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Series 7 Flashcards

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Series 7 Top-off Exam flashcards
1
Q

ANALYSIS

A
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2
Q

Broadest money supply?

A

M3 or L

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3
Q

money supply

A

M1- all currency in circulation
M2- savings + CDs. time deposits
M3- jumbo CDs (100k)
L- savings bonds and money market instrucments

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4
Q

Net working capital, net worth

A

current assets- current liabilities
toootal oassets- total liabilities

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5
Q

loan rates

A

Prime- bank to instutition
broker call- bank to broker dealer.
customers- call loan +x%
Discount- US treasury to bank
Fed- bank to bank

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6
Q

Keynesian vs Supply side vs Monetarist

A

Keynseian- consumption drives growth. gov spending
Supply side- reganomics, taxation
Monetarist- FRB determines economic growth and monetary policy

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7
Q

Discount rate

FRB monetary tools

A

discount rate
open market operations- daily buying and selling treasury secuirities between fed dealers
Reserve requirement

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8
Q

FOMC

A

federal open market committee- manages open market secuirities used by FRB

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9
Q

Liquidity measures

A

net working capital
current ratio= assets/ liabilities
quick acid test ratio= assets- inventory/ liabilities

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10
Q

short interest theory

A

high indicates market oversold and ready for upturn
low shows overbought

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11
Q

CAPM

A

capital asset pricing model- reflects diversibiable and non diversifiable risk (market
-beta and alpha

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12
Q

beta and alpha

A

beta- expected return, compare to benchmark
alpha- specific stock. actual vs expected

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13
Q

blue chip companies

A

established american companies steady growth and dividends

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14
Q

Growth companies

A

high PE and low dividend

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15
Q

depreciation methods

A

straight line, double declining balance (acc), sum of years digits (acc)

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16
Q

Head and shoulders

A

top- reverse upwards
bottom- reverse downwards

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17
Q
A
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18
Q

Safety

current income

growth

aggressive growth

liquidity

A
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19
Q

bullet

barbell

ladder

A

bullet- same target date, bought over time. beneficial- interest rise. not lower

barbell- short and long term bonds average life near target date. best with variable interest rates

Ladder- bonds purchased one time with maturities at regular intervals. protects in rising interest rates

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20
Q

S&p 500

Willshire 5000

value line

russell 2000

A

s&p 500-

willshire- Broadest 3.5k issues

value line- very broad 1.7k.

Russell- 2k small cap

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21
Q

Pre-refunded GO bonds

A

safest municipal bond

escrowed by issuer with treasury or agency secuirities to be retired at near term call date.

AAA. shortish maturity

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22
Q

growth vs value

A

grwoth- stock appreciation rate

value- PE and price/book value ratios

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23
Q

allocations:

portfolio rebalancing

strategic asset management

tactical asset allocation

active asset managemenet

A

portfolio rebalancing- reallocation of funds into asset allocation model. overperforming assets, underperforming

strategic asset management- determination of percentage of assets in each class

tactical asset allocation- permited variation from fixed percetnages

active asset managemenet- pursuit of returns in excess of benchmark. Undervalued stocks

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24
Q

lead liquid

A

private placements

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25
Q
A
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26
Q

cost basis and sales proceeds

A

cost basis: sale price + commission

sales proceeds: sales price- commission

Capital gains: sales proceeds- cost basisis

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27
Q

Things that impact cost basis

A

stock splits- lower

spin off

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28
Q

Accretion vs Amoritization

A

accretion- discount below par, cost basis raised

Amortization- premium above par, cost basis lowered

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29
Q

Tax bond rules

Corporate- must or may?

Municipal?

Reportable interest income?

A

Corporate: may. OID MUST

Municipal: must Market D may

OID not taxable

discount- increase

premium- decrease

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30
Q

Cost basis of funds share

A

purchase price+ reinvested distribution/ total shares in fund= average cost per share

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31
Q

Wash sale rule

Municipal tax bond swap

A

61 days. 30 before, 30 after

-buying a call

deep in the money put

convertible bond or preferred stock

right/ warrant

loss allowed if two features are different.

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32
Q

Estate taxes/ gift taxes

A

progressive tax 11.58 million

23 million if married

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33
Q

Corp characteristics

A

unlimited life

free trasnferability of shares

limited liability

centralized managment

-if avoid 2, conduit taxation, not taxed as corp

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34
Q

conduit taxation

A

buisness passes along income and losses to partners

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35
Q

K1

A

individual partners file taxes for business using K1

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36
Q

recourse loan

A

secured financing. other assets

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37
Q

Oil and gas programs

A

Exploratory wild cat. high intangible drillin costs

development step out- moderate everything

incoe stripper wells- low IDC, low risk reward

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38
Q

AMT

A

if donation reduces taxable income substantially, triggers alternative min tax

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39
Q

1099- DIV

1099-INT

A

DIV- cash dividends and capital gains

INT- interest and tax free interest

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40
Q

Corporate taxation exlcusions

A

may exclude 50% of dividends (common and preferred)

interest income 100% taxable except tax-free municipal

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41
Q

MARCS

A

modified accelerate cost recovery stystem

aircraft, oil, drilling, ocmputer equipment

depreciated on straight line method over 27 1/2 years

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42
Q
A
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43
Q
A
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44
Q

control pereson

A

10% or more interest held by immediate family members

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45
Q

natural person

legal person

A

human

legally created entitiy

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46
Q

code of procedure

A
  1. district hearing panel
  2. adjudicators council
  3. SEC appeal
  4. federal court
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47
Q

Red herring

A

preliminary prospectus, indications of interest to set the final offering price

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48
Q

effective date

A

SEC declares issue effective. Underwriter sets effective date

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49
Q

exempt from 1933

A

Commercial paper, gov secuirities, municipal, agency

charitable or non profit SBIC small business investment companies

insurance companies

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50
Q

Rule 147

A

intrastate issues. Common stock issued within 1 state and only residents of that state.

