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Series 6 Exam > What Is A Security? > Flashcards

What Is A Security? Flashcards

1
Q

What type of security grants the investor holds ownership interest in a company?

A

Equity

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2
Q

What type of security grants the investor a creditor relationship with a company?

A

Debt Obligation

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3
Q

How is an equity security most commonly represented?

A

Stock

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4
Q

How are debt securities most commonly represented?

A

Bonds & Notes

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5
Q

What are the equity securities that give enhanced access?

A

Rights, Warrants, and Options

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6
Q

What is the reason corporations issue equity and debt securities?

A

Raise Capital to implement ideas such as expanding operations, funding a merger, or acquisition

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7
Q

What type of security is considered conservative for the issuer and risky for investor?

A

Equity

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8
Q

What type of security is considered risky for the issuer and conservative for investors?

A

Debt

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9
Q

What entity is charged with regulating the securities markets?

A

Securities and Exchange Commission or SEC

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10
Q

What bill created the Securities Exchange Commission (SEC)?

A

Securities Exchange Act of 1934

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11
Q

What gave the Securities Exchange Commission (SEC) the authority to establish self-regulatory organizations or SRO’s?

A

Maloney Act of 1938

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12
Q

What was the first SRO established?

A

National Association of Securities Dealers (NASD)

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13
Q

What is the function of the NASD?

A

Regulate the securities industry within assigned jurisdictions

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14
Q

What SRO replaced the National Association of Securities Dealers?

A

Financial Industry Regulatory Authority or FINRA

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15
Q

What is the purpose of the Financial Industry Regulatory Authority (FINRA)?

A

Regulate participants in the Over-The-Counter Market (OTC) in securities. As well as members on the New York Stock Exchange (NYSE)

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16
Q

Who are the other SROs in the industry?

A

Municipal Securities Rulemaking Board (MSRB)

Chicago Board Options Exchange (CBOE)

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17
Q

What is the function of the SROs?

A

Enforce federal securities laws on their members

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18
Q

Who do the SROs answer to?

A

Securities Exchange Commission (SEC)

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19
Q

What is the name of a primary offering transaction?

A

Primary Market Transaction

20
Q

Where do securities normally trade between investors?

A

Secondary Market

21
Q

What are examples of Secondary Markets?

A

Stock Exchanges, Over-the-Counter Market or in some cases both

22
Q

What type of securities are listed on the New York Stock Exchange (NYSE)?

A

Exchange-Listed

23
Q

How are exchange-listed securities priced?

A

By Auction on the trading floor

24
Q

How do brokerage houses purchase the exchange-listed stocks?

A

Lowest available asked or offering price

25
Q

How do brokerage houses sell their investors securities?

A

Highest available bid pice

26
Q

How are over-the-counter securities priced?

A

Negotiation

27
Q

What are the brokers/dealers called by in the over-the-counter markets?

A

Market Makers

28
Q

What is the job of the Market Makers?

A

Maintain inventories of OTC securities and sell to other broker/dealers out of their inventory for their asked or offering price or but them from other broker/dealers at their bid price.

29
Q

What determines whether a market maker buys and customers sells?

A

Bid Price

30
Q

What determines whether a market maker sells and customers buys?

A

Asked price

31
Q

What is a person called that is any employee, manager, director, officer, or partner of a broker/dealer or another entity (issuer,bank,etc.) or any person controlling, controlled by, or in common control with that member?

A

Associate Person (AP) of a Member

32
Q

What is an individual or a firm that charges a fee or commission for executing buy and sell orders by another individual?

A

Broker

33
Q

What is it any individual, person, partnership, corporation, or legal entity that is not a broker, dealer or municipal securities dealer–that is, public called?

A

Customer

34
Q

What is the role of a brokerage firm when it acts as a principal in a particular trade?

A

Dealer

35
Q

What is a firm called when it buys or sells a security for its own account and at its own risk, then charges the customer a markup or markdown?

A

Dealer

36
Q

Who is any person engaged in the business of buying and selling securities for their own account, either directly or through a broker, that is not a bank?

A

Dealer

37
Q

What is any individual, partnership, corporation or legal entity admitted to membership in FINRA called?

A

A member

38
Q

What is any note, stock, bond, investment contract, variable annuity, profit-sharing or partnership agreement,certificate of deposit, option on a security, or other instrument of investment known as?

A

Security

39
Q

What is the disposition of a security or interest in a security, for value called?

A

Sale or Sell

40
Q

What is every attempt or offer to dispose of, or offer to buy, a security or interest in a security, for value called?

A

Offer to sell, offer for sale or offer

41
Q

What is any notice, circular, advertisement, letter, or communication, written or by radio or television, which offers and security for sale or confirms the sale of any security?

A

Prospectus

42
Q

What makes up a companies balance sheet?

A

Assets, liabilities, and net worth

43
Q

Term for what the company owns: cash in the bank, accounts receivable (money it’s owed), investments, property, inventory, etc.

A

Assets

44
Q

Term for what the company owes: accounts payable (cut tent bills it must pay), short term and long term debt and other obligations.

A

Liabilities

45
Q

The excess of the value of assets over the value of liabilities.

A

Net Worth

46
Q

What is a company’s net worth plus it’s long term debt called?

A

Total capitization

47
Q

What constitutes an investment of money, in a common enterprise, with the expectation to be derived from the efforts of a person other than the investor?

A

A Security

Series 6 Exam (3 decks)

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