Securities Industry Overview Flashcards
Can you list the 10 types of investors in the securities industry?
1.) Retail investor
2.) Accredited investor
3.) Institutional investor
4.) Broker-dealers
5.) Broker
6.) Dealer
7.) Full Service broker-dealer
8.) Regional broker-dealer
9.) Boutique
10.) Investment company
What is a retail investor?
individuals who purchase securities for their own accounts.
What is an accredited investor?
Investors who have earned income that exceeds $200k or $300k with a spouse in each of the prior two years and reasonably expect the same income for the current year. Or, investors that have a net worth over 1 million dollars either single or married excluding the value of their home.
What is an institutional investor?
investors such as mutual funds, insurance companies and pension funds.
What is a broker-dealer?
a firm that can act in the capacity of a broker or dealer in transactions with customers.
What is a broker?
a firm that acts as an agent to execute orders on behalf of the clients.
What is a dealer?
acts as a principal party to a transaction and trades for its own accounts.
What is a full service broker-dealer?
conduct a public business encompassing securities sales, trading, asset management, publishing of reports and investment banking. (supermarket of financial services)
What is a regional broker-dealer?
smaller scale than full service b/d and operates in a specific region of the country.
What is a boutique?
Small securities firm.Specializes in a certain product line or investment strategy. (equities, munis, green tech kwk.)
What is an investment company?
Corporation or trust that pools clients money and invests in various types of securities.
What are the laws enacted by congress that underpins most of todays securities regulations?
The Securities Act of 1933
The Securities Exchange Act of 1934
The Investment Advisers Act of 1940
The Investment Company Act 1940
Bliley-Leach Act 1990’s
What is the Securities Act of 1933?
The Securities Act of 1933 was created and passed into law to protect investors after the stock market crash of 1929. It was designed to create transparency in the financial statements of corporations it also established laws against misrepresentation and fraudulent activities in the securities markets. Some offerings may be exempt from the act if they are not sold to the wider public.
What is the Securities Exchange Act of 1934?
The Securities Exchange Act of 1934 was enacted to govern securities transactions on the secondary market. All companies listed on a stock exchange must follow the requirements outlined in the SEA of 1934.
The purpose of the requirements of the Securities Exchange Act of 1934 is to ensure an environment of fairness and investor confidence. The SEA created the Securities and Exchange Commission (SEC), which regulates securities, markets, financial disclosures, and the conduct of financial professionals.
What is the Investment Advisors Act of 1940?
Financial advisers must adhere to the Investment Advisers Act of 1940, which calls on them to perform fiduciary duty and act primarily on behalf of their clients.
The Act imposes upon the adviser the “affirmative duty of ‘utmost good faith’ and full and fair disclosure of material facts” as part of their duty to exercise client loyalty and care. Investment advisers are required to pass a qualifying exam and register with a regulatory body as part of the Act.
