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Series 7 > S7 Vocab > Flashcards

S7 Vocab Flashcards

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Series 7 Top-off Exam flashcards
1
Q

buy securities of companies that are considered to be in a position to benefit from special nonrecurring situations. Those could be new management, new products, patents pending, takeover or turnaround situations

A

A Special Situation Fund

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2
Q

is a tax based on the assessed value of an item, such as real estate or personal property. The most common ad valorem taxes are property taxes levied on real estate. However, ad valorem taxes may also extend to a number of tax applications, such as import duty taxes on goods from abroad.

A

Ad Valorem Taxes

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3
Q

is the profit to a syndicate member selling municipal bonds to broker/dealers who are not members of the syndicate . The difference between the price the underwriters pay for the bonds and the price at which they resell the bonds to the public is known as the spread

A

Additional Takedown

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4
Q

is a limited partner’s cost basis at any point in time

A

Adjusted Basis

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5
Q

require interest to be paid only if declated by the board of directors

A

Adjustment Bonds

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6
Q

Details number of stocks up vs down. Helps determine overbought or oversold markets

A

Advance/Decline line

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7
Q

“Additional taxes paid on traditionally deductible income

Private activity bonds are subject to AMT”

A

Alternative minimum tax (AMT)

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8
Q

a promise to the convertible security owner that the issuer will make adjustments to the conversion feature if a stock spit or dividend occurs. Specifically, the issuer will change the conversion price and ratio to offset the dilution.

A

anti-dilution covenant

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9
Q

“the opportunity for an instantaneous profit

If a profit can be made by buying the convertible security, immediately converting to common stock, and selling those shares, it’s arbitrage.”

A

Aribtrage (Opportunity)

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10
Q

rate the insurance company assumes the separate account will earn during the payout period. If the assumption is wrong, the monthly payments will be adjusted accordingly. If the separate account earns more than the AIR, the next motnh’s payment is increased. If the separate account earns less than the AIR, the next month’s payment is reduced. If the account earns the assumed rate, monthly payments will not change

A

Assumed Interest Rate (AIR)

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11
Q

Companies that will acquire or merge with currently unknown businesses

A

Blank check companies

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12
Q

“Similar to blank check companies, but provide more transparency
Typically disclose targeted industries or sectors”

A

Blind pool companies

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13
Q

quotation on a municipal security between dealers is assumed to be a bona fide quote

A

Bona Fide Quote

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14
Q

the online publication primarily read by underwriters looking for potential business. is an average yield of 25 revenue bonds with 30 years to maturity

A

Bond Buyer

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15
Q

aka the bond contract, contains the requirement for the municipality to properly keep the facilities books, reporting requirementes regarding revenues collected, conditions of the maintenance covenant, and terms of the rate covenant.

A

Bond Resolution

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16
Q

is when a business sells all or nearly all of its inventory to a single buyer and such a sale is not part of the ordinary course of business. … Such procedures are outlined in the bulk sales act of most jurisdictions

A

Bulk Transfer / Bulk Sale

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17
Q

a cover or shell that protects or encloses something

A

Casing

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18
Q

is a call provision in municipal bonds that allows for the early redemption of the instrument if a catastrophic event occurs and severely damages the project financed by the issue. Possible catastrophes will be listed in the bond’s indenture and are often callable at par.

A

Catastrophe Call

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19
Q

express severe disapproval of (someone or something). especially in a formal statement

A

Censure

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20
Q

are considered revenue issues and therefore, do not require voter approval. They are a form of lease revenue bond that allow the holders of the certificates to participate in some revenue stream (lease or loan payments) aassociated with land, equipment, or facilities purchased or built by the municipaility.

A

Certificate of Participation (COPs)

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21
Q

are monies that pass between Federal Reserve banks and regular banks in the form of personal or business checks prior to credit approval. These funds are in the process of clearing and reconciliation through a central processing system.

A

Clearinghouse Funds

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22
Q

compares the amount of taxes assessed versus taxes collected. If the collection ratio starts to fall, it indicates the taxpayers are having a tough time paying their obligations

A

Collection Ratios

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23
Q

“Allowed for margin account securities

Prohibited for cash account securities”

A

Commingling Securities

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24
Q

“Provides the consoldated tape
Displays quotes on securities across multiple markets
Combines first and third market quotes”

A

Consolidated Quotation System

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25
Q

A “C” Corporation is a legal and taxable entity separate from its owners. It is owned by shareholders. An advantage is shareholders have limited liability. A disadvantage is it is subject to double taxation.

A

Corp - C

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26
Q

An “S” Corporation is a corporation where income “flows through” to the shareholders and is taxed only once (like a partnership).

A

Corp - S

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27
Q

Confirms the legal status of the coporation looking to open a corporate account

A

Corporate Charter

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28
Q

Names the employees of the coproration that may act on behalf of the entire corporation

A

Corporate Resolution

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29
Q

The date the bonds start to accrue for the next time frame

A

Dated Date

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30
Q

measures the ability to pay debts – net operating income / debt service requirements

A

Debt Service Coverage Ratio (DSCR)

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31
Q

Existining in actual fact although not by offical recognition

A

Defacto

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32
Q

by design are nonqualified and not subject to ERISA. Therefore, they may discriminate as to who may participate. In any questions on the exam, a qualified plan sponsored by a business will most liekly have to comply with ERISA

A

Deferred Compensation Plans

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33
Q

Type of pension plan where income or other benefits that the employee will receive after leaving employment are “defined” by the plan.

A

Defined Benefit Plans

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34
Q

Type of pension plan in which the amount of pension the employee will receive depends on the contributions made to the employee’s account plus actual earnings on contributions.

A

Defined Contribution Plans

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35
Q

“Facilitates options trading on CBOE
Helps create a fair and orderly market
Similar to DMM on NYSE”

A

Designated Primary Market Maker (DPM)

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36
Q

never adjusted for cash dividends

A

DNR (Do not reduce) orders

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37
Q

“-Three types of market trends: Main/Medium/Short trend
-Confirmed with Dow averages
-If Dow averages moving in:
same direction: confirmation of new trend
different direction: uncertainty”

A

Dow Theory

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38
Q

is a transaction inbolbing the combination or reorganization of one or more limited partnershipps into securities of a successor corporation. - makes them more liiquid

A

DPP Rollup

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39
Q

“A product that lasts a long period of time

Examples: automobiles, water heaters, refrigerators, furniture, etc.”

A

Durable Goods

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40
Q

ECNs are generally privately-owned electronic order execution systems that display, match, and execute orders on listed and OTC securities. ECNs do not maintain inventories of securities, whereas market makers do maintain inventories. Instinet was the first and is one of the largest ECNs that provides quotations for, and handles a large amount of, the fourth market transactions.

A

ECNs (Electronic Communication Networks)

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41
Q

Market prices instantly reflect new public info

A

Efficient Markets Theory

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42
Q 
"MSRB-owned website
Contains municipal market info, including:
Official statements
Trading activity
Market statistics
529 and ABLE account information"
A

Electronic Municipal Market Access (EMMA)

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43
Q

Not qualified plans. That means that the employee purchases the stock with after-tax $.

A

Employee Stock Purchase Plans (ESPPs)

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44
Q

“Taxes on a good
Examples:

Alcohol tax
Liquor tax
Gasoline tax”

A

Excise taxes

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45
Q

Listed stocks trading on exchanges

A

First Market

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46
Q

“Creates the fund’s structure

Registers fund with the SEC”

A

Fund Sponsor

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47
Q

Inspection of a company’s finances

A

Fundamental Analysis

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48
Q

“Portfolio of several hedge funds (diversification)
Lower investment minimums than individual hedge funds
Potential lower liquidity risk
Higher fees than individual hedge funds”

A

Funds of hedge funds

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49
Q

Creates and funds the trust

A

Granton

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50
Q

negotiated with and agreed to by the issuer, allows the syndicate to sell u pto 15% more shares than initally registered within 30 days of the IPO beginning to trade

A

Green Shoe Clause

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51
Q

Sometimes called the dumping ground for stocks that cannot trade on the organized markets for regulatory resasons or have such little investor sinterest that broker-dealesrs are unwilling to quote them.

