SIE Flashcards
(280 cards)
1
Q
Regulation (T) Deposit Requirement
A
The greater of 50% or $2,000
2
Q
Leasing Corporation
A
For an Industrial development bond (IDB), the Primary source that backs the bond.
3
Q
Offering Memorandum
A
The disclosure document for a private placement
4
Q
Price of closed-end shares
A
A market price as determined by the supply and demand for the shares
- Bought and sold on an exchange
- Commission
5
Q
Write or sell
A
Put = Options bring action to
How to calculate
buy/VAR
6
Q
OTCBB
A
Quotes for unlisted stocks
7
Q
Margin?
Cash?
A
Leveraging (borrowed) position
Unleveraged position
8
Q
Open -end
A
Sales charge
9
Q
Cost of block purchase of open end
(Receives breakpoint)
A
Budget / Nav x sales charge %
10
Q
Cumulative preferred
A
Unpaid dividends (in rvears) must be caught up prior to payment of current dividend
11
Q
NSCC
A
Clearing services for equities
12
Q
Stock splits
A
- Ratio 7 for 5
- Divide 7/5=1.4 to get the factor
- Number of shares x factor = new number of shares
- $ price / factor = new $ shares
Smaller number into larger number
13
Q
Bond Price
A
- Premium means the bond is up Par
- Intrest down = premium; bond price up
- Discount means the bond is down Par
4.Intrest up = Discount; bond price down
14
Q
Discount rate
A
The rate charged by the Fed when a member bank borrows
15
Q
Stock taxes
A
Realized when sold (action was taken)
Unrealized when unsoled (no action)
16
Q
Intrinsic value
A
Put = strike price - market price
Call = market price - strike price
17
Q
Custodian Bank
A
Responsible for safeguarding securities owned by a mutual fund
18
Q
EFT
A
The securities may be used by Individuals to pursue a market timing strategy
19
Q
Bond Call Provision description
A
The Call date and the call price
20
Q
What happens when a company executes stock
A
The price per share of the common stock decreases
21
Q
Institutional Accounts
A
- Banks
- RIA’s
- Registered investment Co.
22
Q
The bank Security Act
A
Enforced by FinCEN, and protects against financial crimes, including terrorism and money laundering.
23
Q
Official Statement
A
The primary disclosure document for a municipal offering.
They may be found on the (MSRB’s EMMA system )
24
Q
The buyers of a put option
A
They have the right to sell 100 shares of stock
25
All or none underwriting
The offering is canceled if the entire amount of the shares is not sold
26
Finra Web address
A member firm must provide to customers each calendar year. Must be present on a company’s Landing page.
27
Dividends paid on stock
The EX dividend date is not set by the company’s board of directors
28
BLiSS
(Buy Limit or Sell stop)
The BL stands for buy limit, and the SS stands for the Sell Stop. All BLiSS orders are entered at or below the market price of the security.
Another thing to remember about BLiSS orders is that they get reduced on the
EX. Dividend date. (The first day the stock trades without a dividend)
The BL in BLiSS helps you remember that the orders are placed below the market price.
29
SLoBS (Sell limit or Buy Stop)
The SL stands for sell limit, and the BS stands for buy stop. All SLoBS orders are entered at or above the market price of the security. Unlike BLiSS orders, SLoBS orders remain the same on the EX Dividend Date. The best way to remember is that SLoBS orders remain unchanged on the EX. The dividend date is to remember the phrase “Once a Slob, always a slob.”
30
Trustee
The day-to-day activities of a unit investment trust (UIT)
31
The B/D can loan money to a customer if:
Must be disclosed in advance and pre-approved by the firm
32
Trades executed before the information is public. (even research reports (even internal communications)
The Employee has traded ahead of the report. No Way!
33
The leasing Corporation
An Industrial Development Bond (IDB) The Primary source that backs the bond
34
Offering Memorandum
The Disclosure Document for a privet placement.
35
Price of Closed-end Shares
The market price as determined by the supply and demand for the shares
36
Call
______
Put
UP Bullish
____ _____
Down Bareish
37
During periods of easy money when interest rates are declining. Yield curve trends to:
(Defince the Inverted Yield Curve)
Slope upward from the shorter to the longer maturities.
38
Common Stock
Returns during periods of high inflation provide the best returns
39
Municipal Bonds
What the Bond Buyer index is based on.
40
Coverdell Education Savings account
1. The Max. contribution of $2,000 a year
2. Contributions are permitted until the beneficiary turns 18
3. transfers are permitted to other family members who are under the age of 30.
41
Special Assessment Bond
A town has started the construction of public sewers. The SAB is what will pay for it.
42
Rights of Accumulation
The ability to receive cumulative quantity discounts.
43
Total Return
The cash flow received from dividends and /or interest plus any application or depreciation in the value of an investment
44
A portfolio of debt instruments will be the most stable when?
The bonds have short maturities
45
Tax Differed Growth
This applies to variable annuities but not to mutual funds.
46
Included in the Letter of Intent
1. The maximum time limit for the letter of intent is 13 months
2. The Letter of intent may be back-dated for up to 90 days.
3. The fund may place some of the initially purchased shares in an escrow account to protect against the failure to fulfill the letter of intent.
47
A type of direct participation program (DPP) (Business Classification)
1. S-Corporation
2. General Partnership
3. Limited Partnership
48
A broker dealer’s anti-money laundering (AML) compliance must be approved; how?
In writing, by a member of a senior management
49
REIT
Trades on an exchange and /or OTC.
50
Stock Dividends
A stock dividend increases the number of shares the holder will own.
51
Issuing Corporation offer has what Benefits?
1. preemptive rights
2. Warrants
3. Bonds
52
If someone is short-stock. What options will provide him protection?
