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165 Cards in this Set
- Front
- Back
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Mutual Fund Sales Price
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When an investor buys shares of a mutual fund (open-end investment company), the investor pays the offering price, which includes the sales charge.
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Calculating the Sales Charge of a Mutual Fund
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The sales charge of a mutual fund is the difference between the bid price and the offer price. The sales charge is always expressed as a percentage of the offering price. The sales charge divided by the offering price equals the sales charge price as a %
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Closed End Funds Sale Price/Charge
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Sell at their current market value plus a commission
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Types of Investment Companies
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1. Face Amount Certificate
2. Management Company 3. Unit Investment Trust |
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Member Firm Discount Rules
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A FINRA member firm cannot sell the fund at a discount to a nonmember firm or to one of the firm's customers (the public). a member firm can only give a discount from the public offering price to another member firm
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Money Market Fund DIvidends
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Most money market funds will declare dividends daily and pay, credit, or reinvest the dividends on a monthly basis
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Sales breakpoints on large purchases of mutual fund shares
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Quantity discounts are only allowed for individuals and individual entities such as corporations
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Mutual Fund Ex- Dividend Date
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Mutual funds sell ex-dividend whenever the fund or its principal underwriter (sponsor) determines. The ex-dividend date for a mutual fund is usually the same day as the record date.
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Characteristics of ETF's
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Exchange-traded funds (ETFs) represent a basket of securities. ETFs are structured to track an index of securities such as the Nasdaq 100, Standard and Poor's 500, or the Dow Jones Industrial Average. Shares are issued and then trade in the secondary market
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SPDR
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Standard & Poor's Depositary Receipt (SPDR) is a type of exchange-traded fund (ETF). It can be used to refer to a specific exchange-traded fund that tracks the S&P 500 or a group of ETFs
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Account Summary Report
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After the sale of a new issue, the syndicate manager must distribute a summary of the account to the members of the syndicate. This summary statement will include the allocation of bonds.
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what is a group order
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is when all members of the syndicate share in the profit.
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Short Swing Profits
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A short-swing profit is a profit made on stock held by insiders for less than six months
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NYSE Trading Halts
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Trading halts on the New York Stock Exchange are triggered by a decline in the Dow Jones Industrial Average (DJIA) of 10%, 20%, and 30%.
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Listing Requirements for NYSE stock
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Listing requirements include: a minimum of 2,000 round-lot shareholders, a minimum of 1,100,000 shares publicly held, minimum market values, a positive earnings history, and national interest in the stock.
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Specialist Trading for its own Account
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A specialist is not permitted to compete with public orders when trading for its own account. The specialist may buy stock at a higher price or sell stock at a lower price. In doing so, the specialist has narrowed the spread (the difference between the bid and ask).
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The Specialist Role
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The responsibilities of the specialist include resolving trade imbalances, which may result from a temporary lack of supply or demand in a particular security. The specialist's role also includes maintaining liquidity and a fair and orderly market.
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Frozen Accounts
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According to Regulation T of the Federal Reserve Board, the brokerage firm must sell out the securities in the account and freeze the account for 90 days
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Broker dealer must deliver stock if a customer fails to do so...
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SEC rules require that the broker-dealer must receive the stock (or, if necessary, buy it in) within 10 business days after settlement.
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The placement ratio
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expresses the amount of bonds sold by new issue syndicates as a percentage of the total amount of new issues brought to market during that week
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Municpals Brokers Broker
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A municipal broker's broker is a broker (agent) that deals only with other municipal securities brokers or dealers
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30 Day Visible Supply
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The 30-day visible supply of municipal securities refers to the face amount of new municipal bonds that will be sold in the next 30 days through competitive and negotiated sales of general obligation and revenue bonds
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Fidelity Bond
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provides insurance in the event of a fraud judgement against the broker-dealer.
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Position Trader
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responsible for maintaining a broker-dealer's inventory as well as trading the firm's account
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The Revenue bond index
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The average yield-to-maturity on a particular day of 25 specific revenue bonds with 30-year maturities.
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The 11 Bond Index
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The average yield-to-maturity on a particular day of 11 of the 20 specific GO bonds from the 20-Bond Index.