A

Grey Market

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52
Q

“Bondholders (debt service) paid first

Operations and maintenance second”

A

“Gross revenue pledge

“

53
Q

Combination of both Mortgage and Equity REITs

A

Hybrid REITs

54
Q

Only junior bonds may be additionally issued

A

Identure (Close-end)

55
Q

“Allows additional senior level bonds to be issued if earnings test is passed
If not passed, can issue additional junior (subordinated) bonds”

A

Identure (Open-end)

56
Q

Legal document that protects the rights of the bondholders. The indenture is a formal agreement between the issuer of the bonds and the bondholder.

A

Indenture

57
Q

are municipal debt securities issued by a government agency on behalf of a private sector company and intended to build or acquire factories or other heavy equipment and tools. IRBs were formerly called Industrial Development Bonds (IDB)

A

Industrial Revenue Bonds

58
Q

Represents the highest bid and lowest ask price available in a security.

A

Inside Quote

59
Q

All bonds issued on the same day, but mature on different days

A

Issue (Serial)

60
Q

Bonds issued on the same day, but mature on different days

A

Issue (Series)

61
Q

All bonds issued on the same day and mature on the same day

A

Issue (Term)

62
Q

“Shows the inside market

Displays highest bids and lowest ask”

A

Level 1

63
Q

Shows all market maker quotes

A

Level 2

64
Q

“Like level 2, but interactive

Only market makers have access”

A

Level 3

65
Q

a right to keep possession of property belonging to another person until a debt owed by that person is discharged.

A

Lien

66
Q

are GO bonds which must be voter approved. All others are revenue bonds which required no voter approval

A

Limited Tax Bonds

67
Q

is an associated person of a broker-dealer who is primarily engaged in municipal securities representative activites other than retail sales to individuals, who solicit municipal securities for the b/d, or who is in the supervisory claim above MFP

A

Municipal Financial Professional (MFP)

68
Q

Yield curve of AAA rated municipal bonds

A

Municipal Market Data (MMD) yield curve

69
Q

“Hears appals from DOE or respondent

May adjust penalties if warranted”

A

National Adudicatory council (NAC)

70
Q

“Issuer chooses their preferred underwriter
Lowest cost underwriter is not required
Agreement among underwriters

Syndicate agreement for negotiated underwritings”

A

Negotiated underwriting

71
Q

net assets / shares outstanding

A

Net Asset Value (NAV)

72
Q

is defined as the actual price the buyer will pay following any discount or promotion. In most cases, few products will sell for the list price. Instead, they’ll sell for the net price—taking into account price reductions for wholesale channels, sales promotions, and other deals

A

Net Price

73
Q

“Operations and maintenance paid first

Bondholders (debt service) paid second”

A

Net revenue pledge

74
Q

indicates a dealer’s estimate of a security’s market value. Nominal quotations are provided for information purposes only and are permitted if the quotes are clearly labeled as such. A workable indication is usally a firm bid price form a dealer and holding a quote is one that is firm for a specified time.

A

Nominal Quote

75
Q

is a type of loan secured by collateral, which is usually property. If the borrower defaults, the issuer can seize the collateral but cannot seek out the borrower for any further compensation, even if the collateral does not cover the full value of the defaulted amount. This is one instance where the borrower does not have personal liability for the loan.

A

Nonrecourse debt/loan

76
Q

Investors trading in odd lots are wrong. Do the opposite of odd lot trends to profit

A

Odd Lot Theory

77
Q

created to record information relating to orders, quotes, and other trade information from all equities that are traded on NASDAQ, EMMA and RTRS deal with mubicoal securities

A

Order Audit Trail System - Oats

78
Q

“OTC market trading non-listed stocks
all trades occur in the second market
Financial and reporting requirements exist”

A

OTC Bulletiin Board (OTCBB)

79
Q

“Least prestigious of OTC Markets Group
No listing or financial requirements
Market for bankrupt and distressed companies”

A

OTC Pink Market

80
Q

Rising market, but starting to trend downward. - bearish indicator

A

Overbought Market

81
Q

Falling market, but starting to trend upward - bullish indicator

A

Oversold Market

82
Q

“What Is a Pass-Through Certificate?
Pass-through certificates are fixed-income securities that represent an undivided interest in a pool of federally insured mortgages put together by a government-sponsored agency, such as the Government National Mortgage Association (Ginnie Mae).

