Term
| Acceptance, waiver & Consent |
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Definition
| A process for settling a charge or complaint that is quicker and less formal than the regular complaint procedure. |
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Term
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Definition
| An Investment Company Act of 1940 provision that allows a mutual fund to collect a fee for the promotion or sale of or another activity connected with the distribution of its shares. The must be reasonable (typically .25%-1% of net assets managed). |
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Term
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Definition
| A tax-deferred defined contribution retirement plan offered by an employer. |
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Term
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Definition
| A tax-deferred annuity retirement plan available to employees of public schools and certain non-profit organizations. |
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Term
| Access equals delivery model |
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Definition
| The securities industry has adopted this model for meeting prospectus delivery obligations. A prospectus will be deemed to precede or accompany a security for sale if the final prospectus has been filed with the SEC, in other words, an investor can see a copy of the final prospectus by logging on to the SEC website. The access equals delivery rule applies to the final prospectus and aftermarket prospectus delivery obligations. It does not apply to preliminary prospectuses, which still must be printer, nor does it apply to mutual funds, which must provide investors with a paper prospectus. |
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Term
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Definition
| As Defined in Rule 502 of Regulation D, any institution or individual meeting minimum net worth requirements for the purchase of securities qualifying under the Regulation D registration exemption. This is a person who generally: 1. Has a net worth of over $1 Million not including net equity in a primary residence or 2. Has had an annual income of over $200,000 during each of the two most recent years (or over $300,000 jointly with a spouse) and who has a reasonable expectation of reaching the same income level during the current year. |
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Term
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Definition
| An investor that has a net worth of $1 million or more, not including net equity in a primary residence; or has had an annual income of $200,000 or more in each of the two most recent years ($300,000 jointly with a spouse) and who has a reasonable expectation of reaching the same income level during the current year. |
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Term
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Definition
| The period during which contributions are made to an annuity account. |
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Term
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Definition
| An accounting measure used to determine an annuitant’s proportionate interest in the insurer’s separate account during an annuity’s accumulation (deposit) stage. |
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Term
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Definition
| The value attributed to an asset or security that reflects any deductions taken on, or capital improvements to, the asset or security. Adjusted basis is used to compute the gain or loss on the sale or other disposition of the asset or security. |
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Term
| Adjusted gross income (AGI) |
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Definition
| Earned income plus net passive income, portfolio income, and capital gains. |
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Term
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Definition
| (1) A person authorized by a court of law to liquidate an intestate decedent’s estate. (2) An official or agency that administers a state’s securities laws. |
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Term
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Definition
| Any promotional material designed for use by newspapers, magazines, billboards, radio, television, telephone recording, or other public media where the firm as little control over the type of individuals exposed to the material. |
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Term
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Definition
| (1) A person who directly or indirectly owns, controls, or holds with power to vote 10% or more of the outstanding voting securities of a company. (2) With respect to a direct participation program, any person who controls, is controlled by, or is under common control with the program’s sponsor and includes any person who beneficially owns 50% or more of the equity interest in the sponsor. (3) Under the investment Company Act of 1940, a person who has any type of control over an investment company’s operations, which includes anyone with 5% or more of outstanding voting securities of the investment company or any corporation of which the investment holds 5% or more of outstanding securities. |
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Term
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Definition
| A debt security issued by an authorized agency of the federal government. Such an issue is backed by the issuing agency itself, not by the full faith and credit of the U.S. government (except GNMA and Federal Import Export Bank issues). |
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Term
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Definition
| A transaction in which a broker- dealer acts for the accounts of others by buying or selling securities on behalf of customers. |
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Term
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Definition
| (1) An individual or a firm that effects securities transactions for the accounts of others. (2) A person licensed by a state as a life insurance agent. (3) A securities salesperson who represents a broker dealer or an issuer when selling or trying to sell securities to the investing public; this individual is considered an agent whether he actually receives or simply solicits orders. |
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Term
| Agreement Among Underwriters |
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Definition
| The agreement that sets forth the terms under which each member of an underwriting syndicate will participate in a new issue offering and states the duties and responsibilities of the underwriting manager. |
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Term
| Agreement of limited partnership |
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Definition
| The contract that establishes guidelines for the operation of a direct participation program, including the roles of the general and limited partners. |
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Term
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Definition
| An order that instructs the firm to execute the entire order. Firm does not have to execute immediately. |
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Term
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Definition
| An order to execute either of two transactions; for example, placing a sell limit (above the market) and a sell stop (below the market) on the same stock. |
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Term
| American Depositary Receipt (ADR) |
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Definition
| A negotiable U.S. security certificate representing a given number of shares of stock in a foreign corporation. It is bought and sold in the American securities markets, just as stock is traded. |
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Term
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Definition
| (1) The paying off of debt in regular installments over a period of time. (2) The ratable deduction of certain capitalized expenditures over a specified period of time. |
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Term
| Amortization of bond premium |
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Definition
| An accounting process whereby the initial cost of a bond purchased at a premium is decreased to reflect the basis of the bond as it approaches maturity. |
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Term
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Definition
| The annual meeting that all registered representatives and principals must attend, the purpose of which is to review compliance issues. |
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Term
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Definition
| A person who receives an annuity contract’s distribution. |
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Term
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Definition
| To change an annuity contract from the accumulation (pay-in) stage to the distribution (payout) stage. |
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Term
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Definition
| A contract between an insurance company and an individual, generally guaranteeing lifetime income to the individual on whose life the contract is based in return for either a lump-sum or a periodic payment to the insurance company. The contract holder’s objective is usually retirement income. |
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Term
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Definition
| An accounting measure used to determine the amount of each payment during an annuity’s distribution stage. The calculation take into account the value of each accumulation unit and such other factors as assumed interest rate and mortality risk. |
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Term
| Anti-money laundering (AML) |
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Definition
| Programs developed under the Bank Secrecy Act to prevent and detect the act of “clean” money or money that has been laundered through legitimate businesses later being used for “dirty” purposes such as terrorist activities. |
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Term
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Definition
| The increase in an asset’s value. |
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Term
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Definition
| The arrangement whereby FINRA or a designated arbitration association hears and settles disagreements between members, member organizations, their employees, and customers. |
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Term
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Definition
| An indication by a trader or a dealer of a willingness to sell a security or a commodity; the price at which an investor may buy from a broker-dealer. |
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Term
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Definition
| The value of a property as appraised by a taxing authority for the purpose of levying taxes. May equal market value or a stipulated percentage of market value. |
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Term
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Definition
| (1) Anything that an individual or a corporation owns. (2) A balance sheet item expressing what a corporation owns. |
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Term
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Definition
| A mutual fund that splits its investment assets among stocks, bonds, and other vehicles in an attempt to provide a consistent return for the investor. |
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Term
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Definition
| One whose value and income payments are backed by the expected cash flow from a specific pool of underlying assets. Pooling the assets into financial instruments allows them to be sold to investors more easily than selling them individually. This process is called securitization. |
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Term
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Definition
| A person who has acquitted a beneficial interest in a limited partnership from a third party, but who is neither a substitute limited partner nor an assignee of record. |
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Term
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Definition
| A persona who has acquired a beneficial interest in a limited partnership and whose interest has been recorded on the books of the partnership and is the subject of a written instrument of assignment. |
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Term
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Definition
| (1) A document accompanying or part of a stock certificate that is signed by the person named on the certificate for the purpose of transferring the certificate’s title to another person’s name. (2) The act of identifying and notifying an account holder that the option owner has exercised an option held short in that account. |
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Term
| Associated person of a member (AP) |
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Definition
| Any employee, manager, director, officer, or partner of a member broker-dealer or another entity or any person controlling, controlled by, or in common control with that member. |
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Term
| Assumed interest rate (AIR) |
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Definition
| The net rate of investment return that must be credited to a variable life insurance policy to ensure that at all times the variable death benefit equals the amount of the death benefit. Forms the basis for projecting payments, but it is not guaranteed. |
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Term
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Definition
| The term used to describe an option when the underlying stock is trading precisely at the exercise price of the option. |
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Term
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Definition
| An order that specifies it is to be executed at the opening of the market of trading in that security or else it is to be canceled. The order will be executed at the opening price. |
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Term
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Definition
| A market in which buyers enter competitive bids and sellers enter competitive offers simultaneously. The NYSE is an auction market. |
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Term
| Audited financial statement |
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Definition
| A financial statement of a program, a corporation, or an issuer (including the profit and loss statement, cash flow and source application of revenues statement, and balance sheet) that has been examined and verified by an independent certified public accountant. |
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Term
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Definition
| The number of shares of stock that a corporation can issue. This number of shares is stipulated in the corporation’s state-approved charter and may be changed by a vote of the corporation’s stockholders. |
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Term
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Definition
| The document enabling a municipal or state government to issue securities. The resolution provides for the establishment of a revenue fund in which receipts or income are deposited. |
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Term
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Definition
| Unless other instructions have been given, contracts that are in the money by a specified amount at expiration will automatically be exercised. The amount, determined by OCC, applies to both customer and institutional accounts. |
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Term
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Definition
| A price at a midpoint amount a number of prices. Technical analysts frequently use this a market indicators. |
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Term
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Definition
| An accounting method used when an investor has made multiple purchases at different prices of the same security; the method averages the purchase prices to calculate an investor’s cost basis in shares being liquidated. The difference between the average cost basis and the selling price determines the investor’s tax liability. |
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Term
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Definition
| A step in determining a bond’s yield to maturity. A bond’s average price is calculated by adding its face value to the price paid for it and dividing the result by two. |
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Term
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Definition
| The failure of a market maker to honor a firm bid and ask price. This violates the Conduct rule. |
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Term
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Definition
| A commission or sale fee that is charged when mutual fund shares or variable annuity contracts are redeemed. It declines annually, decreasing to zero over an extended holding period- up to eight years- as described in the prospectus. |
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Term
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Definition
| A mutual fund whose stated investment policy is to have at all times some portion of its investment assets in bonds and preferred stock, as well as in common stock, in an attempt to provide both growth and income. |
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Term
| Balance of payments (BOP) |
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Definition
| An international accounting record of all transactions made by one particular country with others during a certain time period; it compares the amount of foreign currency the country has taken in with the amount of its own currency it has paid out. |
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Term
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Definition
| The largest component of a country’s balance of payments; it concerns the export and import of merchandise (not services). Debit items include imports, foreign aid, domestic spending abroad, and domestic investments abroad. Credit items include exports, foreign spending in the domestic economy, and foreign investments in the domestic economy. |
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Term
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Definition
| A report of a corporation’s financial condition at a specific time. It identifies the value of the company’s assets (what it owns) and its liabilities (what it owes). The difference between these two figures is the corporation’s equity, or net worth. |
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Term
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Definition
| A formula stating that a corporation’s assets equal the sum of its liabilities plus shareholders’ equity. |
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Term
| Balanced investment strategy |
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Definition
| A method of portfolio allocation and management aimed at balancing risk and return. A balanced portfolio may combine stocks, bonds, packaged products, and cash equivalents. |
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Term
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Definition
| A repayment schedule for an issue of bonds wherein a large number of the bonds come due a prescribed time (normally at the final maturity date); a type of serial maturity. |
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Term
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Definition
| The document supplied by a commercial bank in which the bank certifies that a put writer has sufficient funds on deposit at the bank to equal the aggregate exercise price of the put; this releases the option writer from the option margin requirement. |
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Term
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Definition
| The act establishing the U.S. Treasury Department as the lead agency for developing regulation in connection with anti-money laundering programs, which require broker-dealers to establish internal compliance procedures to detect abuses. |
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Term
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Definition
| A money market instrument used to finance international and domestic trade. It is drawn on a bank by an importer or exporter of goods and represents the bank’s conditional promise to pay the face amount of the note at maturity (normally less than three months). |
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Term
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Definition
| A tool used by technical analysts to track the price movements of a commodity over several consecutive time periods. |
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Term
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Definition
| A measure of a bond’s yield, equal to 1/100 of 1% of yield. A bond whose yield increases from 5.0% to 5.5% is said to increase by 50 basis points. |
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Term
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Definition
| The price of a security quoted in terms of the yield that the purchaser may expect to receive. |
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Term
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Definition
| An investor who acts on the belief that a security or the market is falling or will fall. |
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Term
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Definition
| A market in which prices of a certain group of securities are falling or are expected to fall. |
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Term
| Best efforts underwriting |
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Definition
| A new issue securities underwriting in which the under writer acts as an agent for the issuer and puts forth his best efforts to sell as many shares as possible. The underwriter has no liability for unsold shares, unlike in a firm commitment underwriting. |
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Term
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Definition
| An indication by an investor, trader, or dealer of a willingness to buy a security; the price at which an investor may sell to a broker-dealer. |
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Term
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Definition
| In general, 10,000 shares of stock would be considered a block trade. |
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Term
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Definition
| To register a securities offering in a particular state. |
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Term
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Definition
| The equity issues of financially stable, well-established companies that have demonstrated their ability to pay dividends in both good and bad times. |
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Term
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Definition
| The nickname for state regulations governing the securities industry. The term was coined in the early 1900s by a Kansas Supreme Court justice who wanted regulation to protect against “speculative schemes that have no more basis than so many feet of blue sky.” |
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Term
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Definition
| (1) Individuals elected by stockholders to establish corporate management policies. A board of directors decides, among other issues, if and when dividends will be paid to stockholders. (2) The body that governs the NYSE. It is composed of 20 members elected by the NYSE general membership for a term of two years. |
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Term
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Definition
| An offer from a broker-dealer to buy or sell securities. It indicates a willingness to execute a trade under the terms and conditions accompanying the quote. |
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Term
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Definition
| An issuing company’s or government’s legal obligation to repay the principal of a loan to bond investors at a specified future date. Usually issued with par, or face, values of $1,000, representing the amount of money borrowed. The issuer promises to pay a percentage of the par value as interest on the borrowed funds. The interest payment is stated on the face of the bond at issue. |
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Term
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Definition
| An attorney retained by a municipal issuer to give an opinion concerning the legality and tax exempt status of a municipal issue. |
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Term
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Definition
| A mutual fund whose investment objective is to provide stable income with minimal capital risk. It invests in income-producing instruments, which may include corporate, government, or municipal bonds. |
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Term
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Definition
| One of a number of quotations listed in the financial press and most daily newspapers that provide representative bid prices from the previous day’s bond market. Quotes for corporate and government bonds are percentages of the bonds’ face values (usually $1,000). Corporate bonds are quoted in one-eight increments where a quote of 99 1/8 represents 99.125% of par ($1,000), or $991.25. Government bonds are quoted in 32nds. Municipal bonds may be quoted on a dollar basis or on a yield to maturity basis. |
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Term
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Definition
| An evaluation of the possibility of a bond issuer’s default, based on an analysis of the issuer’s financial condition and profit potential. Standard & Poor’s, Moody’s Investors Service, and Fitch Investors Service among others, provide these services. |
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Term
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Definition
| One of several tools used by bond analysts to assess the degree of safety offered by a corporation’s bonds. It measures the percentage of the corporation’s capitalization that is provided by long-term debt financing, calculated by dividing the total face value of the outstanding bonds by the total capitalization. |
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Term
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Definition
| The sale of a bond and the simultaneous purchase of a different bond in a like amount. The technique is used to control tax liability, extend maturity, or update investment objectives. |
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Term
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Definition
| The annual rate of return on a bond investment. Types of yield include nominal yield, current yield, yield to maturity, and yield to call. Their relationship vary according to whether the bond in question is at a discount, a premium, or at par. |
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Term
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Definition
| A measure of the net worth of each share of common stock. It is calculated by subtracting intangible assets and preferred stock from total net worth, then dividing the result by the number of shares of common outstanding. |
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Term
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Definition
| A security sold without delivery of a certificate. Evidence of ownership is maintained on records kept by a central agency; for example, the Treasury keeps records of the Treasury bill purchasers. Transfer of ownership is recorded by entering the change on the books or electronic files. |
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Term
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Definition
| Any location identified by any means to public as a place where a registered broker-dealer conducts business. |
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Term
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Definition
| The point at which gains equal losses. |
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Term
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Definition
| The schedule of sales charge discounts mutual fund offers for lump-sum or cumulative investments. |
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Term
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Definition
| The sale of mutual fund shares in an amount just below the level at which the purchaser would qualify for reduced sales charges. This violates the Conduct Rules. |
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Term
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Definition
| An index designed to reflect the movement of the market as a whole. Examples include the S&P 100, The S&P 500, the major market index and the value line composite index. |
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Term
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Definition
| (1) An individual or a firm that charges a fee or commission for executing buy and sell orders submitted by another individual or firm. (2) The role of a firm when it acts as an agent for a customer and charges the customer a commission for its services. |
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Term
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Definition
| Money loaned to a brokerage firm by a commercial bank or other lending institution for financial customers’ margin account debit balances. |
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Term
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Definition
| A person or firm in the business of buying and selling securities. A firm may act as both broker (agent) and dealer (principal), but not in the same transaction. Broker-dealers normally must register with the SEC, the appropriate SROs, and any state in which they do business. |
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Term
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Definition
| An investor who acts on the belief that a security or the market is rising or will rise. |
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Term
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Definition
| A market in which prices of a certain group of securities are rising or will rise. |
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Term
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Definition
| A predictable long-term pattern of alternating periods of economic growth and decline. The cycle passes through four stages: expansion, peak, contraction, and trough. |
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Term
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Definition
| A day on which financial markets are open for trading. Saturdays, Sundays, and legal holidays are not considered business days. |
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Term
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Definition
| An order to buy a security that is entered at a price above the current offering price and that is triggered when the market price touches or goes through the buy stop price. |
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Term
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Definition
| A settlement contract that calls for delivery and payment according to a number of days specified by the buyer. |
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Term
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Definition
| The procedure that the buyer of a security follows when the seller fails to complete the contract by buying the security in the open market and charging the account of the seller’s option. |
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Term
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Definition
| The amount of fully margined securities that a margin client may purchase using only the cash, securities, and special memorandum account balance and without depositing additional equity. |
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Term
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Definition
| An option contract giving the owner the right to buy a specified amount of an underlying security at a specified price within a specified time. |
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Term
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Definition
| An investor who pays a premium for an option contract and receives, for a specified time, the right to buy the underlying security at a specified price. |
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Term
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Definition
