Chapters 1-5 Flashcards
Securities Act of 1933
Requires full and fair disclosure for investors so that they’re able to make informed investment decisions
Securities Act of 1934
Created SEC (primary and secondary markets) and FRB (margin regulation)
Requires registration of registered reps and broker dealers
Maloney Act of 1938
Creation of non exchange SROs
Created NASD to oversee OTC markets
Created MSRB
Investment Advisors Act of 1940
Investment advisors must meet ABC (Advice, operating as a business, receiving compensation)
- broker dealers, certain professionals (lawyers, accountants, teachers, engineers, and publishers) are IAs.
Securities Investor Protection Act of 1970
insures customers in case bank becomes insolvent
maximum of 500,000 of which 250,000 may be cash holdings
SIPC does not cover fraud
FINRA rule 2261: Disclosure of financial condition
if requested, a firm has to make available latest balance sheet
FINRA rule 2262: disclosure of control relationships
a brokerage firm that has a control relationship with the issuer of any security is required to disclose this fact to its customers. for ex, if a firm is a publicly traded company or its a subsidiary of a publicly traded company.
SEC rule 10b-18: purchases of certain equity securities by the issuer
SEC will not assume issuer is trying to manipulate stock if:
- issuers are prohibited from making a purchase that’s the first reported transaction for that day and during the last 10 minutes of the trading day.
- price issuer pays may not be higher than the highest independent bid or the last independent transaction price, whichever is higher.
- total volume on any single day cannot exceed 25% of average daily trading volume
1 point is 1%
corporate and muni bonds trade in increments of 1/8th of a point while treasury notes and bonds trade in increments of 1/32 of a point
Types of Muni notes
short term issues to assist in managing cash flow
Tax anticipation notes (TAN): in anticipation of future tax receipts from property taxes
Revenue Anticipation notes (RANs): in anticipation of future revenues (could be federal or state grants)
Tax and Revenue anticipation notes (TRANs): when TANs and RANs are issued together
Bond Anticipation Notes (BANs): issued to obtain financing for projects that will eventually be financed by sale of long term bonds
Grant Anticipation Notes (GANs): anticipation of receiving grants from the federal government
Construction Loan Notes (CLNs): construction of a project before bond issue
Variable Rate Demand Obligations
short term investments where interest rate is reset at specific intervals (daily weekly monthly) and investor can sell back or give it back to issuer at these reset intervals
Auction Rate Securities
long term investments where the interest rates or dividends they pay are reset at frequent intervals through an auction.
corporations, museums munis, student loan authorities like auction rate bonds
Most of the time,
US government: auction
GOs are competitive
Revs are negotiated
Corporate bonds are negotiated
money market is less than 1 yr
eurodollar bonds
yankee bonds
eurobonds
eurodollar bonds: pay interest and principle in us dollars but issued outside of the US
yankee bonds: allow foreign entities to borrow money in US marketplace
eurobonds: sold in one country but denominated in the currency of another
The employee retirement income security act of 1974 (ERISA)
retirement accounts, 401k plans for people who have vesting periods