issuer can advertise to any

cannot sell out of state for 6 mo after effective date

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51
Q

Regulation 8

A

Start up comapnies to raise capital

issues small dollar amounts of secuirities within 12 months

Tier 1- 20 million no audited financial statments

Tier 2- 75 milion audited satements. A+

Dislcosure: circular rather than prospectus

1A filled with SEC and a 20 day review period

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52
Q

1A

A

Regulation A, filled with SEC before issue is sold

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53
Q

circular

A

disclosure for Reg A rather than prospectus

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54
Q

Rule 415

A

shelf registration

seasoend companies to issue shares quickly, blanket registration with SEC

2 day notice

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55
Q

Regulation D

A

private placements

accredited investor- 1 mil net worth, 200k income. 5 mil assets

non accredited- letter understanding risk

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56
Q

Regulation M

A

public oferings. prohibitions on syndicate members during 20 day cooling period

Stabilization rules- included in prospectus

market manipulation- broker dealers cannot purchase shares to cover short positions within 5 days of effecive date

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57
Q

Rule 144

A

sale of restricted and control stock

1% outstanding shares, 4 weeks trading volume, 4x a year

unregistered shares held for 6 mo before they can be sold

  • company must be public and SEC required filings current
  • form can only be filled every 3 months, 4x a year

applies to insiders and affiliates- relatives, etc

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58
Q

144a

A

private placements with qualified institutional buyers QIBs 100 mil assets

no filing if sale every 90 days is no more than 5k sharesworth no more than 50 k

shares illiquid or inacctive, PORTAL trading

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59
Q

145

A

SEC requires registration statements when public traded secuirities created due to mergers, spinoff, etc

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60
Q

Bond tender offer rules

A

attempting to buy majority stake in company

makers offer prices at premium, contigent on min number of shares being tendered

initial offer 20 business days SEC rules, each sweetening extends by 10 days

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61
Q
A
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62
Q

short tender

A

investors can only tender shares they are net long

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63
Q

10b5

A

catch all fraud rule

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64
Q

10b-18

A

allow issuer to buy shares at highest bid or last reported sale price

1 broker dealer, cannot be opening transaction, executed within 10 min of close activity, must not be higher than market price or exceed 25% of trading valme

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65
Q

insider

A

10% holder, officer, director. must report status to SEC

report trades within 2 business days

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66
Q

Reg sho

A

before it can be sold short, locate requirement

rules for selling secuirities short

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67
Q

stabilization

A

satbilization of new issue in secondary market.

underwriter can stabilize price at or below POP

notice of stabilization in prospectus

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68
Q

13 D

A

proxies. filled with SEC 5% or more of a companies stock. 10 days

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69
Q

10k

A

balance sheet

income statement

cash flow statement

retained earnings

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70
Q

8k

A
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71
Q

1939

A

trust indenture act.

corporate bonds

protect bond holders SEC covenants or promises to bond buyer

trustee appointed bank or trust company

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72
Q

1940

A

investment advisors act

not required to register- banks, attorneys, accountants

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73
Q

Sarbanes Oxley Act

A
  1. faster reporting of trades

analysts separate from broker dealer investment banking functions

CEO and CFO annual certification of appropriateness financial statements

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74
Q

Penny stock 15g1-6

A

risk disclosure

exempt if customer signed 3 suitability determinations or done one trade before

bid/ask must be disclosed, compensation earned by rep, customer provided with monthly statements

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75
Q

CFTC

A

futures market. commodities futures trading commmission

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76
Q

EMMA

A

electronic municipal market

official statements for new issues, prerefunded bond info, 529 plans, municipal trades

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77
Q

CBOE rules

A

any options commuincation not occompanied by ODD disclosure be fille dwith exchange 10 days in advance of use

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78
Q

REgulation FD

A

fair disclosure inside trading.

prohibits issuers from making dslective disclosure to reasearch, mutual fund, and other professionals

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79
Q

NEW ISSUES

A
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80
Q

New issue requirements

A

prospectus, Registration with SEC

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81
Q

shelf offering

A

3 year shelf life,blue chip companies file blanket registration

Sales within 2 days of SEC notification

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82
Q

IPO 5130 Rule

A

restricted persons may not buy common IPOs

provide eligibility every 12 months (neg) and at account 9pos_

Restricted- FINRA members, finra employees and family

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83
Q

Syndicate letter-

A

participation % allocation, compensation (concession, liability

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84
Q

selling group member

A

agent helps find customers for new issues but neither participates in selling or liability.

selling concession

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85
Q

Managing underwriter

A

Forms syndicate and establishes spread and portions.

management fee

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86
Q

syndicate members

A

share in financinal liability and profit

underwriters concession

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87
Q

underwriting spread

A

difference bewteen POP and price bid by syndicate

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88
Q

Spread components

A

management- syndicate manager

underwriting fee- syndicate members

selling concession- seller earns

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89
Q

20 day cooling off

A

SEC filing

shares must be sold at POP

permitted- red herring prelim prospetus, indications of interest, tombstone without POP

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90
Q

tombstone announcment

A

issuer, business, secuirty,

gross offering size, POP, names of members

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91
Q

public sale

A

shares sold at POP

prospectus must be delivered at or prior to confirmation of sale

Disclaimer on front page

Delivery- 90 days for IPOs

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92
Q

good faith deposit

A

specified in official notice of sale for new municipal bond issue

cashier or ceritied check which each underwriter must submit

returned to unsuccessful bidders day winning underwriter is announced

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93
Q

municipal competitive bid

A

lowest interest rate bid wins

computation of weighted average interest cost to issuer without considering time value NIC net interest cost

premium subtracted from NIC, discount added

-qualified and unqualified opinions

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94
Q

NIC

A

net interest cost

computation of weighted average interest cost to issuerwithout considering time value .

