| A | B |
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| Accretion | A method of adjusting a taxpayer's cost basis of a bond bought at an original discount. |
| Accumulation Account | An account used by the sponser of a Unit Investment Trust to acquire securities for the eventual placement within the trust |
| Accumulation Period | In a variable annuity, the time when the client is contributing money into the annuity and purchasing accumulation units |
| Accumulation Unit | An accounting measure that represents a concract owner's proportionate unit of interest in a separate account during the accumulation period of a variable annuity |
| ACRS what it stands for | Accelerated Cost Recovery System |
| ACRS what it means | The IRS approved method of calculating depreciation expense for tax purposes. Also known as Accelerated Depreciation |
| Ad Valorem Tax | A tax based on the assessed value of real property |
| Advance Refunded Bonds | Bonds whose debt service is paid by escrowed funds. Also called Prerefunded Bonds. |
| AMT stands for | Alternative Minimum Tax |
| Alternative Minimum Tax | A tax designed to prent wealthy investors from using tax shelters to avoid other (income) taxes. The calculation of AMT takes into accoutn tax preference items |
| Annuitize | An investor's decision to end the accumulation period and begin receiving periodic payments from an annuity |
| Annuity | A contract between and insruance company and an individual. |
| Annuity guarantees... | Lifetime income to the person on whose life the contract is based in return for either a lump sum or a periodic payment to the insurance company. |
| A fixed annuity guarantees... | A specific amount of payment each month |
| A variable annuity guarantees... | the amount of a monthly check would fluctuate according to the value of the securities in a seperate account. |
| Annuity Period | In a variable annuity the time when the client is receiving benefits from the contract based on the number of unites owned, payout option selected and the performance of hte separate account |
| Annuity Unit | The accoutning measure used to determine the amount of each payment to an annuitant during the payout period. |
| Assumed Interest Rate | Rate of growth built into an annutiy table whihc dtermines payout on a variable annuity |
| AIR | Assumed Interest Rate |
| Julie Neilan | girlfriend of the year |
| Balanced Program | An oil/gas drilling program which drills in both areas of known production and in unproven areas. |
| Bear Spread | An option sprad position in which the investor profits form a decline in the underlying stock price |
| Bearer Bond | A bond which doe snot have the owner's name registered on the booksof the issuer. Interest is paid by means of attatched coupons. Interest and principal, when due are payable to the holder |
| Beta | A statisticla measure of the price volatility of a security in relation tothe entire stock marekent's volatility. A beta of 2 is twice as volatile ans the market aka systematic risk |
| Blind Pool | A limited partnership that does not specify the assets or properties to be acquired. |
| Bond Equivilant Yield | A discount yield restated to make it directly comparealbe to an interst bearing investment |
| Breakout | Movemnt of a stock price out of an established trading range either above resistance level or below support level |
| Breakpoint Sales | Solicitied slaes at dollar amounts just below the ponits hwere a breakpoint would occur. This is a violation of NASD rules |
| Bull Spread | An option sparead position in which the investor profits from a rise in the underlying security's price |
| Calendar Spread | An option spread position in which the expiration dates of the options are different, but the strike prices are hte same. Aka horizontal or time spread |
| Call Loan | A collateralized loan obtained by a brokerage frim from abank with no fixed maturity date, that can be called (termintated) at anytime, has fluctuating interest rates computed daily. |
| Call Loan Rate | The rate of interst a bank charges a brokerage firm on collateralized loans for its margin account clients |
| Call Price | The price ath which an issuer may redeem a bond prior to maturity, usually at a slight premium to par |
| CAPM | Capital Asset Pricing Model |
| Capital Asset Pricing Model | a theory tha tconcludes that investors are rewarded for taking systematic risk, but not for taking nonsystematic risk. |
| Class A Shares | Shares of amutual fund that charges a front-end load and asmall or no 12b-1 fee |
| Class B Shares | Shares of a mutual fund that generally assesses a contingent deferred sales charge if the shares are sold witin a certain period. Have a higher 12b-1 fee than Class A |
| Class C Shares | Shares of amutual fund that have an up-front sales charge, usually 1% plus an anual 12b-a fee or level load that is usually equal to 1% of the funds assets. Sometimes there is a contingent deferred sales charge if shares are sold in less than 12-18 months |
| CMO | Collateralized Mortgage Obligation |
| Collateralized Mortgage Obligation | A type fo security that attemsp to customize the amount of prepayment risk associated with investnments in mortgage-backed securties. CMO creats bonds collateralized bt a pool of mortgages or agencty Pass-through securities. Each bond (tranche) has a different rate of interest, repayment schedule, and priorty level for recieving principal payments |
| Commingling | The mixing of client owned securites or money with that owned by the broker-dealer. This is ILLEGAL |
| CROP | Compliance Registered Options Principal |
| Compliance Registered Options Principal | The individual designated by a broker-dealer to be responsible for options related compliance matters sucha sapproval of advertising and sales literatures. CROP does not supervise registered reps |
| Comptroller of Currency | A government office responsible for hte enforcemnt of MSRB rules for banks dealing with municipal securities |
| Conduit Theory | IRS ruls which avoids double taxation by allowing qualifiying Investment Companies and REITs to pass income (wihthout taxation) directly to investors who are taxed ans individuals aka pipeline theory |
| CDSC | Contingent Deferred Sales Charge |
| Contingent Deferred Sales Charge | A method of assessing a sales charge in variable annuities and mutual funds where the actual percentage of the sales charge is dependent upon the length of tiem that hte investors holds the contract and payable upon redemption of hte shares. aka back end loan |
| Credit Spread | An option spread position in shich the premium of hte option sold is greater than the premium of hte option purchased |
| Crowd | A group of exchange members who have congregated around the post for a specific security to actively seek the execution of orders. the crowd might include the specialist ofr the stock, floor brokers, registered traders and two dollar brokers |
| Crowding Out | The situation in which government borrowing force3s interst rates to go up, squeezing the private sector from teh credit markets |
| Debit Balance | IN a custormer's margin account that portion of hte prucahse price of stockes or bonds that is covered by credit extended by the broker to the margin customer |
| DR | Debit Balance |
| debit spread | An option spread position in which the premium of hte purchased option is greater than teh premium of hte option sold |
| Debt Limit | The maximum amount of debt that a municipality may incur |
| Debt Service | The yearly amount of interest and principal payable on a bond issue |
| Defined Benefit Plan | A qualified retirement plan in which the emploter will make contributions in to the plan based on a specific formula that will yield suffiecient assets to pay retirement benefits. Teh formulay considers years of service and compensation level at time of retirement. |
| Defined Contribution Plan | A qualified retierment plan in which the level of contributions is based on a percentage of the employees compensation. teh money is invested by the employee according to hte options available. Teh benefit at retirement depends on teh performance of the investment account |
| Depletion Accounting | An accounting practice similar to depreciation consiting of charges against earnings based on teh amount of natural resources taken out of total reserves during an accounting period. A bookkeeping entry. It does not represent any cash outlay nor are any funds earmarked for that purpose |
| Designated Order | An order given to a municipal syndicate that designates one or more members to recieve credit for hte sale. the order is enerally fromj an institutional investor |
| DPP | Direct Participation Program |
| Direct Participation Program | A business venture structured to pass through income and tax losses to investors. commonly structured as a limited partnership |
| Disinflation | The situation where the rise in teh general level of pricdes slows down resulting in a decline in the rate of inflation |
| Disintermediation | The withdrawal of monies from a low-yielding financial intermediart and the reinvestment in other higher-yielding securities |
| Divided Account | A form of a new issue syndicate where a member is only liable for hte percentage of the issue equal to its participation. The member's liablility ceases after sellign the participation amount. aka western account |
| DNR | Do not Reduce |
| Do not Reduce | A designation on an order tha tthe price should not be reduced for cash divdends |
| Double-Barreled Bond | A municipal bond secured bt hte revenues of a projec tor special revenues providing the initial security, with secondary security provided by hte general obligaiton taxing powers of the issuer |
| Dual purpose fund | A closed-end investment company that issues two types of shares: income and capital. The income shares recieve all the income (dividnets and or interest) and the capital shares recieve all capital gains |
| Effective Yield | The rate of returen for a bond that assumes the bond will be held to maturity or the first call date if hte bond is callable at par, and is currently trading at apremium to par. aka Yield to Worst |
| Eleven Bond Index | The average yield (on a particular day) of eleven selected general obligation municipal bonds with 20-year maturities. It is comprised of 11 out of the 20 bonds for the 20 bond index. t is calcualted on Thursday afternoon and published in the Daily Bond Buyer on Friday |
| Engineering Report | A study followed by a report that is done by and engineering frim. It si done as part of the feasebility study for a proposed municipal revenue bond issue |
| Equipment Trust Certificate | A type of secured bond, generally issued by arailroad to pay for new equipment. Title to the equipment, such as a locomotive, is held by a trustee until the bonds are paid off. |
| ERISA | The federal law (Employee Retirement Income Security Act) that regulates priate sector pensions and retirement plans |
| Erroneous Report Rule | A NYSE rule that states that a client must accept a valid execution as it occurred regardless of any mistake in reporting |
| Face-amount Certificate Company | A type of investment company where an inve3stor makes periodic payments and at the end of a specified period, the company pays the investor the face amount of hte security. |
| Fallen Angels | Bonds that have dropped from investment grade to junk bond status |
| Federal Financing Bank | Established by Congress, it is authorized to acquire any obligation that is issued or guaranteed by a federal agency with the exception of the Federal Farm Credit System, Federal Home Loan Mortgage Co. and the Fedral National mortgage ASsociation. This aides agencies in issuing obligations. The FFB borros from teh Treasury |
| FFB | Federal Financing Bank |
| FICB | Federal Intermediate Credit Banks |
| Federal Intermediate Credit Banks | A part of the Fedral Farm Credit System that provided intermediate-term lonas for agriculatural purposes |
| FLB | Federal Land Bank |
| Federal Land Bank | A part of the Federal Farm Credit System, it provides long-term lonas to farmers and ranchers for various agricultural purposes. |
| FOMC | Federal Open Market Committee |
| Federal Open Market Committee | A committee of hte Federal Reserve Board that operates by selling and buying US securities to and from member banks in the open markeyt. Teh fed's open market operations are it most effective tool of monetary control |
| Fidelity Bond | An insturancy policy required of every broker-dealer to provide protection for the firm in the event of fraud or theft by broker-dealer employees |
| 5% Markup Policy | An NASD guideline used when determining the price that a broker-dealer charges a customer or pays a customer for securities |
| Fixed Annuity | An annuity contract in which the insurance company makes fixed (guaranteede) dollar payments to hte annuitant for the term of hte contract (usually until she dies) |
| Form U5 | The NASD uniform termination notice for securities industry registration |
| Fourth Market | The direct trading of securities between institutional investors to avoid brokerage commission. In some cases, this is done through an electronic system |
| Frozen Account | An account in shich the custormer has violated Reg. T by not paying within 5 business days. A purchase or sale in a frozen account will only be done when sufficient funds or securities are in the account |
| Functional Allocation | An arrangement between the general partner and limited partner of an oil/gas program in which the limited partners are allocated the tax-deductile expenses and the general partner bears nondeductible costs |
| Grant Anticipation Note | A short-term security issued by a municipality. Payment is normally paid from future funding provided by the federal government |
| Green Shoe | A disclosed provistion (first used in the public offering of hte Green Shoe Manufacturing Company) that underwriters may purchase additional shares from an issuer to meet the demands of an oversubscribed offering |
| Group Order | An order placed with a municipal syndicate wher the entire syndicate (group) whill share in a takedown |
| Head and Shoulders | looks like head and shoulders. The stock reaches one plateau (left shoulder) then goes higher (top of head) and then drops back to the plateau (right shoulder) The top pattern signifies the reversal of an upward trend. A head and shoulders bottom pattern signifies the reversal of a downward trend |
| Hypothecation | The pledging of securites as collateral, for example, teh secure the debit balance in a margin account |
| Income Program | An oil-gas direct participation program designed to primarliy generate income by purchasing and operating producing wells. |
| Industrial Development Revenue Bond | A bond issued by a municipality that is secured by a lease agreement with a private corporation. |
| Intangible Drilling Costs | The expenses assocaited with drilling an oil or gas well that have no lasting physical value such as labor, geologist expense, core analysis etc. Most of htese costs are tax-deductible in the yrea they are incurred |
| Interbank market | The unregulated international trading of foreign currencies between banks that establishes foreign exchange rates |
| Interpositioning | The placing of a third party between a broker-dealer and its costomer when filling a trade. This practice is prohibited unless it results in a better execution for customer |
| In-the-Money | An option with intrinsic value For example: A call option in which the underlying security is selling above the strike jprice or a put option in whicdh hte underlying security is selling below the strike price |
| Intrinsic Value | The amount tha the market price of a stock is above the strike price of a call opton or below the strike price of a put option on that stock |
| Inverted Yield Curve | The curve formed when the plotting yield vs maturity during a period when short-term yields are higher than long-term yeilds. It is also called a negative sloping yield curve. |
| Keogh Plan( HR 10 | a qualified retirement plan tha tmay be established by self-employeed individuals for themselves and any qualified employees |
| Keynesian Economics | The theory advanced by John Maynard Kaynes that governemnts should attempt to influence the economy using fiscal policy |
| LEAPS | Long Term Equity Anticipation Securities |
| Long Term Equity Anticipation Securities | Long term call and put equity options with expirations of up to 39 months |
| Letters Testamentary | A certificate issued by the court evidencing the appointment of hte executor of an estate |
| Level Debt Service | Yearly interest and principal payments that remain relatively constant for the life of the bond issue. |
| M1 | The basic money supply definition that includes currency in circulation ad demand deposits NOW accounts, and super NOW accounts |
| M2 | A wider defintion of Money Supply tha tincludes all of M1 plus savings accounts and other time deposits |
| MACRS | Modified Accelerated Cost Recovery System |
| Maintenance | The minimum equity requied to be kept in a margin account Current NASD/NYSE maintenance requirements are 25% for a long position and 30% for a short position |
| Maloney Act of 1938 | An amendment to the Sucuriteis Exchange Act of 1934 that made possible self regulation by securites firms involved in hte over-the-counter mareket the NASD was established because of this act |
| Married Put | The purcdhase of a put option and the underlying stock on the same day. Spcial tax rules apply if the put expires |
| Mill | A unite used in computing the property tax owed on real estate A mill equals .1% (.001) of assessed value or $1 per $1000 of assessed value |
| Moral Obligation Bond | A bond secured by revenues that is additionally secured by a moral, but not legal pledge from the state to make up any deficiencies. The ste legislature would need to approve any makeup funds. |
| Moral Suasion | The influence used by the Federal Reserve to persuade hte banking system to coply with FRB objectives. AKA jawboning |
| Munifacts | The newswire service for the municipal bond industry that disseminates news items and secondary market offerings throughout the day |
| NAC | National Adjuducatory Council |
| National Adjuducatory Council | The NASD body that hears appeals of Hearing Panel decisions under the Code of Procedure |
| Net Bond Debt | The total municipal debt obligation minus any self-supporting debt |
| NIC | Net Interest Cost |
| Net Interest Cost | The average weighted coupon rate for new municipal issue. For a competitive issue the issuer may request that the syndicates submit theri bids in the form of an NIC the lowest NIC bid will be awarded the issue |
| Noncompetive Tender | A method that small investors use to purchase Treasury securities at the original auction |
| Nonqualified Annuity | A retirement plan in which after-tax dollars are invested and payments from the plan are considred part return of principal (not taxed) and part earnings (taxed) |
| OSJ | Office of Supervisory Jurisdiction |
| Office of Supervisory Jurisdiction | A designated office of a member firm where certain management reviews take place, including reviews of customer orders, approval of new accounts an dapproval of advertising and sales literature |
| Oil Depletion Allowance | An allowable percentage of tax-free income that an investor in an oil and gas limigted partnership may receive from the gross revenues generated by the sale of oil and gas form a producing property |
| OID | Original Issue Discount |
| Original Issue Discount | A bond that is initially offered in the market at a discount (below par) The bond's value must be increased (accreted) over its life from the original discounted price up to par |
| Out-of-the-Money | An option that has not intrinsic value, for example, a put option in which the security is selling above the exercise price or a call option in which the security is selling below the exercise price |
