Glossary – Letter S
Sales charge
The fee charged by a mutual fund when purchasing shares, usually payable as a commission to a marketing agent, such as a financial advisor, who is thus compensated for his or her assistance to a purchaser. It represents the difference, if any, between the share purchase price and the share net asset value (NAV).
Savings
Money you have not spent.
Savings account
An account with a bank, trust company or credit union that pays interest on the money you deposit and allows you to withdraw your money at any time.
Scam
A fraudulent or unethical activity; a fraud or trick.
Scrip
A certificate exchangeable for cash before a specified date, after which it may have no value. Usually issued for fractions of shares in connection with a stock dividend or split or in a reorganization of a company. For example, a one-for-three stock dividend would result in many shareholders being entitled to a fraction of a share (1/3 or 2/3) for which scrip would be issued instead of an actual stock certificate.
Seat
The traditional term for membership on a stock exchange. An investment dealer would buy a seat on the exchange and one employee would be designated as the seat holder.
SEC
The Securities and Exchange Commission, a federal body established by the United States Congress as a national U.S. regulatory authority. In Canada there is no national regulatory authority because securities legislation is provincially administered.
Secondary distribution / Secondary offering
The redistribution of a block of stock after it has been initially sold by the issuing company. Usually a large block of shares is involved (e.g. from the settlement of an estate) and these are offered to the public at a fixed price, set in relationship to the stock’s market price.
Secondary market
Secondary markets are the stock exchanges and the over-the-counter market. Securities are first issued as a primary offering to the public. When the securities are traded from that first holder to another, the issues trade in these secondary markets.
Sector
Particular group of stocks, usually concentrating in one industry. Securities analysts often specialize in a particular sector such as financial, consumer products, resources, or science and technology, for example.
Securities
Transferable certificates of ownership of investment products such as notes, bonds, stocks, futures contracts and options.
Securities administrator
A general term referring to the provincial regulatory authority (e.g. securities commission) responsible for administering provincial securities acts.
Securities advisor
A person or firm registered with applicable securities commissions to generally advise the public on securities, often through publications.
Securities commission
Each province has a securities commission or administrator which oversees the provincial securities act. This act is a set of laws and regulations which set down the rules under which securities may be issued and traded.
Securities regulation
Is a series of rules and regulations imposed by Provincial securities regulators, such as the Ontario Securities Commission, BC Securities Commission, etc., upon the conduct of securities market participants including
- issuers that raise capital through security offerings, and
- their directors and officers and
- securities firms, and
- their employees registered to advise and trade in securities.
Securitization
- The development of markets for a variety of debt instruments that permit the ultimate borrower to bypass the banks and other deposit-taking institutions and to borrow directly from lenders.
- In a narrow sense it also refers to the process of converting loans of various sorts into marketable securities by packaging the loans into pools and then selling shares of ownership in the pool itself.
SEDAR
System for Electronic Document Analysis and Retrieval. The CSA’ s national electronic filing system for disclosure by public companies and mutual funds.
SEDI
System for Electronic Disclosure by Insiders. The CSA ‘s national web-based system that facilitates the filing and public dissemination of “insider reports.”
Segregated fund
Legally known as “individual variable insurance contracts,” segregated funds are similar to mutual funds but they also come equipped with a guarantee. At least 75%, and in some cases up to 100%, of the initial investment is guaranteed upon the maturity of the premium deposits or the death of the planholder, regardless of what the funds are worth on the market at the time. Other key differences include creditor protection and the ability to avoid probate fees by naming a beneficiary.
Life insurance companies often partner with mutual fund or money management companies in offering these funds. The partnerships are structured so the money management company handles the investing of the money and the administration of the contracts and the insurance company issues the contracts and provides all the guarantees that are associated with them.
Self-Regulatory Organizations (SROs)
Many important rules governing securities industry practices and standards in Canada are set by the self-regulatory organizations, which include the Vancouver, Alberta and Toronto Stock Exchanges, the Montreal Exchange and the Investment Dealers Association of Canada. Many of the regulatory and compliance functions have been delegated to the SROs by the provincial securities administrators.
Selling group
Investment dealers who assist a banking group in marketing a new issue of securities in order to obtain wide distribution. These dealers do not assume financial responsibility for the underwriting of the issue as the banking group does.
Senior bond issue
A corporate bond issue which has priority over other bonds as to its claim on the company’s assets and earnings. An example is a first mortgage bond.
