This is a glossary of terms that are, for the most part, unique to the world of financial investigations, or terms that have a different meaning than that which is commonly understood when they are used in this context.

10K or Form 10K also known as an Annual Report: Public companies are required to file an annual report with the Securities and Exchange Commission detailing the preceding year's financial results and plans for the upcoming year. Its regulatory version is called "Form 10 K." The report contains financial information concerning a company's assets, liabilities, earnings, profits, and other year-end statistics. The annual report is also the most widely-read shareholder communication.

10Q or Form 10K, also known as a Quarterly Report: A report, required by the SEC of publicly-held companies, filed quarterly, that provides unaudited financial information and other selected material.

12B-1 Fees: A fee that is levied by a mutual fund--usually on a yearly basis and is usually about 1% or less of a fund's assets. The monies collected are usually used to pay broker-dealers for servicing accounts. A mutual fund that charges a 12B-1 fee must disclose this in writing. Mutual funds that assess 12B-1 fees generally are no-load funds.
AAA: American Arbitration Association
Absorption Point: During market trading, securities are absorbed when there are corresponding orders to buy and sell. When further absorption is impossible without an adjustment in price, the security has reached its absorption point.

Abusive Tax Shelter: A limited partnership is classified as an abusive tax shelter by the Internal Revenue Service when it determines that the limited partnership is claiming illegal tax deductions. This usually occurs when the limited partnership values its property beyond the fair market value. If these tax deductions are denied by the IRS, investors must pay back taxes, severe penalties and interest charges.
Abusive Trust: Trust arrangements widely touted in seminars and on the Internet that purport to reduce or eliminate federal taxes in ways that are not permitted by law.

Acceleration Clause: A clause frequently contained within an indenture agreement and other contracts. It stipulates that if certain default events should occur, the unpaid balance will become due and payable. Examples of the type of events are insolvency and failure to meet principal, interest or sinking fund payments.

Account Executive (AE): An employee of a brokerage firm who must pass specified tests and must be registered with the National Association of Securities Dealers (NASD) before he or she may solicit or accept orders from clients.

Accounts Payable: The amount owed to creditors for goods and services. Analysts look at a company's relationship of accounts payable to purchases for indications of sound financial management.

Accounts Receivable: A component of a corporation's current assets that consists of money owed to the corporation for services or merchandise it sold to customers. It is a key factor in examining a corporation's "liquidity"--its capacity to meet current obligations without receiving additional revenues.

Accounts Receivable Financing: If a corporation is in need of short term financing, it may try to obtain accounts receivable financing. If obtained, the corporation's accounts receivable is used as collateral for working capital advances.

Accredited Investor: To qualify as an accredited investor, an investor must either be: A) a financial institution; B) an affiliate of the issuer; or C) an individual with a net worth of at least $1 million or an annual income of at least $200,000, and the investment must not account for more than 20% of the investor's worth. This can be very significant as SEC Regulation D stipulates that a maximum of 35 non-accredited investors are allowed to invest money into a Private Placement. An issuer of a private placement will try to acquire accredited investors to raise a greater amount of capital than would be possible if only 35 investors of less affluence could contribute.

Accrual Basis: An accounting method in which income and expense items are credited as they are incurred or earned, although they may not have been received or actually paid in cash. Cash Basis accounting is an alternative method.
Accumulated Dividend: A dividend due to stockholders of cumulative preferred stock that has not been paid to them. Until the dividend is paid, it is carried on the corporation's books as a liability.
Accumulation Account: The sponsor of a Unit Investment Trust uses an accumulation account to deposit securities it has acquired. These securities will eventually become part of the trust itself.
Acid Test Ratio: A ratio that tests a corporation's liquidity. It is a stricter test than if the current ratio is used. The ratio is calculated by dividing the sum of cash, cash equivalents, accounts receivable and notes receivable by the total current liabilities.
Acquisition: The act of one corporation acquiring a controlling interest in another corporation. In an "unfriendly" takeover, the buying corporation may offer incentives to stockholders such as offering a price well above the current market value.

Across The Board: Movement, up or down, in the stock market that affects nearly all stocks in the same direction. That is, nearly all stocks are gainers (or losers).

ACT (Automated Confirmation Transaction Service): NASD service that allows parties to a telephone negotiation to speed the steps involved in completing a transaction.
Acting In Concert: More than one investor who work in concert to achieve an investment objective. A group of investors who wish to take over a company may act in concert to buy up the company's stock. This is legal as long as proper notification is made to the SEC. However, if the group is acting in concert to manipulate a stock's price for their own gain, it would be considered an illegal act.

Actuals: A physical commodity that, when traded, results in the delivery of the actual commodity to the buyer when the contract expires. When actuals are traded, most options and futures contracts are closed out before the contracts expire. Thus, these transactions tend not to end in the actual delivery of the commodity. Examples of actuals are commodities such as oil and gold.

