Definition of Fail

Fail

A trade is said to fail if on settlement date either the seller fails to deliver securities in proper form or the
buyer fails to deliver funds in proper form.

Business failure

A business that has terminated with a loss to creditors.

failure cost

a quality control cost associated with goods or
services that have been found not to conform or perform
to the required standards as well as all related costs (such
as that of the complaint department); it may be internal or
external

Failure analysis

The examination of failure incidents to identify components
with poor performance profiles.

Clear

A trade is carried out by the seller delivering securities and the buyer delivering funds in proper form.
A trade that does not clear is said to fail.

Confidence level

The degree of assurance that a specified failure rate is not exceeded.

Default

failure to make timely payment of interest or principal on a debt security or to otherwise comply
with the provisions of a bond indenture.

Divergence

When two or more averages or indices fail to show confirming trends.

Fallout risk

A type of mortgage pipeline risk that is generally created when the terms of the loan to be
originated are set at the same time as the sale terms are set. The risk is that either of the two parties, borrower
or investor, fails to close and the loan "falls out" of the pipeline.

Herstatt risk

The risk of loss in foreign exchange trading that one party will deliver foreign exchange but the counterparty financial institution will fail to deliver its end of the contract. It is also referred to as settlement risk.

Income bond

A bond on which the payment of interest is contingent on sufficient earnings. These bonds are
commonly used during the reorganization of a failed or failing business.

Pivot

Price level established as being significant by market's failure to penetrate or as being significant when
a sudden increase in volume accompanies the move through the price level.

Shareholders' letter

A section of an annual report where one can find jargon-free discussions by
management of successful and failed strategies which provides guidance for the probing of the rest of the
report.

Cost of quality

The difference between the actual costs of production, selling and service and the costs that would be incurred if there were no failures during production or usage of products or services.

defective unit

a unit that has been rejected at a control inspection
point for failure to meet appropriate standards of
quality or designated product specifications; can be economically
reworked and sold through normal distribution channels

design for manufacturability (DFM)

a process that is part of the project management of a new product; concerned with finding optimal solutions to minimizing product failures
and other adversities in the delivery of a new product
to customers

spoiled unit

a unit that is rejected at a control inspection
point for failure to meet appropriate standards of quality
or designated product specifications; it cannot be economically
reworked to be brought up to standard

Default

The failure by a debtor to make a principal or interest payment in a timely
manner.

reorganization

Restructuring of financial claims on failing firm to allow it to keep operating.

Assuris

Assuris is a not for profit organization that protects Canadian policyholders in the event that their life insurance company should become insolvent. Their role is to protect policyholders by minimizing loss of benefits and ensuring a quick transfer of their policies to a solvent company where their benefits will continue to be honoured. Assuris is funded by the life insurance industry and endorsed by government. If you are a Canadian citizen or resident, and you purchased a product from a member life insurance company in Canada, you are protected by Assuris.
All life insurance companies authorized to sell in Canada are required, by the federal, provincial and territorial regulators, to become members of Assuris. Members cannot terminate their membership as long as they are licensed to write business in Canada or have any in force business in Canada.
If your life insurance company fails, your policies will be transferred to a solvent company. Assuris guarantees that you will retain at least 85% of the insurance benefits you were promised. Insurance benefits include Death, Health Expense, Monthly Income and Cash Value. Your deposit type products will also be transferred to a solvent company. For these products, Assuris guarantees that you will retain 100% of your Accumulated Value up to $100,000. Deposit type products include accumulation annuities, universal life overflow accounts, premium deposit accounts and dividend deposit accounts. The key to Assuris protection is that it is applied to all benefits of a similar type. If you have more than one policy with the failed company, you will need to add together all similar benefits before applying the Assuris protection. The Assuris website can be found at www.assuris.ca.

Beneficiary

This is the person who benefits from the terms of a trust, a will, an RRSP, a RRIF, a LIF, an annuity or a life insurance policy. In relation to RRSP's, RRIF's, LIF's, Annuities and of course life insurance, if the beneficiary is a spouse, parent, offspring or grand-child, they are considered to be a preferred beneficiary. If the insured has named a preferred beneficiary, the death benefit is invariably protected from creditors. There have been some court challenges of this right of protection but so far they have been unsuccessful. See "Creditor Protection" below. A beneficiary under the age of 18 must be represented by an individual guardian over the age of 18 or a public official who represents minors generally. A policy owner may, in the designation of a beneficiary, appoint someone to act as trustee for a minor. Death benefits are not subject to income taxes. If you make your beneficiary your estate, the death benefit will be included in your assets for probate. Probate filing fees are currently $14 per thousand of estate value in British Columbia and $15 per thousand of estate value in Ontario.
Another way to avoid probate fees or creditor claims against life insurance proceeds is for the insured person to designate and register with his/her insurance company's head office an irrevocable beneficiary. By making such a designation, the insured gives up the right to make any changes to his/her policy without the consent of the irrevocable beneficiary. Because of the seriousness of the implications, an irrevocable designation should only be made for good reason and where the insured fully understands the consequences.
NoteA successful challenge of the rules relating to beneficiaries was concluded in an Ontario court in 1996. The Insurance Act says its provisions relating to beneficiaries are made "notwithstanding the Succession Law Reform Act." There are two relevent provisions of the Succession Law Reform Act. One section of the act gives a judge the power to make any order concerning an estate if the deceased person has failed to provide for a dependant. Another section says money from a life insurance policy can be considered part of the estate if an order is made to support a dependant. In the case in question, the deceased had attempted to deceive his lawful dependents by making his common-law-spouse the beneficiary of an insurance policy which by court order was supposed to name his ex-spouse and children as beneficiaries.

Incontestable Clause

This clause in regular life insurance policy provides for voiding the contract of insurance for up to two years from the date of issue of the coverage if the life insured has failed to disclose important information or if there has been a misrepresentation of a material fact which would have prevented the coverage from being issued in the first place. After the end of two years from issue, a misrepresentation of smoking habits or age can still void or change the policy.

Lapse

This refers to the termination of an insurance policy due to the owner of the policy failing to pay the premium within the grace period [Usually within 30 days after the last regular premium was required and not paid]. It is possible to re-instate the coverage with the same premium and benefits intact but the life insured will have to qualify for this coverage all over again and bring up to date all unpaid premiums.

Default

failure of a debtor to make timely payments of principal and interest as they become due.

Guarantee

To take responsibility for payment of a debt or performance of some obligation if the person primarily liable fails to perform.

Personal Guarantee

A legal document whereby an individual takes responsibility for payment of debt or performance of some obligation if the person/company primarily liable fails to perform.

Lapse

Termination when a policy has no cash value after all attempts at conservation have failed.

Lapses

Policies which are sold but do not remain in force because the policyholder fails to pay premiums.

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