Free Series 65 Glossary — 50 Terms in Plain English

The first 50 terms from our full Series 65 glossary, defined so a beginner actually gets them. Type to filter:

American Depositary Receipt (ADR)

A certificate traded in the U.S. that represents shares of a foreign company. It lets Americans invest abroad in dollars, but adds currency risk on top of normal stock risk.

Assessable vs. nonassessable stock

Nonassessable stock means the company cannot demand more money from shareholders after purchase. Virtually all modern stock is nonassessable, limiting your loss to what you paid.

Authorized stock

The maximum number of shares a company is legally allowed to issue, set in its charter. The key distinction: authorized is the ceiling, issued is what has been sold, and outstanding is issued shares still held by investors (issued minus treasury).

Callable preferred stock

Preferred shares the issuer can buy back at a set price after a certain date. The trap is that companies tend to call them when rates fall, hurting the investor who wanted the high dividend.

Common stock

The basic ownership share of a company, carrying voting rights and a claim on profits. It offers the most upside but sits last in line if the company is liquidated.

Control stock

Shares held by an affiliate such as an officer, director, or large shareholder, regardless of how they were bought. Selling them is limited by Rule 144 volume caps because the seller has inside influence over the company.

Convertible preferred stock

Preferred shares the holder can swap for a set number of common shares. This lets the investor trade steady income for a shot at the common stock's growth.

Cumulative preferred stock

Preferred shares where any skipped dividends pile up and must all be paid before common shareholders get anything. A frequent exam favorite for calculating dividends in arrears.

Cumulative voting

A voting method where a shareholder's total votes equal their shares multiplied by the number of director seats up for election, and those votes may be split among candidates or stacked on one. Allowing them to concentrate on a single candidate gives minority and small shareholders a better shot at electing a director than statutory voting.

Debenture

A corporate bond backed only by the company's general credit and promise to pay, not by any specific collateral. It is junior to secured bonds if the company fails.

Declaration date

The day the board officially announces an upcoming dividend, its size, and its payment dates. No dividend is owed to anyone until the board declares it.

Dividend

A cash or stock payment a company makes to shareholders out of profits. Dividends are never guaranteed and the board must declare them before any payment is owed.

Dividend yield

The annual dividend divided by the current share price, shown as a percentage. It tells you the income return on a stock, and it rises as the price falls.

Equipment trust certificate

A bond secured by physical equipment such as railcars or planes. If the issuer defaults, lenders can seize the gear, making these relatively low risk.

Equity security

An ownership stake in a company, usually stock. Owners share in profits and growth but get paid last if the company fails.

Eurodollar bond

A bond denominated in U.S. dollars but issued and sold outside the United States. It exposes investors to currency and political factors of the issuing market.

Ex-dividend date

The first day a stock trades without the right to the upcoming dividend. Buy on or after this day and the seller keeps the dividend, which is why the price typically drops by the dividend amount that morning.

Guaranteed bond

A bond whose interest and principal are backed by a company other than the issuer, usually a parent firm. The guarantee is only as strong as the guarantor.

Limited liability

The protection that caps a shareholder's loss at the amount they invested. They are not personally on the hook for the company's debts, which is a key appeal of owning stock.

Market capitalization

A company's total stock value, found by multiplying share price by shares outstanding. It's how stocks are sorted into large-cap, mid-cap, and small-cap categories.

Outstanding shares

The shares currently held by investors, equal to issued shares minus any treasury stock the company bought back. This is the figure used for market cap, earnings per share, and dividend totals.

Par value

An arbitrary accounting value assigned to a share, not its market price. For preferred stock it matters because the fixed dividend is set as a percentage of par, and preferred par is typically $100 (so a 6% preferred pays $6 per year).

Participating preferred stock

Preferred shares that can earn extra dividends beyond the fixed rate when the company has strong profits. The investor 'participates' in good years rather than being capped at the stated rate.

Payable date

The day the company actually delivers the dividend to qualifying shareholders. It is the last step in the dividend timeline, after declaration, ex-date, and record date.

Preemptive right

The right of existing shareholders to buy new shares first so their ownership percentage isn't diluted. This is the basis for a rights offering.

