cram Flashcards
<p>Tax treatment of Annuitizing</p>
<p>Portion of each payment is tax-free, and the other portion is taxable at ordinary income</p>
<p>No capital event occur in</p>
<p>Annuities</p>
<p>What if I work for a non-profit 503c3</p>
<p>Eligible to contribute to a 403b plan</p>
<p>regulated by state insurance commissioner</p>
<p>Fixed annuity</p>
<p>regulated by state insurance commissioner finra and sec</p>
<p>Variable</p>
<p>Vesting scheduled by years of service gives you certain percentages as years employed with company</p>
<p>Graded vesting</p>
<p>Vesting Scheduled by years of service at o until certain years of service than 100 percent</p>
<p>Cliff vesting</p>
<p>Traditional IRAs</p>
<p>Contribute the lesser of 5000 or 100percent of earned income contributions may or may not be tax-deductible. ( if not an active participant in a qualified plan, contributions are tax-deductible) Taxed deferred growth</p>
<p>Catch up provisions</p>
<p>age 50 plus can contribute an additional 1000 per year</p>
<p>Irs Tax Penalties</p>
<p>Excess Contributions 6%</p>
<p>Roth IRAs</p>
<p>can contribute the lesser of 5000 or 100% of earned income Contributions are always non tax-deductible. Tax deferred growth. Qualified distributions are tax-free</p>
<p>Inflation means</p>
<p>Hedge against would be Precious metals fund</p>
<p>monthly income</p>
<p>GNMA fund</p>
<p>new house, park $</p>
<p>Money market fund</p>
<p>Maximum diversification</p>
<p>Asset allocation fund</p>
<p>Familiar names</p>
<p>Blue chip fund</p>
<p>Broad exposure, low cost, passive</p>
<p>Index fund</p>
<p>Qualified</p>
<p>tax deductible contributions. earnings grow tax deferred , Zero cost basis, entire amount taxed at distribution "ordinary income tax bracket</p>
<p>Non-qualified</p>
<p>Already taxed by IRS </p>
<p>subject to legislative risk</p>
<p>Sector funds</p>
<p>invest in companies that produce gold, silver and other precious metals</p>
<p>Precious metals fund</p>
<p>invest in bonds issued by corporations yields are typically higher than treasury funds may be high grade or high yield</p>
<p>corporate bond funds</p>
<p>offers higher yields than other traditional government funds</p>
<p>GNMA Funds</p>
<p>Types of Qualified Plans</p>
<p>Killed the face amount certificate co's</p>
<p>Private securities transaction or when a rr sells something Privately</p>
<p>Written notification to firm </p>
<p>Opening Outside account</p>
<p>Permitted by finra, but some firms prohibit,</p>
<p>Code of procedure</p>
<p>Violation of Conduct rules: which is B/D to public or rr to public</p>
<p>Code of Arbitration</p>
<p>violation of UPC; is BD to BD or BD carrying</p>
<p>ALL variable products are considered</p>
<p>securities and subject to prospectus delivery requirements</p>
<p>Variable contract owners may convert their policies to whole life within 2 years from the date of issuance often without presenting evidence of insurability</p>
<p>Conversion</p>
<p>Equity indexed annuities</p>
<p>returns are partially linked to a stock market index provides investors with a guaranteed minimum return tax deferred surrender charges</p>
<p>Ate age of retirement ways to take out money</p>
<p>Lump-sum=take money and run</p>
<p>Annuity pay out period</p>
<p>accumulation units are exchanged for annuity units, payments may fluctuate.</p>
<p>Being a limited partner is not a job (Passive)</p>
<p>Does not need to tell company</p>
<p>must be approved by a principal before use</p>
<p>Sales literature and advertising</p>
<p>Not joint accounts</p>
<p>UGMA/UTMA</p>
<p>advertising/marketing/trailer commissions</p>
<p>12b-1 fees no load fees of .25% max</p>
<p>12b 1 fees</p>
<p>voting for new 12b 1 fees </p>
<p>Rates not set by fed</p>
<p>prime rate </p>
<p>Lowest to Highest</p>
<p>fed funds</p>
<p>Easy money</p>
<p>lower reserve requirement </p>
<p>Tight money</p>
<p>raise reserve requirement</p>
<p>Four tools of the Fed</p>
<p>discount rate</p>
<p>education savings plan</p>
<p>Contributions are not deductible</p>
<p>can be used for any education level</p>
<p>Cordell ESA</p>
<p>state sponsored</p>
<p>section 529 Plans</p>
<p>reinvestment of capital gains</p>
<p>impact on cost basis Increases</p>
<p>on reinvestment of capital gains</p>
<p>stays the same</p>
<p>12b-1 fees</p>
<p>asset based charge </p>
<p>Break down of expense ration</p>
<p>management fee, administration fee 12b1 fees. Management fee or investment fee makes up the largest portion</p>
<p>Formulas to know</p>
<p>current yield, bond song prices of LT, discount bonds,fluctuate more in price</p>
