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12b-1 Fees

Fees paid out of fund assets to cover the costs of marketing and selling fund shares. "Distribution fees" include fees to compensate brokers and others who sell fund shares, and to pay for…

401(k) Plan

An employer-sponsored retirement savings plan that gives employees a choice of investment options, typically mutual funds. Employees who participate in a traditional 401(k) plan have a portion of…

403(B) Plan

A type of tax-deferred retirement savings program available to employees of public schools, certain non-profits, and some members of the clergy.

529 Account Beneficiary

A current or future student for whom the 529 account is established.

529 Account Owner

A person who establishes an account for a student to save money for qualified higher education expenses or tuition for elementary or secondary public, private, or religious schools; also called the…

529 Education Savings Plan

A type of 529 plan that lets an account owner open an investment account to save for the account beneficiary’s qualified higher education expenses or tuition for elementary or secondary public,…

529 Plan Offering Circular

529 plan document that has detailed information about the 529 plan; often called a disclosure statement, disclosure document, program description, or offering document.

529 Plan or Program Manager

A financial services firm — a mutual fund company, a brokerage firm, an investment adviser, or an insurance company — that handles all of the transactions and investments within the plan.

529 Plan Sponsor

A state, a state agency or educational institution that chooses a plan manager and determines the rules and limits for its plan.

529 Plans

A 529 plan is a tax-advantaged savings plan designed to encourage saving for educational costs. 529 plans, legally known as “qualified tuition plans,” are sponsored by states, state agencies, or…

8-K

Public companies file Form 8-K, known as the "current report," to the SEC to announce major events that shareholders should know about, including bankruptcy proceedings, a change in corporate…

Account Fee

A fee that some funds separately impose on investors for account maintenance. For example, individuals with accounts below a specified dollar amount may have to pay an account fee.

Accounts – Opening A Brokerage Account

For information on what to expect when opening a brokerage account, including what information you will need to provide, what decisions you will be asked to make, and what questions you should ask…

Accredited Investors

Under the federal securities laws, a company that offers or sells its securities must register the securities with the SEC or find an exemption from the registration requirements. The federal…

Accrued Interest

Interest earned on a security but not yet paid to the investor.

Advance Fee Fraud

Advance fee frauds ask investors to pay a fee up front – in advance of receiving any proceeds, money, stock, or warrants – in order for the deal to go through.  The advance payment may be described…

Affinity Fraud

Affinity fraud refers to investment scams that prey upon members of identifiable groups, such as religious or ethnic communities, the elderly, or professional groups. The fraudsters who promote…

After-hours Trading

After-hours trading, also known as extended-hours trading, refers to trading that occurs outside of regular trading hours. Regular trading hours for stocks traded on exchanges and certain other…

All-Or-None Order

An All-Or-None (AON) order is an order to buy or sell a stock that must be executed in its entirety, or not executed at all.  AON orders that cannot be executed immediately remain active until they…

Alternative Mutual Fund (Alt Fund)

Alternative mutual funds (sometimes called alt funds or liquid alts) are publicly offered, SEC-registered mutual funds that hold non-traditional…

Alternative Trading Systems (ATSs)

Alternative Trading Systems (ATSs) are SEC-regulated electronic trading systems that match orders for buyers and sellers of securities. An ATS is not a…

American Depositary Receipts (ADRs)

The stocks of most foreign companies that trade in the U.S. markets are traded as American Depositary Receipts (ADRs). U.S. depositary banks issue these stocks. Each ADR represents one or more shares…

Annual Meeting

Once-a-year meetings where the chief executive officer reports on the year's results to shareholders. At this meeting, shareholders vote to elect the board of directors and on other corporate…

Annual Report

The annual report to shareholders is a document used by most public companies to disclose corporate information to their shareholders. It is usually a state-of-the-company report, including an…

Annual Report (10K)

A report filed to the SEC by public companies that includes the company's history, audited financial statements, a discussion of products and services, a review of the organization and its…

Annual Return

An annual rate of return is the profit or loss on an investment over a one-year period. There are many ways of calculating the annual rate of return. If the rate of return is calculated on a…

Annuities

An annuity is a contract between you and an insurance company that is designed to meet retirement and other long-range goals, under which you make a lump-sum payment or series of payments. In return…

Arbitration and Mediation

Arbitration, a form of alternative dispute resolution, is a technique for the resolution of disputes outside the court system.  In arbitration, the parties agree to have their dispute heard by one or…

Asset

Any tangible or intangible item that has value in an exchange. A bank account, a home, or shares of stock are all examples of assets.

Asset Allocation

Asset allocation involves dividing your investments among different categories, such as stocks, bonds, and cash.

Asset Classes

Investments that have similar characteristics. The three main asset classes are stocks, bonds, and cash.

Back-end Load

A sales charge, also known as a "deferred sales charge," investors pay when they redeem (sell) mutual fund shares. Funds generally use these to compensate brokers.

Banking Regulators

The SEC routinely receives questions and complaints from investors about the investment products they have purchased. But not all investments are considered securities under the securities laws. For…

Bankruptcy

Filing for protection under the federal bankruptcy laws can help companies make plans to repay their debts.  A bankrupt company might use Chapter 11 of the Bankruptcy Code to reorganize its business…

Bankruptcy for a Public Company

A company may decide to declare bankruptcy when it suffers from crippling debt.  Federal bankruptcy laws govern how the assets and business of a company will be used to clear its debts. There are…

Basis Point

One one-hundredth (.01) of a percentage point. For example, eight percent is equal to 800 basis points.

Bear Market

A time when stock prices are declining and market sentiment is pessimistic. Generally, a bear market occurs when a broad market index falls by 20% or more over at least a two-month period.

Beneficial Owner

A beneficial owner holds stocks indirectly, for example, through a bank or broker-dealer. Beneficial owners are sometimes said to be holding shares in "street name."

Bid Price

The term "bid" refers to the highest price a buyer will pay to buy a specified number of shares of a stock at any given time.  The term …

Bid Price/Ask Price

The term "bid" refers to the highest price a buyer will pay to buy a specified number of shares of a stock at any given time.  The term …

Binary options

A binary option is a type of options contract in which the payout depends entirely on the outcome of a yes/no proposition and typically relates to whether the price of a particular asset will rise…

Blank Check Company

A blank check company is a development stage company that has no specific business plan or purpose or has indicated its business plan is to engage in a merger or acquisition with an unidentified…

Blue Sky Laws

In addition to the federal securities laws, every state has its own set of securities laws—commonly referred to as "Blue Sky Laws"—that are designed to protect investors against fraudulent sales…

Board of Directors

A group of people elected by shareholders to oversee the management of a corporation.

