Term
| Ex-Dividend Date Rule for Buying Stock the regular way |
|
Definition
| Must be purchased before 2 Business Days Before Record Date. Essentially 3 days before record date. |
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|
Term
| Payment of Straight Preferred over Common Stock |
|
Definition
| All due dividends must be paid before common shareholders can be paid. Cumulative preffered simply means they get paid first. |
|
|
Term
| Is par value per share reduced/increased when a stock reverse-splits/splits? |
|
Definition
| Yes, the par value does increase |
|
|
Term
| What Does Trading Flat mean? |
|
Definition
| The securities trade with no accrued interest |
|
|
Term
|
Definition
| Income Bonds, Zeroes, Bonds in Default and bonds that settle on an interest payment date. |
|
|
Term
| When is bond interest calculated? |
|
Definition
| From the Dated date up to, but not including, the settlement date. The dated date is the date of the last interest payment. |
|
|
Term
| Classes of Collateralized Mortgage Obligations |
|
Definition
Principal Only- PO
Interest Only- IO
Planned Amortization Class - PAC
Targeted Amortization Class - TAC
Zero Only- Ztranche
Inverse Floater CMO |
|
|
Term
| Difference Between PAC and TAC |
|
Definition
| Planned Amortization Classes have an established prepayment date because they transder prepayment and extension risks to another tranche of risk. TACs transfer prepayment risk but do not transfer extension risk. They are riskier and have higher interest payments. |
|
|
Term
| How does the Parity price of a convertible bond change when the price of a stock (trading at parity) changes? |
|
Definition
| It changes proportionally. If the common stock goes up by 20%, the bond price is multiplied by 120% |
|
|
Term
| Yield Hierarchy for Discount and Premium bonds |
|
Definition
Discount (Low-High):
NY=>CY=>YTM=>YTC
Premium (Low-High):
YTC=>YTM=>CY=>NY |
|
|
Term
| Are US investors who hold EUROBONDS assume currency risk? |
|
Definition
| US investors in Eurobonds assume no currency risk because the principle is paid in us dollars, as well as the interest. The interest is fixed because it is a % of par, so they get the same amount of money regardless of exchange rates. The issuer does incur exchange rate risk |
|
|
Term
|
Definition
Moody's
Investment Grade: AAA - AA - A - Baa
Spec Grade: Ba - B - Caa - D
S&P
IG: AAA - AA - A - BBB
SG- BB - B - C -D
REMEMBER! Moody's has lower case letters in the title, S&P does not |
|
|
Term
| What is a Money Market Instrument? |
|
Definition
| A HIGH QUALITY, SHORT TERM, DEBT INSTRUMENT. This does not include common stock. |
|
|
Term
|
Definition
Acronym for Corporate bond allocations. Stands for:
Presale Group Designated Member
Group stands for selling group.
Designated stands for Institutional orders specified to syndicate members
Member stands for orders for personal inventory. |
|
|
Term
| When is a call spread a debit spread |
|
Definition
| When the long option has a higher premium than the short option |
|
|
Term
| When is a Put option A Debit Put Option? |
|
Definition
| When the long put has a shorter premium |
|
|
Term
| When is a Call Spread Bullish? |
|
Definition
| When the lower strike is long |
|
|
Term
| When is a put spread bearish? |
|
Definition
| When the long strike is higher |
|
|
Term
| What is the Maximum Gain for a Credit Spread? What is the Maximum Gain for a Debit Spread? |
|
Definition
Credit Spread: Net Credit
Debit Spread:
(Difference in Strikes)-Net Debit |
|
|
Term
| What is the Max Loss for a Credit Spread? Debit Spread? |
|
Definition
Credit Spread:
(Difference in strikes) - (Net Credit)
Debit Spread: Net Debt |
|
|
Term
| What options position entails unlimited risk? |
|
Definition
|
|
Term
| Difference Between a straddle and a spread? |
|
Definition
| A straddle uses 2 calls or 2 puts. A spread uses a call and a put. |
|
|
Term
| What is required for a number or symbol account? |
|
Definition
| Signed, written statement from the client to be kept on file. |
|
|
Term
| What happens in a partnership if one dies? |
|
Definition
| The account is frozen until an amended partnership agreement is received, the partner's share usually goes to their estate. |
|
|
Term
| What happens if one of 3 persons in a "tenants in common" account dies? |
|
Definition
| The two survivors continue as cotenants with the decendent's estate. The tenant's estate becomes tenants in common with the survivor. |
|
|
Term
| Who is required to sign for a cash account? What about a margin account? |
|
Definition
| To open a cash account only a principle accepting the account has to sign. For a margin account the customer has to sign. |
|
|
Term