premium subtracted from NIC, discount is added

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95
Q

official notice of sale

A
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96
Q

priority order for sale for municpal

A

PGDM

presale, group, designated orders, member

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97
Q

official statement for municipal

A

provides disclosure, requrested by underwriters to perform due diligence

delivered by settlement

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98
Q

competitive vs non compeitive bid

A

compeitive bid- primary dealers, gov secuirities dealers, other institutions

max bid 35% of total offering

noncompeitive bid- small insutitional investors. Max $5 million

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99
Q

Gov quoted on

A

yield basis

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100
Q

Bills auction

A

auctioned by fed as agent weekly

issued by treasury, issued on thursday

52 week is monthly

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101
Q

EMMA

A

MSRBs public web portal for information on municipal markets including official statements

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102
Q

Bloomberg

A

published daily, dealings offerings of muniicpal bonds in secondary market

quotes for any size, quotes subject to prior sale of change in price

-Quotes firm unless stated. Can be any size, doesn’t need to be round

quotes are bona fide

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103
Q

Standard and poors

A

Summaries of all corporate bonds

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104
Q

munifacts wire

A

owned by bond buyer, market info of new municpal bond offerings. official notice of sale, bond redemption, statistics of interest rates

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105
Q

Bests ratings

A

independent ocmpany. rates insurance companies

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106
Q

CRD

A

finras database of info on each representative including discipline history

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107
Q

Bond buyer index

A

yield of 20 GO bonds with 20 years to maturity AA rated or better

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108
Q

Revdex

A

yield to maturity by Bond Buyer. 25 revenue bonds, 30 years maturity

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109
Q

Standard and poors

A

100 index OEX, traded on CBOE

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110
Q

OEX

A

american style actively traded

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111
Q

standard and poors

A

500 index SPX european style

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112
Q

XMI

A

major market index AMEX

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113
Q

Dow jones

A

DJX CBOE

OEX spx most popular XMI broad based less popular

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114
Q

value line

A

vlleo phlx

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115
Q

willshire

A

all american stocks. broad measure

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116
Q

NYSE composite index

A

2.5k on NYSE

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117
Q
A
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118
Q

Qualified vs nonqualified pension plans

A

qualified- pre-tax funded. tax deductible

IRS DOL qualifies, cannot descriminate, zero cost based

nonqualified- after tax not tax deductible

eg. variable annuity, deferred comp, payroll deduction

accumulation may be tax deferred, earnings over cost basis taxed.

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119
Q

Simple IRA

A

14k max salary reduction 2-3% match

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120
Q

SEP IRA

A

25% of employee income

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121
Q

403 b tax

A

qualified annuities

tax deductible to employee

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122
Q

Keogh HR-10

A

61k max contibution. 20%

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123
Q

inherited IRA

A

only spouse can roll over funds in a new IRA under benefiicary name

distributions immedaite and deplete over 10 years

cost basis of secuirities is 0

market value of distrubition date= sales proceeds

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124
Q

defined benefit vs defined contribution pension plans

A

benefit- known benefit at retirement. high salaried emplyees, funding employer

contribution- unknown retirement. formula based. favors long tendured.

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125
Q

ERISA

A

employee retirement income secuirty act 1974

segregation of funds from corporate assets, non discirimation

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126
Q

departments:

margin departments

purchase of sales

reorgainzation

order department

A

margin- all accounts maintained under margin regulations of FRB and finra

purchase- processing orders

reorganization- secuirities changes in capitalization due to mergers, aquisitions, stock splits

oorder department- routing buy and sell orders

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127
Q

GMIB

A

guranteed minimum income benefit. only occurs at annuitization and over accumulation phase

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128
Q

accumulation phase

A

all interest dividends and capital gains realized from secuirites in separate accounts. must be reinvested to buy more accumulation units

build up of reinvested dividends is tax deferred

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129
Q

accumulation unit

A

accounting measure of owners interest in seaprate account

shares that a customer acquires in a seaprate account

underlying mutual fund shares

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130
Q

annuity units

A

accounting measure of annuity amount to be received by owner

once variable annuity contract is annuized, accumulation units converted to annuity unts determine annuity payments to be made

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131
Q

529 and max gift

A

1 time gift 5x normal limit. so 16kx5=80k

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132
Q

written complaints and customer accounts kept for how long

A

written- 4 years

customer accounts- 6 years

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133
Q

joint tennats with rights of survivorship

A

parties have undivided interest. survivor recieves assets

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134
Q

joint tennats in common

A

percentage ownership in account

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135
Q

transfer of assets

A

carrying firm has 1 business day to validate. must complete transfer in 3 days of validation

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136
Q

account record verification

A

sent to customer within 30 days of account opening and 36 months after

within 30 days of each account record update

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137
Q

REgulation SP

A

privacy notices, at opening and annually.

must be able to easily opt out of NPI non public personal information

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138
Q

BSA

A

bank secrecy act and patriot act- money laundering

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139
Q

options agreement

A

customer must sign no later than 15 days afte raccount opened. cannot do opening transactions until then

if conditions change, agreement must be ammended withint 15 days

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140
Q

levels of options contracts

A
  1. covered calls
  2. buy calls and puts
  3. spread positions
  4. naked
141
Q

options prospectus

A

available upon request

142
Q

options exercise limit

A

number of options that can be exercised during 5 buisness days, established by options clearing corporation OCC

143
Q

wrap account

A

customer service wrapped into one account. annual fee.

144
Q

change to U4 form

A

30 days with CRD

145
Q

official statement

A

disclosure document for new municipal bond offering

no prospectus for municipal

146
Q

tombstone

A

announcmenet of public offering of secuirities in financial newspapers

147
Q

official notie of sale

A

advertising in bond buyer and newspaper to solicit competitive bids.

type of bond, dollar amount, secuirty backing, rreputation, good faith deposit

148
Q

Uniform secuirites act USA

A

blue sky laws. state laws govern secuirities industry.