Boiler Room Schemes

Boiler room schemes are large-scale operations designed to lure in as many investors to an investment scam as possible, often using high-pressure sales tactics.   Boiler room scheme operators may…

Bond Funds and Income Funds

What is a bond fund? "Bond funds" and "income funds" are terms used to describe a type of investment company (…

Bond Swap

The investor sells one bond and uses the proceeds to buy another bond, often at the same price.…

Bonds

A bond is a debt security, similar to an IOU.  Borrowers issue bonds to raise money from investors willing to lend them money for a certain amount of time. When you buy a bond, you are lending to…

Bonds, Corporate

Corporate bonds are bonds issued by companies. Companies issue corporate bonds to raise money for a variety of purposes, such as…

Bonds, Municipal

Municipal bonds (or “munis” for short) are debt securities issued by states, their political subdivisions (such as cities, towns, counties, and school districts), their agencies and instrumentalities…

Bonds, Selling Before Maturity

Investors who hold a bond to maturity (when it becomes due) get back the face value or "par value" of the bond. But investors who sell a bond before it matures may get a far different amount. For…

Bonus Credits for Annuities

In an attempt to attract purchasers, some insurance companies offer variable annuity contracts with "bonus credits." A bonus credit is the extra amount an insurance company agrees to add to the value…

Breakpoint Discounts

Some mutual funds that charge front-end sales loads will charge lower sales loads for larger investments. For…

Broker

An individual who acts as an intermediary between a buyer and seller, usually charging a commission to execute trades. Brokers are required to seek the best execution of trades they make for…

Broker Vote

For certain routine matters to be voted upon at shareholder meetings, if you don’t vote by proxy or at the meeting in person, brokers may vote on your behalf at their discretion. These votes may also…

Broker-Dealers: Record-Keeping Requirements

Investors should always keep good records of their securities transactions, including copies of…

Broker-Dealers: Why They Ask for Personal Information

Brokers generally request personal information from their customers, including financial and tax identification information, to comply with U.S. government laws and rules, as well as rules imposed by…

Brokerage Account – Closing Your Brokerage Account

Generally, either you or your brokerage firm may close your brokerage account at any time.  The specific steps you will need to follow to close your account are usually found in the terms and…

Bull Market

A time when stock prices are rising and market sentiment is optimistic. Generally, a bull market occurs when there is a rise of 20% or more in a broad market index over at least a two-month period.

Buying Long

Purchasing or owning shares of stock, with the expectation that the stock will rise in value.

Callable Bonds (or Redeemable Bonds)

Bonds that can be redeemed or paid off by the issuer prior to the bond's maturity date.

Callable CDs

These give the issuing bank the right to terminate – or "call" – the CD after a set period of time, but they do not give the CD holder the same right. If interest rates fall, the issuing bank might…

Callable or Redeemable Bonds

Callable or redeemable bonds are bonds that can be redeemed or paid off by the issuer prior to the bonds' maturity date. When an…

Capital Gain

The profit that comes when an investment is sold for more than the price the investor paid for it.

Cash

Money that can be used to pay for goods or services.

Cash Account

A cash account is a type of brokerage account in which the investor must pay the full amount for securities purchased.  An investor using a cash account is not allowed to borrow funds from his or her…

CD Call Period

Don't assume that a "federally insured one-year non-callable" CD matures in one year. It doesn't. These words mean the bank cannot redeem the CD during the first year. A "one-year non-callable" CD…

Central Registration Depository (CRD)

The Financial Industry Regulatory Authority (FINRA) administers the CRD program, which  facilitates the licensing and registration of U.S. securities industry firms and professionals. The CRD…

Certificate of Deposit

A certificate of deposit (CD) is a savings account that holds a fixed amount of money for a fixed period of time, such as six months, one year, or five years.  In exchange, the issuing bank or credit…

Churning

A broker typically earns a portion of the commissions or other fees on each purchase or sale of securities that the brokerage firm makes for an investor…

Class Actions

A federal securities class action is a court action filed on behalf of a group of shareholders under Rule 23 of the Federal Rules of Civil…

Classes

Different types of shares issued by a single fund, often referred to as Class A shares, Class B shares, and so on. Each class of a fund holds identical investments and shares the same investment…

Clean Shares

A class of fund shares without any front-end load,…

Closed-end Funds

A closed-end fund, legally known as a closed-end investment company, is one of three basic types of investment companies…

Closing Price

"Closing price" generally refers to the last price at which a stock trades during a regular trading session. For many U.S. markets, regular trading sessions run from 9:30 a.m. to 4:00 p.m. Eastern…

Comment Letters

From time to time, the SEC invites comments from the public onProposed Rules, Concept Releases…

Commissions

You will likely pay a commission when you buy or sell a stock through a financial professional.  The commission compensates the financial professional and his or her firm when it is acting as agent…

Committee on Uniform Securities Identification Procedures (CUSIP)

The Committee on Uniform Securities Identification Procedures (CUSIP) number identifies most securities, including U.S. government and municipal bonds. CUSIP numbers are unique nine-character…

Commodity Futures Trading Commission (CFTC)

The Commodity Exchange Act requires certain firms and individuals to be registered with the CFTC.  Registration and examination of firms and individuals is conducted on behalf of the CFTC by the…

Complaints

The SEC’s Office of Investor Education and Advocacy (OIEA) receives many types of complaints from individual investors, including complaints against brokers, brokerage firms, investment advisers,…

Compound Interest

Interest paid on principal and on accumulated interest.

Consolidated Tape

The "consolidated tape" is a high-speed, electronic system that reports the latest price and volume data on sales of exchange-listed stocks. The data reflected on the consolidated tape are generated…

Contact the SEC

The SEC’s Office of Investor Education and Advocacy provides a variety of services and tools to address the problems and questions you may face as an investor.  We cannot tell you what investments to…

Contingent Deferred Sales Load

A type of back-end load, the amount of which depends on the length of time the investor holds his or her shares. For example, a contingent deferred sales load might be 5% if an investor holds his…

Conversation Starters

We always recommend confirming whether a financial professional is registered using the free search tool at Investor.gov. After confirming that a financial…

Conversion

A feature some funds offer that allows investors to automatically switch from one fund class to another, typically one with lower annual expenses, after a set period of time. The fund's prospectus…

Convertible Securities

A "convertible security" is a security—usually a bond or a preferred stock—that can be converted into a different security—typically shares of the company's common stock. In most cases, the holder of…

Corporate Governance

A framework which may include rules and regulations, corporate charter and bylaws, formal policies, as well as customs and other processes, that determines the leadership, organization, and…

Corporate Reports

Corporate reports can provide important information for investors by, for example, telling you whether a company is making money or losing money and why. You'll find this information in the company's…

Coupon

A feature of a bond that denotes the amount of interest due and the date that the payment will be made.