Long on a Co. call option
53
A client purchased 1,500 shares of stock from a broker-dealer, a registered market maker in this stock. The broker-dealer acted in what capacity?
Principal compacity and charged the client a markup
54
As a bond approaches maturity, what happens to a discount bond?
The discount bond increases in price because it matures at par ($1,000)
55
Preferred shares
1. They don’t have the right to vote before the common shares.
2. Receive the dividends before the common shareholders.
3. Are paid before the common shareholders in liquidation.
56
Reg D
Red D 506(b)
Red D 506(c)
Rule 504 Rights
(Reg D) It can be sold over a 90-day period.
Other names: Legond Stock Lettered Stock
Accredited Investor (Accreted Invest. $200k Joint $300k / or Net ass. $1 min. without Home) (officers & Directors)
Rule 506(b) traditional: Accredited Investor / 35 non-accredited investors (Accreted Invest. $200k Joint $300k / or Net ass. $1 min. without Home) (no Advertising)
investors must be qualified
Reg D Rule 506(c) Advertising & solicitation ok Investors need to be Accredited Unregistered can’t sell for 6/m investors must be qualified needs proof
Rule 504 Sell up to $5mil. over a 12/m
no solicitation or advertising restricted for
1 year unless issuer reg. with the SEC.
57
Exercise Rights
Subscribe to a rights offering and buy more shares.
58
Statuary disqualification
They are FIRED
59
529 college savings plan has the deductibility of contributions to what?
The deductibility of contributions from federal income taxes
60
Regular-way settlement for equity options
One business day after the trade date T-1
61
Tenants in common
1. After one owner dies, ownership of account assets is governed by the decedent’s will or state law.
2. Tenants in common are permitted for 2 or more individuals.
3. Tenants in common are typically used for business partners.
62
If a customer wants to open an account to trade options, the account must be approved_________
Prior to the time, the initial order is accepted.
63
Expense ratio What is the Formula?
Management fees / Divided by Total investments in the fund.
64
The 5% markup policy applies to?
Securities quoted on the Nasdaq
65
Warrants exercise price
Higher than the current market price of the stock.
66
The Fund that would have the most price volatility is a
International Equity Bond Fund: Market, exchange & Political Risk
67
What type of order is used if a customer wants to sell stock at $25 although the stock is currently trading at $20?
Limit Order = Above current market price & tells the B/D to sell @ limit or higher.
Market order = Don’t specify a price & are immediately executed.
Stop Order = Below current market price & evaluated only if the price falls to the stop price.
68
The current regulations: If a client redeems his mutual fund shares the fund Co. must send the payment within.
7 Days
69
If the B/D decides to change the electric storage method that it currently uses to maintain its records what's the firm's obligations?
It must notify the primary regulator at least 90 days prior to using the new method!
70
Treasury Stock:
Was previously issued stock that has been subsequently repurchased by the corporation
71
A B/D Must maintain customer account records for how long after an account is closed.
6 years
72
Payment for trades
Principle
B/D Agent
1. Principle = Marke up or mark down
2. Agent & B/D = Comission
73
A Customer has an account with a discount broker-dealer that specializes in online trading. If the customer is being charged a commission the firm is most likely acting as a?
Agent or B/D
74
Two business partners have a joint account with rights of survivorship. If one partner dies?
The account will be registered in the other partner's name
75
Good delivery
Shares can be added to equal 100 ( No odd trades)
76
The competitive offering of municipal bonds documents that notify the bidders of the general features of the offering.
Notice of sale
77
A customer has placed a market order w/ a B/D. The broker-dealer must
Execute at the most reasonable price available
78
The maximum contribution from a municipal finance professional (MFP) to a candidate for whom he can vote for is?
$250
if married $500 but both husband and wife must sign the check
79
If an investor purchased security & received part of his original investment back this is called
Return of Capital
80
What action is the Federal Reserve Board that results in a decrease in the money supply?
The sale of securities in the open market decreases ( Taking $ out)
Purchasing of securities in the open market = increase (they are putting $ in)
81
Deflation will cause existing bond prices to
Increase
82
(ETN) Exchange-traded notes will lose the most value if?
If the credit rating of the issuer is lowered
83
American depositary receipts (ADRs) are under what law?
Must be registered under the Securities Act of 1933
84
Modies investment grades
MIG 1 Best
MIG 2 Midgrade
85
Approval is required from who? before the municipality can begin making payments on a moral obligation bond?
State legislature
86
The role of the transfer agent
To maintain a list of registered stockholders
87
The efficient market hypothesis
Buy-and-hold systematic rebalancing is an example of the passive approach to asset allocation.
88
Bond anticipation notes (IDB)
A municipality borrowing for a short-term period to finance a capital project
89
Current regulations if a client redeems his mutual fund Co. must send the payment within?
7 Days
90
Fee-based accounts are generally suitable for?
An account that rebalances frequently
91
When watching for signs of inflation, what’s the most effective and relevant statistic to watch?
CPI
92
Tax-exempted debt securities issued by munies for long-term investing 20 - 30 years.
Short-term rates & floating rates.
Variable rate demand obligation (VRDO)
93
When opening a cash account
The principal of the firm must sign the new account form
94
If a company’s assets are increasing whats the result?
Shareholders equity increases
95
The type of order that becomes a market order when a round lot trades at or through a particular price is called
Stop order
96
Balance Sheet Equation
Total Assets = Liabilities + Shareholder Equities
or
Assets - Liabilities = Shareholders Equities
or
Assets - Shareholders = Liabilities
97
Interest on treasury inflation-protected Securities (TIPS) Is taxed on?
Federal Income tax but exempt for State tax
98
Broker-dealers must provide a privacy notice to every customer
When the account is opened
99
A clearing corporation
It provides trade comparison and reporting services.
It assists B/D in transferring assets in a customer account to another BD
It offers the customer the ability to have real-time trade matching.
100
The purchase price of a no-load fund is determined by the
Net Asset Value
101
The 5%markup policy applies when a member firm
Acts as a dealer in a transaction with a customer
Proceed Transaction
102
A Eurpoen Co. with offices in the States would like to have its stock traded on the NYSE. How would they do that?
American Depositary Receipts
103
Price & Time means
Price & Time means
104
MSRB rules apply to?
Registered Reps
BD that prepares research
Underwriters
NOT TO ISSUERS
105
Investments in a fixed annuity are concerned with the performance of the Insurance Co.
A Variable Annuity is most concerned.
General Account for the Fixed
A separate account for the Variable
106
Husband and wife have a joint account with rights of survivorship. If one of them places an order the RR?
Must accept the order
107
The difference between a primary and secondary distribution is?
The primary distribution must be made at the current market price.
While the second distribution must be made at a fixed public offering price (POP)
108
Pass through entity for tax purposes?
1) LLC
2) Reaistate Investment Trust (REIT)
3) S Corporation
NOT C CORPORATION
109
A Rep wants to set up a charity investment program that he will not be paid for. What does he need to do?
Must receive written approval from his BD
110
An RR of a BD is planning on working a side job for extra cash. What does he need to do?
MUST provide written notification to his Employer
111
Cash Settlement When is it paid?
Same day
112
When a BD executes a trade of client for municipal Securities, all material is disclosed when?
At or prior to the time of the trade
113
Banker’s acceptance (BA) is used for
Banker’s acceptance (BA) is used for
114
Firm commitment underwriting to sell shares, what is the arrangement?
Sell the entire issue or buy any shares left over.
115
BD must send balance sheets to customers every?
6 Months
116
During periods of deflation, the FRB (Federal Reserve Board) will________________
Purchase securities in the open market
117
A 529 characteristic?
No income limits are placed on the contributors.
Withdrawals from the 529 used for education and not subject to Fed Tax.
Earnings in the account are taxed-deferred
118
Unit Investment Trust (UIT)
Does not charge management fees
119
The third market is concerned with
Securities are listed on the exchange but traded on the OTC Market.
120
Fee-based accounts are most suitable for customers who?
frequently trade
121
The Fed Reserve Board Open Market Committee (FOMC) buys and sells what securities
Treasure Bills
122
Stabilization
Used to prevent new issue stocks from falling
123
Brokerage firm executes trades for customers for Municipal Securities all
information is disclosed when?
At or prior to the time of trade
124
If an Equity option is exercised when does the stock transaction settle
T + 2
Options t + 1
Stock delivery or purchase T + 2
125
Benefits of investing in Real Estate Investment Trust (REIT)
Stable Dividend income
Liquidy
Diversification
126
Payments for trades
Principal
Agent & BD
Principal = Markup or Markdown
Agent or BD = Comission
127
Good Delivery
Shares can be added to equal 100
128
Call: How do you calculate the cost?
Market price - Strike Price = $
129
Balance Sheet
Assets = Liabilities + Shareholders
Share Holders = Assets - Liabilities
Liabilities = Assets - Shareholders
130
Limit order
Bought or sold at the client’s stated price.
Execution is not guaranteed.
Buy Limit is executed at or below market order.
Sell Limit at or above the current market order.
131
Stop Orders what are they used for?
Used for timing the market
Strategy Limet loss and protect gains
Will be executed when elected or triggered.
The $ must go through the stop price to be triggered.
132
Buy Stop Order
The customer shorts stock and wants to limit upside loss.
Buy 1000 XYZ @21 Stop. If the stock goes to 21, then it is triggered and becomes a market order.
Will be filled at the next available price.
133
Sell Stop Order
The customer is long-stocked at $20 and wants to limit downside loss.
Sell 1000 XYZ @19 stop Market trade goes down at or through $19 the order is triggered and becomes a market order.
Will be filled at the next available price.
134
Stop Limit Order
Stop limit orders become limit orders when triggered.
The stop price is the trigger.
135
BLiSS and SLoBS what is the order
SLoBS are always above CMV
BLiSS are always below CMV
136
Common Stock and Cumulative Voting Rites
Shares x vacancies = number of votes
Statutory: one vote per share per position open.
Cumulative: Shareholders may cast all votes any way they choose. ( favors the minority so that they can give all votes to a single person. )
137
Common Stock Dividend Dates
D. Declaration
EX. FINRA/Exchange
R. Record
P.Payable
Settlement T+2
Not set by the BOD
138
MF Dividend Dates
All dates set by the BOD
Declaration date
Ex-Dividend date
Record Date
Payable date
Settlement T+1
139
Preferred Stock what is it?
Can’t vote.
Will have priority in a bankruptcy
Declared dividends first
Is an Equity
140
Cumulative Preferred Stock
Receives current dividends plus any dividends in arrears.
141
Participating Preferred Stock
Participating in additional profits
Before participating rates can be paid, common dividends must be declared.
142
Callable Preferred Stock
Issuers will only call if it’s to their advantage.
When interest rates fall, expect a call!!!
143
Adjustable Rate Preferred Stock
Typically tied to the rates of other interest rate Benchmarks
144
Convertible Preferred Stock
Can convert to common stock
If the common stock position is valued at $120, the Parity (Equil) of convertible preferred stock is $120.
Always calculate at par, not market price.
145
Rule 144 Governs the sale of restricted & controlled securities.
Sales of restricted securities (received from other than a registered public offering)
Non-affiliates Freely transfer after 6 month holding period (lettered /legend certificate)
Affiliates = Director officer Share holder w/ 10% or more outstanding voting stock
File form 144 effective for 90 days Greater of 1% outstanding. Or an average of 4 weeks of trading.
