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.

NAIC (National Association Of Investment Clubs): Association that helps groups of individuals to establish investment clubs. Members of investment clubs pool their money and make group decisions on how to invest those assets. The NAIC can be contacted by calling (313) 543-0612 or by writing 1515 E. Eleven Mile Rd. Royal Oak, Michigan 48067.

NAIS (National Association of Investigative Specialists):

Naked Option: Industry lingo for call or put options that are written and not covered or have another position that will limit their liability. In the case of call options, writers are naked if they do not own either the underlying security, a security convertible into the underlying security, or a long call at a strike price equal to or lower than the strike price that was written and that does not expire before the written call. In the case of put options, writers are naked if they do not either have a short position in the underlying security, a bank guarantee letter, or do not own a long put with a strike price equal to or higher than the strike price of the put that was written and that does not expire before the put that was written.

Naked Position: A securities position that is not protected from market risk in any manner. For instance, the position of person who writes a call option without owning a long position in the underlying security, or writing a put option without having a short position in the underlying security.

Narrowing the Spread: Closing the difference between a security's bid (highest price anyone is willing to buy) and asked (lowest price anyone is willing to sell) prices. When a stock's bid price, for example, is $8 a share and the asked price is $8 5/8, the spread is 5/8 of a point. If a broker enters a bid to buy at $8 3/8, the bid and ask are now $8 3/8 to $8 5/8, thus the spread has been narrowed to 1/4 of a point.

Narrow Market: Said of a securities market that is characterized by light trading, and larger price fluctuations relative to volume than would be the case if trading is active. A stock is said to be in a narrow market when its price drops more than a point between round lot trades without any obvious reason; this infers a lack in investor interest and too few orders.

NASAA (North American Securities Administrators Association, Inc.): An association of securities commissioners from each of the 50 states, the District of Columbia, Puerto Rico, and several of the Canadian provinces. This organization is an invaluable resource to investigators.

NASD (National Association Of Securities Dealers): A nonprofit membership organization registered with the Securities and Exchange Commission (SEC) under the provisions of the Securities Exchange Act of 1934. Membership is limited and consists mostly of broker-dealers and investment banking houses. Basic goals of the NASD are to:

• Promote just and equitable principles of trade for the protection of investors;
• Adopt, oversee, and enforce rules of fair practice;
• Consult with government and investors on matters of common concern;
• Conduct periodic examinations and audits to ensure solvency and financial integrity among members.

Under federal law, every securities firm doing business with the US public is a member of NASD. Roughly 5,500 brokerage firms, nearly 90,000 branch offices and more than 650,000 registered securities representatives come under its jurisdiction.

NASDAQ (National Association Of Securities Dealers Automatic Quotations): A computerized information network that provides brokers and dealers with price quotations on securities traded over-the-counter. The system has three levels. Level I displays a security's highest bid and lowest offer in the system. Level II displays market maker's quotes for securities in which they make a market. Level III allows market makers to actually enter their quotes into the system. NASDAQ is owned and operated by the NASD. NASDAQ quotes are published in the financial pages of most newspapers.

NASD Information Request Form (NIRF): Allows members of the public to obtain certain types of disciplinary and registration information regarding member firms and associated persons.

National Association of Investment Clubs (NAIC): Association that helps groups of individuals to establish investment clubs. Members of investment clubs pool their money and make group decisions on how to invest those assets. The NAIC can be contacted by calling (313) 543-0612 or by writing 1515 E. Eleven Mile Rd. Royal Oak, Michigan 48067.
National Association Of Securities Dealers (NASD): A nonprofit membership organization registered with the Securities and Exchange Commission (SEC) under the provisions of the Securities Exchange Act of 1934. Membership is limited and consists mostly of broker-dealers and investment banking houses. Basic goals of the NASD are to:

• Promote just and equitable principles of trade for the protection of investors;
• Adopt, oversee, and enforce rules of fair practice;
• Consult with government and investors on matters of common concern;
• Conduct periodic examinations and audits to ensure solvency and financial integrity among members.

Under federal law, every securities firm doing business with the US public is a member of NASD. Roughly 5,500 brokerage firms, nearly 90,000 branch offices and more than 650,000 registered securities representatives come under its jurisdiction.

National Market System (NMS): An informational system that is part of the NASDAQ system. NMS displays actual transactions, last trade and volume data.

National Quotation Bureau Inc. (NQB): Daily service that provides its subscribers bid and asked quotes from market makers in securities traded over-the-counter. Stock quotes are published in Pink Sheets and corporate bonds in Yellow Sheets.

NAV (Net Asset Value): An open-ended mutual fund's per share market value. In mutual funds, the net asset value is synonymous with "bid price" and "redemption price". In no load funds, the NAV is also the asked price. They are all one figure. In load funds, the asked price is quoted after the sales charge is added to the net asset value. Most funds compute the NAV after the close of the exchanges each day. It is calculated by taking the closing market value of all securities within the fund plus all other assets (i.e., cash), subtracting all liabilities, then dividing the result (total net assets) by the total number of outstanding shares. The total number of outstanding shares usually varies daily because of redemptions and purchases.

