Series 66: E

a definition under the tax code, this is wages and salaries earned in an occupation, net of the expenses necessary to earn that income. (compare Portfolio income, Passive income (losses))

another name for retained earnings, these are earnings of the company that have not been paid to shareholders as a dividend. They have been retained for use in the business.

that portion of a company's profit that is allocated to each outstanding common share after bond interest, taxes, and preferred dividends have been paid. A company's Board of Directors decides what portion of the EPS is distributed as a dividend to common shareholders.

a syndicate agreement in which each member has technically unlimited selling responsibility and unlimited liability. Typical for municipal underwritings, each member takes a percentage of the offering. This percentage does not limit sales by the member. However, if securities remain unsold out of the total syndicate account, each member is liable for that percentage of all unsold securities. Thus, each member's liability is affected by the performance of all other syndicate members. (compare Western syndicate)

abbreviation for an Electronic Communications Network, these are electronic order books of customer buy and sell orders that are matched for execution by such firms as INSTINET, Island (now a wholly owned subsidiary of Instinet), and Archipelago in the Fourth Market (see INSTINET)

enamed the Coverdell Education Savings Account, a type of tax deferred account that allows a maximum aggregate $2,000 non-deductible contribution to be made for the purpose of paying for a child's education expenses. These have been renamed as "Coverdell Education Savings Accounts." (compare IRA, Roth IRA)

the first date that a new issue can be sold to the public under the provisions of the Securities Act of 1933. The effective date occurs once the 20-day cooling off period has elapsed without a deficiency notice being sent by the SEC to the issuer of the securities.

the theory that all information about an issuer is available to all participants in the market at the same time and that the prices of securities directly reflect investor expectations based on this information. Therefore, attempting to profit from buying undervalued stocks or selling short overvalued stocks is futile. Most accepted is the "semi-strong" version of this theory, which states that market valuations reflect all "publicly known" information about an issuer; but do not reflect information known only by "insiders" - the officers and directors of that company.

an insurance product that promises to pay a fixed amount at a specified date, if the policyholder has not died prior to that date.

a long-term debt security issued by corporations that are common carriers such as airlines and railroads. The proceeds from the issue are used to purchase equipment such as aircraft or railroad cars, to which a trustee holds the title for the certificate holders until the bond is retired. If there is a default or bankruptcy, the certificate holders have first claim on the equipment pledged as collateral for the loan.

an annuity contract that gives the purchaser a return based on changes in an equity index, such as the S and P 500 Index. The annuity holder typically is not credited with the entire gain in the index. In return for accepting this cap, the annuity holder is guaranteed a minimum return.

the excess return earned above the risk-free rate of return for investing in equity securities

Securities that represent an ownership interest in a corporation – either preferred stock or common stock. In a corporate liquidation, equity securities are repaid after everyone else.

commonly called a stock or a share, a security representing a proportionate ownership of a business and the right to receive dividends. Common and preferred stock are equity securities.

acronym for Employee Retirement Income Security Act, the 1974 act which regulates for-profit employer-sponsored pension plans. A plan that meets ERISA's guidelines for vesting, non-discrimination, and fiduciary responsibility is considered a tax-qualified plan. (see Tax qualified plan, Vesting)

the day on which the price of the stock is reduced by the dividend amount and anyone purchasing the stock will no longer be eligible to receive the dividend. The NYSE and NASDAQ set the ex dividend date for cash dividends at 2 business days prior to the Record date (since regular way settlement takes 3 business days, anyone who buys 3 business days or more prior to the Record date will settle on, or before, the Record date and will receive the dividend). The ex date for non-cash distributions such as stock splits, stock dividends, and rights is set at the business day following the Payable date. (see Payable date)

the risk of a foreign currency value declining when one is long the currency; or of a foreign currency value increasing when one is short the currency; due to any of a variety of factors such as government policy changes, inflation level changes, economic performance, etc.

index funds such as Spiders (Standard and Poor's 500 Index Fund shares); DIAmonds (Dow Jones Industrial Average Index Fund Shares); and Qubes (NASDAQ 100 Index Fund Shares). Exchange traded index funds, as compared to index mutual funds, are traded throughout the day and can be purchased on margin.

securities, including governmental issues such as U.S. Government securities, Agency securities, municipal bonds; money market instruments such as commercial paper and banker's acceptances; and issuers that are regulated under other laws such as banks, insurance companies and common carriers; that are exempt from the provisions of the Securities Act of 1933 and the Securities and Exchange Act of 1934 (except for the anti-fraud provisions).

defined under the Securities Act of 1933, these are unregistered securities offerings that are exempt from registration. Exempt transactions include private placements under Regulation D; intrastate offerings under Rule 147; small dollar offerings under Regulation A; and Rule 144 transactions.

1.converting a convertible security into common stock

2.buying the common stock of an issuer by converting a right or warrant

3.buying the common shares (or other underlying instrument) at a fixed price stated in a call option contract

4.selling the common shares (or other underlying instrument) at a fixed price stated in a put option contract

the rate of return that an investment is "expected" to return. It is computed by assigning probabilities to various scenarios for that investment's potential returns.

a guarantee that the expenses charged to the purchaser of an annuity contract will not rise above a certain level. If they do, then the insurance company agrees to absorb the excess. (compare Mortality guarantee)