Trading Equities & Retirement Plans Flashcards
When a written trade confirmation must be given or sent to a customer
At or before the completion of the transaction (settlement)
The capacity shown on a confirmation when the shares are sold from the inventory of the broker-dealer
Principal
The capacity shown on a confirmation when the broker has arranged a trade between a buyer and seller
Agent
Compensation charged when a dealer sells shares from inventory
Mark-up
Compensation charged when a dealer purchases shares for inventory
Mark-down
Compensation charged when a broker transacts an order on a client’s behalf
Commission
Standard trading unit of equity securities
Round lot (100 shares)
Order that is executed immediately at the current price, and has priority over all other orders
Market order
An order that is entered to protect a profit or prevent a loss
Stop order
Can be executed only at the specified price or better
Limit order
When principal approval is required for a new customer account
At or promptly after the first transaction in the account
Type of trading authorization granted to permit a third party to make trades but not withdraw cash or securities
Limited trading authorization
Type of trading authorization granted to permit a third party to make trades and withdraw cash or securities
Full trading authorization
Two types of custodial accounts established for minors
UGMAs and UTMAs
Joint account that passes assets to remaining tenant at death with no probate
Joint tenancy with rights of survivorship (JTWROS)
Type of account that passes assets by will to the heirs
Joint tenants in common (JTIC)
Type of joint account that permits unequal ownership interests
Joint tenants in common (JTIC)
Type of joint account that requires equal ownership interests
Joint tenancy with rights of survivorship (JTWROS)
Type of account that authorizes registered representative to make trades on behalf of the customer
Discretionary
Type of individual account that passes assets to a named beneficiary at death and avoids probate
Transfer on death (TOD)
Three trading restrictions for custodial account
Short sales, uncovered options, margin accounts
Prohibited practice of trading frequently to boost commissions
Churning
The number of days a firm has to validate positions when an account transfer is requested
One business day
The number of days a firm has to transfer the securities after the account has been frozen
Three business days
Two order instructions that are not considered discretionary
Time and price
Length of time mail can be held for customers that are traveling in the U.S.
2 months
Length of time mail can be held for customers that are traveling outside of the U.S.
3 months
Minimum frequency a statement must be sent to a customer in an inactive account
Quarterly
Frequency with which account statements are sent to customers in an active account
Monthly
Minimum frequency statements are sent to customers if penny stocks are held in the account
Monthly
When a principal must approve an order ticket
Promptly after execution
The number of days after account opening a firm has to furnish a copy of the account record to the customer
30 days
Two required documents for opening a corporate account
Corporate charter and corporate resolution
Account charge that is appropriate only for persons who engage in moderate to active trading
Fee-based
Account charge that is appropriate for persons who engage in little trading activity
Commission
Accounts that provide a group of services such as asset allocation and portfolio management, and are generally available through investment advisors
Managed accounts
Document that must be obtained when opening a partnership account
Partnership agreement
An individual who is charged with prudently managing a custodial account to achieve the stated investment objectives
Fiduciary
Series of steps that a firm must follow at the death of an individual account owner
Cancel all open orders, freeze the account, await instructions
The party that can buy, sell or liquidate securities in an UGMA account
Custodian
When assets transfer to the donee in an UGMA account
Age of majority
The Social Security number on an UGMA account form
The minor’s
Documents that can confirm identity of a new customer as specified by a firm’s Customer Identification Program
Unexpired driver’s license or passport
The organization that maintains a list of known or suspected terrorists that must be checked when a firm verifies a new customer’s identity
US Treasury (Office of Foreign Assets Control – OFAC)
The frequency that customer account information must be updated
Every 3 years
Frequency that privacy notices must be provided to customers after account opening
Annually
Protects a profit or limits a loss in a short stock position
Buy stop order
Protects a profit or limits a loss in a long stock position
Sell stop order
Orders that are entered below the current market price
Buy limits, sell stops and sell stop limits
Orders that are entered above the current market price
Sell limits, buy stops and buy stop limits
Order that is to be executed immediately in its entirety
Fill-or-Kill
Order that is to be executed immediately; partial execution is acceptable, remainder is canceled
Immediate-or-cancel
Execute the entire order or none of it; does not require an immediate fill
All-or-none
Price-weighted index of 30 “blue chip” U.S. stocks of industrial companies
Dow Jones Industrial Average
Capitalization-weighted index of 500 stocks, regarded as the standard for measuring large-cap U.S. stock market performance
S&P 500
Used in anticipation of a breakout of the level of resistance
Buy stop order
Used in anticipation of a breakout of the level of support
Sell stop order
Upon receipt of an ACAT form, a firm must verify the account positions within
1 business day
A pattern day trader effects 4 or more day trades within a
5 business day period
Customers must receive a copy of new account form every
36 months
Order ticket must be filled out prior to
order execution