Account Executive – An individual who is employed by a Broker/Dealer to handle customer accounts and to advice about investing and securities. Also known as a broker or Registered Representative (RR). Must be appropriately licensed and registered with the proper Self Regulatory Organization (SRO).

Accredited Investor – A purchaser of a Private Placement (Regulation D) who has a high net worth. The federal securities laws define the term accredited investor in Rule 501 of Regulation D as:

  1. a bank, insurance company, registered investment company, business development company, or small business investment company;
  2. an employee benefit plan, within the meaning of the Employee Retirement Income Security Act, if a bank, insurance company, or registered investment adviser makes the investment decisions, or if the plan has total assets in excess of five (5) million;
  3. a charitable organization, corporation, or partnership with assets exceeding five (5) million;
  4. a director, executive officer, or general partner of the company selling the securities;
  5. a business in which all the equity owners are accredited investors;
  6. a natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds one (1) million at the time of the purchase;
  7. a natural person with income exceeding two (2) hundred thousand in each of the two (2) most recent years or joint income with a spouse exceeding three (3) hundred thousand for those years and a reasonable expectation of the same income level in the current year; or
  8. a trust with assets in excess of five (5) million, not formed to acquire the securities offered, whose purchases a sophisticated person makes.

Active Asset Management – An asset/money management approach that seeks to surpass the specific index return. Active Asset Managers believe that undervalued stocks exist in the market and that investing in them can allow them to exceed returns of similar index funds.

Active Return – The excess return achieved by an asset manager above the specified benchmark.

Administrator – The person designated to enforce the provisions of the Uniform Securities Act. Typically is the State Securities Commission, State Securities Commissioner or the Secretary of State.

Affiliated Person – A definition under Rule 144. An individual who is in a position to influence the actions of a corporation. This includes people such as directors, executives, and owners.

After Tax Rate of Return – The yield provided by an investment after taxes have been paid.

Agency Transaction – A trade where the executing member acts as a middleman. The middleman attempts to find the highest price for the seller and the lowest price for the buyer. The executing member earns a commission for finding the “best value” for the customer.

Agent – A registered person who makes a transaction on behalf of his or her employer or client. A broker, Registered Representative, or Account Executive is typically an agent.

Agreement Among Underwriters – More often called the Syndicate Agreement. This is a legal agreement among the members of the syndicate which defines the members’ proportionate liability and responsibility in the underwriting of a new issue security.

Alpha – A measure of performance on a risk-adjusted basis. Alpha is a measure of a security’s price movement relative to the securities in its industry. A high alpha means the security moves faster than the average in its group. A low alpha means the security moves slower than the average in its group.

American Stock Exchange (AMEX) – The AMEX has now merged with the NASDAQ. It was the third-largest stock exchange by trading volume in the United States and handled approximately ten (10) percent of all securities traded in the U.S.

Annualized Rate of Return – The rate of return for a time period shorter than a year is annualized to make a valid comparison with other investments. For example, if an investment has a 6 month return of 2%, the annualized return would be 4%.

Annuity – An investment contract, typically issued by insurance companies, in which the purchaser makes periodic or lump-sum payments for a period of time and begins receiving distributions at a fixed date in the future, typically at retirement. There are fixed annuities where the payment distribution is fixed and there are variable annuities, where the distribution payment is dependent upon the value of the securities underlying the contract.

Arbitrage – The simultaneous purchase and sale of an asset in order to profit from a difference in the price. This usually takes place on different exchanges or marketplaces.

Arbitrage Account – An account in which an investor performs arbitrage transactions or sells short against the box (selling securities that you already own). One side exactly offsets the other, so these accounts are said to have no credit risk.

Arbitration – A binding, non-appeal-able process in which a disagreement between two or more parties is resolved by impartial individuals, called arbitrators, in order to avoid costly and lengthy litigation. Intra-industry disputes and disputed between a member firm and a customer are typically handled in this way.

Asset Allocation – The systematic and thoughtful placement of investment dollars into various classes of investments such as stocks, bonds, and cash equivalents. The aim is to optimize the risk/reward tradeoff based on an individual’s or institution’s specific situation and goals. A key concept in financial planning and money management.

Asset Class – The categorization of investments into groupings with similar risk and return characteristics. Examples are stocks, bonds, and cash.