SIE Flashcards
ETN (Exchange Traded Notes)
-adversely impacted if issuers credit rating is downgraded
-debt Secuity
-issued by banks or financial institutions and typically track an index or benchmark
-can go long or short
-does NOT pay dividends or interest
-debt instrument
Treasury Notes
- interest is paid semiannually
-quoted by whole and fractional bond points
-1/32
Treasury Stock
- issued stock subsequently reacquired by a corporation
-par value
-it is authorized, issued, and owned but NOT outstanding
Credit risk=Default Risk
Market Risk is the highest for variable life
Market risk=liquidity risk
marketability ricst=liquidity risk
currency risk=non-systematic risk
Purchasing Power risk= inflation risk
risk
Securities Act of 1933
-All gov. agency issues are exempt
-Registration is required for ADRs
-registration is not required for securities by gov. muni bons, Eurodollar
-Registration is required for new issues
-registration Is listed it of non-expect new issues
-prohibit fraud and deceit in the marketing of securities
-financial statements certified by independent accountants
-registration not required for small business investment companies
Ginnie Mae (GNMA)
-interest payments on pass through are made monthly
- mortgage
-conservative investments that may be suitable for senior investor
-payment due T+1
-pass through certificate has no credit risk as it is backed by us gov
Hypothecation
-pledging of securities as collateral
-margin account
-make loans to banks
Treasury Bonds
-exposed to inflationary risk
-issued by US. gov. in book entry
Debenture
-unsecured bond
-promised by issuers promise to pay
-seeking income
DDP (Direct Participation Programs)
-provide exposure to non-correlated assets
-offers professional management
-high risk, high reward
-illiquid
-passive income
12b-1 Fee
-Sales and Advertising
-includes cost of marketing and distributing a mutual fund is collected
-expenses of selling, marketing, distributing fund
-salaries of fund salespeople
-Highest can be 1%
-No-load fund cannot be greater than .25%
-if fund has 12b-1 fee the max sales charge is 7.25%
Preferred Stock
-Cumulated, participating, convertible, callable, straight
-can be converted to common stock not bonds
HSA (Health Savings Account)
-funded w/ tax-deductible contribution
-established by corporate employees as part of their health insurance plans
-sponsored by employer so qualified
-plans w/ high deductibles
-$4,150 for 1, $8,300 for family
-tax deferred
-withdrawals for medical is tax-free
ODD (Options Disclosure Document)
-customer must be sent options agreement for signature and returned within 15 days of first options transaction
bust be sent at or prior to account opening
(REIT) Real Estate Investment Trusts
-non-exempt under Securities act 1933
-traded on stock exchange or OTC
GNP (Gross National Product)
- includes American companies doing business in other countries
GDP (Gross Domestic Product)
- business conducted between American boarders
Qualified Institutional Buyers (QIB)
UTMA (Uniform Transfers to Minors Act)
-opened under Tax ID of the minor
-owned by minor
FDIC (Federal Deposit Insurance Corporation)
- savings account at a bank is guaranteed by FDIC
Regulation D
-504, 506(b), 506(c)
-regulation dont need to be registered under 1933 if these rules are followed
-Private Offering
-no limit for accredited investors
-no more than 35 non accredited investors
-refers to private placements
-how restricted shares are normally acquired
Regulation T
-a 90-day restriction occurs when a customer opens and closes the same stock in a cash account without paying in full
-applies to corporate bonds OTC, common stock, and preferred stock OTC but NOT municipal bonds OTC
-max time peripd to collect monies owned by customer prior to extension request is 3 buisness days
-rules cover both cash accounts and margin accounts
-payment for trade must be made 3 business days after trade
-set by Fed
-broker to customer
-does NOT apply to us gov bonds
-exntension for payment is S+2
payments must be made in 3 days
apples to listed and unlisted securities
applies to non expempt securities
Regulation A-offering circular
- up to $75 Million
-can still be public offering
529
-potential deductibility of contributions from state taxes
-changes state to state
-must inform contribution must be deductible at state level
-tax-free Distrubutions
