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Tutoring For 65 > Tutor Q Bank > Flashcards

Tutor Q Bank Flashcards

1
Q

Rules on 2 Agents Splitting the commission on a client

A

Doesn’t - have to be in writing
Doesn’t - Need Client Approval

Does - Need to not Increase the overall cost to the client
Does - Need to be by agents who are in the same company
OR
Agents who are in the same Direct/Indirect Common Control (Parent company’s Family)

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2
Q

Common Control

A

Parent Company Owning 1 or more child companies

Agents splitting commissions need to be within the same common control

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3
Q

Test Tip:
Especially with law questions, always think of which rule they are quizzing you on (That can help narrow down the choices)

A

Test Tip:
Especially with law questions, always think of which rule they are quizzing you on (That can help narrow down the choices)

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4
Q

Requirements for 3rd party trading Authorization

A

Must be in writing from the client themself
(Oral is NEVER accepted)
(Email is accepted because that’s a form of writing)

OR

From some type of Court Order

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5
Q

When you See NASAA think

A

State level Not Federal

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6
Q

Performance Based Fee

A

!!!Different from participating in the Gains/Losses of Client Account

ie: if you get a client a +10% return then you charge an additional fee of ___% for all the returns above that amount

Only based upon the gains of the account never the losses

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7
Q

State Requirements for a
Performance Based Fee

A

Client Must have:
$1.1 million in AUM (with you) for that single account
OR
$2.2 million in Net Worth

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8
Q

$ amount of Net Capital Required in most states for a IA with Custody of clients Funds

A

$35k

(probably wont be directly tested on in the test)

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9
Q

Right of Recission

A

Undoing something you did for your client

They cant take legal action if they agree

You must pay back all $ with interest to them

If client doesn’t respond to it within 30 days the right is terminated

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10
Q

In What Time Frame Must
Advisors Send Clients Statements

A

Quarterly

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11
Q

When Must an IA do a surprise Audit

A

1/year

and only if they have custody of clients funds

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12
Q

How long do IA need to keep Copies
All Confirmations Sent To Client

A

For 3 years
(I’m assuming that from time the Confirmation was sent to client)

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13
Q

How long do IA need to keep Copies
All Communications Sent To Client

A

Forever
until
5 years after the clients account has been closed

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14
Q

How Frequently do
IA Manuels need to be reviewed

A

Once Per Year

ALL IA MANUELS

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15
Q

What types of
education requirements
do IA’s need to disclose in their manuals

A

Any Continuing Education Requirements

NOT any prior employment education that was required
(if the employee got the job they already looked into that)

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16
Q

IA - Rules on Showing Off their
Clients Account Performance
in promotional materials

A

Cannot - State the specific performance of a single account/client
Can - State their overall AVERAGE performance (not client/account specific)
Should be backed up with disclosure that past performance doesn’t guarantee future performance

(Cannot be specific to a client or account - otherwise they could just cherry-pick their best performers)

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17
Q

IA - When ok to
Disclose Clients Accounts Info

A

Either:
-Court Orderd
or
-Client gives permission IN WRITTING
(but still cant use that in promotional materials)

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18
Q

IA send a buy order to BD that bundles multiple client accounts

During the transaction process the Price of the security fluctuates a couple times

How does the BD Distribute those price changes back to the IA’s Clients

A

Each Client gets the:
AVERAGE COST BASIS
for the transaction

(basically they average out the changes during trading to all the clients so that its fair)

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19
Q

3 Types of Suitability

A

1) Reasonable Basis - Basic Info gathered about the client (ie: a Fact Finder or getting to know them)

2) Client Specific - Info unique to the client that may conflict with their reasonable basis (ie: they are really old but love gambling in the market)

3) Quantitative - Extra info you can infer/ make additional conclusions on based on their Reasonable Basis (ie: they wont tell you their salary but you know they are a CEO of a huge company, you infer that they have a large salary)

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20
Q

Does the Client have to tell you anything in order for you to work with them

A

No, you can just use the 3 types of suitability to learn about them as you go

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21
Q

What type of Closed-End Funds can be redeemed not just traded in the Secondary Market

A

UIT’s

(still considered a closed-end fund though)

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22
Q

What should you assume about Mutual Funds unless otherwise stated

A

they are Open-End Class A funds

(unless otherwise stated)

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23
Q

Discounted Cash Flow

A

What a Cash Flow is actually worth after factoring in compounding Inflation
(less than the cash flow stated if there is inflation)

On questions that have you calculate it, remember to take out inflation from the interest payments and that that inflation is compounding year over year

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24
Q

Do Trusts always pay the taxes before passing income on to beneficiaries?

