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Brian lee video Flashcards

1
Q

big difference between ugma and utma

A

utma greater investment choices

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2
Q

agent definition

A

natural person that accept or place orders for broker for securities transactions

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3
Q

Investors in closed-end investment companies may trade only in

A

full shares

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4
Q

Under the NASAA Model Rule on Custody Requirements for Investment Advisers, an investment adviser would be permitted to maintain custody of customer cash and/or securities if

A

In order to maintain custody, notification must be given to the Administrator and, obviously, the state must not have a rule forbidding custody.

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5
Q

the only life insurance considered a security is

A

variable life

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6
Q

It is not permitted to have a 401(k) and a___at the same time

A

403B

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7
Q

annuitization payout options

A 
life only(largest monthly income) - receive check every month until you die.
life with period certain. if owner dies, bene gets check for remainder of period. If owner does not die then they still get check
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8
Q

Advisers that manage $110 million or more in customer assets are

A

federal covered advisers and are required to register with the SEC under the Investment Advisers Act of 1940. In addition, they are normally required to file notice in each state where they conduct business. There are no bonding requirements for federal covered advisers.

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9
Q

micro
small
mid
large

number breakdown

A

0-300 m
300-
- to 10 billion
10 billion around beyond

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10
Q

administrator powers

A

seek injunction(can’t issue)
issue subpoena and conduct investigations
require specific forms
deny, suspend cancel, revoke registrations

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11
Q

The owner of a fixed annuity is protected against

A

longevity risk

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12
Q

administrator has authority of any offer or sale that

A

originates in state
directed to state
accepted to state

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13
Q

Borrowing money or securities from a client is an unethical business practice, unless

A

the client is a broker-dealer, a bank or other financial institution in the business of loaning funds, or an affiliated person of the adviser.

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14
Q

renewal of registration difference with sec and state

A

fed pays fee

state does not

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15
Q

which entity uses member for its owners

A

llc

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16
Q

SEP (Simplified Employee Pension Plan)

A

Offers self employed persons and small business easy to administer pension plans
Qualified plan that allows employer to contribute money directly into an IRA setup for each employee

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17
Q

risk adjusted return. what is the other name for this

A

Sharpe ratio

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18
Q

Under the Investment Advisers Act of 1940, if an investment adviser’s sales literature describes an investment system, the description must include

A

the difficulties and limitations of using the system

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19
Q

advantage of country funds is

A

liquidity

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20
Q

notice filing

A

For Federally Covered Securities; i.e. mutual fund.

cleared by sec

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21
Q

capital needs analysis does not take into consideration

A

market fluctuations

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22
Q

burden of proof for exemption falls to the person

A

claiming the exemption

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23
Q

what law regulates unit investment trusts

A

securities act 1933

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24
Q

discounted cash flow cares about

A

coupon rate
par value
maturity(number of payments)

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25
Q

government workers use what retirement plan

A

457

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26
Q

in perpetuity pick what answer

A

400,000

annual income/ expected rate of return

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27
Q

coordination

A

for all regular ipos and is cleared by sec

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28
Q

if supervisor gets suspended

A

agents registration suspended. They have 30 days to find new broker dealer

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29
Q

An investment adviser is servicing a group of physicians and will offer a discounted fee to the doctors in that particular partnership. In what way would this be considered ethical?

A

This would be permitted as long as a disclosure is made in the IA’s brochure that fees are negotiable.

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30
Q

erisa minimum number of investments

A

3

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31
Q

investment advisor definition

A

person in the BUSINESS(firm) of providing investment advice. Holds themselves out to the public as investment advisor and receives economic benefit for advice.

State and fed definition is identical

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32
Q

year at the end of law means

A

federal

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33
Q

CDSC is with what share class

A

c

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34
Q

remainderman

how is remainder distributed

A

heir to beneficiary in a trust

per stirpes

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35
Q

Under the Investment Advisers Act of 1940, a registered investment adviser who provides investment advisory services to individuals must

A

provide each client with a disclosure statement or brochure no later than when entering into the advisory agreement

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36
Q

residency difference between s corp and c corp

A

c corps don’t have residency restrictions

none of the 100 people in an s corp can be a “nonalien”

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37
Q

Under the Uniform Securities Act, an Administrator investigating violations

A

may appoint an officer who has the power to subpoena records, administer oaths, or require production of documents and books

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38
Q

when a market maker publishes a quote, what price is shown

A

bid and offer

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39
Q

nominal yield same thing as

A

Coupon

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40
Q

TIPS what happens when CPI increases

A

the principal that adjusts by CPI, not the coupon rate.

