General Principles Flashcards
Exam and Licensing Sequence/Initial Registration Process to sell most equity-based products
- Associates with B/D
- Registers w/ FINRA thru B/D on Form U-4
- Passes appropriate exams
- CRD system makes registration w/ FINRA uniform among states
When you see FINRA, think Series…
6 or 7
When you see Investment Advisor, think Series…
66
Per the Investment Advisors Act (1940), there’s a three-pronged Definition for determining who is an investment advisor (and must meet all three of these “ABCs”)…
A: Provides Advice
B: In the Business of providing such services
C: Provides services for Compensation
Exceptions and Exemptions to Filing as an Investment Advisor…what’s the phrase to remember?
“Exceptional BLAT Incident”
(Bank, Lawyer, Accountant, Engineer, Teacher whose performance of advisory services is incidental to the practice of their profession)
In addition to the “Exceptional BLAT Incident,” who are some of the other parties exempt from filing as an Investment Advisor?
B/D whose advice is solely limited to the role as B/D and receives no special comp for advice; intrastate adviser in unlisted securities; advisor whose only clients are insurance companies; a family office who does not hold itself out to the public as as advisor
What’s allowed with a FINRA Series 6 License?
Can sell mutual funds, unit investment trusts (primary offerings only), variable life insurance, and variable annuities.
What’s allowed with a FINRA Series 7 License?
Can sell all securities except commodities and certain options.
What’s allowed with a FINRA Series 63 License?
Meets licensing requirements in other states besides state of residence (i.e. the “Blue Sky” license).
What’s allowed with a FINRA Series 65 License?
Registered Investment Advisors (state requirement); note that some state’s security regulators also accept the CFP® as an alternative to the Series 65.
What’s allowed with a FINRA Series 66 License?
Uniform Combined State Law Exam; combines Series 63 and 65.
For variable contracts, the representative must hold what two licenses?
Series 6 or 7 license AND a variable state life insurance license.
What does ERISA (1974) protect, and who enforces it?
Federal legislation that defines fiduciary conduct for parties associated with qualified corporate retirement plans. It is enforced by DOL.
What are the 5 Common Factors that Affect Credit Scores?
- Payment History (the single most important factor; counts for 35% of FICO score)
- Amounts Owed to Others (credit utilization ratio over 30% is a negative)
- Credit History Length
- Credit Mix
- New Credit
Which debts are not generally cancelable by bankruptcy?
Student and government loans; Wage Withholding and FICA Obligations (and recent income taxes due); Child Support and Alimony
True or False: Generally, people earning beyond their state’s median income may not apply for Chapter 7 Bankruptcy.
True
What is the bankruptcy exemption/cap for funds in a traditional or Roth IRA? What about for a rollover IRA?
Funds in a traditional or Roth IRA are exempt up to an inflation-adjusted cap of $1 million. For a rollover IRA, the exemption is unlimited on the account balance.
Are inherited IRAs protected under federal bankruptcy laws?
Per a 2014 Supreme Court ruling, inherited IRAs are NOT protected under federal bankruptcy laws.
Housing expenses (PITI or rent) should be less than what % of gross income?
28%
(NOTE: shouldn’t exceed whether it’s one house or multiple houses)
Consumer debt and total debt should be less than what % of gross income, respectively?
20% for consumer debt, 36% for total debt
The leading indicator of inflation trends is the…
Producer Price Index (PPI)
What tools can the Fed use as part of its Monetary Policy?
Reserve Requirements: the level of reserves that member banks must maintain.
Discount Rates: the rate the Fed charges member banks to borrow reserves.
Open Market Operations: Buys bonds to loosen credit, sells bonds to tighten credit.
Margin: increase or decrease initial margin requirements
When the Fed buys securities (Repo scenario), what effect does it have?
Expansionary/easy money/loosens credit
(remember: Buy=Easy Money; B is near E)
When the Fed sells securities (Reverse Repo), what effect does it have?
Tight money policy
(remember: Sell=tighten; S is near T)
PITI is figured as a percentage of _____ income, which (does/does not) include dividends and interest in the income.
Gross; does
Loans taken to buy, build, or improve will have deductible interest up to what amount?
$750k
Who controls monetary policy?
The Federal Open Market Committee (FOMC) controls monetary policy.
(NOTE: The New York Fed is the lead bank of the FOMC.)
Since a reverse mortgage is a non-recourse loan, the borrower(s) can never owe more than what?
The amount the house is worth, even if that value is less than the loan balance.