A

No they CAN pay the taxes but dont HAVE to pay the taxes

they might also just pay a portion of the taxes

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25
Q

What is the Limit of # of Grantors, Beneficiaries, and trustees you can have on a trust?

A

NO Limit

(you can have unlimited amount of any of those on a trust)

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26
Q

Can a Day trading account be short Securities?

A

Yes

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27
Q

$250/$100 Political Contributions limits are rules for who?

A

Industry Professionals
(NOT everyday people)

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28
Q

the political Contributions limits ($250/$100) are for what period of time

A

Per election campaign
(they donate to the election campaign not the Individual)

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29
Q

RIETS 90% Taxable income Rule is for passing income on to beneficiaries. Is that Income being passed on PRETAX or POSTTAX

A

PRETAX

the beneficiary now has a tax liability for that dividend income

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30
Q

Ending Retained Earnings Formula

A

Ending RE = Beginning RE + (Net Income - Dividends (Also Known as The Current Years Retained Earnings))

Think of Retained Earnings like a Bucket of money and each year you might add more or less to it. Beginning Retained Earnings is whatever is left in the bucket at the start of the year from previous years

Easier Formula:
Ending RE = Whats left in the bucket from past years + this years RE that’s added to the bucket

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31
Q

Beginning Retained Earnings

A

Last Years
Ending Retained Earnings

Think of Retained Earnings like a Bucket of money and each year you might add more or less to it. Beginning Retained Earnings is whatever is left in the bucket at the start of the year from previous years

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32
Q

On the test what is
Net Income

A

Either
Net Revenue
or
Net Earnings
(they flip-flop on the test just remember to use context to decide which it is for the test. In real life its always Net Revenue)

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33
Q

Net Profit Margin

A

Net Profit / Gross Revenue (Sales)

Net Profit on the test is Net Revenue
(usually sometimes its net Earnings)

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34
Q

Circulars

A

Flyers you hand out

for IA - any advertising materials given to MORE than 25 people may need to be filed with the state admin
(If Federal advisor its the same rule but filed federally)

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35
Q

Form Letters

A

Any advertising that’s based off of a template

for IA - any advertising materials given to MORE than 25 people may need to be filed with the state admin
(If Federal advisor its the same rule but filed federally)

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36
Q

Radio/Tv Broadcasting in 2 different states

Which state/states has Jurisdiction?

A

Jurisdiction is not about which state the IA/BD is in but where it’s being broadcast to
(where the broadcast originated - where was the radio tower that sent out the signal)

ie:
advisor lives in state A
But broadcast radio ads to State B exclusively

State B has jurisdiction of the advertisement

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37
Q

Newspaper/ Periodical in 2 different states

Which state/states has Jurisdiction?

A

Jurisdiction is not about which state the IA/BD is in but where it’s being broadcast to
(where the Newspaper/ Periodical was)

if 2/3rds of the paper’s circulation is outside of the IA/BD’s resident state, their resident state admin DOES NOT have Jurisdiction

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38
Q

Net Assets

A

Means
Net Worth (or equity)

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39
Q

UTMA’s —> Can you:
-Buy on Margin
-Leverage
-Buy Leveraged ETF’s
-Buy Options/ risky securities

A

-Buy on Margin - NO
-Leverage - NO
-Buy Leveraged ETF’s - YES
-Buy Options/ risky securities - YES

the account can be invested however you want. It doesn’t matter if its risky or not (if that’s what the client wants)
BUT a minor cannot enter into contracts so taking out a loan (margin and Leveraging) is NOT allowed in UTMA

