Regulatory entities agencies and market participants Flashcards
1
Q
Securities exchange act 1934
A
Primary securities regulator
Broker dealers
Self regulatory organizations
Reporting companies
2
Q
Broker dealer may not claim registration
A
The commission has passed upon or approved the broker dealers financial standings, business, or conduct
3
Q
A B C
A
Agents brokers commissions
4
Q
P D M
A
Principal - dealer - markup/mark down
5
Q
Not a security
A
Insurance guaranteed whole life universal life term life endowment fixed and equity indexed annuity policies
Retirement plans (IRAs, Keogh, pensions)
Qualified retirement plans
6
Q
Associated persons = DEBOP
A
Directors employees branch managers officers and partners
7
Q
Sanctions for broker dealers “BROKER CHECK”
A
Don’t arrest
Don’t jail
Don’t impose injunctions
8
Q
self regulatory organization’s SROs
A
FINRA Financial industry regulatory authority
CBOE Chicago Board options exchange
MSRB Municipal bond rulemaking board
9
Q
Margin accounts
A
Put half down then borrow the rest from a regulated entity
10
Q
Commodities commodity futures and currencies
A
Not covered by SIPC meaning they are not securities
11
Q
SIPC Insurance covers
A
Missing assets
NOT Market loss
12
Q
FDIC (Federal deposit Insurance corporation)
A
Covers member banks up to $250,000
13
Q
Accredited
A
Net worth of 1 million excluding equity in home
Or annual income of 200,000 for two most recent years
14
Q
Investment advisor
A
Investment advice
Business advice
Compensated for advice
15
Q
Issuers and underwriters
A
Issuer (IPO)
Common stock
Primary sell
16
Q
Traders and market makers
A
Like a car deal
MM- Manheim
Traders- me
17
Q
OTC Over the counter
A
Unlisted also known as Lindsay Lohan stock he pulling trash stock or D-list
18
Q
MMBB
MARKET MAKERS
A
Market makers by at the bid
And sell at the ask
19
Q
Broker dealers
A
Buy at the ask
Sell at the bid
20
Q
100 shares equals
A
1 round lot
21
Q
Firm quote
A
A price quote that guarantees a bid or ask price up to the amount quoted
22
Q
T + 2
A
Corporate stock
23
Q
T +1
A
US government/federal securities
24
Q
T
A
Trade Date
Or
Same Day
25
A market maker in an over-the-counter stock
Buys at the bid price
26
CUSIP number
Committee uniform security identification procedures meaning
Personal identification number for each individual security nine digits
27
Custodians and trustees
Persons or institutions responsible for making all investment decisions
28
Transfer agents
In charge of good delivery
UPC- uniform practice code
29
DTCC
Depository trust and clearing company
Worlds largest securities depository
WORLD
30
NSCC
National securities clearing corporation
U.S.
31
Primary market
Capital markets such as stock and bond markets
Primary focus is to raise funds in the public and private sector
32
IPO
SPO
APO
Primary sell
Securities act of 1933
33
Primary issuer transaction
(Manheim)
IPO- initial public offering’s
APO- additional public offerings
34
Secondary non-issuer transaction in the primary market
(Me/individual)
Financial markets
Stock market
Bond market
Physical or electronic venue
Regulated conduct rules
35
Secondary offering
Sales by one or more major stockholders to the public
Proceeds paid to stockholders
36
Third market
NASDAQ (Apple)
37
Fourth market
Unlisted
No middleman
ECNs - Electronic communication networks- Open 24 hours examples are Merrill Lynch and Raymond James
38
3 Ps of 1933
Paper prospectus and primary
IPO
39
Which of the following statements regarding the market is true?
