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Equity Securities Flashcards

1
Q

Common stock can be classified how

A

authorized
issued
outstanding
treasury

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2
Q

What is auth stock

A

max amount that CAN be issued

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3
Q

Are auth stock counted toward the comps total capitalization

A

no

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4
Q

Why might a comp keep unissued stock

A

to raise later
paying stock dividends
exchanging com stock for outstanding convertible bonds or preffered stock

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5
Q

What is outstanding stock

A

Issued stock - treasury stock
(amount of stock held by investors)

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6
Q

What is issued stock

A

All shares the company has issued

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7
Q

What is treasury stock

A

outstanding stock that was bought back by the comp

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8
Q

What is market cap

A

outstanding X current market value

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9
Q

What is a penny stock

A

unlisted
less than 5$/share

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10
Q

Are Penny stocks are considered
speculative
highly speculative

A

highly speculative

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11
Q

What does the SEC require before purchasing a penny stock from a cold call

A

risk disclosure doc

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12
Q

What ongoing things does the BD have to do for a penny stock owner

A

provide monthly statement about the market value, # of shares, and issuers name

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13
Q

What’s the first thing a BD must do during a solicitation for a penny stock to the customer

A

determine sutability based on their finances and objectives

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14
Q

What does a BD disclose and what does the customer sign when they are buying a penny stock during a cold call

A

of shares

they must disclose:
stock name
number of shares to be purchased
current quotation
commission for him and the firm

They must sign the suitability statement

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15
Q

Established customers are exempt from what when buying a penny stock during cold calls

A

suitability statement

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16
Q

What makes an established customer for penny stocks

A

held acc with the BD for a least a year with a deposit
OR
has made 3 or more penny stock purchases of diff issuers on diff days

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17
Q

Unsolicited transactions for penny stock dont have to follow what

A

the suitability and disclosure rules

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18
Q

What are the three types of dividends from com stock

A

cash
stock
product

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19
Q

When are cash dividends on common stock usu dist

A

quarterly

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20
Q

For cash dividends on com stock, what are the two ways they are delivered to the shareholder

A

by check if the shares are paper certs
direct dep if held in street name

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21
Q

Where do stock dividends of com stock come from

A

auth or treasury stock

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22
Q

Consideration for stock dividends of com stock

A

cost per share drops so tax implications when sold

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23
Q

Are stock dividends taxable

A

no

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24
Q

Cash dividends of com stock may be taxed as

A

unqual or qual
unqual is the investors norm income tax rate
qual is based on IRS tax code and the invs income bracket (usu cheaper)