De minimus exemption can't exceed 5,000 Shares or $50,000 in sales. (No short sales)(no 144 filings)
146
144A
Qualified Institutional buyers (QIB)
Minimum of $100 million in securities.
147
A client places an open (GTC) order for listed stock on the NYSE it will?
Remain active until executed or canceled but must be renewed according to exchange rules
148
Clearing services for equity securities. What is its name?
The National Securities Clearing Corporation (NSCC)
149
RR sells a property short to the bank, which accepts the proceeds as payment in full for the mortgage. What must the rep do?
Notify FINRA
150
What happens when a CO. executes a stock split?
Price per share of the common stock decreases
151
US Treasury Securities is taxed on?
Federal but exempt from State
152
When a UTMA is opened, they use the SS# of the?
Minor
153
Each calendar year, a member firm must provide customers with a what in writing?
FINRS’s website address.
154
Registered Non-Trade Real estate Investment Trusts (REIT’s)
They are required to distribute the same percentage of taxable income as an exchange-traded REIT’s
155
Proxy
Certificate, which gives a person other than the shareholder the right to vote.
156
Time of trade disclosures regarding municipal Securities
The disclosure is required for an unsolicited transaction
157
Stock Splits must be voted on by the?
Corporation’s Shareholders
158
Yield to Maturity Bond What is the order
Normal Yield
Callable Yield
Yield to Maturity
Yield to Call
Yield to Call or Yield to Maturity, whatever is the lower of the 2
159
GO Bonds
Taxes How it’s paid for.
State Income, Sales
Political County Cities Ect. AD-Valorem (real estate) Taxes
Voter Approval, Debit Limit
Double Barreled Bonds, both GO Bond and Revinew bond
160
And the Put was exercised
And the Call was exercised
The Stock was bought or sold on the strike
161
Collatorized Mortgages Obligations What is the order of risk?
Collateralized Debt Obligations What is it?
PAC (Short), TAC (Mid Length), Z tranches Longest, and all others must be paid first.
Bonds, auto loans, Credit cards, and
Co. Receivables
162
DPP Programs (Direct Participation Programs) What is the difference between a Limited partnership and a Corporation?
Both have two or more partners.
Everything flows through. (tax benefits)
Unlimited liability
Joint Venture
Profit Motive
Centralized management
2 that differ
1. Freely Transferable Intrest
2. Continuity of life (must remain in for the full term)
163
Pricing of funds for
Closed End
Open End
What’s the formula
When will the price be known?
What is the market for Closed-end Funds?
Closed-end after the IPO is announced & trades in the Second Market. (Exchanges / OTC) $? by supply & demand
Open-end Forward $ NYSE Closes at 4 PM for $ for the next day. After 4 PM the next day. (Assets - liabilities / Shares) (NAV per Share)
Nav(BID)+ Sales Charg = POP or ask
9.50 + (SC)? = (POP)10.00 (?.50)
NAV - POP = SC$ SC$/ POP = SC%
164
What is a class (A) Share
Class A shares provide a co. Board with voting power in a volatile public market. Without A shares it is easier for an outside Co. to obtain enough shares to take control. f Class A shares extra voting power ensuring hostile situations can’t happen.
provide enhanced benefits to the holder including dividend priority and liquidation preference & paid first when the company distributes dividends or Closes.
165
Rule 144
Nonaffiliates = 6/m holding period (can trade) Lettered/ Legend certificate
Affiliates = Directors etc. 10% or more of Outstanding voting stock must file with sale
File form 144 Effective for 90 days.
166
Rule 504
Rule 504 Co. can sell up to $10 mill. in securities in a 12/m without registration. co. must file Form D within 15 days of the first sale.
167
Calculating for Corporate and Municipal bonds, how many days?
Settlement date for Corporate and Municipal bonds
30 days
settlement days = 2
168
What bond is quoted yield to maturity?
What bond is quoted according to the price?
Serial Bond
Term Bonds
169
Trade dates for
Municipal bonds
Corporate Bonds
30 days and 360 days per year
Settlement is 1 business day
170
Commercial Paper
It Matures in 270 days or less
it has no accrued interest
It’s an exempt security
171
SIPC Securities Investor Protection Corporation Coverage?
$500,000
No more than $250,000 in cash per Customer. One Customer with multiple accounts only has 1 account for coverage.
Only available if B/D becomes insolvent
172
CDOs
They represent the securitization of non-mortgage loans including credit cards and auto loans
have tranches that have different forms of prepayment and extension risk
not suitable for all investors
173
yield found on the indenture of a bond
Nominal yield
174
How much of a REIT's gross income must be real estate-related income?
75%
175
A member firm must preserve records of customer complaints for at least _______ years from the date of the complaint.
Four years
176
What are the advantages of a corporate zero coupon bond for the bondholder?
It provides greater leverage to an investor than many other types of investment
It locks in the interest rate for the bond
It is not subject to reinvestment risk
177
What type of REIT is this?
Public non-listed REIT?
Listed REIT?
Hybrid REIT?
Public non-listed - It has a high level of risk.
Listed - Its shares are liquid.
Hybrid - It is not registered with the SEC.
Private - It is typically limited to accredited investors.
178
What’s the common anality for Regulation D offerings, whether conducted under Rule504,
506(b), or 506(c)?
Both equity and debt securities may be offered.
179
What is not a self-regulatory organization?
What is?
The NYSE, FINRA, The MSRB are SRO’s
SEC is not it’s a government agency.
180
a durable power of attorney
A document giving either full or limited authority to a third party who survives the mental or physical incompetence (but not death) of the grantor.
181
effective tax rate
The overall rate paid on a taxpayer's total taxable income. It will always be less than the marginal tax rate.
