Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

SIE > Unit 1 > Flashcards

Unit 1 Flashcards

You may prefer our related Brainscape-certified flashcards:
SIE Exam flashcards
1
Q

An intangible financial asset that may be bought, sold, or gifted between persons is what?

A

A Security

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Who provided us a legal test for what is a security?

A

Sec vs. Howey (Howey Test)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Is Bitcoin a security?

A

Currently Bitcoin is a Commodity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What does an equity represent?

A

Ownership in a company

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

A corporation can raise money by issuing securities. The corporate charter specifies the number of shares the company can issue. Not all shares have to be issued. The company may sell the remaining shares in the future. If wanted to issue additional shares, this has to be amended through stockholder vote. What kind of stock is this?

A

Authorized Stock

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

This stock has been sold to investors. The investors have bought the stock and the company has received the money. What type of stock is this?

A

Issued Stock

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

True or False. Authorized stocks that is unissued does not carry the rights and privileges of issued shares and is not considered in determining a company’s total capitalization. It is similar to a blank check.

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

This stock included any shares that a company has issues and are in the hands of investors. What type of stock is this?

A

Outstanding Stock

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

This stock is a stock a corporation has issued and subsequently reacquired. It can be held indefinitely or it can be reissued or retired. It does not carry voting rights and the right to receive dividends.

A

Treasure Stock

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

How are common stocks classified?

A

The size of the corporation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

This math equation determines what? (outstanding x CMV)

A

Market Cap

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

This stock is the largest companies. It is also known as ‘blue chip stocks.’ They are usually company names you have heard of. What type of stock is this?

A

Large-Cap Stock

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

This stock is the most standard.

A

Mid-Cap Stock

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

This stock is the smallest stock but is still large enough to be listed on the exchange. What type of stock is this?

A

Small-Cap Stock

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

This stock is unlisted that trades at less than $5 per share. They are highly speculative. Customers must receive a copy of a risk disclosure document. BD must provide monthly account statements to the customer that includes the market value and the number of shares in the account. What type of stock is this?

A

Penny Stock

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

When a BD contacts a potential customer to purchase this certain stock, they must first determine suitability on the basis of information about the buyer’s financial situation and objectives. The customer must sign and date this suitability statement before trades may be placed. What is this considered?

A

Penny Stock cold-calling rules

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

These types of customers are exempt from the suitability statement requirement but NOT from the disclosure requirements.

A

An established customer who:

  1. Has held an account with the BD for at least one year
  2. Has made at least three penny stock purchases of different issuers on different days
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What do the provisions of the penny stock rules apply to?

A

Solicited transactions only

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

These type of penny stock transactions are exempt from the rules on suitability and disclosure.

A

Unsolicited

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Distributions from a company’s profits to its shareholders is what?

A

Dividends

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

These type of dividends are normally issues via check or automatically deposited to a brokerage account.

A

Cash Dividends

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

If a company wishes to reinvest its profits for business purposes rather than to pay cash dividends, the BD can declare which type of dividend?

A

Stock Dividends

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

This is a rare form of dividend. Some companies will pay such dividends by sending a sample of the company’s product.

A

Product Dividends

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

How are cash dividends taxed?

A

Non-qualified (taxed at the investors ordinary income tax rate) or qualified (maximum rate on qualified dividends is specified by current IRS tax code and will depend on customer’s tax bracket).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

True of False: If a customer has a higher tax bracket, the lower the tax on qualified dividends will be, up to the specified maximum.

A

False. The tax will be higher, but will be lower than the investors ordinary income tax rate.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

What is D.E.R.P?

A

Declaration Date, Ex-Date, Record Date, Payable Date

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Which date does a company’s BOD approve a dividend payment, designate the payment date and designates the record date?

A

Declaration Date

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

This date is declared by either FINRA or the exchange. It is one business day before the record date. A customer must purchase stocks two business days before the record date to qualify for dividends. In other words, the stock must be purchased before this date.

A

Ex-Date

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

This date consists of the stockholders on the books to receive dividends

A

Record Date

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

On this date, the dividends disbursing agent sends dividend checks to all stockholders whose names appear on the books as owners. Investors are taxed for the tax year the dividend is paid.

A

Payable Date

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

These are some of the benefits of owning what?

  1. Voting rights for corporate directors
  2. Can create proxy if unable to attend a meeting
  3. Freely transferable
A

Common Stock

32
Q

How many votes can a stockholder cast?

A

One vote for each share of stock owned

33
Q

This type of voting allows a stockholder to cast one vote per share owned for each item on a ballot.

A

Statutory Voting

34
Q

This type of voting allows a stockholder to allocate their total votes in any manner they choose.

A

Cumulative Voting

35
Q

True or False: Common stockholders has the right to access the corporations books, examine the minutes of meetings, receive audited sets of financial statements of the company’s performance each year and common stockholder have the preemptive right to maintain their proportionate share of ownership.

A

True

36
Q

This means to put oneself in front of another.

A

Preempt

37
Q

An increase in the market price of securities, also known as capital appreciation and allows investors to receive returns well in excess of the inflation rate is considered what?

A

Growth (Capital Gain)

38
Q

Corporations paying regular quarterly cash dividends to stockholders that may increase over time is considered what?

A

Income

39
Q

In the event of corporate bankruptcy, a shareholder’s personal assets are not at risk. What is this considered?

A

Limited Liability

40
Q

What are the three reasons why someone would want common stock in their portfolio?

