Series 65 Glossary Terms Flashcards
(140 cards)
1
Q
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 a life insurance policy.
A
1035 Exchange
2
Q
A section of the Investment Company Act of 1940 that permits an open-ended investment company (mutual fund) to levy an ongoing charge for advertising and sales promotional expenses. This fee may not exceed .75% and, if above .25%, the fund may not describe itself as no-load.
A
12b-1 fee
3
Q
A tax-deferred defined contribution retirement plan offered by a private-sector employer.
A
401(k) plan
4
Q
A tax-deferred retirement plan available to employees of public schools and certain non-profit organizations.
A
403(b) plan
5
Q
Plans designed by states to provide tax-advantaged means of saving for eligible education expenses.
A
529 savings plan
6
Q
Those persons required under an investment adviser’s code of ethics to report their personal securities transactions and holdings on a quarterly basis.
A
access person
7
Q
Any institution or individual meeting minimum requirements for the purchase of securities qualifying under the Regulation D registration exemption.
A
accredited investor
8
Q
The period during which contributions are made to an annuity contract.
A
accumulation stage
9
Q
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.
A
accumulation unit
10
Q
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 ratio.
A
acid-test ratio
11
Q
Active managers believe they can identify industries that are undervalued or overvalued in order to weight them appropriately and achieve returns in excess of the market.
A
active management style
12
Q
_____ _____ is used to compute the gain or loss on the sale or other disposition of the asset or security.
A
adjusted (cost) basis
13
Q
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.
A
adjusted gross income (AGI)
14
Q
(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.
A
administrator
15
Q
A firm’s endorsement or approval of the social media content of a third-party site.
A
adoption
16
Q
A technical analysis tool representing the total of the differences between advances and declines or security prices. The ____/____ ___ is considered the best indicator or market movement as a whole.
A
advance/decline line
17
Q
Any promotional material where the firm has little control over the type of individuals being exposed to the material.
A
advertisement
18
Q
An account through which a registered investment adviser (RIA) or investment adviser representative (IAR) of the RIA provides investment advice to her clients for a fee.
A
advisory account
19
Q
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.
A
affiliate / affiliated person
20
Q
For an advisory client, a transaction in which a person acts as an investment adviser in relation to a transaction in which that investment advisor acts as a broker for both an advisory client and for another person on the other side of the transaction.
A
agency cross transaction
21
Q
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).
A
agency issue
22
Q
allow individuals to invest in large-scale, income-producing real estate
A
real estate investment trusts (REITs)
23
Q
A transaction in which a broker-dealer acts for the accounts of others by buying or selling securities on behalf of customers.
A
agency transactions
24
Q
(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.
A
agent
25
A method of portfolio allocation and management aimed at achieving maximum return. Aggressive investors pursue aggressive policies, including margin trading, arbitrage, and option trading.
aggressive investment strategy
26
AGI
adjusted gross income
27
This trading makes use of computer programs for entering pre-programmed trading instructions on electronic trading platforms. The algorithm, usually proprietary, has a set of automatic responses to many complex market conditions.
algorithmic trading
28
The return on an investment measured against the return of the market as a whole or a certain benchmark index
alpha
29
This is tax computation that adds certain tax preference items back into the adjusted gross income. If the ______ is higher than the regular tax liability for the year, the regular tax and the amount by which the _______exceeds the regular tax are paid.
alternative minimum tax
30
An option contract that may be exercised at any time between the date of purchase and the expiration date. Most exchange-traded options are this.
American-style option
31
A formal statement issued yearly by a corporation to its shareowners. It is a reflection of the corporation's financial and operational well-being at the close of the business year (balance sheet) and earnings performance (income statement).
annual report
32
A person who receives an annuity contract's distribution.
annuitant
33
To change an annuity contract from the accumulation (pay-in) stage to the distribution (pay-out) stage.
annuitize
34
A contract between an insurance company and an individual. Upon annuitization, it guarantees 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.
annuity
35
An accounting measure used to determine the amount of each payment during the annuity's distribution stage.
annuity unit
36
A protective clause found in most convertible issues (preferred stock or debentures) that adjusts the conversion rate for stock splits and/or stock dividends. This ensures that the holder of the convertible will not suffer a dilution in value.
anti-dilutive covenant
37
The increase in value of an asset.
appreciation
38
The purchase of securities on one market and the simultaneous resale on another market to take advantage of a price discrepancy. This is not a form of market manipulation and is completely legal.
arbitrage
39
The average of a set of numbers, arrived at by adding them together and dividing by the number of terms in the set.
arithmetic mean
40
An indication by a trader or dealer of a willingness to sell a security or a commodity; the price at which an investor can buy a security.
ask
41
Stock issued below par, carrying with it the option on the part of the issuer or creditors to assess the owner for the remainder. A gift of assessable stock is considered an offer and a sale under the Uniform Securities Act.
