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TOC Flashcards

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1
Q

1035 Exchange

A

a tex-free exchange between like contracts. This provision applies to transfers from annuity to annuity, life to life, and life to annuity. it cannot be used for transfers from an annuity to a life insurance policy

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2
Q

12b-1 Fee

A

A section of the Investment Company Act of 1940 that permits an open-end investment company (mutual fund) to levy an ongoing charge for advertising and sales promotional expenses. this fee may not exceed .75% and, if above .25%, the fund may not describe itself as no-load

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3
Q

401(k) Plan

A

A tax-deferred defined contribution retirement plan offered by a private-sector employer

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4
Q

403(b) Plan

A

A tax-deferred retirement plan available to employees of public schools and certain nonprofit organization

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5
Q

529 Savings Plans

A

plans designed by states to provide tax-advantaged means of saving for eligible education expenses

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6
Q

75-5-10 Test

A

The standard for judging whether an investment company qualifies as diversified under the Investment Company Act of 1940. Seventy-five percent of a fund’s assets must be invested in such a way that no more than 5% of its total assets are invested in any one company’s voting securities, and no single investment may represent ownership of more than 10% of any one company’s outstanding voting securities. There are no restrictions on any remaining 25% of the funds’ assets.

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7
Q

Acceptance, Waiver, and Consent

A

A form of plea bargaining under the Code of Procedure. FINRA’s Enforcement Department brings disciplinary actions against a respondent and, if the respondent agrees, the proposed settlement is accepted, all rights to a hearing are waived, and the respondent consents to the penalty submitted.

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8
Q

Accredited Investor

A

Any institution or individual meeting minimum requirements for the purchase of securities qualifying under the Regulation D registration exemption

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9
Q

Accumulation Stage

A

The period during which contributions are made to an annuity contract. (see also accumulation unit)

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10
Q

Accumulation Unit

A

An accounting measure used to determine and annuitant’s proportionate interest in the insurer’s separate account during a variable annuity’s accumulation (deposit) stage. (see also accumulation stage, annuity unit, separate account)

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11
Q

Acid-Test Ratio

A

A measure of a corporation’s liquidity, calculated by adding cash, cash equivalents, and accounts and notes receivable, but not inventory, and dividing the result by total current liabilities. it is a more stringent test of liquidity than current ratio.

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12
Q

Ad Valorem Tax

A

A tax based on the value of real or personal property

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13
Q

Adjusted (cost) Basis

A

Adjusted basis is used to compute the gain or loss on the sale or other disposition of the asset or security

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14
Q

Adjusted Gross Income (AGI)

A

Gross income from all sources minus certain adjustments to income to income, such as deductible contributions to an IRA and net capital losses. It is the amount of income that will be subject to tax. (see also tax liability)

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15
Q

Administrator

A

(1) The official or agency administering the securities laws of a state. (2) A person authorized by a court of a law to liquidate an interstate decedent’s estate.

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16
Q

Advertisement

A

Any promotional material where the firm has little control over the type of individuals being exposed to the material

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17
Q

Advisory Account

A

An account through which a registered investment adviser (RIA) or investment adviser representative (IAR) of the RIA provides investment advice to her clients for a fee

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18
Q

Affiliated Person

A

Anyone in a position to influence decisions made in a corporation, including officers, directors, principal stockholders, and members of their immediate families. Their shares are often referred to as control stock

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19
Q

Agency Issue

A

A debt security issued by an authorized agency of the federal government. such issues are backed by the issuing agencies themselves, not by the full faith and credit of the US Government (except GNMA and Federal Import Export Bank Issues). See Government Security

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20
Q

Accrued Interest

A

The interest that has accumulated since the last interest payment, up to but not including the settlement date, and that is added to the contract price of a bond transaction

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21
Q

Agency Transaction

A

A transaction in which a broker-dealer acts for the accounts of others by buying or selling securities on behalf of customers. Syn. agency basis. See also agent: broker: principal transaction