Senior debt
A senior debt issue ranks before other issues in terms of claims on assets in the event of a company break-up. For example, senior bonds rank before junior bonds, which rank before senior debentures, which rank before junior debentures, etc.
Serial bond / debenture
A bond or debenture issue in which a predetermined amount of the principal becomes due and payable each year.
Serial bonds
See installment debentures.
Settlement agreement
A settlement agreement is a signed document between the executive director of the BCSC and a person who agrees the allegations against them under the Securities Act are true. The respondent agrees to a statement of facts, including an admission of wrongdoing, penalties, which can include a reprimand, restrictions on access to the securities market, or participation with those operating in the securities market, and financial penalties. The respondent also agrees to comply with the Securities Act, to waive all reviews and appeals and to consent to reciprocal orders (for non-financial penalties) in other Canadian jurisdictions and pay investigation and hearing preparation costs.
Settlement date
The date on which a security buyer must pay for his or her purchase, or a seller must deliver the securities he or she has sold. In Canada, investors have three days to pay for a purchase or, if selling, three days to turn in the securities certificate if it is in their possession.
Shareholder / Stockholder
Someone who owns preferred or common shares of a company.
Shareholder of record
A shareholder whose name is registered in the records of a company whose shares he or she holds. Dividend payments and rights issues are announced as being payable to shareholders of record.
Shareholders’ equity
Ownership interest of common and preferred stockholders in a company. It is also the difference between the assets and liabilities of a company, which is sometimes called net worth, or just “equity.”
Shares / Stocks
These two terms are used interchangeably. Certificates representing ownership in a corporation and the appropriate claim on the corporation’s earnings and assets.
Sharpe ratio
The Sharpe ratio is a risk-adjusted measure developed by Nobel Laureate William F. Sharpe. It is calculated using standard deviation and excess return to determine reward per unit of risk. First, the average monthly return of the 91-day Treasury bill (over a 36-month period) is subtracted from the fund’s average monthly return. The difference in total return represents the fund’s excess return beyond that of the 91-day Treasury bill, a risk-free investment. An arithmetic annualized excess return is then calculated by multiplying this monthly return by 12. To show a relationship between excess return and risk, this number is then divided by the standard deviation of the fund’s annualized excess returns. The higher the Sharpe ratio, the better the fund’s historical risk-adjusted performance.
Short selling
The sale of a security which the seller does not own. This is a speculative practice done in the belief that the price of a stock is going to fall and the seller will then be able to cover the sale by buying the security back at a lower price. The profit would be the difference between the initial selling price and the subsequent purchase price. It is illegal for a seller not to declare a short sale at the time of placing the order.
Short-term bond
A bond or debenture maturing within three years.
Short-term debt
Company borrowings repayable within one year that appear in the current liabilities section of the company’s balance sheet. The most common short-term debt items are bank advances or loans, notes payable, debentures and bonds due within one year.
Simple interest
Interest that is paid only on the amount of the initial deposit and not on any interest the deposit earns over time, unlike compound interest (e.g.: in year 1, the bank pays you $5 interest on your $100 deposit; in year 2, it again pays you interest only on the original $100 deposit).
Sinking fund
A fund set up by a company to retire, over a period of time, the major part of a preferred share issue, or a debt issue prior to maturity. The fund helps to “pay off” the debt issue over the term of the issue and can be compared to principal payments made by a mortgage holder. Even though the issue is outstanding until maturity, the small incremental payments made under a sinking fund can make the maturity of the bond issue less onerous on the company. Instead of having to re-fund the entire issue, there may only be a small outstanding balance. A sinking fund security is attractive to investors as there is more assurance that the debt will be repaid on maturity.
Small-cap stocks
Shares of companies with smaller capitalization or number of shares. Small-caps are generally defined as companies with less than about $800 million in capitalization. Many successful small-cap companies eventually grow into large-cap corporations.
Solvency liabilities
The expected cost of the promised pension benefits based on the assumption that the plan is terminating.
Solvency ratio
The ratio of the assets of the plan to the solvency liabilities of the plan.
Solvency valuation
An actuarial report valuing the assets of the plan and the expected cost of the promised benefits based on the assumption that the plan is terminating.
Sortino ratio
The Sortino ratio, a variation of the Sharpe ratio, differentiates harmful volatility from volatility in general by using a value for downside deviation. The Sortino ratio is the excess return over the risk-free rate divided by the downside semi-variance, and so it measures the return to “bad” volatility. (Volatility caused by negative returns is considered bad or undesirable by an investor, while volatility caused by positive returns is good or acceptable.) In this way, the Sortino ratio can help an investor assess risk in a better manner than simply looking at excess returns to total volatility, and as such a measure does not consider how often returns are positive as opposed to how often they’re negative.