| Overlapping Debt | Debt of a political entity such as a county where its tax base overlaps the tax base of another political entitiy such as a city within the county |
| Painting The Tape | The illegal manipulation of a security done by entering orders that give the appearance of active trading in a security |
| Parity | The price at which a convertible security's value would be equal to that of hte underlying stock if converted. |
| Payout Option | The choice made during the annuitization period that determines how cash payments will be made. A straight life annuity will generally provide the hightest monthly payout to the annuitant |
| Pegging | The illegal manipulation of a security designed to keep its price above a certain level |
| PAC | Planned Amortization Class |
| Planned Amortization Class | A type of CMO tranche tha tuses support trances to absorb the risk of prepayment, if actual prepayment does not conform with anticipated levels. If actual prepayments for the mortgagte pool are within a specified range the PAC tranche will experience its originally computed return. If actual prepayments are less than or greater than the range allows, investors are subject ot extenstion ad contraction risk |
| Positive Sloping Yield Curve | The curve formed when plotting yield vs. maturity during a period when short-term yields (interest rates) are lower than long-term yields. aka ascending or normal yield curve |
| Price Spread | An option spread position in which the strike prices of the options are different, but the expiration dates are the same aka vertical or money spread |
| Municipal Underwritings | The first orders to be filed by a municipal syndicate |
| Progressive Tax | A tax where the tax rate increases as the taxable amount goes up, i.e the graduated income tax |
| Protective Put | The purchase of a put option to fully hedge a long stock position |
| PSA Model | benchmark made by the public securities association (now the Bond market association) to aid in teh prediction of prepayment rates for mortgage pools. This modesl is one of several used in the market to arrive at anticipated overall yield and average life figures for CMOs |
| PHA | Public Housing Authority Bonds |
| Public Housing Authority Bonds | Municipal bonds issued by local housing authorities to buld low-income housing. The bonds are secured by the revenues of hte local aughority and are furgher secured by the US govt. thes have not been issued since 1974 but since they had maturities of upt o 40 years they will continue to be available in the secondary market. |
| Quialified Plan | A retirement plan into which tax-deductible contributions are made and invested. The investment's earnings are taxed deferred. Taxes are paid only when money is withdrawn. Keogh plans and most corporate pensions are qualified |
| Random Walk | A theory that assumes that the fugure price of movement of a security cannot be predicted from past price movemnt. and that the random nature of securites prices maeks it impossible to outperform the market |
| Rate Covenant | A revenue bond idduer's commitment to maintain rates at a level sufficient to produce a specified debt service coverage |
| Recourse Loan | A note or laon signed by a imited partner, for which the signer is personally responsible (at risk) Recourse loans are included in the aprtner's basis for tax purposes. |
| Regressive Tax | a flat tax that tends to affect low-income persons more heavily as a proportion of income eg. sales tax |
| Regulation D Offering | A type of exempt offering that is sold directly to accredited investors and a maximum of 35 nonaccredidted investors. aka private placement restricted stock, lettered stock, legend stock |
| Regulation FD | The federal regulation governing corporate officials hwo are required to make public (fair disclosure) any information disclused to analysts or investors |
| Regulation SP | The federal regulation governing the privacy of customer information |
| Regulation T | governs the amount of credit that may be advanced by brokers and dealers to customers for hte purchase of securites |
| Regulation U | governs the amount of credit that may be advanced by a bank to its customers for purchase of securities |
| Regulatory Element | That portion of securites industry's continuing education requirement that is adminsited in a 3 hour training session at a testing center. All RRs must complet a traning session within 120 days of thier 2nd registration anniversary and every 3 years. RRs who fail to do this iwll have an inactive registration |
| Reversionary Working Interest | an arrangement in oil/gas in which the limited partners bear all expenses. The general partner's claim on revenues is subordinate to the limited partner's until the limited parner's costs are reimbursed. aka subordinated working interest |
| Rule 144 | A regulation that provides for the sale of restricted stock and contrl stock. File with the SEC is required prior to selling restricted and control stock. The # of shares sold is limited |