149
Q

omnibus account-

A

broker dealer account to make trades for customers

150
Q

fail to deliver

A

10 days

151
Q

complaints must be reported

A

to finra within 15 days of each calendar quarter

152
Q

UTMA vs UGMA

A

UTMA more secuirites gifted and trasnfer up to age 21

153
Q

unsuitable for senior investors

A

variable annuities, equity index annuities, structured products, mortgaging a residence

154
Q

discretionary account

A

POA needed in writing before trasding

broker has power and authority

customer must recieve confirmation statements

155
Q

REgulation T

A

customer to broker dealer

customer signs margin agreement aka hypothecation, pledges secuirites as collateral

regulates extension of credit

156
Q

Regulation U

A

Broker dealer rehypothecates secuirties to bank 140% of customers loan

banks loan money to broker at call loan rate

regulates credit between bank and broker dealer

157
Q

Margin fails to deliver or pay

A

frozen for 90 days. fails to deliver in 10 days

158
Q

to open options in margin

A

delivery of options disclosure document at or prior to account approval

options agreement sent- first trade officially opens account

signed options returned by customer in 15 days of approval

159
Q

street name

A

name of broker dealer, nominal owner

160
Q

portfolio margining

A

lower margin requirements for stock positions that are hedged by options

min equity 100k. must be approved for naked options

seaprate approval from registered options principal

161
Q

maitenance margin vs initial margin

A

initial margin FRB Reg T

maiteiance- FINRA. closing position that day

162
Q

mutal fund shares on margin

A

sold with prospectus, require 100%. after 30 days has loan value and can be margined

163
Q

loan value of long options contracts

A

0, because they expire in the future

164
Q
A
165
Q

SAR

A

suspicious activity report. reiggered at least 5k funds or other assets within 30 days with FcEN

166
Q

CTR

A

currency transaction report. triggered greater amounts than 10k

167
Q

OFAC and SDN

A

office of foreign assets, specifically designated nations. accounts will be frozen and new accounts wont be opened

168
Q

OCC

A

options clearing corporation

specifies contract: contract size strike price and expiration

169
Q

max life

A

9 months, near expiration is less expensive

170
Q

time and intrinsic value

A

intrinsic= amount an option is in the money

time/extrinsic value premium- intrinsic

171
Q

otpions expiration

A

third friday of the month at 11:49 eastern

172
Q

stop limit order vs stop order

A

limit- becomes order to sell at specified limit once triggered.

stop order- become market orders once triggered.

173
Q

75-5-10 rule

A

1940

75% of assets invested in cash or secuirites

no more than 5% in any company or 10% ownership

174
Q

supchapter M

A

IRS reg of investment companies and REITS

90% or more of net investment must be in related secuirties

175
Q

investment advisor

A

manage funds within objective. management fee

176
Q

custodian bank

A

safekeeps funds, clerical functions like transfer agen or paying agent

sponsor sets up investmen

177
Q

sponsor

A

sponsor sets up investment objectives

178
Q

BDC

A

invests in private companiesbusines. private equity investments development company

registered investment 1940, trades like other stock

distribute 90% of taxable net income

invests in privatley held start up businesses and financially troubled companies

to qualify 70% of assets msut be in small or troubled companies

conduit tax treatment 90% taxable income must be from dividends, interest and capital gains on investments

179
Q

VC

A

venture capital fund. limited partnership only sold in private placements to wealthy accredited investors

180
Q

open end vs closed end

offerings vs shares

prospectus

types of shares

charges

A

open- continuous primary offering/ closed- number of shares fixed

prospectus:open yes. closed- no prospectus afte IPO

shares- open: common/ closed- common, preferred, bonds

charges- 8.5% max sales/ closed- commissions

181
Q

ETFs vs Index mutual fund

pricing

commisisons

margin

shorting

capital gains

A

pricing: ETF continuous/ mutual- forward pricing
commissions: ETF commission/ mutual none
margin: ETF yes/ mutual no
short: ETF yes/ mutual no
gains: ETF taxed when sold/ mutual- taxed annually

182
Q

NAV

POP

SC%

A
183
Q

sales charges

A

front end

back end CDSC

asset based- 12b-1 fees. annual fee

184
Q

Mutual funds pricing

A

day closing price for computations

orders redeemed at days closing NAV adjusted by fees, slaes charge etc

185
Q

letter of intent

A

investors agree to buy additional shares and is given reduced charge.

good for 13 months. backdated 90 days

186
Q

UITS fixed vs nonfixed

A

fixed- benefits, dversity in one investment. no management fee. liquid. redeemable

nonfixed- trust purchases shares of underlying mutual fund. variable annuity. create fixed porfolio sell units of 1k, diersified. board of trustees. redeemable

187
Q

cannot be sold with series 6

A

mutual, initial POP of closed end funds, UIT variable annuities

188
Q
A
189
Q

secondary markets

A

1- listed auction market. NYSE, AMEX, CBOE regional exchanges. NASDAQ

2-OTC negotiated market unlisted. OTCBB interdealer quotes, PINK otc

  1. market makers interactive . OTC global market 24 hrs
  2. ECN insutitional subscriberes
190
Q

agent vs dealer

A

agent- broker, commission, matching orders

dealer- principal, markup, inventory, market maker

191
Q

prime brokers

cleaning broker dealer

introducing broker dealer

A

prime brokers- hedge funds

cleaning broker dealer- holds funds and secuirities. process trades for own customers

introducing broker dealer- introduces accounts into firm, do not hold funds or secuirties.

