Series 6 key terms

The process of identifying and contacting potential customers who may need securities or investment products, often through referrals, lists, seminars, or cold calls, while following firm and regulatory communication rules.

An unsolicited telephone contact made to a potential customer to introduce the representative and determine whether the person has interest in or need for investment products.

A recommendation or introduction of a potential customer by an existing client or another person; the representative should record its source and follow firm rules before contacting the prospect.

Written or electronic promotional material distributed to customers or prospects that discusses a broker-dealer's services or investment products and is subject to firm review and retention requirements.

The contract signed when an account is opened that sets out the customer's rights, the firm's terms, arbitration provisions, and authorizations such as whether the account is cash or margin.

The required process of collecting and updating facts about a customer, including identity, financial situation, investment experience, objectives, and risk tolerance, so recommendations and account handling are appropriate.

The standard requiring a representative to have a reasonable basis to believe a recommendation fits the customer's financial profile, investment objectives, risk tolerance, and other relevant circumstances.

The customer's stated financial goal for an investment, such as current income, long-term growth, capital preservation, or a combination, which guides suitable recommendations.

A customer's willingness and financial ability to accept possible loss or volatility in exchange for potential return; it helps determine which investments and allocations are suitable.

Policies and procedures designed to detect and deter money laundering, including monitoring transactions, reporting suspicious activity, and maintaining records required by law.

A required program under which a broker-dealer verifies each new customer's identity using name, address, date of birth, identification number, and other required information before or soon after opening an account.

The official offering document for a mutual fund or other registered security that describes investment objectives, risks, fees, expenses, performance, and how to buy or redeem shares.

A shorter prospectus permitted for mutual funds that presents key information such as objectives, costs, risks, performance, and portfolio holdings, with the full prospectus available on request or online.

A supplementary document filed with the SEC that contains more detailed information about a mutual fund's operations, policies, trustees, and financial statements than the prospectus provides.

The value of a fund's assets minus its liabilities, divided by the number of shares outstanding; it is the price used to calculate purchases and redemptions of open-end fund shares.

An open-end investment company that pools money from many investors and issues redeemable shares; investors buy and sell at net asset value plus any sales charge or minus fees.

An investment company that raises a fixed amount of capital through an initial public offering and then trades its shares on an exchange or over-the-counter market rather than continuously redeeming them.

An investment company that offers a fixed portfolio of securities, often bonds or municipal securities, for a specified period; units are redeemable and the portfolio is generally not actively managed.

A fund whose shares trade on an exchange throughout the day like stock, generally seeking to track an index or portfolio; investors buy and sell at market prices rather than once-daily net asset value.

An insurance contract that invests premiums in a separate account and pays benefits that vary with the performance of underlying investments; it offers tax deferral and optional living or death benefits.

An insurance company account that holds assets supporting variable contracts; its investment performance is passed through to contract owners and is kept separate from the insurer's general account.

A unit used to measure the value of a variable annuity contract during the accumulation phase, before annuity payments begin; its value changes with the separate account's investment performance.

A unit used to calculate annuity payments during the payout phase of a variable annuity; the payment amount varies with the value of the annuity unit and the assumed interest rate.

A recurring fee deducted from a variable annuity's separate account to compensate the insurer for assuming mortality and expense risks and for administrative costs.

A fee charged when a variable annuity or similar product is surrendered or withdrawn early within a stated period, often declining over time; it is separate from tax penalties.

A state-mandated period after delivery of a variable annuity or life insurance contract during which the buyer may cancel for a refund, often subject to the terms in the contract.

A SEC rule requiring broker-dealers and representatives to act in the retail customer's best interest, disclose conflicts, exercise reasonable care, and avoid or disclose excessive compensation, when making recommendations.

An investment strategy of investing a fixed dollar amount at regular intervals regardless of price, which buys more shares when prices are low and fewer when prices are high.

The price an investor pays to buy shares of an open-end fund, generally equal to net asset value plus the maximum or applicable sales charge.

A fee added to or deducted from an investment when shares are bought or sold, often used to compensate the selling broker-dealer; mutual fund sales charges are disclosed in the prospectus.

An annual mutual fund fee charged against fund assets to pay for distribution and sometimes shareholder services, subject to a regulatory cap and disclosed in the prospectus.

The annual percentage of a fund's assets used to pay operating expenses, including management fees and administrative costs; it is disclosed in the prospectus and reduces investor returns.

A dollar level of mutual fund purchases at which the sales charge rate decreases, often offering investors a lower load on larger investments; the prospectus lists the applicable schedule.

A written statement by a mutual fund investor that expresses intent to purchase enough shares within a specified period to reach a breakpoint, allowing a reduced sales charge now.

A mutual fund pricing privilege that lets an investor count the current value of certain existing holdings toward the amount needed to reach a breakpoint on new purchases.

A back-end sales charge charged when mutual fund shares are redeemed within a stated period, usually declining each year until it disappears.

The sale or withdrawal of mutual fund shares back to the fund at net asset value, possibly reduced by a contingent deferred sales charge or other applicable fee.

A written or electronic notice sent to a customer after a securities transaction that states key details such as the security, quantity, price, commission, and trade and settlement dates.

The date by which a securities transaction must be paid for and the securities delivered; for regular-way trades it is set by market rules, commonly one business day after the trade date.

A transaction executed by a representative without the customer's specific instruction as to security, amount, or timing, which requires prior written discretionary authorization and firm approval.