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22
Q

Agent

A

(1) An individual or firm thats effects securities transactions for the accounts of others. (2) A securities salesperson who represents a broker-dealer or issuer when selling or trying to sell securities to the investing public; this individual is considered an agent whether he actually receives or simply solicits orders. see broker; broker-dealers; dealer, principal

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23
Q

Aggregate Exercise Price

A

The strike price expressed in total dollars. The aggregate exercise price for a standard July 40 call contact is $4,000 (100 shares at $40 per share)

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24
Q

Aggressive Investment Strategy

A

A method of portfolio allocation and management aimed to achieving maximum return. Aggressive investors pursue aggressive policies, including margin trading, arbitrage, and option trading. See also balanced investment strategy, defensive investment strategy

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25
Q

Agreement Among Underwriters (AAU)

A

The agreement that sets forth the terms under which each member of an underwriting syndicate will participate in a new issue offering and states the duties and responsibilities of the underwriting manager. see syndicate; underwriting manager

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26
Q

Agreement of Limited Partnership

A

The contract that establishes guidelines for the operation of a direct participation program, including the role of the general and limited partners

27
Q

All-or-None Order (AON)

A

An order that instructs the firm to execute the entire order. Firm does not have to execute immediately.

28
Q

All-or-None Underwriting (AON)

A

A form of best efforts underwriting in which the underwriter agrees that, if it is unable to sell all the shares (or a prescribed minimum), the issuer will cancel the offering

29
Q

Alternative Minimum Tax (AMT)

A

An alternative tax computation that adds certain tax preferences items back into adjusted gross income. if the AMT is higher than the regular tax liability for the year, the regular tax and the amount by which the AMT exceeds the regular tax are paid. See tax preference item.

30
Q

American Depository Receipt (ADR)

A

Facilitate trading in foreign securities in the US domestic markets. Sometimes these are shown as ADS (American Depository Shares) and are similar to a GDR (Global Depository Receipt), which is traded outside the United States

31
Q

American Stock Exchange

A

Former name of the NYSE American Stock Exchange. This exchange should not be confused with the NYSE Amex Options Exchange

32
Q

American-Style Option

A

An option contact that may be exercised at any time between the date of purchase and the expiration date. Most exchange-traded options are American-Style

33
Q

Amortization

A

(1) The paying off of debt in regular installments over a period of time. (2) The ratable deduction of certain capitalized expenditures over a specified period of time

34
Q

Amortization of Bond Premium

A

An accounting process whereby the initial cost of a bond purchased at a premium is decreased to reflect the basis of the bond as it approaches maturity. See also accretion of bond discount

35
Q

Annual Compliance Review

A

An annual meeting that all registered representatives and principals must attend, the purpose being to review compliance issues

36
Q

Annual Report

A

A formal statement issued yearly by a corporation to its shareowners. It is a reflection of the corporation’s financial and operational wellbeing at the close of the business year (balance sheet) and earnings performance (income statement)

37
Q

Annual Return on Investment (ROI)

A

For example, the annual return on a bond investment, which equals the annual interest and either plus the prorated discount or minus the prorated premium

38
Q

Annuitant

A

A person who receives an annuity contract’s distribution

39
Q

Annuitize

A

To change an annuity contact from the accumulation (pay-in) stage to the distribution (pay-out) stage

40
Q

Annuity

A

A contract between an insurance company and an individual. Upon annuitization, it guarantees lifetime income to the individual on whose life the contact is based in return for either a lump sum or a periodic payment to the insurance company

41
Q

Annuity Unit

A

An accounting measure used to determine the amount of each payment during an annuity’s distribution stage. see also accumulation unit; annuity; distribution stage

42
Q

Anti-Money Laundering

A

A program required to be instituted by all FINRA member firms under NASD Rule 3011. All personnel are to be trained to identify the different stages of money laundering and how to combat it

43
Q

Appreciation

A

The increase in value of an asset

44
Q

Arbitration

A

The arrangement whereby FINRA’s Board of Arbitration or a designed arbitration association hears and settles disputes between members, allied members, member organizations, and their employees. Nonmembers in dispute with members or employees may submit voluntarily to arbitration. Once both parties agree to the process, there is no appeal.

