Free SIE Glossary — 50 Terms in Plain English

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

Adjustable-rate preferred stock

Preferred stock whose dividend resets periodically to track a benchmark interest rate. Because the payout floats with rates, its price stays steadier than fixed-rate preferred stock.

American Depositary Receipt (ADR)

A certificate traded on U.S. exchanges that represents shares of a foreign company, letting Americans invest abroad in dollars. Holders typically have limited or no voting rights and receive dividends converted into U.S. dollars; the main tested risk is currency (exchange-rate) fluctuation.

Articles of incorporation (corporate charter)

The founding document filed with the state that legally creates a corporation and sets its basic terms, such as how many shares it may issue.

Authorized shares

The maximum number of shares a company is legally allowed to issue, set in its corporate charter. It is a ceiling, not the number actually sold.

Blue-chip stock

Stock in a large, financially strong, well-established company with a history of steady earnings and dividends. Seen as relatively safe, lower-risk equity.

Callable preferred stock

Preferred stock the issuer can buy back at a set price after a certain date. It usually pays a higher dividend to compensate, since the issuer holds the timing advantage.

Cash dividend

A dividend paid in actual money per share. It is taxable in the year received and reduces the company's cash.

Common stock

The basic ownership share of a company. It gives you voting rights and a chance at growth, but you get paid last if the company is liquidated.

Control stock (affiliate stock)

Shares held by company insiders such as officers, directors, or large owners. Even if the shares are registered, insiders must follow Rule 144 limits when selling.

Convertible preferred stock

Preferred stock that can be swapped for a set number of common shares. It typically pays a lower dividend because the conversion feature adds upside potential.

Cumulative preferred stock

Preferred stock where any skipped dividends pile up and must all be paid before common shareholders get a dime. The trap: missed dividends are not forgiven, they accumulate.

Cumulative voting

A voting method where your total votes equal shares owned times the number of open seats, and you may pile them all on one candidate. This is designed to give small shareholders a better shot at electing a director.

Dilution

The drop in each existing shareholder's ownership percentage when a company issues new shares. Preemptive rights exist to protect investors from being diluted.

Dividend

A share of company profits paid out to shareholders, usually in cash or extra stock. Dividends are never guaranteed and must be declared by the board.

Dividend dates

The four-step sequence for paying a dividend: declaration date (board announces it), ex-dividend date (buy on or after and you miss the dividend), record date (you must own the stock to qualify), and payment date (cash arrives). The ex-date is one business day before the record date under T+1 settlement.

Equity security

A piece of ownership in a company, usually stock. Owning equity means you own a slice of the business, not a loan to it like a bond.

Growth stock

Stock in a company expected to grow earnings faster than average, usually paying little or no dividend because profits are reinvested. Investors buy it for price appreciation.

Issued shares

Shares the company has actually sold out of its authorized amount. Issued is always less than or equal to authorized.

Large-cap, mid-cap, and small-cap stocks

Categories that sort companies by market capitalization (share price times shares outstanding). Large-caps are the biggest and steadiest; small-caps are smaller and tend to be more volatile.

Limited liability

A core protection of stock ownership: the most a shareholder can lose is the money invested. Personal assets are never on the hook for the company's debts.

Market capitalization

A company's total stock-market value, found by multiplying shares outstanding by the current share price. It sorts firms into large-cap, mid-cap, and small-cap buckets.

Outstanding shares

Issued shares currently held by investors. Outstanding equals issued shares minus any treasury (repurchased) shares.

Par value

A bookkeeping number assigned to a share, not its market price. For preferred stock, the annual dividend is figured as par value times the dividend rate (for example, 6% of a $100 par equals $6 a year); for common stock par is mostly meaningless to investors.

Participating preferred stock

Preferred stock that can receive dividends above its fixed stated rate, sharing in extra distributions (typically alongside common shareholders) when the company declares them.

Penny stock

A low-priced stock (generally under $5) that is not listed on a major exchange and trades over the counter. Special Penny Stock Rules require firms to give risk disclosures and confirm the customer can handle the speculation.

Preemptive right

An existing shareholder's right to buy new shares first before they are sold to the public, so their ownership percentage is not watered down.

Preferred stock

A stock that pays a fixed dividend and gets paid before common stock, usually with no voting rights. Because its dividend is fixed, its price reacts to interest rates much like a bond, but it is still equity and ranks behind bonds and creditors if the company is liquidated.

Proxy

A form letting a shareholder vote on company matters without attending the meeting in person. It is essentially voting by mail or absentee ballot for stockholders.

Proxy solicitation

When a company asks shareholders to assign their voting authority so management can vote on their behalf. Proxy materials must be sent before the annual meeting.

Registrar

The party that audits the transfer agent, making sure a company never issues more shares than it is authorized to. It prevents over-issuance of stock.

Restricted stock

Unregistered shares, often from a private sale, that cannot be freely resold until a holding period and other conditions are met under Rule 144.

Rights (subscription right)

Short-term securities issued to current shareholders (one per share owned) that let them buy new shares at a price below market, honoring their preemptive right. They expire quickly, often within 30 to 45 days.

Rule 144

The SEC rule that governs reselling restricted and control stock. Restricted shares need a six-month holding period, and affiliates face volume caps each quarter to prevent flooding the market.

Statutory voting

A voting method where you get one vote per share for each open board seat, but you must spread those votes across candidates (you cannot pile them all on one). This tends to favor large shareholders.

Stock dividend

A dividend paid in extra shares instead of cash. You owe no tax until you sell, but your cost basis spreads across more shares, so the per-share basis drops.

Stock split

A change in the number of shares that adjusts the price to match, leaving total value the same. A forward split (e.g. 2-for-1) gives you more shares at a lower price; a reverse split (e.g. 1-for-10) gives you fewer shares at a higher price. Par value adjusts inversely, but your total investment value does not change.

Tender offer

A public bid to buy a large block of shares from holders, usually at a premium over market price, within a set window. When a company buys back its own shares this way, those shares become treasury stock.

Transfer agent

The firm that keeps a company's official list of shareholders, issues and cancels stock certificates, and handles name changes when shares trade hands.

Treasury stock

Shares the company issued and later repurchased. Treasury stock has no voting rights and pays no dividends, and it is not counted as outstanding shares.

Voting rights

Common stockholders' power to vote on board members and major company decisions. The exam contrasts this with preferred and treasury stock, which generally do not vote.

Warrant

A long-term security giving the holder the right to buy stock at a fixed price. Unlike rights, warrants last for years and are usually issued with an exercise price above the stock's current price, often attached to a bond or preferred stock as a sweetener.

Adjustment (income) bond

A bond that only pays interest if the issuer earns enough to afford it, often issued by companies coming out of bankruptcy. Interest is not guaranteed, making it risky.

Adjustment of open orders

On the ex-date, certain open GTC orders priced below the market (like buy limits and sell stops) are automatically reduced for a split or cash dividend. Exam tip: orders the customer marks DNR (do not reduce) are left alone.

ADR voting and dividends

ADR holders generally have limited or no voting rights and receive dividends in U.S. dollars after conversion. Exam tip: those dividends can be reduced by currency conversion and foreign tax withholding.

Buyback (share repurchase)

A company buying back its own shares, which shrinks the supply and can lift earnings per share. Those repurchased shares become treasury stock and lose voting and dividend rights.

Collateral trust bond

A bond backed by securities (like stocks or other bonds) the issuer owns and pledges, held by a trustee. Used when a company has financial assets but no real property to pledge.

Corporate action

Any company decision that changes its shares or capital structure, such as a split, merger, dividend, or buyback. The exam wants you to track what happens to the investor's position afterward.

Cum dividend (with dividend)

A trade made before the ex-dividend date, so the buyer is entitled to the upcoming dividend. Exam tip: it is the opposite of buying ex-dividend, where the seller keeps the payout.

Currency risk

The danger that a foreign currency loses value against the dollar, shrinking an ADR holder's returns even if the foreign stock itself rose. A stronger foreign currency works the other way and can boost returns.

Declaration date

The day a company's board officially announces a dividend and sets the other key dates. It is the starting gun of the dividend timeline.

The full glossary

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