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1
Q

margin requirements

A

$2K under $2k investment, $2k for investments between $2K and $4k, 50% over $4k investment

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2
Q

customer finders’ fee

A

customers of an investment firm are never allowed to receive a finders’ fee for introducing additional business to the firm

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3
Q

recession

A

occurs after a decline in GDP for two or more consecutive quarters

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4
Q

depression

A

a decline in GDP exceeding 10% or a decline in GDP for at least six consecutive quarters

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5
Q

stagflation

A

periods of slow economic growth accompanied by rising prices, or inflation and relatively high unemployment

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6
Q

inflation

A

increasing prices and cost of living

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7
Q

expansion

A

increased economic activity and increased availability of goods and services; unemployment declines and GDP rises

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8
Q

accrued interest rules: corporate. municipal and agency bonds

A

a year is assumed to have 360 days with 30 days each month; T+2 settlement

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9
Q

accrued interest rules: T-notes and T-bonds

A

a year is assumed to have 365 days with actual-day months; T+1 settlement

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10
Q

accrued interest mechanics

A

the number of days of accrued interest is calculated on the last coupon date, including that date and up to, but not including, the settlement date; be aware of weekends when calculating settlement date

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11
Q

contributions to IRAs and corporate retirement accounts

A

an individual may contribute to both an IRA and a corporate retirement account at the same time

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12
Q

non-qualified ERISA plans

A

Payroll deduction, deferred compensation

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13
Q

qualified ERISA plans

A

401k, Keogh plan (HR-10), pension plan

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14
Q

OTC margin requirements

A

the Federal Reserve Board has to approve OTC stocks for margin trading

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15
Q

position trading

A

broker-dealers acting in a dealer capacity (market maker) to trade for their own accounts

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16
Q

letter of intent

A

a type of contract offered by a mutual fund in which an investor agrees in writing to purchase a specified amount of shares over the next 13 months, can be backdated up to 90 days, shares can be held in escrow and liquidated to pay higher sales charges if the investor does not complete the LOI

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17
Q

Securities exchange act of 1934

A

regulates the secondary market requiring participants be registered. Anti-fraud provisions make up a large portion

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18
Q

Securities exchange act of 1933

A

prohibits fraud and ensures investors receive all information regarding new issues. Regulates primary market and specifically new securities being SEC-registered.

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19
Q

Trust indenture act of 1939

A

requires that corporate debt issues of more than $50MM include a trust indenture between the issuer and an independent trustee acting on behalf of the bondholders

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20
Q

Accredited investor

A

net worth over $1MM (excluding residence) and/or past two years income over $200K ($300K jointly)

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21
Q

Keogh Plan

A

also HR-10 plans; are qualified plans that allow self-employed individuals and owners of unincorporated businesses to contribute for retirement on behalf of themselves and their employees

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22
Q

Bond current yield

A

annual interest divided by current market price

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23
Q

Finra regulatory element

A

all registered individuals complete a computer-based training program within 120 days of 2nd anniversary and every three years after that (2, 5, 8, 11…)

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24
Q

Finra firm element

A

must be completed by registered rep annually; firm policies could require reps to complete firm element more frequently

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25
Q

Private securities transactions

A

also selling away; participating in securities transactions that are not approved for sale by the firm. Rep must provide notice of the transaction and received written approval from their firm

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26
Q

SEC rule 144

A

defines the way in which control and restricted stock can be sold. restricted stock: subject to 6 month holding period; control stock: subject to volume restriction

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27
Q

US treasury tax

A

federal only

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28
Q

Ginnie Fannie Freddie taxes

A

federal and state/local

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29
Q

Muni bonds interest taxes

A

in-state: none; out of state: state/local

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30
Q

Corporate bonds, CMOs, foreign debt securities taxes

A

federal and state/local

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31
Q

Federal farm credit banks (farm credit) taxes

A

federal tax only

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32
Q

Treasury bills (T-bills)

