Brian lee video Flashcards
(129 cards)
1
Q
big difference between ugma and utma
A
utma greater investment choices
2
Q
agent definition
A
natural person that accept or place orders for broker for securities transactions
3
Q
Investors in closed-end investment companies may trade only in
A
full shares
4
Q
Under the NASAA Model Rule on Custody Requirements for Investment Advisers, an investment adviser would be permitted to maintain custody of customer cash and/or securities if
A
In order to maintain custody, notification must be given to the Administrator and, obviously, the state must not have a rule forbidding custody.
5
Q
the only life insurance considered a security is
A
variable life
6
Q
It is not permitted to have a 401(k) and a___at the same time
A
403B
7
Q
annuitization payout options
A
life only(largest monthly income) - receive check every month until you die. life with period certain. if owner dies, bene gets check for remainder of period. If owner does not die then they still get check
8
Q
Advisers that manage $110 million or more in customer assets are
A
federal covered advisers and are required to register with the SEC under the Investment Advisers Act of 1940. In addition, they are normally required to file notice in each state where they conduct business. There are no bonding requirements for federal covered advisers.
9
Q
micro
small
mid
large
number breakdown
A
0-300 m
300-
- to 10 billion
10 billion around beyond
10
Q
administrator powers
A
seek injunction(can’t issue)
issue subpoena and conduct investigations
require specific forms
deny, suspend cancel, revoke registrations
11
Q
The owner of a fixed annuity is protected against
A
longevity risk
12
Q
administrator has authority of any offer or sale that
A
originates in state
directed to state
accepted to state
13
Q
Borrowing money or securities from a client is an unethical business practice, unless
A
the client is a broker-dealer, a bank or other financial institution in the business of loaning funds, or an affiliated person of the adviser.
14
Q
renewal of registration difference with sec and state
A
fed pays fee
state does not
15
Q
which entity uses member for its owners
A
llc
16
Q
SEP (Simplified Employee Pension Plan)
A
Offers self employed persons and small business easy to administer pension plans
Qualified plan that allows employer to contribute money directly into an IRA setup for each employee
17
Q
risk adjusted return. what is the other name for this
A
Sharpe ratio
18
Q
Under the Investment Advisers Act of 1940, if an investment adviser’s sales literature describes an investment system, the description must include
A
the difficulties and limitations of using the system
19
Q
advantage of country funds is
A
liquidity
20
Q
notice filing
A
For Federally Covered Securities; i.e. mutual fund.
cleared by sec
21
Q
capital needs analysis does not take into consideration
A
market fluctuations
22
Q
burden of proof for exemption falls to the person
A
claiming the exemption
23
Q
what law regulates unit investment trusts
A
securities act 1933
24
Q
discounted cash flow cares about
A
coupon rate
par value
maturity(number of payments)
25
government workers use what retirement plan
457
26
in perpetuity pick what answer
400,000
annual income/ expected rate of return
27
coordination
for all regular ipos and is cleared by sec
28
if supervisor gets suspended
agents registration suspended. They have 30 days to find new broker dealer
29
An investment adviser is servicing a group of physicians and will offer a discounted fee to the doctors in that particular partnership. In what way would this be considered ethical?
This would be permitted as long as a disclosure is made in the IA's brochure that fees are negotiable.
30
erisa minimum number of investments
3
31
investment advisor definition
person in the BUSINESS(firm) of providing investment advice. Holds themselves out to the public as investment advisor and receives economic benefit for advice.
State and fed definition is identical
32
year at the end of law means
federal
33
CDSC is with what share class
c
34
remainderman
how is remainder distributed
heir to beneficiary in a trust
per stirpes
35
Under the Investment Advisers Act of 1940, a registered investment adviser who provides investment advisory services to individuals must
provide each client with a disclosure statement or brochure no later than when entering into the advisory agreement
36
residency difference between s corp and c corp
c corps don't have residency restrictions
none of the 100 people in an s corp can be a "nonalien"
37
Under the Uniform Securities Act, an Administrator investigating violations
may appoint an officer who has the power to subpoena records, administer oaths, or require production of documents and books
38
when a market maker publishes a quote, what price is shown
bid and offer
39
nominal yield same thing as
Coupon
40
TIPS what happens when CPI increases
the principal that adjusts by CPI, not the coupon rate.