-amount contributed won’t be deductible from federal income tax but possibly state income tax
-donor and beneficiary can be the same person
-donor maintains control over assets
Rule 147
-interstate offering
-offers cannot be sold out of state for +6 months after initial sale date
-subject to blue sky laws
DTC (Depository Trust Company)
SIPC (Securities Investor Protection Corp)
-must be made available at account opening only and annually after
-must be provided with phone number and website address prior to accounts open
-insures customer accounts against B/D fail
-backed financially by B/D that are members
-protects against bankruptcy
MSRB (Municipal Securities Rulemaking Board)
-
FinCEN
-mission is to safeguard financial system from abuses of financial crime, terrorist financing, and money laundering
-enforces Bank Secrecy Act
Rule 144a
-issuers of restricted stock must sell to QIBs
-allows QIBs to buy and trade between each other in large blocks of privatly placed issues
Regulation S-P
- a firm must include the policies to protect security of nonpublic info in its customers privacy and opt-out notices
-covers notification to customers of a member firms privacy policies and practices
Rule 145
-merger w/ another publicly held company requires registration statement filing w/ SEC
-exempts corp. action
Form Registration
What Requires
-stock split
-reverse stock split
-stock dividend
-mergers where shareholders are part
Regulation S
-
Rule 144
-unregistered Restricted Securities (6 months)
TIPS (Treasury Inflation Protection Securitues)
-principal amount if adjusted upwards with the rate of inflation
-interest rate *is fixed
-no purchasing power risk
-deflation does NOT make maturity price drop below par
STRIPS (Separate Trading of Registered Interest and Principal of Securities)
-discount to par
-0 coupon bond
-separates interest and principal components
-pay interest at maturity
-insuated investor of reinvestment risk
504
506(b)
506(c)
Trust Indenture Act of 1939
Form 1099-DIV
-cash dividends
Ad Valorem
-real estate taxes backed by debt Secuities issuers by town, cities, or counties (never states) local municipalities
Municipalities
Basis Points
100 Basis Points= 1%
1%=.01
10%=.1
100%=1
403(b) Plan
-schools and non-profit
-not corps.
457(b)
412
T-Bills
-10U
-Conservative Short Term
-B/D would get them from a primary dealer
-max maturity of 1 year
-sold at discount to par
-can be purchased directly at weekly option
-most actively traded money market instrument
-zero coupon security
-quoted in terms of a discount yield or basis quote
C-Ds
Corp. Resolution
-needed when corp. opens account with B/D
Open-End
- the NAV is the min price at which a share can be purchased
Close-End
-can sell at a discount or premium to its NAV depending on investor perception of the fund
-they are negotiable because the are traded in secondary market and their ownership can be transfered across individuals
Warrants
Rights
Oh
Dow-30
NYSE-250
Index-1700
Wilshire-3500
ADR (American Depositary Receipts)
-common shares
-securities you buy in American with US dollars that represents stock in foreign countries
-if US goes down it is good
-non-exempt
-subject to currency/exchange risk
-when us dollar goes up, price of receipt will fall
-money market fund wont invest in this
-equity security that is the vehicle for foreign stocks to trade
UIT (Unit Investment Trust)
-not actively management
-passively managed
-lower fees
ERISA
-rules regarding retirement plans stress that investments should be safe
–safety of principle
CRD (Central Registration Depositary)
Buyer
Holder, Owner, Long
Seller
Short, Writer
Monetary Theory
-control money supply
-FED
Supply-Side
-Individual/tax rate reductions
Keynesian Theory
Fiscal Policy-the use of government spending and tax policies to influence economic conditions
Commercial Paper
-Short term
-matures in 270 days
-exempt security under 1933
-smooths out cash flow used by corps
LGIP (Local Gov. Investment Pool)
-municipal entity
-trust established by local gov. that allow Municiple entities to invest their money in a variety of securities
-managed by gov. employees or investment management firms
-purchase interest in trust, and assets are investment to trust stated objectives to benefit from economies of scale, diversification, professional portfolio management, and liquidity
-regulated by MSRB
Custodian
Type of cash account
Unlimited Loss for call not put
What loss does Short/Short have?
