SIE Exam Definitions Study Guide.
12b-1 fee - answeran annual fee charged by a mutual fund for its marketing and distribution
costs. Also called a maintenance fee or distribution fee.
529 College Savings Plan - answerA tax-free savings plan that offers families professionally
managed portfolios...
12b-1 fee - answer✔an annual fee charged by a mutual fund for its marketing and distribution
costs. Also called a maintenance fee or distribution fee.
529 College Savings Plan - answer✔A tax-free savings plan that offers families professionally
managed portfolios to help meet specified college expenses.
A shares - answer✔a class of mutual fund shares that have a front-end sales charge, expressed as
a percentage of its net asset value.
ABLE account - answer✔a tax-advantaged savings account for disabled people and their
families, allowing them to save up to $15,000 per year without losing eligibility for such public
benefits as SNAP and Medicaid.
Accredited Investor - answer✔an investor that may participate in private placement offerings
without restrictions, usually a large institutional investor, wealthy individual, or an officer of the
issuing firm.
Accredited Investor Questionnaire - answer✔a form confirming to a private placement issuer
that the investor is accredited, to be maintained in the issuer's customer file.
Accumulation Phase - answer✔the period when an annuitant invests money in an annuity
account.
Adjustable-rate Preferred Stock - answer✔preferred stock that ties returns and dividends to an
outside interest rate, most often a Treasury bill rate. Also known as floating-rate preferred stock.
Advance Refunding - answer✔a refunding bond in which the old issue remains outstanding for a
period longer than 90 days after the refunding bond has been issued.
Advisor-sold Plan - answer✔a 529 college savings plan offered through an authorized
investment firm that provides investment advice and more investment options, and comes with
higher fees than a direct-sold plan offered by the state.
Affiliate - answer✔a person that directly or indirectly controls, is controlled by, or is under
common control with another person.
Agency Securities - answer✔securities issued by government-sponsored agencies, such as
Fannie Mae and Freddie Mac, but not backed by the full faith and credit of the U.S. government.
Agency Transaction - answer✔a transaction where a firm acts as broker, serving as an agent or
go-between for the buyer and the seller.
All-or-none (AON) Commitment - answer✔a form of underwriting where the underwriter must
sell all the shares in the offering within a specified time or the offering is voided.
Alternative Minimum Tax (AMT) bond - answer✔a private activity bond that qualifies for tax-
exempt status but is subject to paying the alternative minimum tax. Also known as a qualified
private activity bond. Compare with public purpose bond and private activity bond (PAB).
American Depository Receipt (ADR) - answer✔a certificate issued by the U.S. bank for the
purpose of trading a specified number of shares of a foreign corporation in the U.S. stock market.
American-style Option - answer✔an option that can be exercised at any time prior to and
including the exercise date. Also called an American option.
An interest - answer✔a descriptor used to indicate that a bond's purchase price will include its
quoted (clean) price plus any accrued interest since the last payment date.
Annuitant - answer✔an individual entitled to receive benefits or payments from an annuity
contract.
Annuities - answer✔contracts sold by an insurance company used to provide steady income to
individuals after retirement, often until death.
Annuitization Phase - answer✔the period when an annuitant starts to receive payments from an
annuity.
Anticipation Notes - answer✔municipal notes that are issued in advance of, or in anticipation of,
an expected source of income.
Arbitrage - answer✔a riskless transaction in which an investor profits from buying and selling
the same product for different prices at the same time in different locations.
Ask Price - answer✔also known as just the "ask," the price at which a market maker is willing to
sell a security.
Asset-backed Security - answer✔a debt security backed by a pool of financial assets, such as
automobile loans, credit card debt, or home equity loans.
Assignment - answer✔a transfer of ownership in a security or other property that gives a
recipient the rights held by the previous owner.
Associated Person - answer✔an individual engaged in the investment banking or securities
business who is registered with FINRA.
At The Money - answer✔a phrase indicating an options position whose exercise today would
result in neither a gain nor a loss.
Auction Market - answer✔a securities exchange for trading securities at a physical location
where buyers make bids and sellers make offers facilitated by a single market maker.
Auction Rate Securities (ARS) - answer✔long-term investments whose interest rates or dividend
payments reset at frequent intervals by auctions, typically every 7, 14, 28, or 35 years.
Authorized Shares - answer✔the shares that a corporation is authorized to issue.
Automatic Stabilizers - answer✔government programs whose expenditures automatically
fluctuate counter to the economic cycle.
B Shares - answer✔a class of mutual fund shares that have a deferred or back-end sales charge
that declines over time and a higher annual expense than A shares.
Back-end Load - answer✔a sales charge that customers are charged after they redeem the shares.
Also called back-end sales charges.
Backing Away - answer✔the failure of a broker-dealer to honor a firm quote.
Balance of Payments - answer✔an accounting of a country's international transactions, such as
exports and imports and capital inflows and outflows.
Balloon Maturity - answer✔a serial bond in which one maturity, usually the last one, contains a
disproportionately large amount of the principal.
Bank Secrecy Act of 1970 (BSA) - answer✔an act of congress that requires financial institutions
in the United States to assist U.S. government agencies in detecting and preventing money
laundering.
Bankers' Acceptance (BA) - answer✔a short-term credit instrument issued by a business for the
purchase or sale of goods, drawn on and guaranteed by a bank.
Basis Point - answer✔one hundredth of a percentage point, the smallest increment of change in a
bond's yield.
Bearer Bond - answer✔a bond certificate with attached coupons that is owned by whoever holds
it, rather than by a registered owner.
Bearish - answer✔a belief that the value of a particular security or the market in general will
decline.
Bearish Strategy - answer✔a trading strategy that is employed when an investor believes the
price of a security will decline.
Beneficial Interest - answer✔the contractual right to receive an interest in the benefits of an asset
that is owned by another party.
Beneficial Owner - answer✔one who has the benefits of owning a stock but whose title is held
for reasons of safety or convenience "in street name" by that person's broker.
Beneficiary - answer✔a person designated to receive the assets of a life insurance policy or trust
upon the account owner's death or the maturity of the contract.
Best Execution - answer✔a legal requirement that brokers provide the most favorable terms of
execution for their customers given the existing market.
Best-efforts Commitment - answer✔an agreement by which an underwriter agrees to make its
best efforts to sell as much of an issuer's securities offering as it can.
Bid - answer✔an offer to buy a security at a specific price and time.
Bid Price - answer✔the price at which a market maker or other investor is willing to buy a
security.
Bid-ask Spread - answer✔the difference between the price at which investors are willing to buy
an asset and the price at which investors are willing to sell it.
Blend Funds - answer✔mutual funds of equity securities that are a blend of growth stocks and
value stocks.
Bond - answer✔a debt instrument created to raise capital by which the issuer promises to repay
by a specified future date and also to pay periodic interest along the way.
Bond Funds - answer✔mutual funds composed of bonds and other debt instruments. Also known
as fixed-income funds.
Bond Indenture - answer✔a legal document filed with the SEC that specifies the terms and
conditions of a corporate bond issue.
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