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15 Cards in this Set
- Front
- Back
securities act of 1933
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- primary market activity
- full disclosure in new offerings |
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exchange act of 1934
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- 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 |
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trust indenture act of 1939
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applis to corporate bonds of :
- issue size of more than 5 mil within 12 month period - maturity of 9 months or more - |
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investment company act of 1940
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- 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 |
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investment advisors act of 1940
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- requires registration to charge fees for investment advice
- wrap fee |
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insider trading act of 1988
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penny stock cold calling rule
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- 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 |
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bank secrecy act
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- 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 |
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telephone consumer protection act of 1991
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- cold calling
- identification requirements - time restrictions - 8-9 - do not call list - consumers may sue - exemptions - nonprofits and ligitimate bill collectors |
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investment risks
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- 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 |
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beta
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- 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 |
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duration
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- 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 |
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Modern portfolio theory
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- 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 |
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taxes and income
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- 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 |
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amortization
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- 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 |