Coupon Payment

The dollar amount of interest paid to an investor. The amount is calculated by multiplying the interest of the bond by its face value.

Coupon Rate

The interest rate on a bond. It is expressed as a semi-annual rate.

Creation Unit

Large blocks of shares in an ETF, typically 50,000 shares or more.

Credit Rating Agencies

Provide their opinion on the creditworthiness of a corporate or government borrower by issuing a grade, or credit rating, on bonds issued by that borrower.

Cumulative Voting

Cumulative voting is a type of voting system that helps strengthen the ability of minority shareholders to elect a director. This method allows shareholders to cast all of their votes for a single…

Current Yield

The ratio of the interest rate payable on a bond to the actual market price of the bond, stated as a percentage. For example, a bond with a current market price of $1,000 that pays $80 per year…

CUSIP Number

CUSIP stands for Committee on Uniform Securities Identification Procedures.  A CUSIP number identifies most financial instruments, including: stocks of all registered U.S. and Canadian companies,…

Data Tagging

Data tagging, in formats like XBRL or “eXtensible Business Reporting Language,” is gaining popularity as a way to enhance financial reporting. By using computer codes to "tag" different kinds of…

Day Order

Unless an investor specifies a time frame for the expiration of an order, orders to buy and sell a stock are “Day” orders, meaning they are good only during that trading day.  Day orders that do not…

Day Trade

FINRA rules define a “day trade” as the purchase and sale, or the sale and purchase, of the same security on the same day in a margin account.  This definition encompasses any security, including…

Day Trading

Day traders rapidly buy, sell and short-sell stocks throughout the day in the hope that the stocks continue climbing or falling in value for the seconds or minutes they hold the shares, allowing…

Debentures

An unsecured bond backed solely by the general credit of a company.

Default

A failure by an issuer to pay principal or interest when due, or to fulfill other obligations, such as reporting requirements.

Deferred Annuity

With a deferred annuity, you make payments to an insurance company, which will be free from taxes until you reach a particular age or a date specified in your contact.

Deferred Sales Charge

A sales charge, also known as a "Back-end Load," investors pay when they redeem (sell) mutual fund shares. Funds generally use these to compensate brokers.

Defined Benefit Plan

Defined benefit plans also are known as pension plans. Employers sponsor defined benefit plans and promise the plan's investments will provide you with a specified monthly benefit at retirement.…

Defined Contribution Plan

A retirement savings plan, such as a 401(k) plan, that does not promise a specific payment upon retirement. In these plans, the employee or the employer (or both) contribute to the employee's…

Derivatives

Financial instruments whose performance is derived, at least in part, from the performance of an underlying asset, security or index. For example, a stock option is a derivative because its value…

Direct Investment Plans: Buying Stock Directly from the Company

Many companies allow you to buy or sell shares directly through a direct stock plan (DSP).  You can also have the cash dividends you receive from the company automatically reinvested into more shares…

Disaster-related Investment Scams

Natural disasters such as wildfires, floods and hurricanes often give rise to investment scams.  These scams can take many forms, including promoters touting companies purportedly involved in cleanup…

Disclosure

Information about a company’s financial condition and business that it makes public. Investors can use this information to make informed investment decisions about the company’s securities. 

Discount

A bond sold before it matures might not sell at full par value. If it sells below par, it is selling at discount.

Discount Note

Short-term obligations issued at a discount from face value. Discount notes have no periodic interest payments; the investor receives the note's face value at maturity. For example, a one-year, $1,…

Distribution Fees

Fees paid out of fund assets to cover marketing and selling fund shares. These fees may cover advertising costs, compensating brokers and others who sell fund shares, payments for printing and…

Distribution [and/or Service] (12b-1) Fees

  So-called “12b-1 fees” are fees paid out of mutual fund or ETF assets to cover the costs of distribution – marketing and selling mutual fund shares – and sometimes to cover the costs of providing…

Diversification

Diversification is a strategy that can be neatly summed up as "Don't put all your eggs in one basket." The strategy involves spreading your money among various investments in the hope that if one…

Dividend

A portion of a company's profit paid to shareholders. Public companies that pay dividends usually do so on a fixed schedule although they can issue them at any time. Unscheduled dividend payments…

Dollar Cost Averaging

Dollar-cost averaging means investing your money in equal portions, at regular intervals, regardless of the ups and downs in the market. This investment strategy can help you manage risk by following…

DTC Chills and Freezes

Should problems arise with a company or its securities on deposit at The Depository Trust Company (DTC), DTC may impose a “chill” or a “freeze” on all the company’s securities. A “chill” is a…

Early Withdrawal

If a CD is redeemed before it matures, you may have to pay a penalty or forgo a portion of the interest.

Earnings Per Share

A public company's net profit divided by the number of its common shares.

EDGAR

The SEC’s EDGAR database provides free public access to corporate information, allowing you to quickly research a company…

Education Savings Plan

A type of 529 plan that lets an account owner open an investment account to save for the account beneficiary’s qualified higher education expenses or tuition for elementary or secondary public,…

Employee Retirement Income Security Act (ERISA)

The Employee Retirement Income Security Act of 1974, which is administered by the U.S. Department of Labor. ERISA does not require employers to offer a pension plan. But it does require employers…

Employee Stock Option Plans

An employee stock ownership plan (ESOP) is a retirement plan in which an employer contributes its stock to the plan for the benefit of the company’s employees.  This type of plan should not be…

Employee Stock Ownership Plans ESOPs

An employee stock ownership plan (ESOP) is a retirement plan in which an employer contributes its stock to the plan for the benefit of the company’s employees.  This type of plan should not be…

Enrollment Fee

Fees that direct-sold college savings plans may charge to join in the program.

Escheatment by Financial Institutions

All states require financial institutions, including brokerage firms and transfer agents, to report when personal property has been abandoned or unclaimed after a period of time specified by state…

Ex-Dividend Dates

To determine whether you should get a dividend, you need to look at two important dates. They are the "record date" or "date of record" and the "ex-dividend date" or "ex-date." When a company…

Ex-Dividend Dates: When Are You Entitled to Stock and Cash Dividends

To determine whether you should get a dividend, you need to look at two important dates. They are the "record date" or "date of record" and the "ex-dividend date" or "ex-date." When a company…

Exchange Fee

A fee that some funds impose on shareholders if they exchange (transfer) to another fund within the same fund group.

Exchange-Traded Fund (ETF)

Exchange-traded funds (ETFs) are SEC-registered investment companies that offer investors a way to pool their money in a fund that invests in stocks, bonds, or other assets. In return, investors…

Executing an Order

When you place an order to buy or sell stock, you might not think about where or how your broker will execute the trade.  But where and how your order is executed can impact the overall cost of the…

Executive Compensation

The federal securities laws require clear, concise and understandable disclosure about compensation paid to CEOs, CFOs and certain other high-ranking executive officers of public companies. Several…

Expense Ratio

The fund's total annual operating expenses, including management fees, distribution fees, and other expenses, expressed as a percentage of average net assets.