A
  1. Potential capital appreciation
  2. Income from dividends
  3. Hedge against inflation
41
Q

The chance of a stock declining in price is considered what?

A

Market risk. Stock prices fluctuate daily.

42
Q

If the company loses money, this may potentially decrease the amount of?

A

Dividend Income

43
Q

If a company enters bankruptcy, the holders of its bonds and preferred stock have priority over common stockholders. This is considered to be?

A

Low Priority at dissolution

44
Q

This allows common stockholders to maintain their proportionate ownership shares in a company by buying newly issued shares before the company offers them to the general public.

A

Stock rights also known as preemptive rights

45
Q

This allows stockholders to purchase common stock below the current market price. It is traded in the secondary market typically within 30-45 days.

A

Rights Offering

46
Q

Stockholders who receive rights may

A
  1. Exercise the rights to buy stock
  2. Sell the rights and profit from their market value
  3. Let the rights expire and lose their value
47
Q

This is a certificate that grants its owner the right to purchase securities from their issuer at a specified price (usually higher than the current price at the time it was issued) at some point in the future. It is long term and usually offered as sweeteners but coming in a bundle.

A

Warrant

48
Q

True or False: Right Offerings are long term and Warrants are short term.

A

False. Warrants are long term and right offerings are short term

49
Q

This applies to shares that are sold through a nonstandard offering and are subject to resale restrictions and to sales by persons who are classified as a control person.

A

Rule 144

50
Q

These securities are acquired through some means other than a registered public offering. It is purchased in a private placement. They cannot be sold until they have been fully paid for six months. Once held for six months, an investor may begin selling shares. When issued, these shares will have a restrictive legend on the certificate. What type of securities are these?

A

Restricted Stocks

51
Q

True of False: Buyers of stock being sold that were subject to Rule 144 when issued are not subject to any restrictions if they choose to resell.

A

True

52
Q

These stocks are owned by directions, officers, or persons who own at least 10% or more of the issuer’s voting stock. Families are aggregated to determine the % of ownership.

A

Control Stocks

53
Q

What needs to be completed in order for an affiliate to sell shares. It determines the number of shares the control person may sell over a 90 day period.

A

Form 144

54
Q

What are the volume limitations under Rule 144?

A

The greater of

  1. 1% of the outstanding shares of the company
  2. The average weekly trading volume over the most recent four weeks
55
Q

This is a type of equity that was designed to simplify foreign investing for Americans. This created when common shares are purchased in the foreign company’s home market but deposited in a foreign branch of a US bank.

A

An ADR

56
Q

What does an ADR provide?

A

Provides US investors with a convenient way to diversify their holdings beyond domestic companies.

57
Q

True or False: ADRs are listed on the NYSE or Nasdaq. Some may also be traded OTC.

A

True

58
Q

True or False: ADRs are not issued in US dollars.

A

False. The purchase is made in US dollars

59
Q

True of False: ADRs help foreign companies attract a US investor base.

A

True

60
Q

The amount of tax withheld by the foreign government is applied as a credit against the investor’s US tax liability is considered to be?

A

ADR taxation

61
Q

True or False: ADR dividends are paid in US dollars and eliminates complications of current conversions.

A

True

62
Q

True or False: ADRs are not subject to currency risk

A

False

63
Q

This stock represents a class of ownership in the issuing corporation. The rate of return if fixed and the annual dividend represents its fixed rate of return. It is a key attractions for income-oriented investors. Annual dividend payments as a percentage of its par value.

A

Preferred Stock

64
Q

This type of stock has no voting rights nor do they have preemptive rights.

A

Preferred Stock

65
Q

Owners of preferred stock must be paid before any payment to common shareholders. This is considered to be?

A

Dividend preference

66
Q

If a corporation goes bankrupt, preferred stockholders have priority claim over common shareholders on the assets remaining after creditors have been paid. This is considered to be?

A

Priority at dissolution over common stock

67
Q

This is the potential that, because of inflation, the fixed income produced will not purchase as much in the future as it does today. This is considered to be?

A

Purchasing power risk

68
Q

When interest rates rise, the value of preferred shares decline. This is considered to be?

A

Interest rate sensitivity

69
Q

Why would you include preferred stock in a client’s portfolio?

A
  1. Fixed income from dividends
  2. Prior claim ahead of common stocks
  3. Convertible preferred stock sacrifices income in exchange for potential appreciation
70
Q

What are the risks of obtaining preferred stocks?

A
  1. Possible loss of purchasing power
  2. Interest rate risk
  3. Business difficulties and even bankruptcy
71
Q

This preferred stock has no special features beyond the stated dividend payment. Missed dividends are not paid to the holder

A

Straight (noncumulative)

72
Q

This preferred stock accrues payments due to its shareholders in the event dividends are reduced or suspended.

A

Cumulative

73
Q

The right to call a stock allows the company to replace a relatively high fixed dividend obligation with a lower one when the cost of money has gone down. Dividend payments cease on the call date. The corporation may pay a premium exceeding the stocks par value at the call. What type of preferred stock is this?

A

Callable preferred

74
Q

When the owner can exchange the shares for a fixed number of shares of the issuing corporations common stock, what type of preferred stock is this?

A

Convertible preferred

75
Q

When dividends are tied to the rates of other interest rate benchmarks and can be adjusted as often as quarterly, what type of preferred stock is this?

A

Adjustable-rate preferred

76
Q

This type of stock offers its owners a share of corporate profits that remain after all dividends and interest due other securities are paid.

A

Participating preferred

SIE (31 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions