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Securities Industry Essentials (SIE) > Chapter 1 - Regulatory Entities, Agencies And Market Participants > Flashcards

Chapter 1 - Regulatory Entities, Agencies And Market Participants Flashcards

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1
Q

What is American Depositary Receipt (ADR)?

A

A negotiable instrument issued by a US bank that trades in the US financial markets and represents shares of a foreign stock.

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2
Q

What is the Ask Price?

A

The price a seller is willing to accept for a security.

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3
Q

What is the Bid Price?

A

The price a buyer is willing to pay for a security.

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4
Q

What is a Bond?

A

A debt obligation in which the borrower promises to pay a set coupon rate until the issue matures, at which time the principal is repaid.

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5
Q

What is a Beneficiary?

A

A person selected by the owner of a bank or brokerage account, trust, or insurance policy, who assumes ownership or receives the benefits of the assets in the event of the owner’s death.

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6
Q

What is a Broker/Dealer?

A

A firm that effects securities transactions for its own account or for the the accounts of others.

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7
Q

What is a Futures Contract?

A

A standardized commodities or securities contract to deliver a certain quantity at a predetermined future price and date.

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8
Q

What is a Margin Account?

A

A brokerage account that allows investors to purchase securities with borrowed funds using credit extended by the broker/dealer/

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9
Q

What does ADR stand for?

A

American Depositary Receipt

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10
Q

What is a Member Firm?

A

Broker/dealer belonging to a self-regulatory organization (SRO), such as FINRA or NYSE, or both

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11
Q

What does FINRA stand for?

A

Financial Industry Regulatory Agency

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12
Q

What does NYSE stand for?

A

New York Stock Exchange

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13
Q

What does SEC stand for?

A

Securities and Exchange Commission

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14
Q

What does SRO stand for?

A

Self-Regulatory Organization

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15
Q

What is a Mutual Fund?

A

A professional managed open-end investment company issuing redeemable securities in a continuous offering of shares.

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16
Q

What is an Option?

A

A security giving the holder the choice to either purchase or sell a security at a set price for a specific period.

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17
Q

What is a Prospectus?

A

A full and fair risk disclosure document required by the SEC for all new offerings of nonexempt securities.

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18
Q

What is a Security?

A

A financial instrument that has monetary value and can be traded between parties.

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19
Q

What is a Self-Regulatory Agency (SRO)?

A

An organization that is authorized to enforce standard and requirements related to securities trading and brokerage.

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20
Q

What is a Stock?

A

A type of security that represents ownership in a corporation.

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21
Q

What is an Underwriter?

A

A broker/dealer or investment bank that helps a company in offering and distributing securities to the public.

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22
Q

What is the Securities Act of 1933 or “Paper Act”?

A

Often referred to as the “truth in securities” law, it requires prospectus and full disclosure filings for all new issued (primary market) of securities considered nonexempt, such as corporate stock and bond offerings.

Governs a new issue market.

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23
Q

What is the Securities Exchange Commission Act of 1934 or “People Act”?

A

Regulates the trading of securities after they have been issued (secondary market). It also created the SEC.

Governs trading in the secondary market.

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24
Q

What is the Maloney Act of 1938?

A

An amendment to the Securities Exchange Commission Act of 1934, originally provided for self-regulatory of the over-the-counter market and paved way for self-regulatory organizations, such as FINRA in 1970.

Created SROs.

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25
Q

What is the Investment Company Act of 1940?

A

Regulates the organization of investment companies offering packaged products, including mutual funds.

Oversees investment management companies.

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26
Q

What is the Investment Advisers Act of 1940?

A

Regulates investment advisers, requiring those that are compensated for provided investment advice to register with the SEC.

Requires investment adviser registration.

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27
Q

What is the Securities Investor Protections Act of 1970 (SIPA)?

A

Established procedures to protect consumer securities and funds in the event of broker/dealer insolvency.

Protects customer brokerage accounts against broker insolvency.

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28
Q

What does SIPA stand for?

A

Securities Investor Protections Act of 1970 (SIPA)

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29
Q

What is the Employee Retirement Income Security Act of 1974 (ERISA)?

A

Established minimum standards for retirement, health, and other rules that prohibit the use of material nonpublic information.

Set standards for retirement and health benefit plans.

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30
Q

What does ERISA stand for?

A

Employee Retirement Income Security Act of 1974

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31
Q

What is the Insider Trading and Securities Fraud Enforcement Act of 1988?

A

Provides clarification on the penalties for violating insider trading rules that prohibit the use of material nonpublic information.

Addresses penalties associated with misuse of material nonpublic information.

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32
Q

What is the USA PATRIOT Act of 2001?

A

Enacted to address homeland security and fight terrorism activities with a focus on anti-money laundering.
Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism

Requires anti-money laundering standards.

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33
Q

What is the Dodd-Frank Wall Street Reform and Consumer Protection ACT of 2010?

A

Represented an effort to reshape the US regulatory system in the areas of consumer protection, trading restrictions, credit ratings, regulation of financial products, transparency, and corporate governance and disclosure.

Reshaped US financial regulations.

34
Q

What does MSRB stand for?

