Finance Chapter 14

financial intermediaries

a financial institution that directs other people's money into such investments as government and corporate securities

securities act of 1933

an act that is sometimes referred to as the truth in securities act because it requires detailed financial disclosures before securities may be sold to the public

sarbanes oxley act of 2002

an act that was intended to restore confidence in the financial markets by demanding accuracy in financial reporting

capital markets

competitive markets for equity securities or debt securities with maturities of more than one year (common stock, bonds, preferred stock)

money markets

competitive markets for securities with maturities of one year or less (treasury bills, commercial paper, negotiable certificates of deposit)

electronic communication networks

electronic trading systems that automatically match buy and sell orders at specific prices

dual trading

exists one one security is traded on more than one stock exchange

federally sponsored credit agencies

federal agencies that issue securities

listing requirements

financial standards that corporations must meet before their common stock can be traded on a stock exchange, set by each exchange, requirements for NYSE are most stringent

internally generated funds

funds generated through the operations of the firm, principle sources are retained earnings and cash flow added back from depreciation and other noncash deductions

securities exchange act of 1934

legislation that established the SEC to supervise and regulate the securities markets

market efficiency

occurs when prices adjust rapidly to new information, there is a continuous market, the market can absorb large dollar amounts of securities without destabilizing prices

specialists

ones who make a market in their assigned stocks by standing ready to buy or sell shares at the current bid and ask price

municipal securities

securities issued by state and local government units; the income generated from these is exempt from federal income taxes

secondary trading

the buying and selling of publicly owned securities in secondary markets

three sector economy

the economy consists of business, government, and households; households are major suppliers of funds, business and government are users of funds

securities acts amendments of 1975

the major feature of this act was to mandate a national securities market

the wall street reform and consumer protection act of 2010

the most comprehensive financial reform legislation since the Great Depression, the government will break up companies that are "too big to fail" and restructure them without taxpayer dollars

securities and exchange commission

the primary regulatory body for security offerings in the United States