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Antifraud Provisions

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Definition of Antifraud Provisions

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Antifraud Provisions

Specific sections and rules of the 1933 Act and 1934 Act that are
designed to reduce fraud and deceit in financial filings made with the SEC. The antifraud provisions
are Section 17(a) of the 1933 Act and Section 10(b) and Rule 10b-5 of the 1934 Act.



Related Terms:

Antidilution Provisions

A clause in a shareholders agreement preventing a company from issuing additional shares, without allowing the current shareholders the opportunity to participate in the offering to avoid dilution of their percentage ownership.


ADF (annuity discount factor)

the present value of a finite stream of cash flows for every beginning $1 of cash flow.


fractional interest discount

the combined discounts for lack of control and marketability. g the constant growth rate in cash flows or net income used in the ADF, Gordon model, or present value fActor.


PPF (periodic perpetuity factor)

a generalization formula invented by Abrams that is the present value of regular but noncontiguous cash flows that have constant growth to perpetuity.


Act of state doctrine

This doctrine says that a nation is sovereign within its own borders and its domestic
Actions may not be questioned in the courts of another nation.



Active

A market in which there is much trading.


Active portfolio strategy

A strategy that uses available information and forecasting techniques to seek a
better performance than a portfolio that is simply diversified broadly. Related: passive portfolio strategy


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Actuals

The physical commodity underlying a futures contrAct. Cash commodity, physical.


Additional hedge

A protection against borrower fallout risk in the mortgage pipeline.


Administrative pricing rules

IRS Rules used to allocate income on export sales to a foreign sales corporation.


American shares

SECurities certificates issued in the U.S. by a transfer agent Acting on behalf of the foreign
issuer. The certificates represent claims to foreign equities.


Amortization factor

The pool fActor implied by the scheduled amortization assuming no prepayemts.


Annual percentage rate (APR)

The periodic rate times the number of periods in a year. For example, a 5%
quarterly return has an APR of 20%.


Annual percentage yield (APY)

The effective, or true, annual rate of return. The APY is the rate Actually
earned or paid in one year, taking into account the affect of compounding. The APY is calculated by taking
one plus the periodic rate and raising it to the number of periods in a year. For example, a 1% per month rate
has an APY of 12.68% (1.01^12).


Annuity factor

Present value of $1 paid for each of t periods.


Asset activity ratios

Ratios that measure how effectively the firm is managing its assets.


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Asset-backed security

A SECurity that is collateralized by loans, leases, receivables, or installment contrActs
on personal property, not real estate.


Authorized shares

Number of shares authorized for issuance by a firm's corporate charter.



Basic IRR rule

Accept the project if IRR is greater than the discount rate; reject the project is lower than the
discount rate.


Blue-chip company

Large and creditworthy company.


Bond agreement

A contrAct for privately placed debt.


Book-entry securities

The Treasury and federal agencies are moving to a book-entry system in which SECurities are not represented by engraved pieces of paper but are maintained in computerized records at the
Fed in the names of member banks, which in turn keep records of the SECurities they own as well as those they
are holding for customers. In the case of other SECurities where a book-entry has developed, engraved
SECurities do exist somewhere in quite a few cases. These SECurities do not move from holder to holder but are
usually kept in a central clearinghouse or by another agent.


Bretton Woods Agreement

An agreement signed by the original United Nations members in 1944 that
established the International Monetary Fund (IMF) and the post-World War II international monetary system
of fixed exchange rates.


Bullet contract

A guaranteed investment contrAct purchased with a single (one-shot) premium. Related:
Window contrAct.


Cash deficiency agreement

An agreement to invest cash in a project to the extent required to cover any cash
deficiency the project may experience.


Cash settlement contracts

Futures contrActs, such as stock index futures, that settle for cash, not involving
the delivery of the underlying.


Cash transaction

A transAction where exchange is immediate, as contrasted to a forward contrAct, which
calls for future delivery of an asset at an agreed-upon price.


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Characteristic line

The market model applied to a single SECurity. The slope of the line is a SECurity's beta.



Changes in Financial Position

Sources of funds internally provided from operations that alter a company's
cash flow position: depreciation, deferred taxes, other sources, and capital expenditures.


Claim dilution

A reduction in the likelihood one or more of the firm's claimants will be fully repaid,
including time value of money considerations.


Collection fractions

The percentage of a given month's sales collected during the month of sale and each
month following the month of sale.


Company-specific risk

Related: Unsystematic risk


Competitive offering

An offering of SECurities through competitive bidding.


Concession agreement

An understanding between a company and the host government that specifies the
Rules under which the company can operate locally.


Conditional sales contracts

Similar to equipment trust certificates except that the lender is either the
equipment manufActurer or a bank or finance company to whom the manufActurer has sold the conditional
sales contrAct.


Contract

A term of reference describing a unit of trading for a financial or commodity future. Also, the Actual
bilateral agreement between the buyer and seller of a transAction as defined by an exchange.


Contract month

The month in which futures contrActs may be satisfied by making or accepting a delivery.
Also called value managers, those who assemble portfolios with relatively lower betas, lower price-book and
P/E ratios and higher dividend yields, seeing value where others do not.


Conversion factors

Rules set by the Chicago Board of Trade for determining the invoice price of each
acceptable deliverable Treasury issue against the Treasury Bond futures contrAct.


Convertible security

A SECurity that can be converted into common stock at the option of the SECurity holder,
including convertible bonds and convertible preferred stock.


Corporate financial management

The application of financial principals within a corporation to create and
maintain value through decision making and proper resource management.


Corporate financial planning

financial planning conducted by a firm that encompasses preparation of both
long- and short-term financial plans.


Cost company arrangement

Arrangement whereby the shareholders of a project receive output free of
charge but agree to pay all operating and financing charges of the project.


Country financial risk

The ability of the national economy to generate enough foreign exchange to meet
payments of interest and principal on its foreign debt.


Cross-sectional approach

A statistical methodology applied to a set of firms at a particular point in time.


Current account

Net flow of goods, services, and unilateral transActions (gifts) between countries.


Current assets

Value of cash, accounts receivable, inventories, marketable SECurities and other assets that
could be converted to cash in less than 1 year.


Current coupon

A bond selling at or close to par, that is, a bond with a coupon close to the yields currently
offered on new bonds of a similar maturity and credit risk.


Current liabilities

Amount owed for salaries, interest, accounts payable and other debts due within 1 year.


Current issue

In Treasury SECurities, the most recently auctioned issue. Trading is more Active in current
issues than in off-the-run issues.


Current maturity

current time to maturity on an outstanding debt instrument.
current / noncurrent method
Under this currency translation method, all of a foreign subsidiary's current
assets and liabilities are translated into home currency at the current exchange rate while noncurrent assets
and liabilities are translated at the historical exchange rate, that is, the rate in effect at the time the asset was
acquired or the liability incurred.


Current rate method

Under this currency translation method, all foreign currency balance-sheet and income
statement items are translated at the current exchange rate.


Current ratio

Indicator of short-term debt paying ability. Determined by dividing current assets by current
liabilities. The higher the ratio, the more liquid the company.


Current yield

For bonds or notes, the coupon rate divided by the market price of the bond.


Current-coupon issues

Related: Benchmark issues


De facto

Existing in Actual fAct although not by official recognition.


Debt securities

IOUs created through loan-type transActions - commercial paper, bank CDs, bills, bonds, and
other instruments.


Depository Trust Company (DTC)

DTC is a user-owned SECurities depository which accepts deposits of
eligible SECurities for custody, executes book-entry deliveries and records book-entry pledges of SECurities in
its custody, and provides for withdrawals of SECurities from its custody.


Derivative security

A financial SECurity, such as an option, or future, whose value is derived in part from the
value and charActeristics of another SECurity, the underlying SECurity.


Dilution

Diminution in the proportion of income to which each share is entitled.


Discount factor

Present value of $1 received at a stated future date.


Discount securities

Non-interest-bearing money market instruments that are issued at a discount and
redeemed at maturity for full face value, e.g. U.S. Treasury bills.


Discounted payback period rule

An investment decision Rule in which the cash flows are discounted at an
interest rate and the payback Rule is applied on these discounted cash flows.


Double-tax agreement

agreement between two countries that taxes paid abroad can be offset against
domestic taxes levied on foreign dividends.


Dual syndicate equity offering

An international equity placement where the offering is split into two
tranches - domestic and foreign - and each tranche is handled by a separate lead manager.


Dupont system of financial control

Highlights the fAct that return on assets (ROA) can be expressed in terms
of the profit margin and asset turnover.


Employee stock ownership plan (ESOP)

A company contributes to a trust fund that buys stock on behalf of
employees.


