Knopman Fact Sheet Flashcards
Roth IRA- Single and Married (contribution is phased from…)
Single: contribution is phased from $110K - $125K
Married: Phased out from $173K-$183K
SIPC now covers up to xxx per separate customer, of which up to xxx can be in cash
$500K
$250K
Securities Investor Protection Corporation (mandates membership of most B/Ds)
Treasury securities, T bills, are entered in xxx form only
book entry - never receives actual paper (form of fully registered, ownership evidenced by computer entry, no physical bond issued, name and address recorded for purposes of receiving, all negotiable UST and gvt agency debt in this form)
Build America Bonds are
taxable muni bonds where the fed gvt subsidizes 35% of the int exp to bondholders (pay less interest)
Hypothecation
occurs when a customer pledges securities as collateral for a loan from a B/D
Rehypothecation
when a B/D then pledges those securities (from the customer that pledged the securities as collateral for a loan) to the bank for the funds that are loaned to the customer
In a tenants with rights of survivorship account (power of the successors to acquire property of the deceased),
one of the tenants can enter an order to trade, but any checks must be payable to both parties
Under Regulation NMS (National Market Systems), market maker cannot execute a trade in a unit smaller than
$.01 (33.9995) unless the stock trades for less than $1/share
Under Reg NMS, market maker cannot execute a limit order at a price
inferior to the best price available on the other side of hte mkt (ex: buy limit order is $34, buy limit must be executed at $34 or below)
Coverdell Educ Savings Accounts
can be transferred to a fam member of the beneficiary who is under age 30
Section 529 College Savings Plan
can be transferred to an yohter beneficiary once per yr
Reg NMS
is to promote efficient and fair price formation across securities markets by fostering competition among individual markets and among indiv orders
1035 exchange
an indiv exchanges 1 annuity (life insurance, endowment etc) for another without incurring any immediate tax liabilities
Trying to time the market is
associates w technical analysis
Overlapping debt (adjacent or coterminous)
only applies to general obligation bonds (issued by states/local gvt to raise funds for public works, backed by municipality), not revenue bonds (muni bonds that finance income producing projects, issued by any gvt agency or fund run like a biz, use private activity bond)
VIX (volatility index) is based on the
S&P500
A bearish investor would buy VIX xxx because
calls; volatility will generally increase as the market goes down
a stock dividend is or is not a taxable event
is not
P/S can be sold but is or is not redeemable w the issuer
is not
If the US econ is performing poorly, US exports are more or less attractive and US imports become cheaper or more expensive
more attractive; more expensive
an exchange of mutual funds within the same family of funds is or is not a taxable event
is
purpose of rule 144 is to
allow unregistered securities to be sold into the mkt, with SEC notification
warrants typically remain outstanding longer than
rights
GDP is quoted in
constant $ so 1 period can be compared to another
if a firm discloses FINRA membership on its website, it must
provide a link to the FINRA website
if a corporate insider purchases the company’s stock in the open market
shares are always subject to volume limitations of Rule 144, but are not subject to a holding period
if a corp insider receives company stock as compensation
shares must be held fully paid for 6 months and are subject to volume limitations of Rule 144 thereafter
if a non-insider wants to sell restricted stock, under rule 144
the shares can be freely sold after a 6 mth period
control persons (corporate insiders) are
officers, directors or 10% shareholders. They can invest in Reg D Private Placements and sell their securities subject to Rule 144
when an investor expects IR to increase
they would buy a yield based call option (good hedge for portfolio of LT bonds)
If bearish, buy put
T bonds would be affected more by a
change in rates than T notes or T bills
S&P 500 index is a xx indicator
leading
eurodollars are
US dollar denominated deposits, in a foreign location (pay attn to the 2nd part to see which currency it’s actually in)
if an investor wants to buy stock immediately to take advantage of an expected increase that’ll happen soon
investor should place a market order
Auction Rate Securities are issued by
- are issued by municipalities or corporations
Auction Rate Securities are long or short term
- are LT, variable rate bonds tied to ST IR
Auction Rate Securities have IR set through xx…clearing rate?
