Flashcards

A coincident indicator changes along with the current phase of the business cycle. Coincident indicators include personal income and industrial production.

Cold storage is a method of storing crypto in which private keys reside in an environment that isn’t connected to the internet. Examples include storing keys on disconnected hard drives, printing or writing them on a piece of paper, or storing them on USB drives. Also, see Hot Storage.

Collateral includes assets that are set aside by a company and pledged to a lender for the time period of the outstanding debt.

A temporary change of owner’s rights, typically done to secure a loan.

A collateral trust bond is a form of secured debt that is backed by stocks and/or bonds of another corporation. The collateral is held by a trustee for safekeeping.

CDOs are debt securities backed by various types of loans, such as credit card debt, auto loans, airplane leases, other equipment leases, and other fixed-income assets. CDOs are similar to CMOs, with different types of loans backing the debt. They are highly illiquid investments. These products are very complex and not suitable for average retail clients.

CMOs are debt securities backed by fixed-rate GNMA, FNMA, and other mortgages. A CMOs is a bond with a stated maturity date. Each CMO pool is divided into portions (called tranches) based on its expected maturity date. There may be short-term, intermediate, or long-term tranches. Each tranch has its own rate of interest and payment schedule. Each tranch passes through payments to investors monthly (principal and interest). Tranches are subject to pre-payment risk, which may reduce the return. They are highly illiquid investments. These products are very complex and not suitable for average retail clients.

A combination includes positions in more than one option at the same time, on the same underlying security but different strike prices, and/or expiration months.

The combination privilege allows an investor to combine purchases within a family of mutual funds towards breakpoints and/or the right of accumulation. The fund’s prospectus would describe this privilege if offered.

A combined annuity includes the features of both fixed and variable annuities.

Commercial paper is a corporate money market instrument that consists of signed promissory notes issued by the corporation to raise short-term funds.  The notes are sold at a discount with full payment on demand at maturity.  Commercial paper is not required to be registered with the SEC if maturing in nine months (270 days) or less.

Commingling occurs when a broker-dealer mixes firm securities with those owned by their clients. It is also considered commingling when the firm mixes a client’s fully-paid securities with their margin securities.

The broker-dealer when acting as a broker charges the client a commission. The commission is the cost charged to the client for the purchase and/or sale of securities.

The head of the state’s Department of Insurance. The Commissioner may also be referred to as the Director or Superintendent depending upon the state. The Commissioner’s job is to supervise the insurance business in a state and administer that state’s insurance laws.

Table of mortality based on intercompany experience over a period of time, which is legally recognized as the mortality basis for computing maximum reserves on life insurance policies. It is the 1980 CSO Table that is currently in use.

If the insured and the primary beneficiary die as the result of the same accident the common disaster clause states that the insured died last, even if that is not true. This common disaster clause protects the rights of the contingent beneficiary.

Common stock is the basic stock issued by a corporation representing shares of ownership. Its dividend rights are subordinate to preferred stock, and its dividend is variable. Common stockholders are a residual claim on assets if the corporation should go broke.

To be legally valid a contract must be entered into by competent parties. This means that the parties understand the contract that they are agreeing to.

A complex trust is a trust that can distribute income and/or corpus in any given year, but does not have to.

Concealment is failure to disclose a material fact.

The concession is the profit on the sale of a security to the public that is paid to the selling group member. The selling group member buys the securities from the syndicate member at the public offering price minus the concession.

A premium receipt given to an applicant that makes a life and health insurance policy effective only if or when a specified condition is met.

The conduit theory is the theory behind IRC Subchapter M. For an investment company to be “regulated” under Subchapter M, it must distribute a minimum of 90% of its net investment income to its shareholders. If it follows this 90% rule, then distributions are deemed to only pass through the company, and the distribution is not taxable to the investment company.

The confirmation is sent to the client on or before the settlement date. The confirmation includes the trade date, settlement date, type of security purchased, and any monies owed.

