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15 Cards in this Set

  • Front
  • Back
securities act of 1933
- primary market activity
- full disclosure in new offerings
exchange act of 1934
- secondary market activity
- no one exempt from antifraud provisions
-registration of broker/dealers and associated persons - U-4
- segregation of customer assets - commingling illegal, may not borrow from customer
- supervision process - principal approves all accounts, transactions, communications, and complaints
- misuse of customer assets - no guarantee against loss, no sharing of profits or losses
- representations to customers
- excessive trading
- inside information - not available to public - insiders may not use - fined greater of 5 mil or 3 times the profit or loss avoided - upt to 20 years in prison
- trading activities - all sell orders marked long or short - agent or principal disclosed on confirmation - uptick rule
- solicitation of proxies - may not charge the client for the proxy
trust indenture act of 1939
applis to corporate bonds of :
- issue size of more than 5 mil within 12 month period
- maturity of 9 months or more
investment company act of 1940
- classified investment compenies
- must be registered with SEC
- have net worht of 100k before offering shares to the public
- owned y a min. of 100 sareholders
investment advisors act of 1940
- requires registration to charge fees for investment advice
- wrap fee
insider trading act of 1988
penny stock cold calling rule
- unless account is over a year old a penny stock disclosure form must be filled out before the first 3 penny stocks trade
- client must receive monthly statement of account
- under 5$ nonlisted, non-nasdaq
bank secrecy act
- currency transaction report - greater than 10,000
- suspicious activity reports - generated for sales of 5,000 or more - structuring transactions - if someone doesn't care if losing or making money in account - anytime financial behavior seems illogical
- anti-money laundering - attempting to hide money- three states (placement - most easily detected, layering- numerous transactiongs, and integration- comingling with other funds) - OFAC - maintain list of individuals and entities that are a threat and if there is a match will block or freeze assets
telephone consumer protection act of 1991
- cold calling
- identification requirements
- time restrictions - 8-9
- do not call list
- consumers may sue
- exemptions - nonprofits and ligitimate bill collectors
investment risks
- capital risk - potential to lose some or all of money
- inflation risk - purchasing power risk - risk of rising prices on investment returns
- timing risk - risk of buying or selling at the wrong time
- interest rate risk - sensitivity of an investments value to fluctuations in interest rates
- reinvestment risk - when rates declune it is difficult to invest proceeds from redemptions, calls or distributions to maintain income
- call risk - risk that a bond might be called before maturity
- market risk - risk that investors may lose principal as a result of price volatility in the overall market
- credit risk - financial or default risk - danger of losing principal through an issuer's failure
- liquidity (marketability) risk - risk that a client might not be able to sell quickly at a good price
- legislative risk - risk of congress changing laws - political risk
- measure of a stocks volatility in relation to the overall maket
- stocks with a beta of 1 move in line wiht the market
- greater than one are more volatile than the market
- less than one are less volatile than the overall market
- measures a securities systematic risk
- measure the time in years it takes for a bond to pay for itself
- the lower the coupon rate the greater the bonds duration and vice versa
- longer the bonds maturity the greater the bonds duration
- duration for a zero coupon bond is equal to its maturity
- duration is always shorter than the maturity
Modern portfolio theory
- an approach that attempts to guantify and control portfolio risk through:
- diversification
- dollar cost averaging - periodic purchase of a fixed dollar amount in one or more common stocks or mutual funds
- constant ratio plan - investor buys and sells securities in a manner that keeps the portfolio balanced between equity and debt securities
- constant dollar plan - goal to buy and sell securities so that a set dollar amount remains invested at all times
taxes and income
- regressive taxes - sales, excise, payroll, property and gasoline taxes - levied equally regardless of income
- progressive taxes - estate, income - increase the tax rate as income increases
- earned income
- passive income - rental property, limited partnerships, and enterprises
- portfolio income
- municipal bonds at a premium must be amortized - reduces cost bases and reported interest income
- bonds bought at a discount must be accreted - adjusting cost bases back up to par - also increases reported interest income