- have IR reset through a Dutch auction process, at predetermined short term intervals (7, 28, 35 days). Lowest bid rate at which all shares can be sold at par = clearing rate
Auction Rate Securities have interest paid in
have interest paid in the current period based on the IR determined in the prior auction period
Auction Rate Securities trade at xxx and callable at xxx
trade at par (price doesn’t fluctuate, IR does) and are callable at par on any interest pymt date at the option of hte issuer
Auction Rate Securities are issued and rated as
are issued and rated as long term bonds (20-30 years) but priced and traded as ST instruments
Auction Rate Securities were typically of good/bad credit quality
good…not so recently
Auction Rate Securities will fail if
there are not enough bids received on the securities or when there are not enough bids below max rate established by the issuer
an U/W scale is a list
of all maturity dates and yields of a bond issuance
max duration of a shelf registration is
3 years
Deposit of a personal check does or does not require a registered rep to fill out a currency transaction report
does not
Only for all cash (cash and coin) trxn by a customer during 1 biz day that EXCEEDS $10k or smaller trxn in a single day that aggregate >$10K
Orders for durable goods is a xx indicator
leading
In a bull market, a security w a beta xx would outperform the market as a whole
> 1
Initial conditions of inflationary environment would be xx IR and xx of $
low IR (which then rises) and oversupply
Depletion applies to
O&G Limited Partnerships NOT Real Estate Limited Partnerships
(Depletion - depreciation deductions qualified for natural resources except raw land)
In a defensive market, xx is not a good sector for investment
manufacturing
defensive = resistant to recession - necessary services like utilities, tobacco, soft drinks, food/essentials
SEC regulates
SROs (Self Regulatory Organizations) Ex: MSRB - Municipal Securities Rulemaking Board or FINRA
Holding period for restricted stock:
- 1st 6 m
- 6m to 1 yr
- > 1 yr
- no resale
- volume restriction on everyone
- volume restriction only on insiders and affiliates
cost basis for a beneficiary who’s receiving securities from a deceased person’s estate is
the market value at the time of death (stepped up basis)
main purpose of an UW selling group
is to increase marketability
once an account has been inactive for 18 months, customer can be sent
quarterly statements
monthly for active accounts
a stop order, once triggered becomes a
market order
stop= once a specified price is reached or passed
- buy when price rises to a stop price
- sell when price falls to a stop price
SIPC only covers the
equity in a margin account (not market value or debit)
Rules 144 and 144A are part of the
Securities Act of 1933
Rule 144 - restricted stock: held for 6 mth, then volume restricted for everyone, >1 yr only vol restricted for insiders and affiliates; control stock has no holding period if bought in secondary
Rule 144A - exemption for purchase of restricted stock by qualified institution buyer (at least $100mm invested in securities of issuers not affiliated w entity)
- no 6 mth holding period, can sell to another qualified inst buyer
ADRs do or don’t have call risk
do not
American Depository Receipts - facilitate trading of foreign stocks in US (claims to foreign securities with shares being held by US banks abroad)
- priced in USD
- shareholders have divd rights, but wont’ receive preemptive rights
- still face FX risk (ADRs rep indirect ownership of foreign sec)
Banker acceptances facilitate
int’l trade
Funds that a bank has in excess of its reserves are
fed funds (can lend to those short on reserves, lend overnight to other banks and help them meet their Reserve Req Ratio, rate charged is the fed funds rate)
REITs invest primarily in
apartment complexes and shopping centers
Appropriate to open a new account for purposes of investing in a new issue?
