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Tutoring For 65 > 5/8/2023 > Flashcards

5/8/2023 Flashcards

(58 cards)

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1
Q

Is there an exchange of commodity at the end of a futures contract

A

No

But the must settle the contract therefore there is an obligation for the buyer and seller of the contract

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2
Q

you are borrowing what when you sell short

A

Borrowing Securities

(Not Money)

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3
Q

With Options when is the Max Gain Infinite

A

When you Buy a Call

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4
Q

With options when is the Max Loss Infinite

A

When you Sell a Call
AND
Are short the stock
(the price could go up infinitely and to cover the option you first need to buy the stock)

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5
Q

Words that are in the same category as Principal

A

Dealer
Marker Maker
Markup / Mark down

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6
Q

Words that are the in the same category as Agency

A

Broker
Agent
Commission

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7
Q

Difference between a Principal Trade and a Agency Trade

A

Principal -
Buys/Sells you the Stock from:
Their Own Inventory

How they Profit:
Marks Up/ Down the Stock

Agency -
Buys/Sells you the Stock from:
The Market

How they Profit:
Charges a Commission on the Sale

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8
Q

Do Agency and Principal Trades cost different amounts

A

No

they charge they same amount its just different in the method its charged
(Mark uUp/Commission)

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9
Q

Day Trading Accounts Minimum Equity

A

$25k
AT ALL TIMES

if under it needs to be covered the same day

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10
Q

Can Day Trading Account Be Short:
-Securities
-Equity

A

Securities - Yes

Equity - Kind Of - Must follow Margin Maintenence Requirement (25% must be equity at all times)
If less they only have till the end of the day to cover the margin call

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11
Q

Time Limit for Covering a Margin Call on a Day Trading Account

A

by the end of the same day.

(unlike normal Margin Accounts where you need to Cover it with in 2 days)

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12
Q

2 things that Day trading accounts have to ensure by the end of every day

A

$25k minnimum Equity

and

Any Margin Calls are covered
(unlike noraml margin accounts = 2 days)

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13
Q

Time Weighted Return

A

DOES NOT include
money being contributed and withdrawn from your account

Views: Time
as being a big cost of the investment

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14
Q

Dollar Weighted Return

A

DOES include
money being contributed and withdrawn from your account

Views: Dollars
as being a big cost of the investment
(focuses on cash flow a little more than Time Weighted)

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15
Q

Holding Period Rate of Return

A

Ignores everything that happened during the time frame and just looks at the return from
Start to Finish

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16
Q

Difference Between Yield and Return and there formula

A

NONE - THEY ARE THE SAME THING

Income (usually Interest and dividends) + REALIZED Capital Gains (not unrealized)
/
Cost of Buying Security

Realized Capital gains mean they sold the securities to make the gain official

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17
Q

CY

A

What we get in INCOME over 1 year / What we bought the security for

Emphasis on 1 YEAR

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18
Q

Things that would be included in CY

A

Dividends

Interest

(both are like receiving Income)

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19
Q

Things that would NOT be included in CY

A

Capital Gains Distribution

Anything that has to do with the PRINCIPAL,
not the INCOME a security Generates

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20
Q

Exempt Issuers

A

-US Government

-State and local Governments

-Foreign National Governments where we have diplomatic relations

!!!!Canada is the only foreign country given exemption at the state level. The country is exempt but the local foreign entity is not (the city isn’t but the country is)

-Banks, Insurance companies, Credit Unions
!!!!BUT NOT their Holding Companies

-(Consolidated carrier) Trucking, railroads, airlines

-Non-Profit Organizations
(Includes Churches and really any other Non-Profit)

NOTE: the Textbook pg 88 lists a bunch more and differs a little bit when in doubt trust the textbook

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21
Q

Exempt Securities

A
  • Commercial Paper
  • Bankers Acceptances
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22
Q

Exempt Transactions
(6 of them)

A

Institutional (Transactions for institutions)

Issuer to Underwriter

Unsolicited orders (If the advisor doesn’t sell the stock to a client but the client comes to them)

Private placements (Unregistered restricted stock)

Court “like” transactions (Executor, Bankrupcy, Court Ordered Etc…)

Pre-Organization Certificates - IF NO COMMISSION PAID AND LESS THAN 10 SUBSCRIBERS

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23
Q

How many Non-accredited investors are allowed in a Private Placement for it to still be an exempt Transaction