Administrator: In regard to investments, an administrator is a court-appointed official empowered to supervise or conduct the court's decisions with respect to a decedent's estate until it is fully disbursed to all claimants. An administrator (or "administratix", if a woman) is appointed when anybody dies either without a will, without naming an executor, or if the named executor will not or cannot serve.
ADR (American Depositary Receipt): A U.S. security that is a repackaged foreign security. A U.S. bank creates an ADR based on evidence of ownership of a specified number of shares in the foreign security, while the underlying shares are held in a depositary in the issuing company's home country. U.S. investors may buy shares in the foreign company in the form of an ADR. The certificate, transfer, and settlement practices for ADRs are identical to those for U.S. securities. (note: it is depositary, not depository)

Advance Fee Scam: Any of innumerable schemes that lead the victim to believe that they will profit dramatically by engaging in some plan that requires that they pay, or invest, a fee “up front.” In many cases, the “plan” has some degree of illegality associated with it – not enough to discourage most people from participating but just enough to make them reluctant to file a complaint with the police.

Adverse Trustee: One who has a substantial, beneficial interest in the trust assets as well as the income or benefits derived from the trust. A trustee that is related to the creator by birth, marriage or in an employer/employee relationship.

Affidavit Of Domicile: A document that states the residence of the decedent at the time of death. The form is executed by the legal representative of an estate and is required when transferring ownership of a security from a deceased person. The security's transfer agent requires the affidavit to be notarized and dated within 90 days.

Affiliated Person: Any persons who are officers, directors, or owns 10 % or greater of the voting shares, and in most cases, the aforementioned immediate family and confidants. These people are in a position to exercise control on the performance and conduct of a corporation. The terms "affiliated person" and "control person" or interchangeable.

Aftertax Real Rate Of Return: The amount of money that an investor can keep from an investment's income and capital gains after it has been adjusted for inflation. Generally, investors look for an aftertax real rate of return that will equal if not surpass the rate of inflation.

Agency Transaction: The brokerage firm's confirmation report to its clients that it executed an order in the capacity of a broker and charged a commission for the services rendered. The firm acted as an "agent" between the customer and the market maker. It is a requirement to show the commission charged separately on the confirmation report. The commission cannot be added into the execution price.

Aggressive Growth Fund: A Mutual Fund that buys shares in small or speculative growth companies to achieve maximum capital appreciation.

American Depositary Receipt (ADR): A U.S. security that is a repackaged foreign security. A U.S. bank creates an ADR based on evidence of ownership of a specified number of shares in the foreign security, while the underlying shares are held in a depositary in the issuing company's home country. U.S. investors may buy shares in the foreign company in the form of an ADR. The certificate, transfer, and settlement practices for ADRs are identical to those for U.S. securities. (note: it is depositary, not depository)
American Stock Exchange (AMEX or ASE): The second largest stock exchange in the US is located in the financial district of New York City at 86 Trinity Place. As a general rule, the securities traded on the AMEX are those of small to mid-size corporations. The AMEX also trades options of many NYSE securities and some OTC securities.

Analyst: Individual in a brokerage firm, bank trust department, or mutual fund group who researches corporations, industry groups and the market to make buy and sell recommendations on specific securities. A majority of analysts specialize in a particular industry. However, some analyze corporations that interest them, regardless of its industry group.

Annual Meeting: A stockholder meeting that is held yearly. Functions of an annual meeting are for corporate executives to report on the year's results, to elect the board of directors, and to transact other business. The chief executive officer customarily makes a statement on the outlook for the next year and conducts a question and answer period. If a shareholder is unable to attend the annual meeting, the owner may vote for directors and pass on resolutions through the use of a proxy. Proxy materials are mailed to all shareholders of record.

Annual Report: A yearly statement publicly traded and privately held corporations are required to file. Publicly traded companies are required to file an annual report with the Securities and Exchange Commission detailing the preceding year's financial results and plans for the upcoming year. Its regulatory version is called "Form 10 K." The report contains financial information concerning a company's assets, liabilities, earnings, profits, and other year-end statistics. The annual report is also the most widely-read shareholder communication.

Annuitant: The beneficiary or beneficiaries (in a last-to-die arrangement) of an annuity who receives a stream of payments pursuant to the terms of the annuity contract.

Annuity: A tax sheltering vehicle. An unsecured contract between the company and the annuitant(s) that is used to provide for one's later years. All income taxes are deferred until maturing of the annuity. Capital gains and income accumulate tax deferred. Results in a stream of payments made to the annuitant during his or her lifetime under the annuity agreement. Taxes are paid on the income, interest earned and the capital gains but only to the extent as and when they are received. Currently, there is no annual limit on purchases, but there is no tax credit for purchases. An annuity is not an insurance policy.