Fair Disclosure, Regulation FD

Regulation FD addresses the selective disclosure of information by publicly traded companies and other issuers. Regulation FD provides that…

Filing and Registration Fees

The SEC collects fees under various provisions of the securities laws, including the following: Section 6(b) of the Securities Act of 1933 (for registrations of securities); Section 13(e) of the…

Fill-Or-Kill Order

A Fill-Or-Kill order is an order to buy or sell a stock that must be executed immediately in its entirety; otherwise, the entire order will be cancelled (i.e., no partial execution of the order is…

Financial Accounting Standards Board (FASB)

The Financial Accounting Standards Board (FASB) is the accounting standard setter for purposes of the Federal Securities Laws. See GAAP.

Financial Industry Regulatory Authority (FINRA)

The Financial Industry Regulatory Authority, a self-regulatory organization for the brokerage industry.

Financial Planners

A financial planner typically prepares financial plans for his or her clients. The kinds of services financial planners offer can vary widely. Some financial planners assess every aspect of your…

Financial Product

Examples of financial products include but are not limited to the following: stocks, bonds, derivatives, and currencies.

Financial Professionals – Background Checks

You should check out the registration status and background of any financial professional before becoming a client, even if a close friend or family member recommends a financial professional. An…

Fixed Annuity

An insurance product that promises a minimum rate of interest while your account is growing. The insurance company also guarantees that the periodic payment will be for a set amount for a fixed…

Fixed-rate Bond

A long-term bond with a set interest rate.

Floating-rate Bond (or Variable or Adjustable rate Bond)

A bond whose interest rate is adjusted periodically according to a predetermined formula; it is usually linked to an interest rate index such as LIBOR.

Floor

The lower limit for the interest rate on a floating-rate bond.

Foreign Corrupt Practices Act (FCPA)

The Foreign Corrupt Practices Act (“FCPA”) generally prohibits the bribing of foreign officials. The FCPA also requires publicly traded companies to maintain accurate books and records and to have a…

Foreign currency exchange (forex)

A foreign currency exchange rate is a price that represents how much it costs to buy the currency of one country using the currency of another country. Currency traders buy and sell currencies…

Foreign Exchange Markets

Markets that trade currencies.

Foreign Regulators

The SEC is the primary overseer of the U.S. securities markets while foreign regulators oversee securities markets in other jurisdictions. The SEC and most foreign securities regulators are members…

Form 10-K

The federal securities laws require publicly reporting companies to disclose information on an ongoing basis. For example, domestic companies must submit annual reports on Form 10-K, quarterly…

Form 10-Q

The federal securities laws require publicly reporting companies to disclose information on an ongoing basis. For example, domestic issuers must submit annual reports on …

Form 1099, Investment Income (Interest and Dividends)

The federal tax laws require brokerage firms, mutual funds, and other entities to report on Form 1099 all investment income, usually interest or dividends, they have paid to investors during the…

Form 13F -—Reports Filed by Institutional Investment Managers

An institutional investment manager that uses the U.S. mail (or other means or instrumentality of interstate commerce) in the course of its business, and exercises investment discretion over $100…

Form 144

This Form must be filed with the SEC by an affiliate of the issuer as a notice of the proposed sale of securities in reliance on…

Form 8-K

In addition to filing annual reports on Form 10-K and quarterly reports on …

Form ADV

Form ADV is the uniform form used by investment advisers to register with both the SEC and state securities authorities. The form consists of two parts, both of which are available to the public on…

Form CRS

Form CRS is a client or customer relationship summary. Advisers and brokers are required to deliver a relationship summary to you beginning in summer 2020. The relationship summary contains important…

Form D

Companies may use an exemption under Regulation D to offer and sell securities without having to register the…

Forms 3, 4 and 5

The federal securities laws require certain individuals (such as officers, directors, and those that hold more than 10% of any class of a company’s securities, together we’ll call, “insiders”) to…

Fraudster

A person whose goal is to con people out of their money.

Free look Period

Variable annuity contracts typically have a "free look" period of ten or more days. During this period, you are free to terminate your contract without paying any surrender charges and you will…

Freeriding

In a cash account, an investor must pay for the purchase of a security before selling it.  If an investor buys and sells a…

Freeze, Brokerage Account

In a cash account, an investor must pay for the purchase of a security before selling it.  If an investor buys and sells a…

Front-end Load

An upfront sales charge investors pay when they buy fund shares. It generally is used by the fund to compensate brokers. A front-end load is deducted from the purchase and reduces the amount…

Future Value

The value of an asset at a specified date in the future.

Futures contract

An agreement to buy or sell a specific quantity of a commodity or financial instrument at a specified price on a particular date in the future.

Futures Market

Markets that trade futures contracts for commodities such as gold, oil or wheat, as well as financial futures.

General Obligation Bond

A municipal bond not secured by any assets; instead it is backed by the issuer's power to tax residents to pay bondholders.

Generally Accepted Accounting Principles (GAAP)

GAAP (Generally Accepted Accounting Principles) are accounting standards, conventions and rules. It is what companies use to measure their financial results. These results include net income as…

Going Private

A publicly held company generally means a company that has a class of securities that is registered with the SEC because those securities are widely held or traded on a national securities exchange.…

Good-Til-Cancelled Order

A Good-Til-Cancelled (GTC) order is an order to buy or sell a stock that lasts until the order is completed or canceled. Brokerage firms typically limit the length of time an investor can leave a GTC…

Hedge Funds

Like mutual funds, hedge funds pool investors’ money and invest the money in an effort to make a positive return.  Hedge funds typically have more flexible investment strategies than mutual funds.  …

High-yield Bond (or Junk Bond)

Bonds that are believed to have a higher risk of default and receive low ratings by credit rating agencies, namely bonds rated Ba or below (by Moody's) or BB or below (by S&P and Fitch). These…

High-Yield Investment Programs

High-Yield Investment Programs (HYIP) are unregistered investments typically run by unlicensed individuals – and they are often frauds. The hallmark of an HYIP scam is the promise of incredible…

Holding Your Securities

Securities may be held in three different ways. One way is to hold them in certificate form, where the securities are registered in your name on the books of the company, and you receive a printed…

Holiday Schedules and Trading Hours for the National Securities Exchanges

You can find the holiday schedules and trading hours for the national securities exchanges on each of their websites. You can find links to each exchange’s website here…

Householding Rules

Investors often invest in funds through a variety of individual and family accounts and, as a result, sometimes receive multiple copies of the same documents from those funds.  To avoid duplication,…

Immediate Annuity

This annuity has no accumulation phase. Instead, you start receiving annuity payments right after you purchase the annuity.