192
Q

market orders. limit and stop

A

market order- executed at next best price. fill guarantee, not price

limit order- executed at specific price or better. guarantees price

stop order-once elected becomes order. elected first by trade at through price.elected and executed at next best price

193
Q

primary market

A

underwriters are market makers

issuer- prints and deliver stock certificates in a new issue

194
Q

Term vs Serial vs Series

A

term- same time, same maturity. PRICE quotes. Corp + muni DOLLAR bonds 1/8, US gov bonds 1/32nd

serial- same time, different maturities, BASIS YIELD quote, BASIS points. money markets. muni bonds, corp equipment and trust certificates.

series- issued different dates, matures same time

195
Q

Diamonds

OTQX

OTCQB

pink

QQQ

CBOT

NYSE

CQS

A

Diamonds

OTQX- developmeal

OTCQB- US and international

pink- spectulative

QQQ- ETFs from NASDAQ

CBOT- futures on CBOE

NYSE closes 9:30-4

CQS- 9am to 6::30 pm

196
Q

floor broker

two dollar broker

introducing broker dealer

clearing agent

RCMM

DMM

super display book

A

floor broker- NYSE order on trading floor. agent only, do not trade for own account

two dollar broker- inependent handles overflow

introducing broker dealer-fully disclosed broker dealer. introduces busienss to carrying firm. cannot take custody

clearing agent- carrying firm. takes custody of secuirities

RCMM- registred competitive market maker. buys and sells own accoutns to add liquidity

DMM- specalist. stands at round tarding posts ready to trade. maintains liquidity. maintains bid and ask quotes

super display book- limit orders

197
Q

nasdaq system

A

single book system

market maker- finra firm tha t buys and sells secuirities out of its own inventory

198
Q

order tapes

A

tickets sent to exchange and stamped with order entry, order execution and cancellation

specialists report trades to tapes

NASDAQ- C tape

NYSE- A tape

AMEX- B tape

199
Q

Systems

TRACE

OATS

ACT

CAT

ADF

OSS

A

TRACE- trade reporting and compliance engine

OATS- order audit trail system. syncrhonized activity

ACT- automated confirmation. reports to network C NASDAQ

CAT- consolidated audit trail system. electronic equity

ADF- alternate display facility where ECNs display quotes

OSS- CBOE automated options trading system. routed directly and bypass firms commnication posts. execution notices sent directly from trading post to brokerage firm

200
Q

gray market and dark pool

A

gray market- quoting and trading OTC secuirities. smaller bankrupt. market is illiquid and not ransparent

companies dont report to SEC. are regulated by FINRA

201
Q

Dark pool

A

Debt financing or utilizing debt leverage too much can lead to the inability to meet principal and interest payments on a company’s debt obligations.

202
Q
A
203
Q

Coupon rate

A

the interest rate the issuer has agreed to pay the investor for use of the funds loaned to the issuer.

204
Q

soverign risk

A

Type of political risk, risk of default by a country on its debt instruments

205
Q

tbonds vs tnotes

A

both priced as percentage of par.

interest paid semianually

tbills at discount to par with interest not paid until maturity.

206
Q

proxies

A

if proxies are to be solicited, corporation must send out material to shareholders. SEC must review before its sent

207
Q

two types of returns on investments

A

capital gains and income

dividends or interest- types of income

capital gains or loss

208
Q

greatest influence on the money supply

A

FOMC federal open market committe.

FRB buys and sells gov secuirities in open market.

FOMC is board of gov, FRB and reserve bank presidents.

209
Q

systemic vs nonsystemic risks

A

systemic risk- purchasing power or inflation risk

nonsystematic- capital risk, business risk, call risk. portfoio diversification

210
Q

rules to portect investors during IPO

A
  • must offer secuirities at POP
  • insiders may not take advantage
  • firms may not withold secuirities in public offering for their own benefit
211
Q

MSCI-EAFE

A

foreign equities. euorpe ,australia, far east index. outside US and Canada.

212
Q

to open a margin account

A
  • credit agreement, hypothecation, risk disclsoure
213
Q
A
214
Q

whats excempt from blue sky

A

purchase sand sales that are unsolicited are exempt.

215
Q

FINRA continuity plans

A

alteernate methods to communicate with employees, customers, regulators

216
Q

revocble living trust

A

established before grantor dies, can change beneficiaries, can add or remove items from trust.

grantor subject to tax on income that remains in the trust

217
Q

margin calls can be met

A

cash or fully paid for marginable secuirities (2x ammount)

218
Q

financial risk

A

Debt financing or utilizing debt leverage too much can lead to the inability to meet principal and interest payments on a company’s debt obligations.

219
Q

bond points vs basis point

A

1 bond point= $10= 1% of par

1 basis point= .10$, .01% of par. 100 basis = 1% $1 per 1k

220
Q

conversion rate and conversion price

A

conversion rate= Par/ conversion price

conversion price= par/ conversion rate

221
Q

parity price of stock and bond

A

parity price of stock= bond price/ conversion rate

parity price of bond= stock price x conversion rate

222
Q

tax equivalent yield and tax free equivalent yield

A

tax yield= tax free (municipal) yield/ (1- Tax bracket%)

tax free yield= Corporate yield x (1-Tax bracket %)

eg municpal

7%/(100%-31%)= 7%/.69= 10%

223
Q

net worth

A

assets- liabilities

224
Q

net working capital

A

current assets- current liabilities

225
Q
A
226
Q

par vs coupon

A

par- face, principal, denomination. ammount issuer pays at maturity. interst based on par

coupon- annualized rate of interest (based on par) interest every 6 mo.