ND (Nothing Done): In a day order, upon expiring at the end of the day, the status given to the order if it has not been executed.

Nearest Month: In options trading or commodity futures, the expiration month that is closest to the current month. For an option that has expiration dates available in September, December, March, and June, for example, the nearest month would be December if a trade was made in November. Nearest month contracts are more heavily traded then "furthest month" contracts.

Negative Cash Flow: Within an accounting period, a condition in which a business spends more cash than it receives through earnings.

Negative Yield Curve: On securities that are of similar quality, a condition in which yields on short term securities are higher than the yields on long term securities. Typically, short term interest rates are lower than long term rates--those who invest their money for longer periods are taking more risk.

Negotiable: A security that can be sold--that is, the ownership is transferable by delivery of a security.

Nest Egg: Assets reserved for a person's retirement. A nest egg is accumulated to assure the retiree with a secure standard of living for the rest of their life. IRAs are considered part of a nest egg.
Net: The gain or loss from the sale of a security--that is, the difference between the cost to purchase and the sale proceeds.

Net Assets: The difference between a company's total assets and liabilities.

Net Asset Value (NAV): An open-ended mutual fund's per share market value. In mutual funds, the net asset value is synonymous with "bid price" and "redemption price". In no load funds, the NAV is also the asked price. They are all one figure. In load funds, the asked price is quoted after the sales charge is added to the net asset value. Most funds compute the NAV after the close of the exchanges each day. It is calculated by taking the closing market value of all securities within the fund plus all other assets (i.e., cash), subtracting all liabilities, then dividing the result (total net assets) by the total number of outstanding shares. The total number of outstanding shares usually varies daily because of redemptions and purchases.

Net Capital Rule: The Security and Exchange Commission requires that all broker/dealers maintain no more than a 15 to 1 ratio between indebtedness and liquid assets. Indebtedness includes money owed to the firm, margin loans, and commitments to purchase securities. Liquid assets include cash, and assets that are easily converted to cash.

Net Change: Difference between a security's last trading price from the previous day to the next day. However, in the over-the-counter market, the net change in a security is usually the difference between bid prices from the previous day to the next day. For example, XYZ's last trade yesterday was at $34. Today's last trade was at $34 1/2. The net change is +1/2--that is, XYZ's final price on that day was 50 cents higher than the final price on the previous trading day.

Net Investment Income Per Share: In a particular accounting period, the amount of income received by an investment company from dividends and interest (minus any management fees and administrative expenses) divided by the number of outstanding shares. Short term trading profits are treated as dividend income. Net investment income is paid shareholders as a dividend.

Net Realized Capital Gains Per Share: Net amount (capital gains minus capital losses) that an investment company realized on the sale of securities divided by the number of outstanding shares. An investment company will usually distribute any net gains at least annually. These distributions are treated as long term capital gains to shareholders, regardless of the length of time they have held the investment company shares.

Net Worth: Dollar amount by which assets exceed liabilities. An individual's net worth equals the total value of all possessions (house, stocks, bonds, etc.) minus all outstanding debts (mortgage, credit cards, etc.). For a corporation, net worth is also known as "net assets".

New Issue: A security being offered to the public for the first time. New issues may be initial public offerings by private companies going public or additional securities of corporations already public. The distribution of new issues are governed by Securities and Exchange Commission rules.

New York Futures Exchange (NYFE): A subsidiary of the New York Stock Exchange that concentrates on the trading of financial futures contracts.

New York Stock Exchange (NYSE): The oldest and largest stock exchange in the United States--also known as the "Big Board" and "The Exchange". The exchange is a not-for-profit corporation consisting of 1,366 individual members. It is governed by a Board of Directors that is made up of 10 public representatives, 10 exchange members, and a full-time paid chairman and president. The NYSE does not buy, sell, own or set the prices of securities traded there. The NYSE has operating divisions that are concerned with market operations, member firm regulation and surveillance, finance and office services, product development and planning, and customer relations. The NYSE imposes requirements on corporations who wish to have their securities listed on the exchange.

NH (Not Held): A market order to buy or sell that allows a floor broker discretion as to the time and price in executing the best possible trade. NH means the customer will not hold the floor broker responsible if a better execution might have been possible. This type of order qualification is principally used for large block orders.

Nikkei Stock Average: Index of 225 leading stocks traded on the Tokyo Stock Exchange. The Nikkei is similar to the Dow Jones Industrial Average. Both are composed of representative blue chip corporations (called "first-section" companies in Japan) and are price-weighted indexes--the movement of each stock is weighted equally regardless of its market capitalization. The Nikkei Stock Average is the most widely quoted Japanese stock index.

NIRF (NASD Information Request Form): Allows members of the public to obtain certain types of disciplinary and registration information regarding member firms and associated persons.

NL (No Load): Abbreviation used in newspaper listings of mutual funds to indicate a no-load fund.