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The 20 Bond Index
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The average yield-to-maturity on a particular day of 20 specific GO bonds with 20-year maturities
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The Pink Sheets
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show The market makers for stocks not listed on the Nasdaq system
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The Fourth Market
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This is the name given to the so-called market where institutions trade with other institutions
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municipal securities principal role
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MSRB rules require a municipal securities principal to approve all transactions in municipal securities
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Bond Buyer New Issue Worksheets
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a service of the Bond Buyer and show details of the issue and bidding requirements
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BA's
(Banker Acceptances) |
helps to finance foreign trade between importers and exporters.
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ADR's
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permit the trading of foreign stocks in the U.S
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GNMA Pass Through Certificates Quoting
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(like T-notes and T-bonds) are quoted in 32nds.
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step-down long-term certificates of deposit
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offer an investor an interest rate that is initially higher than current market rates will pay for that maturity period. Subsequent interest rates paid to investors would be lower and may be adjusted more than once
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Federal Home Loan Bank Types of Securities
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issued two types of securities to raise capital, discount notes with maturities of less than one year, and consolidated bonds with maturities of up to 30 years. These funds are used to lend funds to FHLB member banks which, in turn, lend these funds to their customers.
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BAN
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A municipality borrowing for a short-term period to finance a capital project would issue bond anticipation note
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Best Efforts Underwriting
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A type of offering in which whatever is not sold is returned to the issuing corporation
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Firm Commitment Underwriting
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A type of offering in which the issuing corporation is assured of receiving the full amount of the offering and whatever is not sold is retained by the underwriter
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Regulation A Offering
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is exempt from the registration and prospectus requirements under the Securities Act of 1933. The offering is limited to the issuance of $5,000,000 or less worth of securities during a 12-month period.
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Rule 144 FIling
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The filing must be made at the time of the sale and is effective for 90 days.
An individual is allowed to sell affiliated (restricted) stock without filing under Rule 144 or reporting the sale if the sale is for less than 5,000 shares and $50,000. |
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Securities Exempt from the Securities Act of 1933
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Securities issued by state chartered banks
Municipal bonds Federal government securities Securities issued by small business investment companies |
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Leveraged Buy Out (LBO)
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the acquisition of a company primarily using debt to finance the purchase. The assets of the acquired company are generally used as collateral for the borrowed funds. This type of acquisition allows the acquiring company, which is referred to as a private equity (PE) firm, to make the purchase without using much of its own equity.
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Regulation A Offering
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is exempt from the registration and prospectus requirements under the Securities Act of 1933. The offering is limited to the issuance of $5,000,000 worth of securities during a 12-month period.
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Blue Sky Laws
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Broker-dealers are required to register in each state in which they do business
Salesmen are required to be registered in each state in which they do business Blue Sky laws are state securities laws |
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Rule 144 A Exemptions
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the owner of securities obtained through a private placement may resell those securities to a qualified institutional buyer without the volume and holding period restrictions of Rule 144. (
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Rule 147 Intrastate Exemption
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-if 80% of its assets are located in the State
-80% of its revenues are derived from the states source -and 80% of the proceeds from the sale are used in the state -100% of the purchasers of the offering must be residents |
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Rule 144 Exemptions
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individual is allowed to sell affiliated (restricted) stock without filing under Rule 144 or reporting the sale if the sale is for less than 5,000 shares and $50,000. (
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Tender Offer
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occurs when an entity offers to buy a corporation's shares at a premium to the current market price. It is normally for the purpose of acquiring control of the company. According to SEC rules, a customer may not tender short (borrowed) shares
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Notice of Sale
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published by the issuer. It announces the issuer's intention to sell an issue and invites securities firms to compete for the issue. All information pertaining to the bidding would be contained in the Notice of Sale
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Order Types Defined
Pre Sale Group Designated Member |
A pre-sale order is any order placed before the syndicate actually purchases the issue from the issuer.
