Flashcards
(433 cards)
1
Q
Reg. BI only applied to ____ customers
A
only applies to retail customers
2
Q
purpose of form CRS?
A
Form CRS is to provide retail investors with information about the nature of their relationship with their financial professional in a simple, easy-to-understand format
3
Q
when to receive form CRS?
A
no later than open brokerage account
place an order
or receive recommendation
4
Q
General obligations under Reg. BI - 4 types?
A
Disclosure
Care
Conflicts of Interest
Compliance
“I disclose that I care about COI and compliance”
5
Q
qualified cash dividend are taxed at?
A
LTCG
6
Q
REITS dividends are taxed at?
A
ordinary income
7
Q
alternative min. tax?
A
wealthy people who get income from certain types of investments pay at least some taxes
8
Q
reasonable basis obligation?
A
believe that recommenation is suitable for at least some of its investors
9
Q
customer-specific obligation?
A
recommendation is suitable for a particular customer based on the customer’s investment profile
10
Q
quantitative obligation?
A
series of recommended transactions are not excessive
11
Q
when conducting business with institutional customers, which obligation doesn’t apply?
A
customer-specfic
12
Q
According to FINRA, when opening an account, required information, required info?
A
RF at 906 Hillside, age 51, Jake and Charlie
13
Q
According to FINRA, when opening an account, required information, requested info?
A
511 at ATC, associated with ATC, annual income wants to make a lot of money
14
Q
How often must the required info be provided to clients?
A
36 months
15
Q
when opening accounts, are customers required to sign the forms?
A
no
16
Q
What does the RR do if customer doesn’t provide the info?
A
write “refused”
17
Q
for cash accounts, who has to sign the form?
A
Principal
18
Q
signature requirements for option or margin accounts?
A
customer required
19
Q
predispute arbitration clause?
A
obligates customers to abide by this
20
Q
recordkeeping requirement of customer account information?
A
6 years
21
Q
Tenancy in common account?
A
each owner has % of ownership
22
Q
community property accounts?
A
b/w married couples
23
Q
cash trading accont requires corporate charter?
A
no
24
Q
revocable trust and irrevocable tax reductions?
A
revocable - no
irrevocable - yes
25
UTMA accounts, max. contribution limit?
none
26
UTMA accounts opened unders whose SSN?
minors
27
UTMA accounts margin accounts?
no
28
Durable POA?
3rd party's power continues even if they're incapacitated
29
Discretionary accounts, what does the principal do?
must accept the discretionary authorization in writing before it becomes effective
each order must be approved by a principal promptly
30
if discretionary authority and a member firm is selling own stock and wants client to have some of the stock?
written consent from customer to execute the trade
31
pattern day trader criteria?
4 or more day trades over a 5-day period
32
day trader buying power?
4x trader's maintenance margin excess
33
if customer meets definition of pattern day trades, but the number of day's trades is less than ____of the total trades, customer will not considered a pattern day trader
6 percent
34
to avoid tax penalty on rollovers, it must be completed wihin ___ days and be done ___ times every 12 months?
60 and one time
35
investors under 59 1/2, tax penalty exceptions for retirement plans?
account owner is disabled
The account owner dies and the money is withdrawn by the beneficiary
The withdrawals are set up as a series of substantially equal periodic payments
certain medical expenses
36
investors under 59 1/2, tax penalty exceptions for IRA?
Medical insurance premiums when the owner is unemployed
Expenses related to being a qualified first-time home buyer (limited to $10,000)
Expenses related to the birth or adoption of a child (up to $5,000)
Paying qualified higher education expenses (including tuition, fees, books, and room and board) for the account holder or a member of her immediate family
37
401k plans loan allowance amounts?
lesser of 50% of the amount vested or $50k
38
BD have ___ days to send copies of account opening or at the time the client's next statement is sent
30
39
Regulation SP consumer requirement?
provide a notice before it discloses non-public, personal information to any unaffiliated third party
40
insider definition?
director or officer of a corporation or
owner of more than 10% of the voting stock and his immediate family members
41
Within ___ days of being an insider, person required to file Form ___
10 and 3
42
insider required to file Form ___ to report any changes in his stock position by the second business day following the change
4
43
outside brokerage accounts require
prior written consent of their firm
written notification to the executing firm
44
ERISA plans allow option strategies?
yes
45
when a client dies, RR should
cancel all open orders
mark the account deceased
await instructions from the executor
46
Firms are required to maintain a file containing all approved communications for ____ years?