NMS (National Market System): An informational system that is part of the NASDAQ system. NMS displays actual transactions, last trade and volume data.

Noise: Market activity caused by program trades and other circumstances that are not reflective of general opinion.

No Load Mutual Fund: A mutual fund that allows shares to be purchased without a sales charge to imposed on its investors.

Nominal Quotation: Bid and asked prices given by a market maker as valuation of a security, but not for trading purposes. Security rules require that nominal quotations be specifically identified as such.

Nominee: Person or firm, such as a brokerage house, whose name is inscribed on a security certificate if it is different from that of the beneficial owner. The purpose is to expedite transfers of title when the security is sold. The beneficial owner is the true shareholder and he retains all rights of ownership.

Non-Callable: A bond that cannot be redeemed before its maturity by the issuer. Call provisions in a bond's indenture agreement specify whether the bond is callable or non-callable. Because so many bonds issues are callable, bond yields are often quoted to the first date at which the bonds could be called instead of maturity.

Non-Cumulative Preferred Stock: Preferred stock on which unpaid dividends do not accrue. Omitted dividends, for the most part, will never be paid. This contrasts with cumulative preferred stock in which omitted dividends accumulate until paid to shareholders.

Non-Public Information: In the securities industry, non-public information most often refers to corporate information that will have a material effect on its stock price when it is released to the public. The information can be either negative or positive. An example of non-public information is an earnings report about to be released that is substantially worse than what most analysts anticipated. It is illegal for insiders to make transactions based on non-public information as they would have an unfair advantage over the rest of the public.

Non-Qualified Plan: A retirement plan or an annuity in which contributions are made with after-tax dollars. The contributions are not tax deductible because the plan or annuity is not an IRS approved pension plan. However, just as with a Qualified Plan, earnings accumulate tax deferred until withdrawn.

Non-Recurring Charge: A one-time write-off or expense--also called "extraordinary charge". These charges are required to be displayed in a corporation's financial statement. An example of a non-recurring charge would be a division that was closed down and written-off.

Non-grantor Trust: Usually an APT created by a NRA person on behalf of the U.S. beneficiaries.

Nonvoting Stock: Corporate securities in which shareholders of such securities have no voting powers--that is, they may not vote on the election of directors or on any corporate resolutions.

Normal Trading Unit (NTU): Standard minimum size of a trading unit for a particular security--more commonly referred to as a "round lot". Stocks typically have a normal trading unit of 100 shares. However, inactive stocks may have normal trading units equal to 10 shares. Any amount of shares less than a round lot is called an "odd lot".

North American Securities Administrators Association, Inc. (NASAA): An association of securities commissioners from each of the 50 states, the District of Columbia, Puerto Rico, and several of the Canadian provinces. This organization is an invaluable resource to investigators.

Not Held (NH): A market order to buy or sell that allows a floor broker discretion as to the time and price in executing the best possible trade. NH means the customer will not hold the floor broker responsible if a better execution might have been possible. This type of order qualification is principally used for large block orders.

Nothing Done (ND): In a day order, upon expiring at the end of the day, the status given to the order if it has not been executed.

Notice of Sale: Advertisement used by a municipal issuer to announce its plan to sell a new issue and to solicit investment bankers to enter bids for the issue.

Not Rated (NR): Indication used by various rating services to show that a security or a company has not been rated. The abbreviation "NR" is placed next to the security's or company's name.

Novation: 1) The substitution of an older debt or obligation with a newer one. 2) An agreement to substitute one party to a contract with a new party. The new party has both the rights and obligations required by the original party. To make the transfer effective, consent of all parties is required.

NQB (National Quotation Bureau): Daily service that provides its subscribers bid and asked quotes from market makers in securities traded over-the-counter. Stock quotes are published in Pink Sheets and corporate bonds in Yellow Sheets.

NR (Not Rated): Abbreviation used by various rating services to indicate that a security or a company has not been rated.

NRA: Nonresident alien. A person as defined under the Internal Revenue Code (IRC) as not being a US person.

NTU (Normal Trading Unit): Standard minimum size of a trading unit for a particular security--more commonly referred to as a "round lot". Stocks typically have a normal trading unit of 100 shares. However, inactive stocks may have normal trading units equal to 10 shares. Any amount of shares less than a round lot is called an "odd lot".

NYFE (New York Futures Exchange): A subsidiary of the New York Stock Exchange that concentrates on the trading of financial futures contracts.

NYSE (New York Stock Exchange): The oldest and largest stock exchange in the United States--also known as the "Big Board" and "The Exchange". The exchange is a not-for-profit corporation consisting of 1,366 individual members. It is governed by a Board of Directors that is made up of 10 public representatives, 10 exchange members, and a full-time paid chairman and president. The NYSE does not buy, sell, own or set the prices of securities traded there. The NYSE has operating divisions that are concerned with market operations, member firm regulation and surveillance, finance and office services, product development and planning, and customer relations. The NYSE imposes requirements on corporations who wish to have their securities listed on the exchange.

I welcome your comments, questions and suggestions.