A

zero coupon and mature in one year or less; quoted in secondary market on a discounted yield basis

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33
Q

Treasury notes (T-notes)

A

pay interest every 6 months and have maturities of 2, 3, 5, 7 or 10 years; quoted in secondary market as a percentage of par in 32nds. eg. 95:07 or 95-07

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34
Q

Treasury bonds (T-bonds)

A

pay interest every 6 months and have maturities of 30 years; quoted in secondary market as a percentage of par in 32nds. eg. 95:07 or 95-07

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35
Q

Treasury inflation-protected securities (TIPS)

A

inflation indexed bonds issued by the US treasury. The principal is adjusted semiannually based on consumer price index. Coupon rate is fixed but yields different cash flows depending on the adjusted principal

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36
Q

Separate Trading of Registered Interest and Principal Securities (STRIPS)

A

individual interest and principal components of certain treasury notes and bonds acting as separate securities; issued at discount and mature to face value

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37
Q

convertible bond conversion ratio

A

par value divided by conversion price

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38
Q

corporate bond quoting

A

quoted in 1/8 increments; includes bid ask spread

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39
Q

FINRA immediate family members

A

parents, mother/father-in-law, spouse, children, relative that the associated person supports

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40
Q

Pre-registration period

A

bake-off, mandate, S-1 & prospectus prepared, S-1 due diligence

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41
Q

Cooling-off period

A

20 days, road show, indications of interest (IOIs)

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42
Q

Post-effective date

A

Bankers confirm IOIs and allocate shares to investors, security begins trading on exchange

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43
Q

Structured products

A

derivative investment product that produces a return based on the performance of one or more underlying securities of markets. underlying securities can vary - typically structured with downside protection

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44
Q

Exchange-traded note (ETN)

A

structured product, type of unsecured corporate debt containing two elements: a bond for protection of principal and a derivative that offers equity exposure. do not pay interest

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45
Q

Master limited partnership (MLP)

A

limited partnerships offered to the public and traded on exchanges. common in natural resources, financial services and real estate

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46
Q

Discretionary trade requirements

A

when the rep decided either asset, amount of action. A not held order: an order in which the rep chooses time and price but not amount, asset or action

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47
Q

Age to contribute to IRA

A

there is no minimum age required to contribute to an IRA

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48
Q

Option class

A

all options of the same type (call or put) and issuer

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49
Q

Option series

A

all options of the same class, strike price and expiration

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50
Q

Indenture

A

a series of promises between the issuer and a trustee including protective covenants; protects and reassures bondholders

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51
Q

USA patriot act

A

introduced after 9/11/2001; imposed AML compliance program, customer identification program (CIP), prohibitions of transactions involving persons on the specially designated nationals list (SDN) and mandatory info-sharing in response to requests by federal law enforcement

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52
Q

Regulation T

A

requires investors to pay for all purchases T+4; if the investors has not paid for securities by T+4 (and an extension is not granted by FINRA), the position must be sold on the 5th day and the account is frozen for 90 days. If the payment shortage is less than $1000, this may be disregarded by broker-dealer. When the account is frozen, it is limited to sell orders only

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53
Q

Free-riding

A

when a customer buys a security and then sells it without first paying for it

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54
Q

Banker’s acceptance

A

money market instrument that is used to finance and facilitate international trade; can be sold on secondary market prior to maturity

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55
Q

Mutual fund redemption timeline

A

the mutual fund must redeem shares to investors within 7 days

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56
Q

Securities investor protection corp. (SIPC)

A

not-for-profit organization; covers customers’ cash and securities from a broker-dealer failure, not market losses; customers protected up to $500k total ($250k cash)

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57
Q

Rule 144/144A

A

144: defines conditions in which restricted and control securities can be sold; 144A: allows QIBs to freely trade unregistered securities among themselves

