Securities Glossary

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Accountant

An accountant is an individual who prepares financial statements and gives tax advice. Any accountant that wants to file audited financial statements with the must be registered with the Public Company Accounting Oversight Board also referred to as the "PCAOB".

Accredited Investor

A term set out by securities laws to identify a person, group or institution deemed financially capable to partake in certain types of high risk investments. Some requirements include having a personal net worth exceeding $1 million, income exceeding $200,000 in each of the two most recent years, etc. Please see the federal securities laws defined in Rule 501 or Regulation D for more information.

Acquisition

The word acquisition is used when one company purchases a majority interest in another company or acquires an asset.

American Depositary Receipt (ADR)

An American Depositary Receipt (or ADR) represents ownership in the shares of a non-U.S. company and trades in U.S. financial markets. The stock of many non-US companies trade on US stock exchanges through the use of ADRs. ADRs enable U.S. companies to buy shares in foreign companies without undertaking cross-border transactions. ADRs carry prices in US dollars, pay dividends in US dollars, and can be traded like the shares of US-based companies.

AMEX

An acronym for the American Stock Exchange, which is based in New York.

AMEX Public Shell Company

An AMEX Public shell Company is a company that trades on the AMEX Exchange but no longer has a plan of business or any major assets.

Angel Investor

An individual investor who provides financial backing for a business startup venture. The angel investor is usually a wealthy entrepreneur who does this in exchange for convertible debt or ownership equity.

Annual Shareholders Meeting

A meeting required by law for a public company open to all shareholders. Issues are resolved during the annual shareholders meeting that can include the election of Directors, the company's future vision, etc.

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Bailout

A term used when there is excessive selling by shareholders. This is often caused by a loss of confidence in the public company.

Bear Market

A term used to describe a period of overall pessimism in the market when share prices generally fall.

Bermuda Stock Exchange (BSX)

The Bermuda Stock Exchange was founded in the Caribbean country of Bermuda in 1971. Approximately 400 securities are listed on the BSX.

Blank Check Company

A Blank Check Company is a company which does not have a business plan or assets. The term blank check company is usually referring to a company that reports to the SEC by way of filing a 10SB filing with the SEC including filing audited financial statements.

Blue Sky Laws

A blue sky law is a law in the United States that regulates the offering and sale of securities to protect the public from fraud. Though the specific provisions of these laws vary among states, they all require the registration of all securities offerings and sales, as well as of stock brokers and brokerage firms. Each state's blue sky law is administered by its appropriate regulatory agency and most also provide private causes of action for private investors who have been injured by securities fraud.

The first blue sky law was enacted in 1911. Today, the blue sky laws of 40 of the 50 states are patterned after the Uniform Securities Act of 1956.

Board of Directors

A group of individuals who are elected by the stockholders to establish corporate management policies and make decisions related to a company’s business plan and direction.

Bond

A bond is a debt investment, with which an investor loans money to a corporation or government which borrows money for a defined period of time. A bond is a formal contract to repay borrowed money with interest at fixed intervals.

Bourse

A stock exchange, especially on in a continental European city.

Broker-Dealer

A company that buys and sells securities for customers as well as for their own account. In the USA, a Broker-Dealer must be registered with the Financial Industry Regulatory Authority. When executing trades for its own account, the institution is said to be acting as a "dealer." Securities bought from clients or other firms in the capacity of dealer may be sold to clients or other firms acting again in the capacity of dealer, or they may become a part of the firm's holdings.

BSX

An acronym for the Bermuda Stock Exchange, which is based in Hamilton, Bermuda.

Bull Market

A term used to describe a period of overall investor confidence when share prices generally climb.

Bulletin Board

Also known as the OTC Bulletin Board, the Bulletin Board is a service of the National Association of Security Dealers (NASD) that displays real-time quotes, last-sale prices, etc, of equity securities that are not listed on the NASDAQ. This system can be used by subscribing Broker-dealers to look up prices or enter quotes.

Bulletin Board Shell Company

A Bulletin Board Shell Company is a company that trades on the OTC Bulletin Board Exchange but no longer has a plan of business or any major assets.

Business Development Bank of Canada

The Business Development Bank of Canada is a financial institution that is wholly owned by the government of Canada that provides financial and consulting services to small Canadian businesses.

Business Consultant

A business consultant is an individual who assists in organizational change, provides expertise on certain business decisions and practices.

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Capital Market

A market where companies and governments can raise long term funds by trading capital such as stocks and bonds.

CEO

CEO is an abbreviated term for Chief Executive Officer. A CEO is a senior manager that oversees the activities of an entire company.

CFO

CFO is an abbreviated term for Chief Financial Officer. A Chief Financial Officer is a senior manager of a corporation who is responsible for the financial activities of an entire company. A CFO's role often includes the signing of checks, monitoring cash flow and financial planning.

Clean Shell

A reporting company that has no debt, no lawsuits and has current filings.

Corporate Finance

Corporate Finance is used to describe any financial or monetary activity that deals with a company and its money.

CUSIP Number

An identification number issued by the CUSIP (Committee on Uniform Security Identification Procedures) Service Bureau. This number identifies all stocks and registered bonds.

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Depository Trust & Clearing Company (DTCC)

The world's largest post-trade financial services company that provides custody of securities. The DTCC works as a clearing house to provide a safe way for buyers and sellers to make securities exchanges.

Depository Trust Company (DTC)

The Depository Trust Company referred to as the "DTC" was established in 1973, it was created to reduce costs and provide efficiencies by immobilizing securities and making "book-entry" changes to show ownership of the securities. DTC provides securities movements (which typically involve money and securities transfers between custodian banks and broker-dealers), as well as instruments. In 2007, DTC settled transactions worth $513 trillion, and processed 325 million book-entry deliveries. In addition to settlement services, DTC retains custody of 3.5 million securities issues, worth about $40 trillion, including securities issued in the US and more than 110 other countries.

Direct Public Offering (DPO)

When a company offers shares directly to the public to raise capital without going through a brokerage firm.

Director

A Director is an executive of a company who shares the responsibilities of the running of operations of a company along with his or her fellow Directors.

Dividend

Payments made by a corporation to shareholders when there is a profit or surplus.

Dow Jones Industrial Average (DOW)

A financial information firm that is considered a good measure of how shares of the largest companies are performing.

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Earnings Per Share (EPS)

The fraction of the earnings returned per share from the initial investment.

Electronic Data-Gathering, Analysis, and Retrieval (EDGAR)

EDGAR is an online public database from the U.S. Securities and Exchange Commission that is used by all publicly traded companies who are required by law to file forms with the SEC.

Equity

Stock or other security held by individuals or corporations that represent ownership interest in a public company. Equity can also be the excess of balance-sheet assets over liabilities.

Exchange Act

Also known as the Securities Exchange Act of 1934, this is a law that requires publicly held companies to continually disclose company information about their business operations, state of management, and financial details.

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Form 8K

A form that must be filed with the U.S. Securities and Exchange Commission (SEC) in the event of a major event in a publicly held company such as bankruptcy, change in CEO, etc. This is one of the most common forms filed with the SEC and is intended to keep other annual and quarterly forms up-to-date.

Form 10K

A form that must be filed annually with the U.S. Securities and Exchange Commission (SEC). This form can be filed electronically through EDGAR.

Form 10Q

A form that must be filed quarterly with the U.S. Securities and Exchange Commission (SEC). This form can be filed electronically through EDGAR.

Form 144

Form 144 is a form that must be filed with the SEC when an executive officer, director or affiliate of a company places an order to sell any stock of the company. Form 144 is also known as "Rule 144".