Immediate-Or-Cancel Order

An Immediate-Or-Cancel (IOC) order is an order to buy or sell a stock that must be executed immediately. Any portion of an IOC order that cannot be filled immediately will be cancelled. …

Impersonators

Impersonators may falsely claim to be affiliated with the SEC (or another federal government agency) in an attempt to steal your personal information or your money. Federal government agencies,…

Index Fund

An "index fund" describes a type of mutual fund or unit investment trust (UIT) whose investment…

Indexed Annuities

An indexed annuity is a type of annuity contract between you and an insurance company. It generally…

Individual Retirement Account (IRA)

Individual Retirement Accounts (IRAs) provide tax advantages for retirement savings.  You can contribute each year up to the maximum amount allowed by the Internal Revenue Service.  There are several…

Information About Some Companies Not Available From the SEC

Investors are sometimes surprised to learn the SEC does not have information about all companies that offer and sell securities. When a company conducts a registered offering or an exempt offering…

Information Available to Investment Company Shareholders

Before you invest in any registered investment company you should read its prospectus and any…

Initial Public Offering (IPO)

An initial public offering, or IPO, generally refers to when a company first sells its shares to the public. For more information about IPOs generally, see our …

Initial Public Offerings, Why Individuals Have Difficulty Getting Shares

The underwriters and the company that issues the shares control the IPO process. They have wide latitude in allocating IPO shares. The SEC does not regulate the business decision of how IPO shares…

Initial Public Offerings: Eligibility to Get Shares at Broker-Dealers

No brokerage firm can guarantee you will be able to purchase shares in an initial public offering (IPO). While it can be difficult for individual investors to buy IPO shares, more firms, including…

Insider Trading

Illegal insider trading refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, on the basis of material, nonpublic information…

Interest

The price paid for borrowing money. It is expressed as a percentage rate over a period of time. Interest rates may be fixed, meaning the rate is set and will not change, or may be variable or "…

Internet Fraud

The Internet allows individuals or companies to communicate with a large audience without spending a lot of time, effort, or money. Anyone can reach tens of thousands of people by building an…

Interval Fund

An interval fund is a type of investment company that periodically offers to repurchase its shares from shareholders. That is, the fund…

Invest

To engage in any activity in which money is put at risk for the purpose of making a profit.

Investigations

The SEC’s Division of Enforcement conducts investigations into potential violations of the federal securities laws. Common violations include misrepresenting important information about potential…

Investment Adviser

An investment adviser is a person or firm that is engaged in the business of providing investment advice to others or issuing reports or analyses regarding securities, for compensation. Investment…

Investment Adviser Public Disclosure (IAPD)

The Investment Adviser Public Disclosure (IAPD) database contains registration documents filed by investment…

Investment Adviser Registration Depository (IARD)

The Investment Adviser Registration Depository (IARD) functions as a one-stop electronic filing system for investment advisers.  All…

Investment Company

A company that issues and invests in securities. The three types of investment companies are mutual funds, closed-end funds, and unit investment trusts.

Investment-grade Bond (or High-grade Bond)

Bonds that are believed to have a lower risk of default and receive higher ratings by the credit rating agencies, namely bonds rated Baa (by Moody's) or BBB (by S&P and Fitch) or above. These…

Investor Complaints

The SEC receives many types of complaints from individual investors, including complaints against brokers, brokerage firms, investment advisers, transfer agents, mutual funds, and other market…

Issuer

The entity obligated to pay principal and interest on a bond.

Large Cap, Mid Cap, Small Cap

Terms used to describe a company’s size and market value (market capitalization).

Late Payment of Interest on Bonds

nvestors sometimes complain to the SEC staff about late payments of interest owed to them on their bonds. The SEC, however, does…

Liability/Debt

An amount owed to a person or organization for borrowed funds. Loans, notes, bonds, and mortgages are forms of debt. These different forms all call for borrowers to pay back the amount they owe,…

Lifecycle Funds

A diversified mutual fund that automatically shifts towards a more conservative mix of investments as it approaches a particular year in the future, known as its "target date." A lifecycle fund…

Limit Orders

A limit order is an order to buy or sell a security at a specific price. A buy limit order can only be executed at the limit price or lower, and a sell limit order can only be executed at the limit…

Liquidity (or Marketability)

Liquidity generally refers to how easily or quickly a security can be bought or sold in a secondary market. Liquid investments can be sold readily and without paying a hefty fee to get money when it…

Listing Standards

Before a company’s stock can begin trading on an exchange, the company must meet certain minimum financial and non-financial requirements, or "initial listing standards." Initial listing standards…

Load

The amount that investors pay when they buy (front-end load) or redeem (back-end load) shares in a mutual fund, similar to a commission. The SEC's rules do not limit sales loads a fund may charge,…

London Interbank Offered Rate (LIBOR)

The interest rates banks charge each other for short-term loans. LIBOR is frequently used as the base for resetting rates on floating-rate securities.

Lost and Stolen Securities Program

Congress directed the establishment of the Lost and Stolen Securities Program (LSSP) to curtail trafficking in lost, stolen, missing, and counterfeit securities certificates.  Rule 17f-1 under the…

Lost or Stolen Stock Certificates

Brokerage firms, banks, transfer agents and corporations have procedures in place to help investors replace lost or stolen certificates. If your securities certificate is lost, accidentally…

Lump Sum Payment

A payment of a sum of money at one time, such as an inheritance.

Maintenance Fee

Fees that direct-sold college savings plans may charge for continued participation in the plan.

Management Fee

A fee paid out of fund assets to the fund's investment adviser for investment portfolio management. A fund's management fees appear under Annual Fund Operating Expenses in the fee table in the fund…

Margin Account

A “margin account” is a type of brokerage account in which the broker-dealer lends the investor cash, using the account as collateral, to purchase securities.  Margin increases investors’ purchasing…

Margin Call

If you buy on margin and the value of your securities declines, your brokerage firm can require you to deposit cash or securities to your account immediately, or sell any of the securities in your…

Market Capitalization

Market capitalization is the value of a corporation determined by multiplying the current public market price of one share of the corporation by the number of total outstanding shares.

Market Index

A measurement of the performance of a specific "basket" of stocks considered to represent a particular market or sector of the U. S. economy. For example, the Dow Jones Industrial Average (DJIA) is…

Market Indices

A market index tracks the performance of a specific "basket" of stocks that represent a particular market or economic sector. U.S. examples include the Dow Jones Industrial Average, an index of 30…

Market Makers

A "market maker" is a firm that stands ready to buy or sell a stock at publicly quoted prices.  Learn More.

Market Manipulation

Market manipulation is when someone artificially affects the supply or demand for a security (for example, causing stock prices to rise or to fall dramatically). Market manipulation may involve…

Market Order

A market order is an order to buy or sell a stock at the current market price. Unless you specify otherwise, your broker will enter your order as a market order. The advantage of a market order is…

Market Volatility Procedures and Circuit Breakers

For information on circuit breakers and other market volatility procedures please read our investor bulletin “New Measures to…

Markups

When a broker-dealer sells you securities out of its inventory, the broker-dealer acts as a principal in the transaction (that is, selling to you directly the securities it holds).  When acting in a…

Medallion Signature Guarantees: Preventing the Unauthorized Transfer of Securities

If you hold securities in physical certificate form and want to transfer or sell them, you will need to sign the certificates and securities powers--a legal document, separate from a securities…

Mediation and Arbitration

Arbitration, a form of alternative dispute resolution, is a technique for the resolution of disputes outside the court system.  The parties to a dispute refer it to arbitration by one or more persons…

Mergers

Mergers are transactions involving the combination of generally two or more companies into a single entity. The need for shareholder approval of a merger is governed by state law.  Typically, a…

Microcap stock

The term “microcap stock” (sometimes referred to as “penny stock”) applies to companies with low or micro market…

Mini-Tender Offers

"Mini-tender" offers are tender offers that, when consummated, will result in the person who makes the tender offer owning less than five percent of a company’s stock. The people behind these offers—…

Money Market Fund

A money market fund is a type of mutual fund that has relatively low risks compared to other mutual funds and most other…

Money Markets

A market that provides trading in short-term debt.

Mortgage-Backed Securities and Collateralized Mortgage Obligations

Mortgage-backed securities (MBS) are debt obligations that represent claims to the cash flows from pools of mortgage loans, most commonly on residential property. Mortgage loans are purchased from…

Mutual Fund Classes

Some mutual funds offer investors different types of shares, known as "classes."  Each class invests in the same portfolio of securities and has the same investment objectives and policies.  But each…

Mutual Fund Fees and Expenses

As with any business, running a mutual fund involves costs. For example, there are costs incurred in connection with…

Mutual Fund Prospectus

Mutual funds must provide a copy of the fund’s prospectus to shareholders after they purchase shares, but investors can – and should – request and read the fund’s prospectus before making an…

Mutual Fund Redemptions

A mutual fund company generally must pay redemption proceeds to a shareholder within seven days of receiving a redemption request from the shareholder. Exceptions apply on days when the New York…

Mutual Funds

A mutual fund is an open-end investment company or fund.  An open-end fund is one of three basic types of investment…

Mutual Funds, Past Performance

This year's top-performing mutual funds aren't necessarily going to be next year's best performers. It’s not uncommon for a fund to have better-than-average performance one year and mediocre or below…

National Securities Exchange

A "national securities exchange" is a securities exchange that has registered with the SEC under Section 6 of the Securities Exchange…

Nationally Recognized Municipal Securities Information Repositories (NRMSIRs)

Prior to July 1, 2009, a Nationally Recognized Municipal Securities Information Repository (NRMSIR) was an entity, designated by the Securities and Exchange Commission, to which an issuer of…

Net Asset Value

"Net asset value," or "NAV," of an investment company is the company's total assets minus its total liabilities. For…

Net Income

The profit earned by a company after all expenses and taxes have been deducted from revenue. A simple way to think about net income is it’s the price of…

No Action Letters

An individual or entity who is not certain whether a particular product, service, or action would constitute a violation of the federal securities law may request a "no-action" letter from the SEC…

No-load Fund

A fund that does not charge any type of sales load. But not every type of shareholder fee is a "sales load," and a no-load fund may charge fees that are not sales loads. No-load funds also charge…

Offering Document (or Official Statement or Prospectus)

The disclosure document prepared by a bond issuer that gives detailed financial information about the issuer and the bond offering. Municipal securities issuers must prepare an “Official…

Old Stock and Bond Certificates

An old stock or bond certificate may still be valuable even if it no longer trades under the name printed on the certificate. The company may have merged with another company or simply changed its…

Online Trading

Although you may save time and money trading online, it does not take the homework out of making investment decisions.  To avoid costly mistakes, investors who trade online should understand how our…

Open-end Company

The legal name for a mutual fund. An open-end company is a type of investment company.

Operating Expenses

The costs a fund incurs in running the fund, including management fees, distribution fees, and other expenses.

Options

Options are contracts giving the purchaser the right – but not the obligation -- to buy or sell a security at a fixed price within a specific period of time. Stock options are traded on a number of…

Order Types

There are different types of orders investors can use to buy and sell stocks through a brokerage firm.  Order types and trading instructions available to you may differ between brokerage firms.  You…

OTC Bulletin Board (OTCBB)

The OTC Bulletin Board (OTCBB) (link is external) is an electronic quotation system that displays real-time quotes, last-…

Pattern Day Trader

FINRA rules define a “pattern day trader” as any customer who executes four or more “day trades” within five business days, provided that the number of day trades represents more than six percent of…

PIPE Offerings

“PIPE” stands for “private investment in public equity.” In a PIPE offering, investors commit to purchase a certain number of …

Ponzi Schemes

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%…

Portfolio

The combined holdings of stock, bond, commodity, real estate and other investments by an individual or institutional investor.

Premium

The amount by which the price of a bond exceeds its principal (par) amount.

Prepaid Tuition Plans

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.

Prepayment

The unscheduled partial or complete payment of the principal amount outstanding on a loan, such as a mortgage, before it is due.

Prepayment Risk

The risk that principal repayment will occur earlier than scheduled, forcing the investor to reinvest at lower prevailing rates.

Price-earnings (P/E) Ratio

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…

Primary Market

Markets in which newly issued securities are sold to investors and the issuer receives the proceeds.

Prime Bank Investments

“Prime bank” investments are scams. Promoters of “prime bank” programs often claim that investors’ funds will be used to buy and trade supposed “prime bank” instruments, and that investors will…

Principal

The total amount of money being borrowed or lent; the initial amount of money invested.

Product Description

A summary of key information about an ETF that explains how to obtain a prospectus.

Profit

Revenue minus cost; money made on a transaction.

Promissory Notes

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.…

Prospectus

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,…

Proving Securities Ownership

Proving securities ownership is easier if you can remember how the security was acquired. Brokerage Firm If you bought the security through a brokerage firm, contact the firm and ask if they have a…

Proxy Statements

A document sent to shareholders letting them know when and where a shareholders’ meeting is taking place and detailing the matters to be voted upon at the meeting.  You can attend the meeting and…

Proxy Statements: How to Find

A company is required to file its proxy statements with the SEC no later than the date proxy materials are first sent…

Proxy Voting

A way for shareholders to vote for corporate directors and on other matters affecting the company without having to personally attend the meeting.

