“PIPE” stands for “private investment in public equity.” In a PIPE offering, investors commit to purchase a certain number of restricted shares from a company at a specified price. The company agrees, in turn, to file a resale registration statement so that the investors can resell the shares to the public. To the extent that they increase the supply of a company’s stock in the market, PIPE offerings can potentially dilute the value of existing shares.
A Ponzi scheme is an investment fraud that pays existing investors with funds collected from new investors. Ponzi schemes are named after Charles Ponzi. In the 1920s, Ponzi promised investors a 50% return within a few months for what he claimed was an investment in international mail coupons. Ponzi used funds from new investors to pay fake “returns” to earlier investors.
The combined holdings of stock, bond, commodity, real estate and other investments by an individual or institutional investor.
The amount by which the price of a bond exceeds its principal (par) amount.
A type of 529 plan that lets an account owner purchase units or credits at participating colleges or universities for future tuition for the account beneficiary.
The unscheduled partial or complete payment of the principal amount outstanding on a loan, such as a mortgage, before it is due.
The risk that principal repayment will occur earlier than scheduled, forcing the investor to reinvest at lower prevailing rates.
A company's P/E ratio is a way of gauging whether the stock price is high or low compared to the past or to other companies. The ratio is calculated by dividing the current stock price by the current earnings per share. Earnings per share are calculated by dividing the earnings for the past 12 months by the number of common shares outstanding.
Markets in which newly issued securities are sold to investors and the issuer receives the proceeds.
“Prime bank” investments are scams.
The total amount of money being borrowed or lent; the initial amount of money invested.
A summary of key information about an ETF that explains how to obtain a prospectus.
Revenue minus cost; money made on a transaction.
Promissory notes are a form of debt that companies sometimes use to raise money. They typically involve investors loaning money to a company in exchange for a fixed amount of periodic income. Although promissory notes can be appropriate investments for many individuals, some fraudsters use promissory notes to defraud investors, especially the elderly.
A document that describes the mutual fund to prospective investors. Every mutual fund provides a prospectus with information about the mutual fund's investment objectives, risks, past performance, and expenses. You can get a prospectus from the mutual fund company's website or by mail. A broker or other financial professional also can provide you with a copy.
Proving securities ownership is easier if you can remember how the security was acquired.
If you bought the security through a brokerage firm, contact the firm and ask if they have a record of your ownership. Brokerage firms are required to keep records for only six years. Copies of confirmations are only required to be kept for three years. In many cases, brokers may retain records longer at their own discretion.
A company is required to file its proxy statements with the SEC no later than the date proxy materials are first sent or given to shareholders. You can see this filing by using the SEC's database, known as EDGAR. Enter the company’s name here and select the appropriate company to view its SEC filings.
A way for shareholders to vote for corporate directors and on other matters affecting the company without having to personally attend the meeting.
A company that offers its securities through an offering and now has those securities traded on the open market.
The Public Company Accounting Oversight Board (also known as the PCAOB) is a private-sector, nonprofit corporation created by the Sarbanes-Oxley Act of 2002 to oversee accounting professionals who provide independent audit reports for publicly traded companies. The PCAOB's responsibilities include:
In a pump and dump scheme, fraudsters typically spread false or misleading information to create a buying frenzy that will “pump” up the price of a stock and then “dump” shares of the stock by selling their own shares at the inflated price. Once the fraudsters dump their shares and stop hyping the stock, the stock price typically falls and investors lose money.
A shareholder fee that some funds charge when investors buy mutual fund shares. This is not the same as, and may be in addition to, a front-end load.
The amount of goods and services that can be purchased by a given unit of currency, taking into account the effect of inflation.
A pyramid scheme is an investment fraud in which new participants’ fees are typically used to pay money to existing participants for recruiting new members. Pyramid scheme organizers may pitch the scheme as a business opportunity such as a multi-level marketing (MLM) program. Fraudsters frequently use social media, Internet advertising, company websites, group presentations, conference calls, and YouTube videos to promote a pyramid scheme.
All pyramid schemes eventually collapse, and most investors lose their money. Hallmarks of a pyramid scheme include: