CMA Securities & Investment key terms

A formal disclosure document that a securities issuer must publish before a public offering, setting out the issuer's business, financial statements, risks, use of proceeds, and the terms of the securities being sold.

A regulatory obligation requiring a dealer or adviser to collect and document each client's financial situation, investment objectives, risk tolerance, time horizon, and knowledge before recommending or trading securities.

The standard that an investment recommendation must fit the client's documented objectives, risk tolerance, and circumstances, and must be assessed against the client's whole portfolio rather than in isolation.

A legal obligation to act in another party's best interest, placing the client's interests ahead of the adviser's own and requiring loyalty, full disclosure of conflicts, and prudent management of entrusted assets.

A situation where an adviser, dealer, or firm has a personal or commercial interest that could bias advice or trading decisions, requiring disclosure, avoidance, or controls to protect the client.

Buying or selling securities while in possession of material non-public information, or passing such information to someone who trades on it, which is prohibited as a breach of market fairness.

Information that a reasonable investor would consider important in deciding whether to buy or sell a security, or that would likely move the security's price if publicly known.

The ongoing obligation of a public issuer to promptly publish material changes in its business or affairs and to file periodic financial reports, keeping the market informed between offerings.

An investor who meets defined financial thresholds, such as minimum income, net worth, or asset size, and may therefore buy securities under exemptions from full prospectus requirements.

An equity security representing residual ownership in a company, typically carrying voting rights and a claim on dividends and assets that ranks after creditors and preferred shareholders.

An equity security that ranks ahead of common shares for dividends and liquidation proceeds, usually pays a fixed dividend, and often carries limited or no voting rights.

The total market value of a company's outstanding shares, calculated by multiplying the share price by the number of shares outstanding, and used to classify companies by size.

A ratio showing annual dividends per share divided by the share price, expressing the income return an investor receives from holding an equity security at its current price.

A valuation multiple equal to a company's share price divided by its earnings per share, showing how much investors pay for each dollar of reported or expected profit.

A company's net income attributable to common shareholders divided by the weighted average number of common shares outstanding, a core input to equity valuation and profitability analysis.

Cash generated by operations after capital expenditures, representing funds available for debt repayment, dividends, buybacks, or reinvestment, and widely used in discounted cash flow valuation.

A valuation method that projects future cash flows and discounts them to present value using a required rate of return, producing an estimate of an asset's intrinsic worth.

A debt security in which the issuer borrows a principal amount and promises to pay periodic interest and to repay the principal at maturity, ranking ahead of equity in the capital structure.

The fixed or floating annual interest rate stated on a bond, expressed as a percentage of its face value, which determines the cash interest paid to the holder each period.

The total annualized return an investor earns by holding a bond to maturity, assuming all coupons are reinvested at that same rate, reflecting the bond's current price and cash flows.

A measure of a bond's price sensitivity to changes in interest rates, expressed in years, where a higher duration indicates a larger percentage price change for a given rate move.

An independent agency's assessment of an issuer's ability and willingness to meet debt obligations, expressed on a letter scale and used to gauge default risk and required yield.

A contract granting the buyer the right, but not the obligation, to buy or sell an underlying asset at a set price before or on an expiry date, in exchange for a premium.

An option contract giving its holder the right to buy an underlying asset at a specified strike price within a stated period, typically used to gain upside exposure or hedge a short position.

An option contract giving its holder the right to sell an underlying asset at a specified strike price within a stated period, often used for downside protection or to express bearish views.

A standardized exchange-traded agreement to buy or sell an asset at a set price on a future date, marked to market daily and settled through a clearinghouse that manages counterparty risk.

Collateral or equity that an investor must deposit with a broker or clearinghouse to support a leveraged or derivative position, subject to minimum requirements and daily calls.

Selling borrowed securities in the hope of buying them back later at a lower price, profiting from a decline while bearing unlimited loss potential and borrowing costs.

The ease and speed with which a security can be bought or sold in meaningful size without materially moving its price, influenced by trading volume and market depth.

The process of dividing a portfolio among asset classes such as cash, bonds, and equities to balance expected return against risk in line with the investor's objectives.

Spreading investments across assets, sectors, or regions so that poor performance in one holding is offset by others, reducing unsystematic risk without necessarily lowering expected return.

A measure of a security's or portfolio's sensitivity to movements in the overall market, where a beta above one implies greater volatility and below one implies less.

An investor's capacity and willingness to accept fluctuations in portfolio value in pursuit of higher returns, shaped by financial situation, time horizon, and psychological attitude.

The date on which a securities trade is finalized, with cash paid and securities delivered to the buyer, typically occurring a set number of business days after the trade date.

An entity that acts as intermediary between trade counterparties, guaranteeing performance, netting obligations, and managing collateral to reduce systemic risk in securities and derivatives markets.

A pooled investment vehicle, usually open only to accredited or institutional investors, that may use leverage, derivatives, and short selling and typically charges performance-based fees.