Equity contribution agreement

An agreement to contribute equity to a project under certain specified
conditions.


Exact matching

A bond portfolio management strategy that involves finding the lowest cost portfolio
generating cash inflows exActly equal to cash outflows that are being financed by investment.


Exchangeable Security

SECurity that grants the SECurity holder the right to exchange the SECurity for the
common stock of a firm other than the issuer of the SECurity.


Exempt securities

Instruments exempt from the registration requirements of the SECurities Act of 1933 or the
margin requirements of the SEC Act of 1934. Such SECurities include government bonds, agencies, munis,
commercial paper, and private placements.


Factor

A financial institution that buys a firm's accounts receivables and collects the debt.


Factor analysis

A statistical procedure that seeks to explain a certain phenomenon, such as the return on a
common stock, in terms of the behavior of a set of predictive fActors.


Factor model

A way of decomposing the fActors that influence a SECurity's rate of return into common and
firm-Specific influences.


Factor portfolio

A well-diversified portfolio constructed to have a beta of 1.0 on one fActor and a beta of
zero on any other fActors.


Factoring

Sale of a firm's accounts receivable to a financial institution known as a fActor.


Federal agency securities

SECurities issued by corporations and agencies created by the U.S. government,
such as the Federal Home Loan Bank Board and Ginnie Mae.


Financial analysts

Also called SECurities analysts and investment analysts, professionals who analyze
financial statements, interview corporate executives, and attend trade shows, in order to write reports
recommending either purchasing, selling, or holding various stocks.


Financial assets

Claims on real assets.


Financial control

The management of a firm's costs and expenses in order to control them in relation to
budgeted amounts.


Financial distress

Events preceding and including bankruptcy, such as violation of loan contrActs.


Financial distress costs

Legal and administrative costs of liquidation or reorganization. Also includes
implied costs associated with impaired ability to do business (indirect costs).


Financial engineering

Combining or dividing existing instruments to create new financial products.


Financial future

A contrAct entered into now that provides for the delivery of a specified asset in exchange
for the selling price at some specified future date.


Financial intermediaries

Institutions that provide the market function of matching borrowers and lenders or
traders.


Financial lease

Long-term, non-cancelable lease.


Financial leverage

Use of debt to increase the expected return on equity. financial leverage is measured by
the ratio of debt to debt plus equity.


Financial leverage clientele

A group of investors who have a preference for investing in firms that adhere to
a particular financial leverage policy.


Financial leverage ratios

Related: capitalization ratios.


Financial market

An organized institutional structure or mechanism for creating and exchanging financial assets.


Financial objectives

Objectives of a financial nature that the firm will strive to accomplish during the period
covered by its financial plan.


Financial plan

A financial blueprint for the financial future of a firm.


Financial planning

The process of evaluating the investing and financing options available to a firm. It
includes attempting to make optimal decisions, projecting the consequences of these decisions for the firm in
the form of a financial plan, and then comparing future performance against that plan.


Financial press

That portion of the media devoted to reporting financial news.


Financial ratio

The result of dividing one financial statement item by another. Ratios help analysts interpret
financial statements by focussing on Specific relationships.


Financial risk

The risk that the cash flow of an issuer will not be adequate to meet its financial obligations.
Also referred to as the additional risk that a firm's stockholder bears when the firm utilizes debt and equity.


Firm-specific risk

See:diversifiable risk or unsystematic risk.


Fiscal agency agreement

An alternative to a bond trust deed. Unlike the trustee, the fiscal agent Acts as an
agent of the borrower.


Fixed-dollar security

A nonnegotiable debt SECurity that can be redeemed at some fixed price or according to
some schedule of fixed values, e.g., bank deposits and government savings bonds.


Floating-rate contract

A guaranteed investment contrAct where the credit rating is tied to some variable
("floating") interest rate benchmark, such as a Specific-maturity Treasury yield.


48-hour rule

The requirement that all pool information, as specified under the PSA Uniform PrActices, in a
TBA transAction be communicated by the seller to the buyer before 3 p.m. EST on the business day 48-hours
prior to the agreed upon trade date.


Forward contract

A cash market transAction in which delivery of the commodity is deferred until after the
contrAct has been made. It is not standardized and is not traded on organized exchanges. Although the
delivery is made in the future, the price is determined at the initial trade date.



 

 

 

 

 

 

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