Review Questions Flashcards
What does a municipal principal approve/review?
Each new account, each municipal transaction, each customer complaint, mailing pieces that solicit business
What’s bullish?
Inverted head and shoulders
Saucers
What does the fill or kill order do?
It gives the trader one try, on which they must take the full trade or cancel the order.
What limited real estate partnership doesn’t do depreciation?
Raw land
How do capital gains work?
Long term is taxed at a max of 15%-20%; short term is taxed at income tax bracket, max of 37%
Consolidated tape shows NYSE trades that happen where?
Everywhere
What’s NASDAQ’s order system?
NASDAQ Market Center Execution System (Single Book)
What’s NYSE’s order book?
SuperDisplay Book
Do tapes show commissions?
No. Just the cost of the stock
If a person becomes disabled before 59.5, what happens to their IRA withdrawals?
They can be made penalty tax free, but still are taxable as ordinary income
When does a company need shareholder approval?
For stock splits or to issue convertible shares. Basically anything that’s going to decrease someone’s share in the company.
What is a defensive company regarding the business cycle?
Not normally effected by the changing economy.
Industry example: Pharmaceuticals
What are the classic cyclical stocks?
Car manufacturers, home builders, and durable goods producers
What are institutional clients?
Banks Investment companies Insurance companies Employee benefit plans with at least 100 employees Persons with at least $50 million
When do communications with institutional clients need to be reviewed?
post
How do you tell open end companies apart from closed end?
Open end companies trade with a sales charge, closed end do not
Open end must be sold for at least NAV, closed end don’t have that requirement
What has a negative long term effect on stock prices?
Rising interest rates
Rising capital gain tax rates
Rising inflation rates
What are factors that cause a security to be more volatile?
Lower coupon Discounted Long term Large discount Large premium
What’s the senior citizen rule say?
Senior citizens must understand the risks, benefits, and costs of the product
What is true about variable annuities?
They must be registered with the SEC
They must be sold with a prospectus
They are participating forms of the investment company
They are sold with a sales charge
At what level are gain and loss computed in a partnership?
The individual partner’s level
Are partnerships taxable entities?
No
What is true about a bank qualified municipal issue?
It must be a public purpose issue
The purchasing bank can deduct 80% of the interest expenses used to fund the purchase of the bonds
What do we know about new municipal selling practices?
Customer needs a copy of the Final Official Statement if it’s printed
Spread must be disclosed on non-competitive bids and negotiated bids
Customer must receive order priority provisions used by manager
Customer must receive confirmation showing the purchase price
What can REITs invest in?
Real estate, mortgages, and government securities (not in limited partnerships)
How does margining work and who uses it?
It uses a standardized stress-testing of price declines or increases to compute margins
Used by institutional investors
How do corporations raise funds to build new facilities?
Issuing rights to outstanding shares of common stock
What does FINRA’s 5% Policy apply to?
Over-the-counter and exchange transactions that don’t involve a prospectus
Which bid is always filled: non-competitive or competitive?
Non-competitive bids. They can be placed by individuals
What serial bonds have declining interest payments that are equally offset by rising principal repayments?
Level debt service serial bonds
What is the main difference between an open end management company and a closed end management company?
Capitalization. Open end funds continuously issue and redeem shares.
Closed-end funds have a one time stock issuance and the fund is closed to new investment.
Are options changed on stock dividends?
No. The contract isn’t changed unless exercised, in which case the deliverable is adjusted
What is required for discretionary margin accounts?
Completed New Account Form
Signed Trading Authorization
Signed Customer’s Agreement
Signature of Manager on New Account Form
What’s the highest to lowest CMO tranches?
Companion
Plain vanilla
Targeted amortization class
Planned amortization class
What is true about the PHLX World Currency options?
They settle in U.S dollars
They can only be exercised at expiration (they’re European)
There’s a standardized contract size
The performance of the writer on an exercise is guaranteed by the O.C.C
403(b) plans allow for what?
Fixed and variable annuities
If an officer in a company has shares of that issuer they got from the open market, what must they do to sell those shares?
There is no holding period, but a form 144 must be filed with the SEC
This is called “control stock”. The 6 month holding period would be required for restricted stock, but not control stock
What must a syndicate member do when they purchase funds for an accumulation account?
The member must disclose to the manager that the bonds are being purchased for an accumulation account, and the manager will disclose the order to the other syndicate members when the account is closed. It is treated as a member takedown order
What is the maximum load on mutual funds?
8.5%
Name the markets
Primary Market: Initial issues of shares going to the public for the first time
Secondary Market: Trading of Issued listed securities. Has 4 submarkets:
First Market: Trading of exchange listed securities on the floor of a stock exchange
Second Market: Over the Counter (OTC) trading of non-listed securities
Third Market: Trading of exchange listed issues on an over the counter basis
Fourth Market: ECNs/ATSs.
What is another name for open ended funds?
Mutual funds
What are broad based securities?
Indexes that measure across markets. Namely, S&P 100 Index (OEX), S&P 500 Index (SPX), and Major Market Index (XMI)
What is the maximum contribution to a Keogh Plan?
25% of income up to $55,000
Who sets the ex-date?
FINRA
What is the order for the FINRA code of procedure?
Filing of complaint and response to the District Hearing Panel
District Hearing Panel hearing (Decision isn’t final)
First appeal to the National Adjudicatory Council
Second Appeal - SEC
Final Appeal - Federal Court
What is open interest and how is it increased/decreased
It’s the number of open options contracts. Increased by opening contracts. Decreased by closing them
What guarantees does a variable annuity have?
Expense and mortality guarantees
Maximum loss when long stock and short a call?
Stock purchase price - premium received
What is the minimum and maximum bid for T-Bills at auction for non-competitive bids? For competitive bids?
For non-competitive:
$100 minimum
$5,000,000 maximum
For competitive:
$5,000,000 minimum
No maximum dollar amount, but there is a maximum amount of 35% of the securities offered in a single auction
What is the Registered Options Principal responsible for?
Account approval
Retail communications approval
Writing procedures for supervision of options accounts
Reviewing of procedures for supervision of options accounts
The approval of options advertising.
Who does the initial approval of options accounts?
Branch manager or registered options principal
What does “funded debt” refer to?
Long-term corporate debt. Not commercial paper because commercial paper is short term
What is the quoting method for Corporate and Municipal Bonds?
1/8ths
What is the quoting method for U.S. Government Bonds?
1/32nds, can be done as a decimal, a dash, or a :