The BOOK of JARGON Hedge Funds: The Latham & Watkins Glossary of Hedge Fund Slang and Terminology

The BOOK of JARGON Hedge Funds: The Latham & Watkins Glossary of Hedge Fund Slang and Terminology

’33 Act: another name for the Securities Act.
’34 Act: another name for the Exchange Act.
’40 Act: another name for the Investment Company Act of 1940, and 
sometimes confused with the Investment Advisers Act of 1940.
3(a)(2) Transaction: an exempt issuance by banks under Section 3(a)(2) 
of the Securities Act. See Section 3(a)(2) of the Securities Act.
3C1 Fund: a Hedge Fund that is exempt from the registration provisions 
of the Investment Company Act of 1940 (per Section 3(c)(1)) so long as 
the fund is beneficially owned by not more than 100 investors and is not 
making a public offering of its Securities. A single investor sometimes 
counts as more than one beneficial owner under this rule. 
3C7 Fund: a Hedge Fund that is exempt from the registration provisions 
of the Investment Company Act of 1940 (per Section 3(c)(7)) if it meets the 
following requirements: (1) it has only Qualified Purchasers as investors 
and (2) is not making a public offering of its Securities.
100 Holder Rule: a Hedge Fund may avoid registration as an investment 
company under of the Investment Company Act of 1940 per Section 3(c)
(1) if it is beneficially owned by not more than 100 investors and is not 
making a public offering of its Securities. A single investor sometimes 
counts as more than one beneficial owner under this rule. See 3C1 Fund.
144A for Life Offering: a Rule 144A Financing that does not provide 
Registration Rights for the buyers of the Securities. Accordingly, the 
Issuer in a Rule 144A Financing is not required to become a Reporting 
Company under the Exchange Act.
144A Offering: another name for a Rule 144A Financing.
404 Compliant: an Issuer that is compliant with SOX Section 404.
A / B Exchange Offer: another name for an Exchange Offer.
ABS: abbreviation for Asset-Backed Security.
Accelerated Share Repurchase (ASR): a method used by an Issuer to buy 
back its own shares from the market via a dealer. Pursuant to a private 
agreement between Issuer and dealer, Issuer pays the Notional Amount 
of the repurchase price to dealer, receives an initial delivery of shares 
from the dealer and retires up to the notional number of shares received 
from dealer. Dealer “borrows” the shares delivered to Issuer from the 
securities lending market for the shares and later covers the borrowing 
with purchases of shares in the market. At maturity, the parties “true up” 
the difference between the repurchase price paid by the Issuer and the 
average share price at maturity. Also referred to as an Accelerated Share 
Buyback, or ASB. 
Acceleration: the end of the line under an Indenture or Credit 
Agreement. The definitions of Default and Event of Default describe how 
Acceleration occurs. Following an Event of Default, the Bondholders 
(under an Indenture) or Lenders (under a Credit Agreement) have the 
right to “accelerate” the due date of their debts; in other words, they 
have the right to declare their Notes or loans immediately due and 
payable. Bankruptcy and insolvency Events of Default automatically 
lead to Acceleration.
Accredited Investor: defined under SEC Rule 501 of Regulation D, this 
refers to people and entities that are permitted to buy Securities in a 
Private Placement. The term covers virtually all the types of institutions 
that are participants in the Private Placement market, and also includes 
people who meet certain income or net worth thresholds. 
Accreted Value: the original purchase price of a Zero Coupon Bond or 
Discount Note plus all non-cash Interest that has accrued on the Bond 
or Note since the date of issuance. The calculation of Accreted Value is 
set forth in the Indenture under which the Bonds or Notes were issued.
Adjusted EBITDA: refers to EBITDA, adjusted to eliminate the impact 
of certain unusual or non-cash items that the Issuer or Borrower (or its 
Sponsor) believes are not indicative of the future performance of its 
business. For reporting issuers, disclosure of EBITDA, Adjusted EBITDA 
and other “non-GAAP financial measures” must be done within the 
confines of Item 10 of Regulation S-K (in the case of certain public filings) 
and Regulation G of the SEC (in all cases). A form of Adjusted EBITDA 
is also a component of the Leverage Ratio and Fixed Charge Coverage 
Ratio definitions.
ADR: abbreviation for American Depositary Receipt.
ADS: abbreviation for American Depositary Share.
ADTV: abbreviation for Average Daily Trading Volume.
ADV: see Form ADV.
Adviser: see Fund Manager.
Advisers Act: another name for the Investment Advisers Act of 1940.
Advisory Fee: the fee that is charged to a fund for investment advisory 
services. See also Management Fee.
Affiliate: defined slightly differently in different types of agreements, but 
generally refers to a subsidiary, corporation, partnership, or other person 
controlling, controlled by or under common control with another entity. 
The official Securities law definition is found in SEC Rule 144; however, 
the definition of “affiliate” is different under the Investment Company 
Act and the Investment Advisers Act.
Affiliate Securities (Control Securities): Securities of an Issuer held 
by a person deemed an Affiliate of such Issuer under Rule 144 of the 
Securities Act. Such Securities are subject to the volume and manner of 
sale limitations of the rule.

The BOOK of JARGON Hedge Funds: The Latham & Watkins Glossary of Hedge Fund Slang and Terminology