| What happens to an account if someone dies? |
|
Definition
| The registered rep should cancel all open orders and mark the account deceast. The firm should not permit and trades until the estate responds with instructions. |
|
|
Term
| How much money can an adult give to a minor in a custodial account? |
|
Definition
| The gift size is unlimited but there is a gift tax after a certain ammount |
|
|
Term
| In a joint account can the check be written to either member of the account? |
|
Definition
| No, it must be in the name of both owners of the account. |
|
|
Term
| Can a custodial account be registered in street name? |
|
Definition
| No, it must be designated "custodian for a minor". |
|
|
Term
| New issues are sold in the ___ |
|
Definition
| primary market, regardless if they are stocks or munis |
|
|
Term
| What is the Telephone Act of 1991? |
|
Definition
1- No calls before 8am or after 9pm in the timezone of the customer
2- Required to provide name, company name, address and phone number
3-Individuals who ask not to be called should be put on the do not call list
4- No unsolicited ads by fax machine |
|
|
Term
| Agent's recommendations to a customer must be: |
|
Definition
In line with a customer's risk tolerance and investment objectives.
Must be reviewed by a principle if they result in a trade.
These must be in accordance to FINRA rules, not FRB rules |
|
|
Term
| Mr. T Jefferson Bought 10 Muni bonds at 105 with 10 years maturity, 3 years later he sold the bonds for 102. What was his tax consequence? |
|
Definition
$150 loss. The bonds were sold at a 50 dollar premium and are amortized at $5 a year. In 3 years thats $15. His cost basis was now 1035 per bond.
1035-1020= $15 Loss per bond*10 = $150 |
|
|
Term
|
Definition
| 2 days before the record date and is the date the purchaser would buy the stock WITHOUT receiving the dividend. |
|
|
Term
| What are the characteristics of EE savings bonds? |
|
Definition
| Government bonds purchased at a discount and mature to face value. They are exempt for state and local tax, but not federal. They can be bought in denominations as low as $25. |
|
|
Term
| If a customer wants to open a new account but refuses to provide some of the financial info requested by the firm, what can you do? |
|
Definition
| If the firm can determine from other sources that the customer has the financial means to handle the account (such as a business card) it may open the account. |
|
|
Term
| What goes in a DMM's display book? |
|
Definition
| The book is for positions that are far away from the stock's current price. Therefore, a market order, which executes immediately would not be in the book. |
|
|
Term
| Guy has a margin account with a CMV of 20250 and a debit balance of 3000 with reg t at 50%. What is the excess equity in the account? |
|
Definition
|
|
Term
|
Definition
| Opttions Price Reporting Authority. Provides last sale and current option quotes collected by participating exchanges. |
|
|
Term
| SEC and FINRA require statements sent to inactive customer accounts ____ |
|
Definition
|
|
Term
| What is needed to open a corporate margin account? |
|
Definition
1- Corporate charter and resolution
2- New Account Form
3- Hypothecation Agreement
4- Credit Agreement |
|
|
Term
| What is the Municipal Bond Index? |
|
Definition
| The average dollar price of 40 highly traded GO and Revenue bonds with average maturity of 20 years and an "A" rating or better. |
|
|
Term
| Which partnership documents need to be filed with the secretary of state in the home state of partnership? |
|
Definition
| The certificate of limited partnership |
|
|
Term
| What is to be included on an order ticket? |
|
Definition
| Time of order, Description of securities, Whether the rep has a discretionary authority, the rep's ID #, Quantity of shares being sold, buying/selling/sellingshort, covered/uncovered, kind of market order (market, GTC, Limit, etc). |
|
|
Term
| Are Municipal securities subject to the 5% mark up rule? |
|
Definition
| No, they are exempt from SEC registration and therefore they are not regulated by FINRA |
|
|
Term
| What should occur when a rep receives a complaint against himself? |
|
Definition
| Accept the complaint and write down any action taken. |
|
|
Term
| What is an Eastern account in a syndicate? |
|
Definition
| Undivided responsibility and undivided liability fore any bonds that remain unsold by other syndicate members, meaning that a syndicate member is responsible for a % of the unsold bonds. |
|
|
Term
Rep executes the following order:
Buy 1 GHI May 30 Call at 8
Sell 1 GHI May 30 Call at 3
Are these trades suitable? |
|
Definition
No it is impossible to make a profit.
