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23 Cards in this Set

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What does the term “financial services industry” cover?
Very broadly, it refers to banking, insurance and investments.
What governmental body is most senior in regulating the sale of investment products?
Securities and Exchange Commission
What governmental body is most responsible for regulating the banking industry?
The Federal Reserve System
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What is the Federal Reserve System?
Often referred to as the Federal Reserve or simply "the Fed," it is the central bank of the United States.
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What is a security?
Originally a certificate stating how many shares of stock in a company a person owned or how much money an investor had loaned a company or government entity, This is called a bond. Today, there are very few actual paper documents issued since the transactions in the securities industry are almost all electronic.
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What is the Securities and Exchange Commission?
A federal government agency that regulates and supervises the securities industry. The commission administers federal laws, formulates and enforces rules to protect against malpractice, and seeks to ensure that companies provide full disclosure to investors.
What is the National Association of Securities Dealers? (NASD)
A self-regulatory organization (SRO) operating under the supervision of the Securities Exchange Commission (SEC). It is actually a non-profit organization owned by its members but under the jurisdiction of the SEC.
What is the purpose for the NASD?
Its purpose is to standardize practices, establish high ethical standards and enforce fair and equitable rules.
As far as BGM is concerned, how do various rules set by the NASD affect us?
Our primary interest is to ensure that marketing material developed by BGM does not violate NASD standards.
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What does the term “compliance” mean?
The department within a brokerage firm that oversees the sales practices, literature and product offerings of a firm and its advisors.
What does a person have to do to sell investment products?
Be appointed by a securities firm which is a Member of the NASD and pass a test administered by the NASD.
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What is a Series 7 license?
It is called a general securities license and licenses a person to sell all investment products. All of the national brokerage firms require a Series 7. It is the broadest of the licenses and also the hardest to acquire. The test is 6 hours and 250 questions.
What is a stock?
It is shares of ownership in a company.
What kinds of companies have stock?
All corporations have stock. Some companies, such as sole proprietorships and partnerships, are not corporations and therefore do not have stock.
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Does Bill Good Marketing Inc. have stock?
Yes. BGM is a corporation. It has 1000 shares of stock, 500 owned by Bill Good and 500 owned by Joava Good.
What kind of companies have their stock sold by financial advisors?
These are companies whose stock is “publicly traded.” They have registered their stock with the Securities and Exchange Commission and agreed to follow certain rules in reporting earnings and other information to the public.
What is a bond?
A bond is a long-term debt obligation of a company or government entity. When you “buy” a bond, you are basically loaning the company or government group money for a period of more than one year.
What is a mutual fund?
A mutual fund is a company that pools money from many investors and invests the money generally in stocks, bonds, or other investments that can easily be converted into cash. The combined holdings the mutual fund owns are known as its portfolio. Each share represents an investor's proportionate ownership of the fund's portfolio and the income those holdings generate.
What is an annuity?
An annuity is a contract with an insurance company in which the company agrees to make payments to a person for life or for a certain period of time.
What kind of annuities are most frequently sold by financial advisors?
Variable annuities
What is a variable annuity?
A life insurance contract where the annuity premium (a set amount of dollars) is immediately turned into units of a portfolio of stocks. Upon retirement, the policyholder is paid according to accumulated units, the dollar value of which varies according to the performance of the stock portfolio. Its objective is to preserve, through stock investment, the purchasing value of the annuity which otherwise is subject to erosion through inflation.
What is a Series 6 license?
It is for people who want to sell only mutual funds and annuities. With a series 6 only, an advisor cannot sell shares of stock, bonds or other publicly traded investment products.
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Why is cold calling dead?
Because Congress passed the "Do Not Call" law that enables people to register any home phone or cell phone they do not want solicited.
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