Series 26 key terms

A fund that continuously issues redeemable shares priced at net asset value plus any sales charge; investors buy from and sell back to the fund itself rather than trading shares on an exchange.

A fund that raises capital once through a public offering and then trades on an exchange or over-the-counter market, so share prices reflect supply and demand rather than net asset value.

A fund holding a fixed, unmanaged portfolio for a set term that issues redeemable units and does not actively trade its holdings, distributing proceeds as securities mature or are called.

The per-share value of a fund, found by subtracting liabilities from total assets and dividing by shares outstanding; it is typically computed once each business day at market close.

The rule that fund shares are priced at the next net asset value calculated after an order is received, so an investor cannot transact at a known, outdated price.

A sales charge deducted from the investor's purchase amount when buying fund shares, usually stated as a percentage of the public offering price and disclosed in the fee table.

A sales charge assessed when shares are redeemed, commonly scheduled to shrink each year until it disappears; it is often used in class B and class C share arrangements.

An annual asset-based charge taken from fund assets to pay distribution and shareholder servicing costs, permitted under a specific rule of the Investment Company Act of 1940.

Total annual fund operating expenses, including management fees and any 12b-1 fees, expressed as a percentage of average net assets and disclosed in the prospectus fee table.

A purchase amount at which the front-end sales charge falls to a lower percentage; investing at or above that level reduces the load paid per dollar.

A privilege allowing an investor to count existing fund holdings toward the amount needed to reach a breakpoint, so additional purchases may qualify for a lower sales charge.

A written statement in which an investor commits to buying a stated dollar amount of fund shares within a set period, such as thirteen months, to obtain a breakpoint discount.

The disclosure document a fund must provide to investors, describing investment objectives, risks, fees and expenses, performance, and the procedures for buying and redeeming shares.

A tax status a fund elects under the Internal Revenue Code that avoids entity-level taxation of income and gains passed through to shareholders, provided diversification, income-source, and distribution tests are met.

An insurance-based product, such as a variable annuity or variable life policy, whose cash value or death benefit rises and falls with the investment results of underlying subaccounts.

An insurance company account, legally segregated from the insurer's general account, that holds assets supporting variable contract values and is itself registered as an investment company.

A division within a separate account that invests in a specific underlying portfolio, giving contract owners a menu of investment options with differing risk and return characteristics.

An accounting measure of a contract owner's interest in a variable annuity's subaccounts during the pay-in phase, whose value changes with the investment performance of those subaccounts.

A measure used during the payout phase of a variable annuity to calculate each income payment; its value fluctuates with investment results, so payments may rise or fall over time.

The benchmark rate used to set the first variable annuity income payment and to judge later ones: performance above the rate increases payments, while performance below it decreases them.

A fee an insurer charges when a contract owner withdraws more than the permitted free amount during early contract years, typically declining each year until it reaches zero.

A state-required window, often ten to thirty days after a contract is delivered, during which the owner may cancel and receive a refund of premiums paid or contract value.

A tax-free transfer of an annuity or life insurance contract into a new contract of the same type, deferring recognition of gain when applicable requirements are satisfied.

The duty to have a reasonable basis for believing a recommendation fits a customer's investment profile, including objectives, risk tolerance, time horizon, liquidity needs, and financial circumstances.

The requirement that a firm use reasonable efforts to obtain and keep current the essential facts about each customer so accounts can be serviced and recommendations properly evaluated.

Approval by a registered principal of items such as new accounts, transactions, correspondence, or advertising before use or execution, documented to show the activity met firm and regulatory standards.

A firm's documented policies and controls describing how it supervises registered representatives and business activities and how it will detect and correct compliance problems.

The overall framework of procedures, reviews, and records a member firm must maintain to supervise its associated persons and ensure compliance with securities laws and rules.

A yearly mandatory session where registered persons review compliance matters, firm policies, rule changes, and ethical standards; the content and attendance must be documented.

A FINRA rule requiring firms to review and approve deferred variable annuity applications, verify suitability, and complete principal review within set deadlines before sending the transaction to the insurer.

Benefits such as travel, prizes, or merchandise provided to registered persons by product sponsors, permitted only within specified limits and subject to firm approval and recordkeeping.

Any written grievance from a customer alleging a problem with the firm's or a representative's activities; it must be recorded, reviewed by supervisors, and reported when it qualifies.

A limit on gifts or gratuities given to employees of other firms in connection with their employer's business, capped at a fixed annual dollar amount per recipient.

Paid work, or a position of influence such as officer or director, outside the employing firm that a registered person must report in writing and receive approval for before beginning.

Securities transactions outside the employing firm that a registered person recommends or executes; they must be reported and recorded, and may require written approval beforehand.

The uniform application used to register an individual with FINRA and state regulators, disclosing employment history, examinations passed, and any reportable legal or disciplinary events.

The uniform termination notice filed when a registered person leaves a firm, stating the reason for termination and any reportable events; the individual may review and comment on it.

Required periodic training for registered persons made up of a regulatory element set by FINRA and a firm-designed product or compliance element, both needed to keep a registration active.

A firm's written framework, required under the Bank Secrecy Act, for verifying customer identity, monitoring for and reporting suspicious activity, and designating a compliance officer.

A confidential filing to federal authorities about transactions a firm suspects involve illegal funds; the firm and its personnel may not tell the customer that a report was made.

A FINRA rule governing advertising, sales literature, and correspondence, requiring fair and balanced presentations, principal approval of certain materials, and filing of new retail communications.