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Tutoring For 65 > 4/10/2023 > Flashcards

4/10/2023 Flashcards

1
Q

Which Act Does Rule 144 fall under

A

The Securities Act of 1933

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2
Q

Restricted Stock

A

Follows Rule 144

Deals with Stock acquired Through Private Placement

Cant Be Re-Sold for 6 months

One sold it becomes apart of the public float

If Affiliated with the Issuer You have Restrictions on how much you can sell at 1 time

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3
Q

Rule 144

A

Rules for Restricted Stock

Deals with Stock acquired Through Private Placement

Cant Be Re-Sold for 6 months

One sold it becomes apart of the public float

If Affiliated with the Issuer You have Restrictions on how much you can sell at 1 time

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4
Q

Form 144

A

Must be filed with SEC when the Investor owning Restricted Stock Or Controlled Stock wants to sell it

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5
Q

Rules for Broker-Dealers and Rule 144

A

They cant Buy or Solicit Restricted Stock

BUT can call back
Investors who expressed Interest in the past 10 days

other BD’s who expressed interest in the past 60 days

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6
Q

Rule 144a

A

Execption to the 6 month waitting preiod if you sell the restricted Stock to a QIB
(Qualified Institutional Buyer)

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7
Q

QIB

A

(Qualified Institutional Buyer)

Person/Entity who
has at least $100 million in Assets

OR

BD who
has at least $10 million in Assets

Rule 144a says:
Restricted Stock can be sold to them without waiting the 6 months period

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8
Q

Private Placements

A

Also called Limited Offering Exemption

The Sale of a Newly issued Security to an Accredited Investor

Doesn’t require SEC Registration

Advisors cannot get commissions on these sales

After buying the investor is Subject to
Rule 144
the Stock is Now Restricted Stock
Cannot be resold for 6 months

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9
Q

Accredited Investor

A

Individual who makes $200k/yr
or
Couple who makes $300k/yr

OR

has $1million in Net Worth other than their Home

Then
They file as accredited Investor with SEC

Can then Buy Private Placements

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10
Q

Limited Offering Exemption

A

Another word for

Private Placements

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11
Q

Control Person

A

Different From Affiliate
(all controlled persons are affiliates, but not all affiliates are controlled persons)

Control - Director, Officer, or 10% ownership of company
(if the question asks under the:
-Investment Advisers Act of 1940
or
-Investment Company Act of 1940
its changed to 25%)

(Affiliated - Director, Officer, employee, or 5% ownership of company)

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12
Q

Hedge Fund

A

ALMOST ALWAYS ORGANIZED AS A LIMITED PARTNERSHIP

Usually:
-aggressively managed fund
- high management fee’s
-uses options futures and leveraging (borrowing)
-less liquid than a mutual fund

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13
Q

Forwards

A

Contract between producer and buyer of commodities (wheat, grain, etc) to buy the commodities at a specified Price and day

Helps Producers hedge against price changes in their commodities during production

Illiquid
No Secondary Market (Can be bought or sold but not traded)
IS A DERIVATIVE
unregulated

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14
Q

Futures

A

Just like Forwards (there is a contract and an actual exchange of the commodity at expiration)

Investors Essentially betting on the price of Commodities in the future

Liquid
Has a Secondary Market (The contract can easily be traded)
Is a Derivative (Very Similar to an Option)
Is Regulated

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15
Q

Viaticals and Life Settlements

A

People with Life Insurance Policy can sell the Death Benefit for more than Cash Value and Less than Death Benefit

Viatical - Have to Be Terminally/Chronically Ill
Life Settlement - Don’t have to Be Terminally/Chronically Ill

The contract is considered a Security

Purchaser agrees to pay any additional Premiums on the contract required

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16
Q

On the Sale of Viaticals / Life Settlements what on the policy changes

A

Grantor (Owner)
Beneficiary

Insured does NOT Change

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17
Q

AIR

A

Assumed Interest Rate

USED FOR VARIABLE ANNUITIES

The Minimum Interest rate needed to ensure Annuity Income Payments are consistent

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18
Q

Annuity Payout Options

A

Single Life - lasts one person’s life

Joint and Survivor - last’s 2 peoples life

Period Certain - lasts a specified # of years (whether a person is dead or alive)

Life with Period Certain - Lasts personal Life OR Certain Nubmer of years whichever lasts longer

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19
Q

Annuities (things to remember for the test)

A

-Grow Tax Deferred - Remember that money contributed is considered Post Tax Unless otherwise stated

-Variable Annuities Fee are Usually higher than Mutual fund

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20
Q

Life Insurance (things to remember for the test)

A

Younger People Should buy Term because its cheaper

Variable Life:
cannot be loaned out for the first 3 years
then 75% or more can be loaned out

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21
Q

Should you use Accretion Amortization for all Bond Total Gain/ Loss Questions?

