Financial key terms
and definitions
Defined Financial information
and glossary
Please see specific financial
information below
Finance and Trading:
C Notice
A notice sent by the IRS to payers that identifies
shareholders who have been under-reporting their income.
Consequently, the agent must withhold tax at the then
current required rate. The withholding will remain in effect
until the agent receives a subsequent IRS notification
stating the shareholder is no longer subject to withholding.
Capital Gain
The amount by which selling price of a security exceeds the
price for which it was purchased.
Capital Loss
The amount by which the initial purchase price of a security
exceeds the current selling price. A capital loss signifies
a decrease in the value of a security.
Cash Dividend
A dividend paid to shareholders in cash, rather than stock.
Cash in Lieu (CIL)
In corporate reorganization transactions such as mergers,
spin-offs or stock splits, fractional shares often result
from the application of a rate. Typically, fractional shares
are not issued to shareholders, but instead are liquidated
and paid in cash. The payment is "cash in lieu" of receipt
of fractional shares.
Cash Only Option
An option provided by certain reinvestment and stock
purchase plans that provides the shareholder the option of
making cash payments for the purchase of additional stock
and receiving the cash dividend payments rather than having
the dividends reinvested.
Certificate
A document indicating a shareholder’s ownership of a
specific number of shares in a corporation. Each certificate
will indicate the specific number of shares that are
represented by the certificate, the date the certificate was
issued, the certificate number, and the name of the
registered owner.
Certificate of Fiduciary
Authority
A document completed and signed by the current acting
trustees of a trust when presented with proof of the
registered trustee’s inability to act allows the current
trustees to act.
Certification
Often, documents that are required by the transfer agent to
effect legal transfers have to be certified. If the document
has not been provided by a court, certification should state
that: i. the copy is a true and complete copy of the
original or relevant extract thereof;
ii. the original is genuine and has been duly executed by
the appropriate person; and
iii. the appropriate person had legal capacity at the time.
Where a document is a court record, recorded or filed,
certification should be in the usual form of the court,
registry or office in question. Legal documents such as
Birth Certificates, Death Certificates, Corporate
Resolutions, Tax Waivers, Certificates of Appointment, etc.
are considered as originals if they have a raised seal or a
medallion guarantee stamp is affixed to such document.
Moreover, a power of attorney or agency agreement is
certified as still in full force and effect if the document
is imprinted with a medallion guarantee stamp.
Class of Stock
The specific type of stock that is issued by a company and
represented by a specific type of stock certificate.
Shareholders of each specific class of stock are entitled to
certain and specific rights within that.
Common Stock
A security representing equity ownership in a corporation.
Common stock provides the holder voting rights, and entitles
the holder to a share to receive dividends. In the event
that the company is liquidated, common stockholders have
rights to a company's assets only after the debt holders and
preferred stockholders have been satisfied.
Conversion
The process of exchanging a convertible security, such as a
bond or preferred stock, into common stock.
Corporate Actions
Activities related to corporate reorganizations or special
stock transactions that a company might undergo in
connection with a merger, acquisition, exchange, stock
split, public offering, tender offer, odd-lot buyback,
rights offering, demutualization, etc.
Corporate Resolution
A document that delineates the actions that can be performed
by the officers of a corporation. The resolution identifies
the names of the persons that can sign on behalf the
corporation.
Corporation
A legal entity that is created and authorized to operate
under the laws of a state for the purpose of conducting
business.
Cost Basis
The original purchase price of an asset, including
commissions and other expenses, used to determine capital
gains and capital losses for reporting purposes.
Court Appointment
A written document issued by a court that explicitly and
legally identifies the person(s) or entity that can transact
business for the benefit of another.
Cumulative Voting
A shareholder voting procedure that provides minority
shareholders more power by allowing them to cast all votes
for a single director candidate. Under cumulative voting, in
an election where there are three candidates, a shareholder
with 100 shares has 300 votes and may allocate the 300 votes
to one of the directors, two of the directors or in any
combination.
