Securities Regulations 101: Securities Acronyms

The securities and financial services industries are just as chock-full of alphabet soup as the insurance industry. If you’re looking for a comprehensive glossary of securities industry acronyms, we’re happy to oblige. 

Don’t forget, you can always refer back to our list of helpful terms to know in personal lines property & casualty, commercial lines property and casualty, and health, life, and benefits. But, while you’re here, why not brush up on your securities regulation acronyms? 

What is an APY?

Annual Percentage Yield, or APY, is a number that represents the total amount that an interest-yielding account (like a savings account, money market, or investment account) will earn in a year when you account for compounding interest. In this way, investors can compare different options “apples to apples” regardless of whether one option has daily compounding interest or a different schedule (monthly, quarterly, or otherwise). 

What is the AUM?

Assets Under Management, or AUM, refers to the total market value of the investments that a person or entity manages for their clients. AUM can be a shorthand for how large a firm is, with the world’s largest firms having nearly $10 trillion in AUM. 

What is a CPA?

A Certified Public Accountant, or CPA, is a professional certification for accountants that designates someone has met specific educational and licensing requirements and that they’ve passed the CPA exam. As a CPA, an accountant is qualified to work in an advanced accounting capacity. While people can work as accountants without a CPA certification, many companies require this higher level of expertise, meaning those with a CPA can have more career opportunities and typically earn higher salaries. 

What is the CFA®?

The Chartered Financial Analyst, or CFA, is one of the highest achievable distinctions for professional financial analysts and is recognized worldwide. This program, administered by the CFA Institute, measures the real-world competence and ethical integrity of financial analysts. To become a Charterholder with the CFA Institute, a professional has to pass three levels of exams, obtain qualifying work experience, submit letters of recommendation, and finally, apply for regular membership.

What is the CFP®?

The Certified Financial Planner, or CFP®, is a professional certification for financial planners conferred by the Certified Financial Planner Board of Standards. It certifies that the holder has met extensive training and experience requirements, and commits to the Board’s ethical standards. When a financial planner achieves the CFP® designation, clients can be assured of the professional’s training and ability to work in the client’s best interest. 

What is the CPI?

The Consumer Price Index, or CPI, is a commonly used measure of the economy’s rate of inflation or deflation. By measuring the weighted average of prices for a standard set of consumer goods and services (like transportation, food, and medical care), the CPI can act as a shorthand for cost of living increases and decreases across the broader economy.

What is DCF?

Discounted Cash Flow, or DCF, is a method of valuing an investment in the present based on its projected future cashflow. It considers what returns an investment may yield and also accounts for the fact that a sum of money now is worth more than the same sum of money paid out in the future. By doing this, DCF helps investors decide if they want to purchase a specific asset, or even an entire business, based on the real value both now and in the future. 

What is GDP?

Gross Domestic Product, or GDP, is the total value of all goods and services produced within a country in a given period (usually a year). The GDP accounts for the value of goods and services produced anywhere within a country’s geographical boundaries, regardless of whether it was made by a resident, a citizen, or anyone else. For example, work performed in the state of Mississippi by a German citizen would count towards the U.S.’s GDP, while work performed by a Mississippi resident living and working in Germany would not. 

What is GNP?

Gross National Product, or GNP, is the value of all goods and services produced by a country’s residents, regardless of the production location. Unlike GDP, a U.S. resident living and working abroad would still contribute to the U.S.’s GNP even when the products and services are made entirely outside the U.S. 

What is the IRC?

The Internal Revenue Code, or IRC, is a comprehensive set of tax laws enacted by the U.S. Federal Government and enforced by the Internal Revenue Service (IRS). It covers all aspects of taxation, including rates, credits, deductions, and procedures for tax administration.

What is an LOA?

A Letter Of Authorization, or LOA, in the financial services industry, is a document that authorizes a securities broker, financial advisor, or other third-party representative, to conduct transactions on behalf of their clients. An LOA is required for most securities professionals to do their jobs, which involve buying and selling assets at the direction of, or in the best interest of, their clients. 

What is an LOI?

A Letter Of Intent, or LOI, in the securities field, is a document signed by someone who intends to purchase mutual funds but doesn’t have the ability to commit a large amount of money upfront. The LOI specifies the amount of money the investor intends to spend over a 13-month period in exchange for reduced sales charges. If the investor doesn’t in fact purchase their intended dollar amount’s worth of mutual funds, the seller can charge an increased sales fee. 

What is the LIHTC?

The Low Income Housing Tax Credit, or LIHTC, is a federal subsidy that helps provide affordable housing to underserved urban and rural areas as well as people priced out of major cities. Through the LIHTC, state and local agencies can receive federal tax credits when they construct, buy, or rehabilitate housing units targeted for lower-income rental residents. The program claims to give the equivalent of over $9 billion each year to the agencies responsible for creating affordable low-income housing.

What is PCE?

Personal Consumption Expenditures, or PCEs, are a measure of consumer spending, made up of aggregated data from various government sources and statistical reports. Two of the leading PCE indices are from the Bureau of Labor Statistics (BLS) and the Bureau of Economic Analysis (BEA). Each PCE tries to measure the amount U.S. households spend each month on goods and services, and also provides a measure of what proportion of households’ income is spent on consumer goods and services. Since PCE is calculated from various data sources, there are multiple versions and not one single PCE. 

What is PII?

Personally Identifiable Information, or PII, is any data that could be used to identify a particular person, and thus is protected by regulations and expected to be stored securely. PII includes a person’s Social Security number, driver’s license number, or financial account number. Because PII is commonly used in the financial and securities industries, safeguarding it is a key aspect of privacy regulations and standards in the financial industry.

What is the PPI?

The Producer Price Index, or PPI, is a measure of what producers receive for their output, averaged over time to show an upward or downward trend. In this context, “producers” refer to people and companies that produce material goods and commodities. The Bureau of Labor Statistics publishes producer price indices covering the “output of almost all industries in the goods-producing sectors of the U.S. economy” which it accomplishes by conducting field surveys among producers in a variety of industries. 

What is an RMD?

A Required Minimum Distribution, or RMD, is a set amount of money that a retirement accountholder must withdraw from their tax-deferred retirement accounts upon reaching a certain age. Failure to withdraw at least this amount can result in tax penalties. However, accountholders can always choose to withdraw more than the minimum each year. The actual RMD amount is calculated based on the accountholder’s age, and RMD requirements also apply to people who’ve inherited a retirement account from a deceased parent, spouse, or other person. 

What is the SIE?

The Securities Industry Essentials, or SIE, exam is “your first step to a career in the securities industry” according to the Financial Industry Regulatory Authority (FINRA). This test is open to anyone age 18 and up and is an entry level exam that assesses the taker’s basic knowledge about securities products, markets, and regulatory structures. Passing the SIE doesn’t qualify anyone to work in securities; however, it’s part of the prerequisites for other qualification exams. 

What is TBE?

Tenants by Entirety, Tenancy by Entirety, or TBE, is one way that spouses can own property together that allows the surviving spouse to assume full ownership without going through probate, in the case of one spouse’s death. When two people own property through TBE, they don’t each own half of the property. Rather, they each own 100 percent, which means the property can’t be sold without both parties’ consent. TBE keeps property out of the estate and the probate process by automatically giving full ownership to the surviving spouse. 

What are TIC?

Tenants In Common, or TIC, is another way for two or more people (whether they’re married or not) to jointly own property. When people own property in a TIC arrangement, they can each own an equal (or unequal) share of the property. TIC gives owners the right to sell off their interest in a property without the consent of other co-owners. Each owner also has the right to leave their share of the property to any beneficiary upon the owner’s death. Owners who are TIC don’t have the ability to bypass the probate process in the case of one owner’s death. 

Securities and their regulations are complex!

These acronyms are just a starting point for learning more about the securities industry and its many (MANY) regulations. 

If you’re looking to manage broker license compliance for insurance producers or securities brokers (or both), see how AgentSync can help.