< previous page page_518 next page > Page 518 REVERSE A SWAP restore a bond portfolio to its former position following a swap of one bond for another to gain the advantage of a YIELD SPREAD or a tax loss. The reversal may mean that the yield differential has disappeared or that the investor, content with a short-term profit, wishes to stay with the original bond for the advantages that may be gained in the future. See also BOND SWAP. REVERSE CONVERSION technique whereby brokerage firms earn interest on their customers' stock holdings. A typical reverse conversion would work like this: A brokerage firm sells short the stocks it holds in customers' margin accounts, then invests this money in short-term money market instruments. To protect against a sharp rise in the markets, the firm hedges its short position by buying CALL options and selling PUT options. To unwind the reverse conversion, the firms buys back the stocks, sells the call, and buys the put. See also MARGIN ACCOUNT; OPTION. REVERSE LEVERAGE situation, the opposite of FINANCIAL LEVERAGE, where the interest on money borrowed exceeds the return on investment of the borrowed funds. REVERSE LEVERAGED BUYOUT process of bringing back into publicly traded status a companyor a division of a companythat had been publicly traded and taken private. In the 1980s, many public companies were taken private in LEVERAGED BUYOUTS by corporate raiders who borrowed against the companies' assets to finance the deal. < previous page page_518 next page > < previous page page_519 next page > Page 519 When some or all of the debt incurred in the leveraged buyout was repaid, many of these companies were in sufficiently strong financial condition to go public again, enriching the private stockholders as well as the investment bankers who earned fees implementing these deals. REVERSE MORTGAGE arrangement whereby a homeowner borrows against home equity and receives regular payments (tax-free) from the lender until the accumulated principal and interest reach the credit limit of equity; at that time, the lender either gets repayment in a lump sum or takes the house. Reverse mortgages are available privately and through the Federal Housing Administration (FHA). They are appropriate for cash-poor but house-rich older borrowers who want to stay in their homes and expect to live long enough to amortize high up-front fees but not so long that the lender winds up with the house. Lower income but greater security is provided by a variation, the REVERSE ANNUITY MORTGAGE (RAM). REVERSE REPURCHASE AGREEMENT see REPURCHASE AGREEMENT. REVERSE SPLIT procedure whereby a corporation reduces the number of shares outstanding. The total number of shares will have the same market value immediately after the reverse split as before it, but each share will be worth more. For example, if a firm with 10 million outstanding shares selling at $10 a share executes a reverse 1 for 10 split, the firm will end up with 1 million shares selling for $100 each. Such splits are usually initiated by companies wanting to raise the price of their outstanding shares because they think the price is too low to attract investors. Also called split down. See also SPLIT. REVISIONARY TRUST IRREVOCABLE TRUST that becomes a REVOCABLE TRUST after a specified period, usually over 10 years or upon the death of the GRANTOR. REVOCABLE TRUST agreement whereby income-producing property is deeded to heirs. The provisions of such a TRUST may be altered as many times as the GRANTOR pleases, or the entire trust agreement can be canceled, unlike irrevocable trusts. The grantor receives income from the assets, but the property passes directly to the beneficiaries at the grantor's death, without having to go through PROBATE court proceedings. Since the assets are still part of the grantor's estate, however, estate taxes must be paid on this transfer. This kind of trust differs from an IRREVOCABLE TRUST, which permanently transfers assets from the estate during the grantor's lifetime and therefore escapes estate taxes. REVOLVING CREDIT Commercial banking: contractual agreement between a bank and its customer, usually a company, whereby the bank agrees to make loans up to a specified maximum for a specified period, usually a year or more. As the borrower repays a portion of the loan, an amount equal to the repayment can be borrowed again under the terms of the agreement. In addition to interest borne by notes, the bank charges a fee for < previous page page_519 next page > < previous page page_520 next page > Page 520 the commitment to hold the funds available. A COMPENSATING BALANCE may be required in addition. Consumer banking: loan account requiring monthly payments of less than the full amount due, and the balance carried forward is subject to a financial charge. Also, an arrangement whereby borrowings are permitted up to a specified limit and for a specified period, usually a year, with a fee charged for the commitment. Also called open- end credit