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Chapter 1 SIE
| Term | Definition |
|---|---|
| American Depositary Receipt (ADR) | A negotiable instrument issued by a U.S. bank that trades in the U.S. financial markets and represents shares of a foreign stock |
| Ask Price | the price a seller is willing to accept for a security |
| Bid Price | The price a buyer is willing to pay for a security |
| Bond | A debt of obligation in which the borrower promises to pay a set coupon rate until the issue matures, at which time the principal is repaid |
| Beneficiary | a person selected by the owner of a bank or brokerage trust, an insurance policy, who assumes ownership or receives the benefits of the asset in the event of the owner's death |
| Broker/Dealer | a firm that effects securities transactions for its own account or for the accounts of others |
| Futures Contract | A standardized commodities or securities contract to deliver a certain quantity at a predetermined future price and date |
| Margin account | a brokerage account that allows investors to purchase securities with borrowed funds using credit extended by the broker/dealer |
| Member firm | Broker/dealer belonging to a self-regulatory organization (SRO) such as FINRA or NYSE, or both |
| Mutual Fund | A professionally managed open-end investment company issuing redeemable securities in a continuous offering of shares |
| Option | A security giving the holder the choice to either purchase or sell a security at a set price for a specific period |
| Prospectus | A full and fair risk disclosure document required by the Securities and Exchange Commission for all new offerings of nonexempt securities |
| Security | A financial instrument that has monetary value and can be traded between parties |
| Self-regulatory Organization (SRO) | An organization that is authorized to enforce standards and requirements related to securities trading and brokerage |
| Stock | A type of security that represents ownership in a corporation |
| Underwriter | A broker/dealer or investment bank that helps a company in offering and distributing securities to the public |
| 1933 Securities Act | Also known as the "Paper Act" Referred to as the "Truth in Securities" law. It requires prospectus and full disclosure filings for all new issues (Primary Market) of securities considered nonexempt, such as corporate stock and bond offerings. |
| 1934 Securities Exchange Ace | Also known as the "Peoples Act" regulates the trading of securities after they have been issued (secondary market) it also created the Securities and Exchange Commission (SEC) |
| The Maloney act of 1938 | An amendment to the securities exchange act of 1934, provided for self-regulation of the over-the-counter market and paved way for the SROs. such as FINRA in 1970 |
| Investment Company Act of 1940 | Regulates the organization of investment companies offering packaged products, including mutual funds |
| Investment Advisers Act of 1940 | Regulates investment advisers, requiring those that are compensated for providing investment advice to register with the SEC |
| Securities Investor Protection Act of 1970 (SIPA) | Established procedures to protect consumer securities and funds in the event of broker/dealer insolvency |
| Employee Retirement Income Security Act of 1974 (ERISA) | Established minimum standards for retirement, health and other welfare benefit plans |
| Insider Trading and Securities Fraud Enforcement Act of 1988 | Provides clarification on the penalties for violating insider trading rules that prohibit the use of material nonpublic information |
| The USA PATRIOT Act (2001) | Enacted to address homeland security and fight terrorist activities with a focus on anti-money laundering. |
| Dodd-Frank Wall Street Reform and Consumer Protection Act (2010) | Reshape the U.S. regulatory system in the areas of consumer protection, trading restrictions, credit ratings, regulation of financial products, transparency, and corporate governance and disclosure. |
| Securities Exchange Commission | Interpret and enforce federal securities laws by issuing new rules and amending existing rules. Responsible for the supervision of capital markets. |
| Blue Sky Laws | State laws that cover many of the same activities the SEC regulates, such as the sale of securities and those who sell them, but are limited to securities sold or people who sell them within each state. |
| North American Securities Administrators Association (NASAA) | Organization of securities regulators with the goal of protecting customers from fraud |
| Financial Industry Regulatory Authority (FINRA) | Nongovernment organization that protects investors by ensuring that the broker/dealer industry operates in a fair and honest manner |
| Uniform Practice Code | Relates to the dealings between broker/dealers, covering all transactions in nonexempt securities and requiring orderly completion of dealer to dealer transactions |
| Code of Procedure | Outlines the procedural process in the event of violations of tade practice rules |
| Code of Arbitration | Settles disputes between broker/dealers, registered representatives, and the public |
| Municipal Securities Rulemaking Board (MSRB) | Established by congress in 1975, mandates to protect municipal securities investors, municipal entities, and the public interest |
| Chicago Board Options Exchange (CBOE) | Founded in 1973 and is the largest options exchange in the United States |
| Department of Treasury | Responsible for overseeing the U.S. economic and financial systems. Enforces finance and tax laws |
| Internal Revenue Service | Largest bureau of the Department of Treasury. Responsible for determining, assessing and collecting taxes, and enforcing the tax laws under the Internal Revenue Code. |
| Federal Reserve System | Central bank of the United States. |
| Regulation T | Set by the Federal Reserve Board to establish the extension credit between broker/dealers and the customers. Reg T initial deposit requirement for margin accounts is 50% of the securitiy's market value. The customer must pay within 4 business days. |
| Securities Investor Protection Corporation (SIPC) | Collects assessments from broker/dealers in order to protect customers from loss due to a failed broker/dealer. Protects brokerage accounts up to $500,000 for each separate customer, which includes $250,000 in cash. |
| Federal Deposit Insurance Corporation (FDIC) | Established to protect customer funds in bank deposit accounts. |
| Fair Credit Billing Act | Protects consumers from unfair billing practices with regard to charge card accounts and credit cards |
| Fair Credit Reporting Act | Regulates credit reporting agencies to ensure that the information they gather and distribute is a fair and accurate summary of a consumer's credit history |
| Truth in Lending Act | Protects consumers in their dealings with lenders and creditors and ensures that they are informed about the true cost of credit |
| Fair Debt Collection Practices Act | Establishes legal protection for consumers from abusive debt collection practices |
| Broker/dealer | A firm that effects securities transactions for its own account or for the accounts of others |
| Principal | effects transactions for its own account |
| Agency | Effects transactions for the accounts of others |
| Prime Broker | Full service broker/dealer catering to clients with more complex needs |
| Clearing broker | handles buy/sell orders and maintains custody of securities |
| Introducing broker | accepts (but does not execute) orders and does not maintain custody of the securities |
| Institutional Investors | organizations that invest such as insurance companies, depository instutions, pension funds, hedge funds, investment companies, mutual finds and endowment funds |
| Retail Investor | Individuals who purchase securities for their own personal accounts |
| Investment Adviser | A firm that is paid a fee to advise others, either directly or indirectly as to the advisability and merit of purchasing or selling securities. |
| Municipal Advisor | Person or firm that provides advice on behalf of a municipal entity or official with respect to municipal financial products or issuing municipal securities |
| Issuer | A legal entity such as a corporation, investment fund, or government entity that issues or proposes to offer securities to investors |
| Underwriter | a broker/dealer that helps an issuer sell securities to the public. An underwriter is also known as an investment banker. |
| Trader | a person who buys or sells securities on behalf of the broker/dealer and executes trades on behalf of the broker/dealer's customers. They do NOT provide quotes to clients |
| Market Maker | a broker/dealer firm that assumes the risk of holding an inventory of shares of stock in order to facilitate the trading of that security. |
| Custodian | a financial institution, such as a bank or trust company, that is responsible for safeguarding the securities of customers. |
| Trustee | Fiduciary that oversees the dat to day management of assets |
| Transfer Agent | Issues and cancels ownership certificates |
| Depositories | Hold security certificates and maintains ownership records |
| Clearing corporation | Handles confirmation, settlement, and delivery of transactions |
Created by:
emulligan