A group order is when all members of the syndicate share in the profit. A designated order is usually placed by a large institution which designates two or more members to receive credit for the sale. A member order is any order placed by members for their customers. |
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Super Dot System
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provides a direct computer tie-in with the specialist and thus bypasses the floor brokers. It can be used for odd-lots, consolidated odd-lots, market orders and limit orders. The NYSE sets limits on the number of shares that may be entered
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Reg T Payment Date
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securities must be paid for within 2 business days of the standard (regular-way) settlement date. Since regular-way settlement is three business days, payment is required within five business days from the trade date. Therefore, while option transactions settle next day, the customer has five business days in which to pay for a purchase
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The symbol ss represents
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a 10 share round lot.
Example 40ss represents 400 shares |
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Settlement Dates
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Regular-way settlement for government securities and options is the next business day. All other securities settle in three business days
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The symbol "m" is used to indicate
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A $1,000 face value bond
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Immediate or Cancel Order (IOC)
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order must be executed immediately but does not have to be executed in its entirety. Part of the order can be executed.
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Settlement
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The conclusion of a securities transaction when a broker-dealer pays for securities purchased or delivers securities sold and receives from the contra broker the proceeds of a sale. Regular-way settlement, for most securities, is three business days from the trade date. Government bonds and options settle the next business day. A transaction done for cash settles on the same day.
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Delivery
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The physical act of exchanging securities and monies on the settlement date
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Trade Date
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The day on which a transaction is executed
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The Visible Supply
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The total of all new issues scheduled to be sold during the upcoming 30 days
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Municipal Brokers Broker
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broker (agent) that deals only with other municipal securities brokers or dealers
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Fidelity Bond
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Insurance purchased by broker-dealers to protect them against fraud
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Custodian Bank
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The bank designated by a mutual fund to hold the cash and securities of the fund and maintain fund level account records.
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Formula :Calculating Mutual Fund Break Point Costs
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1. Find the new offering price based on break point sales %
2. Use the complement of the sales charge (i.e. 100- x%) 3. Divide the NAV by the compliment of the sales charge %, which = new offering price 4. Divide the investable amount by the offering price |
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1. Calculating the Sales Charge of a Mutual Fund
2. the % of the sales charge |
1. Subtract the offering price from the NAV
2. sales charge divided by offering price *if sales charge is more than 8 1/2% than it is not a mutual fund |
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Corporate Tax Exemptions
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A corporation is exempt from paying taxes on 80% of dividends received from common and preferred stock of another corporation if it owns at least 20% of the distributing corporation.
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Accretion on OID bond
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on an OID (Original Issue Discount) is based on a constant yield method (also called constant interest method) which uses the bond's yield-to-maturity.
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Corporate Tax Exemptions
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a corporation owns less than 20% of the distributing company, the corporation is required to pay tax on 30% of the dividends it receives on stock which it owns (70% is excluded).
If the corporation owned at least 20% of the distributing company, only 20% of the dividends would be taxable |
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Short Sale Taxes
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Short sales are always treated as short-term capital gains or losses,
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Put Option Taxes
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When a customer exercises a put option, the proceeds of the sale equals the strike price minus the premium
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Wash Sale Rule
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If a security is sold at a loss and within 30 days (prior to and after the sale) substantially the same security is purchased, the IRS considers it a wash sale and will disallow the loss. To avoid purchasing a security that the IRS would consider substantially the same as the security sold, you should purchase bonds either by a different issuer or with a different coupon or maturity
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straight-line amortization
constant-yield amortization |
If the adjustment is in equal amounts
the adjustments are not made at an equal rate, |
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the market price ($56) of the stock divided by the earnings per share
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the market price of the stock divided by the earnings per share
The earnings per share is found by dividing the available income to the common stockholders by the # of shares of common stock outstanding. |
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Bond Points & Basis Points
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A basis point is the measure of the change in yield
A basis point is equal to 1/100th of 1% of a bond or $.10. A bond point deals with the price of a bond. A bond point is equal to 10 dollars |
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Funded Debt
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includes any corporate debt with one or more years to maturit
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Regulated Investment Company
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An Investment company which pays out 90% of its net investment income to shareholders
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The Advanced Decline Theory
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is concerned with the number of stocks that advance in relation to the number that decline. It is a good measure of the strength of a bull or bear market.