45
Q

Ask

A

An indication by a trader or dealer of a willingness to sell a security or a commodity; the price at which an investor can buy a security.

46
Q

Assessed Value

A

The value of a property, as appraised by a taxing authority, for the purpose of levying taxes. Assessed value may equal market value or a stipulated percentage of market value.

47
Q

Assessment

A

An additional amount of capital that a participant in a direct participation program may be called upon to furnish beyond the subscription amount. Assessment may be mandatory or optional and must be called within 12 months

48
Q

Asset

A

A balance sheet item expressing what a corporation owns

49
Q

Asset Allocation Fund

A

A mutual fund that splits its investment assets among stocks, bonds, and other vehicles, with a view to provide a consistent return for the investor

50
Q

Asset-Backed Security (ABS)

A

One whose value and income payments are backed by the expected cash flow from a specific pool of underlying assets. Pooling the assets into financial instruments allows them to be sold to investors more easily than selling them individually. This process is called securitization

51
Q

Assignment

A

(1) A document accompanying, or part of a stock certificate signed by the person named on the certificate for the purpose of transferring the certificate’s title to another person’s name.
(2) The act of identifying and notifying an account holder that an option held short in that account has been exercised by the option owner. See also stock power
(3) Transferring an investment advisory contract to another firm. This may not be done without written consent of the customer. A change in the majority interest in an investment advisory firm organized as a partnership is also considered assignment.

52
Q

Associated Person

A

Any employee, manager, director, or partner of a member broker-dealer or another entity (e.g., issuer or bank), or any person controlling, controlled by, or in common control with that member, is considered an associated person of that member.

53
Q

Associated Person of a Member (AP)

A

An individual who solicits customers, orders, or funds on behalf of a futures commission merchant (FCM) and is controlled by that member or an introducing broker (IB)

54
Q

Assumed Interest Rates (AIR)

A

(1) The net rate of investment return that must be credited to a variable life insurance policy to ensure that at all times, the variable death benefit equals the amount of the death benefit. The AIR forms the basis for protecting payments, but it is not guaranteed.
(2) The rate that a variable annuity separate account must earn to keep annuity payments level. If the account earns more than the AIR, the next payment will increase; if it earns less, the next payment will decrease

55
Q

At The Money

A

The term used to describe an option when the underlying stock is trading precisely at the exercise price of the option.
See also in the money; out of the money

56
Q

Auction Market

A

A market in which buyers enter competitive bids and sellers enter competitive offers simultaneously. The NYSE is an auction market

57
Q

Authorized Stock

A

The number of shares of stock that a corporation may legally issue. This number is stipulated in the corporation’s state-approved charter and may be changed by a vote of the corporation’s stockholders.

58
Q

Automated Quotation System (NASDAQ)

A

The NASDAQ Stock Market is a US-Registered stock exchange providing an automatic execution venue. Trade reporting for NASDAQ trades goes through the FINRA/NASDAQ Trade Reporting Facility (TRF)

59
Q

Automatic Exercise

A

A procedure initiated by Options Clearing Corporation (OCC) to automatically exercise in-the-money options upon their expiration

60
Q

Automatic Reinvestment

A

A feature available available to shareholders whereby dividend distribution are automatically reinvested

61
Q

Average

A

A price at a midpoint among a number of prices. Technical analysis frequently use averages as market indicators.

62
Q

Back-End Load

A

A fee that is charged when mutual fund shares or variable annuity contracts are redeemed. it is typically found with Class B shares (and for one year with Class C shares). It declines annually, decreasing to zero over an extended holding period - up to 8 years - as described in the prospectus.

63
Q

Backdating

A

The predating of a letter of intent (LOI) by as many as 90 days to allow an investor to incorporate recent deposits for the purpose to qualifying for sales load discount (breakpoint) on a purchase of open-end investment company shares

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