What Is A Security? Flashcards
What type of security grants the investor holds ownership interest in a company?
Equity
What type of security grants the investor a creditor relationship with a company?
Debt Obligation
How is an equity security most commonly represented?
Stock
How are debt securities most commonly represented?
Bonds & Notes
What are the equity securities that give enhanced access?
Rights, Warrants, and Options
What is the reason corporations issue equity and debt securities?
Raise Capital to implement ideas such as expanding operations, funding a merger, or acquisition
What type of security is considered conservative for the issuer and risky for investor?
Equity
What type of security is considered risky for the issuer and conservative for investors?
Debt
What entity is charged with regulating the securities markets?
Securities and Exchange Commission or SEC
What bill created the Securities Exchange Commission (SEC)?
Securities Exchange Act of 1934
What gave the Securities Exchange Commission (SEC) the authority to establish self-regulatory organizations or SRO’s?
Maloney Act of 1938
What was the first SRO established?
National Association of Securities Dealers (NASD)
What is the function of the NASD?
Regulate the securities industry within assigned jurisdictions
What SRO replaced the National Association of Securities Dealers?
Financial Industry Regulatory Authority or FINRA
What is the purpose of the Financial Industry Regulatory Authority (FINRA)?
Regulate participants in the Over-The-Counter Market (OTC) in securities. As well as members on the New York Stock Exchange (NYSE)
Who are the other SROs in the industry?
Municipal Securities Rulemaking Board (MSRB)
Chicago Board Options Exchange (CBOE)
What is the function of the SROs?
Enforce federal securities laws on their members
Who do the SROs answer to?
Securities Exchange Commission (SEC)
What is the name of a primary offering transaction?
Primary Market Transaction
Where do securities normally trade between investors?
Secondary Market
What are examples of Secondary Markets?
Stock Exchanges, Over-the-Counter Market or in some cases both
What type of securities are listed on the New York Stock Exchange (NYSE)?
Exchange-Listed
How are exchange-listed securities priced?
By Auction on the trading floor
How do brokerage houses purchase the exchange-listed stocks?
Lowest available asked or offering price
How do brokerage houses sell their investors securities?
Highest available bid pice
How are over-the-counter securities priced?
Negotiation
What are the brokers/dealers called by in the over-the-counter markets?
Market Makers
What is the job of the Market Makers?
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.
What determines whether a market maker buys and customers sells?
Bid Price
What determines whether a market maker sells and customers buys?
Asked price
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?
Associate Person (AP) of a Member
What is an individual or a firm that charges a fee or commission for executing buy and sell orders by another individual?
Broker
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?
Customer
What is the role of a brokerage firm when it acts as a principal in a particular trade?
Dealer
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?
Dealer
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?
Dealer
What is any individual, partnership, corporation or legal entity admitted to membership in FINRA called?
A member
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?
Security
What is the disposition of a security or interest in a security, for value called?
Sale or Sell
What is every attempt or offer to dispose of, or offer to buy, a security or interest in a security, for value called?
Offer to sell, offer for sale or offer
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?
Prospectus
What makes up a companies balance sheet?
Assets, liabilities, and net worth
Term for what the company owns: cash in the bank, accounts receivable (money it’s owed), investments, property, inventory, etc.
Assets
Term for what the company owes: accounts payable (cut tent bills it must pay), short term and long term debt and other obligations.
Liabilities
The excess of the value of assets over the value of liabilities.
Net Worth
What is a company’s net worth plus it’s long term debt called?
Total capitization
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 Security
