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Personal Investment > WEEK 1: Market Regulators & Taxation of Securities > Flashcards

WEEK 1: Market Regulators & Taxation of Securities Flashcards

memorize terms

1
Q

regulatory authorities

A

congress, SEC, commodity future trading commission, FINRA, Exchanges

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2
Q

Securities and Exchange Commission (SEC)

A

independent US regulatory agency established to enforce Congressional securities laws

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3
Q

Self-regulatory Organizations (SROs)

A

FINRA, exchanges, MSRB, clearing houses, industry organizations

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4
Q

Financial Industry Regulatory Authority (FINRA)

A

private, non-profit regulatory entity with the mission of safeguarding the investing public against fraud and bad practices

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5
Q

Municipal Securities Rulemaking Board (MSRB)

A

regulatory, non-profit entity with the mission to protect the public who invest in state/local government debt

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6
Q

Securities Exchanges

A

exchanges provide an efficient and transparent platform to trade securities (secondary market)

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7
Q

Securities Act of 1933

A

new securities, full disclosures, prospectus, prohibit fraud

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8
Q

Securities Exchange Act of 1934

A

created SEC, registration broker-dealers, 10k fillings all publicly-traded securities

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9
Q

Maloney Act of 1938

A

established NASD

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10
Q

Investment Company Act of 1940

A

regulation of all investment companies that are open to the public,

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11
Q

Investment Advisers Act of 1940

A

establishes standards for persons deemed to be investment advisers

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12
Q

Federal Deposit Insurance Co (FDIC)

A

government agency that examines and supervises financial institutions. protected assets include traditional bank products for up to $250,000

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13
Q

Securities Investor Protection Co (SIPC)

A

non-proft, member-based entity that insures customer accounts at SIPC-member brokerage firms. protected assets include securities held in street name and up to $500,000

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14
Q

Institutional investors

A

business entities (asset managers, pension funds, insurance companies, mutual funds, etc.)

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15
Q

Retail investors

A

general public who buy/sell securities for own account. non-professional investors (self-directs or advised)

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16
Q

“Accredited” retail investors

A

considered sophisticated retail investors who are capable of informed decisions without regulatory protection. Based on assets (>1M excluding residence) income (200/300k test over last two years with expectation of same in the current year) and/or relevant certifications

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17
Q

broker-dealer (firm)

A

as a dealer, the firm will buy securities for their own accounts and then sell those securities to customers. as broker, they serve as an intermediary between customer and a third party. Apart of DTCC and OCC.

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18
Q

brokers (registered representative)

A

employed by broker-dealer and act in an agent capacity, build a customer book of business, solicit and receive customer buy or sell orders

19
Q

investor advisers vs municipal advisers

A

investor advisers receive compensation for offering investment advice. municipal advisers are registered professional offering advice about municipal financial products to states, cities, and districts

20
Q

market makers

A

firm or individual who is willing to buy and sell a particular security on a continual basis and publish bid-ask quotes. profits by buying at the bid and selling at the ask

21
Q

traders

A

buys and sells securities for customers or own account, do not provide market-maker duties. profit from customer fees or gains on own account.

22
Q

custodians

A

firm that holds and safeguards customer securities and cash

23
Q

trustees

A

legal ownership of trust and power to manage assets. beneficiary holds equitable title to property

24
Q

depositories and clearing corporations

A

process daily security transactions and trades

25
Q

Depository Trust Clearing Corporation (DTCC)

A

settles stock, bonds, mortgage-backed securities, mutual fund and money market trades.

26
Q

Option Clearing Corporation (OCC)

A

settles option and future trades

27
Q

transfer agents

A

keep track of individuals and entities that own company securities

28
Q

issuers

A

company that offers equity or debt to investors in exchange for the capital contribution

29
Q

underwriters

A

analyze company issue to determine fair price. intent is to bring security to market at a price that will be filled by demand.

30
Q

private offering

A

placement to one or small group accredited investors, terms can be customized, exempt from SEC, lack of liquidity

31
Q

public offering

A

placement to the general public which requires SEC, high costs, 4 types

32
Q

Qualified Institutional Buyers

A

QIB status necessary in order to buy private placements, restricted stock, below investment grade securities.

33
Q

Follow-on offering (after IPO)

A

issuing company offers additional set of shares into marketplace, thereby diluting the number of existing shares, SEC registration and prospectus.

34
Q

Content of Prospectus

A

describes essential information about security issue, company information, underwriters, type of offering, share count, business objective/strategy, etc

35
Q

secondary offering

A

following IPO, existing shareholder offers large number of shares to the public, typically offered at a discount to market price

36
Q

stock rights offering

A

allows existing shareholders to purchase additional shares (right), number of shares is in proportion to current percentage of ownership in company

37
Q

primary market

A

market where new or existing securities are offered to institutional or retail investors for first time

38
Q

secondary market

A

market in which retail investors and institutional investors trade exchange-listed securities, physical stock exchange or electronic market

39
Q

third market

A

over the counter, large-block trades between institutional investors and/or broker-dealers

40
Q

fourth market

A

over the counter trading of non exchange listed securities directly between two institutions, without broker-dealer

41
Q

ordinary income taxes

A

applied on earned income, passive income, portfolio interest, ordinary dividends

42
Q

capital gain taxes

A

sale of capital assets, including financial securities and property, and qualified dividends

43
Q

ordinary stock dividends

A

cash, stock or property paid out to shareholders. dividends paid from profits or retained earnings are taxed as ordinary income

44
Q

qualified companies

A

dividends from domestic and certain foreign companies that meet the IRS definition. taxed at long-term capital gain rates

Personal Investment (6 decks)

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