Investment Company and Insurance Based Products Flashcards
Considerations for investment companies
raise capital by selling shares so is reg’d by same as securities like Sec Act but also Investment company act
What are the three main types of investment companies
Face Amount Certs
Unit investment trusts
managed investment comps
Characteristics of a UIT?
No BOD just trustees
not managed
doesnt trade secondarily
Characteristics of closed end invs comps
IPO for a specified amount
secondary trading
might sell at a discount/premium
issues com/pref sto and debt
Whats another name for closed end invs comps
publicly traded funds
What are the types of managed investment comps
closed/open ended
Characteristics of open ended invs comps
continous primary offerings
no secondary trading bec redeemed by the fund
com sto only
fractional shares
Priced and usu reinvested at NAV at end of day
reinvestments/divi’s taxed
If a mutual fund has sales charges then how are the shares classfied
Class A
B and C
What are class A shares for mutual funds
pay sales charge at purchase as % of total investment
What are Class B shares of a mutual fund
pay sales charages on the back end, usu declining % over the years to zero
Consideration for Class B shares of mutual funds
even though sales charages go to zero over time other fees may be high
What are Class C mutual fund shares
usu 1 year 1%CDSC, .75% 12b-1 fee, and a .25% shareholder fee
considerations for class C/level load shares
at least a year but less than 4 years bec expensive
Whats a breakpoint
sales charge levels based on the amount initially invested
Whats a requirement of advisers for breakpoints
need to mention if close to the next breakpoint
What can you use to get a better breakpoint without the necessary funds
letter of intent
Rules for a LOI
additional funds needed within 13mos
the 13mo can be back dated 90 days
if funds not received, option to send check or sell the shares in escrow to pay for the sales charge
What are rights of accumulation
allows prior investments to help total higher amounts to get better breakpoints
example of rights of accumulation
if 30K starting has 5%load then you add another 10K and the fees at 40K are 4%, the additional 10k will have a 4% load
Whats the combination privilege
allows combining the money in different mutual funds within the same sponsor fam to reach breakpoints
Whats exchange privilege
can switch to another fund in the family without sales charges
calculation for NAV
(Assets - liabilities)/outstanding shares
What is a mutual funds expense ratio
compares the management , operting fees, and 12b-1 fees to the funds average net assets
Whats inc;ldued in the operating costs of an expense ratio
BOD
admin
Whats not included in an expense ratio
sales charges/loads
Whats included in the POP of front loaded shares
NAV+ sales charges
difference of distribution btween stocks and mutual funds
ex divi happens one day after record date so DRPE
settles T1
Do mutual funds need prospectuses
yes
What might be given inst of a flul pros & what rules for it
summary pros
-Name
- class of sto
- ticker sym
- legend with disclosure that its a sum and where to find the full
What can invs of a mut fund or closed end fund ask for and receive within 3 days
statement of additional info
Can prospectuses be marked on highlighted etc
never
what is a omitting pros and whats its only allowed purpose
advertisement
raising awareness
How can a fund avoid taxes on teh fun dlevel
Subchapter M qualification
Whats a rule for subchapter M
90% of net investment income distributed or taxes on 100%
Whats an annuity
savings account within an insurance company that’s designed for retirement income
What is the cirtieria insurance comps use to determine the income of an annuity
SAAPI
sex
age
amount
payout type
assumed interest rate
Criteria for recommending a variable annuity
Should be able to purchase with cash not selling other things
no big future costs like home pruchase, college tuition
not putting it into a tax favored account
okay with risk
other retirement savings vehicles have been used
Qual vs nonqual annuities
nonqual are commercial contracts
qual are held in retirement acc like 401k
For the exam, annuities are considered what unless specified
nonqual
When are annuities taxed
withrawl
Whats the rules of withdrawl for variable annuities (when not annuitized)
if entire amount - taxed as ord income
if sum taken on random basis - gains are taxed first then principal
before 59.5 yr taxable portion has a 10% penalty
You can transfer bwteen annuities tax free but what might still need to be paid
surrender fees