A

No

Only those where you help the Bond for longer than 1 year

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22
Q

Technical Analysis

A

Cares about the Stock

Focuses on the graphs and charts of securities

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23
Q

Fundamental Analysis

A

Cares about the health of Company

Looks at:
Income Statement
Balance Sheet

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24
Q

Mutual Fund

A

A pool of investors funds invested and managed by a company

Portfolio and NAV calculated at the end of every market day

ON THE TEST IS ALWAYS CONSIDERED AND OPEN END A CLASS FUND UNLESS OTHERWISE STATED

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25
Q

Management Company

A

Another word for Mutual Fund

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26
Q

NAV

A

Net Asset Value

Used in Mutual Funds
calculated at the end of every trading Day

Portfolio Value / # Shares Outstanding

(Value = Assets - Liabilities)

(it’s the dollar amount each share is worth)

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27
Q

POP

A

Public Offering Price

The price the fund is offered to the public

NAV + Sales Charge = POP

28
Q

A B and C shares are for what type of Mutual Fund

A

Open End Fund

29
Q

Class A Shares

A

Front End Loaded

Buy Shares @ POP
Sell Shares @ NAV

Good for Long Term Investing (8+ years)

30
Q

Class B Shares

A

Also Known as Contingent Sales Charge

Back End Loaded

Buy @ NAV
Sell @ NAV - Sales Charge (If they have one. The longer you invest, usually the smaller the Sales charge on these)

Good for Mid Term Investing (5-8 years)

31
Q

Class C Shares

A

Small Management Fee

Called Level Load Funds

Buy @ NAV
Sell @ NAV

Charged a small annual fee based on the size of the account

Good for Short Term Investing (1-5 Years)

32
Q

What are Closed-End Funds bought and sold at

A

the CMV of shares in the secondary market

not POP or NAV!!!

33
Q

Class I Shares

A

Open-end Fund Shares

Used for Institutional Investors (i shares)

minimum of $250k needed to invest into these shares

34
Q

What is the sales charge when swapping from one fund to another in the same investment company?

A

$0

They can only charge a sale charge once.

New fund is always bought and sold at NAV
(or CMV if closed-end fund)

35
Q

Front end Loaded Also Called What?

A

Class A Shares

36
Q

Back End Loaded Also Called What

A

Class B Shares

37
Q

Breakpoints

A

The more money you have in the account

the smaller the sales charge

Like a bracket system

For A Class Shares Only

38
Q

Breakpoint Sales Violations

A

If a client is close to a breakpoint you need to make that known to them so that if they want they can contribute more money and have a smaller fee.

If you dont that is a violation

39
Q

ROA

A

Rights of Accumulation

Open-end Investment companies consider all accounts someone has with them together when calculating their breakpoint for fee’s

40
Q

LOI

A

Letter Of Intent

You Submit an LOI to Investment Company Promising to contribute more money to a fund for the purpose of adding to the breakpoints and reducing your fee.
They will consider those funds as ALL READY IN the fund for the sake of fee’s and breakpoints

Good for 13 months

Can be backdated for 90 days

41
Q

Open End Fund Max Sales Charge

A

8.5%

if on test a sales charge is higher than this that means its a Closed-End Fund

42
Q

12B1 Fee’s

A

For Open End Funds ONLY

A fee that pays for anything to do with the Distribution (Selling and Marketing) of the fund

Paid Quarterly

Max 12B1 Fee:
Load Fund => .75%
No Load Fund => .25%

43
Q

When Calculating Sales Charge What do you Apply that to?

A

What it cost you for that share

THAT MAY OR MAY NOT BE THE NAV

44
Q

On questions with A B or C share or Open End Fund Questions, what should you remember?

