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Series 7 - Details > Keep Straight > Flashcards

Keep Straight Flashcards

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Series 7 Top-off Exam flashcards
1
Q

During the first year of an oil and gas drilling program what will generate the largest deduction?

A

Intangible drilling costs (because they are expensed that year and not spread out over a period of years)

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2
Q

As it relates to member firms distributing their own securities, what does Control mean?

A

Is considered having ownership of 10% or more of the common or preferred equity or subordinated debt of another entity or having a right to 10% or more of the profits or losses of a partnership.

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3
Q

How long do forward trades take to settle?

A

T+>2

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4
Q

What is a combination?

A

An option position in which an investor either purchases (is long) a call and a put contract or sells (is short) a call and put contract with different expiration months and/or different strike prices.

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5
Q

What is Rule 144A?

A

An exemption to the holding period and volume restrictions of Rule 144 for qualified institutional buyers.

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6
Q

Which of the following trade T+3?

  1. Cash Trades
  2. Corporate Securities
  3. Municipal Securities
  4. US Government Securities
  5. Option Trades
A

2 and 3 - Corporate and Municipal Securities.

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7
Q

What is Rule 144?

A

A regulation that provides for the sale of restricted stock and control stock. Filing with the SEC is required prior to selling restricted and control stock. The number of shares that may be sold is limited?

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8
Q

What is an accredited investor?

A

Includes any of the following:

  • Financial institutions (banks), a large tax-exempt plans, or private business development companies
  • Directors, executive officers, or general partners of the issuers
  • Individuals who have a net worth of $1,000,000 or have a cross income of at least $200k ($300k combined with spouse) for each of the past two years with the anticipation that this level of income will continue.
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9
Q

What are authorized shares?

A
  • At the time of incorporation, a company is authorized to issue a certain number of shares.
  • Although the original number of shares is arbitrary, it may only be change by a majority vote of the stockholders and by revising the corporate charter.
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10
Q

During the cooling off period, underwriters are permitted to do what? 3

A
  • Discuss the issue
  • Provide the red herring to potential purchasers
  • Record the names of persons providing an indication of interest
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11
Q

What happens when a customer fails to pay for securities by payment date?

A
  • The account is frozen for 90 days.
  • Before the customer may buy additional securities, the customer must deposit the full purchase price of the securities in the account. (Reg T requirement)
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12
Q

What are issued shares?

A

The amount of stock that is actually been sold by the corporation. Any shares that have not been sold or distributed are referred to as unissued shares.

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13
Q

If a client redeems his mutual fund shares, the fund company must send the payment within how many days?

A

7 days.

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14
Q

What are the rights of a shareholder? 5

A
  1. Right to Evidence of Ownership
  2. Right of Transfer
  3. Right of Inspection
  4. Right to Vote
  5. Right to Receive Dividends
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15
Q

In a new issue of muni bonds, the syndicate manager will fill orders in which of the following priorities?

A
  1. Pre-Sale
  2. Group Net
  3. Net Designated
  4. Member
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16
Q

What is best efforts all-or-none underwriting?

A

The underwriters act as agents for the issuer and attempt to sell as much of the offering as possible. If the entire issue is not sold, all sales that were made must be canceled and the money returned to the subscribers.

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17
Q

What are the characteristics of long-term brokered CDs? 5

A
  1. Not considered Highly liquid (no active secondary market)
  2. Subject to interest-rate risk
  3. May be callable
  4. May have features such as floating rates
  5. FDIC insurance may not apply to long-term CDs sold by BDs if the face amount exceeds $250k.
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18
Q

What are Certificates of Participation (COP)?

A

Lease financing agreements which are typically issued in the form of tax-exempt or municipal revenue bonds.

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19
Q

What are the three phases of the registration process for securities?

A
  1. The preregistration period
  2. The (20-day) cooling-off (waiting) period
  3. The post-effective period.
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20
Q

F a long margin position, the customer’s minimum required deposit is what? (Think $, not %)

A

The lesser of:

  1. $2,000 or
  2. 100% of the purchase price
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21
Q
  1. Exercise prices for the Australian dollar, British pound, Canadian dollar, Swiss Franc, and Euro option contracts are stated in what?
  2. Japanese yen option contracts are stated in what?
A
  1. Cents per unit

2. Hundreths of a cent per unit.

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22
Q

For an investor who holds stock in a company that is subject of a tender offer may tender what?

A
  • Only stock that he holds long.
  • If a shareholder has written call option positions against the long stock, the options positions will reduce his net long holding in the stock.
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23
Q

What are the three stages or money laundering?

A

Placement
Layering
Integration

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24
Q

According to corporate dividend exclusion, corporations may exclude from taxation what?

A

70% of eligible dividends received from investments in stock of other corporations.

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25
Q

Listed equity options cease trading at what time during the day?

A

4 pm Eastern

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26
Q

What is the political contribution limited for a municipal finance professional?

A

$250

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27
Q

Transfers from one brokerage account to another of shares are done by what method?

A

ACATS - Automated Customer Account Transfer Service.

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28
Q

What does Rule 144 state in regards to unregistered (restricted) stock?

A

An affiliated person must hold unregistered stock for at least six months before it may be sold.

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29
Q

What is best-efforts underwriting?

A

When underwriters agree to sell as much of the new offering as they are able to, with the stipulation that they can return any unsold securities to the issuer.
-Acting as agent for the issuers.

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30
Q

Technically speaking, when does the Reg T 50% initial requirement really apply?

A

For initial deposits are greater than $4,000 (or lmv?)

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31
Q

FINRA focuses on the suitability of annuity transactions when?

A
  • In the purchase of new contracts
  • Exchanges
  • Allocations of funds to the subaccounts products within the annuity.
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32
Q

What are short sellers required to do when they are short a stock that issues a dividend?

A

They must pay the lender the dividend. That is true even if the dividend is a stock dividend. They have to return the borrowed shares plus the newly issued shares from the stock dividend

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33
Q

Who is permitted to participate in a rights offering?

A

Only common stockholders.

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34
Q

What is the initial margin requirement % for short accounts?

A

50%

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35
Q

What is bankers’ acceptances?

A

A money-market instrument used to finance international and domestic trade. It is a check drawn on a bank by an importer or exporter of goods representing the bank’s unconditional promise to pay the face amount of the note at maturity.

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36
Q

If an investor believes interest rates will decrease they should do what with yield-based options?

A
  • Buy yield-based puts or

- Sell yield-based calls

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37
Q

The options for which six currencies are the primary focus of the series 7?

A
  1. Austrailian Dollar
  2. British Pound
  3. Canadian Dollar
  4. Euro
  5. Swiss Franc
  6. Japanese Yen
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38
Q

What does the AMBAC do?

A

Insured new municipal bond issues.

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39
Q

What is statutory voting?

A

A method of voting for members of the board of directors of a corporation. Under this method, a shareholder receives one vote for each share and may cast those votes for each of the directorships.

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40
Q

Which type of bonds are quoted using 32nds?

A

T-Bonds, T-Notes

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41
Q

How do you determine the yield of a yield based option?

A

The strike price is divided by 10

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42
Q

What is the private placement disclosure document?

A

Offering Memorandum

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43
Q

Some non-equity options use what style exercise?

A

European

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44
Q

What is an unsponsored ADR? 3

A
  • Company does not pay for the cost associated with trading in the US
  • A depository bank issues the ADR
  • Trade in the OTC market and usually quoted on the OTC Link
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45
Q

During periods of deflation, which investments tends to perform best?

A

During deflationary periods, interest rates and the price of goods will be declining, which generally has a negative impact on the stock market. The consumer price index (CPI), to which the principal on TIPS is linked, declines in value during periods of deflation resulting in decreasing principal on TIPS. The fixed interest on TIPS would also decline. Bonds perform better when interest rates decrease, with long-term debt appreciating more than short-term debt. Long-term zeros would tend to perform best during deflationary periods.

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46
Q

What is the spot rate?

A

The current market price for the cash currency.

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47
Q

All listed equity options use what style exercise?

A

American

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48
Q

A brokerage firm must buy in securities within how many days if a customer has failed to deliver the securities that were previously sold?

A

10 business days from settlement.

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49
Q

The underwriting spread is made up of what three parts?

A
  1. Manager’s Fee
  2. Member’s Underwriter’s Fee
  3. Concession
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50
Q

What is the minimum maintenance requirement % for a short position?

A

30%

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51
Q

Loans against a cash value policy do what to the cash value?

A

Reduce the cash value available.

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52
Q

Assuming normal market conditions, what is the order of the different types of preferred stock listed from the most valuable to least valuable?

A
  1. Cumulative
  2. Participating
  3. Convertible
  4. Noncumulative
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53
Q

What type of POA is required for a third party to do Not-Held Orders (for one day)?