<p>Annual Interest/Market Value</p>
<p>Current Yield</p>
<p>Bond song prices</p>
<p>Triangle</p>
<p>Net assest Value</p>
<p>(total assets-total liabilities)/# of shares outstanding</p>
<p>POP</p>
<p>NAV/(100%-SALES CHARGE PERCENTAGE)</p>
<p>Sales charge percentage</p>
<p>(pop -Nav)/POP</p>
<p>Expense Calculations</p>
<p>(management fee + administration fee + 12b1 fee) divided by average assets</p>
<p>annual return</p>
<p>ending nab + distributions - initial NAV) divided by initial NAV</p>
<p>Sec yield or current yield</p>
<p>Annual dividends /current pop</p>
<p>tax equivalent Yield</p>
<p>Municipal yield /(100%-tax bracket)</p>
<p>net yield</p>
<p>taxable yeild X (100%-tax bracket)</p>
<p>Product of an investment advisory firm</p>
<p>Wrap accounts</p>
<p>US imports prefer a</p>
<p>strong dollar</p>
<p>US exports prefer a</p>
<p>weak dollar</p>
<p>Fed increase money supply</p>
<p>interest rates fall</p>
<p>Fed decrease the money supply</p>
<p>Interest rates rise</p>
<p>Individual letters, individual e-mail or text message, written or electronic communication to any number of existing customers customers and/or fewer than 25 prospective customers</p>
<p>Correspondence</p>
<p>form letter, email or text to 25 or more prospective customers, research reports, telemarketing scripts , brochure or circulars, seminar texts, market letters, reprints or excerpts of previously published articles, if not independently prepared</p>
<p>Sales Literature</p>
<p>Newspaper, magazine,or billboard ads, television or radio, commercials, phone book yellow pages ads, internet websites, video taped presentations, motion pictures</p>
<p>Advertising</p>
<p>IRA acceptable investments</p>
<p>stocks, bonds, mutual funds, annuities, U.S minted coins</p>
<p>Non acceptable for IRA</p>
<p>Insurance, collectables (stamps, art, gems, and antiques) short sales of stock, margin trading, speculative options strategies.</p>
<p>Highest rate of return no benefit payout option annuity</p>
<p>Straight life</p>
<p>Annuity -least rate of return</p>
<p>joint and last survivor</p>
<p>middle rate of return</p>
<p>life annuity with period certain</p>
<p>lower lowest rate of return has beneficiary set balance if an annuitant dies (estate)</p>
<p>Unit refund life</p>
<p>as bond prices rise</p>
<p>bond Yields fall</p>
<p>bonds yields rise</p>
<p>bond prices fall</p>
<p>ABC</p>
<p>agent broker commission</p>
<p>md p</p>
<p>mark up dealer principal</p>
<p>use credit to purchase securities</p>
<p>Margin account</p>
<p>Time frame to appeal FINRA Rules</p>
<p>25 days</p>
<p>Found in the Prospectus</p>
<p>Distribution /service fee = 12-b1 fees and management fees</p>
<p>Asset class thought as classes of investments is</p>
<p>an Index</p>
<p>Production is also known as</p>
<p>pop</p>
<p>a joint in which the decease portion of the account goes to his estate</p>
<p>Tenants in common</p>
<p>the assets would go to the surviving owner</p>
<p>joint tenants with right of survivor</p>
<p>Required by patriot act for anti money laundry</p>
<p>establish a independent audit function that will monitor and evaluate the firms anti money laundry program</p>
<p>Higher fees, lack of liquidity, lack of diversification, no guaranteed redemption at the nAV</p>
<p>Hedge funds</p>
<p>Priced once per business day (4pm), forward pricing, Nav and pop determined by formula</p>
<p>Open-end Funds or Mutual funds. Have no secondary market</p>
<p>priced all day (continued pricing) Bid and Ask prices set by supply and demand</p>
<p>Closed end funds in the secondary market</p>
<p>time frame to fill out CTR</p>
<p>15 calendar days</p>
<p>attempts to prevent the price of a security from falling</p>
<p>Pegging</p>
<p>attempts to prevent the price of a stock from rising</p>
<p>capping</p>
<p>created to protect those who invest in companies whose primary business is to invest in other securities on behalf of their shareholders</p>
<p>Investment company act of 1940</p>
<p>is the federal law that governs distributions of securities to the public usually an offering of new securities by an issuer. New issues must be 1 registered with the sec under the act or 2 exempt from registration of one of the provisions of the act</p>
<p>securities act of 1933</p>
<p>regulates broker dealers and the sales practices regarding variable products</p>
<p>securities act of 1934</p>
<p>Market as a whole and pay little costs</p>
<p>Index funds: they traditionally mirror a particular index "s & P 500"</p>
<p>Undewriter acts as an agent</p>