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40
Q

EBITDA

A

another word for Net Revenue

stands for
Earnings
Before
Interest
Taxes
Deductions
Amortization

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41
Q

The Full Income Statement Formula

A

Revenue - operating expense = Net Revenue (EBITDA)
-Taxes +-Interest +-Deductions +-Amortization = Net Earnings
- Dividend = Retained Earnings (for that time period only(refer to Ending/Beginning Retained Earnings))

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42
Q

10K

A

Companies Official Report

Filed Annually

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43
Q

10Q

A

Companies Official Report

Filed Quarterly
(except for 4th quarter becasue they file a 10k then)

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44
Q

8K

A

Report to SEC for anything “Newsworthy”

must be done within 4 days of the event

(anything newsworthy that may affect the actual health of the company/ its securities)

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45
Q

What type of management fee do hedge funds usually have

A

Performance based Fee

(because they are all about aggressive performance)

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46
Q

Are Hedge Funds usually:
-Registered / Unregistered
-Privately / Publically organized

A

UnRegistered
and
Privately Organized

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47
Q

On questions that ask if either A,B,C class shares should be used in a specific client situation what do you need to remember?

A

You have to actually calculate (or get a quantifiable estimate on) what the total fee wil be to the client

You CANT just look at time frame they plan to hold the shares

Also B class shares CDSC will start out equal or greater than A shares SC

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48
Q

Are Affiliated Persons and Control Persons the same thing?

A

NO!!!!!! (all controlled persons are affiliates, but not all affiliates are controlled persons)

Affiliated - Director, Officer, employee, or 5% ownership of company

Control - Director, Officer, or 10% ownership of company
(if the question asks under the:
-Investment Advisers Act of 1940
or
-Investment Company Act of 1940
its changed to 25%)

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49
Q

Face Amount Certificate Company

A

Like a Zero Coupon Bond

Still considered an investment company and under Investment Company act of 1940

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50
Q

When swapping from one fund to another in the same company family is there a taxable event

A

Yes
(you would pay taxes on any gains from the previous security)

(unless there in a qualified account like 401k/IRA. on the test assume they are not though)

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51
Q

Fund has “Net Redemptions” means

A

More shares are being redeemed by fund than being bought

(has no impact on NAV)

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52
Q

Fund has “Net Purchases” means

A

More shares are being purchased by fund than redeemed

(has no impact on NAV)

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53
Q

When Auditors come in to audit books investors want to see
Qualified
or
UnQualified
Opinions

A

unqualified opinion

(qualified means they are uncertain about something in the financials)

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54
Q

If something is More Competitive that means

A

More people would buy them

(means the price is low)

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55
Q

Balance Sheet Net Worth would contain which of the following:
-Net Revenue
-Net Earnings
-Retained Earnings

A

Retained Earnings
(that’s what the shareholders value comes from because its after all expenses and dividends its what they company has left over)

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56
Q

What is:
Paid in Capital
in an IPO

A

Its the Extra money the company gets above what the stock is worth

ie:

Price of stock:
$10

Par Value (what the stock is worth):
$1

Paid in Capital:
=$9
(its extra value in the sale the company gets)

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57
Q

Net Inventories goes up

means what is happening to sales

A

Sales are decreasing

(a general rule not exact or set in stone)

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58
Q

EDGAR

A

the online system where investors can go and access the financials of any listed company

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59
Q

Stagflation

A

High Inflation
+
High Unemployment
+
Low Demand in the Economy

a Tricky situation to create policies that will fix things for.
Usually fixing the low demand(growth) in the ecomony would cause even higher inflation and vis-versa

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60
Q

Performance Based Fee’s
$1.1 million AUM requirement mean AUM with you the advisor or just 1.1 million in AUM that they have in general?

