Unit 10- Investment Products Flashcards
UIT
Unit Investment Trust
FAC
Face-Amount Certificate Company
Open-Ended Funds
mutual fund
when liquidating, investor returns shares to fund
Closed-End Funds
limited number of shares
when liquidating, investor sells on secondary market
75-5-10 Diversificaton
Within 75% of invested funds:
-No more than 5% of funds should be invested in the securities of any one issuer
- Fund may not own more than 10% of the outstanding voting securities of any one issuer
UNDER INVESTMENT ACT OF 1940
OF 3 TYPES OF INVESTMENT COMPANIES, WHAT TYPE IS AN ETF?
UITs or open-end funds
ETF CREATION UNITS
LARGE BLOCK ISSUES OF ETF
- IF LIQUIDATING, INVESTOR returns creation units to fund and redeems the actual securities that comprise the portfolio instead of CASH.
How many times are ETFs priced throughout the day?
Continuously
Which of three types of investments does not have management fee, has redeemable shares, and a fixed portfolio?
UIT
Who must an investment company register with?
SEC
3 requirements to be an investment company and issue securities to the public:
- private capitalization of $100,000
- 100 investors
- clearly defined investment objectives
- If does not meet first two requirements, it can still register a public offering as long as it does meet the requirements within 90 days.
Can mutual funds be purchased on margin?
No
How often must shareholders receive reports according to 1940 ACT?
At least, semi-annually
Expense Ratio
Expenses / Avg. Net Assets
Sales Charge Equation
Public Offering Price - Net Asset Value = Sales Charge
Sales Charge % Equation
Sales Charge / POP = Sales Charge %
POP Equation
NAV / (100%-Sales Charge %) = POP
What is the maximum sales charge?
8.5% If does not offer: -breakpoints -rights of accumulation -automatic reinvestment MAX = 6.25%
Class A Shares of Mutual Fund
front-end load that can be reduced with breakpoints
Class B Shares of Mutual Fund
back-end load declines over time
Class C Shares of Mutual Fund
12b-1 fees charged quarterly with small back end load in first year
Class D Shares of Mutual Fund
level load plus a redemption fee
How many days does a mutual fund have until it must redeem shares
7 calendar days
How often are 12b-1 fees charged?
Quarterly, must be approved annually
SubChapter M
requires a fund to distribute at least 90% of its net investment income to shareholders
Mutual Fund Yield
Annual Dividend/POP
ex date
determined by BoD
-typically one business day after the record date
When is Dollar Cost Average an effective method of purchasing fund shares?
When the average cost is less than the average price
Dollar Cost Averaging will result in average cost less than average price when:
1) Price of Stock Fluctuates
2) A fixed dollar amoutn is invested regularly
Redemption Price is equal to _____
NAV
NAV / share of mutual fund is affected by:
Changes in market value of positions
Receiving Cash Dividends from positions
The fund paying dividends to shareholders
Are dividends of mutual fund taxable?
NO
Are capital gains distributions of mutual fund taxable
YES
How often can capital gains be distributed to mutual fund investors?
Annually
How many days can an LOI be backdated by?
90 days
OPEN OR CLOSED-END FUNDS ISSUE DEBT SECURITIES?
CLOSED END
Is the LOI binding to the customer?
NO
If customer never follows through with LOI, what does the fund do?
Reduce the redemption by shares held in escrow
A redeemable security DOES/DOESN’T have a secondary market?
DOES NOT
Breakpoint Sale
Just below the number share needed to reach the breakpoint discount
What Class of Share can always be redeemed at its NAV
C