A

None

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54
Q

The VIX is often considered to be a gauge of what?

A

Investors’ sentiments or fears of expected stock market volatility over the next 30 days. The VIX will typically move inversely to the S&P Index.

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55
Q

When is a dividend taxed at a maximum rate of 20%?

A

Dividends paid on stock held by individuals for more than 60 days during the 120-day period beginning 60 days before the ex-dividend date are taxed at a maximum rate of 20%

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56
Q

What is the 5% Markup Policy and when does it apply?

A
  • A guideline used when determining the price that a BD charges a customer or pays a customer for securities.
  • It applies when a member firm acts as a dealer in a transaction with a customer.
  • Does not apply when a security is being issued with a prospectus or for municipal securities.
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57
Q

When is the expiration date for listed equity options?

A

The third Friday of the expiration month at 11:59 pm Eastern.

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58
Q

When a customer wants to transfer part or all of the assets of her brokerage account to another firm, they must complete what?

A

The Transfer Initiation Form (TIF)

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59
Q

While equity options use a multiplier of 100 shares, currency options use the multiplier of what?

A

$100

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60
Q

A high put/call ratio would most likely be associated with what?

A

It is a contrarian indicator so the higher the ratio, the more oversold the market and the higher the probability that the market will reverse course and turn bullish.

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61
Q

Customer payment date is NOT regulated by Reg T for what types of securities/trades? 2

A
  1. Municipal Securities

2. US Govt Securities

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62
Q

What factors affect the supply or demand of a country’s currency that play a major role in establishing its spot rate? 7

A
  1. Demand for a country’s products and/or raw material.
  2. A country’s balance of payments
  3. The level of affluence of a country’s population
  4. The level of foreign investment by the country
  5. Government monetary and fiscal policy
  6. Direct Government Intervention
  7. Prevailing Interest Rates
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63
Q

IRS rules allow for the reallocation of investments in a 529 plan to be made how often?

A

Twice per year

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64
Q

What is Standard and Poor’s best and worst rating for notes?

A

Best - SP-1

Worst - SP-3

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65
Q

What is a spread? (option)

A

The purchase and sale of puts or calls on the same underlying security with different expirations and/or strike prices.

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66
Q

Interest from what type of financial instrument is only tax exempt at the federal level?

A

Out of state munis

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67
Q

A person maintains an IRA account and has contributed both pretax and after-tax dollars. Withdrawals from this account will be treated as what?

A

A portion will be taxable as ordinary income and the after-tax dollar portion will be tax-free.

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68
Q

Which of the following trade T+1?

  1. Cash Trades
  2. Corporate Securities
  3. Municipal Securities
  4. US Government Securities
  5. Option Trades
A

4 and 5 - US Government Securities and Option Trades

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69
Q

When a stock sells ex-rights (similar to ex-dividend), the designated market maker will reduce which orders on his book? 3

A

Those that were entered below the market:

  • Buy limit order
  • Sell stop order
  • Sell stop-limit orders
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70
Q

What is a straddle?

A
  • An option position in which the investor purchased or sells a call option and a put option on the same underlying stock.
  • The expiration month and exercise price of each contract must be the same.
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71
Q

Index options may be used to assisting in reducing what two specific risks that are associated with investing in equity securities?

A
  1. The risk associated with the specific industry in which a corporation operates
  2. The risk associated with how a specific corporation will react to trends in the stock market.
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72
Q

What is a Presale Order?

A

An order placed for a municipal new issue with a syndicate prior to the time the syndicate actually wins the issue.

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73
Q

What are special assessment bonds?

A

Revenue bonds that are backed by assessments that are made on those who directly benefit from the facilities.

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74
Q

There is a halt in the trading of a security that underlies option contracts. Who makes the decision to stop trading the option contracts?

A

Officials of the exchange on which the options trade.

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75
Q

The initial margin requirement is what % for a long account?

A

50%

76
Q

What must an RR who has outside employment do?

A

Notify his employer (principal approval is not required)

77
Q

Securities issued under the intrastate exemption may not be sold outside the state until how much time has passed?

A

9 months.

78
Q

What does reclamation mean as it relates to the delivery of a security?

A

The return of securities that were previously accepted for delivery. Reclamation may be used for reasons including:

  • missing or mutilated coupon
  • missing legal opinion
  • because the securities were reported missing, stolen, or fraudulent after they had been initially accepted.
79
Q

What is a yield-based option?