41
stock received as an inheritance always has what type of capital gain
long term
42
fixed assets
plant and equipment
43
life trust vs test trust
life trust while living
| test trust set up by will
44
Two of the major factors involved in the capital asset pricing model (CAPM) are
stock risk premium
| market risk premium
45
tenants in common
each party gets their own percentage. Generally for non spouses.
46
right of rescission
opportunity for client to get all money back plus court costs.
dividends and interest subtracted
or just keep the security.
30 days to make decision
47
discounted cash flow cares about
principal, coupon rate, number of payments
48
is investment policy statement
is it required
invest choices
how we track and measure performance
contact info
no
49
all corporate pension and profit-sharing plans must be established under
a trust agreement
50
sports agent must register yes or no
yes
51
529 vs cordevel
cordevel 2000 max per child , must stop making contributions when child is 18. must take distributions by time they are 30. can be used for primary or secondary education
529 max is for secondary education only
52
What is the term used to describe a common stock issued below its par value
All stock issued today is
Assessable stock
nonassessible
53
sale in terms of preemptive rights
Although the receipt of preemptive rights is not a sale, the exercise of them is
54
A popular tool used by analysts is discounted cash flow (DCF). Most use this tool to evaluate
the present value of future cash flows to determine an appropriate current value.
55
statement of cash flow includes
salary, invest income, taxes , utility, mortgage
56
purchasing shares directly from the client is considered
principal capacity also
57
Which of the following is (are) advantages of irrevocable insurance trusts?
Provide estate liquidity.
Insurance proceeds are removed from the estate of the insured for tax purposes.
58
options paperwork explanation
Customers do not have to complete (sign) the options agreement prior to entering an order; under current rules, the agreement must be signed and returned by the customer within 15 days of account approval.
59
One major difference between the customer identification program (CIP) and the new account opening rules of the regulatory bodies is that
the CIP requires date of birth while the regulators only require proof of legal age
60
death benefit of variable annuity
The death benefit insures that the investor will never receive back less than the original amount contributed to the account.
61
broker dealer definition
effects securities transactions for themselves or others
62
A grantor retained annuity trust (GRAT)
is an estate planning tool designed to pass assets to beneficiaries (usually children) in a way to minimize gift and/or estate taxes.
63
The main assumptions of the capital market theory are as follows:
All investors can borrow or lend money at the risk-free rate of return.
All investors are rational and evaluate investments in terms of expected return and variability (standard deviation). Therefore, given a set of security prices and a risk-free rate, all investors use the same information to generate an efficient frontier.
The time horizon is equal for all investors: when choosing investments, investors have equal time horizons for the chosen investments.
There are no transaction costs or personal income taxes; investors are indifferent between capital gains and dividends.
There is no inflation
All assets are infinitely divisible: this means that fractional shares can be purchased.
There is no mispricing within the capital markets: it is assumed that the markets are efficient and that no mispricings within the markets exist. Another way to state this is that capital markets are in equilibrium.
64
With regard to taxation of distributions from a REIT
in the majority of cases, dividends are taxed as ordinary income
capital gains distributions are treated as long-term capital gains
65
capm is used to find what?
what is the formula
find the required return when it is not computed to see if a security is overvalued or undervalued
rfr+beta(mr-rfr)
66
when does federally covered IA have to notice file
states they have a place of business
Notice file if they have more the 6 or more non institutional clients in a state
67
529 all info
After tax contributions
Contributions are NOT tax deductible
Earnings grow tax deferred
Qualified withdrawals are tax free for educational purposes if withdrawn
Otherwise 10% tax penalty and subject to income tax on earnings
No Contribution limit
No Income limit
No age restrictions for contribution to be used
Only used for college and graduate school
Beneficiaries can be changed to any family member
68
ABC Advisers, a federal covered investment adviser, is moving the firm's headquarters to a new office park in the suburbs. ABC is required to file this change with the SEC
promptly
69
when can you get a performance fee
2 mill net worth 1 mill invested and hedge funds
must be percentage of net gains
for a specific time period
against peer portfolio
70
exempt transaction
```
Unsolicited▪
Financial Inst.▪
Issuer/UW▪
Private Placements▪
Fiduciaries
Sherriff,
trustee inB/K
Isolated Non-issuer trans.
