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SIE > Ch. 13 > Flashcards

Ch. 13 Flashcards

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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
Q

True or False: Customers selling stock are considered long if they own a preferred or bond convertible into the stock.

A

False, the convertibles must already have been TENDERED for conversion.

26
Q

For good delivery, what unit value (or multiple) is required for bonds?

A

$1,000

27
Q

___________ is the settlement for cash transactions (also referred to as cash trades or cash settlement).

A

Same day

28
Q

Identify the acronym: NOBO

A

Nonobjecting beneficial owner

29
Q

What form is used to file year-end audited financial statements with the SEC?

A

10-k

30
Q

Clients with a _____ account are required to pay for each transaction in full (No extension of credit is permitted)

A

Cash account

31
Q

True or False: Restricted stock will not be transferred by the transfer agent unless the legend is removed.

A

True

32
Q

True or False: Five stock certificates that have 300 shares each is considered good delivery.

A

True. Since each certificate is in a multiple of 100 shares, this is good delivery.

33
Q

Secondary market trades involving U.S. Government securities settle _____________________.

A

Secondary market trades involving U.S. Government securities settle next business day (T + 1).

34
Q

Identify the acronym: OBO

A

Objecting beneficial owner

35
Q

A stockholder who does not want a BD to disclose her name as the owner of record is an ____________________________.

A

Objecting beneficial owner

36
Q

A _______ account allows clients to take advantage of leverage through borrowing either cash or securities.

A

Margin

37
Q

True or False: An opinion letter is necessary for the transfer agent to remove the legend from a restricted stock.

A

True. An opinion letter is necessary for the transfer agent to remove the legend from a stock if transfer is restricted.

38
Q

When does a “seller’s option” trade settle?

A

On a date longer than using regular way (i.e., more than T+2).

39
Q

What is the role of the DTCC?

A

The DTCC provides securities settlement and clearing services in the U.S.

40
Q

What form is used to file quarterly financial statements with the SEC?

A

10-Q

41
Q

True or False: When stock is sold, stock certificates must be endorsed with a signature or stock power.

A

True. Similar to when cashing a check, stock must be endorsed before it’s sold.

42
Q

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?

A

The issuer

43
Q

In a cash account, the payment date for all securities purchases is ____ business days after the ___________ date.

A

In a cash account, the payment date for all securities purchases is two business days after the settlement date.

44
Q

True or False: For a 500-share trade, two stock certificates each for 250 shares is considered good delivery.

A

False. Certificates must be in in multiples of 100 shares.

45
Q

When do companies issue proxy statements?

A

Whenever there is a voting issue for their shareholders.

46
Q

If a corporation executes a stock split, is there a resulting gain or loss for existing stockholders?

A

No, the overall position stays the same. Forward = more shares at lower price; Reverse = fewer shares at higher price.

47
Q

True or False: Customers must pay for their trades on or before the settlement date.

A

False. According to Reg. T, customers must pay within two business days of settlement (i.e., S + 2 or T + 4).

48
Q

A reverse stock split is a corporate action through which a corporation __________ its number of outstanding shares.

A

Decreases

49
Q

Who has the authority to remove the restriction or legend on a security?

A

Transfer agent

50
Q

Who pays the expenses incurred for mailing proxy materials or annual reports to clients whose assets are in street name?

A

The distributing corporation

51
Q

What is a tender offer?

A

A public offer to buy stock at a fixed price (usually a premium to the current market value)

52
Q

Restricted or _______ stock may not be transferred (sold) unless an opinion letter is received from the issuer.

A

Legend stock

53
Q

True or False: For clients whose assets are in street name, proxy materials must be forwarded to the client.

A

True, provided the distributing corporation pays for the mailing expenses.

54
Q

Trades involving corporate or municipal securities settle by the _______________ day following the trade date (T + __).

A

T+2

55
Q

When do corporate bond trades settle?

A

T+2

56
Q

By signing a _____, shareholders are giving another person the authority to vote on their behalf.

A

Proxy

57
Q

What are some examples of odd splits?

A

3:2, 5:4, 12:5

58
Q

If a customer buys a corporate bond on Wednesday, October 10, when will the trade settle?

A

Friday, October 12 (T + 2)

59
Q

When considering business days, what days are excluded?

A

Weekend days, holidays, and any other days where the securities markets are closed

60
Q

Customers are given ____ business days after settlement date to pay for their portion of the trade.

A

2 business days (S+2 (settlement)) or (T+4)

SIE (20 decks)

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