A

Municipal Securities Rulemaking Board

35
Q

What does the Municipal Securities Rulemaking Board (MSRB) do?

A

Regulates the municipal securities business.

36
Q

What is the mission of the SEC?

3 answers

A

Protect Investors.
Maintain fair, orderly, and efficient markets.
Facilitate capital formation.

37
Q

What is the EDGAR Database?

A

Electronic Data Gathering, Analysis, and Retrieval Database.

An electronic system used by companies to submit required filings with the SEC.

38
Q

What does DEA stand for?

A

Designated Examining Authorities

Interchangeable term for SRO.

39
Q

What does NASAA stand for?

A

North American Securities Administrators Association

40
Q

What is the North American Securities Administrators Association (NASAA)?

A

An organization of securities regulators with the goal of protecting customers from fraud.

41
Q

What does CBOE stand for?

A

Chicago Board Options Exchange

42
Q

What does SIPC stand for?

A

Securities Investor Protection Corporation

43
Q

What does FDIC stand for?

A

Federal Deposit Insurance Corporation

44
Q

What is the Federal Reserve Board?

A

Governing body of the Federal Reserve System

45
Q

What is the Federal Reserve System?

A

Central bank of the US responsible for conducting monetary policy

46
Q

What is the CBOE?

A

The CBOE is the largest options exchange in the US.

47
Q

What does FINRA do?

A

FINRA regulates broker/dealer firms, activities, and personnel.

48
Q

What does the SEC do?

A

The SEC supervises the securities markets, writes, and enforces the laws.

49
Q

What is the MSRB?

A

Principal regulator of the municipal securities market.

50
Q

What does and SRO do?

A

Writes regulations to enforce securities laws imposed by the SEC.

51
Q

What does the Department of Treasury do?

A

Oversees the US economic and financial systems.

52
Q

What does the IRS do?

A

Assesses and collects taxes and enforces the Internal Revenue Code.

53
Q

What doe the SIPC do?

A

Protects consumer funds in brokerage accounts.

54
Q

What does the FDIC do?

A

Insures deposits in banks and thrift institutions.

55
Q

What does USA stand for?

A

Uniform Securities Act

56
Q

What is the role of a Prime Broker?

A

Full-service broker/dealer catering to clients with more complex needs.

57
Q

What is the role of a Broker/Dealer?

A

Effects securities transactions for its own account or for the accounts of others.

58
Q

What is the role of a Principal Dealer?

A

Effects transactions for its own accounts.

59
Q

What is the role of an Agency Broker?

A

Effects Transactions for the accounts of others.

60
Q

What is the role of a Clearing Broker?

A

Handles buy/sell orders and maintains custody of the securities.

61
Q

What is the role of an Introducing Broker?

A

Accepts, but does not execute, orders and does not maintain custody of the securities.

62
Q

What is an Accredited Investor?

A

A person who can buy unregistered securities if net worth (including spouse or spousal equivalent) exceeds $1M and annual income exceeds $200k (or $300k with a spouse or spousal equivalent) and who expects to make the same in the current year.

63
Q

What is an Institutional Investor?

A

Includes mutual funds, insurance companies, pension funds, hedge funds, and investment companies.

64
Q

What is a Retail Investor?

A

An individual who purchases securities for his/her own personal account.

65
Q

What is an Investment Adviser?

A

A firm that is paid a fee (directly or indirectly) in its regular course of business to advise others on the merits of buying and selling securities.

66
Q

What is a Municipal Adivser?

A

A person or firm that provides advice on behalf of a municipal entity or official with respect to municipal financial products or issuing municipal securities.

67
Q

What is the Spread?

A

The difference between the Bid and the Ask price?

68
Q

What is a Market Maker?

A

A member of a stock exchange that provides liquidity in a security by holding shares of a stock, which enables it to buy and sell at will.

69
Q

What does OCC stand for?

A

Options Clearing Corporation

70
Q

What does CFTC stand for?

A

Commodities Futures Trading Commission

71
Q

What does DTCC stand for?

A

Depository Trust and Clearing Corporation

72
Q

What does DTC stand for?

A

Depository Trust Company

73
Q

What does NSCC stand for?

A

National Securities Clearing Corporation

74
Q

What is an Issuer?

A

A corporation, investment fund, or government entity that issues securities to investors.

75
Q

What is an Underwriter?

A

A broker/dealer that helps issuers sell securities to the public.

76
Q

What is a Trader?

A

A person who buys or sells securities on behalf of a broker/dealer and its customers.

77
Q

What is a Market Maker?

A

A corporation that holds an inventory of securities on behalf of a broker/dealer and its customers.

78
Q

What is a Custodian?

A

A financial institution that safeguards the securities of customers.

79
Q

What is a Trustee?

A

A fiduciary that oversees the day-to-day management of assets.

80
Q

What does a Transfer Agent do?

A

Issues and cancel ownership certificates.

81
Q

What does a Depository do?

A

Hold security certificates and maintains ownership records.

82
Q

What does a Clearing Corporation do?

A

Handles confirmation, settlement, and delivery of transactions.

Securities Industry Essentials (SIE) (1 decks)

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