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41
Q

stock received as an inheritance always has what type of capital gain

A

long term

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42
Q

fixed assets

A

plant and equipment

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43
Q

life trust vs test trust

A

life trust while living

test trust set up by will

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44
Q

Two of the major factors involved in the capital asset pricing model (CAPM) are

A

stock risk premium

market risk premium

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45
Q

tenants in common

A

each party gets their own percentage. Generally for non spouses.

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46
Q

right of rescission

A

opportunity for client to get all money back plus court costs.
dividends and interest subtracted

or just keep the security.

30 days to make decision

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47
Q

discounted cash flow cares about

A

principal, coupon rate, number of payments

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48
Q

is investment policy statement

is it required

A

invest choices
how we track and measure performance
contact info

no

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49
Q

all corporate pension and profit-sharing plans must be established under

A

a trust agreement

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50
Q

sports agent must register yes or no

A

yes

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51
Q

529 vs cordevel

A

cordevel 2000 max per child , must stop making contributions when child is 18. must take distributions by time they are 30. can be used for primary or secondary education

529 max is for secondary education only

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52
Q

What is the term used to describe a common stock issued below its par value

All stock issued today is

A

Assessable stock

nonassessible

53
Q

sale in terms of preemptive rights

A

Although the receipt of preemptive rights is not a sale, the exercise of them is

54
Q

A popular tool used by analysts is discounted cash flow (DCF). Most use this tool to evaluate

A

the present value of future cash flows to determine an appropriate current value.

55
Q

statement of cash flow includes

A

salary, invest income, taxes , utility, mortgage

56
Q

purchasing shares directly from the client is considered

A

principal capacity also

57
Q

Which of the following is (are) advantages of irrevocable insurance trusts?

A

Provide estate liquidity.

Insurance proceeds are removed from the estate of the insured for tax purposes.

58
Q

options paperwork explanation

A

Customers do not have to complete (sign) the options agreement prior to entering an order; under current rules, the agreement must be signed and returned by the customer within 15 days of account approval.

59
Q

One major difference between the customer identification program (CIP) and the new account opening rules of the regulatory bodies is that

A

the CIP requires date of birth while the regulators only require proof of legal age

60
Q

death benefit of variable annuity

A

The death benefit insures that the investor will never receive back less than the original amount contributed to the account.

61
Q

broker dealer definition

A

effects securities transactions for themselves or others

62
Q

A grantor retained annuity trust (GRAT)

A

is an estate planning tool designed to pass assets to beneficiaries (usually children) in a way to minimize gift and/or estate taxes.

63
Q

The main assumptions of the capital market theory are as follows:

A

All investors can borrow or lend money at the risk-free rate of return.

All investors are rational and evaluate investments in terms of expected return and variability (standard deviation). Therefore, given a set of security prices and a risk-free rate, all investors use the same information to generate an efficient frontier.

The time horizon is equal for all investors: when choosing investments, investors have equal time horizons for the chosen investments.

There are no transaction costs or personal income taxes; investors are indifferent between capital gains and dividends.

There is no inflation

All assets are infinitely divisible: this means that fractional shares can be purchased.

There is no mispricing within the capital markets: it is assumed that the markets are efficient and that no mispricings within the markets exist. Another way to state this is that capital markets are in equilibrium.

64
Q

With regard to taxation of distributions from a REIT

A

in the majority of cases, dividends are taxed as ordinary income

capital gains distributions are treated as long-term capital gains

65
Q

capm is used to find what?

what is the formula

A

find the required return when it is not computed to see if a security is overvalued or undervalued

rfr+beta(mr-rfr)

66
Q

when does federally covered IA have to notice file

A

states they have a place of business

Notice file if they have more the 6 or more non institutional clients in a state

67
Q

529 all info

A

After tax contributions
Contributions are NOT tax deductible
Earnings grow tax deferred
Qualified withdrawals are tax free for educational purposes if withdrawn
Otherwise 10% tax penalty and subject to income tax on earnings
No Contribution limit
No Income limit
No age restrictions for contribution to be used
Only used for college and graduate school
Beneficiaries can be changed to any family member

68
Q

ABC Advisers, a federal covered investment adviser, is moving the firm’s headquarters to a new office park in the suburbs. ABC is required to file this change with the SEC

A

promptly

69
Q

when can you get a performance fee

A

2 mill net worth 1 mill invested and hedge funds

must be percentage of net gains
for a specific time period
against peer portfolio

70
Q

exempt transaction

A 
Unsolicited▪
Financial Inst.▪
Issuer/UW▪
Private Placements▪
Fiduciaries
Sherriff, 
trustee inB/K
Isolated Non-issuer trans.
71
Q

When discussing the differences between purchasing a mutual fund and a hedge fund, the investor should be aware that

A

Because hedge funds are not registered with the SEC (or the states), there are limited disclosures—the transparency is not nearly what investors have with mutual funds.

72
Q

Margin regulations are determined by which act

A

securities act 1934

73
Q

statute of limitations for criminal violations of the USA

A

There is a 5-year statute of limitations for criminal violations under the USA

74
Q

Current yield for any security is always computed on the basis of

A

current market value

75
Q

In a defined benefit plan

A

the retiree receives a specified amount, with the sponsor bearing the investment risk.

76
Q

authority of administrator

how many reasons do they need

A

deny, revoke, suspend registration

  1. one must be in the public’s best interest

other reasons could be person is senile
felony arrest in past 10 years
other reg auth asks you to leave

77
Q

non exempt

A

corp securites

78
Q

who are fiduciaries ias or broker dealers

A

ias

79
Q

exempt entities

A 
U.  S.  Govt’s.
 Muni’s
 Bank/Insurance Co
.Non-Profit/
ReligiousCommon 
Carriers (Trucking Co., Railroads, etc.)
Canadian Gov’t (Fed and all subdivisions) 
Foreign Govt’s. (Fed only)
Commercial Paper Maturity < 270 days 
Face value > $50,000
80
Q

Keogh plans are for

contribution limits vs ira

A

self employed individuals

much higher

81
Q

In order for a security to lawfully be sold or offered under the USA, it must meet at least one of the following requirements

A 
It is unlawful to sell a security in a state unless the security is 
a federal covered security, 
exempt from registration under the USA, 
sold in an exempt transaction, 
or registered under the act.
82
Q

variable annuties taxed on what basis

how are non qualified taxed

A

lifo

non qualified is after tax and taxed as ordinary income. on amount exceeding basis

83
Q

is acceptable for use as the firm’s brochure

A

Form ADV Part 2A and Part 2B

84
Q

sec release 10-92 who is an advisor

A

financial planners
sports and entertainment agents
pension consultants(employee benefit plans)

85
Q

A life settlement contract involves

A

A life settlement contract involves the sale of a life insurance policy to a party other than the insured. In exchange for the payment, the new owner is entitled to the death benefit when the seller passes away.

86
Q

custody what must be done

A

must segregate
quarterly statements
location of securities
surprise annual independent audit

87
Q

current liabilities

A

accounts payable

interest due on outstanding debt

88
Q

what authority does state admin have of fed covered advisor

A

anti fraud

89
Q

The YTC computation involves knowing

A

the amount of interest payments to be received, the length of time to the call, the current price, and the call price

90
Q

With defined benefit plans who bears the risk

A

With defined benefit plans, the employer (not the employee) bears the investment risk.

91
Q

viatical settlement

A

paying off cash value for terminally ill clients

92
Q

efficient market hypotheses

A

weak- price and volume. research could help
semi strong- all public info company financials. research not going to help as much.
Strong- all public and private information(insider) No analysis will help

93
Q

Money may never be borrowed from a client, unless

A

something in the question indicates that the client is in the business of lending money or an affiliate of the firm

94
Q

when must ads be filed with administrator. when not

A

All advertising, sales literature, and other written material (prospectus, pamphlets) intended for distribution to current or potential clients must be filed with the administrator.

For materials relating to exempt securities, exempt transactions, or federal covered securities, FILING WITH THE ADMINISTRATOR IS NOT REQUIRED

95
Q

index(equity) based annuity

A

comes with participation rate

you receive that % of the gain

comes with caps. if index goes down, annuitant does not lose money

96
Q

Under the Securities Exchange Act of 1934, an exchange is

A

an organization that provides facilities for bringing together buyers and sellers of securities

97
Q

is receiving a check made out to a third party considered custody

A

no

98
Q

policy loans and life insurance

A

As long as the policy has cash value, loans are permitted

99
Q

variable annuity units

A

The number of annuity units is fixed when payout begins.