Forward Triangular Merger

A merger that happens when the subsidiary of the acquiring corporation merges with the target firm. The subsidiary's equity merges with the target firm's stock.

FTSE Group

A private company owned by the Financial Times and London Stock Exchange that provides stock market indices and associated data services.

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GAAP (General Accepted Accounting Principles)

Financial accounting is information that must be assembled and reported objectively. Third-parties who must rely on such information have a right to be assured that the data are free from bias and inconsistency, whether deliberate or not. For this reason, financial accounting relies on certain standards or guides that are called "Generally Accepted Accounting Principles" (GAAP).

Principles derive from tradition, such as the concept of matching. In any report of financial statements (audit, compilation, review, etc.), the preparer/auditor must indicate to the reader whether or not the information contained within the statements complies with GAAP.

Going Public

Also referred to as Initial Public Offering (IPO), Going Public is when a formerly private company starts selling shares to new investors for the first time.

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Holding Company

A company that owns enough voting stock in another corporation to control its board of directors. Holding Companies usually do not produce goods or services themselves, they just own majority shares of other companies.

Horizontal Merger

When a company merges with another company that produces similar goods or offers similar services in an attempt to expand in the same industry.

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Initial Public Offering (IPO)

The first sale of stock by a company in an attempt to gain capital to expand the business. IPOs are often made by smaller, younger companies although they can also be from larger privately owned companies looking at becoming publicly traded.

Investment Bank

An investment bank is a financial intermediary that performs a variety of services including the raising of capital, acting as an intermediary between an issuer of securities and the investing public as well as facilitating mergers and acquisitions.

Investor Relations

Most medium to large public companies have an investor relations department which serves as a way for the investing public to communicate with the company.

IPO (Initial Public Offering)

An IPO is when the first sale of stock of a private company is offered to the public. IPO's are often made by smaller start-up companies seeking to raise capital to expand their business.

Issuer

A legal entity, such as a government, corporation or investment trust, that registers and distributes securities.

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Joint Venture

An entity formed between two or more parties with each party agreeing to contribute equity and share loss of the enterprise. A Joint Venture is often referred to as a "JV".

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Leverage Buyout (LBO)

A strategy where a financial sponsor acquires controlling interest in a company's equity by using borrowed money. The assets of the acquiring company as well as the acquired company can be used as collateral for the loan.

Listing

When a company's shares are on the list of stocks officially traded on a stock exchange.

Listing Requirements

The requirements to trade stocks on major stock exchanges such as the NYSE, LSE, etc.

London Stock Exchange (LSE)

A stock exchange located in London, England. The LSE was founded in 1801 and is one of the largest stock exchanges in the world.

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Market Conditions

The state of the stock market or market segment. When market conditions are good it is referred to as a bull market. When market conditions are bad it is referred to as a bear market.

Market Maker

A broker-dealer firm that quotes both a buy and a sell price in a financial instrument or commodity. This is done in hopes to make a profit on the turn or the bid/offer spread.

Mergers and Acquisitions (M&A)

A corporate strategy of buying, selling and merging companies together to help a growing company expand without creating another business entity.

Mezzanine Funding

A hybrid of debt and equity funding. It is typically used to finance the expansion of existing companies.

Micro Cap Company

The term "Micro Cap Company" is used to describe companies which have a market capitalization of $250 million or less. The vast majority of US stocks fall into this category. Most "Micro Cap" companies trade on the OTCBB Exchange or the Pink Sheet Exchange.

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NASD

The National Association of Securities Dealers is a securities organization that regulates and operates the NASDAQ stock market.

NASDAQ

The National Association of Securities Dealers Automated Quotations is an American stock exchange based in New York City. It was created in 1971 and was the world's first electronic stock market. The NASDAQ provides quotations and facilitates trading for over-the-counter stocks.

National Market System

A national system in the United States for trading equities.

Net Asset Value (NAV)

A term to describe the value of assets minus the value of liabilities. The NAV is often calculated on a daily basis in the context of mutual funds.