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Capital Risk
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The full amount originally invested may not be received by the customer upon disposition of the security
refers to the risk of losing the principal invested |
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S&P 100 Index options
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Exercise prices are set at five point intervals.
Expiration date is the Saturday following the third Friday of the expiration month. Settlement is in cash, if the option is exercised. |
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SEC rule 15c 3-3
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regulates the sale of securities and requires that securities sold must be received by the firm not later than 10 business days after settlement of the transaction
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Stock Index Options Characteristics
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Exercise prices and expiration dates are standardized by the OCC. Premiums are determined by market demand. Stock index options are not based on an underlying stock, rather, on an index. There is no stock that could be delivered on exercise. All stock index options which are exercised settle in cash.
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Euro Dollar Bond Characteristics
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Eurodollar bonds generally are offered at rates lower than U.S. rates due to lesser regulation and less taxation
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529 College Savings Plan
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do not have annual limitations on contributions like IRAs and Keogh plans. They are fully controlled by the owner who can change the beneficiary of the account. As well, withdrawals meeting qualification requirements are free from federal income tax.
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SIPC Coverage
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If a claim exceeds the maximum coverage, the customer becomes a general creditor of the firm and securities will be settled at the market value on the date a Federal Court was petitioned to appoint a trustee
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Passbook Savings Account
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a type of savings account in which transactions are entered into a passbook in the possession of the account holder.
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Real Estate LP Characteristics
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ordinary operating costs are deductible, while costs associated with purchasing land are not. A corporation can be a general partner as long as there is no conflict of interest. Management expertise and economic soundness are key factors in the success and profitability of real estate limited partnerships
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NAV
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reflects the closing value of all shares in the fund's portfolio and is calculated by taking the total assets of the fund, minus the total liabilities, divided by the total number of outstanding shares.
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Dow Jones Industrial Average
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a price-weighted average of 30 actively traded Blue Chip stocks. It is the oldest and the most quoted market indicator
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Basis Point
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1/100 of 1%
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Important Factors When Evaluating a Real Estate DPP
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The market value of adjoining property.
The general partner's management ability. Tax considerations. Economic viability of the project. |
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ETN's Characteristics
Exchange Traded Note |
A type of unsecured, unsubordinated debt security
This type of debt security differs from other types of bonds and notes because ETN returns are based upon the performance of a market index minus applicable fees, no period coupon payments are distributed and no principal protections exists. |
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Non Qualified Deferred Compensation Plan
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the employer is allowed to be selective as to who participates in the plan and who does not. The employer can include key personnel to the company without having to include all employees.
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AMT
(Alternative Minimum Tax) |
only applies if the tax burden of AMT exceeds the individual's current regular tax liability.
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The Ex Date
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Whoever ends up owning a security the day before the ex-date would receive a dividend
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401K Plan Characteristics
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Are a type of defined contribution plan
Earnings on the contributions accumulate on a tax deferred basis Participants may make both tax deductible and non-deductible contributions Employers may make matching contributions |
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Variable Annuities
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The insurance company promises ("guarantees") to pay annuity payments, but not the principal amount. When the annuitant annuitizes, he/she loses control of the principal.
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Necessary Information for Opening a New Account
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New Account Report Form
The person's exact age Whether the person is a citizen |
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Determining "Ex- Date" for Dividends
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Ex-date for regular way settlement is 2 business days prior to record date
Ex-date for cash settlement is the business day after records |
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LEAP
Long Term Equity Anticipation Securities |
Publicly traded options contracts with expiration dates that are longer than one year
the later expiration dates offer the opportunity for long-term investors to gain exposure to prolonged price changes without needing to use a combination of shorter-term option contracts |
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New Issues of US Government Securities Are Originally Distributed Through?
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New issues of government securities are distributed by the Federal Reserve Board through Dutch auctions.