```
71
When discussing the differences between purchasing a mutual fund and a hedge fund, the investor should be aware that
Because hedge funds are not registered with the SEC (or the states), there are limited disclosures—the transparency is not nearly what investors have with mutual funds.
72
Margin regulations are determined by which act
securities act 1934
73
statute of limitations for criminal violations of the USA
There is a 5-year statute of limitations for criminal violations under the USA
74
Current yield for any security is always computed on the basis of
current market value
75
In a defined benefit plan
the retiree receives a specified amount, with the sponsor bearing the investment risk.
76
authority of administrator
how many reasons do they need
deny, revoke, suspend registration
2. one must be in the public's best interest
other reasons could be person is senile
felony arrest in past 10 years
other reg auth asks you to leave
77
non exempt
corp securites
78
who are fiduciaries ias or broker dealers
ias
79
exempt entities
```
U. S. Govt’s.
Muni’s
Bank/Insurance Co
.Non-Profit/
ReligiousCommon
Carriers (Trucking Co., Railroads, etc.)
Canadian Gov’t (Fed and all subdivisions)
Foreign Govt’s. (Fed only)
Commercial Paper Maturity < 270 days
Face value > $50,000
```
80
Keogh plans are for
contribution limits vs ira
self employed individuals
much higher
81
In order for a security to lawfully be sold or offered under the USA, it must meet at least one of the following requirements
```
It is unlawful to sell a security in a state unless the security is
a federal covered security,
exempt from registration under the USA,
sold in an exempt transaction,
or registered under the act.
```
82
variable annuties taxed on what basis
how are non qualified taxed
lifo
non qualified is after tax and taxed as ordinary income. on amount exceeding basis
83
is acceptable for use as the firm's brochure
Form ADV Part 2A and Part 2B
84
sec release 10-92 who is an advisor
financial planners
sports and entertainment agents
pension consultants(employee benefit plans)
85
A life settlement contract involves
A life settlement contract involves the sale of a life insurance policy to a party other than the insured. In exchange for the payment, the new owner is entitled to the death benefit when the seller passes away.
86
custody what must be done
must segregate
quarterly statements
location of securities
surprise annual independent audit
87
current liabilities
accounts payable
| interest due on outstanding debt
88
what authority does state admin have of fed covered advisor
anti fraud
89
The YTC computation involves knowing
the amount of interest payments to be received, the length of time to the call, the current price, and the call price
90
With defined benefit plans who bears the risk
With defined benefit plans, the employer (not the employee) bears the investment risk.
91
viatical settlement
paying off cash value for terminally ill clients
92
efficient market hypotheses
weak- price and volume. research could help
semi strong- all public info company financials. research not going to help as much.
Strong- all public and private information(insider) No analysis will help
93
Money may never be borrowed from a client, unless
something in the question indicates that the client is in the business of lending money or an affiliate of the firm
94
when must ads be filed with administrator. when not
All advertising, sales literature, and other written material (prospectus, pamphlets) intended for distribution to current or potential clients must be filed with the administrator.
For materials relating to exempt securities, exempt transactions, or federal covered securities, FILING WITH THE ADMINISTRATOR IS NOT REQUIRED
95
index(equity) based annuity
comes with participation rate
you receive that % of the gain
comes with caps. if index goes down, annuitant does not lose money
96
Under the Securities Exchange Act of 1934, an exchange is
an organization that provides facilities for bringing together buyers and sellers of securities
97
is receiving a check made out to a third party considered custody
no
98
policy loans and life insurance
As long as the policy has cash value, loans are permitted
99
variable annuity units
The number of annuity units is fixed when payout begins.