Specified educational program
This is a program at post-secondary school level that lasts at least three consecutive weeks, and that requires a student to spend not less than 12 hours per month on courses in the program.
Specified plan
A specified plan is essentially a single beneficiary RESP (non-family, Individual plan) under which the beneficiary is entitled to the disability tax credit for the beneficiary’s tax year that includes the 31st anniversary of the plan. Furthermore, a specified plan cannot permit another individual to be designated as a beneficiary under the RESP at any time after the end of the year that includes the 35th anniversary of the plan.
In addition, no contributions (except transfers from another RESP) may be made to the plan at any time after the end of the year that includes the 35th anniversary of the plan, and the plan must be completed by the end of the year that includes the 40th anniversary of the plan.
Speculator
A speculator is one who is prepared to accept calculated risks in the marketplace for attractive potential returns. A speculator’s objective is usually short to medium term capital gain, whereas regular income and safety of principal are the prime goals of the conservative investor.
Spouse
For the purposes of pension legislation, a person married to the member or former member (includes a void marriage).
Spread
- The gap between the bid and ask prices in the quotation for a security.
- The term can also be applied to certain strategies for options and commodities where the investor is trading on the differences in prices between two related securities.
Standard & Poor’s 500 (S&P; 500) Index
The Standard & Poor’s Index of 500 stocks is a popular standard for measuring stock market performance among the biggest, most broadly-based companies in the U.S. Financial analysts follow this index closely because it is a key indicator of market trends.
Standard deviation
For investments, standard deviation is applied to the investment’s annual rate of return to measure the volatility of the investment’s market price. Standard deviation is also known as historical volatility and is used by investors as a gauge for the amount of expected volatility.
Standard deviation is a statistical measure of the range of a investment’s performance. When an investment has a high standard deviation, its range of performance has been very wide, indicating there is a greater potential for volatility. By definition, approximately 67% of the time, the total returns of any given investment is expected to differ from its mean total return by no more than plus of minus the standard deviation figure or one standard deviation. 95% of the time, a fund’s total returns should be within a range of plus or minus two times the standard deviation of its mean or 2 standard deviation. These ranges assume that a investment’s returns fall in a normal bell-shaped distribution.
In any case, the greater the standard deviation, the greater the investment’s volatility.
For example, if comparing two investments with identical annualized returns, the investment with a lower standard deviation would normally be more attractive, if all else is equal.
Statement of Changes in Financial Position
A financial statement which provides information as to how a company generated and spent its cash during the year. It links the company’s balance sheets for two successive years and provides a summary of the incoming and outgoing movement of a company’s funds for the period. It explains changes in working capital (current assets less current liabilities) from one year to the next.
Statement of Material Facts
A document presenting the relevant facts about a company and compiled in connection with an underwriting or secondary distribution of its shares. It is used only when the shares underwritten or distributed are listed on a recognized stock exchange and takes the place of a prospectus in such cases.
Stock Certificate
Written evidence of ownership in a corporation.
Stock consolidation
The opposite of a stock split. A number of existing shares are combined into a smaller number of shares, i.e. turning every three shares into one.
Stock dividend
Dividends paid to shareholders in shares of stock rather than cash.
Stock exchange / Stock market
An organized marketplace where buyers and sellers are brought together to buy and sell stocks and must follow certain rules, regulations and guidelines.
Stock index
An indicator used to measure and report value changes in a specific group of stocks. For example, the TSE 300 Index measures 300 stocks with the greatest market capitalization of all the companies listed on the Toronto Stock Exchange.
Stock option
Right to purchase or sell a corporation’s stock at a specific price within a stated period.
Stock savings plan
Some provinces (such as Quebec, Nova Scotia, Saskatchewan and Newfoundland) offer stock savings plans which allow individuals in those provinces a deduction or tax credit for provincial income tax purposes. The credit or deduction is a percentage figure based on the value of investment in certain prescribed vehicles.
Stock spam
Unsolicited email that promotes a company’s stock. Check out our SpamWatch program for more information about stock spam, including a list of spammed stocks.
Stock split
Division of a company’s outstanding common shares into a larger number of common shares. A three-for-one split by a company with one million shares outstanding would result in three million shares outstanding. Each holder of 100 shares before the three-for-one split would have 300 shares after the split, but his or her proportionate equity in the company would remain the same.