It is composed of listed securities traded OTC
40
The federal reserve board
Helps regulate the economy
41
Monetary policy
Quickest way to make changes to air money supply
42
Fiscal policy
Based on taxes and spending
43
M1
Cash +demand deposits (checking)
44
M2
M1 +CDs +money market mutual funds +overnight repose
45
M3
M2 + negotiable CDs + term repos
46
Open markets activities and impact on the economy
T-bills FOMC
Most frequently used
47
Raising interest rates or tightening contracts
Bearish
fight inflation
Bond prices decrease
48
Lowering interest rates or loosening money supply
Bullish
Risks inflation
Bond prices increase
49
BBFF
Bank to bank for federal funding
50
Prime rate
Best rate
Big banks to big customers
The general public usually pays prime + one or two
51
Financial statements
Assets = liabilities + net worth (Equity)
52
Working capital
Current assets Minus current liabilities
53
Recession
Two consecutive quarters
54
Depression
Six consecutive quarters
55
Leading indicators and measures for economic factors
The money supply = M2
Price rule of S&P 500 index of common stocks
New building permits for private housing units
Orders for consumer durable goods and materials
Average weekly production hours in manufacturing
56
Coincident
Usually mirror movements of the business cycle (same time)
Employees on non-agricultural payrolls
The index of industrial production
GDP
57
Lagging
Consumer price index for services
Prime rate charged to banks
Labor cost per unit of output for manufactured goods
Average duration of unemployment
58
Inflation
Rate at which;
goods and services is rising
purchasing power of currency is falling
59
Deflation
Decline in prices
60
Stagnation
Prolonged periods of slow economic growth with high unemployment rates
61
Stagflation
Combination of inflation and high unemployment
62
Utilities
Highest Dividend payout ratio
63
Cyclical
Equity security affected by ups and downs in overall economy
64
Non-cyclical (defensive)
Stock that provides constant dividend and stable earnings regardless of the state of the stock market
```
Examples include;
Food
Tobacco
Drugs
Liquor
Clothing
Cosmetics
Utilities
```
65
Counter cyclical
Stock who’s price tends to move in opposition to overall business cycle
Examples include;
Precious metals
Used automobiles
66
Growth industries
Industry that is growing faster than the economy
Apple
Tesla
Microsoft
Paying hardly any dividends
A. Bioengineering
B. Computers and IT
67
Special situation stocks
Stocks of a company with unusual profit potential resulting from non-recurring circumstances
New management
Introduction of a new product
Oprah’s stock because she pays to help her stock stay afloat
68
GNP
Measures the total value of all the goods and services produced by a national economy
Example includes;
US plant in Mexico or outside of the country
69
Deficit
More money flowing out of the country
US interest rates are low
US dollar is strong
SID- strong import deficit
US currency buys more foreign goods
70
Surplus
More money flowing into the country
US interest rates are high
US dollar is weak
WES- w. Export services
71
Keynesian theory
Active government involvement
72
Investment objective must
Be included in the registration statement
73
Registration statement
Lists everything possible on that security and up to five years business history
74
Tombstone advertisement
New mutual fund
Name of the issuer
Type of security being offered
Public offering price POP
Number of shares to be sold
75
Shelf offering
Raising money immediately and notconcerned with later
Only strong companies can do this
76
State registration requirements under the uniform securities act
NASAA or BLUE SKY
“STATE”
77
Coordination
Method of registration where the issue were files with the state at the same time files with the SEC
78
Qualification
IQ
Intrastate by qualification
Interstate offerings
States have high IQ
79
Prospectus
You can sell with this
final asking price
Offering date
Offering price
Description of offering
80
Preliminary prospectus
Red herring
Take orders
Distribute sales literature or advertising material
81
Underwriters may
Take indications of interest nonbinding on both sides
Can’t take any checks during cooling off period
Minimum of 20 days
82
Exempt securities
They don’t have to do a prospectus
US government securities federal (exempt)
Municipal bonds = State and local
Commercial paper and bank acceptance is with the maturity of 270 days
Insurance policies and fixed annuities
National and state bank securities
83
Exempt transactions
Regulation A+
Regulation D
Rule 147
Regulation S
84
Rule 147
Securities offered and sold exclusively intrastate
80% in state
85
Which of the following is used by corporations raise capital?
APO and IPOs
86
What can be delivered during the cooling off period of a new registration?
A red herring may be delivered to prospectus investors
87
What is associated with economic expansion
Increasing GDP
higher stock prices
more consumer demand
NOT rising consumer debt
88
Fiscal policy
Gives fits because it involves taxes and spending
89
What rate is set by the federal reserve board
The discount rate
90
SIPC coverage limits bar
$500,000 total
up to which only $250,000 can be cash
91
What is the basic corporate balance sheet equation
Assets = liabilities + shareholders equity
92
Working capital is
Current assets - current liabilities
93
Who decides how much and how often stock sells?
The Board of Directors
94
A stock dividend or a forward stock split
Not a taxable event
The number of shares goes up
Cost basis and cost of shares goes down
The aggregate position stays the same
It’s not taxed until the shares are sold
95
Reverse stock split
1:2
Cutting shares in half
value doubles
96
Process for cash dividends (STOCKS)
```
D
Declaration = BOD
E
Ex = FINRA / Exchange
R
Record = BOD
P
Payable = BOD
```
Stock is reduced by your dividend
97
DERP
```
D
Declaration = BOD
E
Ex = FINRA / Exchange
R
Record = BOD
P
Payable = BOD
```
98
Ex date rules
Buy on or after ex-date
no received dividends
99
Spin off
Type of divestiture where a parent company sells all or part of the shares of a company to create a new company
100
Take over
The purchase of one company known as a target company by another in a hostile manner
101
Tender offer
Buying securities for cash
7 business days
102
MMBB
Market
Maker
Buys
@ Bid price
103
Proxies
Power of attorney
The public never pays expenses for;
clerical
administration
mailers
104
Notice required...
