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Last Updated: Jan 31, 2017 08:39AM AST

Definitions of specific terms found within the Insider Transactions of a person’s profile:

Award/ Grant:
The issuance of an award under a stock plan, such as stock options or shares of restricted stock.

Call:

  • The period of time between the opening and closing of some future markets wherein the prices are established through an auction process
  • An option contract giving the owner the right (but not the obligation) to buy a specified amount of an underlying security at a specified price within a specified time.

Class A Common Stock:
A classification of common stock that may be accompanied by more or fewer voting rights than Class B shares. Although Class A shares are often thought to carry more voting rights than Class B shares, this is not always the case. Companies will often try to disguise the disadvantages associated with owning shares with fewer voting rights by naming those shares “Class A,” and those with more voting rights “Class B.”

Class B Common Stock:
A classification of common stock that may be accompanied by more or fewer voting rights than Class A shares. Although Class A shares are often thought to carry more voting rights than Class B shares, this is not always the case. Companies will often try to disguise the disadvantages associated with owning shares with fewer voting rights by naming those shares “Class A,” and those with more voting rights “Class B.

Common Stock: 
Are securities that represent part ownership in a company and generally carry voting privileges. Common shareholders may be paid dividends, but only after preferred shareholders are paid. Common shareholders are last in line after creditors, debt holders and preferred shareholders to claim any of a company’s assets in the event of liquidation.

Convertible Debenture: 
A type of loan issued by a company that can be converted into stock by the holder and, under certain circumstances, the issuer of the bond. By adding the convertibility option the issuer pays a lower interest rate on the loan compared to if there was no option to convert. These instruments are used by companies to obtain the capital they need to grow or maintain the business.

Convertible Note:
A convertible note is a type of security that can be converted into common stock at the holder’s option. Convertible notes can be exchanged for common stock at a stated conversion price. The number of common shares that can be obtained is determined by the conversion ratio, which divides the par value of the security by the conversion price. For example, assume the conversion price at the time of issue for a convertible subordinate note is $50. Each $1,000 note, then, could be exchanged for 20 shares of common stock ($1,000 / $50 = 20 shares).

Deferred Stock: 
Is one or more shares of stock that does not pay dividends until a specified date or event occurs, such as a company reaching certain profitability levels. Deferred stock is typically held in a lock deferred stock compensation account until the expiration date. Shareholders of deferred stock do not have any rights to the assets of a bankrupt corporation until all preferred and common stockholders have been paid. Usually deferred stock is issued to company founders and certain members of management to restrict their access to dividends until dividends have been distributed to all other shareholders. Deferred stock is, therefore, subordinate to all other classes of stock.

Derivative: 
A security whose price is dependent upon or derived from one or more underlying assets. The derivative itself is merely a contract between two or more parties. Its value is determined by fluctuations in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes. Most derivatives are characterized by high leverage.

Direct Ownership: 
Direct owners are stockholders, with their names registered on the company books. Any legal entity, such as a business or individual, may be a direct owner. Direct owners become direct owners by either possessing a stock certificate or using the book-entry form. Those entered in book-entry form do not receive a physical certificate, but instead receive a statement once a year indicating the number of shares registered to a particular stockholder within that year. Stockholders purchasing stock through a broker must request a book-entry form. Direct owners receive dividend payments, direct corporate communications and annual reports. The shareholder name also appears on the shareholder on record list.

Employee Stock Option (ESO): 
Compensation that has been earned by an employee, but not yet received from the employer. Because the ownership of the compensation – which may be monetary or otherwise – has not been transferred to the employee, it is not yet part of the employee’s earned income and is not counted as taxable income.

Exercise: 
To put into effect the right specified in a contract. In options trading, the option holder has the right, but not the obligation, to buy or sell the underlying instrument at a specified price on or before a specified date in the future. If the holder decides to buy or sell the underlying instrument (rather than allowing the contract to expire worthless or closing out the position), he or she will exercise the option, and make use of the right available in the contract.

Gift: 
Property, money or assets that one person transfers to another while receiving nothing or less than fair market value in return. Under certain circumstances, the IRS collects a tax on gifts. Transfers of money or property that are given freely or exchanged for less than market value may be subject to the gift tax if the donor has exceeded the annual or lifetime gift exemption.

Hypothetical stock portfolios:
Are sometimes called practice portfolios or stock watch lists. Investors use them primarily to track a particular security or market’s performance before investing cash. Strategies for tracking a hypothetical portfolio’s performance are similar to the strategies investors use when tracking the performance of a funded portfolio. Investors have several options for tracking hypothetical portfolios. Some methods are as simple as making a list or spreadsheet of performance measurements for various stocks, while other methods are more sophisticated and use software to monitor the portfolio’s performance.

Incentive Stock Option (ISO):
A type of employee stock option with a tax benefit, when you exercise, of not having to pay ordinary income tax. Instead, the options are taxed at a capital gains rate.