Stock symbol
An unique three or four letter symbol assigned to a security trading on a stock exchange. For example, Hollinger Inc. is listed as HLG on the Toronto Stock Exchange.
Stockholder
Someone who owns shares in a company.
Stocks / Shares
These two terms are used interchangeably. Certificates representing ownership in a corporation and the appropriate claim on the corporation’s earnings and assets.
Stop loss and stop buy orders
Orders for certain securities when the price of a stock rises or falls to a specified price. A stop loss order is an order to sell when the price of the stock declines to, or below, a stated price. The purpose of this is to reduce the amount of loss that might occur. A stop buy order is an order to buy a stock when the price rises to a certain level. This is given by a person who has sold a security short and is an attempt to reduce loss or protect a profit should the price rise unexpectedly.
Street certificate / “Street name”
Most people who own securities today do not physically have possession of the stock or bond certificates. Their securities are kept on their behalf by their investment dealer, which is called keeping securities in “street name.” All interest payments and dividends are passed onto the client by crediting their account with the dealer.
Strike price
The price at which the underlying stock of a call option can be purchased, or the price at which the underlying stock of a put option can be sold. Also referred to as the exercise price.
Strip bonds / Zero coupon bonds
Usually high quality federal or provincial government bonds originally issued in bearer form, where some or all of the interest coupons have been detached. The bond principal and any remaining coupons trade separately from the strip of detached coupons, both at substantial discounts from par.
Stripped debentures
Debentures which have been separated from other securities, such as warrants, which were originally issued together as a unit.
Subject bid / Subject offer
A bid or offer made for a security that indicates the buyer’s interest (in the case of a bid), or the seller’s interest (in the case of an offer), but does not commit the buyer or seller to the purchase or sale of the security at that price or time.
Subscriber
A person (including the subscriber’s spouse or common-law partner as a joint subscriber) who enters into an RESP contract with the promoter/provider. The subscriber agrees to contribute to the contract on behalf of individuals named under the plan as beneficiaries.
Note: A subscriber must be a person. Therefore, a corporation, trust, church, or charity cannot be a subscriber.
Subsidiary
A company which is controlled by another company, usually by owning the majority of the first company’s shares.
Suitable investment
An investment that is appropriate to your risk tolerance and investment goals when considered in the context of your life circumstances and entire portfolio.
Surplus
Contributed surplus is a balance sheet figure which originates from sources other than earnings, such as the initial sale of stock above par value. Earned surplus, or retained earnings, is the amount of accumulated earnings retained in the business after the payment of all expenses and dividends.
Surtax
An additional income tax over and above the regular income tax amount. Usually used as a temporary measure to raise funds for short-term needs.
Swap-based Exchange Traded Funds (ETF)
A swap-based ETF invests its assets into a collateral account and enters into a swap agreement with a counterparty. The swap counterparty, typically a large commercial or investment bank, is contractually obligated to deliver the precise index return, and bears all responsibilities, risks and costs of managing the investment portfolio or commodity underlying the ETF.
Sweetener
A feature included in the terms of a new issue of debt or preferred shares to make the issue more attractive to initial investors. Examples of sweeteners include warrants, or convertible, extendible or retractable features.
Switching
Selling one security and buying another.
Syndicate
A group of investment dealers who underwrite and distribute a new issue of securities or a large block of an outstanding issue.
Systematic Risk
Systematic risk, also known as “unknowable risk”, “volatility” or “market risk,” impacts the overall market, not just a particular stock or industry. This type of risk is both unpredictable and impossible to completely avoid. Investors cannot be lessen systematic risk through diversification, only through hedging or by using the right asset allocation strategy can the risk be reduced.
Interest rate changes, inflation, recessions and wars all represent sources of systematic risk because they affect the entire market. Systematic risk is broader than all other investment risks.
Severe stock market downturns like the Dot.com, technology bubble and the Great Recession of 2008-2009 provides a prime example of investment and financial systematic risk. Anyone who invested in the stock market saw the values of their investments drop, regardless of what types of investments they owned. Broad market declines and recessions affected different asset classes in different ways, however, so investors with broader asset allocations were impacted less than those who held nothing but stocks.
An investment’s “beta” is a measure of how much market price volatile that investment has in comparison to the overall market. A beta of greater than 1 means the investment has more systematic risk than the market, less than 1 means less systematic risk than the market, and equal to one means the same systematic risk as the market.
Systematic withdrawal plan
Plan offered by mutual fund companies that allows unitholders to receive specified payments from their investment at regular intervals.