A

A form of debt instrument-based option that derives its value from the difference between the exercise price and the value of the yield of the underlying debt instrument

80
Q

An order that dictates to fill as much of the order as you can right now and cancel the rest is called what?

A

An Immediate-or-Cancel orders.

81
Q

What is best efforts mini-maxi underwriting?

A

Like best-efforts but in addition, a minimum threshold of sales must be met in order for the offering to avoid cancellation. Once that minimum is met, additional sales may be made up to a specified maximum amount.

82
Q

What is outstanding stock?

A

The number of shares that have been issued to the public, less treasury stock.

83
Q

The 30-day visible supply of municipal securities refers to new municipal bonds that what?

A
  • Will be sold in the next 30 days through competitive and negotiated sales of general obligation and revenue bonds
  • It is an indication of expected supply in the new issue market and
  • is published each day in The Bond Buyer.
84
Q

Customer payment is due for option trades by T+ what?

A

5

85
Q

What is delivered at the time of settlement for a VIX option?

A

The cash amount representing the difference between the exercise settlement value and the strike price of the options multiplied by $100

86
Q

What type of POA is required for a third party to do trading, deposits, and/or withdrawals of funds?

A

Full POA

87
Q

How long does a dealer have to deliver the prospectus for an NYSE or NASDAQ-listed follow-on offering?

A

No requirement to deliver prospectus.

88
Q

If transfer of shares between brokerage firms is validated, how many days does the carrying firm have to complete the transfer of the account and deliver the securities to the receiving party?

A

Within three business days

89
Q

What is a reverse stock split?

A

1-for-2, 1-for-5 - investors will own fewer shares at a higher price per share.

90
Q

Customer payment date is regulated by Reg T for what type of securities/trades? 2

A
  1. Corporate Securities in a cash or margin account

2. Options Trades

91
Q

What is meant by 4.50% less 3/4 for a municipal bond selling in the secondary market?

A

$1,000 bond at 4.50 yield - $7.50

3/4 refers to 3/4 of a point and each point is worth $10.

3/4 discount is the same as $1000 x 99.25%

92
Q

What type of POA is required for a third party to only do trades?

A

Limited POA

93
Q

Securities issued by who/what are triple tax exempt? 2

A
  1. Securities issued by US territory or possession bonds (Puerto Rico, US Virgin Islands, Guam, American Samoa)
  2. Interest on in-state munis
94
Q

According to ______, marginable securities include ______ and ______.

A
  • Regulation T
  • Securities that are listed on a registered stock exchange
  • Securities that are listed on Nasdaq.
95
Q

How does an account become restricted?

A

When the equity in an account is below the 50% Reg T requirement but still greater than the 25% minimum maintenance requirement.

96
Q

Yield based options and index options settle when?

A

T+0. Since they are cash basis and no physical delivery of a security is required.

97
Q

Once a Transfer Initiation Form (TIF) is received, when must the carrying firm either validate or take exception to the account transfer request?

A

Within one business day.

98
Q

How long does a dealer have to deliver the prospectus for a non-listed follow-on offering?

A

40 days

99
Q

What types of bonds use a 30/360 day calendar? 2

A

Corporate and Registered Muni bonds

100
Q

What are qualified institutional buyers?

A
  • Entities that have at least $100 million of investable securities.
  • Bank and savings and loan associations that have a net worth of at least $25 million.
  • Term institution includes insurance companies, investment advisers, investment companies (mutual funds), employee benefit funds (pension funds), or other types of institutional buyers.
101
Q

What is found in a municipality’s notice of sale?

A
  1. Amount of good faith deposit
  2. Expenses to be borne by the purchaser or issuer.

(Is this all?)

102
Q

During the cooling off period, underwriters are permitted to not do what? 2

A
  • Accept payment for the new issue in advance

- Sell the new issue

103
Q

What is found in a municipality’s official statement?

A
  1. Project feasibility

2. Financial statements are audits

104
Q

What is a debenture?

A

A corporate bond backed by the general credit of a company and not secured by a mortgage or lien on any specific property.

105
Q

For an individual wishing to sell stock according to Rule 144 requirements, they may sell how many shares?

A

The greater of 1% of the outstanding shares or the average weekly trading volume for the preceding 4 weeks.

106
Q

What are the characteristics of bank-qualified muni bonds?

