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Glossary: Learn the Terms
 
 

Glossary of Terms

 

 

  Affidavit of Domicile
A notarized form stating where a person resides (or where a deceased party resided).

Affidavit of Loss/Affidavit of Non-Receipt
A written statement that attests to the fact that a shareholder is not in possession of his/her certificate due to loss or non-receipt. The affidavit should be notarized.

Articles of Incorporation
The basic governing rules which set out the rights and duties of officers, directors and shareholders and the organizational structure of the company.

Authorized Stock
The amount of stock that a corporate charter permits a corporation to issue.

Basis
An amount usually representing the taxpayer's cost in acquiring an asset. It is used for a variety of tax purposes including computation of gain or loss on the sale or exchange of the asset and depreciation with respect to the asset.

Beneficiary of a Trust
A person or organization that has any present or future interest, vested or contingent, in the assets of a trust.

Bylaws
The bylaws of a corporation constitute the internal set of operating rules for the corporation. In corporate law, the bylaws have been regarded as the proper place for the self-imposed rules and regulations deemed necessary for the corporation’s efficient functioning to be set forth.

Certification
A statement by court or authorized party that the copy is true and correct copy and is still in full force and effect.

Common Stock
Equity ownership in a corporation in the form of Common Stock. May be in the form of a physical certificate or book entry.

Court Appointment
A dated document issued by the court naming an individual to act on behalf of an estate. Generally this is the document, which names the Executor, Administrator, or Personal Representative.

Cumulative Voting
A provision that permits shareholders to apportion the total number of votes they are entitled to cast in the election of directors in any fashion they desire. The total number is equal to the number of directors to be elected at the meeting multiplied by the number of shares eligible to be voted. With cumulative voting, each shareholder may cast the total number of votes that he or she is entitled to cast for one director, or apportion them among the candidates as desired.

Cusip Number
Cusip is an acronym for the Committee on Uniform Securities of Identification Procedures. Used to identify issuer and type of security issued.

Custodian
A person or institution legally charged with the responsibility of safeguarding the property of another.

Dividends
Corporations, pay cash dividends declared on Common Stock usually quarterly, to shareowners of record on the declared record date. Shares directly registered on the books of the corporation are paid directly to shareholders while the corporation pays shares held through a broker to the broker.

Escheatment
The turning over of property to the state of last known address when such property is considered abandoned. Different rules and regulations apply to the various states.

Evergreen Provision
A provision of a stock option plan that reserves a specified percentage of the outstanding shares (or an exact number of shares) for award each year. Evergreen plans have no termination date. Frequently, shares that are not the subject of an award may be carried over for future grants.

Executor
An individual or institution nominated in a will and appointed by a court to settle the estate of an individual. If a woman is appointed, she may be called an executrix.

Exercise
To implement the right under which the holder of an option, warrant, or right is entitled to buy or sell the underlying security.

Fiduciary
A person or institution having a duty to act for another's benefit such as managing money or property. A fiduciary must exercise care in such management activity imposed by law or contract.

Grantor
A person who establishes the trust. Also may be called a trustor.

Guaranteed Signature
Provided by a Financial Institution; a signature guarantee signifies that the person signing the document is who they claim to be, and that the financial institution backs that guarantee by a bond it has posted as a guarantor. See Medallion Signature Guarantee.

Guardian
A person who has custodial rights and responsibilities for a minor or a person who is incapable of handling their own affairs. A Guardian is Court Appointed.

In testate
The deceased party had no will.

Inheritance Tax Waiver
A document issued by the state certifying that the estate tax has either been paid or has been waived by the state.

Investor
Someone who commits money or capital in order to gain a financial return e.g. as an investment in the common stock of a company. A shareholder.

Joint Tenancy
A form of registration, properly abbreviated as "JT TEN" on stock certificates, that means that all parties named on the certificate have an undivided interest in the shares represented by the certificate. Thus, if one of the tenants should die the entire value of the certificate becomes the property of the surviving tenants. (Identical to Joint Tenancy With Right of Survivorship.)

Legal Transfer
Transfer of securities, which require special documents because they involve the settlement of estates of deceased shareholders, trust accounts, or corporation holdings.