How a Pass-Through Certificate Works
A large percentage of mortgages that have been issued to borrowers are sold in the secondary mortgage markets to institutional investors or government agencies that buy and package these loans into investable securities. These securities are then offered for sale to investors who expect to receive periodic interest payments and a principal repayment upon maturity of the securities.”

A

Pass Through Certificate

83
Q

Income or loss from a “Passive Activity” which is defined as the conduct of trade or business in which the taxpayer does not materially participate. An example would be gains or losses realized from investment in a limited partnership, where limited partners do not participate in management of day-to-day activities.

A

Passive Income or Loss

84
Q

A pension is a regular payment made to a retired person from an investment fund to which that person or person’s employer made contributions during that person’s working life. Two main types of Pension Plans are Defined Benefit Plans and Defined Contribution Plans.

A

Pension

85
Q

never ending or changing; occurring repeatedly; so frequent as to seem endless and uninterrupted

A

Perpetual

86
Q

DMMs analyze market data to determine a stock’s opening price

A

Price Discovery

87
Q

is when an institutional or an accredited investor buys stock directly from a public company below market price.

A

Private Investment in Public Entities (PIPEs)

88
Q

Occurring in equal portions

A

Pro Rata

89
Q

the official proving of a will.

A

Probate

90
Q

A product only avilable and elgiable to be held at the firm where the account is held

A

Proprietary Product

91
Q

requires a broker with actual or de facto control over a customer’s account to have a reasonable basis for believing that a series of recommended transactions, even if suitable when viewed in isolation, is not excessive and unsuitable for the customer when taken together in light of the customer’s investment profile.

A

Quantitative Suitability

92
Q

“Loans provided to partnership

Limited partners are personally liable”

A

Recourse Notes

93
Q

Any security for which transaction reports are collected, processed, and made available through the National Market System and includes equity securities listed on an exchange, exchange traded funds, and listed options.

A

REG NMS Security

94
Q

Regressive taxes place more burden on low-income earners. Since they are flat taxes, they take a higher percentage of income on the poor than on high-income earners. Taxes on most consumer goods, sales, gas, and Social Security payroll are examples of regressive taxes.

A

Regressive Tax

95
Q

“Governs B/D to bank relationship

B/Ds can rehypthecate 140% of debit”

A

Regulation U

96
Q

“Type of Principal transaction
Request to purchase security not in firm’s inventory
Security bought into inventory from market, then sold to customer”

A

Riskless Transaction

97
Q

permits issuers to broadly solicit and generally advertise an offering, provided that: all purchasers in the offering are accredited investors. the issuer takes reasonable steps to verify purchasers’ accredited investor status and. certain other conditions in Regulation D are satisfied

A

RULE 506C

98
Q

As a general rule, debentures pay interest every six months. Further, interest on nonmortgage-backed government securities is taxable at the federal level and exempt from state and local taxation.

A

Salle Mae Debentures

99
Q

“-Stock price falls, flattens, reverse upward

-A reverse downward trend - bullish indicator”

A

Saucer Bottom Formation

100
Q

“-Stock price rises, flattens, reverses downward

-A reverse upward trend - bearish indicator”

A

Saucer Top Formation

101
Q

is a listing by maturity of the price or yields at which a new issue will be offered. A typical scale has earlier maturities with lower yields and later maturities with higher yields

A

Scale / Reoffering Scale

102
Q

permits delivery of an abbreviated prospectus, usually referred to as a summary prospctus in the sale of open-end investment companies

A

SEC Rule 498

103
Q

is any investment for profit with management peformed by a third party. In addition, an element of risk must be present

A

Security

104
Q

Capital gain made within 6 months

A

Short Swing Profit

105
Q

“Tracks Variable Rate Demand Notes
SIFMA = Securities Industry and Financial Markets Association
Published weekly”

A

SIFMA Index

106
Q

money is put aside to repay the principal on a regular basis offers greater safety. Having a sinking fund enables the issuer to use partial calls to redeem the bond ahead of the final maturty date.

