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Definition of SEC

SEC Image 1

SEC

The securities and Exchange Commission, the primary federal regulatory agency of the securities
industry.


SEC

See securities and Exchange Commission.



Related Terms:

Asset-Backed Securities

Bond or note secured by assets of company.


Asset-backed security

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


Available-for-Sale Security

A debt or equity security not classified as a held-to-maturity security or a trading security. Can be classified as a current or noncurrent investment depending on the intended holding period.


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.



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.


Cross-sectional approach

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


SEC Image 2

Debt securities

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


Debt Security

A security representing a debt relationship with an enterprise, including a government
security, municipal security, corporate bond, convertible debt issue, and commercial
paper.


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.


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.


Employee Retirement Income Security Act of 1974 (ERISA)

A federal Act that sets minimum operational and funding standards for employee benefit
plans.


Equity Security

An ownership interest in an enterprise, including preferred and common stock.


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.


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.


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.


Fixed-income security

A security that pays a specified cash flow over a
specific period. Bonds are typical fixed-income securities.



floating-rate security

security paying dividends or interest that vary with short-term interest rates.


Government securities

Negotiable U.S. Treasury securities.


Held-to-Maturity Security

A debt security for which the investing entity has both the positive
intent and the ability to hold until maturity.


Host security

The security to which a warrant is attached.


Hybrid security

A convertible security whose optioned common stock is trading in a middle range, causing
the convertible security to trade with the characteristics of both a fixed-income security and a common stock
instrument.


Intermarket sector

spread The spread between the interest rate offered in two sectors of the bond market for
issues of the same maturity.


Intramarket sector spread

The spread between two issues of the same maturity within a market sector. For
instance, the difference in interest rates offered for five-year industrial corporate bonds and five-year utility
corporate bonds.


Manufactured housing securities (MHSs)

Loans on manufactured homes - that is, factory-built or
prefabricated housing, including mobile homes.


Market sectors

The classifications of bonds by issuer characteristics, such as state government, corporate, or utility.


Marketable security

An easily traded investment, such as treasury bills, which is
recorded as a current asset, since it is easily convertible into cash.



Monthly income preferred security (MIP)

Preferred stock issued by a subsidiary located in a tax haven.
The subsidiary relends the money to the parent.


Mortgage-backed securities

securities backed by a pool of mortgage loans.


Mortgage-Backed Securities Clearing Corporation

A wholly owned subsidiary of the Midwest Stock
Exchange that operates a clearing service for the comparison, netting, and margining of agency-guaranteed
MBSs transacted for forward delivery.


Mortgage pass-through security

Also called a passthrough, a security created when one or more mortgage
holders form a collection (pool) of mortgages sells shares or participation certificates in the pool. The cash
flow from the collateral pool is "passed through" to the security holder as monthly payments of principal,
interest, and prepayments. This is the predominant type of MBS traded in the secondary market.


Nonmarketable Security

A debt or equity security for which there is no posted price or bidand-
ask quotation available on a securities exchange or over-the-counter market.


Pass-through securities

A pool of fixed-income securities backed by a package of assets (i.e. mortgages)
where the holder receives the principal and interest payments. Related: mortgage pass-through security


Primitive security

An instrument such as a stock or bond for which payments depend only on the financial
status of the issuer.


Project loan securities

securities backed by a variety of FHA-insured loan types - primarily multi-family
apartment buildings, hospitals, and nursing homes.


Public Securities Administration (PSA)

The trade association for primary dealers in U.S. government
securities, including MBSs.


Second pass regression

A cross-sectional regression of portfolio returns on betas. The estimated slope is the
measurement of the reward for bearing systematic risk during the period analyzed.


Secondary issue

1) Procedure for selling blocks of seasoned issues of stocks.
2) More generally, sale of already issued stock.


Secondary market

The market where securities are traded after they are initially offered in the primary
market. Most trading is done in the secondary market. The New York stock Exchange, as well as all other stock exchanges, the bond markets, etc., are secondary markets. Seasoned securities are traded in the
secondary market.


Secondary Market

The market where securities are exchanged between investors.
secondary market transactions have no effect on the issuing
company.


secondary market

Market in which already issued securities are traded among investors.


Secondary Market

New security issues are first sold directly to the public by the issuing firm or the government. After this initial sale, the owners of the securities can trade them among themselves or others; such activity is said to take place on the secondary market.