A

$1.1 Million AUM with you the Advisor

(they cant just have $1.1 million AUM total with multiple different advisors, it has to be with you)

61
Q

What type of companies needs to file 10k 10Q and 8k forms

A

Ones that are publically traded

(Usually means they are Federally regisitered)

62
Q

Are directors and officers considered Employees of the company

A

They can be an employee but just because they are a director or officer doesn’t mean they are en employee

(basically No but they could be a Director/ Officer and an employee with a w2)

63
Q

Definition of a “person”

A

Anyone/ entity that can open an account

64
Q

3 Non-persons

A

1) A Minor
2) Deceased Individual
3) Individual Declared Mentally Incompetent

65
Q

How long do the following need to keep their records:

IA

BD

A

IA - 5 years - 2 years Readily Accessible

BD - 3 years - 2 years Readily Accessible
(most records are 3 years)

66
Q

State Registered IA’s Record Requirement need to be met in which states

A

Only the state that their principal office is located

67
Q

Are Record Requirements for the Fiscal year or calendar year

A

Fiscal Year
(means its not December 31st but 3 or 5 years from the date the record was created. that could be any day of the year.)

68
Q

Uniformed Security Act:
When Does IA NOT need to register in a State

A

If all of these requirements are met:
1 - No Place of business in the State
2 - They only deal with Institutions in the State (Unless they are an Investment Companies or BD’s -then they must register federally which means they notice file-)
3 - They deal with less than 5 Non-Institutions

69
Q

Definition of Institution (its a list of different things)

A

Banks
Savings and Loan Associations
Insurance Companies
Investment Companies
Trust Companies
Employee Benefit Plans (with Assets of $1 million or more)
Government Agencies and Organizations

70
Q

Is the Investment Advisor Act of 1940 a Federal or State Law

A

Federal

71
Q

Whats a Word for:
Someone who is representing someone else

A

Agent

72
Q

When can an IA use the term “Investment Council”

A

Their Principal business is acting as an IA
and
A Big Part of their Business is giving Continuous Management Services

(some IA’s just sell a 1-time financial plan for a fee. they wouldn’t be Investment Council)

73
Q

Is a Trust Company Considered an IA

A

No

74
Q

What Does Tenure Mean

A

Their Experience / How long they’ve been doing something

75
Q

Systematic Risk

A

Changes in the overall economy will have an adverse effect on an investor’s Securities
REGARDLESS OF SPECIFIC COMPANIES CIRCUMSTANCES

Cannot be avoided through Diversification

76
Q

Market Risk

A

A Form of Systematic Risk

Changes in the overall economy will have an adverse effect on an investor’s Securities
REGARDLESS OF SPECIFIC COMPANIES CIRCUMSTANCES

Cannot be avoided through Diversification

77
Q

Unsystematic Risk

A

Changes in a Specific company will have an adverse effect on an investor’s Securities
IS SPECIFIC TO AN INDIVIDUAL COMPANIES CIRCUMSTANCES

Can be avoided through Diversification

78
Q

Business Risk

A

A Form of Unsystematic Risk

Changes in a Specific company will have an adverse effect on an investor’s Securities
IS SPECIFIC TO AN INDIVIDUAL COMPANIES CIRCUMSTANCES

Can be avoided through Diversification

79
Q

Interest Rate Risk

A

A Form of Systematic Risk

The Risk that Fluctuating Interest rates can have an adverse effect on investor securities
HURTS THE PRICE OF THE SECURITY

if something isnt able to be traded then it doesnt have interest rate risk

80
Q

Reinvestment risk

A

A Form of Systematic Risk

An investor receives periodic income from an investment and risks not being able to reinvest that money at the same rate

81
Q

Inflation Risk

A

A Form of Systematic Risk

Another word for Purchasing Power Risk

Risk of loosing spending power due to Inflation

82
Q

Financial Risk

A

A Form of Unsystematic Risk

The risk that a company uses leveraging and then goes under because they can afford to pay it off which leads to a loss to the stockholders.
You don’t have to be an owner of their debt security to have this risk (because the stockholders will get screwed too if the company goes under)

(according to Tutor, Financial risk is very broad and is just the risk that you might lose money in general -not sure if that’s accurate-)

83
Q

Credit Risk

A

A Form of Unsystematic Risk

Also, Know as Default Risk

Very similar to Financial Risk

The risk that the company will default on its debt obligation which hurts the owners of those debt securities
You HAVE to be an owner of their debt security to have this risk

(according to tutor its the risk that the credit quality of the issuer is low. low credit quality = higher interest they have to pay for investors to be wlling to take the risk -not too sure he;s right on that-)