assessable stock
42
A balance sheet item expressing what a corporation owns.
asset
43
A mutual fund that splits its investment assets among stocks, bonds, and other vehicles, with a view to provide a consistent return for the investor.
asset allocation fund
44
Dividing an investment portfolio among different asset categories such as stocks; bonds; cash; and tangible assets, such as real estate, precious metals, and other commodities.
asset class allocation
45
1) transferring an investment advisory contract to another firm. 2) A document accompanying or part of a stock certificate signed by the person named on the certificate for the purpose of transferring the certificate's title to another person's name. 3) The act of identifying and notifying a customer that an option short in their account has been exercised.
assignment
46
Transferring an investment advisory contract to another firm. This may not be done without written consent of the customer. A change in the majority interest in an investment advisory firm organized as a partnership is also considered this.
assignment
47
Any employee, manager, director, officer, or partner of a member broker-dealer or another entity (e.g., issuer or bank), or any-person controlling, controlled by, or in common control with that member, is considered an _______________________ of that member.
associated person
48
1) 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. The _______ forms the basis for projecting payments, but it is not guaranteed. 2) The rate that a variable annuity separate account must earn to keep annuity payments level. If the account earns more than the ______, the next payments will increase; if it earns less, the next payment will decrease.
assumed interest rate (AIR)
49
A market in which buyers enter competitive bids and sellers enter competitive offers simultaneously. The NYSE is an ________________.
auction market
50
A financial statement of a program, a corporation, or an issuer that has been examined and verified by an independent certified public accountant.
audited financial statement
51
The number of shares of stock that a corporation may legally issue. This number is stipulated in the corporation's state-approved charter and may be changed by a vote of the corporation's stockholders.
authorized stock
52
A feature available to shareholders whereby dividend distributions are automatically reinvested.
automatic reinvestment
53
A person whose past disciplinary history or potential for improper actions disqualifies certain exemptions.
bad actor
54
A fee that is charged when a mutual fund shares or variable annuity contracts are redeemed. It is typically found with Class B shares (and for one year with Class C shares). It declines annually, decreasing to zero over an extended holding period - up to eight years - as described in the prospectus.
back-end load
55
The predating of a letter of intent (LOI) by as many as 90 days to allow an investor to incorporate recent deposits for the purpose of qualifying for a sales load discount (breakpoint) on a purchase of open-end investment company shares.
backdating
56
A financial statement showing the assets, liabilities, and shareholder's equity at a particular moment.
balance sheet
57
A formula stating that a corporation's assets equal the sum of its liabilities plus shareholders' equity.
balance sheet equation
58
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.
balanced fund
59
A holding company whose primary asset is a commercial bank.
bank holding company
60
The Bank Secrecy Act authorizes the Treasury Department to require financial institutions to maintain records of personal financial transactions that involve the movement of currency in excess of $10,000 in and out of accounts. It also authorizes the Treasury Department to require any financial institution to report any suspicious transaction. These reports, called suspicious activity reports (SARs), are filed with the Treasury Department's Financial Crimes Enforcement Network (FinCEN).
Bank Secrecy Act (BSA)
61
1) The cost of an asset or security. 2) Another term for yield to maturity.
basis
62
A measure of a bond's yield, equal to 1/100 of 1% of a yield. A bond whose yield increases from 5.0% to 5.5% is said to increase by 50 _______________. A _____________ is equal to 10 cents.
basis point
63
An investor who acts on the belief that a security of the market is falling or is expected to fall.
bear
64
A market in which prices of a certain group of securities are falling or are expected to fall.
bear market
65
A model portfolio of a large number of assets, such as the S&P 500 against which the performance of a fund or portfolio is measured.
benchmark portfolio
66
A means of measuring the co-movement of the return of a security or a portfolio of securities to the return on the overall market. A _____ of 1 indicates that the security's returns will be expected to move in tandem with the market. A _____ greater than 1 indicates that the security's returns will be expected to exceed those of the market. A ____ less than 1 means returns will be expected to be lower than those of the market.
beta
67
1) An indication by an investor, a trader, or a dealer of a willingness to buy a security or commodity; the price at which an investor can sell to a broker-dealer. 2) The price at which an investor can redeem shares of a mutual fund.
bid
68
One of the most popular options pricing models. Appears frequently on the exam as an incorrect choice.