A

Sinking Funds

107
Q

is a term used to describe payments made by broker-dealers to investment advisers in return for research and other eligable services. The difference between soft dollars and hard dollars (cash) is that instead of paying a broker-dealer with cash, the fund will pay with brokerage business. Soft dollars may be used to pay for research, software, services for the benefit of clients, and seminar registration fees. Not permitted by the SEC computer hardware, office equipment, and reimbursement of travel expenses to attend seminars

A

Soft Dollars

108
Q

“Type of blank check company
Primarily acquires other businesses
Invested capital placed in trust
Shareholders must approve proposed business acquisitions”

A

Special purpose acquisition companies (SPACs)

109
Q

are typically undervalued stocks that rise in price suddenly, usually due to a significant, company-specific event such as an approval of a patent, approval of a new drug, or the roll-out of a new product. This can result in signficant capital appreication within a short time period

A

Special Situation Stocks

110
Q

the underwriting agrees to purchase any unsold shares remaining after the expiration of a rights offering (fimr commitment)

A

Standby Offering

111
Q

“DMM freezes a stock price for a short amount of time

Must be for a public customer”

A

Stopping Stock

112
Q

“Order routing system of the NYSE

Universal Trading Platform is the modern system”

A

Super Display Book

113
Q

When bonds are being bought by members of the underwriting syndicate to be sold to the public. Compensation on municipal bonds sold as part of a new issue.

A

Takedown

114
Q

is a collective investment scheme, often a mutual fund or a collective trust fund, designed to provide a simple investment solution through a portfolio whose asset allocation mix becomes more conservative as the target date approaches.

A

Target Date Funds

115
Q

is a dollar-for-dollar reduction of the income tax you owe. For example, if you owe $1,000 in federal taxes but are eligible for a $1,000 tax credit, your net liability drops to zero

A

Tax Credits

116
Q

is the document that authorizes the issuance of a municipal bond. The resolution also describes the proposed issue’’s features and the issuer’s responsibilities to its bondholders

A

The Bond Resolution

117
Q

The method takes into consideration the time value of money. The interest cost method being used when an issuer discounts future interest payments to arrive at present value

A

The True Interest Cost

118
Q

“Earned by syndicate member if sale is made

Additional takedown and selling concession combined”

A

Total Takedown

119
Q

“Facilitates the mandatory reporting of over the counter (OTC) primary and secondary market transactions in eligible fixed income securities.

tracks corporate and government agency bond transaction in the OTC market”

A

“TRACE

Trade Reporting and Compliance Engine. “

120
Q

are a feature when you have customers owning mutual funds with 12b-1 charges. In most cases, those charges are levied every year an dover time can add up to considerable compensation

A

Trailer Commissions

121
Q

Third Market

A

TRF - Trade Reporting Facilities

122
Q

is the real cost of taking a loan. True interest cost includes all the subsidiary costs like late fees, discount costs, prepaid interest, and finance charges along with all the other factors that are related to the value of money

A

True Interest Cost

123
Q

“Agreement between issuer and trustee
Trustee works for the benefit of the bondholders
Issuer makes promises (covenants) to bondholders
Trustee sues bondholder if promise is broken”

A

Trust indenture

124
Q

Removes registration status, fillout and filled when leaving a firm

A

U5

125
Q

“Reports the following:
Disciplinary actions
Reportable events
Arbitration results”

A

U6

126
Q

type of assets held, cash (bank deposits), stocks, bonds, mutual funds, and other securities and insurance policies.

A

UGMA

127
Q

expanded the types of property that are transferable into a custodial account. Types of assets held, almost any type of asset - including works of art and real estate.

A

UTMA

128
Q

measures the dollar amount of new issues scheduled over the coming month

A

Visable Supply

129
Q

“prohibits investors from realizing a loss on an investment when the investor essentially buys the same security within 30 days before or after the sale.
Example: If an investor purchases a call option on ABC, then sells 100 shares of ABC at a loss in their account 2 weeks later, the investor has the ability to replace the securities sold at a loss with the call option, so the wash sale rule would apply.”

A

Wash Sale

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