| The date, specified in the prospectus of every callable security, after which the security’s issuer has the option to redeem the issue at a par or at par plus a premium. |
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Term
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Definition
| A collateralized loan of a brokerage firm having no maturity date that may be called (terminated) at any time. The loan has a fluctuating interest rate that is recomputed daily. Generally, the loan is payable on demand the day after it is contracted. If not called, the loan is automatically renewed for another day. |
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Term
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Definition
| The rate of interest a brokerage firm charges its margin account clients on their debit balance. Also known as the Broker loan rate. |
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Term
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Definition
| The price usually a premium over the issue’s par value, at which preferred stocks or bonds may be redeemed before issue’s maturity. |
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Term
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Definition
| A provision in a bond indenture stating that the issue is non-callable for a certain period of time (e.g. 5 years or 10 years) after the original issue date. |
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Term
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Definition
| The written agreement between an issuing corporation and its bondholders or preferred stockholders giving the corporation the option to redeem its senior securities at a specified price before maturity and under certain conditions. |
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Term
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Definition
| The potential for a bond to be called before maturity, leaving the investor without the bond’s current income. Because this is more likely to occur during times of falling interest rates, the investor may not be able to reinvest the principal at a comparable rate of return. |
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Term
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Definition
| An investor who receives a premium and takes on, for a specified time, the obligation to sell the underlying security at a specified price at the call buyer’s discretion. |
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Term
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Definition
| A type of bond issued with a provision allowing the issuer to redeem the bond before maturity at a predetermined price. |
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Term
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Definition
| A type of preferred stock issued with a provision allowing the corporation to call in the stock at a certain price and retire it. |
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Term
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Definition
| Accumulated money or goods available for use in producing more money or goods. |
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Term
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Definition
| A rise in an asset’s market price. |
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Term
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Definition
| The amount of a participant’s investment in a direct participation program, not including units purchased by the sponsors. |
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Term
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Definition
| The profit realized when a capital asset is sold for a higher price than the purchase price. |
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Term
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Definition
| The loss incurred when a capital asset is sold for a lower price than the purchase price. |
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Term
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Definition
| The Segment of the securities market that deals in instruments with more than one year to maturity – that is, long-term debt and equity securities. |
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Term
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Definition
| The potential for an investor to lose all money invested owing to circumstances unrelated to an issuer’s financial strength. For example, derivative instruments such as options carry risk independent of the underlying securities’ changing value. |
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Term
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Definition
| All of a corporation’s outstanding preferred stock and common stock listed at par value. |
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Term
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Definition
| The composition of long-term funds (equity and debt) a corporation has as a source for financing. |
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Term
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Definition
| The sum of a corporation’s long-term debt, stock, and surpluses. |
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Term
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Definition
| Placing selling pressure on a stock in an attempt to keep its price low or move its price lower; this violates the Conduct Rules. |
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Term
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Definition
| A sharing arrangement in an oil and gas direct participation program whereby the general partner shares the tangible drilling costs with the limited partners, but pays no part of the intangible drilling costs. |
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Term
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Definition
| An account in which the customer is required by the SEC’s Regulation T to pay in full for securities purchased not later than two days after the standard payment period set by the uniform practice code. |
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Term
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Definition
| Money paid to a corporation’s stockholders out of the corporation’s current earnings or accumulated profits. The board of directs mush declare all dividends. |
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Term
|
Definition
| A security that may be readily converted into cash. Examples include Treasury bills, certificates of deposit, and money market instruments and funds. |
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Term
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Definition
| The money received by a business minus the money paid out. Cash flow is also equal to net income plus depreciation or depletion. |
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Term
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Definition
| A settlement contract that calls for delivery and payment on the same day the trade is executed. Payment is due by 2:30 pm ET or within 30 minutes of the trade if it occurs after 2:00 pm ET. |
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Term
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Definition
| The department within a brokerage firm that delivers securities and money to and receives securities and money from other firms and clients of the brokerage firm. |
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Term
| Chicago Board Options Exchange (CBOE) |
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Definition
| The self-regulatory organization with jurisdiction over all writing and trading of standardized options and related contracts listed on that exchange. Also, the first national securities exchange for the trading of listed options. |
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Term
| Chicago Stock Exchange (CHX) |
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Definition
| Regional exchange that provides a listed market for smaller businesses and new enterprises. In 1949, the exchange merged with the St. Louis, Cleveland and Minneapolis/ St. Paul exchanges to form the Midwest Stock Exchange, but in 1993, the original name was reinstated. |
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Term
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Definition
| Excessive trading in a customer’s account by a registered representative who ignores the customer’s interests and seeks only to increase commissions. This violates the conduct rules. |
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Term
|
Definition
| A dealer willing to accept the risk of holding a particular security in its own account to facilitate trading in that security. |
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Term
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Definition
| Options of the same type on the same underlying security. |
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Term
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Definition
| A class of mutual fund share issued with a front-end sales load. |
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Term
|
Definition
| A class of mutual fund shares issued with a back-end sales load. |
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Term
|
Definition
| A class of mutual fund share issued with a level load. |
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Term
|
Definition
| A class of mutual fund share issued with both a level load and a back-end load. |
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Term
|
Definition
| An intermediary between the buy and sell sides in a securities transaction that receives and delivers payments and securities. Any organization that fills this function, including a securities depository but not including a Federal Reserve Bank, is considered a clearing agency. |
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Term
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Definition
| A broker-dealer (BD) that clears its own trades as well as those of introducing brokers. A clearing BD may hold customers’ securities and cash. |
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Term
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Definition
| The price of the last transaction for a particular security on a particular day. |
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Term
| Closed-end investment or management company |
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Definition
| An investment company that issues a fixed number of shares in an actively managed portfolio of securities. The shares may be of several classes; they are traded in the secondary marketplace, either on an exchange or over the counter. The market price of the shares is determined by supply and demand and not by net asset value. |
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Term
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Definition
| The date designated by the general partners in a direct participation program as the date when sales of units in the program cease; typically, the offering period extends for one year. |
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Term
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Definition
| An options transaction in which the seller buys back an option in the same series; the two transactions effectively cancel each other out, and the position is liquidated. |
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Term
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Definition
| The relatively narrow range of prices at which transactions take place during the final minutes of the trading day. |
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Term
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Definition
| An options transaction in which the buyer sells an option in the same series; the two transactions effectively cancel each other out, and the position is liquidated. |
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Term
| Code of Arbitration Procedure |
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Definition
| The formal method of handling securities-related disputes or clearing controversies between member firms or associated persons must be submitted to arbitration. |
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Term
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Definition
| The formal procedure for handling trade practice complaints involving violations of the Conduct Rules. The Department of Enforcement (DOE) is the first body to hear and judge complaints. The National Adjudicatory Council handles appeals and review of DOE Decisions. |
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Term
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Definition
| A measureable economic factor that varies directly and simultaneously with the business cycle, thus indicating the current state of the economy. Examples include nonagricultural employment, personal income, and industrial production. |
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Term
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Definition
| Certain assets set aside and pledged to a lender for the duration of a loan. If the borrower fails to meet obligations to pay principal or interest, the lender has claim to the assets. |
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Term
| Collateralized mortgage obligation (CMO) |
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Definition
| A mortgage-backed corporation security. Unlike pass-through obligations issued by FNMA and GNMA, its yield is not guaranteed, and it does not have the federal government’s backing. These issues attempt to return interest and principal at a predetermined rate. |
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Term
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Definition
| (1) For corporations, a rough measure of the length of time accounts receivable have been outstanding. It is calculated by multiplying the receivables by 360 and dividing the result by net sales. (2) For municipal bonds, a means of detecting deteriorating credit conditions; it is calculated by dividing taxes collected by taxes assessed. |
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Term
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Definition
| An equity mutual fund that attempts to combine the objectives of growth and current yield by dividing its portfolio between companies that show long-term growth potential and companies that pay high dividends. |
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Term
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Definition
| A customer account that has cash and long and short term margin positions in different securities. |
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Term
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Definition
| An institution that is in the business of accepting deposits and making business loans. Commercial banks may not underwrite corporate securities or most municipal bonds. |
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Term
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Definition
| An unsecured, short-term promissory note issued by a corporation for financing accounts receivable and inventories. It is usually issued at a discount reflecting prevailing market interest rates. Maturities range up to 270 days. |
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Term
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Definition
| (1) The combining by a brokerage firm of one customer’s securities with another customer’s securities and pledging them as joint collateral for a bank loan; unless authorized by the customers, this violates SEC Rule 15c2-1. (2) The combining by a brokerage firm of customer securities with firm securities and pledging them as joint collateral for a bank loan; this practice is prohibited. |
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Term
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Definition
| A service charge an agent assesses in return for arranging a security’s purchase or sale. A commission must be fair and reasonable, considering all the relevant factors of the transaction. |
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Term
| Commission house broker (CHB) |
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Definition
| A member of an exchange who is eligible to execute orders for customers of a member firm on the floor of the exchange. |
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Term
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Definition
| The state official with jurisdiction over insurance transactions. |
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Term
| Committee on Uniform Securities Identification Procedures (CUSIP) |
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Definition
| A committee that assigns identification numbers and codes to all securities to be used when recording all buy and sell orders. |
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Term
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Definition
| A security that represents ownership in a corporation. Holders exercise control by electing a board of directors and voting on corporate policy. |
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Term
| Communications with the public |
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Definition
| FINRA categorizes public communications into three categories: retail, institutional, and correspondence. |
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Term
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Definition
| The department within a brokerage firm that oversees the firm’s trading and market making activities. It ensures that the firm’s employees and offers abide by the rules and regulations of the SEC, exchanges, and SROs. |
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Term
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Definition
| Regulations designed to ensure that FINRA member firms and their representatives follow fair and ethical trade practices when dealing with the public. The rules complement and broaden the Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Company Act of 1940. |
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Term
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Definition
| A means for an investment company to avoid taxation on net investment income distributed to shareholders. If a mutual fund acts as a conduit for the distribution of net investment income, it may qualify as a regulated investment company and be taxed only on the income the fund retains. |
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Term
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Definition
| The date on which the IRS considers that a taxpayer receives dividends or other income. |
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Term
| Consumer Price Index (CPI) |
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Definition
| A measure of price changes in consumer goods and services used to identify periods of inflation or deflation. |
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Term
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Definition
| A term used by Keynesian economists to refer to the purchase by household units of newly produced goods and services. |
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Term
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Definition
| A person who enters a trade at or near the same time and in the same security as a person who has inside information. The contemporaneous trader may bring suit against the inside trader. |
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Term
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Definition
| An order that is conditional upon the execution of a previous order and that will be executed only after the first order is filled. |
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Term
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Definition
| The broker on the buy side of a sell order, or on the sell side of a buy order. |
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Term
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Definition
| A period of general economic decline - one of the business cycle’s four stages. |
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Term
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Definition
| A monetary policy that decreases the money supply, usually with the intention of raising interest rates and combating inflation. |
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Term
| Control (controlling, controlled by, under common control with) |
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Definition
| The power to direct or affect the direction of a company’s management and policies, whether through the ownership of voting securities, by contract or otherwise. Control is presumed to exist if a person directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing at least 10% of a company’s voting securities. |
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Term
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Definition
| (1) A director, an officer, or another affiliate of an issuer. (2) A stockholder who owns at least 10% of any class of a corporation’s outstanding securities. Who owns a security, not the security itself, determines whether it is a control security. |
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Term
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Definition
| Any security owned by a director, an officer, or another affiliate of the issuer or by a stockholder who owns at least 10% of any class of a corporation’s outstanding securities. Who owns a security, not the security itself, determines whether it is a control security. |
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Term
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Definition
| Two securities, one of which may be converted into the other, of equal dollar value. A convertible security holder can calculate parity to help decide whether converting would lead to gain or loss. |
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Term
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Definition
| The dollar amount of a convertible security’s par value that is exchangeable for one share of common stock. |
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Term
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Definition
| A feature the issuer adds to a security that allows the holder to change the security into shares of common stock. This makes the security attractive to investors and, therefore, more marketable. |
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Term
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Definition
| The number of shares of common stock per par value amount that the holder would receive for converting a convertible bond or preferred share. |
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Term
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Definition
| The total market value of common stock into which a senior security is convertible. |
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Term
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Definition
| A Debt security, usually in the form of a debenture, that may be exchanged for equity securities of the issuing corporation at specified prices or rates. |
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Term
| Convertible preferred stock |
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Definition
| An equity security that may be exchanged for common stock at specified prices or rates. Dividends may be cumulative or noncumulative. |
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Term
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Definition
| The period (minimum of 20 days) between a registration statement’s filing date and the registration’s effective date. In practice, the period varies in length. During this time underwriters may not: · Make offers to sell securities · Take orders · Distribute sales literature or advertising material They may: · Take indications of interest · Distribute preliminary prospectuses · Publish tombstone advertisements to provide information about the potential availability of the securities. |
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Term
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Definition
| An account held in a corporation’s name. The corporate agreement, signed when the account is opened, specifies which officers are authorized to trade in the account. In addition to standard margin account documents, a corporation must provide a copy of its charter and bylaws authorizing a margin account. |
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Term
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Definition
| A debt security issued by a corporation. Typically has a par value of $1,000, is taxable, has a term maturity, and is traded on a major exchange. |
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Term
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Definition
| The most common form of business organizations, in which the organization’s total worth is divided into shares of stock, each share representing a unit of ownership. A corporation is characterized by a continuous life span and its owners’ limited liability. |
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Term
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Definition
| FINRA defines this category of communications with the public as any written (including electronic) communication that is distributed or made available to 25 or fewer retail investors within any 30-calendar-day period. |
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Term
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Definition
| The price paid for an asset, including any commissions or fees, used to calculate capital gains or losses when the asset is sold. |
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Term
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Definition
| A term used to describe municipal entities that share the same boundaries. For example, a municipality’s school district and fire district may issue debt separately although the debt is backed by revenues from the same taxpayers. |
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Term
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Definition
| A debt obligation with attached coupons representing semiannual interest payments. The holder submits the coupons to the trustee to receive the interest payments. The issuer keeps no record of the purchaser, and the purchaser’s name is not printed on the certificate. |
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Term
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Definition
| A component of a debt issue’s trust indenture that identifies bondholders’ rights and other provisions. Examples include rate covenants that establish a minimum revenue coverage for a bond; insurance covenants that require insurance on a project; and maintenance covenants that require maintenance on a facility constructed by the proceeds of a bond issue. |
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Term
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Definition
| An investor who sells a call option while owning the underlying security or some other asset that guarantees the ability to deliver if the call is exercised. |
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Term
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Definition
| An investor who sells a put option while owning an asset that guarantees the ability to pay if the put is exercised. |
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Term
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Definition
| A component of a customer’s margin account agreement, outlining the conditions of the credit arrangement between broker and customer. |
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Term
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Definition
| The amount of money remaining in a customer’s account after all commitments have been paid in full. |
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Term
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Definition
| The degree of probability that a bond’s issuer will default in the payment of either principal or interest. |
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Term
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Definition
| Any broker or dealer, member of a national securities exchange, or person associated with a broker-dealer involved in extending credit to customers. |
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Term
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Definition
| A term describing stock trading with rights. |
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Term
| Cumulative preferred stock |
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Definition
| An equity security that offers the holder any unpaid dividends in arrears. These dividends accumulate and must be paid to the cumulative preferred stockholder before any dividends may be paid to the common stockholders. |
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Term
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Definition
| A voting procedure that permits stockholders either to cast all of their votes for any one candidate or to cast their total number of votes in any proportion they chose. This results in greater representation for minority stockholders. |
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Term
| Currency transaction report (CTR) |
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Definition
| A report filed by financial institutions to the IRS for deposits of any currency on a single day of more than $10,000. |
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Term
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Definition
| Cash and other assets that are expected to be converted into cash within the next 12 months. Examples include such liquid items as cash and equivalents, accounts receivable, inventory, and prepaid expenses. |
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Term
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Definition
| A corporation’s debt obligations due for payment within the next 12 months. Examples include accounts payable, accrued wages payable, and current long-term debt. |
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Term
| Current market value (CMV) |
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Definition
| The worth of the securities in an account. The market value of listed securities in an account. The market value of listed securities is based on the closing prices on the previous business day. |
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Term
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Definition
| A measure of a corporation’s liquidity; that is, its ability to transfer assets into cash to meet current short-term obligations. It is calculated by dividing total current assets by total current liabilities. |
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Term
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Definition
| The annual rate of return on a security, calculated by dividing the interest or dividends paid by the security’s current market price. |
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Term
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Definition
| An account in which a custodian enters trades on behalf of the beneficial owner, often a minor. |
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Term
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Definition
| An institution or a person responsible for making all investment, management, and distribution decisions in an account maintained in the best interests of another. Mutual funds have custodians responsible for safeguarding certificates and performing clerical duties. |
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Term
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Definition
| Any person who opens a trading account with a broker-dealer. A customer may be classified in terms of account ownership, trading authorization, payment method, or types of securities traded. |
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Term
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Definition
| A document that a customer must signed when opening a margin account with a broker-dealer; it allows the firm to liquidate all or a portion of the account if the customer fails to meet a margin call. |
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Term
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Definition
| The accounting record that lists separately all customer cash and margin accounts carried by a firm. |
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Term
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Definition
| A document showing a customer’s trading activity, positions, and account balance. The SEC requires that customer statements be sent quarterly, but customers generally receive them monthly. |
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Term
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Definition
| Highly sensitive to business cycles and inflation trends. This industry usually produces durable goods, such as heavy machinery, and raw materials, such as steel and automobiles. |
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Term
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Definition
| A fundamental analysis term for an industry that is sensitive to the business cycle and price changes. Most cyclical industries produce durable goods, such as raw materials and heavy equipment. |
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Term
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Definition