No
if a registered rep sells shoes on the side, notify the employer?
employer must be notified and grant permission!
to open a numbered acct
customer would have to provide a written statement (that he owns acct) and prove identity
numbered acct (doesn’t need to show name, ex: Swiss banks)
subscription agreement accepts the LP as an investor in a
limited partnership
lowest to highest IR
discount rate, fed funds, broker’s call, prime rate
fed funds (interbanks), discount rate (set by Fed), broker’s call rate (IR which margin loans are quoted), prime rate (IR for most credit worth customers)
subscription agreement accepts the LP as an investor in a
limited partnership
lowest to highest IR
discount rate, fed funds, broker’s call, prime rate
fed funds (interbanks), discount rate (set by Fed), broker’s call rate (IR which margin loans are quoted), prime rate (IR for most credit worth customers)
if a customer purchases
100% of the market value
Eurodollars
are US dollars on deposit in foreign countries
if a T note is quoted 102.20 bid - 102.24 ask
spread is $1.25 bc difference is (4/32)% of par so .00125*1000=1.25
investor who sells a call and put (short straddle) and earns premiums of $8/sh will profit if
both options expire or if premiums are
if a T note is quoted 102.20 bid - 102.24 ask
spread is $1.25 bc difference is (4/32)% of par so .00125*1000=1.25
interbank market
where banks trade currencies (where FX rates are established; unregulated and decentralized)
Reg D private placement can have a max of xx non accredited investors
35 non accredited investors (accredited investors - fin inst like a bank, large tax exempt plan or priv biz dvp co or indiv who’s wore more than $1mm and net inc of at least $200K or $300 if married for last 2 years
interbank market
where banks trade currencies (where FX rates are established; unregulated and decentralized)
Reg D private placement can have a max of xx non accredited investors
35 non accredited investors (accredited investors - fin inst like a bank, large tax exempt plan or priv biz dvp co or indiv who’s wore more than $1mm and gross inc of at least $200K for last 2 years
Sallie Mae
securities loans from other educational lenders
To take advantage of a support level on a stock, investor would place either a
sell stop or sell stop limit order
Sallie Mae
securities loans from other educational lenders
investor who is certain of volatility on the upside OR downside buys a
if expect no volatility, create a
straddle (lots of volatility)
short straddle
elderly person who wants to save for 2 children’s education might invest in
T-bills
investor who is certain of volatility on the upside OR downside buys a
straddle (lots of volatility)
if spot rates for foreign currencies increase, premium on foreign curr puts
decrease
easiest process to detect money laundering conspiracy is
placement (bc first stage, place large amount sof $$ into legit fin system is easy to catch)
SMA can’t be used to pay down
debit balance (other way, debit will incr to reduce SMA)
Discretionary account - what’s not considered discretionary trade by RR (don’t need written order)
If rep only has to choose time and or place (customer chooses security, buy/sell, # of shares), it’s not discretionary
Discretionary if broker buys/sells without client’s consent
Discretionary account - what’s not considered discretionary trade by RR (don’t need written order)
If customer chooses security, buy/sell, # of shares, but leaves discretion on time and or price
Rule 144A applies to
QIBs
only earned inc can be contributed to
IRA
Property tax is not impt in
revenue bond analysis
Property tax is not impt in
revenue bond analysis
Increase inflation, Fed can
lower discount rate (think past recession, IR so low)
Increase inflation, Fed can
lower discount rate (think past recession, IR so low)
Upon opening a numbered account, customer must sign
form certifying ownership of the account and proves identity
numbered acct (doesn’t need to show name, ex: Swiss banks)
support level represents
bottom of a trading range (prevent further declines)
Resistance - opposite, prevent further rises
If REIT passes through 90% of its gains to shareholders, doesn’t have to
pay taxes on amount it passes through
Taxable only to investors, can’t pass through operating losses
Rights and warrants may trade as
independent securities in the secondary mkt
Trading flat means
a security trades without accrued interest (t-bills, zeroes)
- no int pymts being made
selling short into a tender offer
is not allowed
a net rev pledge
pays expenses from gross revenue first, then subtracts debt service from net revenues
(for revenue bonds)
Beta is
measure of a stock’s volatility in relation to overall mkt
In a firm’s 1st year of operation, must pre-file
all advertisements w the FINRA at least 10 days prior to first use
OCC Options Disclosure Doc must be received by a customer
before or upon account approval
Currency Transaction Report is req for
cash deposits of > $10K on 1 biz day
Also applies when aggregate of multiple smaller trxn total >$10K
Stock splits and stock dividends are or not taxable events
are not
cash dividends are taxable
penny stock is a
non-Nasdaq equity security in the OTC market w a price of $5 or less
a metric that a technical analyst is concerned with is
trading volume
looks at past price history and markets
fundamental analyst would be concerned with
P/E ratio and historical earnings
focuses on indiv co and their industry groups: F/S, outlook for industry etc.