84
Q

If investor has a Letter of intent and doesnt contribute the money BUT the account appreciates to a $ they promised for the LOI do they still need to pay the promised contributions

A

YES

its about contributing X amount of money
NOT
the account growing to X amount

85
Q

Equity RIET

A

Most Common Type of RIET

Invests in:

Real Estate Property

NOT
mortgages

86
Q

Mortgage RIET

A

Invests in:

Mortgages

NOT
Real Estate Property

87
Q

Hybrid RIET

A

Invests in:

Real Estate Property

AND

Mortgages

88
Q

Leveraged RIET

A

Only type of RIET that can take out a mortgage when investing in a property

They are VERY risky

89
Q

Options Spreads

A

The Opposite of a straddle

Buy a Call
and
Sell a Put
(or Sell a Call and Buy a Put)

in the same security

there are tons of different reasons why you would do a spread

90
Q

What is typically used as a “sweetener” for a bond

A

a Warrant

91
Q

Do most warrants Expire or last forever

A

Most of the expire

92
Q

Are Forwards considered Derivatives

A

YES

they just aren’t listed

93
Q

Difference Between
an Annual Report
and
10k

A

the annual report usually talks about future plans for the company in addition to talking about the current company financials

10k - only talks about the current company financials

94
Q

Cash Flow

A

Same thing as working capital (Basically)

Current Assets - Current Liabilities

95
Q

How Do Prepaid Expenses affect the Balance Sheet and Income Statement

A

Its a Current Asset on the Balance sheet

—then once the expense comes due—

it turns into an expense on the income statement instead

96
Q

List all Types of Systematic Risk

A

Market Risk
Interest Rate Risk
Reinvestment Risk
Inflation Risk

97
Q

List all Types of UnSystematic Risk

A

Business Risk
Financial Risk
Credit (Default) Risk

98
Q

Trust Company

A

The company that will Be the trustee for your trust for a fee

99
Q

Difference Between
Political Risk
Regulatory Risk
Legislative Risk

A

Political Risk - Risk of Political Movements hurting your investments (doesnt have to be elected officials ie: political Insurection)

Regulatory Risk - Regulatory Agency Changes Regulations (not Laws) that hurts your investments

Legislative Risk - Laws change (not Regulations) that hurts your investments

100
Q

High Water Mark

A

A Method in Life and Annuity Contracts that says the benefit (ie: annuitization or death benefit) amount will be determined by the highest account value the plan ever reached (even if since then the account took losses)

101
Q

Are Yield and Return the same Thing?

A

YES!!!!

its what you get / what you payed for it

102
Q

Yield / Return Formula (3 parts to the formula)

A

(Income payments + Realized Capital Gains) / What the security Cost

only REALIZED capital Gains not Unrealized

103
Q

Mutual Fund Withdrawl Plan Types
(2 types)

A

Fixed Interval - Guarantees a certain amount of payments but not $ the amount of each payment

Fixed Payment - Guarantees a Certain $ amount for each payment but not amount of payments

104
Q

When must the following be given to clients
IA Brochure
ADV Part 2A
ADV Part 2B

A

Federal:
- At or before you sign the contract (they sign to become a client)

State:
- at least 48 hours before signing a contract
OR
at the time of the contract being signed. AND the client must be able to
cancel it without a penalty within five days.

IA Brochure - About the RIA (the company)
ADV Part 2A - About the RIA (the company)
You need to give ONE of these -NOT BOTH- to the client

ADV Part 2B - About the IAR (the person)

105
Q

IA Brochure
ADV Part 2A
ADV part 2B

When must they be reviewed

A

Annually

106
Q

IA Brochure
ADV Part 2A
ADV part 2B

When Updated when does old forms need to be replaced with the newly updated forms

A

Immediately after updating

Only needs to be given to NEW clients not old ones

107
Q

When must your Current Client Info Be reviewed and updated

A

either every 3 or 4 years (tutor wasn’t sure on which one it is)

108
Q

When is the IA Brochure not required to be given to a new client

A

if the client is an investment company
OR
if services offered are “impersonal” and costs less than $500/yr

109
Q

IA Brochure
ADV Part 2A
ADV part 2B

What are these forms Penalty Free Withdrawl Period Rules?