227
Q

Ratings for secuirities

A
228
Q

nominal yield and current yield

A
229
Q

corporate debt

A

TRACE must be reported no later than 15 min post execution

settled in clearing house funds. through NSCC national secuirties clearing corp

230
Q

US securities settle where

A

federal funds through FIIC fixed income clearing corp

231
Q

taxation of corporate OID issues

A

OID issues zero coupon and commercial paper

discount taxable as interest income (phantom income)

discount is accreted

232
Q

funded vs unfunded debt

A

funded- long term corp debt

unfunded- short term debt

233
Q

commercial paper

A

corporate, promissary note/ prime paper. short term 270 days. insutitional investors

Ratings: p1,2,3, NP

sold at discount, matures at par (most money markets)

234
Q

guaranteed bond

A

backed by party other than issuer. parent or subsidiary

takes on credit of issuer

235
Q

income/ adjustment bond

A

pays interest with earnings. Bankrupt ccompanies. trade flat due to uncertainty of future payment

236
Q

where do most bonds trade?

A

OTC not NYSE

237
Q

Bankers acceptances

A

corporate money market. time drafts finance energy country imports and exports with third world countries

exempt 1933. sold without prospectus

238
Q

CD’s

A

negotiable- jumbo 100k 1 year or less FDIC up to 250k.

Brokered- negotiable, higher rates

money market istrument!

239
Q

money market

A

tbills, municipal promissory notes, anticipation notes, BA acceptances, CD’s, commercial paper

240
Q

ARS

A

auction rate secuirities- long term bonds with short term market rates

successful auction with coupon reset. illiquid

traded on NYSE, NASDAQ, AMEX ,not CBOE

241
Q

eurodollar

A

issued in bearer form outside US

not subject to US withholding taxes cause they’re offered outside US

242
Q

ETNs

A

unsecured debt obligations issued by bank linked to market

based on performance, does not pay periodic interest.

trades like stock and can be redeemed

tax effiecient

243
Q

VRDR

A

weekly renewable municipal note. set to market index

25k long term debt 20-30 years. reset to benchmark.

put option

244
Q

ARS

A

long term bond with reset interest rate. reset with dutch auction, no put option

245
Q

IDR/ IDB

A

industrial dvelopment revenue bond. private purpose non essential use. Alternative min tax

246
Q

special assesment bonds

A

community improvments

247
Q

special tax bonds

A

backed by taxes other than ad valorem. usually excise taxes

248
Q

double barreled bonds

A

primary backing is revenue, ultimate backing is credit of municipal issuer

249
Q

municipal taxes. one mill

A

.001

voter approval to raise debt limit

250
Q

moral obligation bond

A

if revenues or taxes are insufficient, moral obligation of state to pay

251
Q

bonds from puerto rico, etc

A

exempt from fed, state and local taxes

252
Q

pre-refunded debt

A

backed with US gov and agency secuirties

safest bond choice offered- backed by collateral

253
Q

short term municipal

A

promissary notes- 270 days

antiicpation notes 12 months

Tan, ran, etc

CLN constructive loan note- short to intermediate term for construction

254
Q

Tender option vs tender offer

A

tender option- put

tender offer- non collable bonds. issue offer to bondholder to redeem at prem cash price.

255
Q

refunding

A

replacement of existing bonds with new bonds. allow issuer to take advantage of interest rates.

advance refunding- called a next call date or remain until maturity

pre-refunding- call at next date

256
Q

Revenue vs GO bonds

A

Revenue- trust indenture. only revenue pledged. protections- rate, issuance, coveneants, maitenance

GO- debt per capita, debt to assesed valueation, collection ratio.

Trend of assesed valution of property, ratio of overall debt per capita, record of tax collection

257
Q

RTRS

A

real time trade reporting system. municipal reported

258
Q

brokers broker

A

firm that trades for other firms to keep them anonymouse, acts as agent

help large institutions buy and sell large blocks of municipal bonds. They take no inventory positions, acting as agent only. Municipal broker’s brokers do not deal with the general public.

259
Q

treasury notes, bills, bonds, TIPS, strips, savings bonds

A

notes- negotiable. interemdiate term 2-10 years. $100

bill- 12 mo or less. yield basis. discount, matures to face value. Auctioned weekly, 1 year monthly. primary gov dealers obligated to bid. conducted each Monday and Tuesday. Issue date Thursday. settlement thursday

treasury bonds- 32nds. mature in >10 years.

TIPS- inflation protection. principal adjusted upwards, rate is fixed. receive higher interest due to increased princiapl. protect against purchasing power risk

strips- pension funds, retirement accounts purchase. deep discount and held to maturity. little risk.

treasury reciept- no longer traded. all matured

savings bonds- non negotiable EE and I

260
Q

floater bonds

A

variable rate bonds. interest rate paid to benchmark.

inflation, rises and holder gets higher interest

261
Q

flow of funds

A

gross revenue pledge- bondholders first

net revenue-bond has claim after maiteiance

operations maitenance, sinking, debt, reserve, renewal, surplus

262
Q

volatitlity with debt

A

discount and longer maturities more volatile

bonds with small premiums more volatile. Deep discounts more volatile

263
Q

yield curve

A

when inverted, short term rates are higher than long term. invest in shor term tranches

whether ascending flat or inverted- long term always more volatile

widening- negative. gov bonds lower, corp yields higher

narrowing- positive.

If short term interest rates are expected to rise, then short-term fixed income security prices will fall, so the customer will want to sell these (establishing a short position).

If long term interest rates are expected to fall, then long-term fixed income security prices will rise, so the customer will want to buy these (establishing a long position).