customer sells short
$2K
it’s 100% in a long account
Gross sales is found on
the I/S
If customer already invested $23,500 in a mutual fund that has a breakpoint at $25K, then chooses to invest antoher $2K,
customer received the lower sales charge on the add’l $2K
bc of breakpoints - while mutual funds quoted at max sales charge %, sales charge lowers as deposit increases
a canadian importer would buy xxx to hedge against an adverse currency mvmt
Put
adverse means canadian currency depreciates so USD stronger; want option to sell USD at higher price
foreign exporter receiving pymt in USD buy calls in own currency to hedge
against an adverse currency mvmt
amortization describes
process of adjusting cost basis of premium bonds (after bond purchased at premium, amortized ea yr or subtracted from cost basis to get down to par at maturity)
syndicate manager choose
priority of orders
part of U/W syndicate
priv placement, primary offering, secondary - which would have the least after-market activity
priv placement
pension plan is a what plan
defined benefit
mutual fund must redeem an investor’s shares within
7 days of request
bond counsel validates
tax-exempt status and legal authority of the muni to issue bonds
revenue bond least likely to be issued for a
high school (doesn’t gen rev)
no appeal under
arbitration (settle disputes)
what’s marginable: muni bonds, NYSE, options, AMEX listed, LEAPS
marginable: muni, NYSE, AMEX, LEAPs
NOT: options
when investor sells mutual fund shares, sales is/is not taxed
is taxed, even if proceeds used to purchase other mutual fund shares in the same family of funds
T bills and notes differ
T bills are 0 coupon, quoted in a discounted yield basis
T notes pay a semi annual coupon, quoted as a % of par in 1/32
ERISA applies to
retirement plans in private sector only
indiv w a corporate retirement plan that promises to pay 40% of their salary for 3 years after retirement is in a xxx plan
defined benefit plan
IRA rollover can be done - how often
once a year
no load fund
if customer purchases a mutual fund where NAV = purchase price (no sales charge)
ad valorem tax is / not relevant when engaging in revenue bond analysis
not
it’s for real estate / property (GO bonds)
monthly non-agricultural payrolls are xx indicator
coincident
if inflation rate is 6.6%, Fed might sell US Gvt Sec to
reduce $$ supply
Dow JOnes INdustrial Avg is narrowest or widest gauge of stock mkt
narrowest
customer tells their register reps she wants to sell their securities only at $30 or above, the rep would place a
sell limit order at $30
stock index options are exercised for
cash (no exchange of physical securities)
if a bond is “held firm for 1 hour with a 5 min recall” it means
a rep has an hour to find a buyer for the security and is subject to a 5 min warning if during the hour, another B/D wants to place an order w that security
If a specialist “stops stock” at a specific price
broker is guaranteed that price on an order but can look for a better price in the mkt
best way to save for college w choice of trasferring beneficiaries is
Section 529 College Savings Plan
When purchasing mutual funds,
investor can’t use positions in a diff family of funds to qualify for breakpoints
when an investor purchases a bond at a discount and adjusts the cost basis toward par
referred to as accretion
a deposit of cash, traveler’s check, or cashier check (money order) of $10K or more requires rep fill out a …
what’s not required
currency transaction report
personal check for $10K doesn’t req a CTR
if in a joint account, a husband provides instructions to sell securities and cut a check in his name only,
rep can sell securities but would advise the husband that the check must be in both names
the fourth market is where
institutions trade securities btwn ea other, w/o B/D
selling short may be appropriate for an indiv who
already has a long position in the stock (shorting against the box and is used to defer a taxable gain)
short sale would be appropriate for someone
with net worth of $10K
Under FINRA Code of Arbitration
no appeal, all decisions are final and binding
Under FINRA Code of Procedure, if a participant is not happy w a result, can
first appeal to the National Adjudicatory Council
(25 days to file)
Hearing Panel –> NAC –> SEC –> FED
if a registered rep volunteers info on a proxy vote
rep may be required to register as a participant
if a customer complains about excessive trading in an account
called churning
when a B/D buys securities in order to sell them to a customer it is called
a riskless principal trxn (riskless and simultaneous trxn)
in a riskless principal trade, broker must disclose
the commission to the customer
new construction Limited Partnership offers
greatest depreciation opportunities, seek capital appreciation
is a prospectus sales literature?
