Glossary


The following definitions and terms relate to the stock and financial industries.

A 10b5-1 sales plan is an agreement made between a brokerage firm and a company insider that allows the insider to sell stock of the company at regular intervals. These plans are typically utilized to help the insider comply with insider trading rules.

A notarized affidavit executed by the legal representative of an estate indicating the residence of the decedent at the time of death.

See also: Transferring shares from a deceased individual

A person or entity that holds more than 10% of the outstanding shares of an Issuer, directly or indirectly, or is an officer or director of the Issuer.

Shares held in non-certificate form by the corporation's transfer agent.

A broker is an individual or institution that is paid a commission for executing customer orders. A broker acts as an intermediary between buyer and seller. A broker must be licensed by FINRA.

Capital stock that is secondary to preferred stock in the distribution of dividends and often of assets. Common stockholders typically have voting rights on such matters as the election of directors, etc.

A signing resolution that lists the authorized signatories for a corporation, or a document that authorizes the company to make some sort of company action.

As defined by the IRS, the cost basis is the total cost of an asset or security, which is usually equal to the purchase price of the security plus commissions and other expenses. The cost basis is used to calculate capital gains and losses for tax purposes.

There are three methods used to calculate cost basis and may be advantageous or disadvantageous depending on the number of tax lot positions within your portfolio and whether the positions are short-term or long-term. These methods are listed as follows:

  • FIFO (First In, First Out): The shares acquired first (with the oldest cost basis tax lot) are sold or transferred first. This is Colonial Stock Transfer's default calculation for cost basis. It is advantageous for shareholders with few tax lot positions.
  • LIFO (Last in, First Out): The shares acquired most recently (with the most recent cost basis tax lot) are sold or transferred first. LIFO creates shorter term transactions with smaller losses or gains, but it also is known for its short-term tax obligations.
  • HIFO (Highest in, First Out): The shares acquired at the highest cost basis tax lot are sold or transferred first. This may limit your gains and maximize your losses, but it doesn't distinguish between short-term and long-term positions. This strategy may be advantageous if the positions were purchased or initially transferred around the same time.

A number used to identify an Issuer and type of security issued. This number is typically located on the stock certificates of the corporation. Abbreviation: Committee on Uniform Securities of Identification Procedures.

The process of turning over unclaimed or abandoned property to a state governmental agency, such as if a person's assets are abandoned without current contact information or if a person dies without a will or any successors to their estate. Transferred property can typically be reclaimed by the rightful owner or executor by contacting the state's unclaimed property division.

The total number of shares of stock publicly available for trading for an Issuer. The float is calculated by subtracting the restricted shares outstanding from the total outstanding shares.

A Form 3 must be filed to the SEC within 10 days of the insider becoming affiliated with the company. An insider (affiliate) may be an officer, director, or a shareholder owning 10% or more of the company's outstanding shares. Official SEC Form 3 Instructions

A Form 4 must be filed to the SEC before the end of the second business day following the day on which an ownership transaction took place. An insider (affiliate) may be an officer, director, or a shareholder owning 10% or more of the company's outstanding shares. Official SEC Form 4 Instructions

A Form 5 must be filed by any insiders who have transactions during the year that would be exempt from a Form 4 filing (typically gift transactions). This form must be filed with the SEC no later than 45 days after the company's fiscal year end. An insider (affiliate) may be an officer, director, or a shareholder owning 10% or more of the company's outstanding shares. Official SEC Form 5 Instructions

An initial public offering (IPO) occurs when a corporation issues stock to the public for the first time. A Secondary Public Offering is an issuance of stock subsequent to the company's initial public offering.

A legal entity that typically issues different types of securities in order to raise capital for their corporation (ie. common stock, preferred stock, bonds, options, warrants, etc). In general, when used on Colonial's web site, the Issuer is referring to the corporation in which you hold shares.

A type of registration on a stock certificate or brokerage account which indicates ownership of the stock/account by two or more people. All tenants typically have equal rights to the assets. This type of registration is common with married persons. In the event of death of one spouse the assets are automatically transferred to the other tenants.

Merger and Acquisitions (M&A) refers to a company's financial structure changing due to the buying, selling, or combining of different companies that in turn increase shareholder value.

A name change occurs when a company changes their name legally through a certificate of amendment with the secretary of state of incorporation. In doing so, a new cusip number (if a publicly traded company) must be obtained and additional processing must occur.