No later than 10 days prior to the record date
105
Under the cumulative voting system and investor but shares of CDE would have?
500 votes yes that he could cast in anyway he chooses among five directors
106
Client has 100 shares of GH I common stock when the stock undergoes a split. After the split the client has?
No effective change in value of the position
107
Par value
Common =1
Preferred = 100
Bonds = 1000
108
Market value
Based on supply and demand
109
Warrants
Long term
Above market value
Attached to bond offering
110
Rights
Short term
4 to 6 weeks
Below market value
111
Preferred stock
Acts like a bond
fix stated dividends
112
Interest rates go up
Preferred stock goes down
113
Participating preferred stock
Pays an extra dividend
Preferred paid first
Common paid second
Preferred then paid the additional
114
ADRs
American depository receipts
Equity positions
Facilitating the trading of foreign shares in US market
Helps by Sony stock in US
Facilitates US citizens owning foreign shares
115
Dividends
Current yield
Current rate of return
116
Capital gains
Losses
Based on your income bracket
117
SEC rule 144
Regulates the sale of control and restricted securities
No holding period
Held for six months
Effective for 90 days
118
Penny stocks
Unlisted security trading at less than five dollars per share
Exempt from the suitability statement but NOT exempt from disclosure document
Monthly statements are provided to customers
119
Market capitalization
(CMV/share) x Number of common shares outstanding
120
Standard and poors 500 (S&P 500)
LARGE
121
The Wilshire 5000
Broadest US market
122
Characteristics of bonds
Borrow the money (debtor)
the investor lends the money (creditor)
123
Call provisions
Advantages to the issuer
places a ceiling on how high a Price of a bond will increase
124
Interest
The charge of the privilege of borrowing money usually stated as a percentage
Usually every six months
Par + semi annual interest payment
125
Accrued interest
Paid by the buyer to the seller
For corporate and municipal bonds
Using 30 day months and 360 day years
Fort government securities
126
Bonds trading flat
| without accrued interest
Trade on an agreed-upon market price only
127
Zero coupon bond
Sold at a discount and mature at par
128
A bond would be considered speculative below which of the following ratings?
BBB
129
list treasury bills treasury bonds and treasury notes in ascending order of maturity
Bills
Notes
Bonds
130
The only 100% back by the full faith and credit of the United States government mortgage Association
Ginnie Mae = GNMA
Interest taxed at all levels- federal, state, and local
131
4 Gs
Ginnie
Guaranteed
Government
Guaranteed monthly income
Pays monthly interest
132
Collateralized mortgage obligation’s
CMOS
Equity positions
Pools of private individualize mortgages
Pass through certificates
Monthly check
133
Collateralized debt obligations
CDOS
Very risky
Pool of non-mortgage-backed security‘s
134
Money market securities
Short term
High quality debt
Best liquidity
Mostly T-bills
One year or less to maturity
135
TANS
Taxes
Tax anticipation notes
Example is Worthington sidewalks
136
RANs
Revenue
Revenue anticipation notes
Example is OSU wants new bleachers
137
Commercial paper
High quality short term debt obligations
270 days maximum maturity
138
Bankers acceptances
Facilitates foreign trade of imports and exports
Backed by the letter of credit
Issued at a discount
270 days maximum maturity
139
US treasury bills
Treasury notes and bonds in the final year of maturity
140
Liquidation priority list
Taxes
Secured Debt
General creditors
Common stock
(MONEY MARKET INSTRUMENTS)
141
Municipal bond characteristics
GO (General obligations) -T Taxes
Backed by full faith and credit general taxing Authority
Political subdivisions cities and counties - Ad Volorem (real estate) taxes (property tax)
142
Double-barreled Bonds
Primarily backed by revenue ultimately by municipality
143
Revenue bonds
Self-supporting
Fees are from highways bridges airports and parks
144
Open End Bonds
Allowing further issuance of bonds with the same status and equal claims on assets
145
Closed End Bonds
Allowing NO further issuance of bonds with an equivalent lien on assets
146
Revenue bonds
Industrial development revenue bond IDRs
Used to construct facilities or purchase equipment
147
Safest bonds
Public housing in new housing (SECTION 8 Bonds)
Backed by for faith and credit of US government
148
Section 529 Plans
Municipal fund securities for K through 12 and post secondary education
The donor may also be the Donee
Unlimited donations
5 year aggregate
149
Section 529 Plans
Prepaid tuition plan
College savings plans
Local government investment pools (money market)
Achieving a better life experience account (ABLE)
Ability or disability
150
Muni bonds
Whatever level is given to you in bonds they tax you on the same level
Federal tax exempt interest
Taxable at state and local
151
A B C
Agent broker commission
152
P D M
Principal Dealer Mark-up
153
Gifts and gratuities to other municipal dealers
$100 limit per year
154
Derivative securities
Speculative contracts
Risky