no
any options sales literature must disclose that
options may not be suitable for all investors
when trading options, opening purchase would be offset by
closing sale
when trading options, opening sale would be offset by
closing purchase
is raw land a depreciable asset
no
exploratory program is or isn’t the riskiest O&G LP
is riskiest
accrued interest is calculated
beginning on the dated date
Under cumulative voting rights, investor can allocate their votes
any way they wish
investor who expects stock to stay neutral should
sell a straddle
stock that increases during a contraction is
countercyclical
under gross revenue pledge, debt service is paid before xxx
before operations and maintenance
OCC Options Disclosure Doc must be received by a cust
before or upon approval of account
no options related material can be sent to customer unless
person received the OCC Options Disclosure Doc
the BE of a covered call
is the mkt value of the long stock - premium
covered call is when you buy stock and sell call
covered put is when you short stock and sell put
one of the objectives for writing a covered call is
earn income
after tax yield on the bond
taxable yield * (1-TR)
Fitch credit ratings are
same as S&P credit ratings
mkt orders to buy are filled
mkt orders to sell are filled
at the lowest offer,
at the highest bid
(buy low sell high)
mutual fund’s POP is based on the
specific sales charge an investor will pay based on their inv and BE schedule
POP = public offering price
Investor receives NAV
If a RR puts the wrong account # on an order tix and the order is filled, RR can
bring situation to supervisor who can cancel and correct the tix
Treasury Receipts are issued by xx and backed by xx
B/D ; US Gvt Sec
If investor violates wash sale rule
investor not allowed to take loss on only the # of shares violated
you have to add the original difference to your cost basis and add to your holding period (you’re stuck)
In an inflationary environ, xxx are all appropriate investments
TIPS, gold and real estate (value adjusted to inflation)
Industrial Protection Index is a xx indicator
coincidental
REITs are not xxx
Suitable for what individuals
not DPPs (nor an investment co)
Suitable for indiv who do not have a high net worth (bc taxed on inc pass through, and don’t want high TR)
mutilated bond is never in xxx form unless validated by xxx
good delivery form, unless it’s validated by a trustee, registrar, transfer agent, paying agent or issuer of sec
when indiv variable annuity is annuitized
accumulation units become annuity units; # of annuity units is fixed but value based on performance of separate account
commissions are paid for
closed end funds not mutual funds or UITs
married put is where
customers buys a stock and a put on same day
- premium is part of the cost basis even if options expires
- no taxable event until stock position is closed
also called protective put
if option expires, gain or loss recognized
if option is exercised, premium becomes
in the mth of expiration
part of cost basis
client wishes to transfer an account from 1 BD to another, fillls out
Automated Customer Acct Transfer
- has 1 biz day to verify the contents and 3 biz days to transfer and ship the securities
dispute btwn 2 public indiv is not required to go to
arbitration
the least risky O&G LP
is an income program
Keynesian economics believe economy can be best controlled through
taxation and gvt spending
Order of liquidation in a LP is
Wages Taxes Secured Creditors General Creditors Suboridnated Creditors (Sub Debentures) Pref Stock Common Stock
easy monetary policy is when FOMC
purchases securities to increase Money supply and spur econ g
tight monetary policy is when FOMC
sells securities to decrease money supply and curb inflation
when FOMC executes open mkt trxn, trades w
primary dealers
bond is escrowed to maturity when…
when a muni deposits gvt sec in escro sufficient to cover the interest and principal pymt until maturity,
escrowed considered defeased or removed as a liability of the issuer
must be noted as such on the trade confirmation
in a muni secondary joint acct, all participants must sell bonds at xx price
at same price
treasury receipts do/don’t pay coupon
do not (zero coupon)
if client of a RR moves to another state, the rep can
maintain the acct provided the rep is registered in the client’s new state of residence
issuers are subject to blue sky laws w regard to
registration of securities
in expansionary g, which inv are suitable
cyclical stocks: auto, tech
B/D can / can’t work w ..