AML (Anti Money Laundering)
records held for 5 years
Form CRS
USA (Uniform Securities Act)
- legal framework for registration of securities at stae level
6 years
How Many Years?
-customer account statements
-new account forms
3 years
How Many Years?
-ads
-correspondence
-customer orders
-registration statement w SEC that uses a method only available for seasoned
issuers
-U4 must be kept after termination
-U5 record kept for
4 years
How Many Years?
-written customer complaints
-approval in advance of use by principal
5 years
How Many Years?
-Anti- money laundering records
customer identification records
-distributions are subject to penalty taxed in a Roth Ira if taken out within…
-RR outside of industry out for 5 years then have to retake exam
Lifetime Records of firm
How Many Years?
-articles of incorporation
-partnership articles
-minutes of partners or directors’ meetings
-stock certificate books
-Form BD
Clearing Agent
-middle man
Regulation M
RMD (Required Min. Distribution)
-amount of money needed to be taken out in ira after 73
Coverdell Account
-$2k max a year
-Cant contribute if rich
Treasury/ US Gov
actual/actual
Corp/Muni
30/360
Systematic
all investors
market risk
Unsystematic
credit/politcial/liquid risk
not all investors
MFP (Municipal Finance Professional)
any person who is primarily engaged in or supervises the activities of underwriting, trading, or selling municipal securities
Solicited
-valid trade
-non-exempt ruling
-RR believes its fair
-initiated by RR
Unsolicited
-not recommended by B/D
-must go through if customer says and is sure-client specifically specifies the bonds/stocks he wants purchased
CRD (Centeral Registration Depository)
ABLE Account
-beneficiary is always accounts owner
–individual disability must begin before 26
-tax deferred
-can have up to $100k
-can still qualify for federal supplemental security income benefits
-regulated by MSRB
Street name
-stock shares having a nominal owner and a beneficial owner
Bond Identure
contract between bond issuer and a trustee for the benefit of the bondholders
Shelf Offering
-issuer files one registration statement for a large number of securities and does not sell than immediately
Follow-on
-when a company decides to sell additional shares to public after IPO
Current Yield
Annual Coupon Rate/Current Market Price of Bond
Real Interest Rate
Nominal Yield-Inflation Rate
Interbank market
where foreign Exchange rates are set
Variable Annuity Contract
-non-exempt for 1933
-basically, buying a mutual fund in an insurance company wrapper
-number of annuity units is fixed
-does NOT need to delect period certain payout option
Fixed Annuity
-not a secuity and does not need to register w 1933
-grows at a guaranteed rate
OFAC
-office of foreign assets control
-maintains a list of known and suspected terrorists called Specially Designated Nationals lists
Certificate of Deposit (CDs)
-a “step down” cd means the interest payment may be reduced
Securities Exchange Act of 1934
-Stabilization of new issues
-registration of exchanges
-registration of broker/dealers
-front running
Form CRS (Customer Relationship Summary)
-must be provided at or prior to the making of a recommendation or account opening only for retail clients
-if firm is acting as broker-dealer
-fees and cost customer will pay
-conflicts on interest
BAN-bond anticipation Note
RAN-revenue anticipation note
Tan-Tax anticipation Note
TRAN- tax revenue anticipation note
Series Bond Offering
-bond issue where the bonds have the same maturity but different dates of issuance
Form D
-must be filed with SEC to claim private placement within 15 days of the offering to claim the exemption
Regulation U
-credit from bank to broker