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58
Q

control person

A

officer of company (CEO, CFO), a member of the board of directors, an individual that owns more than 10% of voting shares

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59
Q

rights of accumulation

A

offers investors a reduced sales charge on subsequent purchases of a mutual fund the investor already holds a large position in; also applies to different investments within the same mutual fund group or family of funds

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60
Q

standby commitment

A

the underwriter will purchase shares not bought by existing investors in a rights offering and then will sell those shares to the public

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61
Q

best efforts commitment

A

underwriter attempts to sell all securities but has no obligation to purchase unsold shares

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62
Q

all-or-none commitment

A

a type of best efforts commitment where if not all shares are sold within a certain time period, the deal will be cancelled

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63
Q

minimum-maximum commitment

A

a type of best efforts commitment where the deal will be cancelled if a minimum amount is raised

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64
Q

firm commitment

A

underwriters agree to purchase all shares that are offered and then resell them to the public

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65
Q

competitive bid

A

underwriters submit to the issuer sealed bids to sell the securities; lowest rate wins

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66
Q

529 plan

A

college savings plan enable tax savings for payment of qualified education expenses; contributions are after-tax

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67
Q

Regulation M

A

SEC rule aimed at preventing market manipulation of IPOs and follow-on offerings by broker-dealers.

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68
Q

Stabilization

A

when the underwriters bid on a new issue in the secondary market to prevent a decline in price

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69
Q

Investment adviser definition

A

any person or firm that is engaged in the business of providing advice regarding securities for compensation

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70
Q

DNR, AON, FOK

A

do not reduce, all or none, fill or kill

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71
Q

Regulation D

A

private placement: an issuer offers securities to accredited investors; no public offering and therefore are not required to be registered with the sec

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72
Q

Retail communication

A

written or electronic communications to more than 25 retail investors within a 30 day period; print, internet and tv ads

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73
Q

Correspondence

A

written or electronic communications to 25 or fewer retail investors within a 30 day period

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74
Q

Institutional communications

A

written or electronic communications distributed or made available to institutional investors

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75
Q

LGIP

A

local government investment pools; a means for local governments to invest excess tax revenues in a fund that will be liquid but provide the government additional income until the money is needed

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76
Q

Outside business activity

A

business activities by registered reps outside the scope of the firm; firm must be notified but permission is not required

77
Q

Interpositioning

A

prohibited action where the firm adds additional broker-dealer that adds no value for the customer.

78
Q

Commingling

A

broker-dealers must separate fully paid customer positions from the positions of the firm and cannot be used to collateralize loans

79
Q

Regulation S-P

A

requires firms to provide clients with privacy notices at account opening and annually thereafter

80
Q

IRA contributions/(catchup)

A

$6000 per year; $1000 catchup per year over 50yo; 6% penalty assessed on excess amount

81
Q

Junk bonds

A

below BBB- (S&P), Baa3 (Moody’s)

82
Q

Hidden profit

A

broker-dealers can’t be both brokers and dealers in the same transaction; charging a client both fees in the same transaction is a violation

83
Q

Rule 147

A

allows a company to sell securities to state residents only and avoid sec registration; state residents can sell to other state residents but must wait 6 months to sell to outside the state

84
Q

Secondary offering

A

when a shareholder sells shares in the market; no new shares created

85
Q

AML compliance

A

AML employee training must be ongoing, generally requiring annual training for persons designated by the firm

86
Q

Margin disclosure statement

A

firms required to provide statement to customers prior to or at the time of opening the margin account as well as annually

87
Q

RR lending to family members

A

permitted; family members include: parents, in-laws, spouses, children, grandparents, grandchildren, cousins, aunts, uncles, nieces, nephews, and any other person that a RR supports directly or indirectly

88
Q

Third market

A

refers to over-the-counter trading of exchange-traded securities

89
Q

Fourth market

A

electronic communications networks; passive computer systems that act as agents, automatically matching their members’ buy and sell orders

