Flashcards
SPAC stands for special purpose acquisition company. A SPAC is a shell company with no operations that offers securities for cash through an initial public offering (IPO), generally selling shares at $10 a share. SPACs then have a specified period of time, typically two years, to identify and merge with a private operating company. This business combination is used as an alternative means of taking the acquired company public, rather than through a traditional IPO. If they don’t find a suitable company to merge with during this time frame the SPAC will dissolve, and the remaining funds in the trust account are returned, with interest, to the current shareholders.
A specialized situation portfolio is a fund in which the investments are concentrated in little-known ventures involving high financial risk, with the hope of a high capital gain in a relatively short time. Special situation funds meet the investment objective of speculation.
The term specialist is a historical term for the person found on the floor of the NYSE who was in charge of maintaining a fair and orderly marketplace for a company’s stock. Phased out in 2009, the “Specialist” was replaced by the “Designated Market Maker” (DMM). DMMs are still required to maintain a fair and orderly marketplace on the floor of the NYSE, but now they also have market maker obligations and are required to provide capital (inject liquidity into the marketplace).
A specialized portfolio offers diversified investments that are concentrated in one industry, field, or geographic area. Sometimes called a sector fund or a geographic fund. These funds are higher than normal risk.
An investor who is engaged in speculation is taking on higher than normal risks in the hope of a higher than normal return. Speculation is an aggressive investment strategy.
A spousal IRA is an IRA that is available to a spouse that has low to no earned income. Contributions are made into the account by the working spouse and grow tax-deferred until withdrawal.
The spread is the difference between the bid price and the ask price. The narrower the spread the more active the issue. The spread is sometimes called the inside market.
Stablecoins are cryptocurrency that aim to manage price volatility. This can be done by tracking the values of more stable assets, including fiat currencies and commodities; holding well-known cryptocurrencies as collateral; or relying on smart contracts that use algorithms to adjust the supply of the stablecoins based on market demand to keep the value stable. Stablecoins are designed to serve as a source of stored value within the blockchain ecosystem, thereby reducing the need to convert digital assets into fiat currency (which typically involves both administrative burdens and significant fees).
Standard deviation is the mean of the means. It is a statistical measurement of the total risk of an investment. The greater the standard deviation, the greater the historical volatility of the investment’s market price.
The market as a whole is the S&P 500. The S&P 500 is comprised of 500 large-cap stocks. It is a market capitalization weighted index.
In a rights offering it is the standby underwriter that is waiting in the wings, ready to sell the shares not subscribed to by existing shareholders to the general public. The underwriter receives a fee for each share that is purchased.
With statutory voting, each share of stock entitles a stockholder to one vote per director.
Stock represents ownership in a corporation. Stock may be either common or preferred. Stock is equity and is purchased by investors looking for appreciation.
A stock certificate is a document stating the number of shares of stock owned by the holder of the certificate.
A stock dividend is a dividend paid to common shareholders in the form of additional stock in the corporation rather than in cash. Preferred stock cannot pay stock dividends, only common stock can pay a stock dividend.
A company will choose to split its stock to pull the market price down. After a stock split, an investor will have more shares, at a lower market price per share. A stock split or reverse split does not change the amount of money the investor has in the stock.
A stop order is an action that the Administrator can take that would prevent the sale of a security in that state. Stop orders require prior notice to the affected parties and a hearing with a finding in law.
Straight preferred stock is preferred stock with no special features. Straight preferred stock is also called non-cumulative preferred.
When a security is held in street name it is held in the name of the broker-dealer and not the individual client. Securities are often held in street name to facilitate their trading.
The strike price on an options contract is the exercise price. It is the price the owner of a call can buy shares at. It is the price that the owner of a put can sell shares at.
Subchapter M is a part of the Internal Revenue Code setting out the tax treatment of a regulated investment company. It is sometimes referred to as the conduit theory or the 90% rule.
A subordinated debenture is a debenture that is junior to regular debentures in a corporate liquidation.
A successor firm takes over for another firm. Successor firms must file their own registration, either Form BD or Form ADV, but do not pay a filing fee until their first renewal. They are allowed to use the unexpired portion of the previous firm’s filing fee.
FINRA rule 2111 is the suitability rule. The suitability rule requires that a firm or associated person have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through the reasonable diligence of the member or associated person to ascertain the customer’s investment profile. The customer’s investment profile includes, but is not limited to, the customer’s age, other investments, financial situation and needs, tax status, investment objectives, investment experience, investment time horizon, liquidity needs, risk tolerance, and any other information the customer may disclose to the member or associated person in connection with such recommendation. A broker’s recommendation is the triggering event for the application of this rule. The three main suitability obligations are reasonable-basis, customer-specific, and quantitative suitability.
The support is the lowest the security’s price has been over time. Support is used by technical analysts.
A surety bond is a bond that is required under state law for agents. A surety bond protects clients against lost or stolen money or securities. Firms that meet the minimum net capital requirements are not required to post surety bonds at the state level
A suspicious activity report must be filed any time a firm or its registered representatives notice a client whose behavior is commercially illogical. SARs are filed with FinCEN electronically within 30 calendar days of the initial behavior.
A syndicate is a group of broker-dealers that is formed to handle the distribution and sale of an issuer’s security. The syndicate typically has one firm managing the underwriting effort. Each member of the syndicate is then assigned the responsibility for the sale and distribution of the issue. The syndicate is bound by the terms of the underwriting agreement.
Systematic risk is non-diversifiable risk. Systematic risk is born by the system and is not stock-specific. Market risk, interest rate risk, and inflationary risk are all types of systematic risks. Diversification by asset class may help reduce systematic risk.
The investment’s tax basis is the amount of money in the investment that has already been taxed. Also called cost basis or just basis.
The tax equivalent yield is the rate of return that a taxable bond would have to earn to be equal to the yield found on a municipal security.
Tax preference items are items that must be added back when doing an alternative minimum tax calculation.
A TSA is an annuity program available to employees of certain non-profit organizations and public school systems. In a TSA part of the employee’s income is excluded from current taxation and used to purchase an annuity. The employee pays taxes when he begins to draw the annuity. Tax-sheltered annuities are also referred to by the IRC, 403b.
Technical analysis is a form of market analysis that utilizes charts and graphs to determine which securities to buy and sell and when. Technical analysis is often called quantitative analysis and the analysts that use this practice are referred to as chartists. Technical analysts will actively manage a portfolio. Technical analysts attempt to use the past to predict the future.
Tenancy by the entirety is a form of joint ownership allowed by married couples in certain states only. When property is held tenancy by the entirety each spouse individually owns the entire property with joint control over it. Both spouses must agree to any transactions when property is owned tenancy by the entirety.
Tenants in common is a form of joint ownership. Each owner has an undivided interest in the property but all the interests need not be equal. There is no right of survivorship. When one of the tenants dies, the interest passes on to the decedent’s estate, going through the probate process.
A tender offer is an offer from the issuer to the securities holders to buy the securities for cash or for cash and securities.
A testamentary trust is a type of trust that is created by a person’s last will and testament.
A testimonial is a statement written by a client that is then used in an advertisement attesting to the great work done by a person or firm. In the securities industry, broker-dealers may use testimonials. If more than a nominal fee is paid, the advertisement must disclose the fact that it is a paid testimonial. Investment advisers have not been allowed to use testimonials historically.
The third market is the trading of exchange-listed securities in the OTC market, done to facilitate after-hours trading.
Time horizon is the length of time money will remain invested. When planning for a client’s retirement their time horizon is their expected lifespan.
Time value is a component of the cost of an option (premium). The longer that is left until the expiration of the option, the more the premium will be comprised of time value. Time value is determined by subtracting the option’s intrinsic value from the premium paid.
A tombstone is an advertisement that announces a securities offering. It identifies the name of the issuer, the type of security, the underwriters, and where additional information is available. It may be published as soon as the issue is cleared for sale.
A company’s total capitalization includes all of the stock and all of the debt issued.
The trade confirmation must be sent to the client no later than on or before the settlement date. It is usually sent the business day after the trade date. The trade confirmation includes the settlement date, details of the transactions, and any amount of monies owed.
The trade date is the day on which the terms of a transaction, such as price and quantity, are established. The transaction will be completed at settlement.
A traditional IRA is a retirement vehicle that may be funded annually, up to the limit, by anyone with earned income. The contributions made into a traditional IRA may or may not be tax-deductible, depending upon the client’s situation and current tax code. Traditional IRAs are subject to the required minimum distribution rules. Earnings in a traditional IRA are taxable as ordinary income.
A tranche is a class of bonds.
The transfer agent is the person responsible for issuing and redeeming shares of a mutual fund. The transfer agent will have custody of clients’ shares if certificates are not issued. The transfer agent also sends confirmations, distributions, and tax forms to the client.
Treasury bills are short-term government debt sold at a discount from face value. T-bills mature in periods of 4, 13, 26, or 52 weeks. T-bills do not pay periodic interest payments. The interest income is the difference between the purchase price and the face value of the bills at maturity. The bills are sold at auction, at which time the discount is determined. The bills do not carry a stated interest rate. Treasury bills make up the bulk of the money market.