The monthly annuity payment is a variable amount.

100
Q

preferred stock

A

fixed income from dividends
prior claim ahead of common stock
convertible shares get opportunity for growth
no maturity date

101
Q

bottom up vs top bottom

A

bottom up starts with individual companies and goes up. opposite for top bottom

102
Q

Under the Investment Advisers Act of 1940, a cash referral fee may be paid by an IA

A

when a written agreement providing certain disclosures has been entered into between the IA and the third party

this only applies to the 1940 act

103
Q

qualification

A

for intrastate offerings, effective when cleared by admin

104
Q

As we know, when a broker-dealer offers wrap fee programs, the exclusion from the definition of investment adviser

A

is lost

105
Q

Firm Brochure rule for state and fed

A

For Federal IA’s brochure must be made to each client no later than the commencement of the advisory agreement
For State IA’s brochure must be give 48 hours prior to signing of investment contract unless contract calls for a penalty free determination
can be given and have 5 days to cancel

ADV 2A and 2B satisfy

106
Q

With high frequency trading, who loses out?

A

With HFT, it is the smaller investors who lose out because they don’t get access to the information as quickly.

107
Q

dividend discount model

A

annual dividend/ expected return= present value(market price)

108
Q

Under what conditions may an unregistered employee of a broker-dealer receive bonuses or incentives

A

When such bonuses or incentives are not tied to transactions, commission activity, or referrals generated by the unregistered person

109
Q

current assets include

A

cash equivalents
marketable securities
accounts receivable
inventories

110
Q

Broker-dealer” does not include

A

(1) an agent, (2) an issuer, (3) a bank, savings institution, or trust company.

111
Q

Included in the Investment Advisers Act of 1940 are a number of different recordkeeping requirements.

A

Ias must keep books and records for 5 years accessible. first 2 years they have to be maintained in principal office

partnership articles, articles of incorp, minutes books, etf must be kept 3 years after termination

112
Q

excluded from definition of an IA

A 
LATE
lawyers
accountants 
teaachers
engineers
113
Q

In a defined contribution plan

A

the employee contributes a defined amount each period, bears the investment risk, and does not receive a defined amount upon retirement.

114
Q

summary plan document

A

required by the corporation

115
Q

a bank may be exempt from state registration but a

A

bank holding company is not

116
Q

balance sheet

A

a-l=nw

117
Q

referral fees

A

Referral fees (not cash fees for full-time soliciting) may be paid to certain professionals (lawyers, accountants, insurance agents, and so forth) as long as the fee is both a nominal amount (up to several hundred dollars) and is the same amount for any referral.

118
Q

As an investment adviser, you feel that RAN common stock is an appropriate addition to the portfolio for several of your clients. You enter an order to purchase 1,000 shares and receive two 500-share confirmations, but they are not at the same price. Which of the following is the proper procedure for you to follow?

A

Allocate using the average of the two prices

119
Q

long term liability

A

outstanding interest

120
Q

when is there concerns about cyber security

A

Anytime that a broker-dealer’s financial records are being handled electronically,

121
Q

Coverdell

A

After tax contribution
Contributions are NOT tax deductible
Earnings grow tax deferred
Qualified withdrawals are tax free if used for education by 30
Otherwise 10% tax penalty and subject to income tax on earnings
Contributions made by anyone but max is $2000 per child in a year
Contribution may be made till child’s 18th birthday
Contributors must fall under earning limits
If makes individually above $110,00 or $220,000 joint cannot make any contribution
Used for k-12 and college
Beneficiaries can be changed to any family member under 30

122
Q

he 3 basic asset classes are

A

stocks bonds cash

123
Q

buy and hold least appropriate for

A

wrap account

124
Q

formula for risk adjusted return

A

PAR-RFR/Standard deviation

125
Q

A client with a sizable estate would probably find it most efficient to pay estate taxes with

A

proceeds from a life insurance policy

126
Q

which types of stocks are interest rate sensitive

A

utility stocks

127
Q

benchmark is a

A

peer portfolio

128
Q

The standard benchmark used to measure the “risk-free” rate of return is the

A

91 day treasury bill

129
Q

3rd party checks and securities and custody

A

must be moved in 3 days to be considered not having custody

BL class notes (3 decks)

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