3
47
Retail communication filings with FINRA need to be done ___ days prior or within ___ days of first use
10
48
10 days prior examples
1st year as FINRA member
disciplinary issues
RICs that include rankings
security futures
49
wihin 10 days of being published examples
RICs
DPPs
CMOs
ETNs
50
Misleading Fund Names must invest at least ___% of its assets in those securities
80
51
SEC standardized Yield for money market funds?
7 day
52
SEC standardized Yield for bond funds?
30 days
53
ODD must provided by?
at or before the options account is opened
54
municipal securities disclosure doc is called?
official statement
55
CMOs retail communications must be approved before intial use and file with FINRA within ___ days of first use
10
56
public appearance person limit
15 or more
57
quiet period for IPOs?
10 days following the offering
58
IPO quiet period applies to?
manager
syndicate member
selling group
59
quiet period for follow-on offerings?
3 days following the offering
60
Follow-on quiet period applies to?
manager
co-manager
61
SEC Rule 482 - an offer to sell securities can be made through a?
prospectus
62
if a communication doesn't make a financial recommendation or doesn't promote a produt or servive of the firm, principal approval? FINRA approval?
no and no
63
market cap formula for stock
current market price * # of outstanding shares
64
super voting stock?
gives key company insiders greater control through the receipt of more than one vote per share
65
spin-off transactions
parent company distributes shares of a subsidiary company to the parent company’s shareholders
66
why preferred stock ?
more income than capital appreciation
67
conversion ratio formula?
p/cp
68
exceptions to penny stock definition?
exchange traded equities
investment company securities
OCC listed puts and calls
securities with a market value of at least $5
securities whose issuer has tangible assets >$2MM if in business for at least 3 years
securities whose issuer has tangible assets >$5MM if in business for < 3 years
avg. revenue of at least $6MM for at least 3 years
69
penny stock disclosure rules
specific penny stock risk disclosure statement
70
penny stock transaction requirements
current quote
BD compensation
RR compensation
71
penny stock disclosure rules exemptions
accredited investors
private placements
transactions with issuer, O&Ds, GPs or 5% owners of the company's stock
transactions that aren't recommended by the BD
total transactions of penny stocks that are executed by BD that if it doesn't exceed 5% of its total commissions
72
penny stock account approval procedures
manually signed and dated copy of the statement
73
penny stock established customer
executed a transaction more than a year prior to penny stock transaction
made 3 purchases of penny stocks which occurred on 3 separate days and involved 3 separate issues
74
ADR
facilitates trading of foreign stock in the US
75
non-qualified dividends are taxed at ?
investor's ordinary tax rate
76
for a dividend to be qualified, an investor must hold shares for more than ___ days
60
77
corporate dividend exclusion
if corporation owns < 20% of the disributing corporation, 50% will be excluded from corporate income
78
Dividends from ____ don’t qualify for the corporate dividend exclusion
REITs
79
wash sale is actually how many days?
61
80
if a security is sold for a loss, the must wait ___ days before repurchasing the same security
31
81
IRS two methods for calculating gains or losses on stock transactions?
FIFO and specific identification
82
who issues options?
OCC
83
dividends received from _____________ may be subject to a witholding tax
foreign securities (ADRs)
84
gain or loss on a short trade tax treatment?
STCG
85
Series K preferred stock?
fixed-to-floating rate preferred security issued by corporations, typically financial institutions, to attract investors seeking dividend income with adjustable rates
86
Series K preferred stock characteristics
depository shares and represent a larger basket of an issuer’s preferred stock
wide range of par values
no voting rights
dividends are non cumulative but are qualified for tax purposes (max. rate of 20%)
87
warrant intrinsic value formula
stock price - exercise price (if a negative number --> no intrinsic value
88
corporate bonds pay on a _____ basis?
30/360
89
dollar amount of accrued interest formula for corporate bonds
amount of interest = (principal * rate * days of interest)/360) --> memory trick = AI = (P*IR*D)/360
90
level debt service
serial bond that's structured so that principal and interest payments are more or less equal annual payments
91
prices of _____ term bonds will fluctuate more than the prices of ________ term bonds
long term / short term
92
bond current yield formula
CY = AI / CMP
93
bond's YTM is aka
basis or yield
94
a bond selling a premium, quote YTC or YTM?