182
DPP
DR
EPS
EQ
ESA
FCA
FCO
FCS
Direct participation program.
Debit register. See debit balance.
Earnings per share.
Equity
Coverdell
Farm Credit Administration.
Foreign currency option.
Farm Credit System.
183
Equipment trust certificate
A debt obligation, generally issued by transportation companies such as railroads, that is backed by equipment
184
ex-date / ex-dividend date
The first date on which a security is traded without entitling the buyer to receive distributions previously declared.
ex-dividend date; ex-warrants; ex-rights; ex-distribution.
185
exchange-traded fund (ETF)
An investment company is legally classified as an open-end company or unit investment trust (UIT), but differs from traditional open-end companies (mutual funds) and UITs. An ETF issues shares in large blocks that are known as creation units. Those who purchase creation units are frequently large institutional traders or investors. The creation units can then be split up and sold as individual shares in the secondary markets, allowing individual investors to purchase shares.
186
Dow Jones Listed Common Stocks
Utilities15
Transportation 20
Industrial 30
Composite 65
187
What is the minimum maintenance requirement for an account for both long and short?
A long account is 25% of CMV
A Short account is 30% of CMV
188
A fundamental analyst would examine all of the following factors about a company
The advance-decline ratio is a technical factor analyzing when the market is bullish and bearish. Fundamental Analysis decides what to buy while technical analysis decides when to buy
189
1. A special assessment bond is a municipal security that is backed by?
2. GO Bond
3. Special Tax Bond
4. Double Barrel Bond
1. charges on the benefited property
2. full faith and credit of the municipality
3. excise taxes
4. revenues and taxes
190
Bankruptcy whats the order
When: Wages
The: Taxes
Sun: Secured Creditors
Goes: General Creditors
Down: Debentures
Send: Subordinate Debt
Pina: Preferred Stock
Coladas: Common Stock
191
Days of the Month
Thirty days hath September, April, June, and November;
All the rest have thirty-one, except February alone, and that has twenty-eight
days clear
And twenty-nine in each leap
year.
192
Settlement days
Corporate and muni’s
Government
T bonds same
Equity options Listed options
Corporate and muni’s regular way t + 2
Cash settlement same day
Government t + 1 Cash the same day
Cash or margins t + 2
T bonds same day cash
Equity options t + 2
Listed options t + 1
193
Leading Indicators of interest rate increasing
Money supply, Stock prices, Fed funds rate, Discount rate, Reserve requirements Housing; new construction Unemployment claims Orders for durable goods
194
Coincidental indicators Interest rate increasing
Industrial Production Personal income
GDP
195
Lagging Indicators interest rate increasing
Prime rate
Call loan rate
Corporate profits
Credit cards
Duration of unemployment
196
General partners:
The general partners are the only partners that can make management decisions for the limited partnership.
Have unlimited liability
197
BABs:
BABs are Build America Bonds that were authorized by the American Reinvestment and Recovery Act of 2009. The bonds are issued to fund infrastructure projects. Although interest payments are federally tax-free, the municipality or the investor receives a tax credit equal to 35% of the coupon rate.
198
Broker-dealer complaint record maintenance rules:
According to FINRA rules, records of complaints must be maintained by brokerage firms for 4 years with easy access for 2 years. MSRB rules require records of complaints to be maintained for 6 years.
199
regulated investment company
A regulated company under Subchapter M is not taxed if 90% of its income is derived from interest, dividends, and capital gains and the company distributes at least 90% of the dividends and interest received to investors each year.
200
The OCC will automatically exercise an option:
An option will be automatically exercised by the OCC at expiration if the option is at least 0.01 in the money.
Index options are automatically exercised when 30 points in the money
201
penny stocks exemptions:
1. Accredited investors
2. Unsolicited transactions 3. Established customers
A customer of the brokerage firm for 1 year or more
or
A customer who has purchased at least 3 different penny stocks
202
Simplified Industry Arbitration:
Simplified Arbitration:
Simplified industry arbitration is for member-to-member disputes not over $50,000.
Simplified arbitration is for non-member-to-member disputes not over $50,000.
203
The Securities Exchange Act of 1934 versus 1933:
The Securities Act of 1933 provided for the regulation of new issues. The Act of 1934 regulates outstanding securities.
204
Coverdell ESAs and 529 plans age limits:
In a Coverdell ESA, the funds must be used by age 30 or transferred to another candidate. In a 529 plan, there are no age requirements.
205
Common shareholders are granted rights:
a. voting power,
b. ownership,
c. the right to transfer ownership,
d. a claim to dividends,
e. the right to inspect corporate documents,
f. subscriptions to rights offerings,
g. and the right to sue for wrongful acts.
205
firm quote requirements for the OTCBB:
For an OTCBB security, the minimum number of shares that must be displayed by a market maker depends on the bid and ask prices. If the bid and ask are from $1 to less than $175, the minimum amount of shares displayed must be 100. If the bid or ask prices are $175 or more, only 1 share is required to be displayed.
206
Under NYSE rules, new brokerage accounts at another firm must:
obtain written permission from his firm
b. make sure that his firm receives duplicate copies of all confirmations for trades executed in the account if requested
207
Letter of Intent:
valid for 13 months from the date of purchase
b. may be backdated for up to 90 days
c. Redemptions are allowed during the letter's effective period
208
Erroneous report rule:
According to the “Erroneous Report Rule,” if the confirmation shows that the trade was executed at a different price than previously reported, the customer must pay the actual execution price.
209
limited partners:
a. have voting rights
b. they cannot make management decisions c. they can compete with the partnership
d. they have limited liability
Limited partners have limited liability. The maximum liability for a limited partner is the amount invested. General partners have unlimited liability since they may be sued by limited partners for an unlimited amount of money.