National Association of Securities Dealers Automatic Quotation system (NASDAQ). NASDAQ is an electronic stock market that facilitates the electronic trading of securities for over 5,000 companies.

The National Stock Exchange (NSX) was founded in 1885 and was the first electronic stock exchange in the United states. It is located in Chicago.

A person that holds less than 10% of outstanding shares and is not an officer or director of the company.

The New York Stock Exchange (NYSE) is the oldest and largest stock exchange in the US. It is a floor based exchange with electronic trading, whereas the NASDAQ is a computer automated market exchange.

The NYSE Markets, formerly the AMEX, is a securities exchange located in downtown New York City that is noted for the variety of its listings. Companies with shares traded on the NYSE MKT are generally smaller than those listed on the New York Stock Exchange. The NYSE MKT is the listing exchange for small to mid cap size companies, most U.S. registered exchange-traded funds (ETFs), and a variety of listed derivative securities including equity and index options.

The Over The Counter Bulletin Board (OTCBB) is an electronic trading system offered by FINRA. Companies trading on the OTCBB are required to keep their financial filings current with the SEC, but otherwise have much less stringent listing requirements than NASDAQ, NYSE MKT, and NYSE.

A penny stock as defined by the SEC is typically a stock that is not listed on a major stock exchange, trades under $5 per share, or does not meet certain asset requirements.

An over the counter quotation service. Stocks listed on the OTC Markets typically are not required to file financial statements with the SEC and do not meet or seek the listing requirements to trade on the OTCBB, NYSE MKT, NASDAQ, or NYSE.

A legal document that enables an individual to designate another person, called the attorney-in-fact, to act on his/her behalf as long as the individual does not become disabled or incapacitated.

Capital stock which provides a specific dividend that is paid before any dividends are paid to common stockholders. Typically preferred stockholders have no voting rights, but hold a higher claim on assets than common stockholders should the company go out of business.

A private offering of securities that is exempt from registration requirements with the SEC. Usually the offering is placed with a select number of private investors. These offerings can be performed in private companies as well as public companies. When a public company performs a private placement, it is referred to as Private Investing in Public Equities (PIPE).

A prospectus is a formal written offer to sell securities. It sets forth the plan for a proposed stock offering for a company and typically includes the company's financials, business plans, etc. so that an investor can make an informed decision.

Authorization, whether written or electronic, that shareholders' votes may be cast by others. Shareholders can and often do give management their proxies in lieu of attending the annual meeting of a company. The shareholder usually marks their votes in favor or against each of the proposed directors up for election and also votes for or against any other proposals at the meeting. The Board of Directors of the company may then act as proxy for that shareholder in deciding any other matters that come before the meeting.

Securities held on the books of a corporation in the name(s) of the shareholder(s), as opposed to holding the shares in street name. Direct owners receive all corporate communications directly from a company.

Some companies will file a registration statement with the SEC that will enable a shareholder to sell restricted stock, provided that any unsold shares be issued back into the shareholders name with the restriction. Normally the company will inform all shareholders that are affected by the registration statement, but it may be worth the time to call the company's investor relations department directly to find out if a registration statement has been filed, or will be filed. See also: 144; Removing a restriction; SEC

According to the SEC's web site, restricted securities are securities acquired in unregistered, private sales from the Issuer or from an affiliate of the Issuer. Investors typically receive restricted securities through private placement offerings, Regulation D offerings, employee stock benefit plans, as compensation for professional services, or in exchange for providing "seed money" or start-up capital to the company.

See also: 144; Removing a restriction; SEC

A reverse stock split reduces the number of outstanding shares and increases the per-share price proportionately. For example, if a company declares a one-for-ten reverse split, then a person who previously held 100 shares valued at $1/share will then have 10 shares valued at $10/share.

According to the SEC's web site, When you acquire restricted securities or hold control securities, you must find an exemption from the SEC's registration requirements to sell them in the marketplace. Rule 144 allows public resale of restricted and control securities if the following conditions are met:

For Affiliates of reporting and non-reporting companies:

  1. 1. Holding Period: The shares must be held at least 6 months after the shares were fully paid for. For non-reporting companies, 12 months is required.
  2. 2. Adequate Current Public Information: The Issuer must be current in their SEC filings, meaning their most recent quarterly and annual reports have been filed.
  3. 3. Volume Limitations: The seller cannot sell more than 1% of the outstanding shares during any 90 day period. For stocks listed on a major stock exchange, the greater of 1% or the average reported weekly trading volume during the four weeks preceding the filing of the 144 forms with the SEC can be sold.
  4. 4. Ordinary Brokerage Transaction: The sale must be made in an ordinary brokerage transaction, using a broker affidavit.
  5. 5. Filing Notice with the SEC: Before you place a sale order, you must first file notice with the SEC on form 144. If the shares are not fully sold within 90 days, then an amended notice must be filed.
  6. 6. Legal Opinion: A Legal opinion from company counsel or from a specified outside attorney is required.