CUSIP
An acronym for "Committee of Uniform Securities of
Identification Procedures". A CUSIP number is a unique
nine-character alpha / numeric code appearing on the face of
each stock certificate that is assigned to a security by
Standard & Poor's Corporation. The number is used to
expedite clearance and settlement.
Custodian
A person or entity legally charged with the responsibility
of holding and safeguarding the property of another.
Custodian for a Minor
A person or entity that is legally responsible for property
until a minor reaches the age of majority. The custodian may
be an individual adult, a bank or a trust company. If stock
is registered using a custodial registration, the stock
should be registered using the minor’s tax identification
number.
Declaration Date
The date on which the Board of Directors announces that a
dividend will be paid. On declaration date, the record and
payable dates and the dividend rate per share are also
announced.
Delisting
The process of removing a stock from an exchange, usually
due to a violation or failure to meet certain financial
requirements.
Demutualization
A conversion in which a mutually owned company becomes a
shareholder-owned, equity-based company. Demutualization
most often occurs in the insurance industry and is used as a
means to raise capital.
Depository
An entity that accepts securities and funds deposited by
others. The depository transfers shares from one depositor
to another by making accounting entries rather than
physically delivering stock certificates.
Depository Trust Company
(DTC)
A central depository where stock and bond certificates are
deposited or transferred. Most transfers are completed
electronically. The DTC is a member of the Federal Reserve
system, registered with the Securities and Exchange
Commission and owned by the Depository Trust and Clearing
Corporation (DTCC). The DTCC is owned by several banks,
brokerage houses and trading exchanges.
Direct Purchase Plan or
Open Enrollment Plan
A purchase plan that is similar to a dividend reinvestment
plan that allows interested investors to purchase their
first share through the plan. Traditional dividend
reinvestment plans require that investors have at least one
share of company stock registered in their name in order to
participate. Many of the features and functionality of
direct purchase plans with regard to reinvestment, purchases
and sales mirror that of traditional dividend reinvestment
plans.
Direct Registration
Direct registration is a process that provides registered
shareholders to hold shares of stock in book-entry form. In
Direct Registration, book-entry shares are registered in the
shareholder’s name on the company’s books. Physical stock
certificates are not issued unless requested by the
shareholder. Direct registration provides registered
shareholders with the ability to perform electronic share
transactions between a broker and the transfer agent.
Director Exception
A proxy or ballot voted by a shareholder who withholds votes
from one or more, but not all, of the nominated directors.
Discretionary Proposal
A proposal on a proxy that brokers can exercise voting
authority and vote shares according to management’s
direction if they have not heard from the beneficial holder
ten days prior the annual meeting.
Dividend
A payment declared by a company’s board of directors and
distributed to shareholders from the company’s current or
retained earnings. Dividends may be paid in the form of cash
or stock.
Dividend Disbursing Agent
An entity appointed by a corporation to distribute dividends
to shareholders.
Dividend Order
A document submitted by a shareholder that instructs a
corporation or its agent to issue and forward dividend
payments to a specific person or entity that is not the
registered owner.
Dividend Reinvestment Plan
(DRIP)
An investment plan offered by some companies that enables
shareholders to automatically invest cash dividends to
accumulate more company stock. Some DRIPs permit the
investment of additional cash contributions by the
shareholder to purchase company stock. Most DRIPs require
that an investor purchase the first share through a
brokerage before becoming eligible to participate in
dividend reinvestment.
Dividend Yield
Annual percentage return earned by shareholders in the form
of dividends paid. The yield is determined by dividing the
amount of the annual dividends per share by the market price
per share of the stock. For example, if a stock pays a $2 in
dividends per year and trades for $10 per share, then the
stock has a 20% dividend yield.
Domicile
A shareholder’s legal, permanent place of residence.
Due Diligence
The process of investigation by an agent or issuer in an
attempt to locate lost shareholders. Due diligence is
accomplished by performing a mailing to lost shareholders.
DWAC
The process of moving shares electronically through the
Depository Trust Company. DWAC is an acronym for
Deposit/Withdrawal At Custodian. Typically, the transfer
agent serves as the custodian in a DWAC transaction.
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Financial key
terms and definitions. All information about financial
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