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Series 7
Series 7 topics
| Question | Answer |
|---|---|
| Common stock rights to inspect corporate books. | Limited. They have the right to recieve financial reports & a stock holder list. Doesn't include detailed records or B.O.D mins. |
| Convertible Bonds | exchangable @ conversion price for common stock. Normally has lower coupon. Senior Sec. w/ potential for capital appreciation. |
| Convertible Preferred | This pref. stock can be converted into common stock. Owner can only do so @ preset amount listed on certificate. |
| Corporate Bonds | legally binding obligation of a corp. to repay a principal amount of debt along w/ interest @ predetermined rate & schedule. Holders are creditors, known as leverage financing, no voting rights while payments are made, taxed @ all levels, senior Sec. |
| Cumulative Voting | One vote per share distributed over all ballot items. Benefits smaller investor. |
| Due Diligence Meeting | Held by underwriter who provides info about issue & what proceeds will be used for. This is around the last time syndicate members can back out of an underwriting agreement. |
| Eastern Account | aka undivided account. Each member is responsible for their share plus a % of unsold shares of other members. % is equal to member % committed to sell of new issue. |
| Equipment Trust Certificate | A bond backed by a pledge of large equipment like planes, trains & ships. |
| Equity | Ownership in a company. Common and Preferred stockholders. |
| Ex-Dividend | an 'x' before sales in a stock quote indicates the next dividend will not be received. |
| Forward Split | increase shares, decrease price |
| Fully Registered Bonds | Bond issuance where issuer has a complete record of owners of the bonds. Not requierd to clip coupons. Most U.S. Bonds. |
| Guaranteed Bond | Interest & principal guaranteed by a third party. |
| Income/Adjustment Bond | usually issued by a company in financial difficulty, high discount & speculative. Only pays interest if issuer has income to do so. Only promise is for principal at maturity. Trade flat wo/ accrued interest. |
| Indications of Interest | Non-binding agreements between brokers and investors who may want to purchase a new issue. |
| Issued Stock | Sold stock. Counts towards capitalization. Distributed to the public. |
| Limited Liability | Stockholders cannot lose more than the amount they have |
| Preferred Stock | Features of both equity & debt (S) usually issued as fixed income w/ fixed div. Price tends to fluctuate w/ interest rate. usually non-voting. no maturity date. priority over common @ liquidation. may vote on missed div. or new issue of = or senior (S |
| Prerefunding | a company seeing low interest rates, calls @ earliest moment, puts out new isue @ lower coupon w/ new income placed in escrow or gov't (S) to repay called (S)s. Called or pre-refunded bonds are made AAA by backing (escrow, gov't) |
| Principal only registration | Bond which requires investor to clip coupons to receive interest payments. Issuer will automatically send principal payment upon maturity. |
| Anti-dilution provision | with a new issue current stockholders may have preemptive rights as a part of an anti-dilution provision. Provision lets current stock-holders buy up to the amount of stock needed to maintain current % ownership in the corp. see proportionate ownership. |
| Authorized stock | # of shares a corp. can issue. Stipulated in charter. Can be changed by vote of stockholders. |
| Balloon Maturity | A bond maturity schedule which requires the largest portion of the principal to be repaid on the last maturity date. |
| Bearer Bonds | A bond issued wo/ owner's name registered on certificate or books of issuer. Whoever has possession (bears) the bond is the owner. No longer issued in US but may be issued abroad. |
| Bond Indenture | Open: allows corps to issue additional bonds secured by the same collateral w/ equal claim on original issue. Closed: prohibits equal claim, new bonds must be subordinate. |
| Book Value | Amount of common stock holder could expect in case of liquidation book = (tangible assets-liabilities) ------------------------------ #shares outstanding |
| Book Entry Bonds | No physical certificates are issued. Owners on books of issuer. aka Journal Entry Bonds |
| Callable Bonds | @ discretion or set schedule, allows corps to take advantage of favorable int. rates. Most are not callable in the first few years of issue. |
| Callable Preferred | Callable or redeemable pref. stock can be bought back at a set price (usually a premium to par) & past a set date. |
| Capital Appreciation | A rise in an assets market value. Taxable if realized (cashed out) |
| Capital Gains Tax | Realized capital gains (appreication) are subject to specific fed taxation. Corps receive a 70% tax exclusion on dividends from investments in other companies |
| Cash Dividend | common form, usually paid quarterly, related to profitability. |
| Class A vs. Class B | Normally class A stock has voting privileges and Class B is non-voting. Sometimes a class may be 'limited voting' |
| CMO | Collateralized Mortgage Obligation. A corporate debt (S). Secured by an underlying pool of mortgages. see CDO |
| Common stock claim on assets (@ liquidation) | Bottom of the pile. Most junior (S). Normally little to nothing left for stock holders to claim. |
| Property Dividend | uncommon. May take the form of stock in a wholly owned subsidiary or even product samples. see Cash Dividend, Stock Dividend |
| Proxy | absentee ballot. vetted by SEC before being mailed to investors. stock holders an revoke their proxy at any time up to final tabulation @ annual meeting. |
