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Day Order
An order to buy or sell a security valid only on the day the order is given.

Debenture
A certificate of indebtedness of a government or company backed only by the general credit of the issuer and unsecured by property or assets.

Debt
Money borrowed from lenders for a variety of corporate or personal purposes. The borrower pays interest for the use of the money and is obligated to repay the principal amount on a set date.

Deemed Disposition
Under certain circumstances, taxation rules state that a transfer of property has occurred, even without a purchase or sale. For example, there is a deemed disposition on death or emigration from Canada.

Default
A bond is in default when the borrower has failed to live up to the obligations under the terms of the agreement. Examples of this are declining to pay interest or sinking fund payments or failure to redeem the bonds at maturity.

Defensive Stock
Stock of a company with continuous dividend payments, which has demonstrated relatively stable earnings despite poor economic conditions.

Deferred Income Taxes
Income tax that would otherwise be payable currently, but which is not paid immediately. This is because larger allowable deductions are made when calculating taxable income than when calculating net income in the financial statements. An acceptable practice, it is usually the result of timing differences and represents differences in accounting reporting guidelines and tax reporting guidelines.

Deferred Profit Sharing Plan (DPSP)
In a DPSP an employer makes cash contributions for an employee's retirement plans out of business profits. The contributions and earnings accumulate tax-free until withdrawn.

Deficiency Letter
A securities commission letter sent to a company that has submitted a preliminary prospectus on a planned new issue of the company's securities. The letter poses any questions the commission wants answered, and outlines any recommendations for changes to the prospectus. When all points raised in the letter are resolved, the issue's final prospectus may be filed.

Deficit
A financial situation for an individual, company or government where expenses exceed income.

Delist
The removal of a security's listing on a stock exchange. This is done when the security no longer exists, the company is bankrupt, the public distribution of the security has dropped to an unacceptably low level, or the company has failed to comply with the terms of its listing agreement.

Delivery
Securities sellers must deliver the certificates on or before the third business day after the sale. Delayed delivery refers to a transaction in which there is a clear understanding that delivery of the securities involved will be delayed beyond this three day period.

Depletion
Refers to the consumption of natural resources which are part of a company's assets. Since oil, mining and gas companies deal in products that cannot be replenished, depletion reduces the company's natural assets over a specified time period. The recording of depletion is a bookkeeping entry similar to depreciation and does not involve the expenditure of cash.

Depreciation
Systematic charges made against earnings to write-off the cost of an asset over its estimated useful life because of wear and tear through use, action of the elements, or obsolescence. It is a bookkeeping entry and does not represent any cash outlay nor are any funds earmarked for the purpose. It reduces the company's fixed assets to zero over a specified time period.

Dilution
Reducing the actual or potential earnings per share by issuing more shares or giving options to obtain more.

Direct or Indirect Holdings
These are the holdings of an individual or company in other companies. For example, company A owns 500,000 shares of company B's 1,000,000 outstanding shares. Company A therefore has a 50% direct interest in company B. Company B, in turn, owns 300,000 of company C's outstanding 500,000 shares. Company B therefore has a 60% direct interest in company C. Company A (by virtue of its 50% direct interest in company B) has a 30% indirect interest in company C.

Director
Person elected by voting common shareholders at the annual meeting to direct company policies.

Disaster Out Clause
A clause in an underwriting agreement allowing the underwriter to cancel the agreement, should a law, event or major financial occurrence transpire that adversely affects financial markets in general or the issuer in particular.

Disclaimer Clause
Securities commissions require that all prospectuses carry a disclaimer on the front page stating that the securities commission itself has in no way approved the merits of the securities being offered for sale.

Discount
The amount by which a preferred share or bond sells below its par value.

Discounted
When some anticipated event such as increased dividends or lower earnings has already been reflected in the market price of a stock, it is said to be "already discounted" by the market.

Discount Brokers
Brokerage firms that offer lower commission rates than investment dealers, but do not offer the services that investment dealers do, such as advice, research and portfolio planning.

Discretionary Account
A securities account where the client has given specific written authorization to a partner, director or qualified portfolio manager of an investment dealer to select securities and execute trades on behalf of that investor. These are opened up as a matter of convenience to clients who are unable to attend to their own accounts through illness or absence from the country.

Diversification
Spreading investment to reduce risk by buying different securities from various companies, businesses, locations and governments.

Dividends
An amount distributed out of a company's profits to its shareholders in proportion to the number of shares they hold. A preferred dividend usually is for a fixed amount, while a common dividend may fluctuate with the profits of the company. A company is under no legal obligation to pay either preferred or common dividends.

Dollar Cost Averaging
Investing a fixed amount of dollars in a specific security at regular set intervals over a period of time, thereby averaging the cost paid per share.

Dow Jones Industrial Average (DJIA)
An average made up of 30 blue chip stocks that trade daily on the New York Stock Exchange. The DJIA is used as an overall indicator of market performance although criticism is periodically raised over how it is calculated, as well as the fact that so few companies are included so that it may not be a truly representative indicator of market activity.

Dow Jones Transportation Average
Similar to the Dow Jones Industrial Average, this average is made up of 20 transportation stocks that trade daily on the New York Stock Exchange.

Dow Theory
A theory of market analysis based upon the performance of the Dow Jones Industrial and Transportation Averages. The theory is that the market is in a basic upward trend if one of these averages advances above a previous important high, accompanied or followed by a similar advance in the other. When both averages dip below previous important lows, this is regarded as confirmation of a basic downward trend.

Draft Prospectus
A prospectus prepared for internal use and discussion by the company issuing securities and the underwriters. It is not for outside distribution and shows only basic data on the company with little final detail about the terms of the planned underwriting. It is not a legal document and does not have to be drawn up strictly to securities commission standards. It is an earlier version of a preliminary prospectus and cannot be used in offering the security.