| Rule 144A | An exemption to the holding period and volume restrictions for rule 144 for qualified insitutional buyers |
| Rule 145 | A regulation covering mergers and acquisitions that also exempts stocdk splits an dstock dividends from the regisration requirements of the Securities act of 1933 |
| Rule 147 | An exemption from the regustration requirement of hte Securities Act of 1933 for intrastate offering if certain requirements are met. One such requirement is that 100% of the purchasers must be from within one state |
| Rule 405 | NYSE - Know your Customer Rule |
| Securites Act of 1933 | The federal law that covers new issues of securities. It provides for ful disclosure of pertinent information relating to the new issue and alos contains antifraud provisitons |
| Securites Act of 1934 | The federal law that regulates broker-dealers and secondary market securities transacations |
| SEP | Simplified Employees Pension |
| Simplified Employees Pension | A type of pension plan tha tcombines a corporate pension plan and an IRA. the employer contributes to the employee's IRA |
| Short Swing Profit | The profit made on stock held less than six months. Insiders are prohibited from taking short-swing profits on teh stock of their firm |
| Sinking Find | Money regularly set aside by a company to redeem its bonds, debentures, or preferred stock from time to time as specified in teh indenture or charter. Relative to a municipality, monies set aside to provide for retirement fo a term issue at or before maturity |
| Skip Day | Settlement for US govt. bond trades that occurs 2 business days after the trade date. |
| SMA | Special Memorandum Account |
| Special Memorandum Account | A line of credit established when a margin account has excess equity SMA may be withdrawn by the client or used to purchase additional securities |
| Stagflation | A prolonged period of time in which the economy has a high rate of inflation at hte same time as high rate of unemployment |
| Statutory Disqualification | An automatic disqualification of a person seeking to be associated with a securites firm. A person will have a statutory disqualification if expelled from membership in a self-regulatory organization or from association with a member only the SEC and reinstate |
| Straight Life Annuity | The payout option tha tiwll guarantee an annuity payment for the remainder of an individual's life. this option typically provides the largest monthly payment |
| Straddle | An option position in which the investor purchase or sells a call and put oion on the same underlying stock. Mush have smae expiration month and exercise of price |
| STRIP | US treasury sanctioned brokerage house practice of separating a bond into ist face value and coupons, tha re then sold spearately as zero-coupon bonds |
| TAC | Targeted Amortization class |
| Targeted Amortization class | A type of CMo tranche that provides protection from refinancing risk through the use of support trances. These support trances absorb prepayment in excess of a targeted amt. up to a specified point wher ehte tac may have a shorter maturity schedule |
| Term Bond | Bnods o fa new municipal issue wher ehte entire issue has 1 maturity date |
| Time Value | The amount of an option premium that exceeds the intrinsic value of an option contract |
| TIC | True Interest Cost |
| True Interest Cost | A calculation used when bidding on a new municipal issue, that takes into account the time value of money aka Canadian Method |
| Trust Indenture Act 1939 | A law that regulates bond offerents by requrieng a corporation to appont a trustee to act for hte benefit of the bond holders |
| Twenty bond Index | TBI average yield to maturity on 20 selected general obligation bonds with 20 year maturities |
| Undivided Account | A form of a new issue syndicate where a member will be liable for a % of the issue and any unsold balance equal to its participation regardless of the amt. the member has sold. aka Eastern Account |
| Variable Annuity | A contract issued by an insurance company where the annuity payments are invested in a separate acct. that varies according to the performance of the securities in teh acct. |
| Variable Rate Demand Obligation | a municipal security that will adjust its interst rate at a specific short term intervals and will allow the owner to sel or put the security back to the issuer on the date the rate is reset |
| Wash Sale | A sale of securites at a loss with the subsequent disallowance of the loss by IRS If securities are sold at a loss and within 30 days repurchases substantially the same surcity the IRS will consider it a wash sale and disallow the loss |
| Yellow Sheets | A monthly publication updated dialy in which inter dealer wholesale quotes for over hte counter corporate bonds are published |
| YTC | Yield to call - the rate of return an investor earns from a bond assuming the bond is redeemed (called) at the first call date |
| YTM | Yield to Maturity- The rate of return an investor earns assuming a bond is held to maturity. |