The monthly annuity payment is a variable amount.
100
preferred stock
fixed income from dividends
prior claim ahead of common stock
convertible shares get opportunity for growth
no maturity date
101
bottom up vs top bottom
bottom up starts with individual companies and goes up. opposite for top bottom
102
Under the Investment Advisers Act of 1940, a cash referral fee may be paid by an IA
when a written agreement providing certain disclosures has been entered into between the IA and the third party
this only applies to the 1940 act
103
qualification
for intrastate offerings, effective when cleared by admin
104
As we know, when a broker-dealer offers wrap fee programs, the exclusion from the definition of investment adviser
is lost
105
Firm Brochure rule for state and fed
For Federal IA’s brochure must be made to each client no later than the commencement of the advisory agreement
For State IA’s brochure must be give 48 hours prior to signing of investment contract unless contract calls for a penalty free determination
can be given and have 5 days to cancel
ADV 2A and 2B satisfy
106
With high frequency trading, who loses out?
With HFT, it is the smaller investors who lose out because they don't get access to the information as quickly.
107
dividend discount model
annual dividend/ expected return= present value(market price)
108
Under what conditions may an unregistered employee of a broker-dealer receive bonuses or incentives
When such bonuses or incentives are not tied to transactions, commission activity, or referrals generated by the unregistered person
109
current assets include
cash equivalents
marketable securities
accounts receivable
inventories
110
Broker-dealer" does not include
(1) an agent, (2) an issuer, (3) a bank, savings institution, or trust company.
111
Included in the Investment Advisers Act of 1940 are a number of different recordkeeping requirements.
Ias must keep books and records for 5 years accessible. first 2 years they have to be maintained in principal office
partnership articles, articles of incorp, minutes books, etf must be kept 3 years after termination
112
excluded from definition of an IA
```
LATE
lawyers
accountants
teaachers
engineers
```
113
In a defined contribution plan
the employee contributes a defined amount each period, bears the investment risk, and does not receive a defined amount upon retirement.
114
summary plan document
required by the corporation
115
a bank may be exempt from state registration but a
bank holding company is not
116
balance sheet
a-l=nw
117
referral fees
Referral fees (not cash fees for full-time soliciting) may be paid to certain professionals (lawyers, accountants, insurance agents, and so forth) as long as the fee is both a nominal amount (up to several hundred dollars) and is the same amount for any referral.
118
As an investment adviser, you feel that RAN common stock is an appropriate addition to the portfolio for several of your clients. You enter an order to purchase 1,000 shares and receive two 500-share confirmations, but they are not at the same price. Which of the following is the proper procedure for you to follow?
Allocate using the average of the two prices
119
long term liability
outstanding interest
120
when is there concerns about cyber security
Anytime that a broker-dealer's financial records are being handled electronically,
121
Coverdell
After tax contribution
Contributions are NOT tax deductible
Earnings grow tax deferred
Qualified withdrawals are tax free if used for education by 30
Otherwise 10% tax penalty and subject to income tax on earnings
Contributions made by anyone but max is $2000 per child in a year
Contribution may be made till child’s 18th birthday
Contributors must fall under earning limits
If makes individually above $110,00 or $220,000 joint cannot make any contribution
Used for k-12 and college
Beneficiaries can be changed to any family member under 30
122
he 3 basic asset classes are
stocks bonds cash
123
buy and hold least appropriate for
wrap account
124
formula for risk adjusted return
PAR-RFR/Standard deviation
125
A client with a sizable estate would probably find it most efficient to pay estate taxes with
proceeds from a life insurance policy
126
which types of stocks are interest rate sensitive
utility stocks
127
benchmark is a
peer portfolio
128
The standard benchmark used to measure the "risk-free" rate of return is the
91 day treasury bill
129
3rd party checks and securities and custody
must be moved in 3 days to be considered not having custody