Net Income

The value of income a firm has after subtracting expenses from total revenue.

New York Stock Exchange (NYSE)

The NYSE is a stock exchange based in New York. By dollar volume, it is the biggest stock exchange in the world.

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OTC / Over-the-Counter

Trading done over-the-counter or OTC, is the trading of financial instruments such as bonds, commodities, stocks or derivatives between two parities. The opposite form of OTC is exchange trading that happens with corporate-owned entities constructed for the purpose of trading (i.e. stock exchanges).

OTC Bulletin Board

Also known as the OTCBB, the OTC Bulletin Board is an electronic quotation system offered by the National Association of Security Dealers (NASD) that shows real-time quotes, last-sale prices, and volume information for OTC equity securities that are not listed on the NASDAQ or a national securities exchange. OTC securities include American Depositary Receipts (ADRs), newer small cap companies, Direct Participation Prograsm (DPPs), and regional, national and foreign equity issues.

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Pacific Exchange

Also known as the PCX, the Pacific Exchange was a regional stock exchange in California. It is now owned by the NYSE and its equities and options trading now takes place exclusively through the NYSE Arca platform, an ECN, as NYSE Arca Equities and NYSE Arca Options, respectively.

Philadelphia Stock Exchange

Also known as the PHLX, the Philadelphia Stock Exchange was the oldest stock exchange in the U.S. In 2008, NASDAQ completed their purchase of the PHLX, creating the third-largest options market in the country.

Pink OTC Markets

Pink OTC Markets is a privately owned company that provides products and services for the U.S. over-the-counter (OTC) securities market. It was established in 1913 as The National Quotation Bureau (NQB), and was also known as Pink Sheets LLC from 2000 to 2008.

Pink Sheets

Also known as Pink Quote, Pink Sheets is an electronic quotation system operated by Pink OTC Markets. It displays quotes from broker-dealers for many over-the-counter securities. The Pink Sheet Exchange is an un-regulated exchange.

Preferred Stock

Preferred stock is a class of stock of a corporation with a stated dividend that must be paid before dividends are paid to common stockholders. Preferred stock does not usually have voting rights.

Public Company

A publicly traded company that is permitted to offer registered securities, such as stocks and bonds, for sale to the public through a stock exchange. A public company can also include companies whose stock is traded over-the-counter or OTC.

Public Shell

A public company that has no business operation or significant assets. It is referred to as a "shell" since nothing but the structure and shareholders are what remain of the original company.

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Real Estate Investment Trust (REIT)

Also known as an REIT, is a tax designation for a corporation investing in real estate. Public REITs may be listed on public stock exchanges and invests in real estate directly, either through properties or mortgages.

Registered Investment Advisor

A registered Investment Advisor is an individual who is registered with the SEC to offer investment advice and manage the investments of others.

Regulation A

A regulation from the SEC that controls offerings of $5million or less that qualify for simplified registration.

Regulation D

A regulation from the SEC that controls private placement exemptions.

Regulation G

A regulation from the Federal Reserve Board that controls the extension of credit for securities transactions.

Regulation M

A regulation from the IRS that allows regulated investment companies to pass taxes onto individual investors from capital gains, dividends, etc.

Regulation Q

A regulation from the Federal Reserve Board that limits the interest rate banks can pay on savings deposits.

Regulation T

A regulation from the Federal Reserve Board that controls customer cash accounts and the amount of credit that can be extended from brokerage firms & dealers to customers for purchasing securities.

Regulation U

A regulation from the Federal Reserve Board that controls loans from banks for the purchase of securities.

Reverse Merger

A Reverse Merger is the acquisition of a public company by a private company to bypass the process of going public. The transaction typically requires reorganization of capitalization of the acquiring company.

Reverse Takeover

Also known as RTO, a Reverse Takeover is another way to describe a Reverse Merger as it describes the purchasing of a public company by a private company. It can also describe the buying out of a larger company by a smaller company.