A

Always assume its an A share unless it says differently

AND

open and closed end funds can invest in common, preffered and bonds

AND

they can only charge a sales charge once so if you move from one fund to another in the same company they cant charge you another sales charge

45
Q

Are Closed-End Funds Activly or Passivly Managed?

A

Passively Managed

will make trades 2-3 times per year

46
Q

On a Question that asks you if something is an Open or Closed Fund What do you need to remember

A

Closed End can have:

POP greater than 8.5% (Sales Charge)

and

POP less than NAV

47
Q

Are ETF and ETN the Same Thing

A

No

48
Q

Are ETF’s a Type of Open or Closed End Fund

A

Closed End

49
Q

ETF

A

Type of Closed-End Fund

Passively Managed

Invested Like an Index Fund

50
Q

2 EXTREMELY IMPORTANT things about ETF’s questions on the Test

A

If Ticker Symbol starts with an S
that means Short - you have to times all returns from it by -1 (inverse them)

AND

If you see 3X or 2X etc
the fund is leveraged by that amount - you have to times the return by the number

51
Q

ETN

A

Exchange Traded Note

Issuer purchases Bonds and packages then as notes then sells it to investors

Biggest Risk:
The Credit Quality Of The Issuer

52
Q

Are UIT’s Investment Companies

A

Yes
BUT

NOT REGULATED BY THE INVESTMENT COMPANY ACT OF 1940
(THEY ARE STILL A INVESTMENT COMPANY THEY JUST ARNT GOVERNED BY THE ACT)

Not classified at one under Investment Company Act of 1940

Instead classified under Each UIT’s Individual Trust

53
Q

RIET’s

A

Pool of investor funds Invested into Real Estate

Can Be Listed (Trades on an Exchange)
or
Unlisted (Doesnt Trade on an Exchange)

Can only distribute gains to Share holders NO LOSSES

54
Q

Difference Between Private Equity and Hedge Funds

A

Hedge Funds Managers typically put some of their own $ into the Fund

Private Equity Managers Do NOT

55
Q

Venture Capital Funds

A

Invests In Young Start Up Companies

Hoping 1 or 2 of them will turn into HUGE businesses that they can then sell
(Its OK that the rest fail)

56
Q

Similarities Between:
Private Equity Funds
Hedge Funds
Venture Capital Funds

A

Very Illiquid

Fund can invest the money however it wants
(very low transperancy)

Can be very Risky but might make huge reward aswell

Usually have very high mnnimums to enter the fund

57
Q

How Annuities Distributions are taxed

A

LIFO - Last In First OUT

2 Parts of the Annuity Money

What you Contributed (considered After Tax Already)

What Growth the Account Had (considered Pre Tax or Tax Deffered)

Which amount came in Last?
Usually the Growth of the account. so that gets taxed First

58
Q

How Annuities Annuitization is taxed

A

Part Tax - The Growth
and
Part POST TAX (already paid taxes on) - What You Contributed To It

59
Q

What to remember about Annuities With a Bonus

A

You don’t get the bonus up front you have to be vested through the life of the plan

60
Q

All Business Entities Flow the Taxes on to the individual EXCEPT

A

C-Corps and Trusts

That means that except for these 2
the taxes will show up on your personal tax return

61
Q

What to remember about Sole P.

A

On the test the

Sole P
and
Individual

are considered 2 different entities and so it does “Flow” the taxes on to the individual

62
Q

Max Loss for a Limited Partner

A

Their Investment

(they can’t come after their house or car or other money etc…)

63
Q

Max Loss for a General Partner

A

Everything

(they CAN come after their house or car or other money etc…)

64
Q

List the different Types of Joint Tennet Accounts

A

JT with Rights of Survivorship
-if you die => 100% goes to the remaining tenants
-if sued => they can come after 100% of the account

JT in Common
-if you die => your % goes to Beneficiaries/ Estate
-if sued => they can come after ONLY you % of the account

JT by Entirety
-if you die => 100% goes to the remaining tenants
-if sued => they can only come after the person and none of the JT Account
(Married Couples ONLY)
(The JT Account is considered its own Entity separate from both individuals)

65
Q

Affiliates

A

Affiliated - Director, Officer, employee, or 5% ownership of company

Different from Control Person!!!!!

Tutoring For 65 (11 decks)

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