A

Up to and Including 25 Non-accredited Investors

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24
Q

When you hear the Word Administrator always Assume

Study These Flashcards
A

they are talking State
NOT federal

25
Soft Dollar Compensation
Company A Compensating Company B for their services in anything other than Actual Cash If it doesn't help with the actual services offered to the A company, its not allowed
26
Examples of Allowed Soft Dollar Compensation
Research Reports Software
27
Examples of NOT Allowed Soft Dollar Compensation
Office Rent Salaries Phone Bill
28
Trading Discretion Definition
Making trading decisions without your client
29
Criteria for determining if there needs to be trading discretion or not
Client Must tell you ALL of these things otherwise you need discretion 1) Buy or Sell 2) EXACT Amount (either # of shares OR $ amount --can be one or the other--) 3) which SECURITY (A Specific Security not general industry)
30
Types of Trading Discretion and what they are
Limited POA - Can only make trades Full POA - Advisor can do whatever they want to the account (ie: Trade, Re-Register Securities, Take $ out of account)
31
an Advisors Conflict of Interest needs to be reported to:
Their Broker-Dealer and IA
32
What Constitutes a Conflict of Interest
All activities the Advisor does outside of the business that might be a potential conflict Doesn't matter if they get Compensated for the activity or not it still needs to be reported
33
An Advisors Criminal Activities Must Be Reported To:
Their Broker-Dealer and IA
34
Which Criminal Activities of an advisor Need to be reported to their Broker-Dealer and IA
All Convicted: Felonies and Misdeminors that were securities or business related (must be convicted not thrown out)
35
Is Loaning Money to Client Allowed
No Unless they are an immediate Family Member
36
Is Receiving a Loan From a Client Allowed
No Unless they are in the business of loaning money out (legitimately cant be the mob or your uncle Frank who doesn't officially loan out money)
37
Can you Share in the Profits/ Losses of a clients account
Yes BUT - you must share in the Profits AND the Losses AND have prior approval of your IA/Principal
38
Selling Away
Selling Securities outside the realm of your IA/BD (they must have an agreement that they can sell those securities) Is a Violation
39
Churning
Is A Prohibited Practice Excessive transactions. An advisor doing excessive transactions with clients accounts not for the benefit of the client but rather to increase commissions
40
Reverse Churning
Is A Prohibited Practice Taking a customers account that doesn’t trade very much and putting it in a fee based account to get more commissions on it and its not in the clients best interest
41
Capping
Is A Prohibited Practice trying to keep a stock price LOW Ie: entering in a large amount of sales orders before the end of the trading day to decrease the stock price
42
Pegging
Is A Prohibited Practice trying to keep the stock price HIGH Ie: entering in a large number of buy orders before the end of the day to increase the stock price
43
Marketing the Open
Is A Prohibited Practice Trying to manipulate the market before the Market Opens (IE: could use Capping or Pegging)
44
Marketing the Close
Is A Prohibited Practice Trying to manipulate the market before the Market Closes (IE: could use Capping or Pegging)
45
Backing Away
Is A Prohibited Practice ONLY APPLIES TO MARKET MARKERS AND ON TRANSACTIONS OF 100 SHARES OR MORE Backing away from a transaction after being connected with the buyer/seller because something like the news changes the price.
46
Front Running
Buying your firms Shares Before Your Clients (pushes up the price for your client)
47
Trading Ahead
Is A Prohibited Practice Placing a trade just before the release of a research report (while knowing information about the report before its released)
48
Painting the Tape
Is A Prohibited Practice Similar Terms: matched purchases / matched sales / washed sales Buying and selling stocks multiple times to people who are in the loop with you to try and create false activity in the stock in order for it to look active. Ie: two people sell the stock back and forth to each other to try and make the stock activity look good.
49
Guarantees in the industry are only allowed by
- The US government - An Insurance company - A parent company guaranteeing the obligations of a subsidiary
50
Personal Securities Transactions Report
Advisors must use this to disclose all their own personal Securities Transactions Done Every Quarter
51
Personal Securities Transactions Report - Which Securities Dont Have to Be Reported
-Treasury and -Money Market Securities
52
Political Contributions Limits
If Candidate is within your jurisdiction (You can participate in a vote) =$250 If NOT within your jurisdiction (You CANT participate in a vote) =$100
53
Rules on gifting to clients
Max $100/yr worth of gifts If you go with them to the event = Doesn't Count (as long as its within reason taking them to Fiji is too much) Also doesnt count life events (weddings, Baby etc...) (Also needs to be within reason/ whats appropriate for the life event)
54
CTR
Currency Transfer Reports Used to report suspicious and potential money Laundering activities to FINCEN Items required to be reported: -Transactions of $10k or more within 15 days of receiving the currency (need to be reported within 15 days) -Wire Transfers of +$3k or more
55
Types of Intrastate Offerings
Qualification - If Offering is in Only 1 State Coordination - If Offering is in More than 1 State (registers in original state and Federally then each other state just does a Filing Notice as their form of registration) Filing Notice - If its Already Federally registered (not a form of registration)
56
What type of registration does Secondary offerings do
Nothing except for notice filing because its already been registered in the Primary offering
57
Matched orders
Forms of painting the tape that involves more than 1 person that's "In on it" Is a violation
58
Washed Sales
Forms of painting the tape that involves ONLY 1 person that is "In on it" They sell shares with one broker Dealer then Buy them shares from themself with another BD Is a violation

Tutoring For 65 (11 decks)

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