Securities 5 Flashcards

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1
Q

Qualified Retirement Plan

A
IRS approval required
Contributions tax deductible
Plan cannot discriminate
Tax on accumulation is deferred
All withdrawals taxed
Plan is set up with trustee
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2
Q

Nonqualified Retirement Plan

A

No IRA approval needed
Contributions not tax deductible
Plan may allow only certain employees to participate
Tax on accumulation may be deferred
Only excess over cost basis is taxed at time of withdrawal
No plan trustee required

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3
Q

Qualified Plans

A
IRA
SEP
Keogh Plans
Tax sheltered annuities (403b and 501c3)
SIMPLEs
401k for traditional and roth
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4
Q

Nonqualified plans

A

payroll deduction

deferred compensation

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5
Q

Regulation T

A

50% initial margin

Set by the Federal Reserve

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6
Q

Long account

A

Long market value - debit = equity

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7
Q

Short account

A

Credit - short market value = equity

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8
Q

Combined account

A

LMV - Dr + Cr - SMV = equity

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9
Q

Min Maintenance Long Account, 25%

A

Debit/(1-.25)

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10
Q

Min Maintenance Short Account, 30%

A

Credit/(1+.30)

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11
Q

Special Memorandum Account (SMA)

A

Applicable to long accounts
Line of credit for future purchases or loans
Buying power = 2 * SMA
Loan value= 1 * SMA
Generated by: increase in market value, non-required deposit, sale of stock (50% to SMA), dividends, or interest
Decreased by: purchase of securities, cash withdrawal
Market value increases, add to SMA.
Market value decreases, SMA stays the same.

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12
Q

Credit agreement

A

Required
Truth in lending document
details all margin account requirements and obligations

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13
Q

Hypothecation agreement

A

Required

Investor pledges collateral (securities) to broker/dealer

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14
Q

Loan consent

A

Optional

Allows Broker/dealer to lend customer securities to other customers

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15
Q

Exchange

A

Listed
Physical location
***Auction market

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16
Q

OTC

A

Unlisted
no physical location
***negotiated market

17
Q

Third market

A

Listed, traded OTC
No physical location
***negotiated market

18
Q

Fourth market

A

Listed and unlisted
Direct trading between financial institutions
use electronic communication networks (ECNs)

19
Q

Day orders

A

Cancel any unexecuted portion at end of day

20
Q

Good till canceled (GTC)

A

Any unexecuted portion remains working until the last trading day of April or October

21
Q

Buy limit

A

Entered below CMV
Buy at limit price or better (lower)
Execution not guaranteed

22
Q

Sell Limit

A

Entered above CMV
Sell at limit price or better (higher)
Execution not guaranteed

23
Q

Buy stop

A

Entered above CMV
triggered at or above stop price
execute immediately at next available price

24
Q

buy stop limit

A

Entered above CMV
triggered at or above stop price
execute at limit price or better (lower)
execution not guaranteed

25
Q

Sell stop

A

Entered below CMV
triggered at or below stop price
execute immediately at next available price

26
Q

Sell stop limit

A

Entered below CMV
triggered at or below stop price
execute at limit price or better (higher)
execution not guaranteed