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Investment Companies > Management Companies > Flashcards

Management Companies Flashcards

1
Q

How long is the investment adviser’s contract initially set at?

A

2 years

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2
Q

What is the 75-5-10 rule for diversified funds?

A

75% or more of assets in securities

5% maximum of its assets invested in any one issuer

10% maximum holding of voting securities in one issuer

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3
Q

Growth fund

A

invests primarily in equities of rapidly growing companies

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4
Q

Growth and income

A

invests in “blue chip” equities that provide dividends and growth potential

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5
Q

Income fund

A

invests in fixed income securities such as preferred stock and bonds

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6
Q

5 types of income funds

A 
US Government Securities
Municipal Bonds
Preferred Stock
Corporate Bonds
Money Market Securities
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7
Q

Balanced fund

A

balances between equities and fixed income securities

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8
Q

Index fund

A

matches portfolio composition to a recognized index; management fees are lower

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9
Q

Specialized fund (sector fund)

A

invests in a particular industry or geographic area

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10
Q

Special situation fund

A

invests in companies in bankruptcy or takeover candidates

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11
Q

How is Net Asset Value calculated?

A

Total market value of underlying securities divided by number of common shares outstanding

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12
Q

What does it mean if a fund is no-load?

A

Sold directly by sponsor, so there is no sales charge

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13
Q

What is a money fund?

A

All shares prices locked at $1. As NAV increases, additional shares given out

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14
Q

What does FINRA impose as the maximum sales charge for a open-ended fun?

A

8.5% of Public Offering Price

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15
Q

How do you compute a sales charge?

A

Ask Price - Bid Price(NAV) / Ask Price

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16
Q

If an open-ended fund share is redeemed, when must payment occur?

A

within 7 calendar days

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17
Q

What is the limit to the Redemption fee a fund can charge?

A

Redemption fee + sales charge must not exceed 8.5% of POP

18
Q

Breakpoints

A

Reduced sales charge for large dollar purchase

19
Q

3 Breakpoint levels

A

0-$10k = 8.5%
$10k-$25k = 7.75%
$25k & over = 6.5%

20
Q

Offering price formula with breakpoints

A

NAV/

100%-Sales Charge %

21
Q

Letter of Intent

A

Allows a customer to indicate they will purchase a large amount of a fund over a period of time and they then get the breakpoint price

22
Q

Can a letter of intent allow for backdating of past purchases?

A

Yes, up to 90 days

23
Q

How long does a letter of intent last?

A

13 months

24
Q

Can the breakpoint be met by asset appreciation?

A

yes

25
Q

What are rights of accumulation?

A

Allow a customer to include current value of owned shares of a mutual fund when determining breakpoint pricing

26
Q

What are 2 situations when a customer would not be charged a sales charge?

A

Reinvestment of profit into fund and moving to another fund in the same “fund family”

27
Q

What are Rule 12b-1 fees?

A

Fees charged to mutual fund shares for purposes of promoting fund

28
Q

What is the maximum sales charge for a Rule 12b-1 fund?

A

7.25% if no account maintenance fee; 6.25% if there is an account maintenance fee

29
Q

Maximum of 12b-1 fee

A

.75%

30
Q

Class A Shares

A

High sales charge; very low 12b-1 charge; good for long-term investment

31
Q

Class B Shares

A

Contingent deferred sales charge, higher 12b-1 fee; good for intermediate term investors

32
Q

Class C Shares

A

No sales charge, high 12b-1 fee; only suitable for short term investment

33
Q

How does ETF pricing differ from mutual fund pricing?

A

Adjusted constantly, no sales charge

34
Q

how to calculate a fund’s expense ratio?

A

Total Expenses/Total Net Assets

35
Q

How much income must a fund distribute to avoid taxation on that income?

A

97% of net investment income

98% of capital gains

36
Q

Formula for current yield before ex-date

A

Annual income/offering price

37
Q

Current yield after ex-date

A

Annual income/

offing price + prior year distributions

38
Q

Front-end load fund vs no-load fund

A

Front-end load funds have a sales charge

39
Q

Are ETFs open-end or close-end?

A

Open-end, but trade on exchanges

40
Q

Which is more tax-efficient: ETFs or Mutual funds

A

ETFs because they do not pay out capital gains on a yearly basis

41
Q

how often must mutual funds send our financial statements to shareholders?

A

2x per year

Investment Companies (5 decks)

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