Miscellneohs Jmlie Flashcards
What is soft dollar compensation ?
It is received by the adviser from the broker dealer
What is the difference between the offering price of common shares and the par value?
Additional paid in capital
What are loans with no personal liability for repayment known as?
Non-recourse loans
What does the securities exchange act of 1934 regulate?
The secondary market
What is the maximum duration of a warrant?
10 years
What is form ADV?
It’d the form an investment adviser has to file in order to register (SEC and the state)
What does ERISA regulate?
Private sector pension plans
How long does an investor who wants to take action against a firm or representative have to do so?
6 years
What are the three annuity purchase options?
Single payment deferred annuity,
Single payment immediate annuity,
Periodic payment deferred annuity
What does qualified mean in the context of retirement accounts?
Contributions are made with pre-tax dollars
What is a sinking fund?
A fund for the purpose of paying off bond holders
Can investment advisors use discretion in managing their clients account if given verbal consent?
Yes, but they must also receive it in writing within ten days
Can investment advisors charge fees based on capital gains or share in the capital appreciation of their client’s fund?
No!
Sanctions imposed by FINRA are effective within how many days of a written decision?
30 days
What is the difference between tactical asset allocation and strategic asset allocation?
Tactical asset allocation is when you increase your holdings of bonds, and strategic asset allocation is switching to fixed-income shit
Are pension consultants considered investment advisors according to the investment advisers act of 1940?
Absolutely
A federally covered investment adviser who has become ineligible to continue their federal registration has how long to file formnADVW?
90 days
Who is exempt from the definition of an investment adviser according to the investment adviser act of 1940?
Banks, LATE (lawyers, accountants, teachers, engineers), any person who’s advice is only related to government issued securities, broker dealers who receive no compensation for such advice which should be incidental to their business as a broker-dealer
Which of the following plans is non#funded? Deferred compensation plan, TSA, Keogh, TDA?
The deferred compensation plan is unfounded because it is a CONTRACT
Can a state administrator compel a registrant to pay restitutions ?
No, only a court can
Is the maximum penalty under the Uniform Securities Act?
Max penalty is 3 years in jail and or 5,000 dollars
Does a broker dealer have to notify the SEC that it intends to do business in a specific state when registering ?
No
Does FINRA regulate broker-dealers or investment advisers?
Just broker dealers. Advisers (firms) and IARs are regulated by the states and the SEC ONLY
A type of expense and profit sharing arrangement where the LPs absorb all the expenses and the GP does not receive payment until the LPs have recovered their costs is known as
Revisionary Working Interest
What is the quick ratio and how is it different from the current ratio?
It is the same thing as the current ratio expect inventory is subtracted from current assets
Under the USA, the statute of limitations for civil action against a firm by a purchaser of a Security is:
2 years from discovery, 3 years from occurrence
How is an open-ended mutual fund liquidated if the client doesn’t specify ?
the shares will be sold on a FIFO basis!
According to the Scurities and Exchange Act of 1934, when institutional investment managers trade with discretionary authority , they must file with the SEC if holdings in
Equity securities are valued at $100,000,000 or more
Does diversification reduce nonsystematic or systematic risk?
It reduced nonsystematic risk. Systematic risk is basically risk u can’t avoid
If an IAR works for a federally registered investment adviser, where must they register?
They only have to register in the state they work in, even if they have clients in other states
An agent sells a non exempt unregistered security to the account of one customer in a neighboring state. This is an example of
An isolated non issuer transaction, which means it is an exempt transaction
“An isolated non-issuer transaction involves an ad-hoc exchange of securities between two private parties, often on an over-the-counter (OTC) basis, exempting it from registration”
If u are given the market price of the stock and the QUARTERLY dividend, how do u calculate the current yield?
Get the annual dividend, and then divide it by the current market price
What is the Russell 2000 index?
Index that tracks 2000 small and mid-cap companies
What is a wrap account, and what brochure must be given to clients who open wrap accounts?
A wrap account is an account that charges a fee for the advice received as well as the transaction. Clients must receive a brochure called Schedule H
What are soft dollars?
They’re essentially kickbacks that brokerage firms give to investment advisers that are routing client order flow to them. Obviously this isn’t what they want it to be called or acknowledged as being, but that is what it is basically.
“The services received need to be for the benefit of the client”
Are sports and entertainment representatives- that offer advice of investing, tax planning, budgeting, etc- now typically required to register as an investment adviser? What about pension consultants?
Yes and Yes
When does a broker-dealer’s registration become effective?
Either at noon 30 days after the initial application was received or at noon after the administrator has received the last piece of required information
If an agent works for a broker dealer, do they have to be registered? Are there any exceptions
Yes, the only exception is for officers or directors who have no involvement with customers, securities transactions, or supervision.
Does a website have to FINRA logo on it?
No, it can only say something like “Member of FINRA”, and if it does that it must also provide a link to FINRA’s website
What are some key words that indicate it is a security,
“Interest, certificate, option, variable”
“Investment contract” is a security
Fixed contracts/annuities, futures contracts are not securities
SINGLE STOCK FUTURE is the one exception: it is a SECURITY
Where are agents (of a broker-dealer) required to register?