Reverse Triangular Merger

When the subsidiary of the acquiring corporation merges with the target firm. In this case, the subsidiary's equity merges with the target firm's stock. As a result of the merger, the target would become a wholly-owned subsidiary of the acquirer and shareholders of the target would get shares of the acquirer.

Road Show

A presentation made by an issuer of securities to acquaint potential investors with the company planning to go public. These presentations are usually face-to-face meetings intended to create interest in the securities.

Rule 144

Rule 144 is a Securities and Exchange Commission (SEC) regulation that places restriction on the minimum length of time for which unregistered securities must be held. It also regulates the maximum volume of unregistered securities permitted to be sold. If certain requirements are met, Form 144 must be filed with the SEC.

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Securities

A negotiable instrument representing financial value such as ownership (stocks), a debt agreement (bonds), or the rights to ownership (derivatives).

Securities ACT

The Securities Act generally requires companies to give full disclosure of all material facts. The Securities Act was enacted in 1933 following the stock market crash of 1929.It is often referred to as the 1933 Act, the '33 Act, or the Securities Act. Legislated pursuant to the interstate commerce clause of the Constitution, it requires that any offer or sale of securities using the means and instrumentalities of interstate commerce be registered pursuant to the 1933 Act, unless an exemption from registration exists under the law. It was the first major federal legislation to regulate the offer and sale of securities. Prior to that time, regulation of securities was chiefly governed by state laws (commonly referred to as "blue sky laws").

Securities Attorney

A Securities Attorney is an attorney that specializes in the laws that pertain to the securities industry.

Securities Offering

A securities offering is a round of investment. It is also known as funding round or investment round.

SEDAR

SEDAR is an electronic filing system for the disclosure of documents of public companies and mutual funds in Canada.

Shares

Shares are certificates representing ownership in a company.

Shelf Registration

An arrangement with the SEC allowing a single registration document to be filed that permits the issuance of multiple securities.

Shell Company

A company that exists in name only and has ceased to trade. Shell corporations can be used as a tool for reverse mergers when they are publicly traded companies and for other business purposes.

Specialist

A person employed by a brokerage firm with a seat on the stock exchange who has the responsibility to stabilize shares trading on traditional stock exchanges.

Spinoff / Spin-off

A public company that creates a new, independent company from pieces of its own business. This is done by selling or distributing shares. This is also sometimes referred to as a Spin Out.

Stock Brokerage

A firm where stock brokers work to buy and sell shares and securities through market makers on behalf of investors.

Stock Market

A private or public market for trading company stock and derivatives. It is a general term for organized trading of stocks through over-the-counter (OTC) or exchanges.

Stock Split

Also referred to as a stock divide, a stock split increases the number of shares in a public company. In a 2-for-1 split, every stockholder receives and addition share for each share held.

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Takeover

The process of one company purchasing another company. If the target company is publicly traded, the acquiring company makes an offer for the outstanding shares.

Ticker Symbol

Usually a one to four letter abbreviation for a company name that identifies the company on the stock market for trading purposes.

Toronto Stock Exchange (TSX)

The TSX is the largest stock exchange in Canada and traditionally trades a high quantity of natural resource companies.

Trade

The action of buying or selling securities.

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U.S. Securities and Exchange Commission (SEC)

The SEC is an independent agency that holding primary responsibility for enforcing the federal securities laws and regulating the securities industry, the nation's stock and options exchanges, and other electronic securities markets.

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Venture Capital

Also known as VC or Venture, this is a type of private equity used to finance a new business. This is an import source of funding for startups without access to capital markets and usually comes at a high risk for the investor.

Vertical Merger

A merger between companies producing different goods or services that combine to produce the same finished product.

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White Knight

A company that makes a friendly takeover offer to a company that is being faced with a hostile takeover bid from a separate party.

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