Here is some terminology that is common to our industry.  

Audited Financial Statement A financial statement of a program, a corporation or an issuer (including the profit and loss statement, cash flow and source and application of revenues statement, and balance sheet) that has been examined and verified by an independent certified public accountant.

Blue-Sky To register a securities offering in a particular state.

Broker-Dealer (BD) A person or firm in the business of buying and selling securities.  A firm may act as both broker (agent) and dealer (principal), but not in the same transaction.  Broker-dealers normally must register with the SEC, the appropriate SROs and any state in which they do business.

Debt Security A security representing an investor’s loan to an issuer such as a corporation, a municipality, the federal government or a federal agency.  In return for the loan, the issuer promises to repay the debt on a specified date and to pay interest.

Equity Security A security representing ownership in a corporation or another enterprise.  Examples of equity securities include:

·        Common and preferred stock;

·        Interests in a limited partnership or joint venture;

·        Securities that carry the right to be traded for equity securities, such as convertible bonds, rights and warrants; and

·        Put and call options on equity securities.

401 (k) Plan A tax-deferred defined contribution retirement plan offered by an employer.

General Obligation Bond (GO) A municipal debt issue backed by the full faith, credit and taxing power of the issuer for payment of interest and principal.

Maturity Date The date on which a bond’s principal is repaid to the investor and interest payments cease.

National Association of Securities Dealers, Inc. (NASD) The self-regulatory organization for the over-the-counter market.  The NASD was organized under the provisions of the 1938 Maloney Act.  

Prospectus (Final Prospectus) The legal document that states a new issue security’s price, delivery date and under writing spread, as well as other material information.  It must be given to every investor who purchases a new issue of registered securities.

Registered Representative (RR) An associated person engaged in the investment banking or securities business.  According to the NASD, this includes any individual who supervises, solicits or conducts business in securities or who trains people to supervise, solicit or conduct business in securities.  Anyone employed by a brokerage firm who is not a principal and who is not engaged in clerical or brokerage administration is subject to registration and exam licensing as a registered rep.

Rollover The transfer of funds from one qualified retirement plan to another qualified retirement plan.  If this is not done within a specified time period, the funds are taxed as ordinary income.

Roth IRA: Individual retirement account for which contributions are taxed but qualified distributions are not.

Secondary Bond

Secondary Market The market in which securities are bought and sold subsequent to their being sold to the public for the first time.

Securities Act of 1933  Federal legislation requiring the full and fair disclosure of all material information about the issuance of new securities.

Securities and Exchange Commission (SEC) Commission created by Congress to regulate the securities markets and protect investors.  It is composed of five commissioners appointed by the President of the United States and approved by the Senate.  The SEC enforces, among other acts, the Securities Act of 1933, the Securities Exchange Act of 1934, the Trust Indenture Act of 1939, the Investment Company Act of 1940 and the Investment Advisers Act of 1940.

Securities Investor Protection Corporation (SIPC) A nonprofit membership corporation created by an act of Congress to protect clients of brokerage firms that are forced into bankruptcy.  Membership is composed of all brokers and dealers registered under the Securities Exchange Act of 1934, all members of national securities exchanges and most NASD members.  SIPC provides brokerage firm customers up to $500,000 coverage for cash and securities held by the firms (although cash coverage is limited to $100,000).

Term maturity: A repayment schedule for a bond issue in which the entire issue comes due on a single date.

Yield to maturity The yield of a bond, taking into account the gain or loss at maturity.