The following definitions apply to this part:
means a person
engaged in the investment
banking or securities business who is directly or indirectly controlled by a National Association of Securities Dealers (NASD) member, whether or not this person
is registered or exempt from registration with NASD. Associated personnel
includes every sole proprietor, partner, officer, director, or branch manager of any NASD member.
Banker's acceptance means a time draft that is drawn on and accepted by a bank and that represents an irrevocable obligation of the bank.
Bank note means a direct, unconditional, and unsecured general obligation of a bank that ranks equally with all other senior unsecured indebtedness of the bank, except deposit liabilities and other obligations that are subject to any priorities or preferences.
means an option that gives the holder the right to buy a specified quantity of a security
at a specified price during a fixed time period.
Collective investment fund
means a fund maintained by a national bank under 12 CFR part 9
(Comptroller of the Currency's regulations).
Commercial mortgage related security
means a mortgage related security
, as defined below, except that it is collateralized entirely by commercial real estate, such as a warehouse or office building, or a multi-family dwelling consisting of more than four units.
Counterparty means the party on the other side of the transaction.
Custodial Agreement means a contract in which one party agrees to hold securities in safekeeping for others.
Delivery versus payment
means payment for an investment
must occur simultaneously with its delivery.
Derivatives means any derivative instrument as defined under generally accepted accounting principles (GAAP).
means a characteristic of an investment
that gives the issuer or holder the right to alter the level and timing of the cash flows of the investment
. Embedded options include call
provisions and interest rate caps and floors. Since a prepayment option in a mortgage is a type of call
provision, a mortgage-backed security
composed of mortgages that may be prepaid is an example of an investment
with an embedded option
Eurodollar deposit means a U.S. dollar-denominated deposit in a foreign branch of a United States depository institution.
European financial options contract means an option that can be exercised only on its expiration date.
Exchangeable Collateralized Mortgage Obligation
means a class of a collateralized mortgage obligation (CMO)
that, at the time of purchase, represents beneficial ownership interests in a combination of two or more underlying classes of the same CMO structure. The holder of an exchangeable CMO may pay a fee and take delivery of the underlying classes of the CMO.
Fair value means the amount at which an instrument could be exchanged in a current, arms-length transaction between willing parties, as opposed to a forced or liquidation sale.
Financial options contract means an agreement to make or take delivery of a standardized financial instrument upon demand by the holder of the contract as specified in the agreement.
Immediate family member means a spouse or other family member living in the same household.
Independent qualified agent
means an agent independent of an investment
that does not receive a transaction fee from the counterparty
and has at least two years experience assessing the value of mortgage loans.
Industry-recognized information provider means an organization that obtains compensation by providing information to investors and receives no compensation for the purchase or sale of investments.
means any security
, obligation, account, deposit, or other item authorized for purchase by a Federal credit union
under Sections 107(7), 107(8), or 107(15) of the Act
, or this part, other than loans to members.
means the issuer of a security
has an adequate capacity to meet the financial commitments under the security
for the projected life of the asset or exposure, even under adverse economic conditions. An issuer has an adequate capacity to meet financial commitments if the risk of default by the obligor is low and the full and timely repayment of principal and interest on the security
is expected. A Federal credit union
may consider any or all of the following factors, to the extent appropriate, with respect to the credit risk of a security: Credit spreads; securities-related research; internal or external credit risk assessments; default statistics; inclusion on an index; priorities and enhancements; price, yield, and/or volume; and asset class-specific factors. This list of factors is not meant to be exhaustive or mutually exclusive.
Investment repurchase transaction
means a transaction in which an investor agrees to purchase a security
from a counterparty
and to resell the same or an identical security
to that counterparty
at a specified future date and at a specified price.
Mortgage servicing rights
means a contractual obligation to perform mortgage servicing and the right to receive compensation for performing those services. Mortgage servicing is the administration
of a mortgage loan, including collecting monthly payments and fees, providing recordkeeping and escrow functions, and, if necessary curing defaults and foreclosing.
means an instrument that may be freely transferred from the purchaser to another person
or entity by delivery, or endorsement and delivery, with full legal title becoming vested in the transferee.
means the retained earnings balance of the credit union
at quarter end as determined under generally accepted accounting principles and as further defined in § 702.2(f)
of this chapter.
means any member of a Federal credit union
of directors, credit committee, supervisory committee, or investment
means the degree of care, which an ordinarily prudent and competent person
engaged in the same line of business or endeavor should exercise under similar circumstances.
means an investment
purchase transaction that is closed or sold on, or before the settlement date. In a pair-off, an investor commits to purchase an investment
, but then pairs-off the purchase with a sale of the same investment
before or on the settlement date.
means an option that gives the holder the right to sell a specified quantity of a security
at a specified price during a fixed time period.
Registered investment company
means an investment
company that is registered with the Securities and Exchange Commission
under the Investment Company Act of 1940
(15 U.S.C. 80a
). Examples of registered investment
companies are mutual funds and unit investment
Regular way settlement
means delivery of a security
from a seller to a buyer within the time frame that the securities industry has established for immediate delivery of that type of security
. For example, regular way settlement
of a Treasury security
includes settlement on the trade date (cash), the business day following the trade date (regular way), and the second business day following the trade date (skip day).
means the remainder cash flows from collateralized mortgage obligations/real estate mortgage investment
conduits (CMOs/REMICs), or other mortgage-backed security
transaction, after payments due bondholders and trust administrative expenses have been satisfied.
means lending a security
to a counterparty
, either directly or through an agent, and accepting collateral in return.
Security means a share, participation, or other interest in property or in an enterprise of the issuer or an obligation of the issuer that:
Either is represented by an instrument issued in bearer or registered form or, if not represented by an instrument, is registered in books maintained to record transfers by or on behalf of the issuer;
Is of a type commonly dealt in on securities exchanges or markets or, when represented by an instrument, is commonly recognized in any area in which it is issued or dealt in as a medium for investment; and
Either is one of a class or series or by its terms is divisible into a class or series of shares, participations, interests, or obligations.
Senior management employee
means a Federal credit union
's chief executive officer (typically this individual holds the title of President or Treasurer/Manager), an assistant chief executive officer, and the chief financial officer
Small business related security
means a security
as defined in section 3(a)(53) of
the securities Exchange Act of 1934
(15 U.S.C. 78c(a)(53)
). This definition does not include Small Business Administration
securities permissible under section 107(7) of the Federal Credit Union Act
Weighted average life means the weighted-average time to the return of a dollar of principal, calculated by multiplying each portion of principal received by the time at which it is expected to be received (based on a reasonable and supportable estimate of that time) and then summing and dividing by the total amount of principal.
When-issued trading of securities means the buying and selling of securities in the period between the announcement of an offering and the issuance and payment date of the securities.
Yankee dollar deposit
means a deposit in a United States branch of a foreign bank licensed to do business in the State
in which it is located, or a deposit in a State
-chartered, foreign controlled bank.
Zero coupon investment
means an investment
that makes no periodic interest payments but instead is sold at a discount from its face value. The holder of a zero coupon investment
realizes the rate of return through the gradual appreciation of the investment
, which is redeemed at face value on a specified maturity