90
Q

Roth IRA penalty

A

If funds are withdrawn before age 59 1/2, a 10% penalty is incurred. Distributions are qualified tax free if the account owner is over 59 1/2 and the money has been in the plan for 5 years

91
Q

Required Minimum Distributions

A

RMDs are required for traditional IRAs starting in the year after age 72; Penalty for not taking RMDs is 50% of the shortage

92
Q

Limited partnership

A

a direct participation program which is regulated as a security in which passive gains and losses are passed through to investors

93
Q

Blue sky laws

A

state securities laws enforced by each state’s securities department of commission

94
Q

ETFs primarily track

A

indexes

95
Q

Agency trading

A

brokerage firm finds a counterparty to the customer’s trade

96
Q

Principal trading

A

brokerage firm completes customer’s trade using their own inventory

97
Q

Free writing prospectus

A

allows issuers to provide additional information to investors beyond what is in the registration statement or prospectus

98
Q

Hedge funds

A

more than $150MM under management require SEC registration

99
Q

Statutory disqualification

A

felony conviction in last 10 years, misdemeanor conviction related to securities or fraud within last 10 years; can’t associate with FINRA member firm unless they receive a waiver from FINRA

100
Q

Vulnerable investor

A

persons aged 65 and older, any person over 18 with a mental or physical impairment that renders the individual unable to protect their own interests

101
Q

Bearer bond

A

until 1983, physical bonds held and paid to whomever possessed the bond. US currency is technically a bearer bond

102
Q

Bank secrecy act

A

administered by FinCEN (financial crimes enforcement network) established basic framework for AML regulations

103
Q

Currency transaction reports

A

filed with FinCEN within 15 days of cash deposit when a cash deposit over $10k is received. IRS must also be notified

104
Q

SIMPLE IRA

A

IRA plan available to small businesses with no more than 100 employees

105
Q

Adjusting limit and stop orders

A

orders entered below market value (buy limit and sell stop) are adjusted downwards on the ex-dividend date; BLiSS

106
Q

Leading economic indicators

A

bond yields, building permits, manufacturing activity, stock market, producer price index, layoff rates, avg weekly unemployment claims, change in business inventories

107
Q

Lagging economic indicators

A

interest rates, unemployment rate, corporate profits, balance of trade, commercial and industrial loans outstanding, inventory/sales ratio, labor cost per unit of output

108
Q

coincident economic indicators

A

GDP, industrial production index and capacity utilization index, non-agricultural employees, personal income, consumer spending, retail and manufacturing sales,

109
Q

5 year rule

A

applies only to earnings in Roth IRAs

110
Q

Inactive brokerage account statements

A

statements required quarterly; active accounts monthly

111
Q

Regulation A

A

exempt from SEC registration

112
Q

Insider trading

A

in the case of witnessing insider trading or fraud, a registered representative should inform their supervisor

113
Q

No-load fund

A

mutual funds sold at their NAV (POP equals NAV); index funds are no-load funds

114
Q

Order approval

A

supervisors mush approve client orders promptly after execution

115
Q

Nominal yield

A

equal to coupon; does not change over the life of the bond

116
Q

Current yield

A

annual interest / bond market price; inverse relationship between CY and bond price - a bond trading at a premium means a CY lower than nominal yield

117
Q

Yield to maturity

A

calculates the yield if the bond is held to maturity and takes into account the bond gain or loss

118
Q

Yield to call

A

investor’s yield if the bond is called on the first possible call date; premium bond: YTC is lower than YTM, discount bond: YTC is higher than YTM

119
Q

Yield relationships

A

Discount: YTC > YTM > CY > NY
Premium: NY > CY > YTM > YTC
Par: all yields equal

120
Q

Tender offer

A

an offer by either the issuer or an outside investor to buy outstanding shares from current investors at a premium. If the offer is oversubscribed, shares are sold proportionally from those who accepted the offer.