| The date on which interest on a new bond issue begins to accrue. |
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Term
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Definition
| An order that is valid only until the close of trading on the day it is entered; if it is not executed by the close of trading, it is canceled. |
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Term
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Definition
| A trader in securities who opens all positions after the opening of the market and offsets or closes out all positions before the close of the market on the same day. |
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Term
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Definition
| (1) An individual or a firm engaged in the business of buying and selling securities for its own account, either directly or through a broker. (2) The role of a firm when it acts as a principal and charges the customer a markup or markdown. |
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Term
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Definition
| Short-term, unsecured promissory notes that the issuer sells through a dealer rather than directly to the public. |
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Term
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Definition
| A debt obligation backed by the issuing corporation’s general credit. |
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Term
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Definition
| The amount of money a customer owes a brokerage firm. |
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Term
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Definition
| Raising money for work capital or for capital expenditures by selling bonds, bills, or notes to individual or institutional investors. In return for the money lent, the investors become creditors and receive the issuer’s promise to repay principal and interest on the debt. |
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Term
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Definition
| A security representing an investor’s loan to an issuer such as a corporation, a municipality, the federal government, or a federal agency. In return for the loan, the issuer promises to repay the debt on a specified date and to pay interest. |
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Term
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Definition
| The schedule for repayment of interest and principal (or the scheduled sinking fund contribution) on an outstanding debt. |
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Term
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Definition
| The ratio of total long-term debt to total stockholders’ equity; it is used to measure leverage. |
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Term
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Definition
| The date on which a corporation announces an upcoming dividend’s amount, payment date and record date. |
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Term
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Definition
| The failure to pay interest or principal promptly when due. |
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Term
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Definition
| Least affected by normal business cycles. They generally produce nondurable consumer goods, such as food, pharmaceuticals, and tobacco, or supply essential services such as utility companies. Investments tend to involve less risk and, consequently, lower investment returns. |
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Term
| Defensive investment strategy |
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Definition
| A method of portfolio allocation and management aimed at minimizing the risk of losing principal. Defensive investors place a high percentage of their investable assets in bonds, cash equivalents, and stocks that are less volatile than average. |
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Term
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Definition
| An annuity contract that delays payment of income, installments, or a lump sum until the investor elects to receive it. |
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Term
| Deferred compensation plan |
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Definition
| A nonqualified retirement plan whereby the employee defers receiving current compensation in favor of a larger payout at retirement (or in the case of disability or death). |
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Term
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Definition
| The SEC’s notification of additions or corrections that a prospective issuer must make to a registration statement before the SEC will clear the offering for distribution. |
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Term
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Definition
| A qualified retirement plan that specifies the total amount of money that the employee will receive at retirement. |
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Term
| Defined contribution plan |
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Definition
| A qualified retirement plan that specifies the amount of money that the employer will contribute annually to the plan. |
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Term
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Definition
| A persistent and measureable fall in the general level of prices. |
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Term
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Definition
| The change in ownership or in control of a security in exchange for cash. Delivery takes place on the settlement date. |
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Term
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Definition
| A consumer’s desire and willingness to pay for a good or service. |
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Term
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Definition
| A sum of money left with a bank (or borrowed from a bank and left on deposit) that the depositing customer has the right to withdraw immediately. |
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Term
| Department of the Treasury |
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Definition
| Oversees the collection of taxes. |
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Term
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Definition
| A tax deduction that compensates a business for the decreasing supply of the natural resource that provides its income (oil, gas, coal, gold or other nonrenewable resource). There are two ways to calculate depletion: cost depletion and percentage depletion. |
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Term
| Depository Trust & Clearing Corporation (DTCC) |
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Definition
| Is a member of the federal Reserve System, and is not in the retail banking business (one can’t open a savings or checking account there). The DTCC provides automated clearing and settlement services in book-entry format to banks and BDs for stock and bond trades and employs a continuous net settlement (CNS) system. The DTCC and its subsidiaries also function as a central securities depository by providing custody and safekeeping services in more than 60 countries worldwide. |
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Term
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Definition
| (1) A tax deduction that compensates a business for the cost of certain tangible assets. (2) A decrease in the value of a particular currency relative to other currencies. |
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Term
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Definition
| A bookkeeping entry of a noncash expense charge against earnings to recover the cost of an asset over its useful life. |
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Term
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Definition
| A prolonged period of general economic decline. |
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Term
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Definition
| An investment vehicle, the value of which is based on another security’s value. Futures contracts, forward contracts, and options are among the most common types of derivatives. Institutional investors generally use derivatives to increase overall portfolio return or to hedge portfolio risk. |
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Term
| Designated market maker (DMM) |
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Definition
| Previously known as specialists, they are exchange members who are assigned to securities on the trading floor and are charged with keeping a fair and orderly market in those securities while providing liquidity to the marketplace. |
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Term
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Definition
| A substantial fall in a currency’s value, compared with the value of gold or to the value of another country’s currency. |
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Term
| Developmental drilling program |
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Definition
| A limited partnership that drills for oil, gas, or minerals in areas of proven reserves or near existing fields. |
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Term
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Definition
| A reduction in earnings per share of common stock. Dilution occurs through the issuance of additional shares of common stock and the conversion of convertible securities. |
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Term
| Direct participation program (DPP) |
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Definition
| A business organized so as to pass all income, gains, losses, and tax benefits to its owners, the investors; the business is usually structured as a limited partnership. Examples include oil and gas programs, condominium securities, and Subchapter S corporate offerings. |
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Term
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Definition
| The difference between the lower price paid for a security and the security’s face amount at issue. |
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Term
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Definition
| A bond that sells at a lower price than its face value. |
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Term
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Definition
| The interest rate charged by the 12 Federal Reserve Banks for short-term loans made to member banks. Also indicates the direction of FRB monetary policy – a decreasing rate indicates an easing of FRB policy, and an increasing rate indicates a tightening of FRB policy. |
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Term
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Definition
| The authority given to someone other than an account’s beneficial owner to make investment decisions for the account concerning the security, the number of shares or units, and whether to buy or sell. The authority to decide only timing or price does not constitute discretion. |
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Term
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Definition
| An account in which the customer has given the registered representative authority to enter transactions at the representative’s discretion. |
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Term
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Definition
| The sum that people divide between spending and personal savings. |
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Term
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Definition
| A sharing arrangement whereby the sponsor in an oil and gas direct participation program pays a portion of the program’s costs but receives a disproportionately higher percentage of its revenues. |
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Term
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Definition
| Any cash or other property distributed to shareholders or general partners that arise from their interests in the business, investment company, or partnership. |
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Term
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Definition
| The period during which an individual receives distributions from an annuity account. |
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Term
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Definition
| A risk management technique that mixes a wide variety of investments within a portfolio, thus minimizing the impact of any one security on overall portfolio performance. |
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Term
| Diversified common stock fund |
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Definition
| A mutual fund that invests its assets in a wide range of common stocks. The fund’s objectives may be growth, income, or a combination of both. |
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Term
| Diversified investment or management company |
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Definition
| As defined by the investment Company Act of 1940, an investment company that meets certain standards as to the percentage of assets invested. These companies use diversification to manage risk. |
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Term
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Definition
| A distribution of a corporation’s earnings. Dividends may be in the form of cash, stock, or property. The board of directors must declare all dividends. |
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Term
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Definition
| The department within a brokerage firm that is responsible for crediting client accounts with dividends and interest payments on client securities held in the firm’s name. |
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Term
| Dividend disbursing agent (DDA) |
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Definition
| The person responsible for making the required dividend distributions to the broker-dealer’s dividend department. |
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Term
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Definition
| A measure of a corporation’s policy of paying cash dividends, calculated by dividing the dividends paid on common stock by the net income available for common stockholders. The ratio is the complement of the retained earnings ratio. |
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Term
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Definition
| The annual rate of return on a common or preferred stock investment. The yield is calculated by dividing the annual dividend by the stock’s purchase price. |
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Term
|
Definition
| The dollar amount of cash dividends paid on each common share during one year. |
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Term
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Definition
| A system of buying mutual fund shares in fixed dollar maounts at regular fixed intervals, regardless of the share’s price. The investor purchases more shares when prices are low and fewer shares when prices are high, thus lowering the average cost per share over time. |
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Term
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Definition
| A response to a confirmation received from a broker-dealer indicating a lack of information about, or record of, the transaction. |
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Term
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Definition
| A person who makes a gift of money or securities to another. Once the first is donated, the donor gives up all rights to it. Gifts of securities to minors under the Uniform Gift to Minors Act provide tax advantages to the donor. |
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Term
|
Definition
| The most widely quoted and oldest measures of change in stock prices. Each of the four averages is based on the prices of a limited number of stocks in a particular category. |
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Term
| Dow Jones Composite Average (DJCA) |
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Definition
| A market indicator composed of the 65 stocks that make up the Dow Jones Industrial, Transportation, and Utilities Averages. |
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Term
| Dow Jones Industrial Average (DJIA) |
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Definition
| The most widely used market indicator, composed of 30 large, actively traded issues of industrial stocks. |
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Term
| Dow Jones Transportation Average (DJTA) |
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Definition
| A market indicator composed of 20 transportation stocks. |
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Term
| Dow Jones Utilities Average (DJUA) |
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Definition
| A market indicator composed of 15 utilities stocks. |
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Term
|
Definition
| A printed statement showing the obligation of a seller to deliver securities or rights to the purchaser. Also used as aj pledge to deliver dividends when the transaction occurs after the record date. |
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Term
|
Definition
| The careful investigation by the underwriters that is necessary to ensure that all material information pertinent to an issue has been disclosed to prospective investors. |
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Term
|
Definition
| A copy of a customer’s confirmation that a brokerage firm sends to an agent or an attorney if the customer requests it in writing. In addition, if the customer is an employee of another broker-dealer (BD), SRO regulations may require a duplicate confirmation to be sent to the employing BD. |
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Term
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Definition
| Income derived from active participation in a trade or business, including wages, salary, tips, commissions, and bonuses. |
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Term
|
Definition
| A corporation’s net income available for common stock divided by its number of shares of common stock outstanding. |
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Term
| Earnings per share fully diluted |
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Definition
| A corporation’s earnings per share calculated by assuming that all convertible securities have been converted. |
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Term
|
Definition
| The potential for international developments and domestic events to trigger losses in securities investments. |
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Term
|
Definition
| The date the registration of an issue of securities becomes effective, allowing the underwriters to sell the newly issued securities to the public and to confirm sales to investors who have given indications of interest. |
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Term
| Employee Retirement Income Security Act of 1974 (ERISA) |
|
Definition
| The law that governs the operation of most corporate pension and benefit plans. The law eased pension eligibility rules, set up the Pension Benefit Guaranty Corporation, and established guidelines for the management of pension funds. Corporate retirement plans established under ERISA qualify for favorable tax treatment for employers and participants. |
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Term
|
Definition
| The signature on the back of a stock or bond certificate by the person named on the certificate as the owner. An owner must endorse certificates when transferring them to another person. |
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Term
| Equipment leasing limited partnership |
|
Definition
| A direct participation program that purchases equipment for leasing to other businesses on long-term basis. Tax-sheltered income is the primary objective of such a partnership. |
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Term
| Equipment trust certificate |
|
Definition
| A debt obligation backed by equipment. The title to the equipment is held by an independent trustee (usually a bank), not the issuing company. Equipment trust certificates are generally issued by transportation companies such as railroads. |
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Term
| Equipment trust certificate |
|
Definition
| A debt obligation backed by equipment. The title to the equipment is held by an independent trustee (usually a bank), not the issuing company. Equipment trust certificates are generally issued by transportation companies such as railroads. |
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Term
|
Definition
| Common and preferred stockholders’ ownership interest in a corporation. |
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Term
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Definition
| Raising money for working capital or for capital expenditures by selling common or preferred stock to individual or institutional investors. In return for the money paid, the investors receive ownership interests in the corporation. |
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Term
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Definition
| A security representing the right to buy or sell common stock at a specified price within a specified time. |
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Term
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Definition
| A security representing ownership in a corporation or another enterprise. Examples of equity securities include: common and preferred stock, and put and call options on equity securities. |
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Term
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Definition
| The certificate provided by an approved bank that guarantees that the indicated securities are on deposit at the bank. An investor who writes a call option and can present an escrow agreement is considered covered and does not need to meet margin requirements. |
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Term
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Definition
| A long-term debt instrument of a government or corporation that is denominated in the currency of the issuer’s country, but is issued and sold in a different country. |
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Term
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Definition
| U.S. currency held in banks outside the United States. |
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Term
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Definition
| The value of money or securities in a margin account that is in excess of the federal requirement. |
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Term
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Definition
| Any organization, association, or group of persons that maintains or provides a marketplace in which securities may be bought and sold. An exchange need not be a physical place, and serval strictly electronic exchanges do business around the world. |
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Term
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Definition
| All of the exchanges on which listed securities are traded. |
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Term
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Definition
| A security that has met certain requirements and has been admitted to full trading privileges on an exchange. The NYSE and regional exchanges set listing requirements for volume of shares outstanding, corporate earnings, and other characteristics. Exchange-listed securities may also be traded in the third market, the market for institutional investors. |
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Term
| Exchange-traded fund (ETF) |
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Definition
| An investment company legally classified as an open-end company or unit investment trust (UIT), but differing from traditional open-end companies (mutual funds) and UITs. An ETF issues shares in large blocks that are known as creation units. Those who purchase creation units are frequently large institutional traders or investors. The creation units can then be split up and sold as individual shares in the secondary markets, allowing individual investors to purchase shares. |
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Term
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Definition
| The first date on which a security is traded that the buyer is not entitled to receive distributions previously declared. |
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Term
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Definition
| A person given fiduciary authorization to manage the affairs of a decedent’s estate. An executor’s authority is established by the decedent’s last will. |
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Term
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Definition
| A security exempt from the registration requirements (although not from the antifraud requirements) of the Securities Act of 1933. These include: · U.S. government securities · Municipal bonds ·Commercial paper and banker’s acceptances that have maturities of 270 days or less ·Insurance policies and fixed annuity contracts (not variable annuities) · National and state bank not banking Holding company) securities · Building and loan (S&L) securities · Charitable, religious, educational, and nonprofit association issues · Interests in railroad equipment certificates · Banks *the bank exemption applies only to the securities of banks, not to the securities of bank holding companies. |
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Term
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Definition
| A transaction that does not trigger a state’s registration and advertising requirements under the Uniform Securities Act (USA). Examples of exempt transactions include: nonissuer transactions in outstanding securities (normal market trading), transactions with financial institutions, unsolicited transactions, and private placement transactions. |
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Term
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Definition
| To effect the transaction offered by an option, a right, or a warrant. For example, an equity call holder exercises a call by buying 100 shares of the underlying stock at the agreed-upon price within the agreed-upon time period. |
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Term
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Definition
| The cost per share at which an option or a warrant holder may buy or sell the underlying security. |
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Term
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Definition
| A period of increased business activity throughout an economy - one of the four stages of the business cycle. Tend to be characterized by: increased consumer demand for goods & services; increases in industrial production; rising stock prices; rising property values; and increasing gross domestic product (GDP). |
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Term
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Definition
| A monetary policy that increases the money supply, usually with the intention of lowering interest rates and combating deflation. |
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Term
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Definition
| A ratio for comparing a mutual fund’s efficiency by dividing the fund’s expenses by its net assets. |
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Term
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Definition
| A set of four expiration months for a class of listed options. An option may have expiration date of January, April, July, and October (JAJO); or March, June, September, and December (MJSD). |
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Term
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Definition
| The specified date on which an option buyer no longer has the rights specified in the option contract. |
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Term
| Exploratory drilling program |
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Definition
| A limited partnership that aims to locate and recover undiscovered reserves of oil, gas or minerals. These programs are considered highly risky investments. |
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Term
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Definition
| A well drilled either in search of an undiscovered pool of oil or gas or with the hope of substantially extending the limits of an existing pool of oil or gas. |
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Term
| Face-amount Certificate company (FAC) |
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Definition
| An investment company that issues certificates obligating it to pay an investor a stated amount of money (the face amount) on a specific future date. The investor pays into the certificate in periodic payments or in a lump sum. |
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Term
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Definition
| A situation where the broker-dealer (BD) on the sell side of a transaction or contract does not deliver the specified securities to the BD on the buy side. |
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Term
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Definition
| A situation where the broker-dealer (BD) on the buy side of the transaction or contract does not receive the specified securities from the BD on the sell side. |
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Term
| Farm Credit Administration (FCA) |
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Definition
| The government agency that coordinates the activities of the banks in the Farm Credit System. |
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Term
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Definition
| An organization of 37 privately owned banks that provide credit services to farmers and mortgages on farm property. Included in the system are the Federal Land Banks, Federal Intermediate Credit Banks, and the Banks for Cooperatives. |
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Term
| Federal deposit Insurance Corporation (FDCI) |
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Definition
| An independent agency of the US federal government that preserves public confidence in the banking system by insuring deposits. Provides deposit insurance guaranteeing the safety of a depositor’s accounts in member banks up to $250,000 for each deposit ownership category in each insured bank. |
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Term
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Definition
| The reserves of bank and certain other institutions greater than the reserve requirements or excess reserves. These funds are available immediately. |
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Term
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Definition
| The interest rate the commercial money center banks charge each other for overnight loans of $1 million or more. It is considered a barometer of the direction of short term interest rates, which fluctuate constantly and can be considered the most volatile rate in the economy. |
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Term
| Federal Home Loan Bank (FHLB) |
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Definition
| A government- regulated organization that operates a credit reserve system for the nation’s savings and loan associations. |
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Term
| Federal Home Loan Mortgage Corporation (FHLMC) |
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Definition
| A publicly traded corporation that promotes the nationwide secondary market in mortgages by issuing mortgage-backed pass-through debt certificates. |
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Term
| Federal Intermediate Credit Bank (FIBC) |
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Definition
| One of 12 banks that provide short-term financing to farmers as part of the Farm Credit System. |
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Term
| Federal National Mortgage Association (FNMA) |
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Definition
| A publicly held corporation that purchases conventional mortgages and mortgages from government agencies, including the Federal Housing Administration, Department of Veterans Affairs, and Farmers Home Administration. |
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Term
| Federal Open Market Committee (FOMC) |
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Definition
| A committee that makes decisions concerning the Fed’s operations to control the money supply. *the following outlines the FRB’s buying or selling of securities in the open market and its impact on the economy. · BUYING - Securities come out of the economy and money goes in. The money supply goes up, interest rates go down, borrowing and spending for consumers is easier, and the economy expands. · SELLING – Securities go into the economy and money comes out. The money supply goes down, interest rates go up, borrowing and spending for consumers becomes more difficult, and the economy contract |
