Series 7 Key Topics Flashcards
New Acct Form
Acct verified by RR and approved by principal
Signed by principal
Arbitration agreement (wont go to court)
CIP verified promptly
If Invest goals not disclosed cannot solicit trades
Must mail duplicate confirms and statements to employing BD on written request
Suitablity questions new acct
Relevent : income, net-worth, inv experience, tax status
Not relevent : marital status, depends, age of children
AML
currency transaction report for deposit > 10k
suspicious activity report for > 5k
within 30 days. cannot disclose to client
OFAC (office of foreign asset control ) maintains SDN (specially designated nationals)
Acct Type
Margin Acct:
Risk disclosure, Margin agreement (, Hypothecation / credit / loan consent agreements)
Cash Acct : pays in full for every transaction
options Acct:
OCC disclosure doc, approved ROP, form must be returned within 15 days of approval.
Acct Titles
JTWROS : after death passes to surviving owner
JTIC : after death proportion ownership goes to estate
TOD : tramsfered on death with probate.
UGMA / UTMA one beneficiary one custodian. transferred at 18 yrs or 18-25yrs. Minor responsible for taxes
Discretionary acct
Can chose security, qty or action (buy/sell)
Need limited power of attorney
Trades approved by principal
Acct monitored by principal
Transferring accts
ACAT sent by new firm to holding firm
i day to verify, 3 days to transfer
On Death
All open orders cancelled, acct frozen and marked DECEASED. wait for instruction from estate
same when legally incompetent (must be declared by court). Wait instructions from court appointed custodian.
common stock holders
voting rights to elect board
limited liability (extent of investment)
residual claims on liquidation
Benefits : growth (cap gain), income (dividends), hedge inflation
Risks : mkt risk
preferred stock holders
ownership with dept like characteristics
sold at par $100, pays dividends,
market value value fluctuates with int rate changes
issuers prefer as less risky to issuer than debt (may skip dividend) but more costly than debt
investors prefer as pays more dividend than similar bonds
cumulative : pays missed dividends before paying common stock div
participating : pays additional dividend
convertible : can be converted to common stock (pays lower div)
callable: called when int rate low
adjustable rate : adjusted based on t-bill
Rights / Warrants
Rights short term (30 - 45 days), to maintain proportionate ownership, priced below market price
Warrants
long term ( 5 years), to sweeten offering,
priced above market price
ADR
issued by domestic banks
foreign stock held in trust account.
pays div in USD. no voting rights
Risks : mkt , currency, legislative
Act of 1933
regulates new issue mkt
registration statement :
description of issuer, investment purpose,
risk factors, amt of money being raised, description of company mgmt, any other material
cooling off period / effective date
cooling off period 20 days
cannot solicit orders, allowed to take IOI using red herring (not a prospectus, contains info from registration statement)
effective date : sale permitted, registration statement becomes prospectus, must receive prospectus no later than with trade confirm
quiet period (number of days before underwriter can publish research ) ipo 40, follow on 10
underwriting types / spread
firm commitment : unsold owned by underwriter
best effort
mini-max : must sell minimum else cancelled ,
all or none : deal cancelled if underwriter cannot sell all
gross spread = mgr fee (10-20%) + underwriting fee (20-30%) + selling concession (50-60%)
mgr + syndicate member + selling group
Act of 1933 Exemptions
Govt securities
Municipal securities
short term debt (commercial paper / money mkt / CD etc)
