2nd set Flashcards
Formula for EPS
Net income (after taxes, interest, & preferred dividends)
divided by
Shares of outstanding common stock
Do firms have to file their AML program with FINRA?
No
AML programs are neither filed with or approved by the SEC or FINRA
Catastrophe call provision
A call only occurs if an unpredictable event requires the issuer to call the bonds
Max contribution from a municipal finance professional to political campaign
$250
If more than $250, firm can’t engage in CERTAIN municipal business for 2 years
If a stock is halted, do the options for that stock get halted too?
Yes
Are section 529 plans legally considered municipal fund securities
Yes
What are section 529 plans primarily used for?
Saving for college
Best option to hedge a long stock position with
Long put
When a company reacquires shares of outstanding stock, how would you refer to these shares?
Treasury stock
Is a call protection feature most valuable during period of rising/declining interest rates
Declining interest rates
How is an account marked when the owner has died?
The account is marked deceased
In a municipal offering, the agreement among underwriters is found in what document?
It is found in the Syndicate Agreement
Visible supply measures the dollar amount of new issues scheduled for the next ____
1 month
Rule that addresses the sale of nonregistered securities to institutional investors
Rule144A
Regulation that has to do w/ corporate offerings not exceeding $50m in a 1 year period
Regulation A
Length of the holding period required before restricted securities can be sold
6 months
Length of time a Form 144 filing covers
90 days
T/F:
A Form 144 might be filed with the SEC when an afiliate of company is selling a large amount of that company’s shares.
True
Under what circumstances must a Form 144 be filed
When an affiliate of the issuer is selling more than 5,000 shares or $50k worth of shares in a three month period
Five things that are permitted during the cooling off period
These activities/marketing materials are permitted:
1) Red herring (aka preliminary prospectus)
2) Collection of IOIs
3) Tombstone ad
4) Road shows
5) Free Writing Prospectus
Regulation A is an exemption from ______
Regulation A is an exemption from registration for public offerings
Term for assets and liabilities that are easily accessible/payable within 1 year
“Current” Assets and Liabilities
Name 3 different “current assets”
1) Cash on hand
2) CDs w/ a maturity date within 1 yr
3) Accounts receivable with terms less than 1 yr
Name 2 “current liabilities”
1) Short-term loans of less than 1yr
2) Accounts payable within 1 yr
Balance Sheet formula
Assets - Liabilities = Net Worth
An Indenture is a contract between what two parties?
The bond issuer and the bond holders
T/F:
Not all bonds need to have an indenture
False
All bonds must have an indenture
Would the coupon rate be found on a bond indenture
Yes
T/F:
Price, maturity date, and coupon rate would NOT be found on a bond indenture
False
All these things would be found on a bond’s Indenture
T/F:
Much of the same info in an Indenture can also be found in the bonds Prospectus
True
T/F:
Regarding bonds, the prospectus uses less technical language than the Indenture
True
Regarding a bond issue, which considered the “final word”:
the Prospectus
or
the Indenture
The indenture would be considered the Final Word
T/F:
The Indenture is another name for a bond’s contract terms
True
Can a share of stock in a rights offering require more than one right to purchase?
Yes
This would mean you have to own multiple shares (to get multiple rights)?
Formula for shareholders equity
Total assets - Total liabilities
Does the final prospectus contain the final offering price & date?
Yes
The final prospectus is called _____
The Statutory Prospectus
What is the intent of the SEC’s no approval clause printed on the first page of a prospectus?
Showing the SEC doesn’t verify accuracy of the info, and doesn’t endorse/approve any security
The SEC’s no approval clause is printed on what page of the prospectus
It’s printed on the first page of the prospectus
Would an underwriter advise the issuer on the preferred capital mix of debt and equity issuance?
Yes
Is the underwriter responsible for ensuring the issuer complies with securities laws?
Yes
Is the underwriter responsible for distributing large blocks of stocks to institutions
Yes
Two things the issuer (not the underwriter) is responsible for filing in an IPO
1) Filing the registration statement as required by the Securities Act of 1933
2) Filing state level registrations in accordance with “Blue Sky” laws
Which act required registration and a prospectus for any security to be distributed in more than one state
Securities act of 1933
Which Act created the regulatory body for securities in the primary and secondary market
Securities act of 1933
Which Act defined criminal penalties in the event of securities fraud
Securities Act of 1933
Chinese wall
Information barriers implemented by a firm
Difference between selling syndicate and selling group
Members of the selling syndicate put up their own capital to purchase the shares of the new issuer.
Members of the selling group may assist in the distribution of shares by selling them to clients but they have none of their own capital at risk.
Gross Spread
The difference between the public IPO price and the amount of that price the issuer will actually receive.
Roles of an issuer’s underwriter during the cooling off period
The underwriters make a judgement on the company as a whole and verify the feasability of the claims made by the issuer. They also provide feedback to the issuer about potential pricing and overall investor demand for the issue.
Are T bills good for income investors
No
They offer no income
A bond backed by machinery or rolling stock is called a(n) __________
Equipment Trust Bond.
Name 4 money market instruments
- T-Bills,
- Bankers’ Acceptances (BAs),
- Commercial Paper,
- Negotiable CDs
When do corporate bond trades settle
T + 3
Is interest on corporate bonds fully taxed?
Yes
When do money market securities mature?
1 year or less
A bond convertible at $50 is trading at $1,200. For parity, where should the stock be trading?
Conv. ratio = $1,000 ÷ $50 = 20 sh. The stock needs to trade at $60 to be at parity with the bond ($1,200 ÷ 20 = $60).
In general, are the prices of long term bonds or short term bonds more volatile?
Long term
Does the price of a bond with a low coupon rate or high coupon rate tend to be more volatile !
Low coupon rate
List the 4 yield amounts in descending if a bond is selling at a premium.
In descending order:
1) Nominal yield
2) current yield
3) YTM
4) Yield to call
A 403(b) plan is also called a _____
A tax sheltered annuity
Are dividends from a muni bond fund exempt from federal income tax?
Yes
Are dividends from a UIT exempt from federal income tax?
Yes
Is there any tax advantage to reinvesting dividends from a common stock fund?
No
When an investor reinvests dividends from a common stock fund, what happens to his cost basis?
It increases by the amount of the dividend
If an investor calls a broker and says “buy 100 shares whenever you think is the best time” what kind of order is this
A time or price order
How long is a time or price order good for?
Good for only the day entered
unless written instructions say otherwise
Is a time or price order a discretionary order?
No
[Mutual funds] If the sales charge comes off the amount invested, is it a front end load or back end load?
Font end load
What class of mutual fund shares are best for investors who can afford a high initial investement and have a long time horizon
Class A mutual fund shares
T/F: If a customer purchases an insured muni bond, you must provide evidence that the bonds are insured when delivering the certificates.
True
T/F: Fannie Mae and Freddie Mac are both publicly traded GSEs that buy mortgage loans
True
What is form 144 filing
Affiliate of issuer sells > 5k shares or $50,000 in three month period
