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Tutoring For 65 > 5/8/2023 > Flashcards

5/8/2023 Flashcards

1
Q

Is there an exchange of commodity at the end of a futures contract

A

No

But the must settle the contract therefore there is an obligation for the buyer and seller of the contract

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2
Q

you are borrowing what when you sell short

A

Borrowing Securities

(Not Money)

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3
Q

With Options when is the Max Gain Infinite

A

When you Buy a Call

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4
Q

With options when is the Max Loss Infinite

A

When you Sell a Call
AND
Are short the stock
(the price could go up infinitely and to cover the option you first need to buy the stock)

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5
Q

Words that are in the same category as Principal

A

Dealer
Marker Maker
Markup / Mark down

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6
Q

Words that are the in the same category as Agency

A

Broker
Agent
Commission

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7
Q

Difference between a Principal Trade and a Agency Trade

A

Principal -
Buys/Sells you the Stock from:
Their Own Inventory

How they Profit:
Marks Up/ Down the Stock

Agency -
Buys/Sells you the Stock from:
The Market

How they Profit:
Charges a Commission on the Sale

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8
Q

Do Agency and Principal Trades cost different amounts

A

No

they charge they same amount its just different in the method its charged
(Mark uUp/Commission)

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9
Q

Day Trading Accounts Minimum Equity

A

$25k
AT ALL TIMES

if under it needs to be covered the same day

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10
Q

Can Day Trading Account Be Short:
-Securities
-Equity

A

Securities - Yes

Equity - Kind Of - Must follow Margin Maintenence Requirement (25% must be equity at all times)
If less they only have till the end of the day to cover the margin call

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11
Q

Time Limit for Covering a Margin Call on a Day Trading Account

A

by the end of the same day.

(unlike normal Margin Accounts where you need to Cover it with in 2 days)

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12
Q

2 things that Day trading accounts have to ensure by the end of every day

A

$25k minnimum Equity

and

Any Margin Calls are covered
(unlike noraml margin accounts = 2 days)

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13
Q

Time Weighted Return

A

DOES NOT include
money being contributed and withdrawn from your account

Views: Time
as being a big cost of the investment

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14
Q

Dollar Weighted Return

A

DOES include
money being contributed and withdrawn from your account

Views: Dollars
as being a big cost of the investment
(focuses on cash flow a little more than Time Weighted)

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15
Q

Holding Period Rate of Return

A

Ignores everything that happened during the time frame and just looks at the return from
Start to Finish

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16
Q

Difference Between Yield and Return and there formula

A

NONE - THEY ARE THE SAME THING

Income (usually Interest and dividends) + REALIZED Capital Gains (not unrealized)
/
Cost of Buying Security

Realized Capital gains mean they sold the securities to make the gain official

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17
Q

CY

A

What we get in INCOME over 1 year / What we bought the security for

Emphasis on 1 YEAR

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18
Q

Things that would be included in CY

A

Dividends

Interest

(both are like receiving Income)

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19
Q

Things that would NOT be included in CY

A

Capital Gains Distribution

Anything that has to do with the PRINCIPAL,
not the INCOME a security Generates

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20
Q

Exempt Issuers

A

-US Government

-State and local Governments

-Foreign National Governments where we have diplomatic relations

!!!!Canada is the only foreign country given exemption at the state level. The country is exempt but the local foreign entity is not (the city isn’t but the country is)

-Banks, Insurance companies, Credit Unions
!!!!BUT NOT their Holding Companies

-(Consolidated carrier) Trucking, railroads, airlines

-Non-Profit Organizations
(Includes Churches and really any other Non-Profit)

NOTE: the Textbook pg 88 lists a bunch more and differs a little bit when in doubt trust the textbook

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21
Q

Exempt Securities

A
  • Commercial Paper
  • Bankers Acceptances
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22
Q

Exempt Transactions
(6 of them)

A

Institutional (Transactions for institutions)

Issuer to Underwriter

Unsolicited orders (If the advisor doesn’t sell the stock to a client but the client comes to them)

Private placements (Unregistered restricted stock)

Court “like” transactions (Executor, Bankrupcy, Court Ordered Etc…)

Pre-Organization Certificates - IF NO COMMISSION PAID AND LESS THAN 10 SUBSCRIBERS

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23
Q

How many Non-accredited investors are allowed in a Private Placement for it to still be an exempt Transaction

A

Up to and Including 25 Non-accredited Investors

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24
Q

When you hear the Word Administrator always Assume

A

they are talking State
NOT federal

25
Q

Soft Dollar Compensation

A

Company A Compensating Company B for their services in anything other than Actual Cash

If it doesn’t help with the actual services offered to the A company, its not allowed

26
Q

Examples of Allowed Soft Dollar Compensation

A

Research
Reports
Software

27
Q

Examples of NOT Allowed Soft Dollar Compensation

A

Office Rent

Salaries

Phone Bill

28
Q

Trading Discretion Definition

A

Making trading decisions without your client

29
Q

Criteria for determining if there needs to be trading discretion or not

A

Client Must tell you ALL of these things otherwise you need discretion

1) Buy or Sell
2) EXACT Amount (either # of shares OR $ amount –can be one or the other–)
3) which SECURITY (A Specific Security not general industry)

30
Q

Types of Trading Discretion
and what they are

A

Limited POA - Can only make trades

Full POA - Advisor can do whatever they want to the account
(ie: Trade, Re-Register Securities, Take $ out of account)

31
Q

an Advisors Conflict of Interest needs to be reported to:

A

Their
Broker-Dealer
and
IA

32
Q

What Constitutes a
Conflict of Interest

A

All activities the Advisor does outside of the business that might be a potential conflict

Doesn’t matter if they get Compensated for the activity or not it still needs to be reported

33
Q

An Advisors Criminal Activities Must Be Reported To:

A

Their
Broker-Dealer
and
IA

34
Q

Which Criminal Activities of an advisor Need to be reported to their Broker-Dealer and IA

A

All Convicted:

Felonies

and

Misdeminors that were securities or business related

(must be convicted not thrown out)

35
Q

Is Loaning Money to Client Allowed

A

No

Unless they are an immediate Family Member

36
Q

Is Receiving a Loan From a Client Allowed

A

No

Unless they are in the business of loaning money out
(legitimately cant be the mob or your uncle Frank who doesn’t officially loan out money)

37
Q

Can you Share in the Profits/ Losses of a clients account

A

Yes

BUT - you must share in the Profits AND the Losses
AND
have prior approval of your IA/Principal

38
Q

Selling Away

A

Selling Securities outside the realm of your IA/BD
(they must have an agreement that they can sell those securities)

Is a Violation

39
Q

Churning

A

Is A Prohibited Practice

Excessive transactions. An advisor doing excessive transactions with clients accounts not for the benefit of the client but rather to increase commissions

40
Q

Reverse Churning

A

Is A Prohibited Practice

Taking a customers account that doesn’t trade very much and putting it in a fee based account to get more commissions on it and its not in the clients best interest

41
Q

Capping

A

Is A Prohibited Practice

trying to keep a stock price LOW

Ie: entering in a large amount of sales orders before the end of the trading day to decrease the stock price

42
Q

Pegging

A

Is A Prohibited Practice

trying to keep the stock price HIGH

Ie: entering in a large number of buy orders before the end of the day to increase the stock price

43
Q

Marketing the Open

A

Is A Prohibited Practice

Trying to manipulate the market before the Market Opens

(IE: could use Capping or Pegging)

44
Q

Marketing the Close

A

Is A Prohibited Practice

Trying to manipulate the market before the Market Closes

(IE: could use Capping or Pegging)

45
Q

Backing Away

A

Is A Prohibited Practice

ONLY APPLIES TO MARKET MARKERS
AND
ON TRANSACTIONS OF 100 SHARES OR MORE

Backing away from a transaction after being connected with the buyer/seller because something like the news changes the price.

46
Q

Front Running

A

Buying your firms Shares Before Your Clients
(pushes up the price for your client)

47
Q

Trading Ahead

A

Is A Prohibited Practice

Placing a trade just before the release of a research report (while knowing information about the report before its released)

48
Q

Painting the Tape

A

Is A Prohibited Practice

Similar Terms:
matched purchases / matched sales / washed sales

Buying and selling stocks multiple times to people who are in the loop with you to try and create false activity in the stock in order for it to look active.

Ie: two people sell the stock back and forth to each other to try and make the stock activity look good.

49
Q

Guarantees in the industry are only allowed by

A
  • The US government
  • An Insurance company
  • A parent company guaranteeing the obligations of a subsidiary
50
Q

Personal Securities Transactions Report

A

Advisors must use this to disclose
all their own personal Securities Transactions

Done Every Quarter

51
Q

Personal Securities Transactions Report - Which Securities Dont Have to Be Reported

A

-Treasury
and
-Money Market
Securities

52
Q

Political Contributions Limits

A

If Candidate is within your jurisdiction
(You can participate in a vote)
=$250

If NOT within your jurisdiction
(You CANT participate in a vote)
=$100

53
Q

Rules on gifting to clients

A

Max $100/yr worth of gifts

If you go with them to the event = Doesn’t Count
(as long as its within reason taking them to Fiji is too much)

Also doesnt count life events
(weddings, Baby etc…)
(Also needs to be within reason/ whats appropriate for the life event)

54
Q

CTR

A

Currency Transfer Reports

Used to report suspicious and potential money Laundering activities to FINCEN

Items required to be reported:
-Transactions of $10k or more within 15 days of receiving the currency
(need to be reported within 15 days)

-Wire Transfers of +$3k or more

55
Q

Types of Intrastate Offerings

A

Qualification - If Offering is in Only 1 State

Coordination - If Offering is in More than 1 State
(registers in original state and Federally then each other state just does a Filing Notice as their form of registration)

Filing Notice - If its Already Federally registered
(not a form of registration)

56
Q

What type of registration does Secondary offerings do

A

Nothing except for notice filing
because its already been registered in the Primary offering

57
Q

Matched orders

A

Forms of painting the tape that involves more than 1 person that’s “In on it”

Is a violation

58
Q

Washed Sales

A

Forms of painting the tape that involves ONLY 1 person that is “In on it”

They sell shares with one broker Dealer then Buy them shares from themself with another BD

Is a violation

Tutoring For 65 (11 decks)

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