CFP Investments Flashcards
(55 cards)
FORMS OF UNDERWRITING: Best Efforts
Underwriter agrees to sell as much of the offering as possible
FORMS OF UNDERWRITING: Firm Commitment
Underwriter agrees to buy the entire issuance of stock from the Company
Underwriter profits from spread from selling to the public
Risk: remains with underwriter
What is in the Prospectus?
Risks
Management Team
Business Operations
Fees/Expenses
What is in the Red Herring?
Preliminary prospectus issued BEFORE SEC approval
Used to determine interest
10K
Annual report
AUDITED
sent directly to shareholders
10Q
Quarterly report
NOT AUDITED
Stop Order to Sell
Means once the price is reached, stock sold at that price
OR
possibly less bc it has become a market order at that point
Stop Limit or Stop Loss Limit Order
Investor sets two prices:
Stop Loss: Once the price is reached, the order turns to a limit order
Limit Price: An investor will not sell below the second price
(Appropriate for signficant gains)
What is Short-Selling?
Borrowing shares
Selling first at a higher price, in hopes of purchasing the stock back at a lower price
GOAL: Sell high, buy low
Must have a margin account to protect against price appreciation
Dividends must be covered by the short seller
Regulation T was established by the Federal Reserve, what is it?
Sets the initial margin at 50%
Assume 50% on the exam unless stated otherwise
Definition of Maintenance Margin
THe minimum amount of equity required before a margin call
Margin Call Formula
Loan /
1 - Maintenance Margin
Value Line rates _____
___ is the best score
Value Line rates stocks
1 is the best score
Morningstar rates _____
___ is the best score
Mutual Funds
5 is the best score
Ex-Dividend Date
Date the stock trades without the dividend
If you sell on the ex-dividend date you will not receive the dividend
1 business day before the date of record
Date of Record
Date you must be registered to receive the dividend
Must purchase 2 business days prior to receive the dividend
Cash dividends are taxable when?
On the date of receipt
Stock dividends are taxable when?
Not until the stock is sold
Securities Act of 1933
IPO
Primary Market
Requires prospectus
Securities Act of 1934
Secondary market
Created the SEC
Investment Company Act of 1940
Authorized the SEC to regulate investment companies. 3 types:
Open
Closed
Unit Investment Trusts
REQUIRED investment advisors to register with the SEC
Securities Investors Protection Act of 1970
Established SIPC
Protection regardless of citizenship
Insider Trading and Securities Fraud Enforcement Act of 1988
Insider Information: Info not available to the public
Insiders cannot trade on that info
Type of Money Market Securities
T-Bills (up to 1 year, $100 denomination)
Commercial Paper (between Corps, $100,000 denomination, sold at discount, 270 days or less)
Bankers Acceptance (imports/exports, 9 mos or less)
Eurodollars (foreign bank, US denomination)