Consideration is an exchange of value. Consideration for the insured is the premiums paid plus the answers to the questions on the application. Consideration for the insurer is the insurer’s promise to pay. Consideration does not have to be equal.

The consideration clause is the part of the insurance contract that sets forth the initial premium payment and renewal premiums as well as the frequency of the premiums due.

Constant dollars are dollars that are adjusted to show the same purchasing power from one period to another. Constant dollars are indexed for inflation.

The consumer price index is used to measure the change in the cost of a basket of goods in various cities across the U.S. over time. The CPI measures inflation at the consumer level.

A period of up to two years during which a life insurance company may deny payment of a claim because of suicide or a material misrepresentation on an application.

Another party or parties who will receive the life insurance proceeds if the primary beneficiary should predecease the person whose life is insured.

In most cases, an insurance policy. A policy is considered to be a contract between the insurance company and the policyholder.

Life insurance is a contract of adhesion, where one party (the insurer) states the provisions of the contract while the other party (the insured) is not involved in its drafting, but whose participation is in either agreeing with it or declining it.

Contraction is a phase of the business cycle. It follows the peak and precedes the trough. A contraction is characterized by a general economic decline.

In a contributory group life plan the employee pays part of the premium. The participation percentage for a contributory life policy is 75%. 75% of the eligible employees must participate.

A contributory plan is a retirement plan in which both the employer and the employee contribute.

A control person includes: a director or officer of an issuer and a shareholder who owns more than 10% of any class of a corporation’s outstanding securities, as well as their immediate family members.

Securities held by control persons are referred to as control securities.

The right to change (convert) insurance coverage from one type of policy to another. For example, the right to change from an individual term insurance policy to an individual whole life insurance policy.

A convertible bond may be exchanged for some other security of the issuer at the option of the holder.  It is usually converted into common stock based upon a fixed conversion ratio, or conversion price.

Convertible preferred stock is preferred stock that may be converted into common stock at the option of the holder.

A convertible term insurance policy may be converted to whole life insurance regardless of the insured’s health. The premium on the whole life insurance policy will be based on the insured’s current (attained) age.

The cooling-off period is the time between the filing date of a registration statement and the effective date of the registration.  Twenty days is the minimum cooling-off period, it is usually longer.

A corporation is a form of business organization in which the total worth of the organization is divided into shares of stock, each share representing a unit of ownership.  By law, a corporation has certain rights and responsibilities.  It is characterized by a continuous life span and the limited liability of the owners.

Correlation measures the extent to which two securities move in the same direction. A perfect position correlation of +1 means that the securities move identically. A perfect negative correlation of -1 means the securities move exactly opposite of each other, adding diversification to the portfolio.

Cost basis is the money in an investment in which taxes have been paid. A return of cost basis is a return of capital and is not subject to tax. Cost basis is sometimes called tax basis or just basis.

A rider that is available for an additional premium that provides for an automatic increase in benefits. The increase may be a set percentage as stated in the policy or may be tied to the Consumer Price Index (CPI), offsetting the effect of inflation.

The percentage return stated on the face of a bond.  It is fixed from the date of issue. Also called the nominal yield. The nominal yield is the annual interest payment on a bond. Bonds pay interest semi-annually.

A covenant is a promise in a trust indenture or other formal debt agreement that certain acts will be performed and others refrained from. Covenants are designed to protect the lender’s interest and cover such matters as working capital, debt-equity ratios, and dividend payments. Also called restrictive or protective covenants.

A Coverdell Educational Savings Account is a savings vehicle for education expenses. It may only be funded for an individual under the age of 18. It is funded with after tax dollars. There are AGI limitations on who can contribute to an ESA, as well as annual contribution limits. If the earnings are used for qualified educational expenses there is no income tax owed. Coverdell ESAs were originally called Educational IRAs. Educational savings accounts must follow the use by age 30 rule, with the exception of special needs children.

A covered call is an option contract that an investor has sold, in which they own the stock that the call is written on. The writer of a covered call has made a promise to sell shares at the strike price if the market price should exceed the strike price. Selling a covered call has limited risk.