Progress 1

Question 1

An accredited investor must have

Answer 1

net worth >$1m excluding primary residence, or >$200k in gross annual income in each of the last 2 years (or $300k if married)

Question 2

What are the AUM ranges an IA needs to register with the SEC, SEC or State, or exempt from SEC registration and just needs state registration?

Answer 2

AUM>$110m, register with SEC only
$100m<AUM<$110m, register with state or SEC
AUM<$100m, exempt from SEC registration, register with state

Question 3

What is the job of a transfer agent?

Answer 3

acts as proxy agent, issues and cancels certificates to reflect changes in ownership, handles lost, destroyed, and stolen certificates

Question 4

What is the responsibility of the registrar?

Answer 4

Maintains issuer’s ownership register for each issue of securities

Question 5

What is an institutional investor?

Answer 5

large entities that pool money, assets>$50million

Question 6

Who enforces MSRB rules?

Answer 6

FINRA or SEC for broker/dealers
Comptroller of the currency, FRB, FDIC for bank dealer violations

Question 7

How much does FDIC cover?

Answer 7

$250k per depositor per FDIC-insured bank

different from SPIC coverage ($250k cash, up to $500k of cash and street name securities)

Question 8

When would a client-signed disclosure agreement be required before trade execution?

Answer 8

OTC stock with price<$5 per share (penny stock)

Question 9

What hours can a customer get a cold call?

Answer 9

between 8am and 9pm local time

Question 10

What is a blue-sky law?

Answer 10

laws established by the state based on the Uniform Securities Act

Question 11

When does the DOJ have jurisdiction?

Answer 11

criminal proceeding involving violation of federal securities law

Question 12

What is the Securities Exchange Act of 1934?

Answer 12

regulates secondary market
SEC utilizing SROs
FRB (Fed Reserve Board) oversight on extension of credit (use of margin) (Reg T)
registration requirements
trading and insider regulations

Question 13

How to calculate outstanding shares?

Answer 13

issued stock-treasury stock

Question 14

What is market capitalization, and what is the formula for it?

Answer 14

The value of the company traded on the stock market
outstanding shares x market price per share

Question 15

What is a warrant? When does it have intrinsic value?

Answer 15

contract giving investor the right to buy or sell at a certain price in a specific time frame
-has intrinsic value when common stock market price is above warrant’s subscription price, and you can buy at subscription price

Question 16

What is control stock?

Answer 16

securities acquired by control persons (ex: CEO) in the secondary market, control person owns >10% of outstanding shares of a company

Question 17

What is the conversion ratio for preferred/common stock?

Answer 17

(par value of preferred/conversion price)=#common stock shares
#common stock shares x market price= approximate value that preferred stock should be trading at

Question 18

What is Rule 144?

Answer 18

unregistered, restricted and control stock are sold under this rule
must submit Form 144 when selling stock
restricted (unregistered): volume limits for affiliate, 6 mo holding period, no volume limits for non-affiliate
control: volume limits, no holding period

Question 19

When is a convertible bond taxed?

Answer 19

After it is converted and the stock is sold

Question 20

For corporate and municipal bonds, accrued interest is calculated on a __ day month and a ___ day year

Answer 20

30 ; 360

Question 21

What is the difference between a Eurodollar Bond, Yankee Bond, and an ADR?

Answer 21

Eurodollar Bond is issued outside of US with principal and interest paid in USD ( not registered with SEC)
Yankee is issued by a foreign entity in the US, also paid in USD,
ADRs (American Depository Receipts) are stocks that represent foreign equities but trade in the US

Question 22

What security is used for import-export financing?

Answer 22

Bankers Acceptance (BA)

Question 23

What are maturities of T-notes, T-bonds, and T-bills?

Answer 23

T-bonds: >10 years
T-notes: 2-10 years
T-bills: <1year

Question 24

What are Repos (Repurchase Agreements)

Answer 24

one party borrows money, with the loan being secured by securities

Question 25

What are Treasury Receipts?

Answer 25

brokerage firms and banks buy gov-backed securities and strip them of their coupons, selling them as zero-coupon bonds

Question 26

What are municipal notes usually used for?

Answer 26

interim (temporary) financing
short term debt, construction projects, generate cash flow