<p>Best efforts, All or none, Minimax</p>
<p>Underwriter acts as principal</p>
<p>Firm Commitment, and Standby underwriting</p>
<p>Unsold shares for firm commitment</p>
<p>retained by underwriter. Transaction will not be canceled if mimimum amount is not sold</p>
<p>Best efforts unsold shares</p>
<p>return to issuer , transaction will not be canceled if minimum amount is not sold</p>
<p>All-or -none unsold shares</p>
<p>return to issuer, sale will be canceled if munimum is not sold</p>
<p>Minimax</p>
<p>returned to issuer, sale will be canceled if minimum is not sold</p>
<p>Stand by Underwriting</p>
<p>may attempt ot use a right offering to raise additional capital from existing shareholders. may choose to purchase the new shares for its own account</p>
<p>may not be sold to more than 35 non accreditied purchasers and has no limit on the number of accreditied investors who may purchase the offering</p>
<p>Reg d</p>
<p>Accredited investors include</p>
<p>banks and savings and loans</p>
<p>To be wealthy individual net worth or income</p>
<p>1 million in net worth or joint net worth of over 1 million. income of 200 thousand and 300 joint each of the last two years</p>
<p>Registered is a term found in the IRS code to designate</p>
<p>an investement company that distributes at least 90% of its net investment income.</p>
<p>Sell short means</p>
<p>to borrow</p>
<p>sell Long</p>
<p>means to buy</p>
<p>Bullish</p>
<p>buy calls and sell puts</p>
<p>Bearish</p>
<p>buy puts and sell calls</p>
<p>offers "pure protection" only</p>
<p>Term life Policies</p>
<p>Invested in the general account</p>
<p>Whole life Policies</p>
<p>Invested in the general acccount</p>
<p>Universal life policies</p>
<p>Has a guaranteed minimum death benefit</p>
<p>Variable universal life insurance</p>
<p>Fluctuating death benefit, put with a gauranteed mimimum</p>
<p>Variable life insurance</p>
<p>Frequency of variable policy calculations</p>
<p>Value of Assets is daily</p>
<p>Greater of 45 days from execution of the application or 10 days from receipt of the policy. Sign on dotted line July 1st got policy july 20</p>
<p>Free-look</p>
<p>Life insurance taxation</p>
<p>pass free to the beneficiary are potentially subject to estate taxation</p>
<p>1035 exchange</p>
<p>tax free exchange to another product offered by their existing provider or to move assets to a different insurance comp. one annuity to another or life insurance product to an annuity product.</p>
<p>Valid reason for 1035</p>
<p>better performance, low costs or economic benefit</p>
<p>Viaticals</p>
<p>Selling the benefits of a life insurance policy to a third party.</p>
<p>During the acccumulation period</p>
<p>variable annuities get accumulation units</p>
<p>Once annuitized</p>
<p>these accumulation units become annuity units</p>
<p>fixed and variable annuities can be bought in three ways</p>
<p>single premium deferred</p>
<p>lump sum investment is made and grows on a tax deffered basis</p>
<p>SPDA or single premium deferred</p>
<p>typically used to provide retirement income</p>
<p>Periodic payment deferred</p>
<p>lump sum is deposited and disributions begin imediately.</p>
<p>Single premium immediate</p>
<p>Air</p>
<p>assumed interest rate</p>
<p>the insurance company promises to pay the annuitant for life.</p>
<p>Straight life</p>
<p>covers the life of the annuitant and one another person</p>
<p>Joint and Last survivor</p>
<p>Annuitant will select a certain mimimum time period certain option. 5 10 15 years</p>
<p>life annuity with period certain</p>
<p>annuitant the ability to name a beneficiary on the account. If the annuitant passes away before he recieves an amount equal to the value of the annuity units are paid out to him is benneficairy will recieve the balance</p>
<p>unit refund life</p>
<p>death benefits on annuity contracts</p>
<p>do not pass tax free to the beneficiary. any benefit above the contracts tax basis is taxable</p>
<p>joint account who intend to leave all of thier assets to each other in the event that one of them dies</p>
<p>Joint tenants with right of survivors</p>
<p>joint account if someone dies the money goes to the person who dies estate</p>
<p>tenants in common</p>
<p>IDR taxed</p>
<p>Taxed at alternative minimum tax rate</p>
<p>front end load 1940</p>
<p>50% of first years payments maximum of 9% over the life of the plan</p>
<p>Spread Load /1970)</p>
<p>Maximum of 20% of any one time payment maximum of 16% average of the first four years payment. maximum of 9% over the life of the plan</p>