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Term
| Federal Reserve Board (FRB) |
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Definition
| Consists of 12 regional Federal Reserve banks and hundreds of national and state banks. Determines monetary policy and takes actions to implement its policies including: Acting as an agent of the US treasury, regulating the US money supply, setting reserve requirements for members, supervising the printing of currency, clearing fund transfers throughout the system and examining members to ensure compliance with federal regulations. |
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Term
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Definition
| The central bank system of the United States. Its primary responsibility is to regulate the flow of money and credit. |
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Term
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Definition
| A bid or an offer published before being identified by source and verified as legitimate. A fictitious quote may create the appearance of trading activity where none exists; this violates the conduct Rules. |
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Term
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Definition
| Insurance coverage required by the self-regulatory organizations for all employees, officers, and partners of member firms to protect clients against acts of lost securities, fraudulent trading, and check forgery. |
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Term
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Definition
| A person legally appointed and authorized to hold assets in trust for another persona manage those assets for that person’s benefit. |
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Term
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Definition
| The day on which an issuer submits to the SEC the registration statement for a new securities issue. |
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Term
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Definition
| An order that instructs the floor broker to fill the entire order immediately; if the entire order cannot be executed immediately, it is canceled. |
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Term
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Definition
| The legal document that states a new issue security’s price, delivery date, and underwriting spread as well as other material information. It must be given to every investor who purchases a new issue of registered securities. |
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Term
| Financial Guaranty Insurance Corporation (FGIC) |
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Definition
| An insurance company that offers insurance on the timely payment of interest and principal on municipal issues and unit investment trusts. |
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Term
| Financial Industry Regulatory Authority (FINRA) |
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Definition
| Regulates all matters related to investment banking (securities underwriting), trading the in OTC market, trading in NYSE-listed securities and the conduct of member firms. 1. Purpose and objectives: a. Promote investment banking and securities business, standardize principals, encourage state and federal securities laws. Enforcing rules to prevent fraudulent and manipulative practices. b. Provide communication between members, government, and other agencies. c. Investigate grievances. 2. Rules to protect the securities market, broken down into 4 sections: i. Conduct rules: establish the relationship between firms and their customers. ii. Uniform Practice Code (UPC): rules over technical aspects of trading and payment for securities transactions. Iii. Code of Procedure (COP): covers the enforcement of FINRA rules and details the punishment of members who incur rule violations. iv. Code of Arbitration (COA): is a FINRA run dispute resolution process to settle monetary disputes. |
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Term
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Definition
| A descriptive name also referred to as an information barrier for the division within a brokerage firm that prevents insider information from passing from corporate advisers to investment traders, who could make use of the information to recap illicit profits. |
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Term
| Firm commitment Underwriting |
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Definition
| The underwriters buys shares from the issuer and resells the securities to the public at a higher price and earns the price differential (spread) for its efforts. They are committed to purchase any shares unsold. |
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Term
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Definition
| The actual price at which a trading unit of a security (such as 100 shares of stock or give bonds) may be bought or sold. All quotes are firm quotes unless otherwise indicated. |
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Term
| First-in, first-out (FIFO) |
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Definition
| An accounting method used to assess a company’s inventor, in which it is assumed that the first goods acquired are the first to be sold. The same method is used by the IRS to determine cost basis for tax purposes. |
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Term
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Definition
| The federal tax and spending policies set by Congress or the president. These policies affect tax rates, interest rates, and government spending in an effort to control the economy. |
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Term
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Definition
| Refers to the governmental budget decisions enacted by our president and congress including increases or decreases in: federal spending, money raised through taxes, and federal budget deficits or surpluses. Based on the assumption that the government can control such economic forces as unemployment levels and inflation by adjusting overall demand for goods and services. It is not considered the most efficient means to solve short-term economic problems. |
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Term
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Definition
| An insurance contract in which the insurance company makes fixed dollar payments to the annuitant for the term of the contract, usually until annuitant dies. The insurance company guarantees both earnings and principal. |
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Term
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Definition
| A tangible, physical property used in the course of a corporation’s everyday operations; it includes buildings, equipment, and land. |
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Term
| Fixed unit investment trust |
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Definition
| An investment company that invests in a portfolio of securities in which no changes are permissible. |
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Term
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Definition
| A term used to describe bonds traded without accrued interest. They are traded at the agreed-upon market price only. |
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Term
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Definition
| A chart showing the yields of bonds with short maturities as equal to the yields of bonds with long maturities. |
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Term
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Definition
| An exchange member who executes transactions from the floor of the exchange only for his own account. |
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Term
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Definition
| The schedule of payments disbursed from the proceeds of a facility financed by a revenue bond. The flow of funds determines the order in which the operating expenses, debt service, and other expenses are paid. Typically, the priority is (1) operations and maintenance, (2) debt service, (3) debt service reserve, (4) reserve maintenance, (5) renewal and replacement, and (6) surplus. |
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Term
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Definition
| A term that describes the way income, deductions, and credits resulting from the activities of a business are applied to individual taxes and expenses as though each incurred the income and deductions directly. |
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Term
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Definition
| Money issued by a country other than the one in which the investor resides. Options and futures contracts on numerous foreign currencies are traded on U.S. exchanges. |
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Term
| Foreign currency option (FCO) |
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Definition
| A security representing the right to buy or sell a specified amount of a foreign currency. |
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Term
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Definition
| The price of one country’s currency in terms of another currency. |
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Term
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Definition
| The valuation process for mutual fund shares, whereby an order to purchase or redeem shares is executed at the price determined by the portfolio valuation calculated after the order is received. Portfolio valuations occur at least once per business day. |
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Term
|
Definition
| For institutional investors in which large blocks of stock, both listed and unlisted, trade in the transactions unassisted by broker-dealers. These transactions take place through electronic communications networks (ECNs) which are open 24 hours a day and act solely as agents. |
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Term
|
Definition
| A portion of a whole share of stock. Mutual fund shares are frequently issued in fractional amounts. Fractional shares used to be generated when corporations declared stock dividends, merged or voted to split stock, but today it is more common for corporations to issue the cash equivalent of fractional shares. |
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Term
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Definition
| The deliberate concealment, misrepresentation, or omission of material information or the truth to deceive or manipulate another party for unlawful or unfair gain. |
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Term
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Definition
| The cash funds in customer accounts. Broker-dealers must notify customers of their free credit balances at least quarterly. |
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Term
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Definition
| Buying and immediately selling securities without making payment. This practice violates the SEC’s Regulation T. |
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Term
| Freeriding and withholding |
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Definition
| The failure of a member participating in the distribution of a hot issue to make a bona fide public offering at the public offering price. This practice violates the Conduct Rules. |
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Term
|
Definition
| The expenses paid for services rendered during a direct participation program’s organization or acquisition phase, including front-end organization and offering expenses, acquisition fees and expenses, and any other similar fees designated by the sponsor. |
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Term
|
Definition
| A mutual fund commission or sales fee that is charged at the time shares are purchased. The load is added to the share’s net asset value when calculating the public offering price. |
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Term
|
Definition
| An account requiring cash in advance before buy order is executed and securities in hand before a sell order is executed. An account holder under such restrictions has violated the SEC’s Regulation T. |
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Term
|
Definition
| A written authorization for someone other than an account’s beneficial owner to make deposits and withdrawals and to execute trades in the account. |
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Term
| Full trading authorization |
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Definition
| An authorization, usually provided by full power of attorney, for someone other than the customer to have full trading privileges in an account. |
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Term
| Fully disclosed firm or introducing firm |
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Definition
| Introduces its customers to a clearing firm. The clearing firm then acts as their back office. *May receive customer checks, but they must be made out to the clearing firm. |
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Term
|
Definition
| A debt issue that prints the bondholder’s name on the certificate. The issuer’s transfer agent maintains the records and sends principal and interest payments directly to the investor. |
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Term
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Definition
| A sharing arrangement whereby investors in an oil and gas direct participation program are responsible for intangible costs and the sponsor is responsible for tangible costs; revenues are shared. |
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Term
|
Definition
| All long-term debt financing of a corporation. |
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Term
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Definition
| An ERISA guideline stipulating that retirement plan assets must be segregated from other corporate assets. |
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Term
|
Definition
| Interchangeable, owing to identical characteristics or value. A security is fungible if it can be substituted or exchanged for another security. |
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Term
|
Definition
| The account that holds all of an insurer’s assets other than those in separate accounts. The general account holds the contributions paid for traditional life insurance contracts. |
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Term
| General obligation bond (GO) |
|
Definition
| A municipal debt issue backed by the full faith, credit, and taxing power of the issuer for payment of interest and principal. |
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Term
|
Definition
| An active investor in a direct participation program who is personally liable for all debts of the program and who manages the business of the program. The GP’s duties include making decisions that bind the partnership; buying and selling property; managing property and money; supervising all aspects of the business; and maintaining a 1% financial interest in the partnership. |
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Term
|
Definition
| An association of two or more entities formed to conduct a business jointly. The partnership does not require documents for formation, the general partners are jointly and severally liable for the partnership’s liabilities. |
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Term
|
Definition
| Communications with the public that promote securities as investment but that do not refer to particular securities. |
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Term
| Glass-Steagall Act of 1933 |
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Definition
| Federal legislation that forbids commercial banks to underwrite securities and forbids investment bankers to open deposit accounts or make commercial loans. |
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Term
|
Definition
| A term describing a security that is negotiable, in compliance with the contract of the sale, and ready to be transferred from seller to purchaser. |
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Term
| Good til canceled (GTC) order |
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Definition
| An order that is left on the order book until it is either executed or canceled. |
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Term
|
Definition
| An intangible asset that represents the value that a firm’s business reputation adds to its book value. |
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Term
| Government National Mortgage Association (GNMA) |
|
Definition
| A wholly government-owned corporation that issues pass-through mortgage debt certificates backed by the full faith and credit of the U.S. government. |
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Term
|
Definition
| A debt obligation of the U.S. government, backed by its full faith, credit and taxing power, and regarded as having no risk of default. The government issues short-term Treasury bills, medium term Treasury notes, and long-term Treasury bonds. |
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Term
|
Definition
| A provision of an issue’s registration statement that allows an underwriter to buy extra shares from the issuer (thus increasing the size of the offering) if public demand proves exceptionally strong. The term derives from the Green Shoe Manufacturing company which first used the technique. |
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|
Term
| Gross domestic product (GDP) |
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Definition
| The total value of goods and services produced in a country during one year. It includes consumption, government purchases, investments, and exports minus imports. |
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Term
|
Definition
| All income of a taxpayer, from whatever source derived. |
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Term
|
Definition
| The total of the initial invested capital in a direct participation program contributed by all of the original and additional limited partners. |
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Term
|
Definition
| All money received by a business from its operations. The term typically does not include interest income or income from the sale, refinancing, or other disposition of properties. |
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Term
|
Definition
| A diversified common stock fund that has capital appreciation as its primary goal. It invests in companies that reinvest most of their earnings for expansion, research, or development. |
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Term
|
Definition
| Every industry passes through four phases during its existence: introduction, growth, maturity, and decline. It is considered in this phase when the industry is growing faster than the economy as a whole, because of technological changes, new products, or changing consumer tastes. |
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Term
|
Definition
| An industry that is growing fast than the economy as a whole as a result of the technological changes, new products, or changing consumer tastes. |
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Term
|
Definition
| A relatively speculative issue that is believed to offer significant potential for capital gains. It often pays low dividends and sells at a high price-to-earnings ratio. |
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Term
|
Definition
| A debt obligation issued with a promise from a corporation other than the issuing corporation to maintain payments of principal and interest. |
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Term
|
Definition
| An equity security, generally a preferred stock, issued with a promise from a corporation other than the issuing corporation to maintain dividend payments. The stock still represents ownership in the issuing corporation, but it is considered a dual security. |
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Term
|
Definition
| A fiduciary who manages the assets of a minor or an incompetent for that person’s benefit. |
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Term
|
Definition
| An investment made to reduce the risk of adverse price movements in a security. Normally, consist of a protecting position in a related security. |
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Term
|
Definition
| The highest price a security reaches during a specified period of time. |
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Term
|
Definition
| A securities transaction settlement and delivery procedure whereby a customer’s securities are transferred into the broker-dealer’s (BD’s) name and held by the BD. Although the BD is the nominal owner, the customer is the beneficial owner. |
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Term
|
Definition
|
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Term
|
Definition
| A company organized to invest in and manage other corporations. |
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Term
|
Definition
| A time period signifying how long the owner possesses a security. It starts the day after a purchase and ends on the day of the sale. |
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Term
|
Definition
| A new issue that sells or is anticipated to sell at a premium over the public offering price. |
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Term
|
Definition
| Pledging to a broker-dealer securities bought on margin as collateral for the margin loan. |
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Term
|
Definition
| The particular security designated for sale by an investor holding identical securities with different acquisition dates and cost bases. This allows the investor to control the amount of capital gain or loss incurred through the sale. |
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Term
|
Definition
| An insurance contract purchased for a single premium that starts to pay the annuitant immediately following its purchase. |
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Term
|
Definition
| A parent, mother or father-in-law, husband or wife, child, sibling, or other relative supported financially by a person associated with the securities industry. |
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|
Term
| Immediate-or-cancel (IOC) Order |
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Definition
| An order that instructs the floor broker to execute it immediately, in full or in part. Any portion of the order that remains unexecuted is canceled. |
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Term
|
Definition
| The term used to describe an option that has intrinsic value, such as a call option when the stock is selling above the exercise price or a put option when the stock is selling below the exercise price. |
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Term
|
Definition
| A debt obligation that promises to repay principal in full at maturity. Interest is paid only if the corporation’s earnings are sufficient to meet the interest payment and if the board of directors declares the interest payment. Are usually traded flat. |
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Term
|
Definition
| A mutual fund that seeks to provide stable current income by investing in securities that pay interest or dividends. |
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Term
|
Definition
| A limited partnership that buys and markets proven reserves of oil and gas; it buys the value of the oil in the ground. |
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Term
|
Definition
| The summary of a corporation’s revenues and expenses for a specific fiscal period. It compares revenue with costs and expenses during the period. |
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Term
|
Definition
| A comparison of current prices to some baseline, such as prices on a particular date. |
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Term
|
Definition
| A security representing the right to receive in cash the difference between the underlying value of a market index and the strike price of the option. |
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|
Term
| Individual retirement account (IRA) |
|
Definition
| A retirement investing tool for employed individuals that allows an annual contribution of 100% of earned income up to a maximum annual allowable limit. Some or all of the contribution may be deductible from current taxes, depending on the individual’s adjusted gross income and coverage by employer-sponsored qualified retirement plans. |
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|
Term
| Industrial development bond (IDB) |
|
Definition
| A debt security issued by a municipal authority, which uses the proceeds to finance the construction or purchase of facilities to be leased or purchased by a private company. The bonds are backed by the credit of the private company, which is ultimately responsible for principal and interest payments. |
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Term
|
Definition
| A persistent and measureable rise in the general level of prices. |
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Term
|
Definition
| A descriptive name also referred to as a firewall for the division within a brokerage firm that prevents insider information form passing from a corporate advisers to investment traders, who could make use of the information to reap illicit profits. |
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Term
|
Definition
| An award paid in connection for original information concerning any violation of securities law. Under Dodd-Frank legislation, awards may range from 10% to 30% of amounts recovered. |
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|
Term
| Initial margin requirement |
|
Definition
| The amount of equity a customer must deposit when making a new purchase in a margin account. The SEC’s Regulation T requirement for equity securities is currently 50% of the purchase price. The initial minimum requirement is a deposit of $2,000 but not more than 100% of the purchase price. |
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|
Term
| Initial public offering (IPO) |
|
Definition
| A corporation’s first sale of common stock to the public. |
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Term
|
Definition
| The redemption of a certain portion of a bond issue at the request of the issuer. |
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Term
|
Definition
| Material information that has not been disseminated to, or is not readily available to, the general public. |
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Term
|
Definition
| The best (highest) bid price at which an OTC stock may be sold, the best (lowest) ask price at which the same stock may be bought in the interdealer market. |
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|
Term
|
Definition
| Any person who possess or has access to material nonpublic information about a corporation. Insiders include directors, officers, and stockholders who own at least 10% of any class of equity security of a corporation. |
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|
Term
| Insider Trading and Securities Fraud Enforcement Act of 1988 |
|
Definition
| Legislation that defines what constitutes the illicit use of nonpublic information in making securities trades and the liabilities and penalties that apply. |
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Term
|
Definition
| An account held for the benefit of others. Examples of institutional accounts include banks, trusts, pension and profit-sharing plans, mutual funds, and insurance companies. |
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|
Term
| Institutional communication |
|
Definition
| FINRA defines this category of communications with the public as any written (including electronic) communication that is distributed or made available only to institutional investors, but does not include a member’s internal communications. |
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Term
|
Definition
| A person or organization that trades securities in large-enough share quantities or dollar amounts that it qualifies for preferential treatment such as lower commissions. Institutional investors are covered by fewer protective regulations because it is assumed that they are more knowledgeable and better able to protect themselves. Examples would include another member firm, bank or savings loan, insurance company registered investment company, government entity, or any entity with $50 million or more in total assets. |
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Term
|
Definition
| Entity that pools money to purchase securities and other investment assets. Can include banks, insurance companies, pensions, hedge funds, mutual funds. |
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Term
|
Definition
| A property owned that is not physical, such as a formula, a copyright, or goodwill. |
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|
Term
| Intangible drilling cost (IDC) |
|
Definition
| In an oil and gas limited partnership, a tax-deductible cost; usually, this is for a nonphysical asset, such as labor or fuel, which does not depreciate. The cost may be expensed in the year incurred, or deductions may be amortized over the life of the well. |
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|
Term
|
Definition
| An unregulated, decentralized, international market in which the various major currencies of the world are traded. |
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Term
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Definition
| The charge for the privilege of borrowing money, usually expressed as an annual percentage rate. |
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Term
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Definition
| A security representing the right to buy or sell government debt securities. The federal deficit has created a large market in securities that are sensitive to changes in interest rates; the investor can profit from fluctuations in interest rates and can hedge the risks created by the fluctuations. |
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Term
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Definition
| The risk associated with investments relating to the sensitivity of price or value to fluctuation in the current level of interest rates; also, the risk that involves the competitive cost of money. This term is generally associated with bond prices, but it applies to all investments. In bonds, prices carry interest risk because if bond prices rise, outstanding bonds will not remain competitive unless their yields and prices adjust to reflect the current market. |
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Term
| Internal Revenue Code (IRC) |
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Definition
| The legislation that defines tax liabilities and deductions for U.S. taxpayers. |
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Term
| Internal revenue service (IRS) |
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Definition
| The U.S. government agency responsible for collecting most federal taxes and for administering tax rules and regulations. |
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Term
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Definition
| An issue of securities registered with the SEC sold to residents of states other than the state in which the issuer does business. |
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Term
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Definition
| An issue of securities exempt from SEC registration, available to companies that do business in one state and sell their securities only to residents of that same state. |
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Term
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Definition
| The potential profit to be made from exercising an option. A call option is said to have intrinsic value when the underlying stock is trading above the exercise price. |
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Term
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Definition
| (1) Any person who makes investment recommendations in return for a flat fee or a percentage of assets managed. (2) For an investment company, the individual who bears the day-to-day responsibility of investing the cash and securities held in the fund’s portfolio in accordance with objectives stated in the fund’s prospectus. |
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Term
| Investment Adviser Act of 1940 |
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Definition
| Legislation which governs who must register with the SEC as an investment adviser. |
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Term
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Definition
| An institution in the business of raising capital for corporations and municipalities. An investment banker may not accept deposits or make commercial loans. |
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Term
| Investment banking business |
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Definition
| A broker, dealer, or municipal or government securities dealer that underwrites or distributes new issues of securities as a dealer or that buys and sells securities for the accounts of others as a broker. |
