Definitions Flashcards
(33 cards)
1035 exchange
A tax-free exchange between like contracts. This provision applies to transfers from annuity to annuity, life to life, and life to annuity. It cannot be used for transfers from an annuity to life insurance policy.
12b-1 fee
A section of the Investment Company Act of 1940 that permits and open-end investment company (mutual fund) to levy an ongoing charge for advertizing and sales promotional expenses. This fee may not exceed 0.75% and, if above 0.25%, the fund may not describe itself as no-load.
401(k) Plan
A tax-deferred defined contribution retirement plan offered by a private-sector employer.
403(k) Plan
a tax-deferred retirement plan available to employees of public schools and certain non-profit organizations.
529 Savings Plans
Plans designed by states to provide tax-advantaged means of saving for eligible education expenses.
75-5-10 Test
the standard for judging whether an investment company qualifies as diversified under the Investment Company Act of 1940. 75% of a fund’s assets must be invested in such a way that no more than 5% of its total assets are invested in any one company’s voting securities, and no single investment may represent ownership of more that 10% of any one company’s outstanding voting securities. There are no restrictions on the remaining 25% of the funds’ assets.
Acceptance, Waiver, and Consent
A form of plea bargaining under the Code of Procedure. FINRA’s Enforcement Department brings disciplinary actions against a respondent and, if the respondent agrees, the proposed settlement is accepted, all rights to a hearing are waived, and the respondent consents to the penalty submitted.
Account Executive/Registered Representative (RR)
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.
Accredited Investor
Any institution or individual meeting minimum requirements for the purchase of securities qualifying under the Regulation D registration exemption.
Accrued Interest
The interest that has accumulated since the last interest payment, up to but not including the settlement date, and that is added to the contract price of a bond transaction. (see also: flat)
Accumulation Stage
The period during which contributions are made to an annuity contract. (see also: accumulation unit)
Accumulation Unit
An accounting measure used to determine an annuitant’s proportionate interest in the insurer’s separate account during a variable annuity’s accumulation (deposit) stage. (See also: accumulation stage, annuity unit, separate account)
Acid-Test Ratio
A measure of a corporation’s liquidity, calculated by adding cash, cash equivalents, and accounts and notes receivable, but not inventory, and dividing the result by total current liabilities. It is a more stringent test of liquidity than current ration. (see also: current ratio)
Ad Valorem Tax
A tax based on the value of real or personal property.
Adjusted (Cost) Basis
Adjusted basis is used to compute the gain or loss on the sale or other disposition of the asset or security.
Adjusted Gross Income (AGI)
Gross income from all sources minus certain adjustments to income, such as deductible contributions to an IRA and net capital losses. It is the amount of income that will be subject to tax. (see also: tax liability)
Administrator
1) The official or agency administering the securities laws of a state. 2) A person authorized by a court of law to liquidate an intestate decedent’s estate.
American Depositary Receipt (ADR)/ American Depositary Shares (ADS)
Facilitate trading in foreign securities in the U.S. domestic markets. Sometimes these are shown as ADS (American Depository Shares) and are similar to a GDR (Global Depositary Receipt), which is traded outside the United States.
Advertisement
Any promotional material where the firm has little control over the type of individuals being exposed to the material.
Advisory Account
An account through which a registered investment adviser (RIA) or investment adviser representative (IAR) or the RIA provides investment advice to her clients for a fee.
Affiliated Person
Anyone in a position to influence decisions made in a corporation, including officers, directors, principal stockholders, and members of their immediate families. Their shares are often referred to as “control stock”.
Agency Basis/ Agency Transaction
A transaction in which a broker-dealer (BD) acts for the accounts of others by buying or selling securities on behalf of customers. (Syn. agency basis. See also: agent; broker; principal transaction)
Agency Issue
A debt security issued by an authorized agency of the federal government. Such issues are backed by the issuing agencies themselves, not by the full faith and credit of the U.S. government (except GNMA and Federal Import Export Bank issues). (see: government security)
Agent
1) An individual or firm that effects securities transactions for the accounts of others. 2) A securities salesperson who represents a broker-dealer or 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. (see: broker; broker-dealer; dealer; principal)