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REIT Characteristics
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There are no minimum investment requirements
REITs have a low correlation to other financial assets since the assets of a REIT are real estate. |
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Bond Amortization
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When a bond buyer pays a premium on a municipal bond, that bondholder is required to amortize the amount of the premium paid over the life of the bond. This will result in a cost basis of zero for tax purposes
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UIT's
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An investment company that offers a fixed, unmanaged portfolio, generally of stocks and bonds, as redeemable "units" to investors for a specific period of time. It is designed to provide capital appreciation and/or dividend income
THEY PAY INVESTORS INTEREST NOT DIVIDENDS |
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Alpha
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A measure of performance on a risk-adjusted basis. Alpha takes the volatility (price risk) of a mutual fund and compares its risk-adjusted performance to a benchmark index. The excess return of the fund relative to the return of the benchmark index is a fund's alpha.
A positive alpha of 1.0 means the fund has outperformed its benchmark index by 1%. Correspondingly, a similar negative alpha would indicate an underperformance of 1% |
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The NYSE minimum margin requirement for short sales
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The requirement for the short sale is $2.50 per share (i.e. $2,500) or 100% of the market value whichever is greater.
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Expense ratio
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is determined by operating expenses divided by its average net assets
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Interpositioning
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Charging both a commission and mark-up is a violation of the NASD Conduct Rules called Interpositioning
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Funded Debt
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a *corporate* term used to describe debt that has one year or more to maturity
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The Trust Indenture Act of 1939
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a federal law that requires all corporate debt securities to be issued under an indenture agreement providing for the appointment of a qualified trustee to represent the bondholders and to free of any conflict of interest with the issuer.
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"Basis" for Bonds
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is synonomous with YTM
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Market Risk
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the risk that the market price of the security will decline.
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GNMA Characteristics
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Payment of interest and principal is guaranteed by the U.S. government
Pooled residential mortgage loans are the principal revenue source for GNMA securities Ginnie Maes are subject to Federal, state, and local tax |
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Interest Rate Risk
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the risk associated with long term investments
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Defeasance covenant
(Muni Bonds) |
eliminates the municipality's obligation to the bondholder because the money invested in U.S. Government securities is pledged exclusively to the payment of principal and interest of the bonds.
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Positioning.
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by municipal traders means they maintain inventory "positions" in bonds in the secondary market
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amortization
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any premium paid for a municipal bond is amortized over the holding period of the bond. This is done so any capital gain or loss can be determined should the bond be sold prior to maturity.there is a constant reduction in the cost basis of the bond up until the year of maturity. In the year of maturity, the investor will have amortized the full amount of the premium and will have no tax consequence in relation to the principal amount that is being returned.
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Broker's brokers
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do not bid new issues or trade for themselves, they deal with other dealers and dealer banks.
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Functions of The Investment Banking Department
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will advise issuers about what type of new issue to distribute and can act as a synidcate menager in the distribution of a new issue. Providing a secondary market or resale market is not done by the investment banking department, that would be done by the trading and marketmaking department.
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45s
(reading the tape symbols) |
45s = 4,500 shares
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Federal Funds
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Excess reserves of commercial banks
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Capital market instruments
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long terms (more than 12 months) or no maturity dates.
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disproportionate sharing arrangement
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the sponsor receives a share of the revenue that is greater than his participation in costs.
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Cash flow analysis
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used for analysis of a Real Estate DPP
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functional allocation arrangement
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when the sponsor bears all of the tangible costs and the investor bears the intangible costs.
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Accelerated Cost Recovery System
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generally uses Composite Depreciation.Composite Depreciation applies one (averaged) depreciation rate to all assets - eg plumbing 20 years; building 50 years = 70 years of depreciation divided by 2 = 35 year weighted average life for depreciation on both assets.
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Non Qualified Variable Annuity
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-After tax dollars are invested
-This means that principal paid into the annuity will be returned to the investor with no tax consequence. -Earnings grew in the account tax-deferred, so these earnings will be taxable to the investor |
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SAR
(Suspicious Activity Report) |
Suspicious activity reports can cover almost any activity that is out of the ordinary, if that activity gives rise to a suspicion that the account holder is attempting to hide something or avoid reporting under the BSA.
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The Retention Period for Customer Communications
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3 years
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Interpositioning
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Charging both a commission and mark-up
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Beta
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A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Beta is used in the capital asset pricing model (CAPM), a model that calculates the expected return of an asset based on its beta and expected market returns.