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Term
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Definition
| A company engaged in the business of pooling investors’ money and trading in securities for them. Examples include face-amount certificate companies, unit investment trusts, and management companies. |
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Term
| Investment Company Act of 1940 |
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Definition
| Congressional legislation regulating companies that invest and reinvest in securities. The act requires an investment company engaging in interstate commerce to register with the SEC. |
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Term
| Investment grade security |
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Definition
| A security to which the rating services (e.g., Standard & Poor’s and Moody’s) have assigned a rating of BBB/Baa or above. |
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Term
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Definition
| Any goal a client hopes to achieve through investing. Examples include current income, capital growth and preservation of capital. |
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Term
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Definition
| The market price at which a convertible security (usually a debenture) would sell if it were not converted into common stock. |
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Term
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Definition
| The purchaser of an asset or security with the intent of profiting from the transactions. |
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Term
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Definition
| The redemption of a bond issue in its entirety at the option of the issuer, as opposed to its redemption based on a lottery held by an independent trustee. |
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Term
| IPO Rules and Regulations |
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Definition
| These rules ensure that members make a bona fide public offering of securities at the public offering price (Pop), members do not withhold securities in a public offering for their own benefit or use such securities to reward persons who are in a position to direct future business to the member, and industry insiders, such as members and their associated persons, do not take advantage of their insider status to gain access to new issues for their own benefit at the expense of public customers. |
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Term
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Definition
| The reinvestment of assets that an individual receives as a distribution from a qualified tax-deferred retirement plan into an individual retirement account within 60 days of receiving the distribution. The individual may reinvest either the entire sum or a portion of the sum, although any portion not reinvested is taxed as ordinary income. |
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Term
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Definition
| The direct reinvestment of retirement assets from one qualified tax-deferred retirement plan to an individual retirement account. The account owner never takes possession of the assets, but directs that they be transferred directly from the existing plan custodian to the new plan custodian. |
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Term
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Definition
| Equity securities authorized by the issuer’s registration statement and distributed to the public. |
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Term
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Definition
| The entity, such as a corporation or municipality, that offers or proposes to offer its securities for sale. |
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Term
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Definition
| An account in which two or more individuals possess some form of control over the account and may transact business in the account. The account must be designated as either tenants in common or joint tenants with rights of survivorship. |
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Term
| Joint life with last survivor |
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Definition
| An annuity payout option that covers two or more people, with annuity payments continuing as long as one of the annuitants remains alive. |
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Term
| Joint tenants with rights of survivorship (JTWROS) |
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Definition
| A form of join ownership of an account whereby a deceased tenant’s fractional interest in the account passes to the surviving tenant(s). |
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Term
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Definition
| The cooperation of two or more individuals or enterprises in a specific business enterprise rather than in a continuing relationship - as in a partnership. |
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Term
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Definition
| A bond backed by the same collateral backing a previous issue and having a subordinate claim to the collateral in the event of default. |
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Term
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Definition
| A qualified tax-deferred retirement plan for persons who are self-employed and unincorporated or who earn extra income through personal services aside from their regular employment. |
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Term
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Definition
| The theory that active government intervention in the marketplace is the best method of ensuring economic growth and stability. |
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Term
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Definition
| A measureable economic factor that changes after the economy has started to follow a particular pattern or trend. Lagging indicators are believed to confirm long-term trends. Examples include average duration of unemployment, corporate profits, and labor cost per unit of output. |
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Term
| Last-in, first-out (LIFO) |
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Definition
| An accounting method used to assess a corporation’s inventory in which it is assumed that the last goods acquired are the first to be sold. The method is used to determine cost basis for tax purposes; the IRS designates LIFO as the order in which sales or withdrawals from an investment are made. |
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Term
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Definition
| A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators are believed to predict changes in the economy. Examples include new orders for durable goods, slowdowns in deliveries by vendors, and numbers of building permits issued. |
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Term
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Definition
| A debt security issued by a municipal authority to raise funds for new construction with the understanding that the finished structure will be rented to the authority and that the rental payments will finance the bond payments. |
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Term
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Definition
| The selection of securities that a state agency (usually a state banking or insurance commission) determines to be appropriate investments for fiduciary accounts, such as mutual savings banks, pension funds, and insurance companies. |
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Term
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Definition
| The statement of a bond attorney affirming that an issue is a municipal issue and that interest is exempt from federal taxation. Each municipal bond certificate must be accompanied by a legal opinion of counsel. |
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Term
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Definition
| The potential for an investor to be adversely affected by changes in investment or tax laws. |
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Term
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Definition
| A signed agreement allowing an investor to buy mutual fund shares at a lower overall sales charge, based on the total dollar amount of the intended investment. A letter of intent is valid only if the investor completes the terms of the agreement within 13 months of signing the agreement. It may be backdated 90 days. |
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Term
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Definition
| A mutual fund sales fee charged annually based on the net asset value of a share. A 12b-1 asset-based fee is an example of a level load. |
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Term
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Definition
| A schedule for debt repayment whereby principal and interest payments remain essentially constant from year to year over the life of the issue. |
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Term
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Definition
| Using borrowed capital to increase investment return. |
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Term
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Definition
| A legal obligation to pay a debt owed. Current liabilities are debts payable within 12 months. Long-term liabilities are debts payable over a period of more than 12 months. |
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Term
| Life annuity with period certain |
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Definition
| An annuity payout option that guarantees the annuitant a monthly check for a certain period and thereafter until the annuitant’s death. If the annuitant dies before the period expires, the payments go to the annuitant’s name beneficiary. |
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Term
| Life annuity/straight life |
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Definition
| An annuity payout option that pays a monthly check over the annuitant’s lifetime. |
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Term
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Definition
| An annuity payout option that provides a death benefit during the accumulation stage. If the annuitant dies during this period, a full contribution is made to the account, which is paid to the annuitant’s named beneficiary. |
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Term
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Definition
| An order that instructs the floor broker to buy a specified security below a certain price or to sell a specified security above a certain price. |
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Term
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Definition
| An investor’s right to limit potential losses to no more than the amount invested. Equity shareholders, such as corporate stockholders and limited partners, have limited liability. |
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Term
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Definition
| An investor in a direct participation program who does not participate in the management or control of the program and whose liability for partnership debts is limited to the amount invested in the program. |
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Term
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Definition
| An association of two or more partners formed to conduct a business jointly and in which one or more partners is liable only to the extent of the amount of money invested. Limited partners do not receive dividends but enjoy direct flow-through of income and expenses. |
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Term
| Limited partnership agreement |
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Definition
| The contract between a partnership’s limited and general partners that provides the guidelines for partnership operation and states the rights and responsibilities of each partner. |
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Term
| Limited power of attorney |
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Definition
| A written authorization for someone other than an account’s beneficial owner to make certain investment decisions regarding transactions in the account. |
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Term
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Definition
| A general obligation municipal debt security issued by a municipality whose taxing power is limited to a specified maximum rate. |
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Term
| Limited trading authorization |
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Definition
| An authorization, usually provided by a limited power of attorney, for someone other than the customer to have trading privileges in an account. These privileges are limited to purchases and sales; withdrawal of assets is not authorized. |
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Term
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Definition
| In the case of a corporation’s liquidation, the order that is strictly followed for paying off creditors and stockholders: 1. Unpaid wages 2. Taxes 3. Secured claims (mortgages) 4. Secured liabilities (bonds) 5. Unsecured liabilities (debentures) and general creditors 6. Subordinated debt 7. Preferred stockholders 8. Common stockholders |
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Term
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Definition
| The ease with which an asset may be converted to cash in the marketplace. A large number of buyers and sellers and a high volume of trading activity provide high liquidity. |
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Term
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Definition
| The potential that an investor might not be able to sell an investment as and when desired. |
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Term
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Definition
| An option contract that may be bought and sold on a national securities exchange in a continuous secondary market. Listed options carry standardized strike prices and expiration dates. |
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Term
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Definition
| A stock, a bond, or another security that satisfies certain minimum requirements and is traded on a regional or national securities exchange such as the New York Stock Exchange. |
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Term
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Definition
| An optional contract between a brokerage firm and a margin customer that permits the firm to lend the margined securities to other brokers; the contract is part of the margin agreement. |
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Term
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Definition
| The term used to describe the owning of a security, contract, or commodity. For example, a common stock owner is said to have a long position in the stock. |
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Term
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Definition
| Buying puts as protection against a decline in the value of a long securities or actual position. |
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Term
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Definition
| The loss realized on the sale of a capital asset that has been owned for more than 12 months. |
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Term
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Definition
| An option contract that has a longer expiration than traditional equity option is the CBOE’s long-term equity anticipation security (LEAPS). |
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Term
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Definition
| The profit earned on the sale of a capital asset that has been owned for more than 12 months. |
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Term
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Definition
| A capital loss incurred during one tax year that is carried over to the next year or later years for use as a capital loss deduction. |
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Term
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Definition
| The lowest price a security or commodity reaches during a specified period. |
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Term
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Definition
| A provision of a municipal revenue bond’s trust indenture that helps ensure the safety of the issue by promising to keep the facility and equipment in good working order. |
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Term
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Definition
| An investment company that trades various types of securities in a portfolio in accordance with specific objectives stated in the prospectus. |
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Term
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Definition
| The payment to the sponsor of a direct participation program for managing and administering the program. The fee is capped at about 5% of the program’s gross revenues. |
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Term
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Definition
| The general partner of a direct participation program that selects the investments and operates the partnership. |
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Term
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Definition
| The redemption of a bond by an issuer authorized in the trust indenture and based on a predetermined schedule or event. |
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Term
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Definition
| The amount of equity contributed by a customer as a percentage of the current market value of the securities held in a margin account. |
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Term
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Definition
| A customer account in which a brokerage firm lends the customer part of the purchase price of securities. |
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Term
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Definition
| The Federal Reserve Board’s demand that a customer deposit a specified amount of money or securities when a purchase is made in a margin account; the amount is expressed as a percentage of the market value of the securities at the time of purchase. The deposit must be made within one payment period. |
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Term
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Definition
| The department within a brokerage firm that computes the amount of money clients must deposit in margin and cash accounts. |
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Term
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Definition
| A demand that a margin customer deposit money or securities when the customer’s equity falls below the margin maintenance requirement set by the broker-dealer or the SRO the broker-dealer reports to. |
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Term
| Margin maintenance requirement |
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Definition
| The minimum equity that must be held in a margin account, determined by the broker-dealer and the SRO the broker-dealer reports to. The amount of equity required varies with the type of security bought on margin, and the broker-dealers house requirement is usually higher than that set by the SRO. |
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Term
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Definition
| The potential that a margin customer will be required to deposit additional cash if his security positions are subject to adverse price movements. |
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Term
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Definition
| A security that is eligible for purchase on margin, including any registered security, OTC margin stock or bond, or Nasdaq Global Select or Global Market security. A firm is permitted to lend money to help customers purchase these securities and may accept these securities as collateral for margin purchases. |
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Term
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Definition
| To adjust the value of the securities in an account to the current market value of those securities; used to calculate the market value and equity in a margin account. |
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Term
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Definition
| The difference between the highest current bid price amount dealers and the lower price that a dealer pays to customer. |
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Term
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Definition
| To stand ready to buy or sell a particular security as a dealer for its own account. A market maker accepts the risk of holding the position in the security. |
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Term
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Definition
| An order to be executed immediately at the best available price. A market order is the only order that guarantees execution. |
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Term
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Definition
| The potential for an investor to experience losses owing to day-to-day fluctuations in the price at which securities may be bought or sold. |
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Term
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Definition
| The price at which investors buy or sell a share of common stock or a bond at a given time. Market value is determined by buyers’ and sellers’ interactions. |
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Term
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Definition
| The ease with which a security may be bought or sold; having a readily available market for trading. |
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Term
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Definition
| An order that specifies it is to be executed at the close. The order will be executed at the closing price. |
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Term
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Definition
| The difference between the lowest current offering price among dealers and the higher price a dealer charges a customer. |
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Term
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Definition
| Any fact that could affect an investor’s decision to trade a security. |
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Term
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Definition
| The date on which a bond’s principal is repaid to the investor and interest payments cease. |
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Term
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Definition
| A broker-dealer in which at least one of the principal offers is a member of an exchange, a self-regulatory organization, or a clearing corporation. |
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Term
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Definition
| The underwriter sets a floor or minimum as well as a ceiling or maximum on the dollar amount of securities the issuer is willing to sell. |
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Term
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Definition
| Option contracts that overlay only 10 shares of the underlying security instead of 100 shares as is the case for standard option contracts. |
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Term
| Minor rule violation (MRV) |
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Definition
| In instances where the Department of Enforcement (DOE) considers a violation minor and the respondent does not dispute the allegation, the DOE may prepare and request that the respondent sign an MRV letter, accepting a finding of violation. Once the respondent signs an MRV letter, the settlement is final. |
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Term
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Definition
| A security transaction’s execution price that is below the previous execution price, by a minimum amount. |
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Term
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Definition
| The Federal Reserve Board’s actions that determine the size and rate of the money supply’s growth, which, in turn, affect interest rates. |
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Term
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Definition
| The FRB engages in this when it attempts to influence the money supply. The money supply is the capital available to be lent to consumers and ultimately spent in the economy. |
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Term
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Definition
| The act of cleaning money gotten from illegitimate businesses through three stages know as placement, layering, and integration for the purpose of hiding the money’s origin in anticipation of its later use for both legitimate and illegitimate purposes. |
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Term
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Definition
| The securities market that deals in short-term debt. Money market instruments are liquid forms of debt that mature in one year or less. Treasury bills make up the bulk of money market instruments. |
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Term
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Definition
| A mutual fund that invests in short-term debt. Money market instruments are liquid forms of debt that mature in one year or less. Treasury bills make up the bulk of money market instruments. |
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Term
| Moody’s Investors Service |
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Definition
| One of the best known investment rating agencies in the United States. A subsidiary of Dun & Bradstreet, Moody’s rates bond commercial paper, preferred and common stocks, and municipal short-term issues. |
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Term
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Definition
| A debt obligation secured by a property pledge. It represents a lien or mortgage against the issuing corporation’s properties and real estate assets. |
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Term
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Definition
| Advisor who provides advice to or on behalf of a municipal entity with respect to municipal products or the issuance of municipal securities, including advice with respect to the structure, timing, terms and other similar matters concerning such financial products or issues; or undertakes a solicitation of municipal entity. |
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Term
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Definition
| A debt security issued by a state, a municipality, or another subdivision (such as a school, a park, or a sanitation or other local taxing district) to finance its capital expenditures. Such expenditures might include the construction of highways, public works, or school buildings. |
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Term
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Definition
| A mutual fund that invests in municipal bonds and operates either as a unit investment trust or as an open-end fund. The fund’s objective is to maximize federally tax-exempt income. |
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Term
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Definition
| A short-term municipal security issued in anticipation of funds from another source. |
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Term
| Municipal securities Rulemaking Board (MSRB) |
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Definition
| A self- regulatory organization that regulates all matters related to the underwriting and trading of state and municipal securities. They regulate but does not have enforcement powers- it depends on other SROs for the enforcement of its rules. It has no regulatory power over the municipalities who issue municipal securities. |
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Term
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Definition
| An investment company that continuously offers new equity shares in an actively managed portfolio of securities. All shareholders participate in the fund’s gains or losses. The shares are redeemable on any business day at the net asset value. Each mutual fund’s portfolio is invested to match the objective stated in the prospectus. |
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Term
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Definition
| A national bank, a stock exchange member firm, a trust company, or another qualified institution that physically safeguards the securities a mutual fund holds. It does not manage the fund’s investment; its function is solely clerical. |
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Term
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Definition
| The position of an option investor who writes a call or a put on security he does not own. |
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Term
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Definition
| An investor who writes a call option without owning the underlying stock or other related assets that would enable the investor to deliver the stock, should the option be exercised. |
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Term
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Definition
| An investor who writes a put option without owning the underlying stock or other related assets that would enable the investor to purchase the stock, should the option be exercised. |
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Term
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Definition
| An index that is designed to reflect the movement of a market segment, such as a group of stocks in one industry or a specific type of investment. Examples include the Technology Index and the Gold/Silver Index. |
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Term
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Definition
| National Association of Securities Dealers Automated Quotation system. |
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Term
| National Market System (Regulation NMS) |
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Definition
| A broad sweeping SEC regulation designed to bring trading and reporting uniformity to U.S. securities markets. |
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Term
| National Securities Clearing Corporation (NSCC) |
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Definition
| An organization that acts as a medium through which member brokerage firms and exchanges reconcile accounts with each other. |
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Term
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Definition
| The net total of a mutual fund’s assets and liabilities; used to calculate the price of new fund shares. |
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Term
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Definition
| The value of a mutual fund share, calculated by dividing the fund’s total net asset value by the number of shares outstanding. |
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Term
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Definition
| A characteristic of a security that permits the owner to assign, give, transfer, or sell it to another person without a third party’s permission. |
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Term
| Negotiable certificate of deposit (CD) |
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Definition
| An unsecured promissory note issued with a minimum face value of $100,000. It evidences a time deposit of funds with the issuing bank and is guaranteed by the bank. |
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Term
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Definition
| A mutual fund share’s value, calculated once a day, based on the closing market price for each security in the fund’s portfolio. It is computed by deducting the fund’s liabilities from the portfolio’s total assets and dividing this amount by the number of shares outstanding. |
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Term
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Definition
| The difference between a security’s closing price on the trading day reported and the previous day’s closing price. In over-the-counter transactions, the term refers to the difference between the closing bids. |
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Term
| Net current asset value per share |
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Definition
| The calculation of book value per share that excludes all fixed assets. |
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Term
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Definition
