Chapter 12.1 Flashcards
1
Q
Investment Company
A
A financial institution principally engaged in investing in securities. This does not include brokerage companies, insurance companies, or banks.
2
Q
Face amount certificate Company
A
Investors invest in the company either in monthly or annual installments. The certificates are sold at less than face value and mature at face value. The difference is the investment return.
3
Q
Unit Investment Trust
A
A fixed portfolio of bonds.
- Low percentage sales charge
- Invests in a fixed portfolio of municipal or corporate bonds(therefore does not have a portfolio manager)
- Organized under a trust indenture
- Issues redeemable securities
- Does not have board of directors, does have a board of trustees
- Pays interest to investors, not dividends
4
Q
Management Company
A
Manages a portfolio of securities
5
Q
Diversified management company
A
75% of it’s assets must be invested so that:
- No more than 5% of it’s total assets may be invested in any one security, and
- The fund may not own more than 10% of the voting stock of any one company
6
Q
Non-Diversified management company
A
Any management company not classified as diversified
7
Q
Open end management company
A
- Also called mutual funds
- Issues only redeemable shares which are redeemable at NAV
- May issue only voting common shares
- Forward pricing is required
- A no load fund is a mutual fund which does not charge a sales load, thus the Bid and Ask would be the same
- Capitalization constantly changes, thus mutual funds are constantly under the 33 Act prospectus delivery regulations
- Types of mutual funds include: Blue chip fund, bond fund, balance fund, income fund, and growth fund.
8
Q
Closed end management company
A
- Does not issue redeemable shares. Shares trade in the open market based on supply and demand
- No sales load charged - commissions are charged
- Fixed capitalization
- May issue common stock, preferred stock, & Bonds
- May be traded OTC or may be listed on an exchange