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Types of Asset Allocation
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Strategic Asset Allocation
Constant-Weighting Asset Allocation (buy and hold) Tactical Asset Allocation Dynamic Asset Allocation Insured Asset Allocation Integrated Asset Allocation |
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Return on Equity Ratio
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Net income divided by Shareholders Equity
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The Value Line Index
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a wider sampling of stocks than NYSE Composite Index, Standard & Poor's Composite Index or the Dow Jones Industrial Average
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The current ratio
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Current Assets Inventory
___________________________ Current Liabilities *most accurately describes liquidity |
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Small cap companies
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relatively low amount of capitalization
fewer shares trading on the open market has liquidity concerns |
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systematic risk
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The risk inherent to the entire market or an entire market segment.affects the overall market, not just a particular stock or industry.
also known as “undiversifiable risk,” “volatility” or “market risk,” |
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The life of a standard listed equity option
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Nine months is the usual life span of a standard listed equity option
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net debit spread
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Debit spreads must widen by more than the amount of the net debit in the premiums to be profitable
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American options
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An option that can be exercised anytime during its life
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European Options
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An option that can only be exercised at the end of its life, at its maturity
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OEX
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The ticker symbol used to identify index options traded on the Standard & Poor's 100 index
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Yield Based Options
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A type of debt-instrument-based option that derives its value from the difference between the exercise price and the value of the yield of the underlying debt instrument
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Interest Rate Options
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An investment tool whose payoff depends on the future level of interest rates
Interest rate options from exchanges in the United States are offered on Treasury bond futures, Treasury note futures and eurodollar futures |
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Index Options
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always settled in cash when exercised
trade and expire on a monthly basis. |
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OBO
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A trading floor participant responsible for maintaining a list of public market or limit orders of a specific option class using the "market-marker" system of executing orders.
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Long Term Options
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have expirations of up to 39 months
They can provide a hedge for stock positions held long term |
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ETN's
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provide investors with the ability to invest in the market sectors that would ordinarily be deemed unsuitable including commodities, currencies, emerging markets, and strategies.
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Advance/Decline Measurement
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A technical analysis tool that represents the total difference between the number of advancing and declining security prices.
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Concession/Re-allowance
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are used interchangeably in the municipal new issue market. It is the amount paid to a broker/dealer that is not part of the selling syndicate
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Options Disclosure Document
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Options regulations dictate that an Options Disclosure Document must be provided to the customer prior to the account being approved for options transactions.
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ETN's
exchange traded notes |
ETNs are debt instruments issued by a bank that promises to repay the principal amount less investor fees therefore the units of an ETN would represent debt of the issuing bank. ETNs are linked to a specific index but do not represent equity in the index, they simply participate in the performance of the underlying index.
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Western/divided syndicate
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any unsold bonds would be confirmed to members having liability for unsold bonds, meaning a syndicate member is responsible only for the number of bonds initially allocated to them.
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Construction loan notes
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municipal securities
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Special Assessment bonds
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municipal securities
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Income bonds
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corporate bonds that offer a promise to pay interest only if earned and declared.
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collateral Trust bonds
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corporate bonds, secured by stocks and/or bonds the corporation owns of other corporations which have been placed on deposit with a trustee.
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Auction rate securities (ARS)
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can be issued by municipalities or corporations. For both types of auction-rate securities, the securities end up being auctioned off at the lowest rate possible in order to sell all securities up for auction.
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SIPC coverage
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will provide protection for customers of up to $500,000 PER SEPARATE CUSTOMER for cash and securities, but no more than $250,000 may be paid for a cash claim.
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Ex-date for cash settlement
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is the business day after records
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interest rate or yield based options
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Call writers expect interest rates to decline and Put writers expect interest rates to rise.
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director of a publicly traded company
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There is no limit on the amount of registered stock the director may purchase.
There is a limit on the amount of unregistered stock the director may sell. |
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Level I of Nasdaq
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provides subscribers with the highest bid and the lowest offer for a security (the inside market) in which there are at least two market makers
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As far as rights offerings are concerned
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preferred stockholders do not have the right to subscribe to rights offerings, but common stockholders do.
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Collateral trust certificate
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A bond secured by other bonds and securities is called a
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