| A measure of the ability of a municipality to meet its debt obligations; it compares the debt issued by the municipality to its property values. |
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Term
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Definition
| The amount of debt obligations of a municipality, including general obligation bonds and notes and short-term notes. Self-supported debt from revenue bond issues is not included in the calculation. |
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Term
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Definition
| A measure of the annual economic output of a nation adjusted to account for depreciation. It is calculated by subtracting the amount of depreciation from the gross domestic product. |
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Term
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Definition
| The source of an investment company’s dividend payments. It is calculated by subtracting the company’s operating expenses from the total dividends and interest the company receives from the securities in its portfolio. |
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Term
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Definition
| A measure of a corporation’s relative profitability. It is calculated by dividing after-tax income by net sales. |
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Term
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Definition
| The some of the debt obligations of municipality, calculated by adding the municipality’s net direct debt to its overlapping debt. |
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Term
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Definition
| The amount by which assets exceed liabilities. |
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Term
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Definition
| The form that must be filled out for each new account opened with a brokerage firm. The form specifies, at a minimum, the account owner, trading authorization, payment method, and types of securities appropriate for the customer. |
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Term
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Definition
| A real estate direct participation program that aims to provide capital appreciation from building new property. |
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Term
| New Housing Authority Bond (NHA) |
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Definition
| A municipal special revenue bond backed by the U.S. government and issued by a local Public Housing Authority to develop and improve low-income housing. |
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Term
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Definition
| The securities market for shares in privately owned businesses that are raising capital by selling common stock to the public for the first time. |
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Term
| New York Stock Exchange (NYSE) |
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Definition
| The largest stock exchange in the United States. |
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Term
| New York Stock Exchange Composite Index |
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Definition
| Index of common stocks listed on the NYSE, based on the price of each stock weighted by its total value of shares outstanding. |
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Term
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Definition
| A mutual fund whose shares are sold without a commission or sales charge. The investment company distributes the shares directly. |
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Term
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Definition
| The person in whose name securities are registered if that person is other than the beneficial owner. This is a brokerage firm’s role when customer securities are registered in street name. |
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Term
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Definition
| The interest rate stated on the face of a bond that represents the percentage of interest the issuer pays on the bond’s face value. |
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Term
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Definition
| An investor not meeting the net worth requirements of Regulation D. Non accredited investors are counted for purposes of the 35-investor limitation for Regulation D private placements. |
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Term
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Definition
| A buyer of an unregistered public offering security who has no management or major ownership interest in the company being acquired. Nonaffiliates may sell this stock only after a specified holding period. |
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Term
| Noncumulative preferred stock |
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Definition
| An equity security that does not have to pay any dividends in arrears to the holder. |
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Term
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Definition
| In a qualified retirement plan, a formula for calculating contributions and benefits that must be applied uniformly so as to ensure that all employees receive fair and equitable treatment. |
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Term
| Nondiversified investment company |
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Definition
| A management company that does not meet the diversification requirements of the investment Company Act of 1940. These companies are not restricted in the choice of securities or by the concentration of interest they have in those securities. |
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Term
|
Definition
| A security representing the right to buy or sell an investment instrument other than a common stock at specified price within a specified period. Examples of such investment instruments include foreign currencies, indices, and interest rates. |
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Term
|
Definition
| A security that must be purchased in a cash account, that must be paid for in full, and that may not be used as collateral for a loan. Examples include put and call options, rights, insurance contracts, and new issues. |
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Term
| Nonqualified retirement plan |
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Definition
| A corporate retirement plan that does not meet the standards set by the Employee Retirement Income Security Act of 1974. Contributions to a nonqualified plan are not tax deductible. |
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Term
|
Definition
| A chart showing long-term debt instruments having higher yields than short-term debt instruments. |
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Term
| North American Securities Administrators Association (NASAA) |
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Definition
| Voluntary association whose members provide insight from their perspective to the SEC and SROs as they move forward in their rulemaking process. Actively advocates pro-investor policies, provides investor education, and offers resources for the regulatory community and securities industry professionals. |
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Term
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Definition
| An order that gives the floor broker discretion as to the price and timing of the order’s execution. Not held orders are often entered for large amounts of a security. |
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Term
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Definition
| A short-term debt security, usually maturing in five years or less. |
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Term
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Definition
| An account titled with something other than the customer’s name. The title might be a number, symbol, or special title. |
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Term
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Definition
| An amount of security that is less than the normal unit of trading for the security. Generally, an odd lot is fewer than 100 shares of stock or five bonds. |
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Term
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Definition
| Under the Uniform Securities Act, any attempt to solicit a purchase or sale in a security for value. |
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Term
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Definition
| An abbreviated prospectus used by corporations issuing less than $5 million of stock. The SEC’s Regulation A allows these offerings an exemption from the full registration requirements of the Securities Act of 1933. |
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Term
| Oil and gas direct participation program |
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Definition
| A direct participation program formed to locate new oil and gas reserves, develop existing reserves, or generate income from producing wells. A high return is the primary objective of such a program. |
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Term
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Definition
| An accounting procedure that reduces the taxable portion of revenues from the sale of oil to compensate for the decreased supply of oil in the ground. Depletion is the natural resource counterpart of depreciation. |
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Term
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Definition
| An account opened in the name of an investment adviser or a broker-dealer for the benefit of its customers. The firm carrying the account does not receive disclosure of the individual customers’ names or holdings and does not maintain records for the individual customers. |
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Term
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Definition
| Entering the options market by selling calls or puts. |
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Term
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Definition
| Entering the options market by selling calls or puts. |
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Term
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Definition
| The buying and selling of securities (primarily government or agency debt) by the Federal Open Market Committee to effect control of the money supply. These transactions increase or decrease the level of bank reserves available for lending. |
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Term
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Definition
| (1) The day to day costs incurred in running a business. (2) In an oil and gas program, any production or leasehold expense incurred in the operation of a producing lease, including district expense; direct out-of-pocket expenses for labor, materials, and supplies; and those shares of taxes and transportation charges not borne by overriding royalty interests. |
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Term
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Definition
| The profit realized from one year of operation of a business. |
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Term
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Definition
| A security that represents the right to buy or sell a specified amount of an underlying security – such as a stock, bond, or futures contract - at a specified price within a specified time. The purchaser acquires a right, and the seller assumes an obligation. |
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Term
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Definition
| The document a customer must sign within 15 days of being approved for options trading. In it, the customer agrees to abide by the rules of the options exchanges and not to exceed position or exercise limits. |
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Term
| Option contract adjustment |
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Definition
| An adjustment mad automatically to the terms of an option on the ex-dividend date when a stock pays a stock dividend or if there is a stock split or a reverse split. |
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Term
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Definition
| A customer account in which the customer has received approval to trade options. |
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Term
| Options Clearing Corporation (OCC) |
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Definition
| The organization that issues options, standardizes option contracts, and guarantees their performance. The OCC made secondary trading possible by creating fungible option contracts. |
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Term
| Options Clearing Corporation (OCC) |
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Definition
| The clearing agent for listed options contracts - that is, those listed for trading on U.S. options exchanges. Its primary functions are to standardize, guarantee the performance of, and issue option contracts. The OCC also designates the contract specifications such as strike prices and expiration months. These standardized features for options help to maintain uniformity and liquidity in the marketplace. |
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Term
| Options disclosure document |
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Definition
| A publication of the Options Clearing Corporation (OCC) that outlines the risks and rewards of investing in options. The document must be given to each customer at the time of opening an options account and must accompany any options sales literature sent to a customer. |
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Term
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Definition
| The department within a brokerage firm that transmits orders to the proper market for execution and returns confirmations to the appropriate representative. |
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Term
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Definition
| The form completed by a registered representative that contains customer instructions regarding an order’s placement. The memorandum contains such information as the customer’s name and account number, a description of the security, the type of transaction (e.g., buy, sell, or sell short), and any special instructions (such as time or price limits). |
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Term
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Definition
| Earnings other than capital gain. |
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Term
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Definition
| An electronic quotation system for equity securities that are not listed on a national exchange or included in the Nasdaq system. |
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Term
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Definition
| A security that is not traded on a national exchange, but that has been designated by the Federal Reserve Board as eligible for trading on margin. |
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Term
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Definition
| The securities exchange system in which broker-dealers negotiate directly with one another rather than through an auction on an exchange floor. The trading takes place over computer and telephone networks that link brokers and dealers around the world. Both listed and OTC securities, as well as municipal and U.S. government securities, trade in the OTC market. |
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Term
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Definition
| An option contract that is not listed on an exchange. All contract terms are negotiated between buyer and seller. |
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Term
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Definition
| The term used to describe an option that has no intrinsic value, such as a call option (when the stock is selling below the exercise price) or a put option (when the stock is selling above the exercise price). |
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Term
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Definition
| Equity securities issued by a corporation and in the hands of the public; issued stock that the issuer has not reacquired. |
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Term
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Definition
| A technical analysis term for a market in which more and stronger buying has occurred than the fundamentals justify. |
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Term
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Definition
| A condition resulting when property in a municipality is subject to multiple taxing authorities or tax districts, each having tax collection powers and recourse to the residents of that municipality. |
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Term
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Definition
| A technical analysis term for a market in which more and stronger selling has occurred than the fundamentals justify. |
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Term
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Definition
| The dollar amount the issuer assigns to a security. For an equity security, par is usually a small dollar amount that bears no relationship to the security’s market price. For a debt security, par is the amount repaid to the investor when the bond matures, usually $1,000. |
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Term
|
Definition
| The dollar amount assigned to a security by the issuer. For an equity security, par value is usually a small dollar amount that bears no relationship to the security’s market price. For a debt security, par value is the amount repaid to the investor when the bond matures, usually $1,000. |
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Term
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Definition
| In an exchange market, a situation in which all brokers bidding have equal standing and the winning bid is awarded by a random drawing. |
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Term
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Definition
| The dollar amount at which a common stock is equal in value to its corresponding convertible security. It is calculated by dividing the convertible security’s market value by its conversion ratio. |
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Term
| Parity price of convertible |
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Definition
| The dollar amount at which a convertible security is equal in value to its corresponding common stock. It is calculated by multiplying the market price of the common stock by its conversion ratio. |
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Term
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Definition
| The redemption by an issuer of a portion of an outstanding bond issue before the maturity date. |
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Term
| Participating preferred stock |
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Definition
| An equity security that offers the holder a share of corporate earning remaining after all senior securities have been paid a fixed dividend. The payment is made in addition to the fixed dividend stated on the certificate and may be cumulative or noncumulative. |
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Term
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Definition
| The provision of the Employee Retirement Income Security Act of 1974 requiring that all employees in a qualified retirement plan by covered within a reasonable time of their dates of hire. |
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Term
|
Definition
| A form of business organization in which two or more individuals manage the business and are equally and personally liable for its debts. |
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Term
|
Definition
| An account that empowers the individual members of a partnership to act on the behalf of the partnership as a whole. |
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Term
| Partnership management fee |
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Definition
| The amount payable to the general partners of a limited partnership or to other persons for managing the day to day partnership operations. |
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Term
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Definition
| Earnings derived from a rental property, limited partnership, or other enterprise in which the individual is not actively involved. Passive income therefore, does not include earnings from wages or active business participation, nor does it include income from dividends, interest, and capital gains. |
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Term
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Definition
| A loss incurred through a rental property, limited partnership, or other enterprise in which the individual is not actively involved. Passive loses may be used to offset passive income only, not wage or portfolio income. |
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Term
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Definition
| A security representing an interest in a pool of conventional, VA, Farmers Home Administration, or other agency mortgages. The pool receives the principal and interest payments, and it passes through to each certificate holder. Payments may or may not be guaranteed. |
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Term
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Definition
| The day on which a declared dividend is paid to all stockholders owning shares on the record date. |
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Term
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Definition
| As defined by the Federal Reserve Board’s Regulation T, the period corresponding to the regular way settlement period. |
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Term
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Definition
| A retirement plan whereby an employee authorizes a deduction from his check on a regular basis. The plan may be qualified, such as a 401K plan, or nonqualified. |
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Term
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Definition
| The end of a period of increasing business activity throughout the economy; one of the four stages of the business cycle. |
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Term
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Definition
| A contract between an individual and an employer, a labor union, a government entity, or another institution that provides for the distribution of pension benefits at retirement. |
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Term
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Definition
| As defined in securities law, an individual, a corporation, a partnership, an association, a fund, a joint stock company, an unincorporated organization a trust, a government, or a political subdivision of a government. |
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Term
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Definition
| An individual’s total earnings derived from wages, passive business enterprises, and investments. |
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Term
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Definition
| An institution retained by an investment company to perform clerical duties. The custodian’s responsibilities include safeguarding plan assets, sending out customer confirmations, and issuing shares. |
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Term
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Definition
| A security transaction’s execution price that is above the previous execution price by a minimum amount. |
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Term
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Definition
| A measure of a bond’s price; $10 or 1% of the par value of $1,000. |
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Term
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Definition
| Earning from interest, dividends, and all nonbusiness investments. |
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Term
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Definition
| The entity responsible for investing a mutual fund’s assets, implementing its investment strategy, and managing day to day portfolio trading. |
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Term
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Definition
| The amount of a security either owned (a long position) or owed (a short position) by an individual or a dealer. Dealers take long positions in specific securities to maintain inventories and thereby facilitate trading. |
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Term
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Definition
| The rule established by options exchanges that prohibits an investor from having a net long or short position of more than a specific number of contracts on the same side of the market. |
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Term
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Definition
| A stockholder’s legal right to maintain their proportionate ownership by purchasing newly issued shares before the new stock is offered to the public. |
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Term
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Definition
| An equity security that represents ownership in a corporation. It is issued with a stated dividend, which must be paid before dividends are paid to common stockholders. |
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Term
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Definition
| A mutual fund whose investment objective is to provide stable income with minimal capital risk. It invests in income-producing instruments such as preferred stock. |
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Term
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Definition
| An abbreviated prospectus that is distributed while the SEC is reviewing an issuer’s registration statement. It contains all of the essential facts about the forthcoming offering except the underwriting spread, final public offering price, and date on which the shares will be delivered. |
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Term
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Definition
| (1) The amount of cash that an option buyer pays to an option seller. (2) The difference between the higher price paid for a security and the security’s face amount at issue. |
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Term
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Definition
| A bond that sells at a higher price than its face value. |
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Term
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Definition
| The potential that the value of a currency or commodity will change between the signing of a delivery contract and the time delivery is made. The futures markets serve to manage price risk. |
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Term
| Price-to-earnings ratio (P/E) |
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Definition
| A tool for comparing the prices of different common stocks by assessing how much the market is willing to pay for a share of each corporation’s earnings. It is calculated by dividing the current market price of a stock by the earnings per share. |
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Term
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Definition
| Securities are sold to the investing public in issuer transactions. The Issuer of these securities receives the proceeds generated by the sale of the securities. |
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Term
|
Definition
| An offering in which the proceeds of the underwriting go to the issuing corporation, agency, or municipality. The issuer seeks to increase its capitalization either by selling shares of stock, representing ownership, or by selling bonds, representing loans to the issuer. |
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Term
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Definition
| The interest rate that commercial banks charge their prime or most creditworthy customers, generally large corporations. |
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Term
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Definition
| A person who trades for his own account in the primary or secondary market. Also, a dealer. |
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Term
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Definition
| A transaction in which a broker-dealer either buys securities from customers and takes them into its own inventory or sells securities to customers form its inventory. |
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Term
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Definition
| In an exchange market, the ranking of bids and offers according to the first person to bid or offer at a given price. Therefore, only one individual or firm can have priority. |
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Term
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Definition
| An offering of new issue securities that complies with Regulation D of the securities Act of 933. According to Regulation D, a security generally is not required to be registered with the SEC if it is offered to no more than 35 nonaccredited investors or to an unlimited number of accredited investors. |
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Term
|
Definition
| An oil or gas well that produces mineral resources that may be marketed commercially. |
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Term
|
Definition
| The ability to generate a level of income and gain in excess of expenses. |
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Term
|
Definition
| An employee benefit plan established and maintained by an employer whereby the employees receive a share of the business’s profits. The money may be paid directly to the employees or deferred until retirement. A combination of both approaches is also possible. |
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Term
|
Definition
| A tax that takes a larger percentage of the income of high-income earners than that of low-income earners. |
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Term
|
Definition
| A distribution made by a corporation to its stockholders of securities it owns in other corporations or of its products. |
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Term
| Prospectus delivery requirement period |
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Definition
| A final prospectus must be delivered to al buyers in the secondary market for a specified time following the effective date. For IPOs this period is: 90 days if the security is to be quoted on the OTC Pink or over the OTC Bulletin board (OTCBB) (non Nasdaq). 25 days if the security is to be listed on an exchange or quoted over Nasdaq For additional issue: If the security is already listed or quoted over Nasdaq, a prospectus must be delivered only in connection with purchases at the POP. Once the distribution is complete, there is no obligation to deliver a prospectus in secondary market transactions. If the security is non-Nasdaq, the prospectus delivery requirement period is 40 days. |
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Term
|
Definition
| A limited power of attorney from a stockholder authorizing another person to vote on stockholder issues according to the first stockholder’s instructions. To vote on corporate matters, a stockholder must either attend the annual meeting or vote by proxy. |
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Term
|
Definition
| The department within a brokerage firm that is responsible for sending proxy statements to customers whose securities are held in the firm’s name, and for mailing financial reports received from issuers to their stockholders. |
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Term
|
Definition
| A legal maxim that restricts discretion in a fiduciary account to only those investments that a reasonable and prudent person might make. |
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Term
|
Definition
| The sale of an issue of common stock, either by a corporation going public or by an offering of additional shares. |
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Term
| Public offering price (POP) |
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Definition
| (1) The price of new shares that is established in the issuing corporation’s prospectus. (2) The price to investors for mutual fund shares, equal to the net asset value plus the sales charge. |
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Term
|
Definition
| The potential that, because of inflation, a certain amount of money will not purchase as much in the future as it does today. |
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Term
|
Definition
| (1) An option contract giving the owner the right to sell a certain amount of an underlying security at a specified price within a specified time. (2) The act of exercising a put option. |
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Term
|
Definition