| Proxy Contest | Proxy vote in which corp. control could change. All candidates must register w/ SEC |
| Putting Bonds | investors can force redemption. Some bonds allow for redemption if rating falls too low or int. rates rise significantly. |
| Registered Bonds | Owners name is recorded & printed on bond |
| Revenue Bonds | Muni. Bond. Used to finance revenue producing project (ex. toll bridge) w/ debt payments made by revenue generated. See Lease Rental Bonds, Special Tax Bond |
| Reverse Split | decrease shares. increase price. x:y where x>y |
| Round lot vs Odd lot | Round lot: evenly divisible by 100 Odd lot: all other sales |
| Secured Bonds | Bonds backed by a specific pledge of assets, Trustee holds collateral. |
| Selling Group | If a Syndicate needs help it can recruit selling group members who aren't part of the syndicate. Members don't make a financial commitment and receive less money per share sold. |
| Selling Short | Customer sells borrowed stock, returns shares bought @, hopefully, lower price, keeps difference btw. prices. Potentially unlimited liability. |
| Lease Rental Bonds | A muni. bond issued to finance building to be rented to agency. Lease payments service debt. see Revenue Bond, Special Tax Bond |
| Serial Bonds / Maturity | Increasing amount of principal maturing on successive years. |
| Special Tax Bond | Muni bond supported by revenue from certain taxes. Often 'sin' taxes. See Revenue Bond, Special Lease Bond |
| Stock Dividend | More common in corps. w/ high R & D costs ex: tech or aggressive growth & new companies. corp simply issues further shares or % of shares per share already owned. |
| Syndicate | Formed when an issue is too large for one firm. Syndicate manager (managing underwriter) forms Syndicate to help sell & relieve burden on managing underwriter. Each member is responsible for a portion of issue. |
| Treasury Bond | Long Term US Gov. (S) which pays semi-annual (6 mo) interest & matures in 10-30 years. see also T-Bills, T-Notes. |
| Treasure Note | Intermediate term US Gov. (S) which pays semi-annual (6 mo) interest & matures in 1-10 years. see also T-Bills, T-Bonds. |
| Treasury Stock | Stock which has been issued & repurchased from public. Company can hold, reissue or retire it. Doesn't receive dividends or vote. |
| Trust Indenture | aka Deed of Trust A written agreement that protects investors by disclosing particulars of the issue (coupon, maturity date, collateral backing, etc). Will lay out par value, call or conversion features & name trustee. |
| Western Account | Divided Account State in Syndicate agreement what members are responsible for. Western account members are only responsible for stocks and bonds originally allocated to them. As opposed to 'Eastern (undivided) account' wild wild west |
| Zero Coupon Bonds | Sold @ deep discount. No interest payments, matures @ par. Both Gov. & Corp. capital appreciation (annualized) is taxed every year as 'phantom income' |
| Collateral Trust Certificate | A bond backed by pledge of (S)s issuer owns in another entity. |
| Concession | profit made by selling group when selling stocks or bonds paid out of Takedown |
| Cooling Off Period | Minimum 20 day period during which SEC reviews a registration statement to be cleared for the public. During this time investors may collect indications of interest. |
| Coordination | Method of state security registration. Registering w/ SEC & states at the same time. SEC notifies states in which stocks will be sold. Corp sends duplicates of reg. to each. Reg. is effective when fed. reg. becomes effective. |
| Cost Basis Per Share | Cost basis: price paid for an asset, including any commissions or fees, used to calculate capital gains or losses when asset is sold. |
| Cumulative Preferred | Safer than straight, Dividends in arrears are recorded & paid back when possible. |
| Current Yield | aka dividend yield annual dividend = ------------------------ current market value |
| CUSIP# | Committee on Uniform Securities Identification Procedures. A universal security # to prevent theft and fraud. |
| Effective Date | Date the registration of (S)s becomes effective, allowing underwriters to sell them & confirm sales to investors who have given indications of interest. |
| Mortgage Bond | A bond backed by a pledge of real property, similar to residential mortgage |
| GO Bond | General Obligation Bond. A Muni. bond backed by the taxing power of the state or municipality state: income & sales local: property within statutory debt limits. |
| Industrial Development/Revenue Bond | A private Muni. bond whose proceeds are used to build a facility that is leased to a corporation. The debt service on the bonds is supported by the lease payments. |
| Nominal Yield | interest rate printed or 'named' on bond. Always % of par. Never changes regardless of market price. |
| Notification | Method of state security registration. Notification is the simplest form for companies. Can also be used to renew previous application. |
| Outstanding Stock | Issued shares which have not been repurchased. Investor owned. |
| OTC | Over the Counter. Financial instruments traded off of an exchange directly between two parties. Traded on OTCBB or 'electronic pink sheets' |
| PE Ratio | Current price to most recent 12 mo. earnings/share. A tool for comparing different common stocks by assessing how much the public is willing to pay for a share of that companies earnings. |
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stdyS7
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