A

FOR STATE LAW ONLY NOT FEDERAL

if
Brochure / ADV was given to client less than 48 hrs before signing:

they MUST be given the option to cancel it without a penalty within 5 days.

110
Q

Stock Swap

A

Swapping one class of stock for another

ie: issuer swaps regular common stock for Class A Stock that has no voting rights to stop a hostile take over (known as the issuer taking a poison Pill)

111
Q

Stock Classes

A

Different types of common stock issued by the same company that have different features

ie: Class A Stock with no voting rights

Always Common NEVER Preferred Stock

112
Q

On The Test Are Mutual Funds

Open End
Closed End
or
Both

A

OPEN END ONLY

Different from the TERM INVESTMENT COMPANY
(investment company could mean open or closed end)

113
Q

Block Trade

A

a Trade of at least 10,000 Shares

114
Q

Allowed Amount of NON-Accredited investors in a Private Placement for
-USA
-SEC

A

-USA = up to 25
-SEC = up to 35

115
Q

State Admin Abilities

What Actions can they take?

A

-Cease and Desist
-Censure
-Suspend
-Fine
-Subpoena

BUT ONLY A COURT CAN ENFORCE THOSE ORDERS (not the State Admin they are only a regulator)

116
Q

IntraState Offerings are for registration in HOW MANY STATES

InterState Offerings are for registration in HOW MANY STATES

A

Only 1 state
they are exempt from SEC registration

More than 1 state

117
Q

involuntary assignment
and
an example of one

A

When IA’s ownership changes but they dont have to send Notice of Approval to their clients

Example:
If IA is a Partnership, not a corporation

118
Q

When IA’s Ownership changes…

When is it a

Assignment
or
Involuntary Assignment

A

Assignment IF

there is a MAJORITY change in ownership
and
IA is not a Partnership

119
Q

Assignment

(When IA’s Ownership changes)

A

It means the Investment Advisory Contracts have been ASSIGNED to a new Buyer

the Clients don’t have to approve of the SALE
only approve of THE NEW OWNERS MANAGING THEIR MONEY

120
Q

Are insurance Companies Exempt From registration?

A

YES and NO

Securities ISSUED by them are Exempt (ie: Stock Ownership in the Insurance Company)

Products SOLD by them are NOT EXEMPT (ie: Variable annuity sold to client by Insurance Company)

121
Q

List All Persons that qualify as an Accredited Investor

A

-Person who makes 200k/yr
-Couple who makes 300k/yr
-Person who has 1 million in Equity Excluding Home

-Institutions
-Affiliates of the Underlying Issuer

122
Q

Are the following Exempt Transactions or Not

-Selling Stock To Existing Shareholders with No Commission
-Executor of an estate selling securities for the estate
-Trustee of a trust selling securities for the trust

A

-Selling Stock To Existing Shareholders with No Commission - EXEMPT

-Executor of an estate selling securities for the estate - EXEMPT

-Trustee of a trust selling securities for the trust - NOT EXEMPT

123
Q

Canada’s Exempt Issuers Rules

A

Federal and State (Providence) are Exempt

also, Subdivisions of those 2 are also Exempt

This means that Localities are basically always exempt as well because they are always subdivisions of providence and Federal jurisdictions

124
Q

S&P 400
what to remember

A

More likely Mid-CAP companies than S&P500

125
Q

Market Capitalization Amounts For
Large Cap
Mid Cap
Small Cap

A

Large Cap: $10 Billion - $200 Billion in Market Capitilization
Mid Cap: $2 Billion - $10 Billion in Market Capitilization
Small Cap: $250 million - $2 Billion in Market Capitilization

126
Q

What is Market Capitalization Mean

A

of Share’s Outstanding * Share Price
(only outstanding shares not treasury shares)

127
Q

Estate Tax Credit

A

the first $12.92 million (might be $11.4 million on the test)
of an inherited Estate is free from estate tax

(its more complicated than that but that’s the basics)

128
Q

What does the Following Mean
-Blue Chip
-White Chip
-Green Chip
-Purple Chip

A

-Blue Chip - Long Established Company
-White Chip - Poor Quality Company
-Green Chip - Environmental Company
-Purple Chip - Highest Level of Blue Chip Companies

