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91 Cards in this Set

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Q: Given a change in interest rates, long-term bonds are more volatile than shortterm bonds
A: low coupon bonds are more volatile than high coupon bonds.
Q: are reits dpp's? who are reits suitable for
A: REITs are not DPPs. REITs may be suitable investments for individuals who do not have a high net worth.
Q: can a wife trade in spouses individual acct
A: A wife cannot trade in her spouse’s individual account without trading authority, even if they have another joint account together
Q: can t bonds be part of mm?
A: T-Bonds with 1 year or less to maturity can be part of a money market fund
Q: can unregistred persons make cold calls
A: Unregistered personnel may make cold calls, though any leads must be follow-up by registered individuals.
Q: how (bid / offer) are mkt orders filled for buys and sells
A: Market orders to buy are filled at the lowest offer, market orders to sell are filled at the highest bid.
Q: how are cash dividends taxed
A: Cash dividends received on stock are taxed at the time of receipt, even if they are reinvested.
Q: how are mutual fund div dist taxed
A: Dividend distributions from a mutual fund are taxable at the time they are paid, even if they are reinvested.
Q: how are sexual harrassment or disc cases handled (ie what legal venue)
A: Disputes regarding sexual harassment or discrimination will only go to arbitration if both parties agree, otherwise they go to court.
Q: how can checks be made to a JTWROS accout
A: Checks cannot be made payable to 1 party in a JTWROS account.
Q: how does custy transfer acct from bd to bd
A: If a client wishes to transfer an account from one broker dealer to another, the client fills out an Automated Customer Account Transfer (ACAT). The new firm forwards the ACAT to the carrying firm (the one losing the account). The carrying firm has 3 business days to verify the contents of the portfolio, and another 3 business days to transfer and ship the securities to the new firm.
Q: how is a wrong acct number on tkt fixed
A: If a Registered Representative puts the wrong account number on an order ticket and the order is filled, the rep can bring the situation to a supervisor who will “cancel and correct” the ticket.
Q: how is minors acct taxed
A: A minor’s account is taxed at the parent’s rate until the age of 18 and at the minor’s rate upon reaching the age of 18.
Q: if given breakpoing schedule and NOV, what is POP
A: If given a breakpoint schedule and the NAV, the POP = NAV/(100%-sales charge)
Q: is a dispute btwn 2 public investors reqd to go to arb
A: no, A dispute between 2 public individuals is not required to go to arbitration.
Q: is generated income oan obj of covered call writing
A: yes, One of the objectives for writing a covered call is to earn income.
Q: mass emails sent to custys…. limits
A: Emails sent to any number of existing customers or up to a maximum of 24 prospective customers are considered correspondence, and are subject to spot checks. Any material sent to 25 or more prospective customers within a 30-day period is considered sales literature and must be pre-approved by a principal of the firm.
Q: what accts can minors have
A: A minor account can only be a party to a UGMA or a UTMA account. A minor cannot open an individual account.
Q: what are three phases of money laundering
A: Placement, layering and integration are the 3 phases of money laundering, as identified by the U.S. Treasury Department.
Q: what can broker dealers do in terms of business
A: Brokers-brokers do not work with the public, they cannot participate in new issues, they cannot maintain an inventory of securities, and they cannot make a market in a security. Brokers-brokers can work with other broker-dealers
Q: what cannot eq research trade
A: Equity research analysts cannot trade contrary to their opinions, though they can trade consistent with their recommendations.
Q: what do dpp's do w/ gains and losses
A: 45. DPP’s pass-through gains and losses to investors
Q: what do keynesian economists beleve
A: Keynesian economists believe the economy can be best controlled through taxation and government spending.
Q: what do yld based options speculate on
A: Yield-based options speculate on an increase or decrease in the yield-to-maturity of the underlying instrument
Q: what does SIPC cover
A: SIPC covers up to $500,000 per separate customer of which up to $100,000 can be in cash
Q: what does the notation .15q indicates
A: The notation .15q indicates a quarterly dividend of $.15 per share
Q: what happends if corp insider receives company stock as comp
A: if a corporate insider receives company stock as compensation, they must hold the stock fully paid for one year and are subject to volume limitations of Rule 144 thereafter.
Q: what happends to time value w./ options as expiry approaches
A: As the expiration of an option approaches, time value decays.
Q: what happends w/ muni secondary joint acct
A: In a municipal secondary joint account, all participants must sell the bonds at the same price.
Q: what happends when custy dies
A: When a customer dies, the account is frozen and open orders are immediately cancelled.
