Term
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Definition
1. Call option--Right to buy (Bulls--expect up market
2. Put option--Right to sell (Bears--expect down market)
a. Buyer benefits from market movement
b. Seller benefits from lack of movement |
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Term
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Definition
1. Right to buy (Bulls--Expect up market)
2. Right to sell (Bears--Expect down market) |
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Term
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Definition
Long term debt.
Minimum 5 years |
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Term
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Definition
1. Statutory Voting: One vote per share
2. Cumulative Voting: # of votes equal # of shares times the # of candidates |
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Term
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Definition
1. The rate a TAXABLE bond must yield to equal the tax-exempt earnings of a MUNICIPAL bond.
2. Suitable for people in a hi-tax bracket (NOT fixed income)
3. Always Tax-exempt at the federal level
4. Exempt at state level if investor is resident of state of issue |
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Term
| SECURITIES INVESTOR PROTECTION CORP (SIPC) |
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Definition
1. Purpose: Broker dealer bankruptcy protection
2. Customer claims: $500,000 for cash & securities, of which no more than $100,000 may be cash (per customer--NOT per account)
NOT COVERED: Commodities & Money Market Accounts |
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Term
| BONDS HAVE THE MOST POTENTIAL TO: |
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Definition
1. Appreciate when:
a. Interest rates are declining
b. Bonds have long maturities
2. Depreciate when:
a. Interest rates are rising
b. Bonds have long maturities
(Bonds with LONG maturities fluctuate more) |
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Term
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Definition
1. Marketable long term privilege to buy shares above the market
2. Sweeteners |
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Term
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Definition
1. Treasury Bills - Make up the BULK of the money markets
a. Always mature in 1, 3, or 6 months (4, 13, or 25 weeks)
2. Treasury Notes - Maturities between ONE to TEN years
3. Treasury Bonds - Maturities TEN years or more
NOTE: T-notes and T-bonds can be put into a money market fund during their last year of maturity |
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Term
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Definition
1. Record date - The date that determines who is eligible to receive a dividend
2. Ex-dividend date (EX DATE) - The date on which a STOCK is sold WITHOUT the right to receive dividend (2 BUSINESS DAYS PRIOR TO THE RECORD DATE)
(MUTUAL FUND ex-date is set by the underwriter)
3. Declaration date - The date on which the board authorizes a dividend
4. Regular way settlement - 3 business days after trade date
5. Regular T settlement - Regular way PLUS 2 business days (5 BUSINESS DAYS) |
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Term
| THE SECURITIES ACT OF 1933 |
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Definition
1. Governs the rules of full & fair disclosure of newly issued securities
2. Violations: $10,000 fine and/or prison |
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Term
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Definition
1. Exchange Market - AUCTION MARKET-LISTED securities
2. Over-The-Counter (OTC) - NEGOTIATED market-UNLISTED
3. NASDAQ Intermarket - LISTED securities in the OTC
4. Fourth Market - Institutional investors-BOTH listed & unlisted securities are traded (Also known as INSTINET)
5. NASDAQ - AUTOMATED network that provides brokers & dealers W/ QUOTATIONS on securities traded OTC-UNLISTED securities
6. Pink Sheets - Used for UNLISTED securities NOT trading on NASDAQ |
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Term
| INVESTMENT COMPANY SALES CHARGES |
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Definition
1. Closed-end funds & stocks do NOT carry a sales charge. Investor pays a brokerage commission to buy or sell securities.
2. Open-end investment companies (mutual funds) carry a maximum sales charge of 8.5%. This includes commissions paid to the B-D, the agent, underwriter, advertising & sales literature expenses |
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Term
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Definition
1. 12b-1 fees are based on the total assets (NAV)
