The FSA Jargon Department

Back to Contents of Issue: December 2001

by Sumie Kawakami

Let's try to decipher the hieroglyphics of FSA jargon. "Solicitation with promise of special profit" could take several forms. One of the most controversial ones is offering a scheme in which a company could defer its redemption loss on a note so that the loss will not appear on its balance sheet. Similar schemes offered by Credit Suisse First Boston created a lot of hullabaloo during 1999: The brokerage was selling derivatives designed to help ailing banks hide losses. Buyers of those products purchased securities that allowed them to postpone accounting for losses on investments. Another example of "solicitation with promise of special profit" could mean a securities firm promising to provide a rebate to a fund management company by way of an advisory fee.

"Evading inspections" simply means lying to inspectors or hiding evidence. "Discretionary transactions" could mean getting a customer to agree with a salesperson to decide order prices and/or volume of each transaction without asking the customer to actually approve each transaction. "Front running" happens when dealers trade an equity in response to information from their analysis department before their clients have been given the information. "Broker churning" could mean a broker asking his customers to sell certain securities because the broker has other products he wants the customer to buy.

And the champion of FSA-ese is the especially unwieldy "act of making a series of securities transactions to create artificial market prices which do not reflect the actual state of the markets." Simply put, this is selling stocks just before the market closes to push the stock price down. Hey FSA, need an editor?

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