or revolving line of credit. REVOLVING LINE OF CREDIT see REVOLVING CREDIT. RICH 1. term for a security whose price seems too high in light of its price history. For bonds, the term may also imply that the yield is too low. 2. term for rate of interest that seems too high in relation to the borrower's risk. 3. synonym for wealthy. RICO acronym for Racketeer Influenced and Corrupt Organization Act, a federal law used to convict firms and individuals of INSIDER TRADING. Many critics have charged that the law was excessively enforced, and several indictments were dismissed for lack of evidence. RIDER written form attached to an insurance policy that alters the policy's coverage, terms, or conditions. For example, after buying a diamond bracelet, a policyholder may want to add a rider to her homeowner's insurance policy to cover the jewelry. See also FLOATER. RIEGLE-NEAL INTERSTATE BANKING AND BRANCHING EFFICIENCY ACT OF 1994 law allowing interstate banking in America. The legislation permitted banks to establish branches nationwide by eliminating all barriers to interstate banking at the state level. Before this legislation went into effect, banks had been required to set up separate subsidiaries in each state to conduct business and it was illegal for banks to accept deposits from customers out of their home states. RIGGED MARKET situation in which the prices for a security are manipulated so as to lure unsuspecting buyers or sellers. See also MANIPULATION. RIGHT see SUBSCRIPTION RIGHT. RIGHT OF FIRST REFUSAL right of someone to be offered a right before it is offered to others. For example, a baseball team may have the right of first refusal on a ballplayer's contract, meaning that the club can make the first offer, or even match other offers, before the player plays for another team. A company may have the right of refusal to distribute or manufacture another company's product. A publishing company may have the right of refusal to publish a book proposed by one of its authors. < previous page page_520 next page > < previous page page_521 next page > Page 521 RIGHT OF REDEMPTION right to recover property transferred by a MORTGAGE or other LIEN by paying off the debt either before or after foreclosure. Also called equity of redemption. RIGHT OFRESCISSION right granted by the federal CONSUMER CREDIT PROTECTION ACT OF 1968 to void a contract within three business days with full refund of any down payment and without penalty. The right is designed to protect consumers from high-pressure door-to-door sales tactics and hastily made credit commitments which involve their homes as COLLATERAL, such as loans secured by second mortgages. RIGHT OF SURVIVORSHIP right entitling one owner of property held jointly to take title to it when the other owner dies. See also JOINT TENANTS WITH RIGHT OF SURVIVORSHIP; TENANTS IN COMMON. RIGHTS OFFERING offering of COMMON STOCK to existing shareholders who hold rights that entitle them to buy newly issued shares at a dis-count from the price at which shares will later be offered to the public. Rights offerings are usually handled by INVESTMENT BANKERS under what is called a STANDBY COMMITMENT, whereby the investment bankers agree to purchase any shares not subscribed to by the holders of rights. See also PREEMPTIVE RIGHT; SUBSCRIPTION RIGHT. RING location on the floor of an exchange where trades are executed. The circular arrangement where traders can make bid and offer prices is also called a pit, particularly when commodities are traded. RISING BOTTOMS technical chart pattern showing a rising trend in the low prices of a security or commodity. As the range of prices is charted daily, the lows reveal an upward trend. Rising bottoms signify higher and higher basic SUPPORT LEVELS for a security or commodity. When combined with a series of ASCENDING TOPS, the pattern is one a follower of TECHNICAL ANALYSIS would call bullish. See chart on the next page. RISK measurable possibility of losing or not gaining value. Risk is differentiated from uncertainty, which is not measurable. Among the commonly encountered types of risk are these: Actuarial risk: risk an insurance underwriter covers in exchange for premiums, such as the risk of premature death. Exchange risk: chance of loss on foreign currency exchange. Inflation risk: chance that the value of assets or of income will be eroded as inflation shrinks the value of a country's currency. Interest rate risk: possibility that a fixed-rate debt instrument will decline in value as a result of a rise in interest rates. Inventory risk: possibility that price changes, obsolescence, or other factors will shrink the value of INVENTORY. Liquidity risk: possibility that an investor will not be able to buy or sell a commodity or security quickly enough or in sufficient quantities because buying or selling opportunities are limited. < previous page page_521 next page > < previous page page_522 next page > Page 522 Political risk: possibility of NATIONALIZATION or other unfavorable government action. Repayment (credit) risk: chance that a borrower or trade debtor will not repay an obligation as promised. Risk of principal: chance that invested capital will drop in value. Underwriting risk: risk taken by an INVESTMENT BANKER that a new issue of securities purchased outright will not be bought by the public and/or that the market price will drop during the offering period. RISK-ADJUSTED DISCOUNT RATE in PORTFOLIO THEORY and CAPITAL BUDGET analysis, the rate necessary to determine the PRESENT VALUE of an uncertain or risky stream of income; it is the risk-free rate (generally the return on short-term U.S. Treasury securities) plus a risk premium that is based on an analysis of the risk characteristics of the particular investment or project. RISK ARBITRAGE ARBITRAGE involving risk, as in the simultaneous purchase of stock in a company being acquired and sale of stock in its proposed acquirer. Also called takeover arbitrage. Traders called arbitrageurs attempt to profit from TAKEOVERS by cashing in on the expected rise in the price of the target company's shares and drop in the price of the acquirer's shares. If the takeover plans fall through, the traders may be left with enormous losses. Risk arbitrage differs from riskless arbitrage, which entails locking in or profiting from the dif- < previous page page_522 next page > < previous page page_523 next page > Page 523 ferences in the prices of two securities or commodities trading on different exchanges. See also RISKLESS TRANSACTION. RISK AVERSE term referring to the assumption that, given the same return and different risk alternatives, a rational investor will seek the security offering the least riskor, put another way, the higher the degree of risk, the greater the return that a rational investor will demand. See also CAPITAL ASSET PRICING MODEL; EFFICIENT PORTFOLIO; MEAN RETURN; PORTFOLIO THEORY. RISK-BASED CAPITAL RATIO FIRREA-imposed requirement that banks maintain a minimum ratio of estimated total capital to estimated risk-weighted assets. RISK CAPITAL see VENTURE CAPITAL. RISK CATEGORY classification of risk elements used in analyzing MORTGAGES. RISK-FREE RETURN YIELD on a risk-free investment. The 3-month Treasury bill is considered a riskless investment because it is a direct obligation of the U.S. government and its term is short enough to minimize the risks of inflation and market interest rate changes. The CAPITAL ASSET PRICING MODEL (CAPM) used in modern PORTFOLIO THEORY has the premise that the return on a security is equal to the risk-free return plus a RISK PREMIUM. RISKLESS TRANSACTION 1. trade guaranteeing a profit to the trader that initiates it. An arbitrageur may lock in a profit by trading on the difference in prices for the same security or commodity in different markets. For instance, if gold were selling for $400 an ounce in New York and $398 in London, a trader who acts quickly could buy a contract in London and sell it in New York for a riskless profit. 2. concept used in evaluating whether dealer MARKUPS and MARK-DOWNS in OVER THE COUNTER transactions with customers are reasonable or excessive. In what is known as the FIVE PERCENT RULE, the NATIONAL ASSOCIATION OF SECURITIES DEALERS (NASD) takes the position that markups (when the customer buys) and markdowns (when the customer sells) should not exceed 5%, the proper charge depending on the effort and risk of the dealer in completing a trade. The maximum would be considered excessive for a riskless transaction, in which a security has high marketability and the dealer does not simply act as a broker and take a commission but trades from or for inventory and charges a markup or markdown. Where a dealer satisfies a buy order by making a purchase in the open market for inventory, then sells the security to the customer, the trade is called a simultaneous transaction. To avoid NASD criticism, broker-dealers commonly disclose the markups and markdowns to customers in transactions where they act as dealers. < previous page page_523 next page > < previous page page_524 next page > Page 524 RISK PREMIUM in PORTFOLIO THEORY, the difference between the RISK-FREE RETURN and the TOTAL RETURN from a risky investment. In the CAPITAL ASSET PRICING MODEL (CAPM), the risk premium reflects market-related risk (SYSTEMATIC RISK) as measured by BETA. Other models also reflect specific risk as measured by ALPHA. RISK-RETURN TRADE-OFF concept, basic in investment management, that RISK equals (varies with) RETURN; in other words, the higher the return the greater the risk and vice versa. In practice, it means that a speculative investment, such as stock in a newly formed company, can be expected to provide a higher potential return than a more conservative investment, such as BLUE CHIP or a BOND. Conversely, if you don't want the risk, don't expect the return. See also PORTFOLIO THEORY. RISK TRANSFER shifting of risk, as with INSURANCE or the SECURITIZATION of debt. ROAD SHOW