129
Q

Tomb Stone Ad

A

Basically Says

“This Security is Comin Soon, here’s how to Find out more”

and that’s it nothing more allowed

130
Q

Definition of Prospectus

and Items that are not considered Prospectus

A

Communication Made in:
-Writing
-Radio
-TV
that offers a security for sale

Not Considered
-Oral
-TombStone Ad

131
Q

Consent to Service of Process must be filed with Admin By

A

IA
IAR
BD

and sometimes (depends on the Admin)
Issuers
Trustee’s

(lists are not all inclusive)

132
Q

The Term “Isolated Transaction” means

A

It was a Private Placement

133
Q

Do Stock Swaps result in Realized Capital Gains

A

Sometimes, it just depends upon what types of stocks are being swapped

134
Q

what form do IAR’s and Agents of BD use when registering

A

U4 form

135
Q

If IA if Federally Registered who does IAR register with?

A

FINRA (basically the states not the SEC)

136
Q

Are Hedge Funds the same thing as Private Funds

A

No

Private Funds are always exempt from federal registration
(if they dont meet the criteria they are then considered Investment companies and required to register)

Hedge Funds usually are exempt but are not always

137
Q

Are ALL private funds exempt from registration?

A

YES

if they dont meet the criteria for exemption then they are considered Investment companies

138
Q

Do Foreign Private Advisors have to register as an IA

A

NO

as long as they meet the exemption criteria

139
Q

what is Order Flow?

what are its rules if you are doing it?

A

Setting Clients up with specific funds/ companies that you benefit on the back end from

Rules:
Must be disclosed to the customer on their
“Trade Confirmation”

140
Q

Are Qualified Plan’s good for receiving Income?

A

No it defeats the purpose.

they get tax deferral status and are better for leaving money in them to grow tax deferred instead of pulling money out where you will be taxed and might have penalties as well.

141
Q

If BD Sponsers a WRAP Program:

-What must BD do
-What must Agents of BD do

A

BD - Register as an IA

Agent of BD - Register as IAR (ONLY IF THEY ARE SELLING THE WRAP PROGRAM TO THEIR CUSTOMERS)

Basically if anyone receives a fee (for managing funds) = register as IA/IAR

142
Q

Are ETN’s or UIT’s Required to register under the Investment Company Act of 1940

A

ETN’s - No (they register under Securities Act of 1933)

UIT’s - Yes (they register under IC act but not regulated by it)

143
Q

Difference Between
Required Rate of Return
and
Nominal Rate of Return

A

Required Rate of Return - The Expected Rate of Return
“This is the return we SHOULD be able to get”

Nominal Rate of Return - The Coupon Rate of Return (think Nominal Yield)
“This is the return we WILL give you”

144
Q

What is a WRAP fee

A

A Bundle of Investment Programs managed by the sponsor

Charges a flat management fee that usually covers and BD commission’s for transactions

ie:
this is our SAFE program
this is our GROWTH program
this is our INCOME program

145
Q

When you pay taxes to foreign countries how does that work on your US tax return

A

Foreign Taxes Paid is a CREDIT to your US tax return
NOT A DEDUCTION!!!

(deductions are plugged into the equation before AGI is calculated
whereas Credits are plugged in AFTER AGI is calculated)

146
Q

What Items of Balance Sheet are Contained within a companies
Capital Structure

A

-Issued Stock
-Issued Bonds
-Retained Earnings

NOT cash

think “What things does the company do to get the capital it needs?”

147
Q

What is Statement of Cash Flows

how is it different from Income Statement

A

Report that deals with WORKING CAPITAL
(current assets and liabilities and the flow of cash)

It breaks down the Flow of Cash on a deeper level than the income statement
(specifies in greater detail where the cash came from, where it is and where it is going where as income statement might just label it as “accounts payable” or something generic like that)

148
Q

AIR

A

Variable Annuities:
Assumed Interest Rate

for Annuitization:
basically says we will give you a minimum of ____% in the account per year (AIR)

your monthly payment will never go below that AIR but might go above it if the market does well

Tutoring For 65 (11 decks)

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