Max Gain Debit:
(S1-S2) - NetDr =
5 - 5 = 0 |
|
|
Term
| Fred buys 100 shares of UPP and holds it for 6 months. He then decides to buy a 9 month call on UPP. If the call expires and Fred sells his stock at market 4 months later what is his tax treatment? |
|
Definition
| Its either a long term gain or a long term loss. |
|
|
Term
| What happens under the UGMA when a minor reaches the age of majority |
|
Definition
| The account is transferred to her name after reaching adulthood |
|
|
Term
|
Definition
| Options Disclosure Document. After that the ROP, registered options principal, approves the account and after that the customer has to sign and return the OAA (Options Account Agreement). |
|
|
Term
| What is the 5% markup Policy? |
|
Definition
| For most cases when executing trades on behalf of public customers, the B/D should not charge a commission in excess of 5%. This applies to actions as a principal as well as an agent. Still applicable for riskless and simultaneous transaction. |
|
|
Term
| What quantities of shares can be delivered? |
|
Definition
| Multiples of 100 or divisors of 100 (1,2,5,10,25,50) or shares that add up to 100 (20+80). If no shares can match up with a odd lot of shares then it is not acceptable. |
|
|
Term
| Bob buys 570 shares. Is a delivery of 10 certificates for 30 shares, 4 for 50 shares and 1 certificate for 70 shares acceptable? |
|
Definition
| No, the 30 share certificated cannot match with anything to equal 100. |
|
|
Term
| What is on the official statement for a municipal bond issue? |
|
Definition
| Offering terms, underwriting spread, description of bonds, description of the issuer, the offering price, the coupon rate, the feasibility statement, and the legal opinion. |
|
|
Term
| Do direct participation programs require a written verification of wealth? |
|
Definition
| Yes, because they may require money beyond more that the initial investment. After the general partner signs the subscription agreement the investor is accepted as a limited partner. |
|
|
Term
| A customer purchases 100 shares of ARGH at 44.10 and 1 OEX Sep 360 put at 4.50. A few months later, ARGH is trading at 42.55 and the OEX index is at 349. If he closes the stock position and executes the OEX option, what is his gain? |
|
Definition
| REMEMBER! The OEX index option settles in cash. He gets 1100 from the execution of the option and 4225 from the sale of the stock. This adds up to a $495 gain. |
|
|
Term
The FRB is responsible for which of the following?
A-Easing money Supply
B-Setting Reg T
C- Printing Currency
D- All of the Above? |
|
Definition
|
|
Term
| Which level includes subject quotes? |
|
Definition
| Level 1. A subject quote is when the price is tentative, and needs confirmation from the B/D. "It's trading around 20-22, work out" |
|
|
Term
| Exchange listed securities trading over the counter trade in the ___ market. |
|
Definition
|
|
Term
| What is the First, Second, Third and Fourth Market. |
|
Definition
First Market- Listed securities trading on an exchange.
Second Market- Unlisted securities trading OTC.
Third Market- Listed securities trading OTC
Fourth Market- Institutional trading without using a broker dealer. |
|
|
Term
| Mutual funds must send statements to share holders at least _____ |
|
Definition
|
|
Term
| What does the acronym AIM stand for? |
|
Definition
This acronym helps you remember how often account statements are sent out.
A- Active Account (Monthly)
I- Inactive Account (Quarterly)
M- Mutual Fund (Semi-annually) |
|
|
Term
|
Definition
| Establishes the US Treasury Department as regulator for anti-money laundering programs. |
|
|
Term
| What are some advantages of Real Estate Direct Participation Programs? |
|
Definition
| Depreciation Deductions, appreciation potential and cash flow. |
|
|
Term
| What is the quiet period? |
|
Definition
| It is 10 days after a stock IPO's when analysts are not allowed to publish or distribute research reports. |
|
|
Term
| What is an exempt security? |
|
Definition
| One which does not have to register with the SEC |
|
|
Term
| Are annuities considered exempt securities? |
|
Definition
| Technically no, but they are. They offer a fixed stream of payments so they are not considered a security but rather an insurance product. |
|
|
Term
|
Definition
| This has to deal with short sales. All ticket orders must be marked as short sale. In addition, brokerage firms must establish rules to located, borrow and deliver securities that are to be sold short. |
|
|
Term
| What is on a Bond Indenture? |
|
Definition
| Maturity date, par value, coupon rate, any collateral securing the bond, any callable/convertible features and the name of the trustee. |
|
|
Term
|
Definition
| A list for fiduciaries that contain state mandated securities which are deemed prudent or acceptable (because of the prudent investor rule). |
|
|
Term
| When must withdrawals occur on an IRA? "Required Minimum Distribution" |
|
Definition
| April 1st the year after the investor turns 70 1/2. |
|
|
Term
| Which bonds are exempt from the Trust Indenture act of 1939? |
|
Definition
| The act regulates corporate bond issues over $5m. Treasury and muni bonds are exempt. |
|
|
Term
Which of the following disputes must be resolved using the Code of Arbitration
1- A dispute between a member of FINRA and a registered rep
2- A dispute between a member of FINRA and a customer
3- A dispute between two members of FINRA
4- A dispute between a bank and a member of FINRA
A-IV only
B-II and IV
C-I and III
D- I, III, IV |
|
Definition
| C. Mandatory for member to member disputes. FINRA has no jurisdiction over disputes between nonmembers such as customers or issuers. In cases like these, the nonmember decides whether to use arbitration or a Code of Procedure hearing to settle a dispute. |
|
|
Term
| What is the debt service coverage ratio? |
|
Definition
| Net Revenues/debt service |
|
|
Term
| A municipal revenue bond was issued under a net revenue pledge. The following numbers are reported the following year. 38m gross revenues, 20m op and maintenance expenses, 5m interest expenses and 1m principle repayment. What is the debt service ratio? |
|
Definition
|
|
Term
|
Definition
| Mandatory for Member vs. Member Disputes, but customers of members may elect to use arbitration to settle a dispute. |
|
|
Term
| Rules under code of arbitration are binding on ___ parties |
|
Definition
|
|
Term
| What must be included on an advertisement with a testimonial on behalf of a member firm? |
|
Definition
Qualifications and experience of testimonial maker
That returns talked about may not be realistic or achievable.
Whether or not the testimonial was paid. |
|
|
Term
| How long can a person be unaffiliated before their licenses are null and void |
|
Definition
|
|
Term
| How are muni bonds bought at discount treated tax wise? |
|
Definition
| The bond is accretted and there is no capital gain. Accretion is considered interest income and therefore not taxable. |
|
|
Term
| Are gifts while made while both parties alive taxable? |
|
Definition
| Yes, however, they are taxable on the original cost of the securities as the tax basis, not the value on the date of the gift. |
|
|
Term
| Disintermediation is most likely to occur when __ |
|
Definition
| Money is tight and rates are rising, meaning money market rates will be higher than savings pass throughs |
|
|
Term
| When the FRB purchases gov securities on the open market _____ happens |
|
Definition
| Fed pays by increasing funds in reserve accounts, meaning Money supply increases, meaning credit is easier, interest rates decrease which causes, cuz of NPV, bond prices to increase |
|
|
Term
| Who sets Monetary Policy? Who sets fiscal policy? |
|
Definition
| The FRB sets monetary policy and the president/congress set fiscal policy |
|
|
Term
|
Definition
| A balance sheet entry that denotes funds over par gained from stock offerings |
|
|
Term
| What is the maximum commission in a selling LP? |
|
Definition
| 10%. Commissions, accounting costs, etc are not deducted from original investment to determine cost basis. |
|
|
Term
| What is the most frequent an investment company can distribute gains? |
|
Definition
| Once a year (Act of 1940) |
|
|
Term
| Muni-Bond funds tax _ but not _ |
|
Definition
| capital gain but not income |
|
|
Term
| What is the only signature needed to start a cash account? |
|
Definition
|
|
Term
| What should a registered rep do immediately upon the death of a account holder? |
|
Definition
| Mark the account "deceased" and freeze it. Cancel all open orders. Await proper documentation from the person's estate. |
|
|
Term
| What dilutes share equity? |
|
Definition
| Primary Offerings. Stock dividends, splits and secondary share offerings do not dilute share equity. |
|
|
Term
| What is the most likely reason the yield curve would be inverted? |
|
Definition
| The fed has tightened short term credit. They do this because the economy is growing too fast. They raise the discount rate, which would invert the yield curve. |
|
|
Term
| What are treasury strips/receips? |
|
Definition
| Zero Coupon Bonds made from dismantling treasury bonds/notes |
|
|
Term
| What is the only thing that can change the conditions of an options contract? |
|
Definition
|
|
Term
| What happens on the customer's end when a stock split occurs? |
|
Definition
| The stock holders will be sent a certificate of the additional shares |
|
|
Term
| Where can an investor find the most information regarding a new municipal issue? |
|
Definition
|
|
Term
| Roth IRA's are made with ___ dollars and distributions are ____ |
|
Definition
|
|
Term
| Principals must approve ___ |
|
Definition
| ALL NEW ACCOUNTS - Customers, banks, trusts and corporations |
|
|
Term
| What does FINRA consider when investigating a customer's account for churning |
|
Definition
| Number of trades, ammount of money in the account and the investment objectives. The profit or loss on the account is not considered, This question is fucking retarded. |
|
|
Term
| Which preferred stock will likely give the highest dividend? |
|
Definition
| Callable. Because there is a call provision the investor must be compensated |
|
|
Term
| What is your liability if participating in and Eastern style syndicate? |
|
Definition
| You will have undivided responsibility of the unsold isssues, proportional to your initial allocation of the underwriting |
|
|
Term
| In an initial margin transaction, an investor purchases 100 shares of FCUK at $24. What is the Initial Margin? A- 1200 B- 1800 C- 2000 D- 24000 |
|
Definition
| C. Initial margin transactions must pay in full, pay reg-t at 50%, or pay $2000. If the transaction is less that $2000, they pay in full. If more than $2000 they pay reg T but if less then $2000 then they pay $2000. If reg t is over $2000, they just pay 50% |
|
|
Term
| What document gives a general partner the authority to charge a management fee for the LLP? |
|
Definition
| The Partnership Agreement |
|
|
Term
| Those joining limited partnerships (for oil, gas, land etc.) sign a ____ agreement |
|
Definition
| SUBSCRIPTION AGREEMENT, DUMBFUCK |
|
|
Term
All of the following are reduced on the order book for a cash dividend EXCEPT:
A- Buy Limit
B- Sell Stop