presentation by an issuer of securities to potential buyers about the merits of the issue. Management of the company issuing stocks or bonds doing a road show travels around the country presenting financial information and an outlook for the company and answering the questions of analysts, fund managers, and other potential investors. Also known as a dog and pony show. ROCKET SCIENTIST investment firm creator of innovative securities. ROLL DOWN move from one OPTION position to another one having a lower EXERCISE PRICE. The term assumes that the position with the higher exercise price is closed out. ROLL FORWARD move from one OPTION position to another with a later expiration date. The term assumes that the earlier position is closed out before the later one is established. If the new position involves a higher EXERCISE PRICE, it is called a roll-up and forward; if a lower exercise price, it is called a roll-down and forward. Also called rolling over. ROLLING STOCK equipment that moves on wheels, used in the transportation industry. Examples include railroad cars and locomotives, tractor-trailers, and trucks. ROLLOVER 1. movement of funds from one investment to another. For instance, an INDIVIDUAL RETIREMENT ACCOUNT may be rolled over when a person retires into an ANNUITY or other form of pension plan payout system. Balances in regular IRAs can be rolled over into ROTH IRAs, although income taxes will be due on untaxed earnings in the regular IRA account. When a BOND or CERTIFICATE OF DEPOSIT matures, the funds may be rolled over into another bond or certificate of deposit. A stock may be sold and the proceeds rolled over into the same stock, establishing a different cost basis for the shareholder. See also THIRTY DAY WASH RULE. < previous page page_524 next page > < previous page page_525 next page > Page 525 2. term often used by banks when they allow a borrower to delay making a PRINCIPAL payment on a loan. Also, a country that has difficulty in meeting its debt payments may be granted a rollover by its creditors. With governments themselves, rollovers in the form of REFUNDINGS or REFINANCINGS are routine. See also CERTIFICATE OF DEPOSIT ROLLOVER. ROLL UP move from one OPTION position to another having a higher EXERCISE PRICE. The term assumes that the earlier position is closed out before the new position is established. See also MASTER LIMITED PARTNERSHIP. ROTH IRA INDIVIDUAL RETIREMENT ACCOUNT created by the TAXPAYER RELIEF ACT OF 1997 permitting account holders to allow their capital to accumulate tax free under certain conditions. The Roth IRA is named after Delaware Senator William V. Roth Jr., who championed the idea of expanded IRAs. Individuals can invest up to $2,000 per year, and they can withdraw the principal and earnings totally tax free after age 59 1 Ú2, as long as the assets have remained in the IRA for at least 5 years after making the first contribution. If the account holder dies before they start withdrawing from a Roth, the proceeds go to their beneficiaries tax free. Unlike regular IRAs, participants do not have to take any distributions from a Roth IRA starting at age 70 1 Ú2, nor do they have to take any distributions at all during their lifetime. They can also continue to contribute after reaching age 70 1 Ú2. Participants in Roth IRAs do not receive deductions for contributing to the account. However, the value of completely tax free withdrawals usually outweighs the tax break from upfront deductions. The Roth IRA also permits participants to withdraw assets without the usual 10% early withdrawal penalty if the proceeds are used to purchase a first home (withdrawals are limited to $10,000), for college expenses, or if the participant becomes disabled. There are income limitations governing who can open Roth IRAs. Married couples with an adjusted gross income of $150,000 or less or singles with adjusted gross incomes of $95,000 or less can contribute the full $2,000. Contribution amounts are phased out for incomes between $150,000 and $160,000 for couples filing jointly and between $95,000 and $110,000 for singles. Those with income over these limits can not contribute to a Roth IRA. Individuals with adjusted gross income of $100,000 or less can roll over existing and deductible IRA balances into a Roth without the usual 10% early distribution penalty, although regular income taxes are due on untaxed earnings in the account. For such ROLLOVERS completed before January 1, 1999, the resulting tax bill is spread over four years. After that, the rollover is fully taxable in the year it is completed. Figuring out whether or not it is advantageous to roll over assets from a regular IRA to a Roth IRA is a complex decision, and may require advice from a financial professional. See ROLLOVER. < previous page page_525 next page > < previous page page_526 next page > Page 526 ROUND LOT generally accepted unit of trading on a securities exchange. On the New York Stock Exchange, for example, a round lot is 100 shares