2. Reviewed at least quarterly by the board & approved annually
3. Maximum 8.5%, must be reasonable (typically, between 1/2 to 1%.
4. Could be charged less than annually, but must be computed on an annual basis.
5. 12b-1 fees pay for: agent, fund manager, advertising & sales literature expenses. |
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Term
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Definition
1. Short-term is one year or less
2. Long-term is 1 day & one year
The following are taxed as ordinary income:
a. Mutual fund dividend stock dividend plus bond interest
b. Interest from bonds
c. Distributions from retirement plans
3. Short-term capital gains
4. Long-term capital gains tax: Maximum 15%
5. Stock dividend taxes as long-term capital gains
6, Maximum loss write-off per year: $3,000. Carryover any excess |
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Term
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Definition
1. Best-efforts underwriter: Will try to sell the securities; Has no obligation to buy unsold securities (Acts as an agent)
2. Firm commitment underwriter: Buys the entire issue from the issuer and proceeds to sell the issue (Acts as a principal)
3. All-or-none underwriter: Must sell the entire issue or sold issues will become null and void
4. Standby underwriter: Used in rights offerings |
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Term
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Definition
1. Advantage is DISCOUNTS from member to member
2. Non-members are treated just as the PUBLIC (NO discounts) |
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Term
| ADVANTAGES OF INVESTING IN MUTUAL FUNDS |
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Definition
1. Diversification
2. Can invest small amounts
3. Professional management
4. CAN dollar cost average
5. Simplified taxkeeping
6. High priced stocks can be purchased by the fund
7. Automatic reinvesting of dividends and gains |
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Term
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Definition
1. Responsible for the physicial safekeeping of the securities
2. Must be a commercial bank
3. Distributes dividends & capital gains to shareholders
4. Redeems shares and distributes new shares
5. Acts as transfer agent |
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Term
| FACTORS TO CONSIDER WHEN RECOMMENDING AN INVESTMENT |
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Definition
1. Income
2. Age
3. Risk tolerance
4. Time
5. Taxation of the investment
6. Market conditions
7. Client's experience in the market
8. Experience of the fund managers
(NEVER consider the agent's commissions) |
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Term
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Definition
Fund name followed by:
* r - fund has redemption fee (back-end load)
* p - fund has 12b-1 fee
* t - fund has redemption fee & 12b-1 |
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Term
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Definition
When the dollar is devalued:
* U.S. products become more competitive
* Foreign products less competitive |
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Term
| INFLATIONARY & DEFLATIONARY PERIODS |
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Definition
During deflationary periods:
- Higher taxes & lower government spending
During inflationary periods:
- Lower taxes & higher government spending |
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Term
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Definition
If the money is not used for education, it goes:
- BACK TO THE DONOR in a 529 plan
- THE BENEFICIARY in a Coverdell, or transferred to someone else |
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Term
| ASSUMING RISKS IN ANNUITIES |
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Definition
1. Investment Risk:
a. Variable - Annuitant
b. Fixed - Company
2. Mortality Risk
a. Variable - Company
b. Fixed - Company |
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Term
| ASSUMED INTEREST RATE (AIR) |
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Definition
1. AIR is used to calculate the 1st monthly payment only (has nothing to do with accumulation units)
2. Assume the AIR = 6% in March
3. Return on separate account = 5% in April
a. Accumulation units: Goes up
b. Annuity units: Goes down |
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Term
| DEFINED CONTRIBUTION PLAN |
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Definition
1. Employer makes contributions fixed by a predetermined formula
2. Contributions may be fixed dollar or percentage |
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Term
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Definition
1. Focuses on the employees' benefits, not the employer's contribution
2. The desired level of retirement is determined (defined) through the use of a benefit formula
3. Better for OLDER employees |
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Term
| FACTORS AFFECTING ANNUITY PAYOUTS |
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Definition
1. Payout option
2. Account value
3. Age of annuitant
4. Gender
5. Health
The COST of annuity (amount invested) is NOT important |
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Term
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Definition
1. Redemption values @ 1, 3, 5, 10 years
2. Assumed investment of $1,000
3. Assumed interest of 5% |
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Term
| AMERICAN DEPOSITORY RECEIPT (ADR) |
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Definition
1. Used for trading FOREIGN securities in the US
2. Has ALL the RIGHTS of the FOREIGN securities |
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Term
| MAIN REASON WHY A COMPANY IS NOT TRADING ON AN EXCHANGE OR NASDAQ |
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Definition
Did NOT Meet Requirements
(NOT because they can't afford it) |
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Term
| WHY WOULD A COMPANY WANT TO TRADE ON EXCHANGE OR NASDAQ |
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Definition
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Term
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Definition
1. Level I - Subject Quote
2. Levels II & III - Firm Quotes |
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Term
| SPECIALIZED (SECTOR) FUND |
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Definition
1. Invests at least 25% in a particular industry or geographic location
2. Aggressive Fund |
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Term
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Definition
Compares the fund to the market
- Beta < 1 -- less volatile
- Beta > 1 -- more volatile
(Works best for DIVERSIFIED funds) |
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Term
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Definition
1. Insiders
2. Institutional investors
3. Individual investors if:
a. has $1 million net worth
b. has $200,000 income ($300,000 couple) |
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Term
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Definition
1. No SEC registration
2. Offered to accredited investors
3. High risk
4. Take short-term positions |
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Term
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Definition
1. Must register with SEC
2. NOT redeemable (unless funds wishes to redeem)
3. Higher expenses than regular funds |
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Term
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Definition
1. Closed-end
2. Designed to track an index (such as S&P 500 or Dow Jones) |
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Term
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Definition
| Rolled from a corporate plan into an IRA within 60 of the distribution |
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Term
| ELIGIBILITY FOR KEOGH (HR-10) |
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Definition
1. Full-time (1,000 hrs/yr)
2. 1 year of service
3. 21 years of age |
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Term
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Definition
1. After tax (NON-DEDUCTIBLE)
2. NO 5 year waiting period requirement
3. NO income restriction
4. MUST withdraw by 70 1/2
5. Employer can match a ROTH 401(k) in regular 401(k)
(This means that employer contributions ARE deductible) |
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Term
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Definition
1. For municipal employees
2. NON-Qualified
3. Tax-deferred
4. Max 100% of income up to $15,000 |
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Term
| UNIFORM GIFT TO MINORS ACT (UGMA) |
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Definition
1. Only one minor and one custodian per account
2. Account listed in minor's name. Securities listed in custodian's name.
3. Custodian may receive reasonable compensation ONLY if he is NOT the donor (CANNOT be reimbursed)
4. Gifts are irrevocable
5. Original custodian must be a competent adult
6. May NOT be held in street name
7. Taxation of an UGMA:
a. Under 14 yrs old - Taxed at parent's rate
b. 14 yrs or older - Taxed at child's rate |
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Term
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Definition
1. Joint tenants in common - The deceased tenant's interest goes on to his estate, NOT to the surviving tenant
2. Joint tenants with right of survivorship - The deceased tenant's interest passes to the surviving tenant |
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Term
| WAYS TO PURCHASE ANNUITIES |
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Definition
1. Periodic payments - The annuitant makes payment over a period of time
2. Single payment - The annuitant makes one lump-sum payment
a. Single payment annuities can be deferred or immediate
b. Deferred - The annuity phase is in the future
c. Immediate - Annuity phase begins immediately (NO accumulation phase) |
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Term
| DIFFERENCE BETWEEN AN UNDERWRITER AND A SELLING GROUP |
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Definition
| Underwriter has a bigger Financial commitment |
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Term
| CLASSES OF MUTUAL FUND SHARES |
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Definition
1. A-shares - upfront sales charges
(Designed for LONG term investing)
2. B-shares - NO upfront sales charges - contingent deferred sales charges
(Designed for SHORT term investing) |
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Term
| MAX GIFT PER YEAR WITHOUT PAYING GIFT TAXES |
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Definition
1. $11,000/year per person
$55,000 in one year (no more contributions for next 5 years)
2. $22,000/year per couple
$110,000 in one year (no more contributions for next 5 years)
(CANNOT average over 10 years) |
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Term
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Definition
1. Margin account is opened without actually paying for the securities - loan. Governed by Regulation T
2. Short sale - selling a security NOT owned by the seller expecting that it will decline (done in margin account). Agents are NOT allowed to sell short. |
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Term
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Definition
1. Appointment of anti money compliance officer
2. Require closer scrutiny of foreign transactions |
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Term
| GRAMM-LEACH-BAILY AND PRIVACY ACT (GLBA) |
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Definition
1. Protect privacy of customers
2. Require disclosures to customers |
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Term
| GRAMM-LEACH-BAILY AND PRIVACY ACT (GLBA) |
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Definition
1. Protect privacy of customers
2. Require disclosures to customers |
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Term
| TELEPHONE CUSTOMER PROTECTION ACT ("DO NOT CALL" LIST) |
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Definition
1. Can NOT call before 8 a.m. or after 9 p.m. at the called party local time
2. CAN call existing clients on the "Do Not Call" list |
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Term
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Definition
1. Member to member
a. MAX: $100/year
2. Member to customer
a. MAX: $100/year
3. CANNOT give Season Tickets
4. Training fees, occasional dinner, sports tickets are allowed |
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Term
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Definition
1. Dividend is included in NAV
2. There is an immediate tax consequence
3. Prohibited |
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Term
| RED HERRING PROSPECTUS (PRELIMINARY PROSPECTUS) |
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Definition
1. Given to prospective purchasers during the 20-day waiting period between the FILING of the registration statement and the EFFECTIVE date.
2. 20-day waiting period (cooling-off) allows the SEC time to study the registration statement and prospectus (the SEC does NOT verify the information) |
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