210
Wash sale rule
According to the “Wash Sale Rule”, if an investor sold a security at a loss, the investor cannot buy the same security or any investment convertible into the same security within the next 30 days. If there is a violation, any losses on the securities sold are disallowed.
If the investor sold ABC common stock at a loss, the investor cannot buy the following within the next 30 days (anything that can even be converted to common stock):
ABC common stock
ABC warrants
ABC convertible preferred stock
ABC call options
ABC convertible bonds
211
A property tax calculation:
Properties are always taxed based on the assessed property value. Remember to
multiply by .001 (2 Ls, 2 zeroes).
b. Example: $10,000,000 x 7 mills x .001 = $70,000
212
regular stock splits:
a. par value of the stock is reduced
b. corporation does need approval of the shareholders to execute a stock split c. stockholder will have the same proportionate ownership of the company
d. overall value of the investment does not change
213
Final arbitration awards against registered representatives and/or firms are reported on which of the following forms?
Form U6
214
Aconfirmation must be sent to a customer no later than:
The completion of the trade
215
A company has announced a tender offer for its shares at $50. The issuer wants to purchase a minimum of 100786 shares, up to a maximum of 1088,00 shares. If 89,000 shares are tendered, how much will an investor receive if he has tendered 1,000 shares?
0
Min = 100,000
Max = 1,000,000
1,000 to small
216
ATreasurybondisquoted105.04(bid) 105.24(ask). The purchase price that a customer would expect to pay would be:
105 24/32 = 105.755
217
How is a firm acting if it effects trades on behalf of its customers, without taking the other side of the trade?
Agent or broker
218
Which of the following is the BEST explanation of the difference between progressive and regressive taxes?
A. Progressive taxes assess higher rates on lower income individuals.
B. Regressive taxes assess higher marginal rates on lower income individuals.
C. Progressive taxes assess the same tax rate for all taxpayers.
D. Regressive taxes will result in lower income individuals paying proportionately more in taxes than higher income individuals.
D. Regressive taxes will result in lower income individuals paying proportionately more in taxes than higher income individuals.
Progressive taxes are designed to ensure that higher income individuals will pay more taxes in proportion to their income. On the other hand, regressive taxes (e.g., sales taxes) often charge the same rate to all taxpayers, which results in lower income individuals paying more taxes in proportion to their income. For example, if a billionaire and a middle class individual each buy the same item in a grocery store, they will both pay the same sales taxes rate on the purchase. However, since the billionaire's income is much higher, the sales tax (as a percent of her overall income) will be much lower than it is for a middle class taxpayer. Progressive taxes will charge higher rates to individuals with higher income (e.g., income taxes), thereby making the tax burden more equitable.
219
Is an individual who represents a BD in the sale of stock to a bank considered an agent?
Yes, since anyone representing a BD in the sale of securities is an agent.
220
True or False: A state Administrator may require notice filing by an issuer of an NYSE security.
False. Notice filing is required for mutual funds and Reg D (Rule 506) offerings, but not exchange listed securities.
221
The annual percentage returns on ABC over the last 9 years have been: 7, -6, -3, 8, 6, 5, 11, 13 and 8. What is the median return?
A. 5.4
B. 8
C. 7
D. 19
The median percentage return is the center point—the point on a data set where there are the same number of points above as below. In this question the median is 7. There are 4 points below (-6, -3, 5, and 6) and 4 points above (8, 8, 11, and 13). 5.4 is the mean or average of the data set. Since 8 appears more often than any other number in the data set, 8 would be the mode. 19 is the range or the difference between the lowest number and the highest number.
Correct Answer is C.
The median percentage return is the center point—the point on a data set where there are the same number of points above as below. **In this question the median is 7. There are 4 points below (-6, -3, 5, and 6) and 4 points above (8, 8, 11, and 13). 5.4 is the mean or average of the data set. Since 8 appears more often than any other number in the data set, 8 would be the mode**. 19 is the range or the difference between the lowest number and the highest number.
222
What is the advantage existing stockholders receive through rights offerings?
The ability to maintain their percentage of ownership and buy additional shares at a discount.
223
Who is the self regulatory organization (SRO) for investment advisers?
Currently, there is no SRO for advisers.
224
Is there a registration exemption for agents who conduct business in a state? If so, what are the guidelines?
Yes, no place of business in state and a client visits the state or existing client moves to the state (regist. pending)
225
May an agent of a BD located in Mexico do business with a client in the U.S. without registering in the state?
No. BDs of Mexico are required to register in the U.S. to effect securities transactions in a state.
226
True or False: The USA requires all employees of a BD to register.
False. Only those representing a BD in effecting transactions (as an agent) must register.
227
An equity-indexed annuity is suitable for which of the following clients?
A. A person who desires a high rate of return with little risk
B. A person who needs a guaranteed return for life with no risk
C. An person who needs a minimum guaranteed return with the potential for a greater return than CDs offer
D. A client who needs tax-free income with limited risk
C. An person who needs a minimum guaranteed return with the potential for a greater return than CDs offer
Equity-indexed annuities are NOT considered securities. Instead, they are hybrid products that combine elements of both fixed and variable annuities. The return of an EIA is linked to the performance of an underlying stock index. The insurance company that issues an equity-indexed annuity guarantees a minimum rate of return (as in a fixed annuity), but the annuity's ultimate return (which is capped) will vary depending on the performance of the index to which it is linked. To receive the EIA's guarantees, an investor must be willing to accept the limited potential gain.
228
Which TWO of the following statements regarding investment advisory contracts are TRUE?
