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Series 65 > Unit 3 > Flashcards

Unit 3 Flashcards

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Series 65 flashcards
1
Q

WHAT IS A POOLED INVESTMENT?

A

POOL OF FUNDS CONTRIBUTED BY A NUMBER OF INVESTORS

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2
Q

INVESTMENT COMPANY

A

CORP OR TRUST THROUGH WHICH INVESTORS MAY ACQUIRE INTEREST IN LARGE SECURITIESBY POOLING THEIR FUNDS WITH OTHER FUNDS

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3
Q

WHY DO INVESTORS USE INVESTMENT COMPANIES?

A

BELIEVE A PROFESSIONAL MONEY MANAGER SHOULD BE ABLE TO OUTPERFORM AVERAGE INVESTOR

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4
Q

HOW DO INVESTMENT COMPANIES RAISE CAPITAL?

A

SELLING SHARES TO PUBLIC

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5
Q

WHO REGULATES INVESTMENT COMPANIES?

A

INVESTMENT ACT OF 1940 PROVIDES FOR SEC TO REGULATE INVESTMENT COMPANIES

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6
Q

WHAT ARE THE 3 TYPES OF INVESTMENT COMPANIES?

A

FACE-AMOUNT CERTIFICATE COMPANIES (FACC)
MANAGEMENT INVESMENT COMPANIES
UNIT INVESTMENT TRUSTS (UITs)

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7
Q

FACE AMOUNT CERTIFICATE (FACC)

A

CONTRACT BETWEEN INVESTOR AND ISSUER WHERE ISSUER GURANTEES PAYMENT OF STATED SUM AT A SET DATE . IN RETURN, INVESTOR AGREES TO PAY A SET AMOUNT IN LUMP OR INSTALLMENTS

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8
Q

MANAGEMENT INVESTMENT COMPANY

A

ACTIVELY MANAGES A SECURITIES PORTFOLIO TO ACHIEVE A STATED INVESTMENT OBJECTIVE. EITHER CLOSED END OR OPEN END. DOES NOT INCLUDE HOLDING COMPANIES.

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9
Q

CLOSED-END FUNDS
-WHERE TRADED?
-PRICE
-CAPITAL STRUCTURE
-SOLD IN FULL OR FRACTIONAL SHARES?

A

PUBLICLY TRADED FUNDS
ISSUE A FIXED NUMBER OF SHARES FOR A LIMITED TIME (IPO)
TRADED ON STOCK EXCHANGE OR IN SECONDARY MARKET
SUPPLY AND DEMAND AFFECT PRICE
MARKET PRICE IS INDEPENDENT OF NAV
CAN HAVE COMMON STOCK, PRERRED STOCK, AND BONDS
FULL ONLY, NO FRACTIONAL

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10
Q

OPEN-END FUNDS
-PRICE
-CAPITAL STRUCTURE
-SOLD IN FULL OR FRACTIONAL SHARES?

A

-MUTUAL FUNDS
-CONTINUOUSLY ISSUE NEW SHARES AND REDEEM OLD ONES
-PRICES BASED ON NAV AT END OF DAY CANNOT BE BELOW NAV
-MUST ISSUE COMMON STOCK
-CAN BE SOLD IN FULL OR FRACTIONAL

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11
Q

NET ASSET VALUE (NAV)

A

=(ASSETS-LIABILITIES)/NUMBER OF OUTSTANDING SHARES

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12
Q

OPEN END FUNDS CANNOT…

A

PURCHASE ON MARGIN
HAVE A JOINT ACCOUNT
SELL SECURITIES SHORT
ACQUIRE MORE THAN 3% OF OUTSTANDING VOTING SECURITIES OF ANOTHER COMPANY

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12
Q

MANAGEMENT INV COMPANIES CANT HAVE MORE THAN —% OF INTERESTED PERSONSON OF THE INV COMPANY?

A

60%

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13
Q

AFFILIATED PERSON

A

PERSON DIRECTLY OR INDIRECTLY OWNING, CONTROLLING OR HOLDING WITH POWER TO VOTE, 5% OR MORE OF THE OUSTANDING SHARE OF THE INV COMPANY.

