SIE Exam Prep Terms

Security

Financial instrument representing ownership or debt

Equity Security

Security representing ownership in a company

Debt Security

Security representing a loan to an issuer

Common Stock

Equity ownership in a corporation

Preferred Stock

Equity security with priority over common stock

Mutual Fund

Professionally managed pool of investor money

Limited Partnership

Business structure with general and limited partners

Municipal Security

Debt security issued by state or local governments

Treasury Security

Debt security issued by the U.S. Treasury

Commodity

Physical asset such as oil, gold, or wheat

Future Contract

Derivative contract on an underlying asset

Personal Residence

Not considered a security

Share

Unit of ownership in a corporation

Stockholder

Owner of a corporation

Board of Directors

Group elected by shareholders to oversee management

Capital Appreciation

Increase in stock value over time

Current Market Value (CMV)

Current price at which a security trades in the marketplace

Authorized Shares

Maximum number of shares a corporation may issue

Issued Shares

Shares sold to investors

Outstanding Shares

Issued shares currently held by investors

Treasury Stock

Shares repurchased by the corporation

Treasury Stock Dividend Rights

Treasury stock receives no dividends

Treasury Stock Voting Rights

Treasury stock has no voting rights

Market Capitalization

Share price multiplied by outstanding shares

Large-Cap Stock

Company with market capitalization above $10 billion

Mid-Cap Stock

Company with market capitalization between $2 billion and $10 billion

Small-Cap Stock

Company with market capitalization between $250 million and $2 billion

Penny Stock

Stock trading below $5 and not listed on NYSE or Nasdaq

Speculative Investment

Investment with high risk and uncertain return potential

Suitability Statement

Document acknowledging risks of purchasing penny stocks

Broker-Dealer

Firm that buys and sells securities for clients or its own account

Established Customer

Customer with account open at least 1 year or who completed 3 penny stock transactions

Risk Disclosure Document

Required disclosure before solicited penny stock transactions

Penny Stock Account Statement

Must be sent monthly

Regular Customer Statement

Must be sent quarterly

Dividend

Distribution of company profits to shareholders

Cash Dividend

Dividend paid in cash

Stock Dividend

Dividend paid in additional shares

Product Dividend

Dividend paid in company products or services

Declaration Date

Date board declares dividend

Record Date

Date shareholders must be on company records to receive a dividend

Ex-Dividend Date

First day stock trades without the dividend attached

Payable Date

Date dividend is distributed

DERP

the order of the dividend timeline

Preemptive Right

Right to maintain ownership percentage when new shares are issued

Rights Offering

Existing shareholders may buy additional shares

Rights

Short-term securities allowing purchase below market value

Rights Exercise Price

Below current market value

Warrants

Long-term securities allowing purchase of stock

Warrant Exercise Price

Above current market value

Unit

Package containing two or more securities

Sweetener

Additional security used to enhance an offering

Proxy

Authorization allowing another person to vote shares

Statutory Voting

One vote per share for each board seat

Cumulative Voting

Shareholder may allocate votes however desired

Super Voting Shares

Shares carrying multiple votes per share

Freely Transferable Interest

Ability to easily buy or sell shares

Liquidity

Ease of converting shares into cash

10-Q

Quarterly report filed by public companies

10-K

Annual report filed by public companies

Capital Gains (growth)

Increase in stock value over time

Income

Dividend payments received by shareholders

Total Return

Capital appreciation plus dividend income

Return

Gain or loss generated by an investment

Capital Gain

Profit from selling a security above purchase price

Capital Loss

Loss from selling a security below purchase price

Realized Gain

Gain locked in by selling a security

Unrealized Gain

Gain that exists only on paper

Limited Liability

Shareholders cannot lose more than invested amount

Residual Claim

Claim on assets after all creditors are paid

Theoretical Liquidation Value (Book Value)

Assets minus liabilities

Market Value

Current market price determined by supply and demand

Par Value

Arbitrary value assigned in the corporate charter

Value Risk

Risk stock price declines

Dividend Risk

Risk dividends are reduced or eliminated

Business Risk

Risk company operations fail

Low Priority at Dissolution

Common shareholders are paid last in bankruptcy

Fixed Dividend

Dividend stated as percentage of par value

Par Value Preferred

Usually $100 per share

Preferred Dividend

Fixed income payment to preferred shareholders

Dividend Preference

Preferred shareholders paid before common shareholders

Liquidation Preference

Preferred shareholders paid before common shareholders

Straight Preferred

Standard preferred stock

Noncumulative Preferred

Missed dividends do not accumulate

Cumulative Preferred

Missed dividends accumulate in arrears

Arrears

Unpaid cumulative preferred dividends

Convertible Preferred

Can be converted into common stock

Conversion Ratio

Number of common shares received upon conversion

Callable Preferred

Can be redeemed by issuer before maturity

Call Price

Price issuer pays when redeeming preferred shares

Call Protection

Period issuer cannot redeem shares

Adjustable Rate Preferred

Dividend adjusts with benchmark interest rates

Participating Preferred

Receives additional dividends beyond stated rate

Interest Rate Risk

Rising rates may reduce preferred stock value

Dividend Risk Preferred

Dividends may be reduced or suspended

Priority at Dissolution

Preferred shareholders paid after creditors but before common shareholders

Current Yield

Annual dividend divided by market price

Trade Date

Date transaction occurs

Settlement Date

Date ownership transfers

T+1 Settlement

Ownership transfers one business day after trade date