For Non-Affiliates of reporting and non-reporting companies:

  1. 1. Holding Period: The shares for reporting companies must be held at least 6 months after the shares were fully paid for. After one year, the shares for all companies may be sold with a Sellers Rep Letter. Non-reporting companies must hold the shares for at least 12 months before selling. After 12 months the legend can be removed and shares can stay in the name of the seller if requested.
  2. 2. Adequate Current Public Information: The Issuer must be current in their SEC filings, meaning their most recent quarterly and annual reports have been filed.
  3. 3. Legal Opinion: A Legal opinion from company counsel or from a specified outside attorney is required for transactions between 6-12 months after the shares were fully paid for.
  4. 4. Broker transaction: 6-12 months sales must be supplied with a broker Sellers Rep Letter with transfer instructions.

See also: 144; Removing a restriction; SEC; Issuer; Affiliates; Non-Affiliates

plus-sign SEC

The Securities and Exchange Commission (SEC) is a governmental agency created by the US Congress to regulate the securities markets and protect the investing public against fraudulent and manipulative securities practices. The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.

A new business entity formed through a split of a larger entity.

An Issuer will often buy back its outstanding shares in order to reduce the number of shares on the market. Companies typically buyback shares to increase the value of the shares by reducing the supply, or to reduce the possibility of takeover threats.

A stock power is a form used to instruct the transfer of ownership of a stock certificate from the registered owner(s) to a third party. In order to transfer ownership, a stock power should be endorsed by all owners listed on the face of the certificate, or by an authorized trustee or corporate signatory if a trust or corporation. The signature(s) should also be Medallion Signature Guaranteed. See also: Medallion Signature Guarantee; Stock Transfer Guide; Trust; Trustee

Individual shareholders are able to hold their certificates in the following three different registration types:

  • Direct Registration: Shareholders may hold their shares directly on the books of the corporation's transfer agent in book-entry form without issuing a physical stock certificate. As transfer agent, Colonial will send you, the shareholder, periodic statements reflecting ownership, along with mailings, proxies, dividends and any other correspondence.
  • Street Name Registration: Shareholders may hold their shares in book-entry form directly with their broker dealer, not through the corporation's transfer agent. Your broker will send you periodic statements reflecting your ownership, along with mailings, proxies, dividends and any other correspondence.
  • Physical Stock Certificates: Shareholders who hold their shares in physical certificate form are considered registered owners held directly with the corporation's transfer agent. As transfer agent, Colonial will send you, the shareholder, mailings, proxies, dividends and any other correspondence. Physical stock certificates should be safeguarded as they carry the risk of being lost. Shareholders who lose their certificates will have to pay to replace them.

A stock split either reduces or increases the number of outstanding shares and increases or decreases the per-share price proportionately. Stock splits do not change the market value of the corporation's stock since everything is pro-rata. For example, if a company declares a one-for-ten reverse split, then a person who previously held 100 shares valued at $1/share will then have 10 shares valued at $10/share. If a forward split of 2 for 1 is declared, then a person holding 100 shares valued at $10/share will then have 200 shares valued at $5/share. See also Reverse Stock Split

Street name shares are those held electronically in your brokerage account. Electronically held shares facilitate efficient trading and settlement of your shares.

Treasury stock is stock that has been repurchased by the Issuer, either privately or on the open market,

A trust is a legal entity created by a grantor (donor), to hold, manage, receive, invest and control property on behalf of a beneficiary. Property transferred to the trust is owned by it in the same way a corporation owns its own assets. Trusts are managed by trustee(s) and are typically used to protect assets.

A trustee is the person or entity designated as the authorized signatory and manager of the trust and its assets. The trustee can be the same person as the grantor. There can be more than one trustee.

A warrant certificate is generally issued with another class of stock, entitling the shareholder to buy a specified amount of securities at a price above the current market price.