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SIE > Ch. 13 > Flashcards

Ch. 13 Flashcards

1
Q

Restricted stock may not be sold until the _______________ removes the legend.

A

Transfer agent

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2
Q

If a customer buys a municipal bond on Thursday, May 5, when will the trade settle?

A

Monday, May 9 (T + 2)

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3
Q

A stockholder who allows a BD to disclose his name as the owner of record is a ________________________________.

A

Nonobjecting beneficial owner

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4
Q

If a customer is an objecting beneficial owner, who is responsible for forwarding proxy materials to her attention?

A

Her broker dealer

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5
Q

How can an even split be identified?

A

Any split to 1 (e.g. 2:1, 3:1. 4:1)

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6
Q

What does it mean to settle a trade?

A

Completing the final step in trading the delivery of cash and securities between two parties

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7
Q

When do municipal bond trades settle?

A

Two business days after the trade date (T+2)

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8
Q

_____ numbers are serial numbers that identify securities (e.g., each maturity of a bond offering)

A

CUSIP

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9
Q

The _______ instructs the transfer agent to remove a stock legend by presenting an _______________.

A

Issuer; opinion letter

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10
Q

Who validates a stock certificate?

A

Issuer or its agent (usually a transfer agent)

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11
Q

When do options trades settle between BD and the OCC?

A

Next business day (T + 1)

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12
Q

Why would a trade have “when issued” settlement?

A

Most likely because it’s a primary market (new issue) trade and the certificates have yet to be created.

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13
Q

A customer buys stock on Thursday, July 3. When will the trade settle?

A

Tuesday, July 8. Notice that Friday, July 4 cannot be included as a business day.

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14
Q

When will a cash trade for a municipal bond settle?

A

Same day

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15
Q

Identify the acronym: NSCC

A

National Securities Clearing Corporation

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16
Q

ABC Inc. has 10,000,000 shares outstanding and effects a 1:10 reverse split. How many shares would now be outstanding?

A

1,000,000 since the outstanding shares would be reduced by a factor of 10 (10,000,000 ÷ 10 = 1,000,000)

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17
Q

When are clients required to pay for their Treasury or municipal bond purchases?

A

On the settlement date of the trade. For Treasuries, this is T + 1, but for municipals, it’s T + 2.

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18
Q

If a customer buys stock on Friday, June 19, when will the trade settle?

A

Tuesday, June 23 (T + 2)

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19
Q

______________ following the trade date is settlement for trades of U.S. Government securities or option contracts.

A

1 business day (T+1) following the trade date is settlement for trades of U.S. Government securities or option contracts

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20
Q

If an equity option is exercised, when does the transaction in the underlying security settle?

A

In two business days (T + 2)

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21
Q

A customer buys a T-bill on Friday, January 4th. When will the trade settle?

A

Monday, January 7

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22
Q

For good delivery, what multiple of shares must be delivered?

A

100 shares (round lots)

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23
Q

True or False: Book entry securities don’t have physical certificates and can be settled electronically.

A

True

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24
Q

When can an investor participate in a tender offer (i.e., what can be tendered)?

A

If she is long stock, a convertible bond, warrant, or right. If long a call option on the stock, she must exercise it.

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25
True or False: Customers selling stock are considered long if they own a preferred or bond convertible into the stock.
False, the convertibles must already have been TENDERED for conversion.
26
For good delivery, what unit value (or multiple) is required for bonds?
$1,000
27
___________ is the settlement for cash transactions (also referred to as cash trades or cash settlement).
Same day
28
Identify the acronym: NOBO
Nonobjecting beneficial owner
29
What form is used to file year-end audited financial statements with the SEC?
10-k
30
Clients with a _____ account are required to pay for each transaction in full (No extension of credit is permitted)
Cash account
31
True or False: Restricted stock will not be transferred by the transfer agent unless the legend is removed.
True
32
True or False: Five stock certificates that have 300 shares each is considered good delivery.
True. Since each certificate is in a multiple of 100 shares, this is good delivery.
33
Secondary market trades involving U.S. Government securities settle _____________________.
Secondary market trades involving U.S. Government securities settle next business day (T + 1).
34
Identify the acronym: OBO
Objecting beneficial owner
35
A stockholder who does not want a BD to disclose her name as the owner of record is an ____________________________.
Objecting beneficial owner
36
A _______ account allows clients to take advantage of leverage through borrowing either cash or securities.
Margin
37
True or False: An opinion letter is necessary for the transfer agent to remove the legend from a restricted stock.
True. An opinion letter is necessary for the transfer agent to remove the legend from a stock if transfer is restricted.
38
When does a "seller's option" trade settle?
On a date longer than using regular way (i.e., more than T+2).
39
What is the role of the DTCC?
The DTCC provides securities settlement and clearing services in the U.S.
40
What form is used to file quarterly financial statements with the SEC?
10-Q
41
True or False: When stock is sold, stock certificates must be endorsed with a signature or stock power.
True. Similar to when cashing a check, stock must be endorsed before it's sold.
42
If an issuer sends its 10-K or 10-Q to investors, who pays to ship them to investors for securities held in street name?
The issuer
43
In a cash account, the payment date for all securities purchases is ____ business days after the ___________ date.
In a cash account, the payment date for all securities purchases is two business days after the settlement date.
44
True or False: For a 500-share trade, two stock certificates each for 250 shares is considered good delivery.
False. Certificates must be in in multiples of 100 shares.
45
When do companies issue proxy statements?
Whenever there is a voting issue for their shareholders.
46
If a corporation executes a stock split, is there a resulting gain or loss for existing stockholders?
No, the overall position stays the same. Forward = more shares at lower price; Reverse = fewer shares at higher price.
47
True or False: Customers must pay for their trades on or before the settlement date.
False. According to Reg. T, customers must pay within two business days of settlement (i.e., S + 2 or T + 4).
48
A reverse stock split is a corporate action through which a corporation __________ its number of outstanding shares.
Decreases
49
Who has the authority to remove the restriction or legend on a security?
Transfer agent
50
Who pays the expenses incurred for mailing proxy materials or annual reports to clients whose assets are in street name?
The distributing corporation
51
What is a tender offer?
A public offer to buy stock at a fixed price (usually a premium to the current market value)
52
Restricted or _______ stock may not be transferred (sold) unless an opinion letter is received from the issuer.
Legend stock
53
True or False: For clients whose assets are in street name, proxy materials must be forwarded to the client.
True, provided the distributing corporation pays for the mailing expenses.
54
Trades involving corporate or municipal securities settle by the _______________ day following the trade date (T + __).
T+2
55
When do corporate bond trades settle?
T+2
56
By signing a _____, shareholders are giving another person the authority to vote on their behalf.
Proxy
57
What are some examples of odd splits?
3:2, 5:4, 12:5
58
If a customer buys a corporate bond on Wednesday, October 10, when will the trade settle?
Friday, October 12 (T + 2)
59
When considering business days, what days are excluded?
Weekend days, holidays, and any other days where the securities markets are closed
60
Customers are given ____ business days after settlement date to pay for their portion of the trade.
2 business days (S+2 (settlement)) or (T+4)

SIE (20 decks)

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