Under the Uniform Securities Act, IA contract must be written
Under the Uniform Securities Act, IA contracts are not required to be written
Under the Investment Advisers Act of 1940, IA contracts must be written
Under the Investment Advisers Act of 1940, IA contracts are not required to be written
A. I and III
B. I and IV
C. II and III
D. II and IV
B. I and IV
State law (the USA) requires that contracts between clients and state-registered advisers be in written form. However, federal law (the IA Act of 1940) does not require investment advisory contracts to be in written form. Despite this, as a matter of good business, most advisers formalize client contracts with a written agreement.
229
An investor has purchased a U.S. government bond for $1,000. The bond is now worth $850. Which TWO of the following risks is a concern to this investor?
I Market risk
II. Credit risk
III. Currency risk
IV. Opportunity risk
A. I and II
B. I and IV
C. II and III
D. II and IV
B. I and IV
There are certain types of risk that are common to any investment. Market risk and opportunity risk would be among these generic risks. Market risk is the day-to-day price fluctuation of a security trading in the marketplace. Opportunity risk is the risk that a better investment decision could have been made after the completion of a purchase or sale. U.S. government bonds would not be subject to credit risk or currency risk, unless the investor had purchased them with foreign currency.
230
Which TWO types of risks are NOT associated with options and derivatives contracts?
Reinvestment risk
Opportunity risk
Purchasing-power risk
Market risk
A. I and III
B. I and IV
C. II and III
D. II and IV
A. I and III
Reinvestment risk and purchasing-power risk are not associated with options or derivatives contracts. Reinvestment risk is the possibility that a principal payment received from an investment will need to be reinvested at a lower rate due to a change in interest rates, or the investor might need to assume more risk to receive the same rate of return. Purchasing-power risk, the risk that the value of assets will be eroded by inflation, applies to long-term debt instruments. Market risk is the day-to-day potential for losses from fluctuations in securities prices. This type of risk cannot be avoided.
231
True or False: Under the Uniform Securities Act, debentures issued by a Canadian bank are exempt from registration.
False
232
All of the following are examples of digital assets, EXCEPT:
A. Cryptocurrency
B. Stablecoins
C. Non-fungible tokens (NFTs)
D. Blockchains
D. Blockchains
Digital assts include cryptocurrencies, non-fungible tokens (NFTs), and stablecoins. A blockchain is a method of recording ownership of digital assets, (e.g., a ledger). Blockchains are used to keep track of purchases and sales of digital assets; however, in and of themselves, they're not an investment. Unlike traditional securities markets which typically use one central clearinghouse to record transactions, blockchains are decentralized. In other words, blockchain records are updated communally and verified through an algorithm.
233
ABC Corporation has 10,000,000 shares outstanding and they're currently selling for $50 per share. ABC Corporation is an example of which type of company?
A. Cyclical
B. Defensive
C. Small capitalization
D. Large capitalization
C. Small capitalization
The market capitalization of a company is determined by multiplying the its number of outstanding shares by the current market price of the shares. ABC Company's*** market capitalization is $500 million (10 million shares x $50 per share). Therefore, ABC is considered a small capitalization company since its market capitalization is between $300 million and $2 billion.*** There's nothing in the question to suggest that ABC is either a cyclical or a defensive company.
234
The USA considers preorganization certificates, prime bank notes, and voting trust certificates to be __________.
Mark For Review101 of 140The USA considers preorganization certificates, prime bank notes, and voting trust certificates to be securities.
235
Under the USA, is a federal covered security trading in the secondary market an exempt security or an exempt transaction?
Exempt security
236
True or False: An American Depositary Receipt (ADR) is a security.
True
237
Are exchanges considered auction markets or negotiated markets?
Auction markets
238
A company's PE ratio has historically been 30, but it has recently dropped to 15. In this case, what has most likely happened to the company?
A. The earnings per share (EPS) has declined.
B. The price of the company's stock has risen.
C. The price of the company's stock has fallen.
D. The company has started paying common stock dividends.
C. The price of the company's stock has fallen.
The Price-to-Earnings (PE) ratio is the price of a company's stock divided by its Earnings Per Share (EPS) (i.e., PE Ratio = Stock Price ÷ EPS). If the company's PE ratio has fallen, this means that either the stock price has fallen or the EPS of the company has risen. ***Paying common shareholders a dividend doesn't impact EPS and will most likely cause the stock's price to rise.***
239
Give some examples of qualified custodians.
Broker-dealers, banks and trust companies. IAs may also be custodians, but usually are not
240
Under the USA, are banks and bank holding companies excluded from the IA definition?
No. Banks, savings institutions and trust companies are excluded, but bank holding companies are not.
241
When must a federal adviser file an updating amendment to determine continued eligibility for SEC registration?
Within 90 days of the end of the adviser's fiscal year.
242
What type of information will be found in an investment adviser's ADV Part I?
Firm name, # of employees, nature of business, history of officers/directors, legal/disciplinary action in past 10 years
242
Where do IAs send their registration forms?
The Investment Adviser Registration Depository (IARD)
243
A stock that is traded on the NYSE has a high P/E ratio, a low dividend payout ratio, and a high level of retained earnings? What type of stock is it?
A, Growth
B. Value
C. Mid-cap
D. Small-cap
A. Growth
Growth stocks are characterized by high P/E ratios, low dividend payout ratios and high levels of retained earnings. Therefore, the stock described in the question is most likely a growth stock. Value stocks, are characterized by low P/E ratios, high dividend payout ratios, and low price-to-book ratios.
Many growth stocks are also small cap-stocks which are issued by companies with market capitalizations between $300 million and $2 billion or micro-cap stocks which are issued by companies with market capitalizations of less than $300 million. However, the characteristics of the stock being described fit the definition of a growth stock much more exactly.