A
  • Issued by small municipalities
  • May only issue up to $10,000,000 annually.
  • Issued to encourage commercial banks to invest in locally issued municipal securities.
  • Commercial banks that purchase this type of security are permitted to deduct 80% of the interest cost paid to depositors on the funds use to purchase the bonds.
107
Q

What is a member order?

A

An order given to a municipal syndicate in which a single member receives credit for the sale. (Typically the last type of order to be filled by the syndicate)

108
Q

Does treasury stock count towards a the number of shares outstanding for a company?

A

No

109
Q

What information is included on an option confirmation? 3

A
  1. The price of the option
    2.The month and strike price of the contract
  2. The name of the underlying security.
    (is this all?)
110
Q

What is firm-commitment underwriting?

A

When a syndicate is acting for its own account and risk by agreeing to purchase the entire issue and absorb any securities that are not sold.

111
Q

Which currency options trade in 10k units per contract and which doesn’t?

A

These trade in 10k units/contract

  1. Austrailian Dollar
  2. British Pound
  3. Canadian Dollar
  4. Euro
  5. Swiss Franc

The Japenese Yen trades in 1,000,000 units per contract.

112
Q

What are American Depository Receipts (ADRs)? 5

A
  • Facilitate the trading of foreign stocks in the US.
  • Represents a claim to foreign securities with the actual shares being held by US banks abroad.
  • ADRs trade in US markets, either on an exchange or over the counter.
  • Are priced and pay dividends in US dollars
  • Have dividend rights, but do not directly receive preemptive rights.
113
Q

Foreign currency options are quoted in terms of what?

A

The number of US dollars required to purchase one unit of the foreign currency.

114
Q

What is the requirements for institutional communication? What is not required?

A
  1. Each BD is required to establish written policies and procedures to review institutional communications.
  2. Principal approval or filing the institutional communication with FINRA.
115
Q

Which types of securities use 365/actual days of month?

A

T-Notes, T-Bonds

116
Q

In the event of a BD bankruptcy, the SIPC protects customers’ funds and securities that are registered how?

A

Registered in the street name

117
Q

What is the consequence of having a restricted account?

A

Nothing really

118
Q

What is treasury stock?

A
  • Stock that is issued and subsequently repurchased by the company.
  • As long as the stock remains in the treasury, it has no voting rights and does not received dividends.
  • Appears as informational item on balance sheet.
119
Q

What is ad valorem tax?

A

a tax whose amount is based on the value of property.

120
Q

Corporate Securities settle in T + what?

A

3

121
Q

How long do spot trades take to settle?

A

T+2

122
Q

What are municipal notes used most for?

A

Interim financing.

123
Q

When do VIX options expire?

A

The Wednesday that is 30 days prior to the third Friday of the following calendar month.

124
Q

What is the minimum maintenance requirement % for a long margin account?

A

25%

125
Q

Interest is taxable on all three levels of government for what types of financial instruments? 8

A
  1. FNMA
  2. FHLMC
  3. GNMA certificates
  4. .Govt Agency issues backed by mortgages (1-3)
  5. CMOs
  6. CDOs
  7. BABs
  8. Corporate Bonds
126
Q

What does it mean when a security is rejected?

A

The refusal to accept delivery of securities. If the securities being delivered are not deemed to be in good deliverable form, they may simply be rejected.

127
Q

To meet the investment advisor definition, a firm must satisfy all three parts of the ABC test which include what?

A
  • providing Advice
  • operating as a Business, and
  • receiving Compensation for the advice
128
Q

When a customer sells stock in a margin account, the BD will credit the customer’s SMA with an amount equal to what?

A

The sale proceeds multiplied by the Reg T requirement of 50%.

129
Q

An ETNs returns are linked to what? Who are they suitable for?

A
  • The performance of an index, currency and commodity.

- For investors who want to speculate on the value of an index (seeking capital appreciation)

130
Q

Unlike SIPC, the FDIC protects its bank affiliated customers against what?

A

Principal Loss

131
Q

As it relates to member firms distributing their own securities, what does affiliate mean?

A

Any entity that controls, is controlled by, or is under common control with the member.

132
Q

US Government Securities settle in T + what?

A

1

133
Q

FINRA disseminates bond transaction information for what types of securities? 3

A
  • Non-investment grade corporate bonds
  • Investment grade corporate bonds
  • debt securities issued by a GSEs
134
Q

A corporation is planning to issue new stock to the public but has not yet filed a registration statement with the SEC. As a registered representative of the firm that is expected to do the underwriting, you are permitted to do what?

