SIE chapter 1 Flashcards
Securities and exchange commission(SEC)
is the securities industry’s primary regulatory body
Although a broker dealer must register with the SEC, The broker dealer may not claim that
this registration in any way Implies that the SEC has passed upon or approved the BDS financial standing, business and conduct. Any such claim would be misrepresentation
FINRA
regulates all matters related to investment banking(securities underwriting), trading in the over the counter market, trading in the NYSE listed securities, and the conduct of finra member firms and associated persons.
conduct rules
establish the relationship between firms and their customers
uniform practice code
these rules cover technical aspects of trading and payment for securities transactions
Code of procedure
covers the enforcement of FINRA rules and details the punishment of member who incur rule violations
the code of arbitration
is a finra run dispute resolution process to settle monetary disputes
Chicago board options exchange
regulates all matters related to trading standardized options and related contracts listed on that exchange
municipal securities rulemaking board
regulates all matters related to the underwriting and trading of state and municipal securities
federal reserve board
consists pf 12 regional federal reserve banks and hundreds of national and state banks that belong to the system
securities investor protection corporation was created under the ___________ the corporation is a____
securities protection act of 1970
non profit membership organization
all Broker Dealers with the SEC must be SIPC members except
banks that deal exclusively in municipal securities
firms that deal exclusively in the US government securities
firms that deal exclusively in redeemable investment company securities
cash and margin accounts for the same customer are combined for
the purposes of determining sipc coverage,
however only the equity in a margin account is covered, not the full market value.
federal deposit insurance corporation
is an independent agency of the us federal government that preserves public confidence in the banking system by insuring deposits.
retail investor
is an individual who makes investments such as the purchase of securities for her own personal account rather than for an organization.
institutional investor
is an entity that pools money to purchase securities and other investment assets.
some institutional investors are referred to as
qualified institutional buyers
an accredited investor has
has a net worth of over $1 million not including net equity in a primary residence; or
has had an annual income of over $200,000 in each of the two most recent years (or over $300,000 jointly with a spouse) and who has a reasonable expectation of reaching the same income level during the current year.
Officers, general partners, and directors of an issuer of securities are also considered accredited.
Carrying(clearing) firm
carries customer accounts and accepts funds and securities from customers.
carrying firms must
segregate customer funds and securities held in their custody
fully disclosed firm(introducing BD)
is one that introduces its customers to a clearing firm
An introducing firm may
receive customer checks, but they must be made out to the clearing firm
acting as a registered representative does or does not require registration as an advisor
does not require registration as an advisor
arbitrage
attempts to profit from pricing differentials that may temporarily exist between markets
underwriters
are groups of BDs or investment bankers that work with an issuer to bring its securities to the market and sell them to the investing public.
issuers
An entity, such as a corporation or municipality, might offer or propose to offer its securities for sale to the investing public for the purpose of raising capital.
market trader /trader
Any entity, individual, or institution willing to accept the risk of holding a particular security in its own account to facilitate trading and provide liquidity in that security is known as a market maker or trader
custodian
An institution or a person responsible for making all investment, management, and distribution decisions in an account maintained in the best interests of another
trustee
Manages assets for the beneficiaries of a trust, estate or other party.
fully disclosed BD
is an introducing firm clearing its transactions through a carrying firm
clearing agent
An intermediary between the buy and sell sides of a transaction
Securities investor protection corporation
A nonprofit organization requiring members to pay assessments into a general insurance fund used to meet customer claims in the event of a BD bankruptcy is
The FDIC provides insurance guaranteeing the safety of a depositor’s accounts in FDIC member banks for each deposit up to
250,000
Determining monetary policy and taking actions to implement those policies is the responsibility of
Federal Reserve Board
Market
used to describe any physical or electronic venue where buyers can come together for the purpose of trading assets
capital markets
broadly defined as the stock and bond markets
primary market
where securities are sold to the investing public in what are known as issuer transactions
secondary markets
where securities trade between investors
third market (nasdaq intermarket )
trading market in which exchange listed securities are traded in the etc market
4th market
market for institutional investors in which large blocks of stock, both listed and unlisted, trade in transactions unassisted by broker- dealers
monetary policy
are those enacted by the FRB to influence the money supply
fiscal policy
refers to governmental budget decisions enacted by our president and congress such as tax laws and federal spending appropriations
m1 consist of
currency
demand deposits
m2 includes
everything in m1 + time deposits less than 100k
m3 includes
everything in m1 and m2 plus time deposits more than 100k and repurchase agreements with terms longer than 1 day
Federal open market committee
meets regularly to direct the governments open market operations
Federal Reserve banks buying
securities come out of the economy and money goes in. Money supply goes up, ir down, borrowing and spending for consumers is easier and economy expands
Federal reserve bank selling
securities go into the economy and money comes out,
ms goes down
ir goes up, borrowing and spending for consumers becomes more difficult.
interest
cost of money
federal funds rate
rate the commercial money center banks charge each other for overnight loans of 1 mill or more.
discount rate
rate the federal reserve charges for short term loans to member banks
prime rate
interest rate that large us money center commercial banks charge their most creditworthy corporate borrowers of unsecured loans
broker loan rate
the interest rate banks charge broker-dealers on money that they borrow to lend to margin account customers
broker loan rate is also known as the
call loan rate or call money rate
when a bank needs to borrow money it can borrow from the ____ or it can
federal reserve
borrow from another member bank like itself
borrowing from the frb=
bank pays the discount rate
borrowing from another member bank
bank pays the federal funds rate
financial statements
provide a fundamental analysis with the raw material needs to assess that corporations profitability, financial strength, and operating efficiency.
balance sheet provides
snapshot of a company financial position at a specific time
equity or net worth is difference in
assets and liabilities
assets- liabilities=
net worth
does the depository trust and clearing corporation act as a retail bank servicing savings and checking accounts
no
Your bd acts as a prime broker for an institutional account. In this arrangement you bd is likely to be providing which of the following services
a. execute of all transactions
b. Maintenance of a trading floor operation on an exchange
c. ensure that all exchange trading rules are complied with
d. clearing and transaction settlement services for executing brokers.
Market maker
individual or institution willing to hold securities positions in its own proprietary account for the purpose of providing liquidity to the marketplace.
depository trust and clearing corporation
provides automated clearing and settlement services in book entry format to banks and bds for stock and bond trades and employs a continuous net settlement system.