Indirect Ownership: 
Owners with stock held through a broker or a bank are indirect owners. An indirect owner’s name is not on the stock’s certificate. The broker receives the dividends, and then distributes them according to the contract. The stockholder receives the annual meeting correspondence by mail, electronically or through a third party delivery. The stockholder chooses the delivery method.

Initial Security Ownership:
Shows the stock offered to high level executives in the company. These are options to buy. The executive usually has an expiry date in which to purchase these stocks. If they are not purchased before the due date the offer is cancelled.

Insider: 
All directors and senior officers of a company, and those who are presumed to have access to inside information concerning the company. An insider is also anyone owning more than 10% of the voting shares of a company.

Insider Transactions: 
The buying or selling of a security by someone who has access to material, non public information about the security. Insider trading can be illegal or legal depending on when the insider makes the trade: it is illegal when the material information is still non public trading while having special knowledge is unfair to other investors who don’t have access to such knowledge. Illegal insider trading therefore includes tipping others when you have any sort of non public information. Directors are not the only ones who have the potential to be convicted of insider trading. People such as brokers and even family members can be guilty.

Insider trading is legal once the material information has been made public, at which time the insider has no direct advantage over other investors. The SEC, however, still requires all insiders to report all their transactions. So, as insiders have an insight into the workings of their company, it may be wise for an investor to look at these reports to see how insiders are legally trading their stock.

Liquidity:
This refers to how easily securities can be bought or sold in the market. A security is liquid when there are enough units outstanding for large transactions to occur without a substantial change in price. Liquidity is one of the most important characteristics of a good market. Liquidity also refers to how easily investors can convert their securities into cash and to a corporation’s cash position, which is how much the value of the corporation’s current assets exceeds current liabilities.

Market Value: 
The current quoted price at which investors buy or sell a share of common stock or a bond at a given time. The market capitalization plus the market value of debt. Sometimes referred to as “total market value”.

Non-Qualified Stock Option (NSO): 
A type of employee stock option where you pay ordinary income tax on the difference between the grant price and the price at which you exercise the option.

Performance Stock: 
In the case of stock compensation, shares of company stock given to managers only if certain companywide performance criteria are met, such as earnings per share targets.

Phantom Stock: 
Phantom stock is essentially a cash bonus plan, although some plans pay out the benefits in the form of shares. Phantom stock is favoured by closely held or family-owned companies who want to incent management and other employees without granting them equity.

Preferred Stock: 
A class of stock that entitles the owner to a fixed dividend ahead of the issuer’s common shares and to a stated dollar value per share in the event of liquidation. It usually does not have voting rights, unless a stated number of dividends have been omitted.

Put: 
An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified time. The buyer of a put option estimates that the underlying asset will drop below the exercise price before the expiration date.

Registered Stock: 
Registered stock is a stock that is registered on the name of the exact owner. If the owner of such a share sells his share, the new owner must register with name and address. Registered stocks offer issuers the advantage, enabling them to always know exactly who their shareholders are.

Restricted Stock: 
Restricted stock, also known as letter stock or restricted securities, refers to stock of a company that is not fully transferable until certain conditions have been met. Upon satisfaction of those conditions, the stock becomes transferable by the person holding the award. Restricted stock is often used as a form of employee compensation, in which case it typically becomes transferrable upon the satisfaction of certain conditions, such as continued employment for a period of time and sometimes the achievement of particular earnings per share goals or other financial targets. Restricted stock is a popular alternative to stock options, particularly for executives, due to favorable accounting rules and income tax treatment.

Sale:

  • In general, a transaction between two parties where the buyer receives goods (tangible or intangible), services and/or assets in exchange for money.
  • An agreement between a buyer and seller on the price of a security.

Stock Option: 
A privilege sold by one party to another that offers the buyer the right, but not the obligation, to buy (call) or sell (put) a security at an agreed-upon price during a certain period of time or on a specific date.

Strike Price: 
The stated price per share for which underlying stock may be purchased (for a call) or sold (for a put) by the option holder upon exercise of the option contract.

Subject to Section 16: 
Insiders affiliated with a public company, or any owners of more than 10%, are required to electronically file Form 3 with the SEC no later than 10 days after the individual becomes affiliated with the company. If there is a material change in the holdings of the company’s insiders, they are required to file Form 4 with the SEC. Also, pursuant to Section 16, Form 5 must be filed by an insider who has conducted an insider transaction during the year if it was not previously reported on Form 4.

Tax Liability: 
Is the total amount of tax that an entity is legally obligated to pay to an authority as the result of the occurrence of a taxable event. Tax liability can be calculated by applying the appropriate tax rate to the taxable event’s tax base. Taxable events include, but are not limited to, annual income, the sale of an asset, a fiscal year-end or an inheritance.

Warrant: 
Is a security giving the holder the right to purchase securities at a stipulated price within a specified time limit. Exercise of the warrant is solely at the discretion of the holder. Warrants are not exercisable after the expiry date. A warrant is often issued in conjunction with another security as part of a financing. A warrant may be traded as a listed security or it may be held privately.

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