Chapter 1 Exam Flashcards
(79 cards)
How does a corporation increase its capitalization over time?
Through retained earnings
A firm that handles and is held responsible for all paperwork associated with the execution of the transaction and maintains custody of clients assets and securities is a ?
Clearing Broker
What is Rule 147?
-80% of the issuer’s assets must be within the state
-80% of the net proceeds from the offering must be used within the state
-80% of the issuer’s gross revenues must come from business activities within the state
They cannot be sold outside the states for 6 months
What does a dealer do with the bid and ask price?
-Dealer buys at bid
-Dealer sells at ask
What is a security?
It is an investment contract offered through a legal entity managing the efforts for an expected profit.
Ex: Bond, Stock, Mutual Fund
What does the SEC require when reviewing prospectuses and registration statements?
-“No Approval Clause”
-They require prospectuses to be in bold and states the SEC does not approve or disapprove them.
- They do not guarantee adequacy or accuracy of information contained
Who requires registration and oversees the activities of BDs and RRs?
FINRA
What is CBOE?
They examine authority for broker-dealers engaging in the OPTIONS MARKET
What does the MSRB do?
They are the SRO that governs the broker-dealers and banks that engage in the municipal securities business.
What type of contracts do CBOE offer?
Trades are exchanged in Standardized options contracts.
What is Rule 144?
-This is how certain restricted stock can be sold to the public
-The rule states the stock must be from an issuer that has current public information available.
In a broker-dealer who negotiates with issuers when selling securities to the public?
Investment Banking
Who is paid from the underwriting spread?
-Selling Group
-Syndicate
-Managing Underwriter
What are the several subdivisions of the secondary market?
-Auction market is the trading of exchange-listed securities on stock exchanges.
-OTC Market trading of unlisted securities.
-Fourth Market is for direct trading between institutions.
-The Primary Market is where new issues are sold.
When do cash settlements be paid for?
Cash Settlement=”Same Day” (T=S)
When do corporate and municipal securities be settled?
This is done through regular way settlement (T+2)
What is a QIB?
They are an institution with a minimum of $100 million in securities on a discretionary basis.
What federal agency oversees the U.S securities market?
The Securities and Exchange Commision (SEC)
Who acts as the central bank of the United States?
The Federal Reserve
What does the Treasury Department do?
They are an executive agency responsible for promoting economic prosperity and ensuring the financial security of the U.S.
What does the FDIC do?
They protect bank account deposits in U.S. banks from bankruptcy.
What are Book Entry Settlements?
These are securities held in book-entry on the issuer’s books or in the brokerage accounts.
- The securities must be settled through a registered security depository (DTCC)
- A clearing agency will transfer ownership through bookkeeping entries.
- It applies to securities held in book-entry on the issuer’s books or in brokerage accounts.
What type of broker-dealer is typically used by hedge funds to settle trades that were executed through several different firms?
Prime Broker
What’s the Howey Test?
Investment of money
Common enterprise
Expectation of profit