Public Company

A company that offers its securities through an offering and now has those securities traded on the open market.

Public Company Accounting Oversight Board (PCAOB)

The Public Company Accounting Oversight Board (also known as the PCAOB) is a private-sector, nonprofit corporation created by the Sarbanes-Oxley…

Public Documents

How to Access Information or Help If you have questions and inquiries relating to the SEC, to federal securities laws or investments, your inquiry should be submitted via this …

Pump and Dump Schemes

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…

Purchase Fee

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.

Purchasing Power

The amount of goods and services that can be purchased by a given unit of currency, taking into account the effect of inflation.

Pyramid Schemes

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…

Qualified Higher Education Expenses

Includes tuition; room and board; mandatory fees; and, books, computers, and software (if required). 

Quarterly Reports (10Q)

Each quarter, public companies file reports to the SEC containing unaudited financial statements and information about the company's operations in the previous three months.

Quiet Period

The federal securities laws do not define the term “quiet period.”  However, that term is used to refer to the period of time surrounding the filing of a registration statement during which an issuer…

Real Estate Investment Trust (REIT)

Real estate investment trusts (“REITs”) allow individuals to invest in large-scale, income-producing real estate. A REIT is a company that owns and typically operates income-producing real estate or…

Real Return

Real return is what is earned on an investment after accounting for taxes and inflation. Real returns are lower than nominal returns, which do not subtract taxes and inflation.

Rebalancing

Rebalancing brings a portfolio back to its original asset allocation mix. This is necessary because over time, some investments will grow faster than others, and holdings may become out of…

Recovering Funds

Investors who are victims of securities law violations may be eligible to receive money recovered from fraudsters. Sometimes a successful SEC enforcement action results in recovered funds being…

Redemption Fee

A shareholder fee that some funds charge when investors redeem (sell) mutual fund shares. Redemption fees, which must be paid to the fund, are not the same as and may be in addition to a back-end…

Registered Owner

A registered owner or record holder holds stocks directly with the company, rather than in "street name." Registration Statement -- By law, public companies in the U.S. must disclose important…

Registration Statement

A registration statement is a filing with the SEC making required disclosures in connection with the registration of a security, a…

Registration Under the Securities Act of 1933

The Securities Act of 1933 has two basic objectives: To require that investors receive financial and other significant information concerning securities being offered for public sale; and To…

Regulation A

Under the federal securities laws, any offer or sale of a security must either be registered with the SEC or meet an exemption.  …

Regulation Crowdfunding

Crowdfunding refers to a financing method in which money is raised through soliciting relatively small individual investments or contributions from a large number of people.    If a company would…

Regulation D Offerings

Under the federal securities laws, any offer or sale of a security must either be registered with the SEC or meet an exemption. …

Relationship Summary

Form CRS is a client or customer relationship summary. Advisers and brokers are required to deliver a relationship summary to you beginning in summer 2020. The relationship summary contains important…

Restricted Securities

Restricted securities are securities acquired in an unregistered, private sale from the issuing company or from an affiliate of the issuer. They typically bear a “restrictive” legend clearly stating…

Revenue

The total amount of money, or gross income, generated by a company from selling its goods and services. A simple way to think about revenue is it’s the price of a widget multiplied by the number of…

Revenue Bond

A municipal bond not backed by the government's taxing power but by revenues from a specific project or source, such as highway tolls or lease fees.

Reverse Stock Splits

When a company completes a reverse stock split, each outstanding share of the company is converted into a fraction of a share.  For example, if a company declares a one for ten reverse stock split,…

Risk

In finance, risk refers to the degree of uncertainty about the rate of return on an asset and the potential harm that could arise when financial returns are not what the investor expected. In…

Risk Tolerance

An investor's ability and willingness to lose some or all of an investment in exchange for greater potential returns.

Robo-Adviser

The term “robo-adviser” generally refers to an automated digital investment advisory program.  In most cases, the robo-adviser collects information regarding your financial goals, investment horizon…

Roth 401(k) Plan

An employer-sponsored Roth 401(k) plan is similar to a traditional plan with one major exception. Contributions by employees are not tax deferred but are made with after-tax dollars. Income earned…

Rulemaking, How It Works

Rulemaking is the process that federal agencies use to make rules. Some rulemaking implements laws passed by Congress and signed by the President. Other rulemaking updates rules under existing laws…

Sales Charge (or Load)

The amount that investors pay when they buy (front-end load) or redeem (back-end load) shares in a mutual fund, similar to a commission. The SEC's rules do not limit sales loads a fund may charge,…

Saving and Investing Apps

“Saving and investing app” may refer to a variety of different mobile applications that use technology to help you save and invest. These apps are often marketed as an easy way to get started saving…

Savings

Income that is not spent on consumption but is put aside.

Savings Bond Calculator

If you own or are considering purchasing a U.S. savings bond, the U.S. Department of Treasury's Bureau of the Fiscal Service has designed a useful tool for determining the present and future value--…

Savings Bonds

Savings bonds are debt securities issued by the U.S. Department of the Treasury to help pay for the U.S. government’s borrowing needs. U.S. savings bonds are considered one of the safest investments…

Say-on-pay Vote

Required by law, most public companies must periodically (at least every three years) provide their shareholders with an advisory vote on the compensation of the most highly compensated executives.…

Schedules 13D and 13G

Schedules 13D and 13G are commonly referred to as a “beneficial ownership reports.” The term "beneficial owner" is defined under SEC rules. It includes any person who directly or indirectly shares…

Secondary Market

Markets where existing securities are bought and sold.

Section 1035

This part of the U.S. tax code allows you to exchange an existing variable annuity contract for a new annuity contract without paying tax on the income and investment gains in your current account…

Securities Act Rule 144

Federal securities laws may deem certain securities as restricted or control securities. Selling restricted or control securities in the marketplace can be a complicated process. Under federal…

Securities Analyst Recommendations

Analyst recommendations can have a significant effect on a company’s stock price, especially when the recommendations are widely disseminated through television appearances or other electronic and…

Securities Investor Protection Corporation (SIPC)

If your brokerage firm goes out of business and is a member of the Securities Investor Protection Corporation (SIPC), then your cash and securities held by the brokerage firm may be protected up to $…

Security

An investment instrument such as a stock or bond.

Senior Bond

A bond that has a higher priority than another bond's claim to the same class of assets in case of a default or bankruptcy. Settlement Date -- The agreed date for the delivery of bonds and payment…

Settling Securities Transactions, T+2

Investors must complete or "settle" their security transactions within two business days. This settlement cycle is known as "T+2," shorthand for "trade date plus two days."  T+2 means that when you…

Shareholder Lists, When You Can Get Them

Although investors sometimes ask the SEC for a list of a company's shareholders, the SEC does not maintain shareholder lists. Under SEC rules, a company must provide shareholders with a process for…

Shareholder Service Fees

Fees paid to respond to inquiries from investors and provide them with information about their investments.