OR A PERSON UNDER COMMON CONTROL OF INVEST COMPANY

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13
Q

CONTROL PERSON

A

PERSON OWNING 25% OR MORE OF OUTSTANDING SHARES

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14
Q

HOW OFTEN DO INVESTMENT COMPANIES NEED TO FILE REPORTS WITH SEC AND ITS SHAREHOLDERS?

A

SEC - ANNUALLY
SHAREHOLDERS - SEMIANNUALLY

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14
Q

WHERE DOES INVESTMENT COMPANY KEEP ITS ASSETS?

A

WITH A CUSTODIAN/CUSTODIAN BANK
DOES NOT HAVE TO BE FDIC INSURED
MAY USE BD

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15
Q

WHAT MUST BE SENT TO A PROSPECTIVE INVESTOR BEFORE SOLICITATION?

A

PROSPECTUS, BECAUSE THERE ARE CONTINUOUS NEW OFFERINGS

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16
Q

COUNTRY FUNDS

A

INVESTMENT IN SECUIITIES OF COMPANIES IN FOREIGN COUNTRIES
CLOSED-END BECAUSETHEY ARE DIFFICULT TO LIQUIDATE

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16
Q

PUBLIC OFFERING PRICE (POP)

A

OPEN-END COMPANIES

INVESTOR BUYS SHARES DIRECTLY FROM THE COMPANY OR ITS UNDERWRITERS

PRICE IS NAV PLUS SALES CHARGES

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17
Q

EXPENSE RATIO =

A

ANNUAL OPERATING EXPENSES/AVG DOLLAR VALUE OF FUNDS ASSETS UNDER MANAGEMENT

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18
Q

CAN MUTUAL FUNDS BE PURCHASED IN FRACTIONAL SHARES?

A

YES, STOCKS CANNOT

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19
Q

CAN CLOSED END FUNDS BE PURCHASED IN FRACTIONAL SHARES?

A

NO

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20
Q

HOW OFTEN IS NAV CALCUATED IN OPEN END INVESTMENTS AND CLOSED END?

A

OPEN - DAILY
CLOSED - WEEKLY

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21
Q

MUTUAL FUND DISTRIBUTORS METHODS FOR COLLECTING FEES

A

FRONT END LOADS
BACK END LOADS
12b-1 FEES

22
Q

FRONT END LOADS SALES CHARGE

A

REFLECTED IN PUBLIC OFFERING PRICE AND ADDED TO NAV,
CLASS A SHARES
LOWER OPERATING COSTS

23
Q

BACK END LOADS SALES CHARGES

A

-CONTINGENT DEFERRED SALES CHARGE.
-DECREASE ANNUALLY THEN CONVERTS TO CLASS A
-CLASS B SHARES

24
Q

12b-1 ASSET-BASED FEES

A

PERCENTAGE OF FUNDS AVERAGE NET ASSETS DURING THE YEAR, REFLECTS MARKETING AND DISTRIBUTION SERVICES ONLY
-CLASS C SHARES
-CANNOT CONVERT TO CLASS A

25
Q

CLASS I SHARES

A

SOLD ONLY TO INSTITUTIONAL INVESTORS

26
Q

CLASS R SHARES

A

SOLD ONLY TO RETIREMENT PLAN PARTICIPANTS

27
Q

BREAKPOINTS

A

SCHEDULE OF DECLINING SALES CHARGES BASED ON THE AMOUNT INVESTED
-APPLIES TO ANY PERSON (COUPLES, PARENTS, MINOR CHILDREN, AND CORPORATIONS.
-DOES NOT APPLY TO INVESTMENT CLUBS OR ASSOCIATES FOR INVESTING

28
Q

BREAKPOINT SALE

A

SELLING OF SHARES TO MAKE HIGHER COMMISSIONS JUST BELOW THE DOLLAR AMOUNT BELOW THE POINT WHERE SALES CHARGE IS REDUCED - ILLEGAL

28
Q

RIGHT OF ACCUMULATION

A

PERMITS INVESTOR TO AGGREATE SHARES IN RELATED ACCOUNTS IN FUND FAMILY TO REACH BREAKPOINT DISCOUNT WITH NO TIME LIMIT

29
Q

LETTER OF INTENT (LOI)

A

ONE SIDED CONTRACT THAT INVESTOR IS INTENDING TO PURCHASE ADDITIONAL SHARES WITHIN 13 MONTHS TO REACH BREAKPOINT.
CAN SIGN UP TO 90 DAYS AFTER INITIAL PURCHASE BUT CANNOT COVER MORE THAN 13 MO TOTAL

30
Q

RIGHTS OF ACCUMULATION

A

ALLOWS AN INVESTOR TO COMBINE PREVIOUS INVESTMENTS IN THE FUND WITH TODAY’S INVESTMENT TO DETERMIN TODAY’S SALES CHARGE
-APPLY ONLY TO SUBSEQUENT INVESTMENTS
-DO NOT REQUIRE A COMMITMENT

31
Q

WAYS TO REACH BREAKPOINT

A

-LUMP SUM PURCHASE
-LOI
-RIGHTS OF ACCUMULATION

32
Q

SALES CHARGE OF MUTUAL FUNDS IS BASED OFF..

A

PERCENTAGE OF POP
8.5 % IS MAX ALLOWABLE

33
Q

PRIVATE FUNDS

A

-LIMIT OWNERSHIP
-NO MORE THAN 100 INVESTORS
-INVESTORS MUST BE QUALIFIED PURCHASERS
-GENERALLY HELD LONGER

34
Q

QUALIFIED PURCHASERS

A

INDIVIDUALS WITH AT LEAST $5M IN INVESTMENTS OR ENTITIES WITH $25M IN INVESTMENTS

35
Q

DIRECT INVESTMENTS WITH PRIVATE FUNDS

A

FUNDS HAVE 10% OR HIGHER VOTING INTEREST IN THE COMPANY WITH GOAL OF INFLUENCING MANAGEMENT AND OPERATIONS

36
Q

PORTFOLIO INVESTMENTS OF PRIVATE FUNDS

A

DOES NOT REQUIRE A CONTROL POSITION AND BUILDS PORTFOLIO OF STOCKS, BONDS, AND DERIVATIVES

37
Q

PRIVATE LIQUIDITY FUND

A

PROVATE FUND SEEKING TO GENERATE INCOME BY INVESTING IN SHORT TERM OBLIGATIONS
EXEMPT FROM SEC
UNREGISTERED
LESS PUBLIC INFO

38
Q

VENTURE CAPITAL FUNDS

A

LIMITED PARTNERSHIPS WHERE DECISIONS ARE MADE BY GENERAL PARTNERS WITH CAPITAL COMING FROM LIMITED PARTNERS

39
Q

HEDGE FUNDS

A

LIMITED PARTNERSHIPS
HAVE HIGH INVESTMENT MINIMUMS
NO MORE THAN 100 INVESTORS
DOES NOT REGISTER WITH SEC
LACK OR TRANSPARENCY
FAR RISKIER INVESTMENT
CAN USE LEVERAGE, DERIVATIVES AND FUTURES
REDUCE VOLATILITY AND RISK
POOLED INVESTMENTS

40
Q

HURDLE RATE

A

INCENTIVE FEE WILL ONLY BE PAID IF FUND RETURN EXCEEDS A SET THRESHOLD RETURN

41
Q

FUNDS OF HEDGE FUNDS

A

LOWER PURCHASE REQUIREMENTS FOR ORDINARY INVESTORS
ALLOWS FOR DIVERSIFICATION
CONTAINS SEVERAL DIFFERENT HEDGE FUNDS

42
Q

UNIT INVESTMENT TRUSTS (UIT)

A

INVESTMENT COMPANY
UNMANAGED INVESTMENT COMPANY ORGANIZED UNDER A TRUST INDENTURE
-NO BOARD
-NO INVESTMENT ADVISOR
-NOT ACTIVELY MANAGED
-UNDIVIDED INTEREST IN PORTFOLIO OF SPECIFIED INTEREST
-FIXED ONCE COMPILED