Secondary Market

In investment terminology, the market in which securities are traded after they have been issued by corporations. When a company sells a new issue of securities, the transaction is considered a "primary market transaction".


Section 482

United States Department of Treasury regulations governing transfer prices.


Section 83(b) Election

The decision by an employee to recognize taxable income
on the purchase price of an incentive stock option within 30 days following
the date when an option is exercised and withhold taxes at the ordinary
income tax rate at that time.


Sector

Refers to a group of securities that are similar with respect to maturity, type, rating, industry, and/or coupon.


Secured debt

Debt that, in the event of default, has first claim on specified assets.


secured debt

Debt that has first claim on specified collateral in the event of default.


secured loan or line of credit

A lump sum of funds (loan), or a revolving source of credit with a pre-established limit (line of credit), for which the customer must provide collateral.


Securities

A general term for stock, bonds, or other other financial assets.


Securities analysts

Related:financial analysts


Securities and Exchange Commission (SEC)

The federal agency that
oversees the issuance of and trading in securities of public businesses.
The sec has broad powers and can suspend the trading in securities of a
business. The sec also has primary jurisdiction in making accounting
and financial reporting rules, but over the years it has largely deferred to
the private sector for the development of generally accepted accounting
principles (GAAP).


Securities and Exchange Commission (SEC)

Federal agency responsible for regulation of securities markets in the United
States.


Securities and Exchange Commission (SEC)

A federal agency that administers securities legislation,
including the securities Acts of 1933 and 1934. Public companies in the United States
must register their securities with the sec and file with the agency quarterly and annual financial
reports.


Securities & Exchange Commission

The sec is a federal agency that regulates the U.S.financial markets.


Securitization

The process of creating a passthrough, such as the mortgage pass-through security, by which
the pooled assets become standard securities backed by those assets. Also, refers to the replacement of
nonmarketable loans and/or cash flows provided by financial intermediaries with negotiable securities issued
in the public capital markets.


Securitization

The pooling and repackaging of similar items into marketable securities that can be sold to investors.


Security

Piece of paper that proves ownership of stocks, bonds and other investments.


Security

Either the collateral on a loan, or some type of equity ownership or debt, such
as a stock option or note payable.


Security

A share or an interest in a property or an enterprise such as a stock certificate or a bond.


Security

Collateral offered by a borrower to a lender to secure a loan.


Security characteristic line

A plot of the excess return on a security over the risk-free rate as a function of
the excess return on the market.


Security deposit (initial)

Synonymous with the term margin. A cash amount of funds that must be deposited
with the broker for each contract as a guarantee of fulfillment of the futures contract. It is not considered as
part payment or purchase. Related: margin


Security deposit (maintenance)

Related: Maintenance margin security market line (SML). A description of
the risk return relationship for individual securities, expressed in a form similar to the capital market line.


Security market line

Line representing the relationship between expected return and market risk.
security market plane A plane that shows the equilibrium between expected return and the beta coefficient
of more than one factor.
security selection
See: security selection decision.


Security Market Line

A graph illustrating the equilibrium relationship between the
expected rate of return on securities and their risk as measured by
the beta coefficient


security market line

Relationship between expected return and beta.


Security selection decision

Choosing the particular securities to include in a portfolio.


Security Value

The monetary value placed on security by a lender in determining the extent to which it can make loans against such security.


Self-Employment Contributions Act (SECA)

A federal Act requiring self-employed business owners to pay the same total tax rates for Social security and
Medicare taxes that are split between employees and employers under the Federal Insurance Contributions Act.


Social Security Act of 1935

A federal Act establishing Old Age and Survivor’s
Insurance, which was funded by compulsory savings by wage earners.


Stripped mortgage-backed securities (SMBSs)

securities that redistribute the cash flows from the
underlying generic MBS collateral into the principal and interest components of the MBS to enhance their use
in meeting special needs of investors.


Tax-exempt sector

The municipal bond market where state and local governments raise funds. Bonds issued
in this sector are exempt from federal income taxes.


Trading Security

A debt or equity security bought and held for sale in the near term to generate income on short-term price changes.


Treasury securities

securities issued by the U.S. Department of the Treasury.


Underlying security

Options: the security subject to being purchased or sold upon exercise of an option
contract. For example, IBM stock is the underlying security to IBM options. Depository receipts: The class,
series and number of the foreign shares represented by the depository receipt.


Unsecured debt

Debt that does not identify specific assets that can be taken over by the debtholder in case of default.