for stock and $1000 or $5000 par value for bonds. In inactive stocks, the round lot is 10 shares. Increasingly, there seems to be recognition of a 500-share round lot for trading by institutions. Large denomination CERTIFICATES OF DEPOSIT trade on the OVER THE COUNTER market in units of $1 million. Investors who trade in round lots do not have to pay the DIFFERENTIAL charged on ODD LOT trades. ROUND TRIP TRADE purchase and sale of a security or commodity within a short time. For example, a trader who continually is making short-term trades in a particular commodity is making round trip or round turn trades. Commissions for such a trader are likely to be quoted in terms of the total for a purchase and sale$100 for the round trip, for instance. Excessive round trip trading is called CHURNING. ROYALTY payment to the holder for the right to use property such as a patent, copyrighted material, or natural resources. For instance, inventors may be paid royalties when their inventions are produced and marketed. Authors may get royalties when books they have written are sold. Land owners leasing their property to an oil or mining company may receive royalties based on the amount of oil or minerals extracted from their land. Royalties are set in advance as a percentage of income arising from the commercialization of the owner's rights or property. ROYALTY TRUST oil or gas company spin-off of oil reserves to a trust, which avoids DOUBLE TAXATION, eliminates the expense and risk of new drilling, and provides DEPLETION tax benefits to shareholders. In the mid- 1980s, Mesa Royalty Trust, which pioneered the idea, led other trusts in converting to a MASTER LIMITED PARTNERSHIP form of organization, offering tax advantages along with greater flexibility and liquidity. RUBBER CHECK check for which insufficient funds are available. It is called a rubber check because it bounces. See also OVERDRAFT. RULE 405 New York Stock Exchange codification of an ethical concept recognized industry wide by those dealing with the investment public. These KNOW YOUR CUSTOMER rules recognize that what is suitable for one investor may be less appropriate for another and require investment people to obtain pertinent facts about a customer's other security holdings, financial condition, and objectives. See also SUITABILITY RULES. RULE OF 72 formula for approximating the time it will take for a given amount of money to double at a given COMPOUND INTEREST rate. The formula is simply 72 divided by the interest rate. In six years $100 will double at a compound annual rate of 12%, thus: 72 divided by 12 equals 6. RULE OF THE 78s method of computing REBATES of interest on installment loans. It uses the SUM-OF-THE- YEAR'S-DIGITS basis in determining the interest earned by the FINANCE COMPANY for each month of a year, < previous page page_526 next page > < previous page page_527 next page > Page 527 assuming equal monthly payments, and gets its name from the fact that the sum of the digits 1 through 12 is 78. Thus interest is equal to 12/78ths of the total annual interest in the first month, 11/78ths in the second month, and so on. RULE 144 see INVESTMENT LETTER; SECURITIES AND EXCHANGE COMMISSION RULES. RULES OF FAIR PRACTICE set of rules established by the Board of Governors of the NATIONAL ASSOCIATION OF SECURITIES DEALERS (NASD), a self-regulatory organization comprising investment banking houses and firms dealing in the OVER THE COUNTER securities market. As summarized in the NASD bylaws, the rules are designed to foster just and equitable principles of trade and business; high standards of commercial honor and integrity among members; the prevention of fraud and manipulative practices; safeguards against unreasonable profits, commissions, and other charges; and collaboration with governmental and other agencies to protect investors and the public interest in accordance with Section 15A of the MALONEY ACT. See also FIVE PERCENT RULE; IMMEDIATE FAMILY; KNOW YOUR CUSTOMER; MARKDOWN; RISKLESS TRANSACTION. RUMORTRAGE stock traders' term, combining rumor and ARBITRAGE, for buying and selling based on rumor of a TAKEOVER. See also DEAL STOCK; GARBATRAGE. RUN Banking: demand for their money by many depositors all at once. If large enough, a run on a bank can cause it to fail, as hundreds of banks did in the Great Depression of the 1930s. Such a run is caused by a breach of confidence in the bank, perhaps as a result of large loan losses or fraud. Securities: 1. list of available securities, along with current bid and asked prices, which a market maker is currently trading. For bonds the run may include the par value as well as current quotes. 2. when a security's price rises quickly, analysts say it had a quick run up, possibly because of a positive earnings report. RUNDOWN In general: status report or summary. Municipal bonds: summary of the amounts available and the prices on units in a SERIAL BOND that has not yet been completely sold to the public. RUNNING AHEAD illegal practice of buying or selling a security for a broker's personal account before placing a similar order for a customer, also called FRONT RUNNING. For example, when a firm's analyst issues a positive report on a company, the firm's brokers may not buy the stock < previous page page_527 next page > [...]