264
Q
A
265
Q

common stock vs

preferred

A

common- quarterly

preferred- semi annually. higher than common and fixed. priority claim to assets and dividends, but after debt. 50% exclusion on dividends for corps

266
Q

what is the parity price for the stock if the bond is trading at 1.5k CP= 40 and CR=23

What is the parity price for a convertible bond if the stock is strading at $43? CP=40, CR =25

A
267
Q
A
268
Q

rights vs warrants

A

rights- 30-45 days. premptive right. proportional ownersihp

warrants- 5 year expiration. issued without intrsincit value, time value

269
Q

ADR

sponsored vs nonsponsored

A

american depository receipt. issued by foreign branch of american bank. registered with SEC

represent foreign stock. bank is registered owner.

sponsored- ADS american depostiory shares. eligibile to trade on exchange

non-sponsored- no participation from foreign issuer, trades OTC

270
Q

who sets the ex date

A

finra

271
Q

SIPC

A

500k secuirities, 250k cash

joint account gets max coverage 500k. Debit subtracted

272
Q

cost of money

A

interest

273
Q

restricted securities

A

acquired through some other means than registered public offering. like private placement. These may not be sold until they have been held for 6 months

274
Q

business cycle stages

A

peak (prosperity), contraction (decline), trough, and expansion (recovery)

275
Q

capital risk

A

the risk an investment depreciates and can only be sold at a loss

276
Q

electronic delivery of documents must include

A

procedures to show delivery took place as intended

procedures to deliver info in paper form upon request

assurance of confidentiality

277
Q

stop vs stop limit

A

stop- next available price after the market price falls or rises to x

stop limit- next price below or above x after market hits x

278
Q

4th market

A

a market for instutitional investors in which large blocks of stock, listed and unlisted trade in transaction unassisted by broker dealers

279
Q

during a cold call, rep must disclose

A

callers name, address at which calller can be contacted, name of the member broker dealer firm

280
Q

IRA distrubtions taxed

A

ordinary income tax rates on full amount of distribution

281
Q

NAV contributers

A

if investors redeem shares, the assets in the fund goes down but number of shares decreases proportionally so NAV would remain unchanged.

if investors purchase shares the assets and the outstanding share increase proportionally, so NAV remains unchanged.

other things that have assets decrease, NAV would decrease. like capital gains, liabilities, and dividends distrubition

282
Q

U5 form filled with central registration depository within how many days of firing

A

30 days

283
Q

earnings per share EPS

A

company earnings by number of outstanding shares. if earnings remain the same while shares increase, EPS decreases.

284
Q

request of Statement of additional information SAI must be satisfied within

A

3 buinsses days free of charge. mutual funds

285
Q

limited partner

A

limited liability of loss of money invested, having income and expenses flow directly, own interest in investment company managed by others

286
Q

requirements of notifications for coporations

A

notify customer of payment date, title of secuirty, declaration date

287
Q

U4 includes

A

criminal charges, aliases, 5 year residency and 10 year employment

288
Q

underwriting agent vs principal

A

agent (best efforts) all or none, min max- fixing a min n amount to go forward

principal (firm)- stand by rights offerings

289
Q

GDP vs GNP

A

gross domestic product- output within a nations borders regardless of ownership

gross national product- measure of economic output of a countrys citizens and companies

290
Q

regulations and revokign registration in state

A

state administrator take actions against broker dealer.

Federal reserve and SEC are national regulatosr

291
Q

repurchase agreement

A

initial purchase followed by a sale at a higher price

292
Q
A
293
Q

regulation M

A

SEC rules covering manipulative practices by market makers in connection with “add-on share” offerings, before, during and after, the 20-day cooling off period while the issue is being registered with the SEC.

Syndicate members that are not market makers are permitted to buy Tier 1 securities anytime prior to the effective date

III Syndicate members that are not market makers are restricted from buying Tier 3 securities for the 5 business day window of time prior to the effective date

294
Q

regulation ATS

A

requriing registration of ECNs as alternate trading systems by finra

295
Q

stabilizing bids

A

. Stabilizing bids can only be entered at or below the public offering price, never above. If the bid were allowed to be placed above the public offering price, it would make the issue instantly “hot” and this is prohibited.

296
Q

diamonds, DIA

A

exchange traded fund. Dow jones industrial average index. 30 stocks

297
Q

fed funds vs clearing house funds

A

clearing house- regular way settlement for OTC, next business day for options

fed funds- gov secuirities

298
Q

durable vs nondurable power of attorney

A

nondurable- ceases upon mental incapasitation

299
Q

types of bids/ quotes

A

firm quote- OTC dealer cannot change or will be backing away

nominal- no quote. approximate price.

subject quote-approx price subject to change or confirmation

workable- a bid price at which a dealer is likely to buy bonds from dealer who wishes to sell.

workout quote- price range the dealer will use to find a firm quote

300
Q

chinese wall

A

seapration of investment banking from trading and research units

research should not be influenced by pending investment banking deals - e.g., research could “help” the deal by putting out a “buy” recommendation on that stock. In addition, research personnel might buy the stock themselves, which can be viewed as trading on “inside information.”

301
Q

NYSE rules for bids

A

Under NYSE trading rules, bids and offers must be for the minimum 100 share size trading unit;

the highest bid and lowest offer have priority (the same as NASDAQ’s “inside market” - now renamed the NBBO - National Best Bid and Offer);

and all bids and offers must be publicly announced (no secret bids and offers, or side deals allowed).

If 2 equivalent price bids (or offers) are made at the same time, the larger order has precedence and will be filled first.

302
Q

bank qualified municipal issue

A

a municipal G.O. issue of $10,000,000 or less which

, if purchased only by a bank investor, allows the bank to deduct 80% of the interest it pays on the deposits used to purchase the bonds.

The interest income received from the bonds is tax free to the bank.

public purpose

303
Q

good delivery

A

To be a good delivery, certificates must be in round multiples of 100 shares on one certificate or must be delivered in certificates that add up to 100 share units. Certificates of 40 shares each are not good because 40 + 40 = 80; 80 + 40 = 120. A round lot of 100 shares cannot be created from these units. The other choices either allow for the creation of 100 share units; or are in multiples of 100 on 1 certificate.

