Fundamentals Flashcards
Conduct deemed unacceptable bar definition
always bar an individual from being certified
- NO recourse
Conduct deemed unacceptable bar list
- theft, embezzlement, tax fraud & other financial/tax crimes
- felony conviction of any degree or murder/rape EVER
- violent crime within 5 yrs
- revocation of financial professional license
Conduct deemed presumptive bar definition
behavior ‘presumed’ unacceptable and will bar certification
- unless individual pteitions Discplinary & Ethics Commission (DEC)
Conduct deemed presumptive bar list
- two+ personal/business bankruptcies
- felony of violent crimes (not murder/rape) occurred >5yrs ago
- nonviolent crimes (perjury,etc within 5 yrs)
- revocation/suspension of nonfinancial professional license
- suspension of financial professional license
Dodd-Frank Act assets < $100mil
register with the state
- midsized investors have assets between $25mil-$100mil
Dodd-Frank Act assets > $110mil
register with SEC
Dodd-Frank Act assets between $100-$110mil
choice to register with state or SEC
To register with SEC, you need to file
Form ADV
To withdraw registration from SEC, you need to file
Form ADV-W
RIA must file ____ and ____ annually
- ADV Part 1
- Schedule I
Form ADV Part 1 A & B (not part of client brochure)
firm name
- background (Executives)
- U4 marks for firm and stake holders
Form ADV Part 2 A & B (makes up client brochure)
firm and advisor info
- compensation and fees
- education
- investment objectives & strategies
- conflicts of interest (proprietary funds)
Form ADV Part 3
- client ‘relationship’ summary (aka CRS)
- help retail investors understand differences between brokers & advisors
- written in plain English, concise, provide certain meaningful & accurate info about firm/financial professionals/services it offers retail investor clients/customers
Exceptions to Registration definition
those who don’t need to register and not regulated by Advisors Act
Exceptions to Registration list (TABLE)
teachers
- accountants
- broker/dealer & banks (advisory services solely incidental to conduct business)
- lawyers
- engineers
Exemptions to Registration definition
meet definition of investment adviser but do not need to register
- are subject to anti-fruad provisions of Advisers Act
- do NOT provide advice, services, analysis/reports regarding nationally listed securities
- do NOT provide advice about securities traded on national exchange
Exemptions to Registration list (VIPs are SaFE from exemptions)
- Venture Capital Funds
- Insurance companies
- Private funds < $150mil
- Foreign advisors without place of business in US
The Brochure Rule (compliance accomplished by ADV Part 2) requires written disclosure to every client regarding:
- advisory services/fees
- types of securities
- education & business standards
- participation/interest in securities transactions
- conditions for managing accounts
Registers with FINRA using what form
Form U-4
Shift in Demand Curve list
income
- taxes
- savings rate
- disposable income
Shift in Demand Curve: Increase in Income
more in pocket = right shift
Shift in Demand Curve: Increase in Taxes
less in pocket = left shift
Shift in Demand Curve: Increase in Savings Rate
less in pocket = left shift
Shift in Demand Curve: Increase in disposable income
more in pocket = right shift
Quantity Demanded
anytime change in price
- movement along demand curve
Quantity Supplied
movements along supply curve due to price change
- price decrease = firms inclined to supply less
- price increase = firms inclined to supply more
Shift in Supply Curve list
technology
- competition
- anything other than price
Shift in Supply Curve: Increase in Technology
down to the right
Shift in Supply Curve: Increase in Competition
down to the right
Gross Domestic Product made up of 4 main areas
consumer spending
- gov spending
- business investing
- net import & exports
Monetary Policy is established by
Fed Reserve
Monetary Policy & Fiscal Policy three main goals
maintain LT economic growth
- maintain price levels supported by economy
- maintain full employment
Fiscal Policy definition
policy & means by which Congress controls spending and taxation, which influences money supply and interest rates
Monetary Policy: Open Market (Buy Securities)
increase money supply
- decrease interest rate
Monetary Policy: Open Market (Sell Securities)
decrease money supply
- increase interest rate
Fiscal Policy three tools
taxation
- spending
- debt management
Bankruptcy: Chp 7 definition
relief through liquidation
- get rid of debt permanently
Bankruptcy: Chp 7 debts NOT discharged
- 3 years of back taxes
- alimony
- child support
- student loans
Bankruptcy: Chp 11 definition
relief through reorganization for business/self employed
Bankruptcy: Chp 13 definition
relief through adjusting debt
Workers Compensation: Is subject to income tax? (Y/N)
not subject to income tax
Unemployment Compensation: Is subject to income tax? (Y/N)
IS INCLUDED in income tax
Debt ratios & Debt analysis definition
indicates how well a person manages their debt
Performance ratios definition
assesses financial flexibility of client as well as client’s progress towards goals
Emergency fund formula
current assets / monthly nondiscretionary expenses
Student Loan: Pay as you earn repayment
- monthly student loan repayment 10% discretionary income
- remaining debt forgiveness after 20 yrs
- only direct fed loans & graduate PLUS loans eligible
Student Loan: income based repayment (IBR)
- monthly student loan repayment of 15% of discretionary income
- reamining debt forgiveness after 25yrs
- most federal (except parent PLUS) loans eligible
Student Loan: Income contingent repayment (ICR)
- monthly student loan repayment of 20% discretionary income
- remaining debt forgiveness after 25yrs
- only debt federal loans & graduate PLUS loans eligible
Consumer Price Index used to forecast:
- potential future inflation
Consumer Confidence Index used to forecast:
- consumer behavior
Index of Leading Economic Indicators used to forecast:
- economic expansions and contractions
Fair Credit Reporting Act (FCRA) is a provision that
- requires all credit reports contain accurate, relevant, and current information
- allows individuals to challenge info deemed incorrect