Preferred stock

A class of stock that pays a fixed dividend and has a senior claim over common stock to both dividends and assets if the company is liquidated. It usually carries no voting rights, and because its dividend is fixed, its price moves with interest rates, so the exam treats it as a hybrid that behaves much like a bond.

Record date

The day the company checks its books to see who owns the stock and therefore qualifies for the dividend. It falls one business day after the ex-dividend date under the standard settlement schedule.

Residual claim

The common shareholder's last-in-line claim on assets if a company is liquidated. Creditors, bondholders, and preferred shareholders all get paid first.

Restricted stock

Unregistered shares acquired privately, such as in a private placement, that cannot be freely resold until a holding period and other Rule 144 conditions are met. The exam tests this as the restriction on dumping insider or pre-IPO shares onto the public market.

Reverse stock split

A reduction in share count that raises the price per share proportionally, leaving total value unchanged. A 1-for-2 split halves your shares and doubles the price, often used to lift a low stock price back up to respectability.

Rights (subscription rights)

Short-term privileges letting current shareholders buy new shares below market price before others can. They usually expire within weeks, which is what separates them from warrants.

Rule 144

The SEC rule that sets the conditions for reselling restricted and control stock, including a holding period and limits on how much can be sold at once. It exists to stop insiders from quietly flooding the market with shares.

Senior securities

Securities that get paid before others if a company is liquidated. Bonds rank above preferred stock, which ranks above common stock.

Statutory voting

A voting method where a shareholder may cast up to one vote per share for each open director seat, but cannot pile those votes onto a single candidate. This favors large shareholders, since they can outvote small holders on every seat.

Stock dividend

A dividend paid in extra shares instead of cash, which lowers your cost basis per share but leaves your total value unchanged. The exam trap: it is not taxed when received, unlike a cash dividend.

Stock split

An increase in share count that lowers the price per share proportionally, leaving total value unchanged. A 2-for-1 split doubles your shares and halves the price, so your stake is worth the same.

Subordinated debt

Debt that gets repaid only after other (senior) debt is paid in a bankruptcy. Higher risk to the lender, so it usually carries a higher yield.

Treasury stock

Shares the company issued and later repurchased, now held by the company itself rather than by investors. These shares carry no votes and pay no dividends while the company holds them.

Trust indenture

The legal contract that spells out a bond's terms, including coupon, maturity, and protections for bondholders. A trustee enforces it on the investors' behalf.

Voting rights

The power common shareholders have to vote on directors and major decisions. Preferred and most other securities typically carry no vote, which is a common exam contrast.

Warrant

A long-term certificate giving the holder the right to buy stock at a fixed price, often years out. Warrants are frequently attached to bonds as a 'sweetener' to make the deal more attractive.

Accrued interest

Interest a bond has earned since its last payment date but not yet paid out. A buyer pays the seller this amount at settlement so each side gets the interest for the days they held the bond.

Agency securities

Bonds from government-linked entities like GNMA, FNMA, and FHLMC, often backed by pools of mortgages. Only GNMA carries the full faith and credit of the U.S. government, while FNMA and FHLMC do not, a frequent exam distinction.

Basis point

One hundredth of one percent, or 0.01%, the standard unit for talking about yield changes. A move from 4.00% to 4.25% is a rise of 25 basis points.

Bond

A loan you make to a government or company in exchange for fixed interest payments and the return of your money at the end. In short, an IOU you can buy, sell, and earn income from.

Bond rating

A grade from agencies like Moody's or S&P signaling how likely an issuer is to repay. Higher ratings mean lower risk and lower yield; a downgrade typically pushes a bond's price down.

Call provision

A feature letting the issuer redeem a bond before maturity, usually when rates fall so it can refinance cheaper. It works against the investor, who loses the high coupon and must reinvest at lower rates.

Call risk

The risk an issuer redeems your bond early when rates fall, cutting off its high coupon and forcing you to reinvest at lower rates. It pairs naturally with reinvestment risk.

Convertible bond

A corporate bond the holder can swap for a set number of the issuer's shares. The conversion feature lets the investor accept a lower coupon in exchange for upside if the stock rises.

Coupon rate (nominal yield)

The fixed annual interest a bond pays, stated as a percentage of par value. A 5% coupon on a $1,000 bond pays $50 a year no matter what the bond's price does.

The full glossary

Every term the Series 65 tests — organized by unit, exam traps flagged: