A suitability doctrine first introduced by the Securities and Exchange Commission in the 1930s. The idea is that a broker who hangs out a shingle will represent his or her customers fairly and responsibly when making suggestions regarding securities. Also referred to as "fiduciary duty", these suitability doctrines were originally used to ensure the protection of investors from unscrupulous broker-dealers. Here, "shingle" refers to a small sign, indicating a professional office.
A firm specializing in the early detection of takeovers. The firm's primary business is usually the solicitation of proxies for client corporations. A shark watcher monitors trading patterns in a client's stock and attempts to determine who is accumulating shares.
A series of events and processes that a company's management team facilitates in order to change and/or reorganize itself in an attempt to improve its current situation. Shakeups can occur when a business has undergone new ownership or has been performing poorly, and a shift in the company's team or overall strategy is a necessary catalyst for potential success. For example, Al Dunlap was brought to shake up Scott Paper in an attempt to make the paper company successful. Over the course of an 18-month process of restructuring and cost cutting, Dunlap transformed Scott Paper from a $2.9 billion company into $9.5 billion company.
A situation in which many investors exit their positions, often at a loss, because of uncertainty or recent bad news circulating around a particular security or industry. During the dotcom boom and bust, numerous shakeouts occurred. During these shakeouts many investors experienced tremendous losses.
A self-help alert is a notification issued by a trading exchange, such as the NYSE or Nasdaq, that a glitch has occurred on one of the exchanges and that exchange, therefore, should be temporarily bypassed to permit the regular flow of orders. A self-help order, for example, could be issued by the Nasdaq if the NYSE had experienced a problem and needed to halt trading on any or all of its stocks. The alert would be canceled when the NYSE resolved its problems.
A pooled group of financial assets that together create a new security, which is then marketed and sold to investors. The value and cash flows of the new security are based off of the underlying value and cash flows of the assets used in the securitization process. Companies will securitize illiquid assets into liquid assets in order to increase their overall liquidity and generate immediate proceeds from their assets. A company (the originator) begins the securitization process by gathering a series of financial assets, such as accounts receivables (AR). These assets are then sold or transferred to an issuer, or special purpose vehicle (SPV), which is used to manage the assets and legally protect the company from the assets' obligations. The SPV will then sell the securities, which are backed by the assets held in the SPV, to investors. The cash flows generated by the underlying assets are then transferred to the investors who purchased the asset-backed securities (ABS). The originator will have received some proceeds from the securitization, which can be used for its ongoing operations or other business uses. During the securitization process, the SPV will often get a rating agency to assign the assets a rating based on the ability of the assets to meet the principal and interest payments on the new securities being sold by the SPV. The SPV may also use credit enhancements to lower the risks of the securities being sold off to make them more attractive to investors.
A buy-sell provision used by related parties in a business venture which gives an investor within the partnership the right to offer his/her portion to a partner at a specified price. If the partner does not buy the offered interest at this price, the partner must then sell his/her own interest to the offering party at the same specified price. The shotgun clause attempts to provide security to the partners of a venture by ensuring the offering of a fair price. Because the investor initially tendering the shares cannot be certain whether the shares will be purchased or rejected, the specified price must be carefully considered - after all, a rejection of the tendering creates an obligation for the offering party to buy the partner's portion at the same price he/she was originally willing to sell at.
An illegal practice employed by unethical internet investors who short-sell a stock and then spread unsubstantiated rumors and other kinds of unverified bad news in an attempt to drive down the equity's price and realized a profit. Due to recent corporate scandals and investor uncertainty, fraudsters have an easier time spreading doom and gloom by claiming that a firm is losing a very costly class action suit or is suffering from low earnings. In order to prevent being conned, investors should do their own due diligence and be critical of the authenticity of news from unverified sources.
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