43
Q

EXCHANGE TRADED FUND (ETF)

A

REGISTERS AS EITHER UIT OR OPEN-END ETF
-INVESTS IN A SPECIFIC INDEX SIMILAR TO INDEX MUTUAL FUND
-CAN BE PURCHASED ON MARGIN OR SOLD SHORT

44
Q

REAL ESTATE INVESTMENT TRUST (REIT)

A

MANAGES A PORTFOLIO OF REAL ESTATE INVESTMENTS
-SHAREHOLDERS RECEIVE DIVIDENDS FROM INVESTMENT INCOME OR CAPITAL GAINS
-OWN COMMERCIAL PROPERTY AND/OR COMMERCIAL
-MUST INVEST 75% OF ASSETS
-MUST DERIVE 75% OF GROSS INCOME FROM REAL ESTATE SOURCES
-MUST DISTRIBUTE AT LEAST 90% OF TAXABLE INCOME TO SHAREHOLDERS TO AVOID BEING TAXED

45
Q

BENEFITS OF POOLED INVESTMENTS

A

DIVERSIFICATION
PROFESSIONAL MANAGEMENT

46
Q

BENEFITS OF MUTUAL FUNDS

A

DIVERSIFICATION
PROFESSIONAL MANAGEMENT
CHOICE OF OBJECTIVES
CONVENIENCE
LIQUIDITY
MIN INITIAL INV
CONVENIENT TAX INFO
COMBINATION PRIVILEDGE (FAMILY OF FUNDS TO REACH BREAKPOINT)
CONVERSION PRIVILEDGE WITHIN FAMILY OF FUNDS

47
Q

RISKS OF MUTUAL FUNDS

A

MARKET RISK (EXCEPT MONEY MARKET FUND)
FEES AND EXPENSES
NET REDEMPTIONS

48
Q

NET REDEMPTIONS

A

EXCESS OF SHAREHOLDER REDEMPTIONS OVER NEW SHARE PURCHASES

49
Q

BENEFITS OF PRIVATE FUNDS

A

OPPORTUNITY FOR LARGE PROFIT
HAVE A SAY IN MANAGEMENT
DIVERSIFICATION

50
Q

RISKS OF PRIVATE FUNDS

A

-BUSINESS RISK (LARGE PERCENT OF STARTUPS DO NOT SUCCEED)
-LIQUIDITY RISK (RARE TO FIND SECONDARY MARKET)
-LACK OR TRANSPARENCY (UNREGISTERE)

51
Q

BENEFITS OF HEDGE FUNDS

A

-DESIGNED FOR POSITIVE RETURN IN BOTH RISING AND FALLING MARKETS
-A LOT OF CHOICES TO MEET OBJECTIVES
-MAY REDUCE RISK
-DIVERSIFICATION

52
Q

RISKS OF HEDGE FUNDS

A

-EXPENSES
-COULD BACKFIRE
-LOCKED UP IN LOCKUP PERIOD (NO SECONDARY MARKET)
-SALE OF PARTNERSHIP MAY REQUIRE GENERAL PARTNER APPROVAL

53
Q

BENEFITS OF REITS

A

-INVEST IN REAL ESTATE WITHOUT DIRECT RISK
-PROPERTIES HAVE GREATER NEGOTIATING POWER
-MOVE OPPOSITE TO STOCK MARKET
-REASONABLE INCOME/CAPITAL APPRECIATION

54
Q

RISKS OF REITS

A

-LOWER CONTROL
-PRICE VOLATILITY VS DIRECT OWNERSHIP
- DIVIDENDS ARE TAXED AS ORDINARY INCOME
-LIQUIDITY IS LIMITED
-PROBLEM LOANS COULD RESULT IN LOSS

55
Q

HOW MUCH MUST A REIT DISTRIBUTE IN ORDER TO NOT BE TAXED?

A

90%

Series 65 (3 decks)

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