Short Sale Volume and Transaction Data

To increase the transparency surrounding short sale transactions, several self-regulatory organizations (SROs) are providing…

Short Sales

A short sale generally involves the sale of a stock you do not own (or that you will borrow for delivery).  Short sellers believe the price of the stock will fall, or are seeking to hedge against…

Short Sales

A short sale occurs when you sell stock you do not own. Investors who sell short believe the price of the stock will fall. If the price drops, you can buy the stock at the lower price and make a…

Social Security Retirement Planner

The Social Security Administration has interactive tools to help you calculate what social security benefits you can expect to…

Sources of Municipal Securities Information

Most municipal securities offerings are exempt from the registration provisions of the federal securities laws.  That means municipal issuers do not have to file a registration statement with the SEC…

Spin-Offs

In a "spin-off," a parent company distributes shares of a subsidiary to the parent company's shareholders so that the subsidiary becomes a separate, independent company. The shares are usually…

Standard & Poor's Depositary Receipts (SPDR) Trust

An ETF designed to replicate the performance of the Standard & Poor's 500 Index. Because of its acronym, the SPDR instrument is referred to as a "spider."

State Regulators

In addition to state securities regulators, there are a number of state agencies that may be…

State Securities Regulators

While the SEC regulates and enforces the federal securities laws, each state has its own securities regulator who enforces what are known as …

Statement of Additional Information (SAI)

Conveys information about an open or closed-end fund that some investors find useful. Funds are not required to provide investors with the SAI, but they must provide it for free upon request. Also…

Stock

An instrument that signifies an ownership position (called equity) in a corporation, and a claim on its proportional share in the corporation's assets and profits. Most stocks also provide voting…

Stock Fund

"Stock fund" and "equity fund" describe a type of investment company (…

Stock Market

A general term for the organized trading of stocks through exchanges, over-the-counter, and computerized trading venues.

Stock Quotes

Listings of prices to buy and sell a specific stock. During trading, quotes show bids, the prices buyers are willing to pay, and offers, the prices sellers are willing to accept. Historical data…

Stock Split

An increase in the number of shares of a corporation's stock without a change in the shareholders' equity. Companies often split shares of their stock to make them more affordable to investors.…

Stop Order

A stop order is an order to buy or sell a stock once the price of the stock reaches a specified price, known as the stop price. When the specified price is reached, your stop order becomes a market…

Surrender Charge

A type of sales charge that applies if you withdraw money from a variable annuity within a certain period of time, usually six to ten years. This is known as the surrender period. The charge…

Target Date Fund

A diversified mutual fund that automatically shifts towards a more conservative mix of investments as it approaches a particular year in the future, known as its "target date." A target date fund…

Tax Questions

Investors sometimes contact the SEC asking about the tax consequences when they sell securities.  In particular, investors want to know whether they will have to pay a capital gains tax or can take a…

Tender Offer

A tender offer is typically an active and widespread solicitation by a company or third party (often called the “bidder” or “offeror”) to purchase a substantial percentage of the company’s securities…

Threshold Securities

Threshold securities are equity securities that have an aggregate fail to deliver position for: Five consecutive settlement days at a…

Ticker

Each publicly traded common stock in the U.S. receives a short abbreviation that identifies it, known as its stock symbol or stock ticker symbol. Some stocks have single-letter ticker symbols while…

Time Horizon

Your time horizon is the number of months, years, or decades you need to invest to achieve your financial goal.

Total Annual Fund Operating Expense

The total of a fund's annual fund operating expenses, expressed as a percentage of the fund's average net assets. You'll find the total in the fund's fee table in the prospectus.

Transfer Agents

Transfer agents work for the security issuer to record changes of ownership, maintain the issuer's security holder records, cancel and issue certificates, and distribute dividends.  Transfer agents…

Transferring Assets

There are at least two ways to transfer assets from one person to another, including Transfer on Death (TOD) Registration, which allows you to pass the securities you own directly to another person…

Transferring Your Brokerage Account

All brokerage account transfers start and end with your new firm.  Customers initiate the transfer process by completing a Transfer Instruction Form (TIF) and sending it to the new firm.  Most…

Treasury Securities

Treasury securities—including Treasury bills, notes, and bonds—are debt obligations issued by the U.S. Department of the Treasury. Treasury securities are considered one of the safest investments…

Trustee

An institution, usually a bank, designated by the issuer as the custodian of funds and official representative of bondholders.

Ultra-Short Bond Funds

Ultra-short bond funds are mutual funds that generally invest in fixed income securities with extremely short maturities,…

Unit Investment Trusts (UITs)

A unit investment trust UIT is one of three basic types of investment companies. The other two types are open-end…

Variable Annuities

A variable annuity is a contract between you and an insurance company, under which you make a lump-sum payment or series of payments.  In return, the insurer agrees to make periodic payments to you…

Variable Annuities - Free Look Period

You may cancel your contract within a short period (usually lasting at least 10 days) of receiving it without a surrender charge. Upon cancellation, you will typically receive a refund of your…

Variable Annuity Surrender Charges

A "surrender charge" is a type of sales charge you must pay if you sell or withdraw money from a variable annuity during the "surrender period" – a set period of time that typically lasts six to…

Variable Life Insurance

A variable life insurance policy is a contract between you and an insurance company. It is intended to meet certain insurance needs, investment goals, and tax planning objectives. It is a policy that…

Variable-rate CDs

These have changeable interest rates. Some variable-rate CDs feature a "multi-step" or "bonus rate" structure in which interest rates increase or decrease over time according to a pre-set schedule…

Viatical Settlements

A viatical settlement allows you to invest in another person's life insurance policy.  With a viatical settlement, you purchase the policy (or part of it) at a price that is less than the death…

Wash Sales

A wash sale occurs when you sell or trade securities at a loss and within 30 days before or after the sale you: Buy substantially identical securities, Acquire substantially identical securities in…

Wrap Account

A wrap account is an investment account where a "wrapped" fee or fees cover all of the…

Yield

The annual percentage rate of return earned on a bond calculated by dividing the coupon interest rate by its purchase price.

Yield Curve

A line graph that shows the relative yields on debt over a range of maturities from three months to 30 years. Investors, analysts and economists use yield curves to evaluate bond markets and…

Zero Coupon Bond

Zero coupon bonds are bonds that do not pay interest during the life of the bonds. Instead, investors buy zero coupon bonds at a deep discount from their face value, which is the amount the investor…