Black-Scholes
69
A large trading order, defined as an order that consists of 10,000 or more shares of a given stock or at a total market value of $200,000 or more.
block trade
70
A book of original entry in which a broker-dealer records on a daily basis every transaction, movement of securities, and cash receipt and disbursement. (Syn. daily journal, diary, day book)
blotter
71
The equity issues of financially stable, well-established companies that have demonstrated their ability to pay dividends in both good and bad times.
blue-chip stock
72
To register a securities offering in a particular state.
blue-sky
73
The nickname for state regulations governing the securities industry.
blue-sky laws
74
Individuals elected by stockholders to establish corporate management policies. A _______________ decides, among other issues, if and when dividends will be paid to stockholders.
board of directors
75
From the Latin "good faith," something that is ____________ is genuine, authentic, and real.
bona fide
76
A legal obligation of an issuing company or government to repay the principal of a loan to bond investors at a specified future date. Corporate _______ are usually issued with a par face value of $1000, and municipal ______ with a par of $50000, 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 _____ or its description at issue.
bond
77
A mutual fund whose investment objective is to provide stable income with minimal capital risk. It invests in income-producing investments that may include corporate, government, or municipal __________.
bond fund
78
A fixed-income investment strategy that involves purchasing several smaller bonds, each with a different maturity date spread over months or years, rather than one larger bond maturing on a single date.
bond laddering
79
Quotes for corporate, municipal, and government bonds are percentages of the bonds' face values (usually $1,000). Corporate bonds are quoted in increments of 1/8. Government bonds are quoted in increments of 1/32. Municipal bonds may be quoted on a dollar basis or on a yield -to-maturity basis.
bond quote
80
An evaluation of the possibility of a bond issuer's default, based on an analysis of the issuer's financial condition and likelihood of meeting all obligations. Standard & Poor's, Moody's Investors Service, and Fitch Investors Service, among others, provide ________________ services. Ratings of municipal bonds may be found on the EMMA System operated by the Municipal Securities Rulemaking Board.
bond rating
81
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.
bond ratio
82
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. Syn. net tangible assets per share.
book value per share
83
Debt instruments, generally from third-world countries, that may have a U.S. Treasury bond as collateral.
Brady bonds
84
A technical analysis theory that predicts the strength of the market according to the number of issues that advance or decline in a particular trading day.
breadth-of-market theory
85
In technical analysis, the movement of a security's price through an established support or resistance level. See also resistance level; support level.
breakout
86
The schedule of sales charge discounts a mutual fund offers for lump-sum or cumulative investments. Breakpoints are available to any person. Investment clubs or associations formed for the purpose of investing do not qualify for breakpoints.
breakpoint
87
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
breakpoint sale
88
A short-term loan made to bridge the gap until permanent financing is arranged.
bridge loan
89
A written disclosure statement that investment advisers must provide to most clients and prospective clients. The Form ADV Part 2A may be used for this purpose.
brochure
90
A state-registered investment adviser must provide its customer with its brochure (Parts 2A and 2B of Form ADV) at least 48 hours before having them sign the contract. If delivery is made after that (but no later than the finalization of the contract), the customer must be given 5 days to void the contract without penalty.
brochure rules
91
A written disclosure statement containing information about certain of an investment adviser's supervised persons. This disclosure is usually accomplished by the delivery of Form ADV Part 2B to most clients and prospective clients.
brochure supplement
92
1) An individual or firm that charges a fee or commission for executing buy and sell orders submitted by a customer. 2) The role of a firm when it acts as an agent for a customer and charges the customer a commission for its services.
broker
93
Person or firm in the business of buying and selling securities and/or futures. A firm may act as both broker (agent) or dealer (principal) but not in the same transaction. Securities broker-dealers normally must register with the SEC, futures broker-dealers with the CFTC and the appropriate SROs and any state in which they do business.
broker-dealer
94
An investor who believes that a security, a commodity, or the market overall is likely to rise.
bull
95
A market where prices of a certain group of commodities or securities are rising or are expected to rise.
bull market
96
Combining individual trade executions at the same price for reporting purposes into a single trade report. Nasdaq does not support the kinds of trade reports.
bunching orders
97
A predictable long-term pattern of alternating periods of economic growth and decline. The cycle passes through four stages: expansion, peak, contraction, and trough.
business cycle
98
A business development company (BDC) is one created to help small companies grow while still in the initial stages of their development. Also referred to as growth development companies, these allow smaller nonaccredited investors the opportunity to invest in startup companies.
business development company
99
The risk inherent in equity securities that poor management decisions will have a negative impact on the stock's performance. Can be reduced through diversification.
business risk
100
An order to buy a security that is entered at a price above the current offering price and triggered when the market prices touches or goes through the buy stop price.
buy stop order
101
A trust fund that is funded with property in amount equal to the exemption equivalent to the transfer tax credit amount applicable to the decedent ($11.7 million in 2021); thus, the property is not subject to federal estate tax.
bypass trust
102
1) 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. 2) The act of exercising a call option.
call
103
The date, specified in the prospectus of every callable security, after which the security's issuer has the option to redeem the issue at par or at par plus premium.