Medallion Signature Guarantee
A statement (stamp and signature) given by a financial institution such as a commercial bank, credit union, brokerage firm, etc., that is a member of the Securities Transfer Association Medallion Program (STAMP), NY Stock Exchange Program or Stock Exchange Medallion Program (SEMP, MSP.)

Medallion Stamp Program
A program developed by the Securities Transfer Association to meet the requirements of an SEC Rule, which increases the number and type of financial institutions eligible to guarantee signatures. By Medallion Guaranteeing the stock to be sold, assigned or transferred, the financial institution is taking financial responsibility if the transfer is completed fraudulently.

Notary Seal
Provided by a Notary Public; a notary seal signifies that the party signing the document has sworn that contents of the document are truthful and accurate.

Over-the-Counter
The buying and selling of securities through 'OTC' stocks are not listed on an exchange but are sold primarily through NASDAQ via a nationwide network of brokers and dealers.

Power of Attorney
A document used by one person to give another signing authority. A power of attorney is in effect only as long as the maker is alive. We will accept a photocopy of the original Power of Attorney that is Medallion guaranteed.

Preferred Stock
Issued after common stock has been issued. Preferred stockholders receive dividends prior to common stockholders. Should a company go out of business, and its assets are liquidated, preferred stockholders are entitled to distributions ahead of common stockholders.

Probate
Probate is the formal, court supervised process of turning a deceased party's assets over to his or her heirs.

Prospectus
A formal written offer to sell securities that sets forth the plan for a proposed business enterprise or the facts concerning an existing one that an investor needs to make an informed decision.

Proxy
As a stockholder, you may have the right to vote on major policy decisions of a company. Most shareholders vote by an absentee ballot or proxy, which they receive prior to the annual meeting.

Record Date
The day on which a company closes its stockholder records for the purpose of identifying the recipients of a forthcoming dividend distribution or other rights.

Registered Shareholder
Securities held on the books of a corporation in the name(s) of the shareholder(s), as opposed to Street Name or another name other than the shareholder. Direct owners receive all corporate communications directly from a company.

Rights Offering
An offering of common stock to existing shareholders who hold rights that entitles them to buy newly issued shares at a discount price at which shares will later be offered to the public.

Shareholders Of Record
Shareholders whose names actually appear on the records of the corporation from which the shares are issued. See also Street Name.

Small Estate Affidavit
A notarized document that the heir completes. The form lists the names of all heirs and next of kin of the decedent and states that probate was not initiated for the decedent. It must also be noted in the affidavit that the estate does not exceed the small estate maximum for the state in which the person resided.

Stock Power or Assignment
Form used to instruct the transfer of ownership of a security from the registered owner(s)s to a third party. Required to be completed in cases of registered book entry shares or where back of certificate is not used. All shareholder(s) signatures are required and it should also be Medallion Guaranteed.

Stock Split
Increase in a corporation's number of outstanding shares of stock without any change in the shareholders' equity or the aggregate market value at the time of the split.

Street Name
Ownership of shares, which are held for the benefit of the shareholder in a brokerage account, and are not reflected in the shareholder's name on the records of the corporation. See also Shareholders of Record.

Street Name Holders
Shareholders who hold their shares in their broker's name.

Surety Company
Usually an insurance company, that guarantees the faith of another. Used during the stock certificate replacement process, whereby a surety bond in the amount of two percent of the market value of the security to be replaced must be issued.

Taxpayer Identification Number
The number used to report dividends and other income. In the case of individuals it is the Social Security Number, in all other instances, it is the Employer Identification Number.

Tender Offer
An offer to buy shares of a corporation, usually at a premium above the shares' market price. A tender offer may arise from friendly negotiations between the company and a corporate suitor who must file a statement with the Securities and Exchange Commission.

Testate
The deceased party had a valid will.

Transfer on Death
A form of registration that allows shareholders to name on their certificate the party they would like to receive the shares at the time of their death.

Trust
A relationship established by agreement between a grantor and a trustee to manage assets or property for another's benefit.

Trustee
A person or institution holding property in trust. The trustee manages and invests the assets and makes distributions according to the terms of the trust.

Warrants
The opportunity to buy stock at a fixed price during a specific period of time. After a warrant is issued, it can be traded like other investments. They carry no voting rights and the holder does not receive dividends.

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