General Principles 2 Flashcards
College funding Phase outs
Phase outs given (MFJ):
- Educational Bonds (EE Savings Bonds) ($124,800 - $154,800)
- Lifetime Learning Credit ($119K-$139K)
- American Opportunity Credit ($160K-$180K)
Deductible housing interest
- All mortgages cannot exceed $750K combined (MFJ); $375K single (MFS)
- Home equity interest is only deductible if used for home renovation/improvement
529 Keys
- Lump sum gift up to $75,000
- Donor can retain control
- K-12 for tuition allowed up to $10,000/yr
- Can be used to pay student loans ($10,000/student)
Federal reserve open market operations
Repo - Fed buys securities - expansionary/easy money policy
Reverse Repo - Fed sells securities - Contractionary/type money policy
Gross domestic product GDP
- Total dollar value of all goods and services produced within the US ONLY
- GDP counts economic activity without regard to price fluctuations
- Does not include any income generated outside the US or adjustments for foreign currencies
Business cycle
Expansion, peak, recession/correction, trough, recovery/expansion
Recession vs. Depression
Recession - two consecutive quarters of economic decline (negative GDP)
Depression - six consecutive quarters of economic decline (negative GDP)
Exceptions to filing as an investment advisor
-Banks that are not also investment companies
-lawyers, accountants, teachers – advice is incidental
-broker/dealers or registered reps whose performance is incidental and who get no special compensation for advice
-publishers of bona fide newspapers
-those who give advice soley relating to US government securities
Exemptions to filing as an investment advisor
- advisor whose only clients are insurance companies
- Family office
How does an investment advisor register with the SEC?
- Initially, files that ADV part I and II with the SEC
- Pay the minimum filing fee of $150
- RIA must submit part I of ADV and schedule I anually
Financial industry regulatory authority (FINRA)
Initial registration process
-The individual associates with a broker dealer
-registers with FINRA through broker/dealer on the form U-4
-takes and passes appropriate exams
Is issued a CRD number (central registration system)
Financial industry regulatory authority (FINRA)
Key examinations/licenses
Series 6: Mutual funds, UITs and variables (only new UITs)
Series 7: General securities (UITs on the secondary market)
Series 63: uniform securities agent state law exam
Series 65: uniform investment advisor law exam
Series 66: Uniform combined state law exam (combines 63 and 65 exams)
Basic components of a legal contract as applied to insurance
- Offer and acceptance - two parties: offeror and acceptor
- Consideration - something of value ($)
- Legal object - legal in purpose
4.Competent parties - principal must have legal capacity to execute contracts
A. Intoxicated adults have a limited or no capacity to
execute contracts
B. Minors have capacity to contracts for necessities
(food, clothing, shelter only) - Legal form - Contract must meet requirements
Law of Agency (Insurance)
Express authority:
Implied authority:
Apparent authority:
Express authority
Written, explicit direction from principal to agent
Implied authority
That which the public believes the individual holds and includes signage, rate books, etc.
Implied authority is actual authority that the agent must carry out the principle’s business.
Apparent authority
Arises out of negligence of the principle in allowing the agent to appear to have authority because of certain actions of the agent in the past this typically affects terminated agents. 
Bankruptcy
Debts not cancelable by bankruptcy:
- student loans, government loans, child support or alimony.
- wage withholding, FICA taxes, income taxes due
Rollovers from qualified plans are exempt (unlimited), and non-rollover IRAs up to $1 million are exempt.
Risk
A condition where there is a possibility of a loss.
A situation where an exposure to a loss exists.
Examples: Starting a business; buying real estate
Peril
The cause of a possible loss, the event insured against perils like windstorm, fire and theft.
Hazard
A condition that may create or increase the chance of loss arising from a given peril like:
- owning a home on an earthquake fault line or
- owning a home by a river. 
