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Series 7 > 3: EQUITY SECURITIES (197) > Flashcards

3: EQUITY SECURITIES (197) Flashcards

1
Q

does the par value increase/decrease on stock splits?

A

Yes

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2
Q

Are mutual funds subject to the 5% markup policy?

A

No

securities that are sold by a prospectus are not subject to the 5% markup policy

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3
Q

T/F: Excess capital losses can be carried foward to use against gains or income indefinitely

A

True

can only use $3k/year tho

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4
Q

T/F: Preferred stock is considered fixed income

A

True

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5
Q

Straight preferred stock

A

No past dividends like cumulative

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6
Q

T/F: Preemptive rights allow stockholders to maintain their proportionate ownership when the corporation wants to issue more stock.

A

True

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7
Q

Is the OTC market negotiated?

A

Yes

its a negotiated market

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8
Q

Does the SEC regulate the OTC market?

A

Yes

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9
Q

For formula for theoretical value of right after ex-date, does it have a 1 or no?

A

w/o 1

If after ex-date, formula has no 1

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10
Q

If capital losses exceed capital gains, up to ____ make be deducted against taxable income

A

$3k

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11
Q

How long to hold a security before you get long teerm capital gains tax treatment

A

Own for MORE than 12 months

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12
Q

According to SEC Rule 15g-2, firms must wait at least ____ business days after sending the risk disclosure document to customer before executing first penny stock trade

A

2 business days

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13
Q

T/F: SEC rules require that customers be given a copy of the risk disclosure document before their first transaction in a penny stock

A

True

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14
Q

Are securities sold with a prospectus subject to the 5% markup policy?

A

No

Transactions in securities that are sold by a prospectus are not subject to the 5% markup policy.

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15
Q

[Theoretical value of rights] If question asks for the value of a right before ex date, is formula with a 1 or without a 1?

A

With a 1

If before ex date, formula has a + 1

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16
Q

Are dividends from ADRs declared in foreign currency or USD?

A

Foreign currency

Although paid in USD

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17
Q

Share holder will always receive _____ right(s) for every share of common stock they own

A

1 right

Shareholders always get one right per share

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18
Q

T/F: FINRA is the authorized SRO for the OTC market.

A

True

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19
Q

Are stock dividends taxable in the year they are received, or when the shares are sold?

A

When the shares are sold

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20
Q

Do ADRs fall under the oversight of the SEC?

A

Yes

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21
Q

Is the exersise price of a warrant usually above or below CMV?

A

above cmv

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22
Q

Are rights ever given to preferred stock holders?

A

No

23
Q

Secutities in the ___ market are not quoted on any U.S quotation system

A

Grey market

24
Q

Can markups exceed the 5% markup policy?

A

Yes

Five percent is a guideline, and markups can exceed it.

25
Q

3 things that are considered portfolio income

A

1) dividends
2) interest
3) net capital gains

26
Q

Does a stock split affect preferred stock?

A

No

preferred is never affected by a stock split

27
Q

Can straight debt securities be listed on NASDAQ?

A

No

Nasdaq for equity and equity equivalent (like convertible bonds) ony

28
Q

Preferred shareholders will always get ___ right(s) for every share they own

A

0

Preferred shareholders are never given rights

29
Q

Is there interest expense with stock?

A

No

30
Q

Is exersise price of stock right usually above/below CMV?

A

below CMW

31
Q

Which act regulates the extension of customers?

A

SEC of 1934

32
Q

Does FINRA regulate the OTC market?

A

Yes

33
Q

Does the 5% markup policy regulate prices, or commissions and markup?

A

Commissions and markup

34
Q

What tax rate are normal dividends taxed at?

A

icome tax rate

35
Q

What does SIPC do?

A

Protect customer assets if BD fails

36
Q

Wha rate are qualified dividends taxed at?

A

capital gains tax rate

which is lower than income tax on normal dividends

37
Q

T/F: All securities sold via prospective are subject to the 5% markup policy

A

False

No securities that are sold by prospectus are subject to the 5% markup policy

38
Q

Formula for outstanding shares

A

Issued shares - treasury shares (shares repurchased by corp)

39
Q

Formula for treasury shares (shares repurchased by company)

A

Issued shares - outstanding shares

40
Q

Formula for the current dividend yield

A

Annual dividend / current market value

Example: A stock trading at $42 pays a $2 annual dividend.
$2 / $42 = 4.76% dividend yield

(Remember to watch out if they give u quarterly, not annual dividend)

41
Q

Who determines the declaration date for a dividend

A

Board of directors

42
Q

Who determines the ex-dividend date (which is 1 business day before record date)

A

Determined by FINRA or SRO

This is the only date not determined by the company’s board of directors

43
Q

Who determines the record date (date trade must settle by for buyer to receive the dividend)

A

Board of directors

44
Q

Who determines the payable date (date dividend is distributed)

A

Bird of directors

45
Q

When are cash dividends taxable?

A

Taxable when received

Unlike stock dividends, which are taxable when the shares are sold

46
Q

When are stock dividends taxable?

A

When the shares are sold

Cash dividends are taxable when received

47
Q

Is the cost basis of the stock adjusted when a stock dividend is received?

A

Yes

Example: 100 shares @ $55 = $5,500
After 10% dividend, position becomes:
110 shares @ $50 = $5,500

48
Q

Is the cost basis of stock adjusted when a stock split occurs?

A

Yes

Example: 100 shares @ $30 = $3,000
After 2-for-1 split, position becomes:
200 shares @ $15 = $3,000

(Technically, it’s taxable when the shares are sold)

49
Q

Does preferred stock have a fixed par value?

A

Yes

Usually $100

50
Q

How are dividends for preferred stock stated?

A

They are a fixed rate stated as a percentage of par

Example: XYZ 3.5% preferred would pay a $3.50 annual dividend

(0.35 x $100 par value = $3.50 annual dividend)

51
Q

Participating preferred stock

A

Pays normal preferred dividend plus an additional dividend

The additional dividend ensures that the shareholders receive an equivalent dividend as common shareholders.

52
Q

Yield to maturity is another name for a bond’s ____

A

Basis

53
Q

T/F: “plain vanilla” describes preferred stock issues

A

True

Plain vanilla means there are no added features, just the fixed dividend.

54
Q

T/F: The 5% markup policy applies to all secondary market transactions. It does not apply to exempt transactions, transactions requiring the delivery of a prospectus, or issues sold at a fixed offering price.

A

True

“The 5% markup policy applies to all secondary market transactions. It does not apply to exempt transactions, transactions requiring the delivery of a prospectus, or issues sold at a fixed offering price.”

Series 7 (64 decks)

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