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25
What are the 4 dates of divi disbursements
declaration ex-dividend record payable
26
Acronym for divi disbursement
DERP
27
Which in DERP is set by Regs
Ex-dividend
28
If you wanna vote but cant make it, then what
an absentee ballot/proxy is set up
29
hat are the voting types of com stock and define thme
Statutory- 1 vote/share per ballot (can use all shares per ballot) Cummulative- votes must be split between ballots
30
Cummulative voting benefits who
the small investor
31
Com stock holders have what rights
limited access to the books meeting minutes list of other stock holders if reasonable audited financial statements
32
Whats the risk of com stock at dissolution
lowest priority
33
what are some diffs of pref stock vs com
fixed rate of return represented by an annual divi no voting or preemptive rights
34
What are preemptive rights and who has them
right to purchase newly issued stock before the public to keep % ownership in the comp com stock
35
Does pref stock typically have more growth potential than com stock
no
36
what are the benefits of pref stock vs com
first dibs on divi's priority at dissolution
37
what are some risks of pref stock
inflation may impact the PP of the fixed income Interest rate risk (rates rise, the value of the pref stock falls) Decrease or cease of divi's
38
If divi's stop for pref stock, what might happen in the back ground
payments are accruing
39
What are the types of pref stock
straight cumulative callable convertible adjustable rate participating
40
What is straight pref stock
doesn't accumulate if divi's are missed
41
what is cummulative pref stock
Ceased or decreased divi's accrue
42
what is callable pref stocks
comp can buy back at stated prices at specified date Its like a refi
43
What is convertible pref stock
can exchange pref stock for a fixed number of com stock
44
What are the advantages of convertible pref stock
if the comp is doing well, they can convert into com stock to enjoy the ride
45
the value of convert pref stock is linked to what and what does that mean
com stock bec its assumed it will be converted in the future it means once the price of the com stock hits the same price as the pref, the pref tracks the com stock
46
What are adjustable rate pref stocks
the rate of return is usu linked to a benchmark like T bills or money market rates
47
What are participating pref stocks
allowed to get extra divi's from profits AFTER all divi's and interest are paid So it might be described like: 6% preferred participating to 9%
48
What type of pref stock would be the worst to recommend someone wanting fixed income
adjustable rate pref
49
What an American Depositary Receipt
allows investors to purchase foreign stock where one ADR may represent one or more shares in the foreign company
50
What are the advs and risks of ADRs
Most listed on US exchanges taxes from the foreign country are credits toward taxes in US political risks of that country currency exchange rate risk
51
Broadly what does rule 144 Restricted stock and control persons do
regs nonstandard offerings has restrictions on reselling and on control persons
52
How long is the holding restriction for restricted stocks and what will show on the certification of shares
6 mo a warning about the holding period
53
Whats another name for restricted stock
legended
54
What must the issuer of restricted stock do before the restricted stock can be sold
lift the restriction
55
Are the buyers of previously restricted stock subject to Rule 144
no
56
What is a control person for restricted stock
10% or more owners
57
What is a rule with family members about control persons
if the combined ownership of the family is >10% than everyone is control person
58
What must a control person do to sell their shares and what are the limitations
sign form 144 They can sell the greater of either 1% of the outstanding shares of the comp or the average weekly trading volume of the last 4 weeks over the nxt 90 days
59
Other than maintaining ownership %, how can you benefit from Preemptive rights
to buy the new issue at below market value sell the rights to profit from the current and market value diff
60
How many preemptive rights does some have
one per share
61
What is a warrant
like a right but allows to purchase at future date usu at a specified higher price
62
What is the goal of owning a warrant
that the market price is higher than the warrant price by the time you can exercise the warrant
63
Does the total value of a postion change with forward or reverse splits
no
64
What is a forward split
splits the shares
65
What are the tax implications for splits
your cost basis drops
66
Is a stock divi or split a taxable event
no
67
What is a merger
two or more comps combine old shareholders are issued new stock operations and assets are combined
68
What is an acquisition
the operations and assets of the bought company are taken over
69
What is a tender offer
the company offers to buy a sec directly from the owner without using the secondary market like a comp buying back its own debt or buying shares of another company
70
Buybacks and tender offers are usu what because why
taxable event bec they usu cash
71
actions like issuing cash divi stock divi rights or warrants OR doing a split require what due to regulations
the issuer to give notice
72
What needs to be included in the notice of corp actions like divi's, splits , right, or warrants
Title of the security date of declaration Date of record date of distribution Details depending on which one
73
When should a notice be given for corp actions like divi's, splits , right, or warrants
10 days before record
74
What are the rules for proxy solicitations
company needs to provide info of the ballot to the shareholder SEC needs to review that info before send the proxy If in a proxy contest: participants must be registered with SEC anyone who provide the shareholder with unsolicited advice is considered a participant
75
Whats a member BDs role in proxies and important material
to act as a forwarding agent to between the corp/proxy and the shareholder if proxy sent but how to vote was not indicated, BD must vote based on issuers management recommendations
76
If a proxy is not received by the 10th day before the meeting, then what for the BD
vote for the customer as they see fit for minor issues no vote on major issues

SIE (17 decks)

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