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45 Cards in this Set
- Front
- Back
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Face Amount Certificate Companies
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Contract between an investor and issuer in which the issuer guarantee payment of a stated (or fixed) sum to the investor at some set date in the future |
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Unit Investment Trust (UIT)
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There is no BOD or investment adviser UIT shares (units) are not traded in the secondary market They must be redeemed by the trust UITs are investment companies as defined under the investment company act of 1940 |
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Open- End
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common stock only; no debt securities; permitted to borrow full or fractional sold and redeem by fund only continuous primary offering must redeem shares NAV+ sales charge selling price determine by formula in the prospectus dividends (when declared) voting set by BOD |
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Closed- End
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common and preferred stock, debt securities full only initial primary offering Secondary trading OTC or on an exchange Does not redeem shares CMV + commission Price determined by supply and demand dividends(when declared) voting, preemptive set by exchange or FINRA |
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Diversified Investment Company 75-5-10-test |
75% must be invested in such a way that: with the 75%, no more than 5% of the fund's total assets are invested in the securities of any one issuer with in the 75%, the fund does not own more than 10% of the outstanding voting securities of any one issuer remaining 25% of the fund's assets does not have to be diversified in this manner fund could have as much as 30% of its assets invested in one company (25+5) and own more the 10% of a company and still is diversified |
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Non diversified investment company
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fails to meet the 75-5-1 test |
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Registration with the SEC company must register with the SEC as an investment company if it |
A company must be register with the SEC as an investment company if it: is in the business of investing in, reinvesting in, owning, holding, or trading securities; has 40% or more of its assets invested in securities (government securities and securities of majority owned subsidiaries are not used in the calculating the 40% limitation |
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Registration with the SEC Company must meet certain minimum requirement before it may register as an investment company with the SEC |
Private capitalization (seed money) of at least $100k of net assets 100 investor clearly defined investment objectives |
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Prospectus
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must be distributed to an investor before or during an solicitation for sale contains the following: fund objective investment policies sales charge management expense service offered |
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SAI typically contains the fund consolidated financial statement |
Include the following balance sheet statement operations income statement portfolio list at the time the statement was complied |
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Financial reports
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report must contain: The investment company's balance sheet a valuation of all securities |
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additional disclosures
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a discussion of those factors and strategies that materially affect its performance during it most recently completed fiscal year a line graph comparing its performance to that of an appropriate broad based securities market index name and title of the person primarily responsible for the fund portfolio day to day management |
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a professional investment adviser manages that portfolio different
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mutual funds provide diversification by investing in many different companies most funds allow a minimum investment, often $500 or less, to open an account, and they allow additional investment for as little as $25 |
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Investment company may allow investment at
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example through larger deposit a letter of intent rights of accumulation |
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investors retains voting rights similar to those
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such as the right to vote for changes in the board of directors approval of the investment adviser, changes in the fund investment objective, changes in the fund's investment objective, change in sales charge and liquidation of the fund |
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Many funds offer automatic reinvestment of
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An investor may liquidate a portion of his with out disturbing the portfolios balance or diversification tax liabilities for an investor are simplified because each year the fund distribute a 1099 form explaining taxability of distribution |
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A fund may offer carious withdrawal plans that
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funds may offer reinstatement provision that allow investor that withdraw fund to invest up to the amount withdrawn with 30 days with no new sales charge This provision must be disclosed in the prospectus and is available one time only |
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Growth Funds
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tends to reinvest all or most of their profits for research and development rather then pay dividends focus on generating capital gains rather then income |
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Incomes funds
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for example utility company stock blue chip stock preferred stock Income fund stresses current income over growth |
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combination fund aka growth and income fund |
combine the objectives of growth and current yield by diversifying it portfolio among companies showing long term growth potential and companies paying high dividends |
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Specialized (Sector) Funds
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example gold funds(gold mining stock) technology funds low grade (non investment grade) bond funds among others funds offer high appreciation potential but may also pose higher risk to the investor |
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Special Situation Funds
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Takeover candidates companies with patents pending and turnaround situation are common investment for these funds |
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Index Funds
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S&P 500 fund buy and sell securities in a manager that mirrors the composition of the selected index tracks the underlying index performance Turn over of securities in an index fund portfolio is minimal |
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Balanced funds
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balanced fund portfolio mat contain 60% Stock and 40% bonds |
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Asset Allocation Funds
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split investment between stocks for growth, bonds for income and money market instrument or cash for stability |
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foreign stock funds
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long term capital appreciation is their primary objective although some funds also seek current income |
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common stock
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price of stock determined by supply and demand traded on an exchange or the OTC market sold in full shares only first security issued by a public corporation carries voting rights may carry preemptive right Ex - dividend: two business days |
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Mutual Funds Shares
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price of share determined by forward pricing next NAV per share calculated as determined by the funds pricing policy purchase from and redeemed by the investment company; no secondary trading can purchase full or fractional share only security issued by a mutual fund carries voting rights does not carry preemptive right ex dividend: typically the day after record date as set by the BOD |
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Bond Funds
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funds invest solely in investment grade corporate bonds seeking enhanced safety invest in government issues only pursue capital appreciation by investing in lower rated bonds for higher yields |
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tax Free ( tax Exempt) Bond Funds
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Tax-Free can invest in municipal bonds and tax exempt money market instrument |
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Us Government and Agency Security Funds
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such as Ginnie Mae investors in these funds seeks current incomes and maximum safety |
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Dual purpose fund
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meet two objectives investors seeking income purchase income shares and receive all the interest and dividends the fund portfolio earns and investors interested in capital gains purchase the gains shares and received all gains on portfolio holdings |
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Sales load
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difference between the public offering price and the net asset value per share of the fund
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When the customer makes the first investment under a letter of intent
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the reduced sales charge applies immediately and to each subsequent investment With each additional investment, the same reduced charge is deducted If the customer does not invest the amount stated in the letter, the full sales load applies retroactively to the total investment. |
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Under a letter of intent
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the full contribution is required for the letter to be completed Appreciation is not considered |
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If any security issued by a mutual fund is tendered for redemption within 7 business days after the date of the transaction
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the broker/dealer must refund to the underwriter the full concession allowed to the broker/dealer on the original sale.
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12b-1 fees
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may be used only to cover promotional and other distribution expenses for funds that are distributors of their own shares fee amounts must be disclosed in the prospectus. The fund may not use the term" no-load "in any communications with the public if the 12b-1 fee and other service fees exceed .25% of average net assets. |
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Class Share Types
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Class A shares are purchased at NAV plus sales charge Class B shares pay the sales charge upon redemption Class D shares have a level load plus a redemption fee Class C shares have only a level load (a 12b-1 fee) which is taken from net assets during the year |
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If a customer redeems mutual fund shares within 7 business days of purchase
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any concession earned by the member firm that sold it to him must be returned to the underwriter. The same rule applies to variable annuities
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unrealized loss is the same as a decrease in net asset value
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investor receives less at redemption than she would have received if the redemption had taken place before the asset's depreciation.
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Money market mutual funds
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invest in a portfolio of short-term debt instruments such as T-bills, commercial paper, and bankers acceptances no sales load or charge money market funds have low betas |
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transfer within a family of funds is generally
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not subject to a sales charge, the customer is liable for any taxes due The IRS considers this transaction a sale and a purchase. Any losses or gains must be declared on that year's tax form. |
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forward pricing
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Purchase or redemption of mutual fund shares occurs at the net asset value next calculated after the fund receives the order
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Investment clubs
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not considered restricted persons under the rules regarding sales of a new issue at the POP eligible to purchase new equity issues never permitted to take advantage of breakpoints available on mutual fund purchases |
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Mutual funds that offer automatic reinvestment of dividends and gains
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do so at net asset value
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