Investment Companies Flashcards

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1
Q

Investment Company Act of 1940

A

Act passed to regulate Investment companies

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2
Q

Investment Advisers Act of 1940

A

Act passed to regulate Advising companies

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3
Q

Fixed Unit Investment Trust (UIT)

A

Buy large block of bonds (usually municipal) and sell off interest. Once matured will send out principal payments and the UIT will no longer exist.

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4
Q

Non-fixed UIT

A

Buys mutual fund shares for benefit of investors. Allow access for investors to mutual funds that have very large minimums.

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5
Q

Face Amount Company

A

Don’t exist in real world anymore. Investment company that assisted people saving for retirement.

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6
Q

Management Company AKA…

A

AKA Mutual Fund. Pools investors assets and invests them in a portfolio of securities in order to meet a stated objective.

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7
Q

Open End Investment Company

A

Continuous Primary Offering.

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8
Q

Closed End Investment Company

A

Issues a fixed amount of shares.

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9
Q

Compare Open End vs. Closed End Investment Companies

A

See Screenshot on desktop.

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10
Q

Capitalization

A

How much money a mutual fund can take in

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11
Q

How are Open Ended Investment Companies Priced?

A

Formula. NAV + Shares Charged = POP

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12
Q

How are Closed Ended Investment Companies Priced?

A

Supply and Demand

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13
Q

Diversified Mutual Funds

A

75% in securities issued by other entities. No more than 5% of portfolio invested in one company. This 5% can’t be more than 10% ownership in companies. The idea is diversify not control. Because mutual funds are so large 5% of their portfolio could take over a company- hence the 10% rule.

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14
Q

Investment Company Registration Stipulations

A

Minimum net worth of $100,000.
At least 100 shareholders within 90 days of registration.
Clearly defined investment objectives.

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15
Q

Board of Directors for Mutual Funds

A

Max of 49% can be ‘interested’ in the company (hold a job there).
At least 51% must be non interested.
Role of the board- set investment objectives for the funds. Hire investment advisor.

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16
Q

Investment Advisor

A

Hired by BOD. Asset selection. Goal is to meet the objectives set forth by the BOD. Paid a fee based on % of NAV. (Net Asset Value). More aggressive objectives bring a higher % fee.
Determines tax consequences for investors when the mutual funds makes distributions to shareholders

17
Q

Custodian Bank

A

Safeguards the portfolio. Holds the shares/assets of the mutual fund.

18
Q

Transfer Agent

A

In charge of issuing and redeeming shares.

19
Q

Expense Ratio

A

The sum of the fees paid to the entities. This allows investors to see how much they spend on investing their money.