Q: what happends when individual inherits an IRA for which mandatory distributions have begun
A: When an individual inherits an IRA for which mandatory distributions have begun, those distributions must continue, though they will be based on the life expectancy of the new owner.
Q: what happens of client of rr moves to another state
A: If the client of a RR moves to another state, the rep can maintain the account provided the rep is registered in the client’s new state of residence.
Q: what happens to NAV when mutual fund pays dist
A: When a mutual fund pays a distribution, the NAV decreases by the amount of the distribution.
Q: what happens to sma when shares are sold in margin acct
A: If shares are sold in a margin account, SMA increases
Q: what happens when corp insider buys co's stock in open mkt
A: If a corporate insider purchases their company’s stock in the open market, they are always subject to the volume limitations of Rule 144, but are not required to hold the stock fully paid for 1 year.
Q: what happens when custy completes a rollover of their 401(k) and mixes the funds with previous funds in an IRA
A: If an individual completes a rollover of their 401(k) and mixes the funds with previous funds in an IRA, the proceeds are ineligible to be put back into a qualified corporate plan in the future. To retain eligibility for a qualified corporate plan, the proceeds from the 401(k) must be maintained in a separate and distinct IRA.
Q: what investments appreciate in inflationary environment
A: In an inflationary environment TIPS, gold and real estate are all appropriate investments
Q: what is a married put
A: A married put is where a customer buys a stock and a put on the stock on the same day. The premium of the put is part of the cost basis of the stock, even if the option expires worthless. There is no taxable event until the stock position is closed.
Q: what is addl bonds test
A: An additional bonds test is used by an issuer to determine if it has sufficient financial strength to issue additional bonds, given that it already has outstanding debt.
Q: what is after tax yield on bonds
A: The after-tax yield on the bond = taxable yield x (100%-tax rate)
Q: what is annutiztion
A: When an individual’s variable annuity is annuitized, accumulation units become annuity units. The number of annuity units is fixed.
Q: what is b/e of covered call
A: The breakeven of a covered call (buy stock + sell call) is the market value of the long stock position minus the premium.
Q: what is efficient market hypothesis
A: Efficient Market Hypothesis theorizes that all information is fully reflected in the price of a stock.
Q: what is escrowed to maturity (re munis)
A: When a municipality deposits government securities in escrow sufficient to cover the interest and principal payments of a bond until maturity, the bond is said to be “escrowed to maturity”. An escrowed to maturity bond is considered to be defeased, or removed as a liability of the issuer. If a bond is escrowed to maturity, it must be noted as such on the trade confirmation.
Q: what is int in margin acct based on
A: Interest in a margin account is based on the broker call rate.
Q: what is interpositioning
A: Interpositioning is a violation that occurs when a firm places itself in between two clients.
Q: what is min equity deposit for short margin acct
A: The minimum equity deposit in a short margin account is $2,000.
Q: what is money market
A: Money market consists of debt securities with 1 year or less to maturity
Q: what is mutual funds POP based on
A: A mutual fund’s POP is based on the specific sales charge an investor will pay, based on their investment and the breakpoint schedule.
Q: what is order of liq for corps
A: The order of liquidation in a Corporation is: Unpaid Wages IRS Secured Bondholders Unsecured Bondholders General Creditors Preferred Stockholders Common Stockholders
Q: what is order of liq for LPs
A: The order of liquidation in a Limited Partnership is: Secured Bondholders Unsecured Bondholders Limited Partners General partner
Q: what is rehypothencation
A: Rehypothecation is the process by which a broker dealer pledges a customer’s securities to a bank as collateral for a margin loan.
Q: what is sec short sale rule
A: According to the SEC Short Sale Rule, stock can be sold short on a (+) tick or a (0+) tick only.
Q: what is shorting against the box
A: Shorting against the box is where an investor sells stock short that they already own. This is done to defer taxation.
Q: what is tax if cust executes a 401k rolloover
A: If a customer executes a rollover of a 401(k), 20% of the account is withheld as a tax.
Q: what is the coupon on tsy receipts
A: Treasury Receipts (TR) do not pay a coupon.
Q: what is the least risky income program
A: An income program is the least risky oil and gas limited partnership.
Q: what is the timing for violating the wash rule
A: If an investor violates the wash sale rule, the investor cannot take the loss on only the number of shares that were repurchased within 30 days.
Q: what is the timing on acct transfers
A: When a customer transfers an account to another firm, the old firm must validate the portfolio within 3 days, and transfer the securities within 3 days.