243
An investor wishing to calculate the basic earnings that a corporation capitalized with common and preferred stock and convertible bonds would divide the:
A. Earnings before interest and taxes by the number of common shares outstanding
B. Net income after converting the convertible bonds and subtracting the preferred dividends by the number of common shares outstanding
C. Net income minus any preferred dividends paid by the number of common shares outstanding
D. Net income by the number of shares of common shares outstanding
C. Net income minus any preferred dividends paid by the number of common shares outstanding
This question is asking for the formula used to calculate earnings per share (EPS). In its simplest form, this formula is net income minus preferred dividends, if any, divided by the number of common shares outstanding. Using net income after conversion would be correct if the question asked for EPS on a fully diluted basis.
244
IAs with no place of business in a state, and whose clients are ____________ are not required to register in that state.
IAs with no place of business in a state, and whose clients are institutions are not required to register in that state.
245
What record must an investment adviser maintain regarding its IARs?
The initial application for each IAR
246
All investment advisory contracts must be in writing and include the ______________ for which services are contracted.
All investment advisory contracts must be in writing and include*** the length of time for which services are contracted.***
247
Is an adviser required to register in a state in which it has no office, but has accredited investors who reside there?
Yes. Since the USA does not recognize accredited investors as institutional investors, IA registration is required.
248
What are some of the characteristics of a value stock?
Low P/E ratios, history of profitability, high dividend payout, and low market-to-book ratio
249
How is market capitalization (cap) determined?
A company's current share price multiplied by the number of shares outstanding
250
A company is conducting an IPO. Its shares will be listed on Nasdaq. For how long does a broker-dealer that is part of the selling group need to make the prospectus available to investors?
A. 25 days
B. 90 days
C. 10 days
D. 40 days
A. 25 days
A company is conducting an IPO. Its shares will be listed on Nasdaq. For how long does a broker-dealer that is part of the selling group need to make the prospectus available to investors?
All investors who purchase new issues must receive prospectuses, which may be made available electronically. **This obligation to provide a prospectus continues for 25 days after the effective date if a company is conducting an IPO and its securities will be listed on a national exchange (e.g., the NYSE or Nasdaq)**, which is the situation described in the question. If a company is conducting an IPO **and its shares are not eligible for listing on an exchange, the prospectus requirement lasts for 90 days.**
A firm that sells a new issue in the aftermarket shortly after it begins trading may also be required to provide prospectuses to its customers. **For secondary offerings of securities that will trade over-the-counter (e.g., securities that are not eligible to be listed on the NYSE or Nasdaq), this obligation lasts for 40 days.** Lastly, for secondary offerings of securities that are listed on an exchange, there is no continuing prospectus requirement.
251
ABC Corporation has 10,000,000 shares outstanding and they're currently selling for $50 per share. ABC Corporation is an example of which type of company?
A. Cyclical
B. Defensive
C. Large capitalization
D. Small capitalization
************D. Small capitalization
The market capitalization of a company is determined by multiplying the its number of outstanding shares by the current market price of the shares. ABC Company's market capitalization is $500 million (10 million shares x $50 per share). Therefore, ABC is considered a ***small capitalization company since its market capitalization is between $300 million and $2 billion. ***There's nothing in the question to suggest that ABC is either a cyclical or a defensive company.
252
True or False: The CEO of an advisory firm who establishes investment policy for the firm must register as an IA.
False. The CEO is considered an IAR, not an IA.False.
253
ADV Part I is a disclosure document for use by the _____ and the ________________.
ADV Part I is a disclosure document for use by the SEC and the Administrator.
254
An investor might purchase a stock with a high P/E ratio because:
A. This indicates the company has sufficient income to pay expenses and possibly make dividend distributions
B. The higher the P/E ratio, the greater the potential for higher dividends
C. This indicates a stable investment with little chance of volatility due to market fluctuations
D. The investor expects higher future earnings
D. The investor expects higher future earnings
The P/E ratio is used by the fundamental analyst to estimate the market's future earnings expectations for a company.*** A high P/E ratio indicates an investor is paying a high market price for today's earnings; the investor might do so with the expectation of higher future earnings.*** Stocks with high P/E ratios (typically growth companies) tend to pay a low, or no, dividend.
255
What SEC filing is used to provide information regarding unscheduled material events or information?
A. Form 10-K
B. Schedule 13D
C. Form 8-K
D. Form 10-Q
C. Form 8-K
Form 8-K is filed by companies in order to provide information regarding unscheduled material events that are important to shareholders. The filing must be made within four business days of any material event that may affect a company’s share price or financial condition. Form 10-K is filed at the end of a company's fiscal year and Form 10-Q is filed quarterly. Schedule 13D is filed by investors who acquire more than 5% of the shares of a SEC reporting company.
256
Is an adviser to a mutual fund considered an IA under the USA?
No, mutual funds advisers are federally covered and are excluded from the IA definition at the state level.
257
Part 2 of Form ADV may be used as the disclosure document that is provided to the IA's ________.
Part 2 of Form ADV may be used as the disclosure document that is provided to the IA's clients.
258
The cost of money refers to ______________.
Interest rates
259
As it applies to a BD or IA, what does the term "exclusion" mean in the USA?
Exclusion signifies that a person does not meet the definition of a BD or IA in the state.
260
True or False: The USA classifies an agent of a BD who also manages wrap accounts as an IA.
No. ***IAs are firms, not individuals.***
261
Does the de minimis exemption apply to BDs that have no place of business in a state?
No. The de minimis exemption only applies to IAs and IARs.
262
What is the difference between the current ratio and the quick asset ratio?
The quick asset ratio is more stringent since it excludes inventory from the current assets.
263
If an IA is registered with the SEC, is registration required in any state in which it intends to do business?
No. The National Securities Markets Improvement Act (NSMIA) exempts federal covered advisers from state registration.
264
265
266
267
268
269
270
271
271
272
273
274
275
275