121
Q

Federal reserve open market committee

A

short-term effect: make credit more or less available

long-term effect: check inflation; stop a recession

122
Q

SIPC Funding

A

broker-dealer assessments based on a percentage of each firm’s gross revenue from securities

123
Q

Oversees blue sky laws

A

NASAA (north american securities administration association)

124
Q

Vulnerable investors protection

A

when exploitation is suspected, firms are permitted to place a 15 day hold on distribution of funds or securities

125
Q

Roth IRA contributions

A

available only to taxpayers who have an income below a certain limit (MAGI below $140K for 2021); 5 year rule starts Jan 1 of the 6th calendar year

126
Q

Traditional IRA RMDs

A

must be taken in the calendar year required

127
Q

Prelim. prospectus delivery

A

must be delivered to potential investors no later than 48 hours before sale confirmation

128
Q

FINRA imposed penalties

A

basically any penalty other than jail time

129
Q

ABLE account tax consequences

A

after-tax contributions, tax free distributions (federal level)

130
Q

Regulatory authority over 529 plans

A

MSRB

131
Q

Notice of dividends and stock splits

A

at least 10 days prior to record date

132
Q

Lowest to highest rates

A

federal funds rate, discount rate, broker’s call rate, prime rate

133
Q

UIT expiration

A

trust is dissolved, investors cannot reinvest in the same trust; UITs don’t have a board of directors

134
Q

Firm allows private security transaction

A

must monitor the transaction as its own

135
Q

US treasury departments AML

A

FinCEN, IRS, Comptroller of the currency (OCC), NOT SEC

136
Q

Coverdell Education Savings Account

A

contribution max is $2k per beneficiary per year

137
Q

First-time homeowner IRA withdrawal

A

exempt from 10% early penalty and capped at $10k

138
Q

Demand for credit

A

slow during contraction, increases during expansion

139
Q

Trade balance

A

difference between exports and imports; trade surplus: more exports than imports; trade deficit: more imports than exports; to increase trade balance, either increase exports or decrease imports

140
Q

Options settlement

A

T+1

141
Q

Dividend dates

A

first to last: declaration date, ex-dividend date, record date, payable date DERP

142
Q

Cash-settled transaction

A

settled same day

143
Q

DNR stock splits

A

DNR is ignored

144
Q

US Govt Agency Securities

A

Ginnie Fannie Freddie; second in credit quality to US treasury securities

145
Q

Limited partnership liquidation schedule

A

secured lenders, general creditors, limited partners, general partner

146
Q

Suspicious activity report

A

filed with FinCEN within 30 days of the discovery of suspicious activity

147
Q

Qualified Institutional buyer (QIB)

A

institution must manage a securities portfolio of at least $100MM; broker-dealers with a securities portfolio of at least $10MM are also considered QIBs

148
Q

Mutual fund investment manager compensation

A

earns annual management fee which is a percentage of the fund’s NAV

149
Q

Money market funds

A

not insured by FDIC

150
Q

Exempt from SEC registration securities

A

us govt securities, us govt agency securities, securities issued by nonprofits, municipal bonds, commercial paper, commercial bank securities

151
Q

Negotiable security

A

a security that can be freely transferred, assigned or delivered to another entity

152
Q

Shelf registration

A

allows an issuer to preregister securities today and sell them at a later date. Good up to 3 years and can only be used for a follow-on offering, not an IPO

153
Q

529 students

A

must be at least half-time students; penalty is 10% if funds not used on qualified educational expenses

154
Q

CMOs

A

Collateralized mortgage obligations: MBSs that have been structured by broker-dealers and divided into distinct pieces called tranches

155
Q

street name

A

endorsing ownership of a stock certificate to a brokerage firm transfers ownership into street name, meaning the securities are now registered in the name of the broker-dealer

156
Q

CDs protected

A

by the FDIC

157
Q

Mutual funds

A

prospectus must be provided when sold

158
Q

Corporation brokerage account

A

must provide a corporate resolution specifying who will have trading authority for the account