Variable price security

A security, such as stocks or bonds, that sells at a fluctuating, market-determined price.


10-K

Annual report required by the sec each year. Provides a comprehensive overview of a company's state
of business. Must be filed within 90 days after fiscal year end. A 10Q report is filed quarterly.


12B-1 fees

The percent of a mutual fund's assets used to defray marketing and distribution expenses. The
amount of the fee is stated in the fund's prospectus. The sec has recently proposed that 12B-1 fees in excess
of 0.25% be classed as a load. A true " no load" fund has neither a sales charge nor 12b-1 fee.


12b-1 funds

Mutual funds that do not charge an upfront or back-end commission, but instead take out up to
1.25% of average daily fund assets each year to cover the costs of selling and marketing shares, an
arrangement allowed by the sec's Rule 12b-I (passed in 1980).


Abusive Earnings Management

A characterization used by the securities and Exchange
Commission to designate earnings management that results in an intentional and material misrepresentation
of results.


accelerated depreciation

(1) The estimated useful life of the fixed asset being depreciated is
shorter than a realistic forecast of its probable actual service life;
(2) more of the total cost of the fixed asset is allocated to the first
half of its useful life than to the second half (i.e., there is a
front-end loading of depreciation expense).


Accidental Dismemberment: (Credit Insurance)

Provides additional financial security should an insured person be dismembered or lose the use of a limb as the result of an accident.


Accounting and Auditing Enforcement Release (AAER)

Administrative proceedings or litigation releases that entail an accounting or auditing-related violation of the securities laws.


Accrued Interest

The amount of interest accumulated on a debt security between
interest paying dates


Accumulated Other Comprehensive Income

Cumulative gains or losses reported in shareholders'
equity that arise from changes in the fair value of available-for-sale securities, from the
effects of changes in foreign-currency exchange rates on consolidated foreign-currency financial
statements, certain gains and losses on financial derivatives, and from adjustments for underfunded
pension plans.


ACID-TEST RATIO

A ratio that shows how well a company could pay its current debts using only its most liquid or “quick” assets. It’s a more pessimistic—but also realistic—measure of safety than the current ratio, because it ignores sluggish, hard-toliquidate current assets like inventory and notes receivable. Here’s the formula:
(Cash + Accounts receivable + Marketable securities) / (Current liabilities)


Adjusted Cash Flow Provided by Continuing Operations

Cash flow provided by operating
activities adjusted to provide a more recurring, sustainable measure. Adjustments to reported cash
provided by operating activities are made to remove such nonrecurring cash items as: the operating
component of discontinued operations, income taxes on items classified as investing or financing activities, income tax benefits from nonqualified employee stock options, the cash effects of purchases and sales of trading securities for nonfinancial firms, capitalized expenditures, and other nonrecurring cash inflows and outflows.


Agencies

Federal agency securities.


Agency pass-throughs

Mortgage pass-through securities whose principal and interest payments are
guaranteed by government agencies, such as the Government National Mortgage Association ("Ginnie Mae"), Federal Home Loan Mortgage Corporation ("Freddie Mac") and Federal National Mortgage Association ("Fannie Mae").


All-or-none underwriting

An arrangement whereby a security issue is canceled if the underwriter is unable
to re-sell the entire issue.


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.


American Stock Exchange (AMEX)

The second-largest stock exchange in the United States. It trades
mostly in small-to medium-sized companies.


amortization

This term has two quite different meanings. First, it may
refer to the allocation to expense each period of the total cost of an
intangible asset (such as the cost of a patent purchased from the inventor)
over its useful economic life. In this sense amortization is equivalent
to depreciation, which allocates the cost of a tangible long-term operating
asset (such as a machine) over its useful economic life. second, amortization
may refer to the gradual paydown of the principal amount of a debt.
Principal refers to the amount borrowed that has to be paid back to the
lender as opposed to interest that has to be paid for use of the principal.
Each period, a business may pay interest and also make a payment on
the principal of the loan, which reduces the principal amount of the loan,
of course. In this situation the loan is amortized, or gradually paid down.


Amortized Cost

Cost of a security adjusted for the amortization of any purchase premium or
discount.


Annual report

Yearly record of a publicly held company's financial condition. It includes a description of the
firm's operations, its balance sheet and income statement. sec rules require that it be distributed to all
shareholders. A more detailed version is called a 10-K.


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.



 

 

 

 

 

 

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