Answer: A respondent's written reply to a claim

Antitrust: Federal Antitrust laws apply to virtually all industries and to every level of business, including manufacturing, transportation, distribution, and marketing. They prohibit a variety of practices that restrain trade. Examples of illegal practices are price-fixing conspiracies, corporate mergers likely to reduce the competitive vigor of particular markets, and predatory acts designed to achieve or maintain monopoly power.

Appreciation: Appreciation is an asset's increase in value.

Approved List: A list of investments that a mutual fund or other financial institution is allowed to invest in. When fiduciary responsibility exists, the use of an approved list may be statutory.
APT (Asset Protection Trust): A special form of irrevocable trust, usually created (settled) offshore for the principal purposes of preserving and protecting part of one's wealth offshore against creditors. Title to the asset is transferred to a person named the trustee. Generally used for asset protection and usually tax neutral. Its ultimate function is to provide for the beneficiaries of the APT.
APTC (Association of Publicly Traded Companies): This organization, which is not connected with NASD, provides publicly-traded companies with a forum for addressing regulatory and legislative issues that affect them.

Arbitrage: This is the practice of simultaneously buying and selling the same (or equivalent securities) to profit from the disparity in their prevailing prices in separate markets. This activity applies to equivalent securities trading in different markets, securities with convertible features, or securities involved in mergers, tender offers, recapitalizations, or corporate divestitures.
Arbitral Immunity: Arbitrators are protected from suits arising out of their quasi-judicial conduct in arbitration proceedings.

Arbitration: A method of settling disputes between brokers and their clients, brokerage firms and clearing corporations, employees and their firms, and two brokerage firms. Arbitration has been adopted by all exchanges and securities associations. A pre-dispute arbitration clause in a customer's brokerage account agreement is customary and assures that disputes will be arbitrated by objective third parties and preclude court cases.

Arbitrator: A private, disinterested person chosen to decide disputes between parties
Arms Length Transaction: When the buyers and sellers of a product act independently of each other and have no relationship to each other. This transaction presumed to be uncompromised by questionable sales tactics or undisclosed relationships.

Arrearage: Past due obligations such as interest on bonds or dividends on cumulative preferred stocks. If a cumulative preferred stock's dividends are in arrears, common dividends cannot be paid.

Articles Of Incorporation: Document filed with a US state by corporation founders. Once the state approves the articles, it will issue a certificate of incorporation. The articles and the certificate form the Corporate Charter and gives the corporation its legal existence. The charter provides such information as the corporation's name, purpose, amount of authorized shares, and the number and identity of directors.

Asset: Anything of value owned or is owed to it by a business, institution, or individual. Assets may include cash, investments, accounts receivable, product inventory and other current assets. Patents and goodwill are called intangible assets.

Asset Management Account (AMA): An account at a brokerage firm or a bank that combines checkwriting, debit cards (or credit cards) and brokerage services such as buying and selling securities. AMAs are convenient because all financial transactions are listed on one monthly statement. AMAs are also called central asset accounts and are known by proprietary names such as PC CASH (First Republic Securities) and Cash Management Account (Merrill Lynch)

Asset Manager: A person appointed by a written contract between the IBC (or the exempt company) or the APT and that person to direct the investment program. It can be a fully discretionary account or limitations can be imposed by the contract under the terms of the APT or by the officers of the IBC. Fees to the asset manager can be based on performance achieved, trading commissions or a percentage of the valuation of the estate under his or her management.

Asset Protection Trust (APT): A special form of irrevocable trust, usually created (settled) offshore for the principal purposes of preserving and protecting part of one's wealth offshore against creditors. Title to the asset is transferred to a person named the trustee. Generally used for asset protection and usually tax neutral. Its ultimate function is to provide for the beneficiaries of the APT.

Associated Person: A person engaged in the investment banking or securities business who is directly or indirectly controlled by an NASD member, whether or not this person is registered or exempt from registration with NASD. Every sole proprietor, partner, officer, director, or branch manager of any NASD member.

Association of Publicly Traded Companies (APTC): This organization, which is not connected with NASD, provides publicly-traded companies with a forum for addressing regulatory and legislative issues that affect them.

Auditor's Report: Often called the accountant's opinion, it is an accounting firm's statement of a corporation's financial documents. The examination assures that the corporation is conforming to the normal and generally accepted practices of accountancy.

Automated Confirmation Transaction Service (ACT): NASD service that allows parties to a telephone negotiation to speed the steps involved in completing a transaction.

Award: The written determination of the arbitrator in an arbitration proceeding.

I welcome your comments, questions and suggestions.