A

Only discuss the offering with employees at the firm.

135
Q

What does it mean when a municipal bond has a basis of 4.33?

A

Since municipal bonds are quoted on yield to maturity basis is means the bond has a YTM of 4.33%.

136
Q

If an investor believes interest rates will increase they should do what with yield-based options?

A
  • Buy yield-based calls or

- Sell yield-based puts

137
Q

The SEC has determined that which securities are exempt from the registration and prospectus requirements of the 1933 Act? 6

A
  1. US Govt and US Govt Agency securities
  2. Muni Securities
  3. Securities issued by non-profit organizations
  4. Short-term corporate debt instruments that have a maturity not exceeding 270 days (bankers’ acceptance).
  5. Securities issued by domestic banks and trust companies
  6. Securities issued by small business investment companies
138
Q

What are examples of derivatives? 10

A

-CDOs
-Swaps (credit default swaps)
-MBS
-ABS
-Forwards
-CMO
-Option contracts
-Warrants
-Rights
-Convertible bonds.
(is this all?)

139
Q

Cash Trades settle in T + what?

A

0

140
Q

For a short margin position, the customer’s minimum required deposit is what?

A

The greater of:

  1. $2,000, or
  2. The required Reg T deposit (50%)
141
Q

What is commercial paper?

A

Debt instruments issued by well established companies to meet short-term financing goals.

  • It is unsecured
  • Max maturity of 270 days
142
Q

Customer payment is due for corporate security trades in a cash or margin account by T+ what?

A

5

143
Q

On the PHLX, if an investor trades his currency call options, their contract will be in-the-money if the foreign currency does what?

A

Strengthens as compared to the US Dollar over the life of the contract.

144
Q

When are annuity transactions not subject to FINRA?

A

When they are in tax-qualified, employer sponsored annuity programs (allocation of funds in subaccounts within qualified plans is covered)

145
Q

What securities are issued at a discount? 5

A
  1. Commercial paper
  2. Bankers’ Acceptances
  3. Treasury Bills
  4. Series I Bonds
  5. Zero coupon bonds
    (Is this all?)
146
Q

What is the tax treatment of a the covered call premium for the writer should the call expire unexercised?

A

It will always be a short-term capital gain.

147
Q

As it relates to mutual funds, what events are taxable? 4

A
  1. Receiving dividends
  2. Reinvesting dividends
  3. Exchanging shares (within a fund family)
  4. Switching shares (outside a fund family
148
Q

What is a standby underwriting?

A

Where the underwriting syndicate agrees to purchase any shares that the corporation does not sell.

149
Q

Index option buyers must be careful when they exercise their option contracts since exercise is based on the what value?

A

The closing index value for that day.

150
Q

How long does a dealer have to deliver the prospectus for an IPO of a security to be listed on the NYSE or NASDAQ?

A

25 days

151
Q

What are K Shares of Preferred Stock? 5

A
  1. Go from a fixed to a floating rate;
  2. Tend to be depository shares in which each shares represents a certain number of preferred shares.
  3. Tend to be noncumulative and perpetual
  4. Pay qualifying cash dividends
  5. Generally offer no voting rights.
152
Q

What is the disclosure document concerning a Regulation A issue?

A

Offering Circular

153
Q

For margin accounts, the loan value is 50% for what type of asset?

A

Marginable securities

154
Q

Municipal Securities settle in T+ what?

A

3

155
Q

As it relates to member firms distributing their own securities, what does common control mean?

A

A situation in which the same person or entity controls two or more entities.

156
Q

What is the special margin rules for low-priced stock?

A

The rule only applies to customers who sell short low-priced securities:

  1. If the market value of the security is less than $5 per share, the required equity is the greater of the market value or $2.50 per share
  2. If the market value is $5 per share or more, then required equity of the market value is the greater of 30% or $5 per share.
157
Q

The SIPC is a non profit organization created by who/what?

A

Congress

158
Q

What is an institutional communication?

A

Any written or electronic communication that is distributed or made available only to institutional investors.

159
Q

Quotes for municipal bonds are usually done how?

A

Per $1,000 and on a yield to maturity basis.

160
Q

What is a group order?

A

An order placed with a municipal syndicate where the entire syndicate will share in the takedown.

161
Q

The principal of a BD must approve retail communications when?

A

Prior to use.