can’t work w public, participate in new issues, maintain inventory of sec, make a market
can work w other B/D
if shares are sold in a margin acct, increases
SMA
options are issued and guaranteed by the
OCC not SEC
yield based options speculate
incrase or decrease in YTM
DPPs pass through
passive gains/ losses to investors
wife can/can’t trade in her spouse’s indiv acct
can’t w.o trading authority, even if have another joint acct together
if given a breakpoint schedule and NAV, POP=
NAV/ (100%-sales charge)
orders are req to be approved when?
promptly after execution by supervisor
order tix must incl
trade conf incl
if order is discretinoary and if solicited/unsolicited
none of those
for a muni bond to be good delivery w/o the legal opinion
must be marked ex-legal
when a customer dies, open orders are
immediately canceled and acct is frozen
minor’s account is taxed at the
parent’s rate until 18, minor’s rate reaching 18
EPS calc
must subtract Preferred divd from earnings
Given a change in IR, LT are xx than ST bonds and low coupon bonds are xx than high coupon bonds
volatile?
more
more
FINRA and NYSE have criminal authority?
no, can censure a firm
divd distrib from a mutual fund are taxable
at time they’re accrued even if they’re reinvested
when a mutual fund pays a distrib, the NAV
decreases by the amt of the distrib
cash divd received on stock are /aren’t taxed
are taxed, even if reinvested
customer must sign the Options Agreement within
15 days of an account being approved
if a RR doesn’t know the total income or net worth of client, rep
can’t recommend muni bond trxn
if a customer executes a rollover of 401K, xx is held as tax
20%
can apply to recover the withholding tax as tax credit
if indiv completes rollover and mixed funds w previous funds in IRA, proceeds are
ineligibel to be put back into a qualifed corp plan in future
- need to maintain separate and distinct IRA
when indiv inherits IRA where mandatory distrib begun, those distrib must
continnue, those they will be based on life expectancy of new owner
add’l bonds test is issued by issuer to determine if
it has suff strength to issue add’l bonds, given it already has outstanding debt
as expiration of option apporaches, time value
decays
interest in a margin account is based on
broker call rate
who determine if security is eligible for margin
Fed (NYSE, any Nasdaq are margineable)
- options aren’t
if us trade balance is negative, $ will
fall, increase value of int’l mutual funds
.15q indicates
quarterly dividend of $.15/sh
unregistered personel make cold calls thru any leads must
follow up by registered indiv
minor account can only be a party to
UGMA or UTMA, minor can’t open indiv acct
money mkt consists of
debt securities
T-bonds w
money market fund
P/S is an
equity security, not in money market
interpositioning is
violation that occurs when firm places itself in btwn 2 clients
when a registered rep recommends out of favor co that may be undervalued, what strategy
value portfolio mgmt strat
3 phases of money laundering
placement, layering, integration
- placement - easiest to catch, deposit illegal funds
- layering - $ trasnferred thru complex fin trxn to separate funds
- funds mixed w legit funds
universable variable life ins policies can be sold by
indiv w insurance and sec license
bonds that are insured must be delivered w
some proof of insurance, and diclose hte info on trade conf
equity resarch analysts can’t
trade contrary to opinions, can trade consistent
efficient mkt hypothesis
theorize that all info si full reflected in price of stock
disputes regarding sex harrassment or discrim will only go to arbitration if
both parties agree, ohterwise to court
correspondence
sales lit
emails sent to any # of exisiting cust or up to 24 prospective cust are considered; subject to spot checks
material sent to >25 prospective cust within 30 day, must be preapproved by principal