Their home state, state of employment, and state of residence of their customers
Who are not investment advisers?
Banks, savings and loans, LATE, an agent, publishers of newspapers and magazines, anyone else exempt by the administrator (ie, an adviser who gives advice on government securities or presumably any other exempt securities)
What is an institutional investor?
An institutional investor is a person or firm who trades securities for his or her own account or the account of others.
Who is a qualified purchaser?
It’s like an accredited investor on steroids. An individual or family owned business with at least 5 milly in investments, or a trust sponsored by qualified purchasers.
Do broker dealers offering wrap accounts have to register as investment advisers?
Yes (because they are being paid fees for execution of transactions AND advice)
What is a broker who maintains a fair and orderly market for other brokers called?
A specialist
What is a municipal bond scale?
It displays various YTMs for munies of different maturities
When registering securities for sale on the primary market, do you have to provide a consent to service of process? What else?
Yes, amount of securities being offered, all other states where filing has or will be made, “specimen of the security”
In order for a private investment company to charge a performance based fee, what must the client have?
Either a net worth of at least 2 milly or 1 milly under the adviser’s management
Which by-laws govern the resolution of complaints filed with FINRA?
Code of Procedure
Which business entities protect personal assets from personal liability?
LLc, c corp, S corp
How do you calculate risk adjusted return (or excess return)
Beta (market rate - risk-free rate)
What can and cannot an administrator do to a broker-dealer who is in violation of the USA
They can: petition a court to issue an injunction, suspend the broker-dealer’s registration, and issue a cease-and-desist
The USA does not empower the state administrator to levy fines against the broker-dealer
How much can you contribute to an educational IRA?
Up to 2k per year
What is the diffference between the weak, semi-strong, and strong versions of the efficient market hypothesis?
Weak- prices only reflect past information
Semi-strong- all past and current information is priced in (but not necessarily non-public information(
Strong- markets are perfect and constantly price in every single piece of information
Under the Uniform Securities Act, is a person effecting transactions in commodities an agent?
No because they are not dealing in securities, only commodities
Do shareholders vote for a dividend?
No, it’s determined by the board of directors
When does registration of firms and agents expire under the USA?
December 31st
How long does a respondent have to appeal an administrator’s order?
60 days
Do Investment Advisers have to be registered in the states they do business? Are there exemptions?
Yes, but there are state registration exemptions for IAs who are
- federally registered,
- manage portfolios for investment companies
-manage portfolios in excess of $110,000,000
-have no office in the state and conduct business exclusively with financial institutions
-have no office in the state and offer advice to five clients or less in any 12 month period (De Minimis Exemption)
Can an Investment adviser borrow from a customer?
No, unless it’s an immediate family member apparently
Can a state administrator subpoena evidence when investigating a broker-dealer?
Yes
What is the maximum maturity of commercial paper?
270 days
What is the maximum penalty under the Investment Advisers Act of 1940?
5 years in prison and/or a $10,000 fine
For the USA it’s 3 years in prison and/or a 5k fine
What is an investor who sues for violation of the Uniform Securities Act entitled to receive?
The value that they paid minus any income received during the holding period
Interest on their money for the holding period
Court costs
Which 3 persons can civil action be taken against for violation of the USA?
An agent,
A firm,
The agent’s supervisor
What is a 121b fee and what does it include?
It is a annual marketing or distribution fee on a mutual fund, and includes printing and promotional fees
What sort of offers does a state administrator have jurisdiction over?
If the offer originated in the state, was directed in that state, or was ACCEPTED in that state.
Also If it’s a newspaper that is published in the state and has more than 1/3 of its circulation in the state
IF the OFFER was a radio or television broadcast that originated outside of the state, then the state administrator does NOT have jurisdiction
What is the net worth requirement of an institutional investor in order to be required to file form 13F with the SEC?
100 milly
What are stop-limit orders?
If a security reaches the stop price, it becomes a limit order, so it will only execute at the limit price or better.
What are sell-stop and buy-stop orders?
Sell-stop is if u have a security at say 50 and u set a sell-stop at $45. If it hits 45, this triggers a market order to sell the security
A buy stop is same but in the opposite direction. If you have a stock at $50, and you set a buy-stop at $55, and the stock hits $55, this will trigger a market order to buy the security
Where can information be found on corporate bonds?
The yellow sheets
Explain the difference between investment advisers and broker-dealers for verbal authorization (for discretion)
Investment advisers can use discretion if they are given verbal consent so long as the client provided written discretionary authority within 10 business days.
Broker dealers need written permission from the client before entering the first discretionary order
An administrator may revoke the exemption from registration from which type of entity?
Non-profits (ie, a church)
What is a Regulation A offering?
It is a rule that allows Canadian and US issuers to raise up to 75 milly in any 12 month period with an exemption from the standard registration process
What is the difference between qualifying rollovers vs direct transfers?
A qualifying rollover involves moving funds from one account to another type of account (at the same institution), and only one can be performed per year and within 60 days
A direct transfer is used to move funds between a single type of account between two different institutions