YTC
95
________________ calls are exempt from the bond disclosure requirement
catastrophe calls
96
call premium?
issuer is often required to pay more than par value in order to compensate bondholders for early redemption of bonds
97
prerefunding?
issuer intends to lock in a lower rate prior to a scheduled call date on a bond
98
defeasance
elimination of bond issuer's responsibility for the offering and elimination of the bondholder's rights
99
crossover refunding allows
issurer's to lock in lower rates now
100
sinking fund
bond issuer's deposit funds each year in order to redeem their bonds
101
sinking fund more likely for LT or ST bonds?
LT
102
accretion definition and formula
gradual increase in the value of the bond. Used on low coupon or zero coupon bonds, typically required to adjust cost basis annually
103
accretion formula
Discount amount / Years to Maturity
104
zero coupon bonds have capital gains or losses if held until maturity?
no - taxed as ordinary income
105
Zero coupons are preferred in tax deferred account why?
phantom income taxation
106
zero coupon bonds sold before maturity gain/loss is determined by
sales price minus adjusted basis
107
True or false: interest accrual includes settlement date?
108
straight line amortization formula
get the new cost basis and subtract purchase price - adjusted cost basis
109
Chapter 7 bankrupcty
liquidation
110
Chapter 11 bankrupcty
reorganization
111
Chapter 13 bankrupcty
individuals can negotiate with the creditors
112
Chapter 15 bankrupcty
foreign investors
113
junk bond status
BBB for S&P and Baa for Moody's
114
eurodollar bond
dollar-denominated deposit made outside of US
115
eurodollar bonds may not be sold in the US until ___ days have elapsed from date of issuance
40
116
Yankee bond
allows foreign entities to borrow money in the US
117
eurobond
one that's sold in one country but denominated in the currency of another country
118
money market instruments returns are ___________ to bonds
uncorrelated
119
Federal Reserve sets which rate?
Fed Funds Rate --> ""FFoBB"
120
prime rate
bank charges this to its best corporate customers
121
exchange traded notes (ETNs)
unsecured debt security that is often linked to the performance of an index
122
Order of Liquidation
"Secured workers tax general subordinates preferred cash"
1.Secured creditors, including secured bonds
2. Wages (payroll)
3. Taxes
4. General creditors, including debentures
5. Subordinated creditors, including subordinated debentures
6. Preferred stockholders
7. Common stockholders
123
Negotiable CDs time limit?
none
124
Negotiable CDs minimum denomination?
$100k
125
Long-term CDs are traded in the ___________ market?
secondary
126
Long-term CDs are considered money-market securities?
no
127
guaranteed corporate bonds?
secured by the corporation's + another corporation
128
Banker's acceptance?
a type of money market security that is used to facilitate foreign trade
129
reverse convertible security
investor receives higher interest payments but could lose principal and receive shares worth less than the original investment
130
repurchase agreement (Repo)
selling dealer borrows money from another party by selling securities (from dealer's perspective)
131
reverse repurchase agreement (Reverse Repo)
dealer purchases securities and agrees to sell them back --> dealer lends cash(from dealer's perspective)
132
1 mil expressed as a decimal =?
0.001
133
limited tax GO bonds?
taxing power of the issuer is limited to specified max. rate
134
Special Assessment Bonds
directly benefit from the facilities / Ex. Water, sewer, sidewalks and streets --> "Special Group Pays"
135
Certificates of Participation (COPs)
COPs are paid through lease payments, not taxes
136
Industrial Development Bonds (IDBs)
purpose for the offering is to build a facility for a private company
137
important detail of Industrial Development Bonds (IDBs)?
if the holder of an IDB is a substantial user of the facility, then the federal tax exemption on the interest earned will not apply
138
important detial of Private Activity or Alternative Minimum Tax (AMT) Bonds?
interest earned on a private activity bond is taxable at the federal level unless the bond is deemed to be a qualified private activity bond
139
Alternative Minimum Tax formula
4.70% x (100-35% tax bracket) = 3.05%
140
BaBs
subject to federal income tax / federal gov't reimbursed 35% of the issuer's interest cost
141
Advance-Refunded Bonds
municipal bonds that have been refinanced early and are secured by U.S. government securities in an escrow account
142
Escrowed-to-Maturity (ETM) Bonds
secured in the same manner as refunded bonds; however, they don’t have a call feature
143
debt service coverage formula
net revenue = gross revenue minus operating and maintenance expense
debt service ratio = net revenue / debt service
2:1 is adequate
144
what's better for investors? Net revenue or gross revenue?
gross b/c debt payments are prioritized --> "Gross = Debt"
145
what's better for issuers? Net revenue or gross revenue?
net b/c it allows funds to cover operational costs first
146
Revenue Anticipation Notes (RANs)?
anticipated revenues are typically federal or state subsidies
147
Auction Rate Securities
long-term investments that have a short-term twist—the interest rates or dividends they pay are reset at frequent intervals through auctions
148
Auction Rate Securities = money market security?
no
149
why are VRDOs safer than ARS?
VRDOs have a put option
150
Coverdell can only be funded until beneficiary reaches ____ years and funds much be w/d by beneificary's ___ birthday
18 30
151
Triple tax exempt issues
bond interest earned in US territories
152
Bank-qualified (BQ) Issues advantage?
deduct 80% of the interest cost - $10MM dollar maximum
153
corporate bonds are subject to what taxes?
federal and state
154
US gov't bonds are subject to what taxes?
state
155
muni bonds are subject to what taxes?
none
156
territorial bonds are subject to what taxes?
none
157
bond's net yield formula
Net yield = Taxable Yield * (100% - Tax bracket %) / NY = TY * (100%-TB%)
158
bond's taxable equivalent yield formula
Taxable Equivalent Yield = Municipal Yield / (100% - Tax Bracket %) / TEY = MY/(100%-TB%)
159
OID (Original Discount) bond?
originally issued at a discount
160
tax implications of OID?
treated as interest income; if a muni bond --> accretion is tax-exempt
161
SMD (Secondary Market Discount) bond?
trades below face value in the secondary market
162
tax implications of SMD?
ordinary income --> "SMD = OI"
163
529 ABLE plans are used for?
qualified medical + disability + some educational expenses
164
parity bond
bond that has an equal claim on the revenue of a project as other outstanding bonds --> "Parity = partners in revenue"
165
bond held to maturity tax gain/loss?
none
166
Moody's long-term ratings include _____ with each letter grade
numbers
167
S&P's long-term ratings include _____ with each letter grade
+/-
168
Moody's best short-term ratings
MIG 1
169
S&P's best short-term ratings
SP-1+
170
Treasury Receipts
not backed by US
171
Treasury Strips
are backed by US
172
days of accrued interest formula
buyer has to compensate seller by paying from last interest payment date to the sales date
173
competitive tenders are for?
securities firms
174
non-competitive tenders are for?
individuals
175
competitive tender is like a ________ order?
limit
176
non-competitive tender is like a ________ order?
market
177
prepayment risk is more likely when interest rates are?
lower --> refinancing
178
reason that investors choose an agency security over a treasury?
monthly payments
179
Collaterilized Mortgage Obligations (CMOs)
takes the principal and interest payments from underlying mortgages and separates them into various classes of bonds that are referred to as tranches
180
CMOs help minimize the ___________ risk that’s associated with traditional mortgage-backed securities by repackaging their principal and interest payments
prepayment
181
most stable CMO?
Planned Amortization Class (PAC)
182
CMO that's somewhat stable but less predictable than a PAC?
TAC
183
_______ tranches have more price volatility than the other tranches
Z
184
CMO that absorbs the prepayments from PAC and TAC?
companion or support tranches
185
CMOs are subject to registration under Securities Act of 1933?
yes
186
CDOs consist of what?
mix of debt instruments
187
rising PSA signifies higher or lower interest rates?
lower b/c homeowners will refinance
188
mortgage-backed securiities trade in the ___ market?
OTC
189
Treasury securities tax status
Federal
190
GNMA tax status
BOTH
191
FNMA tax status
BOTH
192
GHLMC tax status
BOTH
193
CMOs tax status
BOTH
194
CDOs tax status
BOTH
195
FFCBs tax status
Federal
196
FHLBs tax status
Federal
197
SLMAs
Federal and state varies
198
if goal is capital preservation which maturity is best?
Short term
199
if goal is monthly income and willing to accept slightly higher risk?
pass-thorugh certificates or CMOs
200
most important risk to CMOs?
prepayment
201
TIPS - if inflation rate is increased to x%, then do what?
new principal value formula --> 1000 * x%
202
total purchase price of a bond includes?
bond price + accrued interest
203
Diversified management company numbers to remember
75% / <5% in one company / <10% of voting stock of any one company
204
sales charge % formula
(POP-NAV)/POP
205
front-end load shares, investors must pay the ?
POP
206
maximum sales charge permitted under FINRA rules is
0.085
207
expense ratio formula
Total Expenses / Avg. net assets
208
Class A shares characteristics
front-end loads + use of breakpoints or ROA
209
Class B shares characteristics
CDSC
210
POP formula?
NAV / (100% - Sales Charge %)
211
LOI numbers to remember
13 months and backdated 90 days
212
# of days mutual funds must pay redemption proceeds
7 calendar days
213
to qualify as a RIC, ___% of net investment income that must be passed through
0.9
214
for qualified dividend for mutual fund, shares must be held for ___ days
60
215
Face-amount Certificate Company does what?
issues debt certificates that pay a predetermined ROI
216
Unit Investment Trust does what?
invest in a fixed portfolio of income-producing securities / undivided interest / indenture / supervised not managed
217
when a mutual fund makes a capital gain distribution the sharholder's holding period is determined by
investment company's holding period
218
Two types of management companies?
open and closed ended
219
market price of a closed-end fund is based on
supply and demand for the shares in the marketplace
220
benefit of annuities is that growth is ___________
tax-deferred
221
fixed annuity risk is assumed by?
insurance company
222
is a fixed annuity considered a security?
no
223
who wants a fixed annuity?
wants lifetime income payments after retirement
224
when withdrawing money from a variable annuity, how is it taxed?
the portion representing earnings is taxable as ordinary income and the invested amount is considered a return of capital and is not taxed
225
when investing in variable annuities, custmers buy _______
accumulation units
226
________% limit on maximum sales charge on variable products?
none --> must be reasonable
227
life annuity with period certain
if client dies before the end of the period, payments will continue to the beneficiary
228
annuities use ______ tax method
LIFO --> earnings are withdrawn first and treated as taxable ordinary income
229
if contributions are pre-tax what is the cost basis?
0
230
in a variable life insurance policy, who decides how the payments will be invested?
policy owner
231
variable life insurance contract offers life insurance and __?
participation in a separate portfolio of securities
232
variable life insurance policy death benefit _____ drop below face value
can never
233
Equity indexed annuities (EIAs) are considered securities?
no
234
Return of an EIA is linked to ?
performance of an underlying stock index
235
unit refund annuity?
beneficiary receives a lump-sum payment upon the death of the annuitant to reflect the value of the remaining annuity units
236
tax treatment of REITs is what ___% of ordinary income is distributed to investors to avoid double taxation?
90
237
why invest in REITs?
stable dividend based on the income they receive with growth potential of appreciating value of real estate
238
REITS and LPs tax advantages?
20% of passive income is excluded from tax / at least 75% of a REITs income must come from investments in real property
239
largest tax benefit provided by oil and gas programs?
depletion deductions
240
interval fund
illiquid investments
241
Business Development Companies (BDCs)
listed on an exchange and trade throughout the day
242
if an options is ATM or OTM, it has ___ intrinsic value
zero
243
Note: option premium is disregarded when determining whether an option is ITM, ATM, or OTM
244
option intrinsic value is ________ for buyers and _______ for sellers
good / bad
245
option EVEN stock split for 1 share (2 for 1, 3 for 1, etc.)
# of option contracts increases, exercise price decreases
246
option ODD stock split and stock dividend (3 for 2)
# of shares increases, price decreases
247
option reverse stock split
# of shares decreases the option represents, exercise price increases
248
LEAPS are equity options with expirations up to ___ months
39
249
breakeven on calls
SP + premium
250
breakeven on puts
SP - premium
251
option if you want to protect a long stock position
buy a put
252
option if you want to protect a short stock position
buy a call
253
the profit and loss potential for the buyer of an option will ALWAYS be the opposite of the p/l potential for the seller
254
straddle is
either purchase or sale of both a call and a put
255
buyer of straddle expects there will be ______ movement in the price
substantial
256
seller of straddle expects there will be ______ movement in the price
minimal
257
if an option expires, the premium paid by the purchaser is a ____________and premium received by the seller of the option is a ________ for tax purposes
capital loss / capital gain
258
uncovered straddle is
sale of a call and put with same expiration and same strike price
259
covered call is
long stock and short a call
260
vertical spread
two options have same expiration but different strike prices
261
Interbank Market
purchases and sales of fx currencies between commercial banks
262
debit spread is what?
investor buys more expensive option and sells the less expensive option
263
credit spread is what?
investor sells more expensive option and buys the less expensive option
264
net credit spreads want spread to ________?
narrow --> "NCN"
265
net debit spreads want spread to ________?
widen --> "NDW"
266
Private Investment in Public Equity (PIPE)
private placement of securities in which a BD assists an issuer by distributing restricted securities to a small group of accredited investors / issuer already has public shares outstanding
267
standby agreement
if the current shareholders fail to subscribe to the stock available through the rights offering, the investment banker will purchase the residual shares on a firm-commitment basis
268
types of underwriting where syndicate is liable for unsold shares
firm commitment and standby
269
Registration statement must contain
character of the business
balance sheet within 90 days
financial statements that show p/l for latest fiscal year and two preceding years
amount of captitalization and use of proceeds from sale
monies paid to affiliated persons or businesses of issuer
shareholdings of affiliated personnel
270
registration statement's effective date is ___ days after the filing
20
271
colling off period is how many days
20
272
red herring indicates a price range or a final offering price
price range
273
prospectus deliver requirements
non-listed IPO = 90 days
non-listed follow-on = 40 days
listed companies = 25 days
NYSE or Nasdaq listed follow-on = none
274
who disseminates closing spot prices
FRB
275
reverse merger
private company buys a public company and the acquirer's shareholders swap their shares for a majority stake in the publicly traded corporation
276
group order?
each member of the underwriting syndicate participates in the profits according to its percentage of liability.
277
Rule 145 does include?
substitutions
mergers/consolidations
transfers of assets
278
Rule 145 doesn't include?
stock split
a reverse stock split
change in par value.
279
New Issue Rule restricted persons
"BIRDPM"
BD personnel
immediate family members
restricted firms
Dealer & Finders
PMs purchasing for own account
280
exempt securities
U.S. government and U.S. government agency securities
munis
securities by non-profits
commercial paper
domestic banks and trust companies
small business investment companies
281
Regulation A Tier 1 value at $__ MM or less sold over a ___ month period with max. amount __%
20/12/30
282
Regulation A Tier 2 value at $__ MM or less sold over a ___ month period with max. amount ___%
75/12/30
283
difference b/w Reg. A tier 1 and 2 is
tier 2 requires audited financial statements/ongoing reporting
284
Rule 147 is _______ exemption
intrastate
285
Rule 147 and 147A important %?
80
286
Rule 147 and 147A time period for resales to people outside of the state?
6 months
287
Rule 144 holding period
6 months
288
Rule 144 ___ days to file amended notice
90 days
289
Rule 144 exemption from notice of sale requirement?
<5k shares and $50k
290
Rule 144 volume limitation
>1% of total shares outstanding or avg. weekly trading volume preceding the filing
291
Rule 144A concerns
QIBs
292
QIB magic $#?
$100M
293
Regulation S purpose?
facilitate capital raising by U.S. and foreign companies from investors located outside the U.S
294
Regulation S holding periods?
40 days for debt / 1 year for equity
295
Green shoe clause % and period?
15% and 30 days
296
GO bonds must satisfy two requirements
voter approval and debt ceiling limitations
297
disclosure document that used in muni offerings is known as
official statement
298
written agreement between the manager and syndicate members is referred to as the
syndicate letter or agreement among underwriters (AAU)
299
penalty bid?
permits the managing underwriter to reclaim a selling concession from a syndicate member when securities that were originally sold are repurchased by the syndicate in stabilizing transactions
300
mini-maxi
minimum threshold of sales that must be met / once minimum is met, additional sales may be made to spcified max. amount
301
to be considered a Qualified independent underwriter (QIU), firm magic years #?
3 years
302
Regulation M purpose?
prevent manipulation
303
syndicate letter is for _____________ sales
competitive
304
agreement among underwriters is for ________ sales
negotiated
305
total takedown formula
spread minus manager's fees and expenses
306
MSRB rules require a syndicate member to disclose to the syndicate manager whether an order is being entered for a ?
unit investment trust (UIT)
307
cooling off period of an IPO includes?
Registered persons send a preliminary prospectus to investors
An underwriter assists the issuer
Indications of interest are obtained from retail investors
308
split offerings are shared sold by ____ and ____________
issuers and shareholders
309
priority of orders for new offerings
presale
group net
designated
member
310
agency trade
BD buys/sells securities on behalf of customer
311
updating account info has to to be sent to customer within __ days
30
312
if a firm changes the form of electronic storage media that it's using, notification period is ____ days prior to using the new method
90
313
specified adult is
65 or older
18 or older that messed up
314
notification period of a temporary hold
2 days
315
temporary hold will expire by
no later than 15 business days
316
temporary hold extension times
15/10/30
317
validating a transfer length in days?
3 business days
318
LT or ST bonds are more vulnerable to interest rate risks
LT
319
higher or lower interest rates are more sensitive to interest rate risks?
lower
320
nominal yield is aka
coupon rate
321
step up in basis means
when securities are inherited, cost basis is equal to current market value at time of death
322
cost basis of gifted securities is
lesser of of security's market value or the donor's cost
323
disclosures for municipal securities should be made ?
at or prior to the time of the trade
324
mortgage-backed securities are subject to what type of risk?
prepayment
325
net basis trade condition for a retail customer
written consent from customer to execute the trade on an order by order basis
326
a return of capital will ______ an investor’s cost basis?
lower b/c there is less money at risk
327
DJIA consists of how many stocks?
30
328
DJ composite consists of how many stocks?
65
329
efficient frontier
set of optimal portfolios that provide the highest possible expected return for a given risk level, or the lowest risk for a desired expected return
330
CAPM
Systematic risk cannot be avoided through diversification
331
Bond Buyer Municipal Bond Index
average of the prices of 40 recently issued and actively traded municipal bonds
332
Revenue Bond Index
avg. yield on 25 revenue bonds with 30 year maturities
333
SIFMA index
VRDOs
334
CAPM risk premium
difference b/w return of the market and the risk free ROR
335
Modern Portfolio Theory (MPT) focus?
Choosing asset classes with the highest return and lowest risk
336
balance sheet formula
assets = liabilities + stockholder's equity --> A=L+SE
337
Asset components of the balance sheet
current assets
fixed assets
intangible assets
338
current assets represent items that can be converted to cash in a short period which is ________
one year
339
FIFO inventory valuation method does what assuming rising prices?
lower COGS resulting in higher net income
340
current liabilities are debts that become due in ______?
less than one year
341
regarding income statement, dividends are paid from _______ income
after-tax
342
net working capital formula
NWC = Currents assets - current liabilities --> NWC = CA - CL
343
current ratio formula
CR = ST CA / ST CL --> 2:1 indicates safety
344
quick asset ratio formula
(Total CA - inventory) / Total CL
345
cash flow formula
CF = Net income/loss + annual depreciation
346
inventory turnover formula
COGS / Avg. Inventory
347
bond ratio formula
par value of bonds / total LT capital
348
common equity formula
common stock at par + capital surplus + retained earnings
349
common stock ratio formula
(common stock at par + capital surplus + retained earnings) / total LT capital
350
debt to equity ratio formula
DER = Debt / Shareholder Equity (common stock at par + capital surplus + retained earnings)
351
book value per common share formula
(TA - TL - Preferred stock - intangibles) / # outstanding common shares
352
return on common equity formula
RCE = (Net income - preferred dividends) / (common stock at par + capital surplus + retained earnings)
353
EPS formula
EPS = (net income - preferred dividends) / # outstanding common shares
354
P/E ratio formula
PER = market price / EPS
355
dividend payout ratio
DPR = annual dividend / EPS
356
issuer's capitalization referes to
stocks and bonds issued
357
capital surplus?
money that an issuer receives in a stock offering in excess of the par value is recorded
358
total capitalization formula?
debt + common equity
359
corporate bond, munis and US gov't and gov't agency's trade in the ___?
OTC market
360
Third market
exchange -listed securities that trade OTC
361
Fourth market
institution to institution
362
Alternative Trading Systems (ATS)
not required to be registered as an exchange
363
discretion not exercised
an order in a discretionary account that was approved or entered by the customer
364
unsolicited
clients idea
365
sell stop order is placed _________ current price
below
366
buy stop order is placed _________ current price
above
367
5% markup policy exemptions
Securities that require the delivery of a prospectus or offering circular
368
circuit breakers
L1: 7% for 15 minutes
L2: 13% for 15 minutes
L3: 20% for rest of day
369
net basis transaction
BD brings security into its own inventory to fill a pre-existing customer order at a DIFFERENT price
370
dual agency cross
BD matches sale from one of its clients with purchase from another client and charges both a commission
371
Immediate-or-Cancel (IOC) Order
as much of the order as possible must be executed immediately. Any portion of the order that’s not immediately executed is cancelled.