... responsibilities of the SEC include the PUBLIC UTILITY HOLDING COMPANY ACT of 1935, the TRUST INDENTURE ACT of 1939, the INVESTMENT COMPANY ACT of 1940 and the INVESTMENT ADVISERS ACT of 1940 It also administers the SECURITIES ACTS AMENDMENTS OF 1975, which directed the SEC to facilitate the establishment of a NATIONAL MARKET SYSTEM and a nationwide system for clearance and settlement of transactions and established... of the 1934 act are as follows: 1 REGISTRATION of all securities listed on stock exchanges, and periodic DISCLOSURES by issuers of financial status and changes in condition 2 regular disclosures of holdings and transactions of ''INSIDERS"the officers and directors of a corporation and those who control at least 10% of equity securities 3 solicitation of PROXIES enabling shareholders to vote for or... to take over another by making a public TENDER OFFER The term was coined in the 1960s after a rash of such surprise maneuvers, which were often announced over weekends The WILLIAMS ACT of 19 68 placed severe restrictions on tender offers and required disclosure of direct or indirect ownership of 5% or more of any class of EQUITY It thus marked the end of what, in its traditional form, was known as the... section of the bylaws of the NATIONAL ASSOCIATION OF SECURITIES DEALERS (NASD) concerned with membership requirements and procedures SCHEDULE 13D form required under Section 13d of the SECURITIES ACT OF 1934 within ten business days of acquiring direct or BENEFICIAL OWNERSHIP of 5% or more of any class of equity securities in a PUBLICLY HELD corporation In addition to filing with the Securities and Exchange... in investigations of possible violations and in enforcement actions The SECURITIES ACT AMENDMENTS OF 1975 ratified the system of free-market determination of brokers' commissions and gave the SEC authority to oversee development of a NATIONAL MARKET SYSTEM SECURITIES EXCHANGE OF THAILAND (SET) only stock market in Thailand, based in Bangkok The SET Index, calculated by the exchange, and the Bangkok Book... 1966 A similar form of secondary distribution, called the SPECIAL OFFERING, is limited to members of the New York Stock Exchange and is completed in the course of the trading day See also EXCHANGE DISTRIBUTION; REGISTERED SECONDARY OFFERING; SECURITIES AND EXCHANGE COMMISSION RULES 144 and 237 SECONDARY MARKET 1 exchanges and over-the-counter markets where securities are bought and sold subsequent... issues of securities offered in interstate commerce or through the mails must be registered with the SEC; all national securities exchanges and associations are under its supervision, as are INVESTMENT COMPANIES, investment counselors and advisers, OVER THE COUNTER brokers and dealers, and virtually all other individuals and firms operating in the investment field In addition to the 1933 and 1934 securities... for the federal chartering of S&Ls under the supervision of the Federal Home Loan Bank Board Deposits in federal S&Ls were insured with the formation of the Federal Savings and Loan Insurance Corporation in 1934 A second wave of restructuring occurred in the 1 980 s The DEPOSITORY INSTITUTIONS DEREGULATION AND MONETARY CONTROL ACT of 1 980 set a six-year timetable for the removal of interest rate ceilings,... of a public corporation Rule 14d: Tender offers regulations and restrictions covering public TENDER OFFERS and related disclosure requirements See also WILLIAMS ACT Rule 15c2-1: Hypothecation of customers' securities regulates a broker-dealer's SAFEKEEPING of customers securities in a MARGIN ACCOUNT, prohibiting the COMMINGLING of customers accounts without the consent of the respective customers and. .. trust services) and, in addition, permitted MUTUAL ASSOCIATIONS to issue INVESTMENT CERTIFICATES In actual effect, interest rate parity was achieved by the end of 1 982 The Garn-St Germain Depository Institutions Act of 1 982 accelerated the pace of deregulation and gave the Federal Home Loan Bank Board wide latitude in shoring up the capital positions of S&Ls weakened by the impact of recordhigh interest . through 12 is 78. Thus interest is equal to 12/78ths of the total annual interest in the first month, 11/78ths in the second month, and so on. RULE 144 see INVESTMENT LETTER; SECURITIES AND EXCHANGE. standards of commercial honor and integrity among members; the prevention of fraud and manipulative practices; safeguards against unreasonable profits, commissions, and other charges; and collaboration. ACT OF 1 986 , the term was synonymous with 401(k) PLAN, but the 1 986 Act prohibited employees of state and local governments and tax-exempt organizations from establishing new 401(k) plans and