call date
104
A contract giving the owner the right to buy a specified amount of an underlying security at a specified price within a specified time.
call option
105
The price, usually a premium over par value, at which a bond or preferred stock may be redeemed at the discretion of the issuer.
call price
106
A provision in a bond indenture stating that the issue is noncallable for a certain period (e.g., 5 or 10 years) after the original issue date.
call protection
107
The written agreement between an issuer and its bond holders or preferred stockholders giving the issuer the option to redeem the securities at a specified price before maturity and under certain conditions.
call provision / call feature
108
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. This risk applies to callable preferred shares as well.
call risk
109
A type of bond issued with a provision allowing the issuer to redeem the bond before maturity at a predetermined price.
callable bond
110
A type of preferred stock issued with a provision allowing the corporation to call in the stock at a certain price and retire it.
callable preferred stock
111
Nonpunitive termination of resignation by a state Administrator. Reasons include the registrant's death, the registrant ceasing to do business, mental incompetence on the part of the registrant, or the Administrator's inability to locate the registrant.
cancellation
112
A rise in the market price of an asset.
capital appreciation
113
A securities market investment theory that attempts to derive the expected return on an asset on the basis of the asset's systematic risk.
capital asset pricing model (CAPM)
114
The profit realized when a capital asset is sold for a price higher than the purchase price.
capital gain
115
Payments made to mutual fund shareholders of gains realized on the sale of the fund's portfolio securities. These amounts, if any, are paid once a year.
capital gains distributions
116
The loss incurred when a capital asset is sold for a price lower than the purchase price.
capital Loss
117
All of a corporation's outstanding preferred and common stock, listed at par value.
capital stock
118
The composition of long-term funds (equity and debt) a corporation has a source for financing.
capital structure
119
1) Th sum of a corporation's long-term debt, stock, surpluses. Syn. invested capital. See capital structure. 2) The number of outstanding shares multiplied by share price. 3) The costs to acquire an asset expensed over the life of the asset.
capitalization
120
Money paid to a corporation's stockholders out of the corporation's current earnings of accumulated profits. The board of directors must declare all dividends.
cash dividend
121
A security that can be readily converted into cash. Examples include Treasury bills, certificates of deposit, and money market instruments and funds.
cash equivalent
122
The money received by a business minus the money paid out. Cash flow is also equal to net income plus depreciation or depletion.
cash flow
123
Negotiable certificate of deposit.
CD
124
Sometimes called a back-end load (conditional deferred sales load, or CDSL) to differentiate between it and a front-end load. Instead of charging a load on each purchase, there is no sales charge unless the investor redeems the shares too early. These charges begin reducing after the first year and generally decline to zero between the sixth and eighth year after purchase.
Conditional Deferred Sales Charge (CDSC)
125
An order used by a state administrator when it appears that a registered person has or is about to commit a violation. May be issued with or without a prior hearing.
cease and desist order
126
A debt instrument issued by a bank that pays a fixed interest rate over a specific time period. CDs are insured up to $250,000 by the FDIC.
certificate of deposit (CD)
127
The first nationally recognized securities exchange listing and trading options. The self-regulatory organization with jurisdiction over all writing and trading of standardized options and related contracts listed on that exchange.
Chicago Board Options Exchange (CBOE)
128
A disused descriptive name 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 reap illicit profits. The preferred term today is information barriers.
Chinese Wall
129
Excessive trading in a customer's account with the view to generate commissions.
churning
130
1) A class of mutual fund shares issued with a front-end sales load. 2) Shares of a company that have differing characteristics from other classes of stock
Class A share
131
A class of mutual fund shares issued with back-end load. A mutual fund offers different classes of shares to allow investors to choose the type of sales charge they will pay.
Class B share
132
A class of mutual fund shares issued with a level load. A mutual fund offers different classes of shares to allow investors to choose the type of sales charge they will pay.
Class C share
133
Information generated on a client that identifies capital and discretionary income available for appropriate investment, according to the investor's investment objectives, financial and tax status, and monetary needs.
client profile
134
An investment company that issues a fixed number of shares in an actively managed portfolio of securities. The shares may be of several classes, and 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.
closed-end management company
135
An options (or futures) 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.
closing purchase
136
An options transaction in which the buyer sells and option in the same series; the two transactions effectively cancel each other out, and the position is liquidated.
closing sale
137
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.
collateral
138
A secured bond backed by stocks or bonds of another issuer. The collateral is held by a trustee for safekeeping.
collateral trust bond
139
A mortgage-backed corporate 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.
collateralized mortgage obligation (CMO)
140
College savings plans allow contributors to invest after-tax dollars in professionally managed accounts that contain a mix of stocks, bonds, and other investments selected to reflect a child's age or a family's investment preference.
college savings plan