159
Q

MSRB G-37

A

places restrictions on political contributions; if a municipal securities firm makes a political contribution to an official of an issuer, the firm is prohibited from engaging in any negotiated municipal securities with that issuer for 2 years; negotiated underwritings only

160
Q

Private activity bond

A

municipal issues that may not qualify for a federal or state tax exemption, ie stadiums, executive private jet airports

161
Q

Investment company act of 1940, Investment advisors act of 1940

A

management investment companies managed under these acts

162
Q

Allocation priority of muni bond funding

A

Presale, group, designated, member (orders) PaGoDaM

163
Q

FOMC executes open market transactions

A

trading with a primary dealer

164
Q

FINRA oversight

A

FINRA is overseen by the SEC and must get approval from SEC on new rules and regulations

165
Q

RR vs. IA

A

RR: suitability standard; IA: fiduciary duty

166
Q

Statute of limitations on fraud

A

within 3 years of manipulation and within 1 year of discovery

167
Q

FINRA 5% policy

A

A policy to help determine the max commission or markup applied to a trade. This is a guide, not a hard-and-fast rule

168
Q

Designated market maker

A

NYSE specialist - one specialist per NYSE listed security

169
Q

457(b)

A

participant directed, ERISA, deferred compensation plans sponsored by state or local government entities

170
Q

Insider trading penalties

A

civil penalties: triple profit fines; criminal penalties: max 20 years in prison, max $5MM fine

171
Q

Most widely quoted bond yield

A

YTM

172
Q

Retirement plan contributions

A

non-deductible contributions: after-tax;

deductible contributions: pre-tax

173
Q

Preliminary prospectus

A

the first offering document provided by a security issuer and includes most of the details of the business and transaction; also red herring

174
Q

CUSIP number

A

identification number assigned to all securities; in negotiated sale, underwriter is responsible for requesting CUSIP number

175
Q

Business continuity plan

A

required 2 emergency contacts; changes to contact info must be reported to FINRA within 30 days; business continuity plan must be reviewed by a registered principal

176
Q

Asset allocation fund

A

invest in a combination of asset classes: stocks, bonds, cash - this provided portfolio diversification

177
Q

Rule 144

A

corporate insider may sell the greater of 1% outstanding shares or the average trading volume of the last 4 weeks

178
Q

Investment company act of 1940

A

covers three basic investment company types: management companies, face-amount certificates, unit investment trusts

179
Q

Anti-money laundering officer

A

A firm must report a change in officer to FINRA within 30 days

180
Q

Treasury receipts

A

zero-coupon bonds structured by broker-dealers but backed by cash flows from treasury securities; similar to STRIPS

181
Q

RIA & IARs

A

RIA: registered investment adviser - individual or firm registered with the SEC; IAR: investment adviser representative - must register at state level

182
Q

Fixed annuities

A

offer both guaranteed principal and guaranteed fixed interest managed through an insurance company’s general account. No risk to investors and therefore fixed annuities are not securities. Individuals selling fixed annuities only need an insurance license, not a securities registration

183
Q

Control relationship

A

a control relationship occurs when the firm selling the security is controlled by, controls, or is under common control with the issuer. For example, a RR recommends a customer buy shares of his own firm. The relationship must be disclosed to the customer prior to the sale

184
Q

Variable rate demand note

A

long-term municipal bond which is offered to investors through money market funds. The notes allow a municipal government to borrow money for long periods of time while paying short-term interest rates to investors

185
Q

Syndicate desk

A

builds an order book and allocates shares of stock

186
Q

Political contributions cap

A

$250

187
Q

Transfer agent

A

maintains records of shareholders eligible to take part in a stock split

188
Q

Rights vs Warrants

A

Rights: usually priced below market
Warrants: longer maturity and usually priced above market

SIE (1 decks)

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