| A debt security requiring the issuer to purchase the security at the holder’s discretion or within a prescribed time. |
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Term
|
Definition
| An investor who pays a premium for an option contract and receives, for a specified time, the right to sell the underlying security at a specified price. |
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Term
|
Definition
| An investor who receives a premium and takes on, for a specified time, the obligation to buy the underlying security at a specified price at the put buyer’s discretion. |
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Term
|
Definition
| The statement of a bond attorney affirming the validity of a new municipal bond issue but expressing reservations about its quality. |
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Term
| Qualified retirement plan |
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Definition
| A corporate retirement plan that meets the standards set by the Employee Retirement Income Security Act of 1974. Contributions to a qualified plan are tax deductible. |
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Term
|
Definition
| The price or bid a market maker or broker-dealer offers for a particular security. |
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Term
|
Definition
| A security’s low price and high price for a particular trading period, such as the close of a day’s trading, the opening of a day’s trading, or a day, month, or year. |
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Term
|
Definition
| An evaluation of a corporate or municipal bond’s relative safety, according to the issuer’s ability to repay principal and make interest payments. Bonds are rated by various organizations, such as Standard & Poor’s and Moody’s. Ratings range from AAA or Aaa (the highest) to C or D, which represents a company in default. |
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Term
|
Definition
| A company, such as Moody’s or Standard & Poor’s, that rates various debt and preferred stock issues for safety of payment of principal, interest, or dividends. The issuing company or municipality pays a fee for the rating. |
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Term
|
Definition
| A real estate direct participation program that aims to provide capital appreciation by investing in undeveloped land. |
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Term
| Real estate investment trust (REIT) |
|
Definition
| A corporation or trust that uses the pooled capital of many investors to invest in direct ownership of either income property or mortgage loans. These investments offer tax benefits in addition to interest and capital gains distributions. |
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Term
| Real estate limited partnership |
|
Definition
| A direct participation program formed to build new structures, generate income from existing property, or profit from the capital appreciation of undeveloped land. Growth potential, income distributions, and tax shelter are the most important benefits of such a program. |
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Term
|
Definition
| The amount a taxpayer earns when he sells an asset. |
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Term
|
Definition
| Changing the capital structure of a corporation by issuing, converting, or redeeming securities. |
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Term
|
Definition
| A general economic decline lasting from 6 to 18 months. |
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Term
|
Definition
| The date that a corporation’s board of directors establishes that determines which of its stockholders are entitled to receive dividends or rights distributions. |
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Term
|
Definition
| Indications of interest taken and solicited with a preliminary prospectus during the cooling-off period. |
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Term
|
Definition
| A security that the issuer redeems upon the holder’s request. Examples include shares in an open-end investment company and Treasury notes. |
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Term
|
Definition
| The return of an investor’s principal in a security, such as a bond, preferred stock, or mutual fund shares must occur within seven days of receiving the investor’s request for redemption. |
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Term
|
Definition
| Issuing equity, the proceeds of which are used to retire debt. |
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Term
|
Definition
| Retiring an outstanding bond issue at maturity using money from the sale of a new offering. |
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Term
|
Definition
| Describes a security that prints the owner’s name on the certificate. The owner’s name is stored in records kept by the issuer or a transfer agent. |
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Term
| Registered as to the principal only |
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Definition
| The term describing a bond that prints the owner’s name on the certificate, but that has unregistered coupons payable to the bearer. |
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|
Term
| Registered Options Principal (ROP) |
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Definition
| The officer or partner of a brokerage firm who approves, in writing, accounts in which options transactions are permitted. |
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Term
|
Definition
| An associated person of a member firm who manages or supervises the firm’s investment banking or securities business. This includes any individual who trains associated persons and who solicits business. Unless the member firm is a sole proprietorship, it must employ at least two registered principals, one of whom must be registered as a general securities principal and one of whom must be registered as a financial and operations principal. If the firm does options business with the public, it must employ at least one Registered Options Principal. |
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|
Term
| Registered Representative (RR) |
|
Definition
| An associated person engaged in the investment banking or securities business. This includes any individual who supervises, solicits, or conducts business in securities or who trains people to supervise, solicit, or conduct business in securities. Anyone employed by a brokerage firm who is not a principal and who is not engaged in clerical or brokerage administration is subject to registration and exam licensing as a registered representative. |
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Term
|
Definition
| The independent organization or part of a corporation responsible for accounting for all of the issuer’s outstanding stock and certifying that its bonds constitute legal debt. |
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Term
| Registration by coordination |
|
Definition
| A process that allows a security to be sold in a state. It is available to an issuer that files for the security’s registration under the Securities Act of 1933 and files duplicates of the registration documents with the state Administrator. The state registration becomes effective at the same time the federal registration statement becomes effective. |
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Term
|
Definition
| A process that allows a security to be sold in a state. Previously referred to as registration by notification, it is available to an issuer who files for the security’s registration under the Securities Act of 1933, meets minimum net worth and certain other requirements, and notifies the state of this eligibility by filing certain documents with the state Administrator. The state registration becomes effective at the same time the federal registration statement become effective. |
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|
Term
| Registration by qualification |
|
Definition
| A process that allows a security to be sold in a state. It is available to an issuer who files for the security’s registration with the state Administrator; meets minimum net worth, disclosure, and other requirements; and files appropriate registration fees. The state registration becomes effective when the legal document that discloses all pertinent information concerning an offering of a security and its issuer is filed. It is submitted to the SEC in accordance with the requirements of the Securities Act of 1933, and it forms the basis of the final prospectus distributed to investors. |
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Term
|
Definition
| An issuer must file this with the SEC disclosing material information about the issue. This must include: 1. a description of the issuer’s business 2. the names and addresses of company officers and directors, their salaries, and a five-year business history of each 3. the amount of corporate securities company officers and directors own and identification of investors who own 10% or more of the company 4. the company’s capitalization, including its equity and debt 5. a description of how the proceeds will be used 6. Whether the company is involved in any legal proceedings |
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Term
|
Definition
| A tax that takes a larger percentage of the income of low-income earners than that of high-income earners. Examples include gasoline and tax and cigarette tax. |
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Term
|
Definition
| A settlement contract that calls for delivery and payment within a standard payment period from the date of the trade. The Uniform Practice Code sets the standards payment period. The type of security being traded determines the amount of time allowed for regular way settlement. |
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Term
|
Definition
| The provision of the Securities Act of 1933 that exempts from registration small public offerings valued at no more than $5 million worth of securities issued during a 12 month period. |
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Term
|
Definition
| The provision of the Securities Act of 1933 that exempts from registration offerings sold to a maximum of 35 nonaccredited investors during a 12 month period. |
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|
Term
| Regulation NMS (National Market System) |
|
Definition
| A broad sweeping SEC regulation designed to bring trading and reporting uniformity to U.S. securities markets. |
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|
Term
|
Definition
| Regulation enacted by the SEC to protect the privacy of customer information, particularly nonpublic personal information. Your firm must provide a privacy notice describing its privacy policies to customers whenever a new account is opened and annually thereafter. The notice must provide customers a reasonable means to opt out of the disclosure of the customer’s nonpublic personal information to unaffiliated third party. |
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Term
|
Definition
| The federal Reserve Board regulation that governs customer cash accounts and the amount of credit that brokerage firms and dealers may extend to customers for the purchase of securities. Regulation T currently sets the loan value of marginable securities at 50% and the payment deadline at two days beyond regular way settlement. |
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Term
|
Definition
| The Federal Reserve Board regulation that governs loans by banks for the purchase of securities. Call loans are exempt from this regulation. |
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Term
|
Definition
| The pledging of a client’s securities as collateral for a bank loan. Brokerage firms may rehypothecation up to 140% of the value of their customer’s securities to finance margin loans to customers. |
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Term
|
Definition
| A sale of securities with an attendant agreement to repurchase them at a higher price on an agreed-upon future date; the difference between the sale price and the repurchase price represents the interest earned by the investor. Repos are considered money market instruments and are used to raise short-term capital and as instruments of monetary policy. |
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Term
|
Definition
| The right of a common stockholder to corporate assets in the event that the corporation ceases to exist. A common stockholder may claim assets only after the claims of all creditors and other security holders have been satisfied. |
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|
Term
|
Definition
| A technical analysis term describing the top of a stock’s historical trading range. |
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|
Term
|
Definition
| A margin account in which the equity is less than the Regulation T initial requirement. |
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|
Term
|
Definition
| These people are defined as: 1. member firms 2. employees of member firms 3. finders and fiduciaries acting on behalf of the managing underwriter, including attorneys, accountants, financial consultants, and so on 4. portfolio managers, including any person who has the authority to buy or sell securities for a bank, savings and loan association, insurance company, or investment company 5. any person owning 10% or more of a member firm |
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Term
|
Definition
| An unregistered, nonexempt security acquired either directly or indirectly from the issuer, or an affiliate of the issuer, in a transaction that does not involve a public offering. |
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|
Term
|
Definition
| FINRA defines this category of communications with the public as any written (including electronic) communication that is distributed or made available to more than 25 retail investors within any 30 calendar-day period. A retail investor is any person other than an institutional investor, regardless of whether the person has an account with the member firm or not. |
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|
Term
|
Definition
| Individual who makes investments such as the purchase of securities for his or her own personal account rather than for an organization. |
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Term
|
Definition
| The amount of a corporation’s net income that remains after all dividends have been paid to preferred and common stockholders. |
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Term
|
Definition
| A customer account established to provide retirement funds. |
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Term
|
Definition
| Ending an issuer’s debt obligation by calling the outstanding bonds, by purchasing bonds in the open market, or by repaying bondholders the principal amount at maturity. |
|
|
Term
| Return on investment (ROI) |
|
Definition
| The profit or loss resulting from a security transaction, often expressed as an annual percentage rate. |
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Term
|
Definition
| A municipal debt issue whose interest and principal are payable only from the specific earnings of an income-producing public project. |
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|
Term
|
Definition
| The unsuitable practice of placing a client who trades infrequently in a fee-based account rather than a commission-based account that would be more appropriate. |
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|
Term
| Reverse repurchase agreement |
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Definition
| A purchase of securities with an attendant agreement to resell them at a higher price on an agreed-upon future date; the difference between the purchase price and the resale price represents the interest earned by the investor. The purchaser initiates the deal. |
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Term
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Definition
| The percentage of depositors’ money that the Federal Reserve Board requires a commercial bank to keep on deposit in the form of cash or in its vault. |
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Term
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Definition
| A reduction in the number of a corporation’s shares outstanding that increases the par value of its stock or its earnings per share. The market value of the total number of shares remains the same. |
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Term
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Definition
| A security representing a stockholder’s entitlement to the first opportunity to purchase new shares issued by the corporation at a predetermined price (normally less than the current market price) in proportion to the number of shares already owned. Rights are issued for a short time only, after which they expire. |
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Term
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Definition
| A benefit offered by a mutual fund that allows the investor to qualify for reduced sales loads on additional purchases according to the fund account’s total dollar value. |
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Term
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Definition
| An issue of new shares of stock accompanied by the opportunity for each stockholder to maintain a proportionate ownership by purchasing additional shares in the corporation before the shares are offered to the public. |
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Term
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Definition
| The transfer of funds from one qualified retirement plan to another qualified retirement plan. If this is not done within a specified time period, the funds are taxed as ordinary income. |
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Term
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Definition
| A security’s normal unit of trading, which is generally 100 shares of stock or five bonds. |
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Term
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Definition
| SEC rule requiring that persons who hold control or restricted securities sell them only in limited quantities, and that all sales of restricted stock by control persons must be reported to the SEC by filing a Form 144, “Notice of Proposed Sales of Securities.” |
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Term
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Definition
| SEC rule that provides exemption from the registration statement and prospectus requirements of the Securities Act of 1933 for securities offered and sold exclusively instrastate. |
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Term
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Definition
| NYSE rule requiring that each member organization exercise due diligence to learn the essential facts about every customer. |
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Term
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Definition
| SEC rule governing shelf offerings. The rule allows an issuer to sell limited portions of a new issue over a three-year period. |
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Term
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Definition
| SEC rule providing that an offering of less than $1 million during any 12 month period may be exempt from full registration. The rule does not restrict the number of accredited or nonaccredited purchasers. |
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Term
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Definition
| SEC rule providing that an offering of $1 million - $5 million during any 12 month period may be exempt from full registration. The rule restricts the number of nonaccredited purchasers to 35, but does not restrict the number of accredited purchasers. |
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Term
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Definition
| SEC rule providing that an offering of more than $5 million during any 12-month period may be exempt from full registration. The rule restricts the number of nonaccredited purchasers to 35, but does not restrict the number of accredited purchasers. |
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Term
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Definition
| Any written material a firm distributes to customers or the public in a controlled manner. Examples include circulars, research reports, form letters, market letters, performance reports, and text used for seminars. |
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Term
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Definition
| The amount added to a mutual fund share’s net asset value to arrive at the offering price. |
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Term
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Definition
| A government debt security that is not negotiable or transferable and that may not be used collateral. |
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Term
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Definition
| (1) A distribution, with a prospectus, that involves securities owned by major stockholders (typically founders or principal owners of a corporation). The sale proceeds go to the sellers of the stock, not to the issuer. (2) A procedure for trading very large blocks of shares of stock whereby the trade is executed off the floor of an exchange after the market closes. |
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Term
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Definition
| The market in which securities are bought and sold subsequently to their being sold to the public for the first time. |
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Term
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Definition
| Securities that trade between investors. One investor selling securities to another, and the issuer is not involved in the transaction. Stock exchanges are an example of a secondary market, where investors buy securities from and sell securities to each other throughout the trading day. |
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Term
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Definition
| A sale of securities in which one or more major stockholders in company sell all or a large portion of their holdings; the underwriting proceeds are paid to the stockholders rather than to the corporation. Typically, such an offering occurs when the founder of a business (and perhaps some of the original financial backers) determines that there is more to be gained by going public than by staying private. The offering does not increase the number of shares of stock outstanding. |
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Term
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Definition
| A mutual fund whose investment objective is to capitalize on the return potential provided by investing primarily in a particular industry or sector of the economy. |
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Term
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Definition
| A debt security backed by identifiable assets set aside as collateral. In the event that the issuer defaults on payment, the bondholders may lay claim to the collateral. |
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Term
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Definition
| Also referred to as the Paper Act, Full Disclosure Act, New Issues Act, Truth in Securities Act, and Prospectus Act. The main purpose is to ensure that the investing public is fully informed about a security and its issuing company when the security is first sold in the primary market. Protects investors who buy new issues by: · Requiring registration of new issues that are to be distributed interstate · Requiring an issuer to provide full and fair disclosure about itself and the offering · Requiring an issuer to make available all material information necessary for an investor to judge the issue’s merit · Regulating the underwriting and distribution of primary and secondary issues · Providing criminal penalties for fraud in the issuance of new securities |
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Term
| Securities Acts Amendments of 1975 |
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Definition
| Federal legislation that established the Municipal Securities Rulemaking board. |
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Term
| Securities and Exchange Commission (SEC) |
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Definition
| Commission created by congress under the Securities Exchange Act of 1934 to regulate the securities markets and protect investors. It is composed of five commissioners appointed by the president of the United States and approved by the Senate. The SEC enforces, among other acts, the Securities Act of 1933, the Securities Exchange Act of 1934, the Trust Indenture Act of 1939, the Investment Company Act of 1940, and the Investment Advisers Act of 1940. It is the primary regulatory body, BDs must apply ad be approved for registration. * Although a BD must register w/ the SEC, the BD may not claim that this registration in any way implies that the SEC has passed upon or approved the BD’s financial standing, business, or conduct. Any such claim or statement is misrepresentation. |
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Term
| Securities Exchange Act of 1934 |
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Definition
| Federal legislation that established the Securities and Exchange Commission. The act aims to protect investors by regulating the exchanges, the over-the-counter market, the extension of credit by the Federal Reserve Board, broker-dealers, insider transactions, trading activities, client accounts, and net capital. |
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Term
| Securities Investor Protection Corporation (SIPC) |
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Definition
| A nonprofit membership corporation created by an act of Congress to protect clients of brokerage firms that are forced into bankruptcy, Membership is composed of all brokers and dealers registered under the Securities Exchange Act of 1934. SIPC provides brokerage firm customers up to $500,000 coverage for cash and securities held by the firms (although cash coverage is limited to $250,000). *All BDs registered with the SEC must be SIPC members except: Banks that deal exclusively in municipal securities, firms that deal exclusively in U.S. government securities, and firms that deal exclusively in redeemable investment company securities.*Cash and margin accounts for the same customer are combined for the purposes of determining SIPC coverage. However, only the equity in a margin account is covered, not the full market value. |
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Term
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Definition
| Other than an insurance policy or a fixed annuity, any piece of securitized paper that can be traded for value. Under the Securities Exchange Act of 1934, this includes any note, stock, bond, investment contract, debenture, certificate of interest in a profit-sharing or partnership agreement, certificate of deposit, collateral trust certificate, preorganization certificate, option on a security, or other instrument of investment commonly known as a security. |
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Term
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Definition
| Holding customer-owned securities separate from securities owned by other customers and securities owned by the brokerage firm. |
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Term
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Definition
| The potential for loss on an investment owing to the particular security chosen performing poorly in spite of good overall market or industry performance. |
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Term
| Self-regulatory organization (SRO) |
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Definition
| One of eight organizations accountable to the SEC for the enforcement of federal securities laws and the supervision of securities practices within an assigned field of jurisdiction. For example, FINRA regulates trading on the NYSE and the over-the-counter market; the Municipal Securities Rulemaking Board supervises state and municipal securities; and certain exchanges, such as the Chicago Board Options Exchange, act as self-regulatory bodies to promote ethical conduct and standard trading practices. |
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Term
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Definition
| To convey ownership of a security or another asset for money or value. This includes giving or delivering a security with or as a bonus for a purchase of securities, a gift of assessable stock, and selling or offering a warrant or right to purchase or subscribe to another security. Not included in the definition is a bona fide pledge or loan or a stock dividend if nothing of value is given by the stockholders for the dividend. |
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Term
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Definition
| An order to sell a security that is entered at a price below the current market price and that is triggered when the market price touches or goes through the sell stop price. |
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Term
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Definition
| A settlement contract that calls for delivery and payment according to a number of days specified by the seller. |
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Term
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Definition
| The procedure that the seller of a security follows when the buyer fails to complete the contract by accepting delivery of the security. The seller closes the contract by selling the security in the open market and charging the account of the buyer for transaction fees and any loss caused by changes in the market. |
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Term
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Definition
| A bond issue that shares that same collateral as is backing other issues but that has a prior claim to the collateral in the event of default. |
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Term
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Definition
| A security that grants its holder a prior claim to the issuer’s assets over the claims of another security’s holders. For example, a bond is a senior security over common stock. |
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Term
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Definition
| The account that holds funds paid by variable annuity contract holders. The funds are kept separate from the insurer’s general account and are invested in a portfolio of securities that match the contract holders’ objectives. |
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Term
| Separate Trading of Registered Interest and Principal of Securities (STRIPS) |
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Definition
| A zero coupon bond issued and backed by the Treasury Department. |
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Term
| Separately identifiable department or division |
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Definition
| A department of a bank that engages in the business of buying or selling municipal securities under the direct supervision of an officer of the bank. Such a department is classified by the Municipal Securities Rulemaking Board (MSRB) as a municipal securities dealer and must comply with MSRB regulations. |
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Term
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Definition
| A debt security issued with a maturity schedule in which parts of the outstanding issue mature at intervals until the entire balance has been repaid. Most municipal bonds are serial bonds. |
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Term
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Definition
| Options of the same class that have the same exercise price and the same expiration date. |
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Term
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Definition
| The general securities principal license, which entitles the holder to supervise the business of a broker-dealer. A Series 7 or Series 62 qualification is a prerequisite for the license. |
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Term
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Definition
| The investment company/variable contract products limited representative license, which entitles the holder to sell mutual funds and variable annuities and is used by many firms that sell primarily insurance-related products. The Series 6 can serve as the prerequisite for the Series 26 license. |
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Term
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Definition
| The uniform securities agent state law exam, which entitles the successful candidate to sell securities and give investment advice in those states that require Series 63 registration. |
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Term
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Definition
| The general securities representative license, which entitles the holder to sell all types of securities products, with the exception of commodities futures (which requires a Series 3 license). The Series 7 is the most comprehensive of the FINRA representative licenses and serves as a prerequisite for most of the principal’s examinations. |
