessed Valuation: The value of real estate that is used for tax purposes.
Assets: Everything a corporation owns or is due to it. Cash, investments, accounts receivable, and materials and inventories are called current assets. Buildings, machinery, and furniture and fixtures are known as fixed assets. Patents and goodwill are examples of intangible assets.
Assignment:
| (1) | To sign a document to authorize transfer of ownership, either the stock/bond certificate itself or a separate authorization known as a stock power/bond power. | |
| (2) | Notice that an option has been exercised. |
Associated Person: Under NASD rules,(i) a natural person who is registered or has applied for registration under the Rules of the NASD or (ii) a sole proprietor, partner, officer, director, or branch manager of a member, or other natural person occupying a similar status or performing similar functions, or a natural person engaged in the investment banking or securities business who is directly or indirectly controlling or controlled by a member, whether or not that person is registered.
Assumed Interest Rate (AIR): Rate of growth built into an annuity table which determines payout on a variable annuity.
At-the-Close Order: An order to buy or sell at the closing price. If not executed at the closing price, the order will be cancelled.
At-the-money: An option in which the underlying stock is trading precisely at the exercise price of the option.
At-the-Opening Order: An order to buy or sell at the opening price. If not executed at the opening, it will be canceled.
Auction Market: The system of trading securities through brokers or agents on an exchange such as the New York Stock Exchange. Exchange participants compete for trade executions where the best price wins. For those looking to buy securities, the highest bidder will obtain the securities, while for those looking to sell, the lowest offer receives priority.
Authorized Shares: The maximum number of common shares which a corporation may issue. This amount is set at the time of incorporation and is part of the Corporate Charter.
Automated Confirmation Transaction (ACT©) Service: Nasdaq’s service that receives trade reports from market makers in Nasdaq Global Market securities, Nasdaq Capital Market securities, CQS issues, OTC equity securities, and Nasdaq-listed convertible bonds within 90 seconds (during applicable hours). Also referred to as the Trade Reporting Facility (TRF).
Average Life: The average length of time that a bond issue is expected to be outstanding.
Averages: Various ways of measuring the trend of securities prices. See: Dow Jones Industrial Average.
Copyright © Securities Training Corporation. All Rights Reserved.