372
stopping stock
market maker or specialist guaranteeing a specific price for a client order, even if the order is not executed immediately
373
non-marginable securities
OTC equities
Standard listed options (9 months)
new issues
374
margin agreement contains:
credit agreement
hypothecation agreement
loan consent agreement
375
hypothecation important number
1.4
376
loan consent agreement is optional - T or F?
t
377
excess equity formula
current equity - IMR
378
equity formula
market value - debit balance(amount borrowed)
379
special memorandum account (SMA) formula
equity - IMR
380
initial margin requirement
50% of market value
381
margin requirement for muni's
0.07
382
SMA can or cannot be used for margin calls?
cannot
383
debit balance is
amount owed to broker
384
portfolio based margin evaluates amount required on
the net risks in the customer's account and doesn't evaluate long and short positions separately
385
In a short margin account, assuming no additional transactions are executed, the credit balance
Remains the same
386
who regulates borrowing through Reg. T
FRB
387
portfolio based margin accounts are allowed for
Any person who has been approved to engage in uncovered option contracts
388
minimum equity requirement for PDT
$25k
389
short initial equity requirement
greater of $2k or required Reg. T deposit
390
long initial equity requirement
greater of $2k or required Reg. T deposit
391
According to Regulation T, securities that are purchased in either a cash or margin account must be paid for by no later
T + 3
392
In a short margin account, the minimum maintenance level is __% of the short market value
30
393
In a long margin account, the minimum maintenance level is __% of the short market value
25
394
total amount of money deposited into a short margin account is referred to as the
credit balance
395
A margin account is restricted if the equity is less than
50% if market value
396
Real-Time Transaction Reporting System (RTRS) (Rule G-14) is operated by
MSRB / used to report municipal securities transactions
397
MSRB’s Electronic Municipal Market Access (EMMA) System
the primary market disclosure service for official statements, other related primary market documents, and market info
398
Trade Reporting and Compliance Engine (TRACE) is for
corporate bond market
399
Dk notice time period
4 days and 1 day
400
settlement date for corporate, muni, and US gov't securities and equity options
T+1
401
settlement date for cash trades
T+0
402
customer payment for corporate securities
T+3
403
customer payment for muni and US gov't securities
T+1
404
customer payment for options trades
T+3
405
ex-dividend date =
record date
406
option exercise notice deadline
5:30 ET
407
Direct Registration System (DRS) allows investors to hold securities in
book entry form
408
the validity of any power of attorney is eliminated at the time of death - T or F?
t
409
seller's option must occur later than ___ days after the trade
1
410
CAT system eligible securities
NMS stocks
listed options
OTC equities
411
which dividend date is not set by BOD?
ex-dividend date
412
If the parties to a dispute consent to mediation, the mediator is selected by:
An agreement b/w both parties to the dispute
413
Under the Code of Procedure, the initial review of complaints is completed by the
Hearing Panel
414
Decisions of the Hearing Panel can be appealed to
National Adjudicatory Council
415
clearly erroneous thresholds during normal market hours
$0-$25 = 10%
$25.01-$50 = 5%
>$50 = 3%
multistock event - 5-19 securities = 10%
416
clearly erroneous thresholds during normal extended hours
double except for multistock which is the same
417
timeframe for a member firm that receives an execution that it believes is erroneous
30 minutes
418
member firms time limit for a file of written complaints
4 years
419
respondent must file a response to complaint within __ days of receiving it / second notice time period is ___
25 / 14
420
the Hearing Officer must provide respondent with ___ days advance notice of the hearing
28
421
decision has been rendered by the Hearing Panel, the respondent has ___ days to file an appeal with FINRA’s National Adjudicatory Council (NAC)
25
422
Appeals process
Hearing Panel --> NAC ---> SEC ---> Federal Court / "HNSF"
423
simplified arbitration eligibility $ threhold amount?
$50k
424
Form U4 disclosures
felonies and securities-related misdemeanors
financial events --> bankrupcty and liens placed
others too
425
Investor Education disclosures
BrokerCheck hotline number
FINRA website
availability of investor brochure
426
why invest in preferred stock?
has both stock and bond features. It provides STEADY INCOME due to fixed dividend payments
427
why invest in a bond?
consistent income
428
why invest in a convertible bond?
safety of a bond with the growth potential of the underlying stock
429
why invest in a zero coupon bond?
predictable growth
430
why is zero coupon bond unsuitable for interest rates are rising?
by the time you receive your money, the real value is lower
431
auction rate security and VRDOs are suitable for who?
conservative investors seeking income
432
Treasury STRIPS are ?
zero-coupon bond issued by the U.S. Treasury where the interest and principal payments are separated and sold individually as separate securities
433
short term gains are taxed at ?
ordinary income