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Term
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Definition
| A debt security issued in a series of public offerings spread over an extended time period. All the bonds in the series have the same priority claim against assets. |
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Term
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Definition
| A nonmarketable, interest-bearing U.S. government savings bond issued at a discount from par. Interest on Series EE bonds is exempt from state and local taxes. |
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Term
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Definition
| A nonmarketable, interest-bearing U.S. government savings bond issued at par and purchased only by trading in series EE bonds at maturity. Interest on Series HH bonds is exempt from state and local taxes. |
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Term
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Definition
| The completion of a trade through the delivery of a security or commodity and the payment of cash or other consideration. |
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Term
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Definition
| The date on which ownership changes between buyer and seller. The Uniform Practice Code standardizes settlement provisions. |
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Term
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Definition
| An accounting method that identifies the specific shares selected for liquidation in the event that an investor wishes to liquidate shares. The difference between the buying and selling prices determines the investor’s tax liability. |
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Term
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Definition
| A method of allocating the responsibility for expenses and the right to share in revenues among the sponsor and limited partners in a direct participation program. |
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Term
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Definition
| An SEC provision allowing an issuer to register a new issue security without selling the entire issue at once. The issuer may sell limited portions of the issuer over a three-year period without reregistering the security or incurring penalties. *a supplemental prospectus must be filed with the SEC before each sale. |
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Term
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Definition
| The term used to describe the selling of a security, contract, or commodity that the seller does not own. For example, an investor who borrows shares of stock from a broker-dealer and sells them on the open market is said to have a short position in the stock. |
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Term
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Definition
| The sale of a security that the seller does not own, or any sale consummated by the delivery of a security borrowed by or for the account of the seller. |
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Term
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Definition
| The profit realized on the sale of an asset that has been owned for 12 months or less. |
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Term
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Definition
| The loss incurred on the sale of a capital asset that has been owned for 12 months or less. |
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Term
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Definition
| An expedient method of settling disputes involving claims not exceeding $50,000, whereby a panel of arbitrators reviews the evidence and renders a decision. All awards are made within 30 business days. |
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Term
| Simplified employee pension plan (SEP) |
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Definition
| A qualified retirement plan designed for employers with 25 or fewer employees. Contributions made to each employees’ individual retirement account grow tax deferred until retirement. |
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Term
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Definition
| An account in which only one individual has control over the investments and may transact business. |
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Term
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Definition
| The ability of a corporation both to meet its long-term fixed expenses and to have adequate money for long-term expansion and growth. |
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Term
| Special memorandum account (SMA) |
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Definition
| A notation on a customer’s general or margin account indicating that funds are credited to the account on a memo basis; the account is used much like a line of credit with a bank. An SMA preserves the customer’s right to use excess equity. |
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Term
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Definition
| A mutual fund whose objective is to capitalize on the profit potential of corporations in nonrecurring circumstances, such as those undergoing reorganizations or being considered as takeover candidates. |
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Term
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Definition
| Trading a commodity or security with a higher-than-average risk in return for a higher-than-average profit potential. The trade is effected solely for the purpose of profiting from it and not as a means of hedging or protecting other positions. |
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Term
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Definition
| One who trades a commodity or security with a higher-than-average risk in return for a higher-than-average profit potential. |
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Term
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Definition
| A type of divestiture where a parent company sells all of the shares of a subsidiary or distributes new shares of a company or division it owns to create a new company. |
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Term
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Definition
| A public offering of securities that combines aspects of both a primary and secondary offering. A portion of the issue is a primary offering, the proceeds of which go to the issuing corporation; the remainder of the issue is a secondary offering, the proceeds of which go to the selling stockholders. |
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Term
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Definition
| A person who is instrumental in organizing, selling, or managing a limited partnership. |
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Term
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Definition
| A separate individual retirement account established for a nonworking spouse. Contributions to the account made by the working spouse grow tax deferred until withdrawal. |
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Term
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Definition
| In a quotation, the difference between a security’s bid and ask prices. |
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Term
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Definition
| A period of high unemployment in the economy accompanied by a general rise in prices. |
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Term
| Standard & Poor’s 100 stock Index (S&P 100) |
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Definition
| A value-weighted index composed of 100 blue-chip stocks. The index is owned and compiled by Standard & Poor’s Corporation. |
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Term
| Standard & Poor’s Composite Index of 500 Stocks (S&P 500) |
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Definition
| A value-weighted index that offers broad coverage of the securities market. It is composed of 400 industrial stocks, 40 financial stocks, 40 public utility stocks, and 20 transportation stocks. The index is owned and compiled by Standard & Poor’s Corporation. |
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Term
| Standard & Poor’s Corporation (S&P) |
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Definition
| A company that rates stocks and corporate and municipal bonds according to risk profiles and that produces and tracks the S&P indexes. The company also publishes a variety of financial and investment reports. |
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Term
| Statutory disqualification |
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Definition
| Prohibiting a person from associating with a self-regulatory organization (SRO) because the person has been expelled, barred, or suspended from association with a member of an SRO’ has had his registration suspended denied or revoked by the SEC; has been the cause of someone else being suspended, barred, or having their license revoked; has been convicted of certain crimes; or has falsified an application or a report that he must file with or on behalf of a membership organization. |
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Term
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Definition
| A voting procedure that permits stockholders to cast one vote per share owned for each position. The procedure tends to benefit majority stockholders. |
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Term
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Definition
| The term used to describe the inability to fill a limit order at a specific price because other orders at the same price were entered previously. |
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Term
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Definition
| Written evidence of ownership in a corporation. |
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Term
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Definition
| The document that an institutional customer must sign when the broker-dealer borrows stock from the customer’s account; the document specifies the terms of the loan and the rights of both parties. |
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Term
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Definition
| A standard form that duplicates the back of a stock certificate and is used from transferring the stock to the new owner’s name. A separate stock power is used if a security’s registered owner does not have the certificate available for signature endorsement. |
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Term
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Definition
| A list of representative prices bid and asked for a stock during a particular trading day. Stocks are quoted in points, where one point equals $1. Stock quotes are listed in the financial press and most daily newspapers. |
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Term
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Definition
| An increase in the number of a corporation’s outstanding shares, which decreases its stock’s par value. The market value of the total number of shares remains the same. The proportional reductions in orders held on the books for a split stock are calculated by dividing the stock’s market price by the fraction that represents the split. |
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Term
|
Definition
| A customer order that becomes a limit order when the market price of the security reaches or passes a specific price. |
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Term
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Definition
| (1) A directive from the SEC that suspends the sale of new issue securities to the public when fraud is suspected or filing materials are deficient. (2) A customer order that becomes a market order when the market price of the security reaches or passes a specific price. |
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Term
| Student Loan Marketing Association (SLMA) |
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Definition
| A publicly owned corporation that purchases student loans from financial institutions and packages them for sale in the secondary market, thereby increasing the availability of money for educational loans. |
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Term
|
Definition
| A securities quotation that does not represent an actual offer to buy or sell but is tentative, subject to reconfirmation by the broker-dealer. |
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Term
|
Definition
| A debt obligation backed by the general credit of the issuing corporation that has claims to interest and principal subordinated to ordinary debentures and all other liabilities. |
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Term
| Subordinated debt financing |
|
Definition
| A form of long-term capitalization used by broker-dealers (BDs) in which the claims of lenders are subordinated to the claims of other creditors. Subordinated financing is considered part of the BD’s capital structure and is added to net worth when computing its net capital. |
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Term
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Definition
| A loan to a broker-dealer in which the lender agrees to subordinate its claim to the claims of the firm’s other creditors. |
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Term
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Definition
| A determination made by a registered representative as to whether a particular security matches a customer’s objective and financial capability. The representative must have enough information about the customer to make this judgement. |
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Term
|
Definition
| The total amount of a good or service available for purchase by consumers. |
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Term
|
Definition
| A technical analysis term describing the bottom of a stock’s historical trading range. |
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Term
| Suspicious activity report (SAR) |
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Definition
| A report filed by broker-dealers and financial institutions when investor behavior is detected that is commercially illogical and serves no apparent purpose. The filing threshold for a SAR is $5,000. |
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Term
|
Definition
| Groups of underwriters who are BDs or investment banking who work with an issuer through the registration process and ultimately bring the securities to the market and sell them to the investing public. |
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Term
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Definition
| The potential for a security to decrease in value owing to its inherent tendency to move together with all securities of the same type. Neither diversification nor any other investment strategy can eliminate this risk. |
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Term
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Definition
| The amount that a limited partner has invested in a partnership. |
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Term
|
Definition
| An amount that can be subtracted from a tax liability, often in connection with real estate development, energy conservation, and research and development programs. Every dollar of tax credit reduces the amount of tax due, dollar for dollar. |
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Term
|
Definition
| The amount of tax payable on earnings, usually calculated by subtracting standard and itemized deductions and personal exemptions from adjusted gross income, then multiplying by the tax rate. |
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Term
|
Definition
| The risk of the erosion of investment income through taxation. |
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Term
|
Definition
| The portion of a sale or distribution of mutual fund shares subject to taxation. |
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Term
|
Definition
| The rate of return a taxable bond must earn before taxes to equal the tax-exempt earnings on a municipal bond. This number varies with the investor’s tax bracket. |
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Term
|
Definition
| A measure of the tax burden of a municipality’s population, calculated by dividing the municipality’s tax receipts by its population. |
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Term
|
Definition
| A mutual fund whose investment objective is to provide maximum tax-free income. It invests primarily in municipal bonds and short-term debt. |
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Term
| Telephone Consumer Protection Act of 1991 (TCPA) |
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Definition
| Federal legislation restricting the use of the telephone lines for solicitation purposes. A company soliciting sales via telephone, facsimile, or email must disclose its name and address to the called party and must not call any person who has requested not to be called. |
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Term
|
Definition
| A form of joint ownership of an account whereby a deceased tenant’s fractional interest in the account is retained by his estate. |
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Term
|
Definition
| An offer to buy securities for cash or for cash plus securities. |
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Term
|
Definition
| A repayment schedule for a bond issue in which the entire issue comes due on a single date. |
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Term
|
Definition
| Trading market in which exchange-listed- securities are traded in the OTC market. Broker-dealers registered as OTC market makers in listed securities can do these transactions. |
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Term
|
Definition
| (1) A customer account for which the owner has given power of attorney to a third party. (2) A customer account opened by an adult naming a minor as a beneficial owner. (3) A customer account opened for another adult. This type of account is prohibited. |
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Term
|
Definition
| A minimum upward or downward movement in the price of a security. |
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Term
|
Definition
| A sum of money left with a bank (or borrowed from a bank and left on deposit) that the depositing customer has agreed not to withdraw from a specified time period or without a specified amount of notice. |
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Term
|
Definition
| The amount an investor pays for an option above its intrinsic value; it reflects the amount of time left until expiration. The amount is calculated by subtracting the intrinsic value from the premium paid. |
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Term
|
Definition
| The potential for an investor to incur a loss as a result of buying or selling a particular security at an unfavorable time. |
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Term
|
Definition
| Advertisements ran relating to a new issue allowed before the effective date. These may be placed by the issuer directly or with assistance of the underwriters. They are the only form of advertising that is permitted from the time the registration statement is filed with the SEC and the effective date of the offering These do not needs to be filed with the SEC and are limited to the following information: Name of the issuer, Type of security being offered, Number of shares to be sold, POP or range, Names of the underwriting member (when placed by the underwriters instead of the issuer), Must contain the following advisory “this announcement is neither an offer to sell nor a solicitation of an offer for any of these securities. This offer is made only by prospectus.” |
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Term
|
Definition
| The sum of a corporation’s long-term debt, stock accounts, and capital in excess of par. |
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Term
|
Definition
| A printed document that contains details of a transaction, including the settlement date and amount of money due from or owed to a customer. It must be sent to the customer on or before the settlement date. |
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Term
|
Definition
| The date on which a securities transaction is executed. |
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Term
|
Definition
| A pause in the trading of a particular security on one or more exchanges, usually in anticipation of a news announcement or to correct an order imbalance. During a trading halt, open orders may be canceled and options may be exercised. |
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Term
|
Definition
| A person or corporation responsible for recording the names and holdings of registered security owners, seeing that certificates are signed by the appropriate corporate officers, affixing the corporate seal, and delivering securities to the new owners. |
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|
Term
| Transfer and hold in safekeeping |
|
Definition
| A securities buy order settlement and delivery procedure whereby the securities bought are transferred to the customer’s name but are held by the broker-dealer. |
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Term
|
Definition
| A securities buy order settlement and delivery procedure whereby the securities bought are transferred to the customer’s name and sent to the customer. |
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Term
|
Definition
| A marketable U.S. government debt security with a maturity of less than one year. Treasury bills are issued through a competitive bidding process at a discount from par; they have no fixed interest rate. |
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Term
|
Definition
| A marketable, fixed-interest U.S. government debt security with a maturity more than 10 years. |
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Term
|
Definition
| A marketable, fixed-interest U.S. government debt security with a maturity of between 2 and 10 years. |
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Term
|
Definition
| The generic term for a zero-coupon bond issued by a brokerage firm and collateralized by the Treasury securities a custodian holds in escrow for the investor. |
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Term
|
Definition
| Equity securities that the issuing corporation has issued and repurchased from the public at the current market price. These shares do not receive dividends and lack voting rights. |
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Term
|
Definition
| A tool used by technical analysts to trace a security’s movement by connecting the reaction lows in an upward trend or the rally highs in a downward trend. |
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Term
|
Definition
| The end of a period of declining business activity throughout the economy; one of the four stages of the business cycle. |
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Term
| Trust Indenture Act of 1939 |
|
Definition
| The legislation requiring that all publicly offered, nonexempt debt securities be registered under the Securities Act of 1933 and be issued under a trust indenture that protects the bondholders. |
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Term
|
Definition
| Institution or person responsible for making all investment, management, and distribution decisions in an account maintained in the best interests of another who has been legally appointed to do so. |
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Term
|
Definition
| A term that classifies an option as a call or a put. |
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Term
|
Definition
| The securities that are bought or sold when an option, right, or warrant is exercised. |
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Term
|
Definition
| An investment banker that works with an issuer to help bring a security to the market and sell it to the public. |
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Term
|
Definition
| The procedure by which investment bankers channel investment capital from investors to corporations and municipalities that are issuing securities. |
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|
Term
| Underwriting compensation |
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Definition
| The amount paid to a broker-dealer frim for its involvement in offering and selling securities. |
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Term
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Definition
| The brokerage firm responsible for organizing a syndicate, preparing the issue, negotiating with the issuer and underwriters, and allocating stock to the selling group. |
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Term
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Definition
| Income derived from investments and other sources not related to employment services. Examples of unearned income include interest from a savings account, bond interest, and dividends from stock. |
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Term
| Uniform Gift to Minors Act (UGMA) |
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Definition
| Legislation that permits a gift of money or securities to be given to a minor and held in a custodial account that an adult manages for the minor’s benefit. Income and capital gains transferred to a minor’s name are taxed at a lower rate. |
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Term
| Uniform Securities Act (USA) |
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Definition
| Model legislation for securities industry regulation at the state level. Each state may adopt the legislation in its entirety or it may adapt it (within limits) to suit its needs. |
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Term
| Uniform Transfers to Minor Act (UTMA) |
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Definition
| Legislation adopted in some states that permits a gift of money or securities to be given to a minor and held in a custodial account that an adult manages for the minor’s benefit until the minor reaches a certain age (not necessarily the age or majority). There are exemption to state registration. The two most common are: 1. Isolated nonissuer transactions: are transactions occurring in the secondary market that occur infrequently. These transactions generally do not involve securities professionals. 2. Unsolicited transactions: are transactions imitated by the client, not the agent or representative. |
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Term
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Definition
| A share in the ownership of a direct participation program that entitles the investor to an interest in the program’s net income, net loss and distributions. |
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Term
| Unit investment Trust (UIT) |
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Definition
| An investment company that sells redeemable shares in a professionally selected portfolio of securities. It is organized under a trust indenture, not a corporate charter. |
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Term
| Unit of beneficial interest |
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Definition
| A redeemable share in a unit investment trust, representing ownership of an undivided interest in the underlying portfolio. |
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Term
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Definition
| The amount by which a security appreciates in value before it is sold. Until it is sold, the investor does not actually possess the sale proceeds. |
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Term
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Definition
| An insurance contract in which, at the end of the accumulation stage, the insurance company guarantees a minimum total payment to the annuitant. The performance of a separate account, generally invested in equity securities, determines the amount of this total payment. |
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Term
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Definition
| (1) An ERISA guideline stipulating that an employee must be entitled to his entire retirement benefits within a certain time period even if he no longer works for the employer. (2) The amount of time that an employee must work before retirement or before benefit plan contributions made by the employer becomes the employee’s property without penalty. The IRS and the Employee Retirement Income Security Act of 1974 set minimum requirements for vesting in a qualified plan. |
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Term
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Definition
| The magnitude and frequency of changes in the price of a security or commodity within a given time period. |
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Term
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Definition
| A stockholder’s right to vote for members of the board of directors and on matters of corporate policy- particularly the issuance of senior securities, stock splits, and substantial changes in the corporation’s business. A variation of this right is extended to variable annuity contract holders and mutual fund shareholders, who may vote on material policy issues. |
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Term
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Definition
| A security that gives the holder the right to purchase securities from the warrant issuer at a stipulated subscription price. Warrants are usually long-term instruments with expiration dates years in the future. |
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Term
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Definition
| Selling a security at a loss for tax purposes and, within 30 days before or after, purchasing the same or a substantially identical security. The IRS disallows the claimed loss. |
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Term
| Wilshire 5,000 Equity Index |
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Definition
| A value-weighted market indicator composed of 5,000 exchange-listed and over-the-counter common stocks. It is the broadest measure of the market. |
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Term
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Definition
| A measure of a corporation’s liquidity; that is, its ability to transfer assets into cash to meet current short-term obligations. The formula for working capital is: Current assets - current liabilities = working capital |
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Term
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Definition
| The seller of an option contract. An option writer takes on the obligation to buy or sell the underlying security if and when the option buyer exercises the option. |
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Term
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Definition
| The rate of return on an investment, usually expressed as an annual percentage rate. |
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Term
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Definition
| A graphic representation of the actual or projected yields of fixed-come securities in relation to their maturities. |
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Term
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Definition
| The rate of return on a bond that accounts for the difference between the bond’s acquisition cost and its proceeds, including interest income, calculated to the earliest date that the bond may be called by the issuing corporation. |
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Term
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Definition
| The rate of return on a bond that accounts for the difference between the bond’s acquisition cost and its maturity proceeds, including interest income. |
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Term
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Definition
| A security representing the right to receive, in cash, the difference between the current yield of an underlying U.S. government security and the strike price of the option. A yield-based option is used to speculate on or hedge against the risk associated with fluctuating interest rates; its strike price represents the anticipated yield of the underlying debt security. |
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Term
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Definition
| A corporate or municipal debt security traded at a deep discount from face value. The bond pays no interest; rather, it may be redeemed at maturity for its full face value. It may be issued at a discount, or it may be stripped of its coupons and repackaged. |
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Term
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Definition
| A security transaction’s execution price that is equal to the price of the last sale but lower than the last different price. |
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Term
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Definition
| A security transaction’s execution price that is equal to the price of the last sale but higher than the last different price. |
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