Q: what is tight money policy
A: A tight monetary policy is when the FOMC sells securities to decrease the money supply and curb inflation.
Q: what kind of security is preferred stock
A: Preferred stock is an equity security, and would not be found in the money market.
Q: what kind of strategy does a rr recommend out-of-favor companies that may be undervalued
A: When a registered rep recommends out-of-favor companies that may be undervalued, it is a value portfolio management strategy.
Q: what kinda of invest co's are commissions paid for
A: Commissions are paid for closed-end funds, not for mutual funds or UITs.
Q: what kiond of indicator is ind production
A: The Industrial Production Index is a coincident indicator.
Q: what must be indicated on a muni bond w/o legal opinion to be in good delivery
A: For a municipal bond to be good delivery without the legal opinion, it must be marked ex-legal.
Q: what must insured bonds have w/ delivery
A: Bonds that are insured must be delivered with some proof of insurance, in addition to disclosing the information on the trade confirmation.
Q: what punishment auth do nasd and nyse have
A: The NASD and NYSE can censure a firm, they do not have criminal authority.
Q: what re fitch credit ratings equal to
A: Fitch credit ratings are the same as S&P credit ratings.
Q: what stocks are good investments in expansionary growth
A: In a period of expansionary growth, cyclical stocks such as autos and tech stocks would be suitable investments.
Q: what stocks perform well in receission
A: Defensive stocks perform well during a recession
Q: what tax credits are avail to investor in foreign govt bonds
A: If an investor owns a foreign government bond and pays tax on the interest to the foreign government, the investor may be eligible for a 15% U.S. federal tax credit.
Q: what to do w/ preferred dividends when calcing EPS
A: Preferred dividends must be subtracted from earnings before calculating the earnings per share (EPS) ratio.
Q: what will happened to the the dollar if the U.S. trade balance is negative (w/r/t the follar and value of international mutual funds)
A: If the U.S. trade balance is negative, the dollar will fall in value which will increase the value of international mutual funds.
Q: whats easy monetary policy
A: An easy monetary policy is when the FOMC purchases securities to increase the money supply and spur economic growth.
Q: whats more volitile given chg in int rates, short or long
A: whats more volitile given chg in int rates, low coupon or high coupon
Q: when are gains and losses recog on exercise and expire of options
A: If an option expires, the gain or loss is recognized in the month of expiration. If an option is exercised, the premium becomes part of the cost basis of the stock position.
Q: when are orders reqd to be approved
A: Orders are required to be approved promptly after execution.
Q: when can custy get options material
A: No options related material may be sent to customers unless the person has received the OCC Options Disclosure Document.
Q: when can ia rr not recommend munis
A: If a registered rep does not know the total income or net worth of a client, the rep cannot recommend municipal bond transactions.
Q: when is a mutilated bond in good delivery form
A: A mutilated bond is never in good delivery form, unless it is validated by a trustee, registrar, transfer agent, paying agent or issuer of the securities.
Q: when must cust sign options agreement
A: A customer must sign the Options Agreement within 15 days of an account being approved for options trading.
Q: when must OCC options disc be rec'd by cust
A: The OCC Options Disclosure Document must be received by a customer before or upon approval of an options account.
Q: when must occ options disclosure by provided
A: The OCC Options Disclosure Document must be provided at, or prior, to account approval.
Q: who are common share holders paid in liq (w/r to preferred)
A: In the priority in liquidation, common stockholders are paid after preferred stockholders
Q: who are options issued and guaranteed by
A: Options are issued and guaranteed by the OCC, not the SEC
Q: who are tsy receipts issued by & backed by
A: Treasury Receipts are issued by broker dealers and backed by U.S. Government Securities.
Q: who can universal variable life insurance policies be sold by
A: Universal variable life insurance policies can only be sold by individuals with insurance and securities licenses.
Q: who determines if a security is elegible for margin
A: the Federal Reserve Board determines if a security is eligible for margin. All securities on the NYSE, Nasdaq Global Select Market and Nasdaq Global Market are marginable.
Q: who does fomc execute open mkt trades with
A: When the FOMC executes open market transactions it trades with primary dealers.
Q: who is subject to blue sky laws
A: Issuers are subject to blue sky laws with regard to registration of securities
Q: with regards to discresionary status, solicited or unsolicited status,what must order tkts and trade confirms include
A: Order tickets must include if the order is discretionary and if the order is solicited or unsolicited. Trade confirmations do not include this information.