304
Q

value line

dow jones

standard and poors

major market

A

value line- 1700 stocks NYSE< AMEX, NASDAQ

dow jones- NYSE 30 stocks

standard and poors- 500 NYSE

major market- 20 NYSE

305
Q

annuity unit

vs accumulation unit

A

annuity unit- accounting measure upon which the amount of pay out is determined

accumulation unit- the legal name for the “shares” that a customer acquires in the separate account when purchasing a variable annuity, since this is a “unit” trust form of investment company. The dividends and capital gains received during the investment period are reinvested in the separate account, purchasing additional accumulation units. (

306
Q

early IRA withdrawl exceptions

A

excess medical expenses

disability

higher education

birth of first child expenses

307
Q

which corp distributions are taxable to recepient

A

cash and product

308
Q

MFP contribution

A

joint if both sign up to $500

309
Q

variable rate preferred

A

divident rate tied to market. minimal market risk. minimal liquiidty risk. Preferred shares are listed and trade, so the shares can be sold readily at low cost.

310
Q

bond resolution

A

he contract between the issuer and the bondholder.

Any restrictive covenants to which the issuer must adhere

II Any call provisions providing for redemption prior to maturity as specified in the contract

III The credit rating assigned to the issue by a nationally recognized ratings agency

IV The compensation received by the underwriters for selling the issue to the public

311
Q

registered options principal vs branch office manager

A

The designated Registered Options Principal resides in the main office of the firm and is responsible for creating and enforcing procedures for compliance with the rules of the O.C.C. and options exchanges. This person is also responsible for approving all options advertising and sales literature.

Each branch must have a BOM - Branch Office Manager. This person is responsible for approving options accounts, options orders, options correspondence sent to 25 or fewer existing or prospective clients and for resolving options complaints.

312
Q

trading of GOV secuirties

A

performed by primary and secondary dealers, federal reserve. market is active.

does not take place on NYSE, is OTC

313
Q

open ended vs close ended fund purchase

A

open- NAV plus sales charge

closed- market price plus commission

314
Q

CMO risks

A

no default risk- backed by gov.

extension, prepayment and interest rate risks yes

315
Q
A
316
Q

negotiated vs nonnegotiated offerings and spread

A

MSRB rules for new issues, underwriter must disclose psread in negotiated udnerwritings

317
Q

custodial account tax

A

interest income in custodial account reported on tax return of minor

318
Q

accelerated depreciation

A

increase in early eyars decrease in later

Accelerated depreciation deductions, when compared to straight-line depreciation deductions, are “front loaded.” The depreciation deduction is higher in earlier years; but the deduction is lower in later years (as compared to straight line depreciation). Because there are higher deductions in the earlier years, this will increase reported expenses in those years; while the lower deductions in later years will decrease reported expenses for those years

319
Q

net tangible asset

A

book value

all assets minus intagibles and liabilities.

measure of liquidation value of the company

320
Q

eurodollar

A

domestic corp

foreign corp

foreign gov

NOT US gov

321
Q

how soon can new issues be margined

A

30 days after issuance

322
Q

BAN

TAN

RAN

TRAN

A

BAN- bond atniticpation- pull fooward funds from later sale. obtain short term funds in anticipation of long term debt financing

TAN- pull forward fudns that will be collected as taxes in later months.

RAN- pull forward revenues expected be rreceived by municipality in coming months.

TRAN- both rev and tax

323
Q

cash management bill

A

sold at auction as needed for unexpected cash shortfalls.

shortest term as short as 5 days. sold $100 min, discount to par at weekly auction like treasury bills

324
Q

right of rejection

A

municipal dealer refuses to accept bonds tendered to that firm by another municipal secuirities dealer. “good form”

buyer has failed to detect irregularity but finds later- buyer may use right of reclamation to correct a problem

325
Q

credit vs debit spreads

A

credit- short a call. profitable in a

long a put- deibt spread

326
Q

cabinet trades

A

cboe- accomodation liquidations. close out worthless long positions, close out worthless shot positions

327
Q

foreign currency vs foreign currency options trades settle

A

currency- spot and forward 1 or 2 buisness day settlemet/ mutually agreed upon date

options- cash and regular way/ same or next business day

328
Q

equity income fund

A

invests in stocks and pay dividends that have growth potential

329
Q

depression vs recession

A

recession- 2 quarters of GDP decline

depression- 6 quarterse

330
Q

fundamental vs technical analysyst

A

fundamental- earnings, balance sheet liquidity, management

technical- chart trading volumes, advance declines,etc

331
Q

frb

A

determines which OTC secuirities are marginable

332
Q

options account

A

opened branch manager initially, subsequent approval by ROP

obtain information, obtain approval, enter intiial order, obtain signed options agreement

333
Q

fifo vs lifo

A

FIFO- used when customer does not chooes method. lowest cost basis being redeemed first. greater taxable gain

334
Q

bond interest payment dates

A

dated date to first payment date.

335
Q

trace

A

corporate bonds in OTC secondary market.both sides have to report. reporting system not execution

336
Q

Notice of sale

A

provides syndicates with information on new primary market issues

337
Q

SLGS

A

State and Local Government Series (SLGS) Securities are purchased by municipal issuers, which are subject to IRS yield restrictions when they invest the proceeds of a pre-refunding. The monies placed in escrow are invested in SLGS, which are government securities whose interest rates are arranged to comply with IRS restrictions.

338
Q

dated date

trade date

settlement date

record date

A

dated date- day bonds start to accrue interest

trade date= agree to terms

settlement date- ownership trades. settles t+2 or 1

record date- before ex date. look to see owner for divident

339
Q

soverign debt

A

secuirities issued by a government. treasury are example

340
Q

Class A, B, C

A

Class A- long term. High front end. no back end (CDSC), low or no 12b-1 fee

Class B- 5-7 year horizon.CDXC declines each year. moderate 12b-1 fee.

Class c- short term. no front end load, moderate back end load. high 12b-1 fees

341
Q
A
342
Q
A
343
Q
A
344
Q
A
345
Q
A
346
Q
A
347
Q
A
348
Q
A

Series 7 (3 decks)

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