162
Q

What information must be contained on the registration statement for new securities? 6

A
  1. The character of the issuer’s business
  2. A balance sheet created within 90 days prior to the filing of the registration statement
  3. Financial statements that show profits and losses for the latest fiscal year and for the two proceeding fiscal years.
  4. The amount of capitalization and the use of the proceeds of the sale
  5. Monies paid to affiliated persons or businesses of the issuer
  6. Shareholdings of:senior officers, directors, and underwriters, and ID of individuals holding at least 10% of the company’s securities.
163
Q

Option Trades settle in T+ what?

A

1

164
Q

When a corporation that is planning to issue a new stock to the public has filed a registration statement with the SEC, an RR of the firm that is expected to do the underwriting may do what?

A

Send a customer a red herring and obtain indications of interest to purchase the new issue.

165
Q

What is a sponsored ADR? 2

A
  • For a sponsored ADR, the company whose stock underlies the ADR pays a depository bank to issue ADR shares in the US.
  • Permits the company to raise capital in the US and list the ADR on the NYSE.
166
Q

How long does a dealer have to deliver the a prospectus for a non-listed IPO?

A

90 days

167
Q

What relationships between NAV and Offered price is not found in open-end companies? 2

A
  1. Their offering price is not below the current NAV.

2. Their sales charge is not greater than 8.5%.of offering price

168
Q

What is cumulative voting?

A

A method of voting for corporate directors that enables corporate shareholders to multiply the number of shares owned by the number of directorships being voted on and cash the total for one director or a selected group of directors.
-Tends to benefit the small investor.

169
Q

The price of an index contract is based on what?

A

The index value multiplied by $100.

170
Q

When is the exercise notice dealine?

A

5:30pm Eastern on expiration date.

171
Q

What is a forward stock split?

A

2-for-1, 3-for-2 - investors will own more shares at a lower price per share.

172
Q

What is a designated order?

A

An order given to a municipal syndicate that designates one or more members to receive credit for the sale. (Order generally from an institutional investor)

173
Q

What does it mean to sell short against the box?

A

When a client that is long a security wants to sell the stock, but not deliver his long position. The client must borrow the security to effective delivery, requiring the order ticket to be marked short.

174
Q

What are the capitalization ratios/formulas? 4

A
  • Long-Term Capital
  • Bond Ratio
  • Common Stock Ratio
  • Debt-to-Equity Ratio
175
Q

What are the 4 liquidity ratios/formulas?

A
  • Net Working Capital
  • Quick Asset Ratio
  • Current Ratio
  • Cash Flow
176
Q

What does a positive working capital ratio indicate?

A

A company’s current assets are sufficient to cover liabilities.

177
Q

How is a company’s balance sheet affected when they declare a cash dividend? 3

A
  • Retained Earnings (part of stockholders equity) is reduced
  • Dividends payable (part of current liabilities) is increased
  • Net working capital is reduced
178
Q

How is a company’s balance sheet affected when they pay a cash dividend? 3

A
  • Cash is reduced
  • Dividends payable is reduced
  • No effect on net working capital
179
Q

How is a company’s balance sheet affected when they buy equipment or machinery for cash? 3

A
  • Cash is reduced
  • Equipment is increased
  • Net working capital is reduced
180
Q

How is a company’s balance sheet affected when they issue a stock dividend or execute a stock split? 3

A
  • Only stockholders’ equity portion is affected
  • # of shares outstanding and the par value per share are changed
  • Total market cap remains the same
181
Q

How is a company’s balance sheet affected when they issue debt? 3

A
  • Cash is increased
  • bonds outstanding is increased
  • Increase to net working capital
182
Q

How is a company’s balance sheet affected when they call bonds? 3

A
  • Cash is reduced
  • Bonds outstanding is reduced
  • Net working capital is reduced
183
Q

How is a company’s balance sheet affected when they issue stock? 4

A
  • Cash is increased
  • Stock outstanding is increased
  • Net working capital is increased
  • Long-term debt ratio will fall as equity capital rises.
184
Q

How is a company’s balance sheet affected when they repurchase stock?

A
  • Cash is reduced
  • Common stock outstanding is reduced
  • Net working capital is reduced
185
Q

When part of an issue of long-term bonds is called, what is the effect on the remaining outstanding bonds?

A

They will improve in quality due to the fact the issuer will have less debt outstanding and will be paying less in interest charges

Series 7 - Details (2 decks)

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