C- Sell Stop Limity
D- Buy Stop |
|
Definition
| D. Only orders placed BELOW the market price are reduced for cash dividends on the order book. ,BL and SS are entered below the market price. Buy stops are entered above the market price |
|
|
Term
| What agency is the issuer and guarantor of all options? |
|
Definition
| The OCC, or options clearing corporation. |
|
|
Term
| What is the maximum gain on a capped call option? |
|
Definition
| 30 points in the money, times 100 shares per option, or $3000. The max gain is $3000 less premium paid |
|
|
Term
|
Definition
| Lease revenue bond, similar to an IDR but instead of being backed by a corporation, they are backed by lease revenue from universities, office buildings, prisons and etc. |
|
|
Term
| When does a listed option expire? |
|
Definition
| The Saturday following the third Friday of the expiration month at 11:59pm. |
|
|
Term
| What should advertisements of Muni fund show? |
|
Definition
| Max sales charge, performance statistics, including sales charge. |
|
|
Term
| Does the MSRB and State agencies approve advertisements? |
|
Definition
|
|
Term
| What is the penalty for excess contributions to traditional IRAs? |
|
Definition
|
|
Term
| When is the required age to begin distributions of ROTH IRA's |
|
Definition
| CHUCK TESTA! There is no minimum age like there is for other retirement plans. |
|
|
Term
| Do Prospectuses and Memos need to be filed with FINRA? |
|
Definition
| No, only sales literature describing the performance ranking of a management company |
|
|
Term
| The Code of Arbitration would handle ____ |
|
Definition
| Disputes involving a member and the public if brought by the public customer |
|
|
Term
| In addition to being the "people's act" the Act of 1934 contains a section that deals with |
|
Definition
| Trading activities such as short-sales, stabilizing and registering OTC brokers and Dealers |
|
|
Term
Among which do the antifraud provisions of the SEC Act of 1934 apply?
1- Muni Bonds
2- National Exchange Listed Securities
3- Nasdaq Listed Stocks
4-Investment Company Securities
a- 1 and 2
b- 2 and 4
c- 3 and 4
d- 1,2,3 and 4 |
|
Definition
|
|
Term
|
Definition
1- Is a nonprofit membership corporation
2- Is funded by broker/dealers
3- Covers customers up to $500,000
It is NOT a gov agency, but was started by the gov |
|
|
Term
Which of the following rates is most volatile?
A- Discount
B- Fed Funds
C- Prime Rate
D- Broker Call Loan Rate |
|
Definition
| B. Fed funds rate is the interest rate that banks with excess reserves charge other FRBs that need overnight loans to meet reserve reqs. Fluctuates daily. |
|
|
Term
| Would Deciding which partnership assets to liquidate to pay creditors be a valid use of partnership democracy? |
|
Definition
| NO. This would involve LP's assuming an active management role and would violate their position as LP's resulting in possible loss of status. |
|
|
Term
Which Annuity would give the largest possible monthly payment?
A- Life annuity with period certain
B- Unit Refund Life Option
C- Life annuity with 10-year period certain
D- Life Only Annuity |
|
Definition
| D. Life only contracts pay the most because payments cease at the annuitants death |
|
|
Term
| An Accumulation unit in a variable annuity contract is _____ |
|
Definition
| An accounting measure used to determine the contract owner's interest in the separate account. |
|
|
Term
| Which retirement plan requires use of an Actuary? |
|
Definition
| In a defined benefit plan, the payout is established, and employers must contribute annually to ensure payment of the benefit amount. An Actuary must calculate the annual contribution necessary to meet the benefit retirement. |
|
|
Term
| The amount paid into a define contribution benefit plan is set by the ____ |
|
Definition
| Trust Agreement. The Trust agreement contains a section explaining the formula used to determine the contributions to the retirement plan |
|
|
Term
| Can someone whose income comes soley from Capital Gains and interest income, can they open an IRA? |
|
Definition
| No. Only earned income can be used to contribute to an IRA. Individuals may contribute to an IRA even if they are already covered by a corporate pension plan or Keogh plan. |
|
|
Term
| Payments received by the the owner of a 403(b) plan are ______ |
|
Definition
| 100% taxable at ordinary income rates. Funds are contributed pretax and earnings accumulate tax deffered. Because no taxes were ever paid, the full withdrawal is taxable. |
|
|
Term
| A certain mutual fund has a bid price of $9.15 and a sales charge of 8.5%, what is the price an investor will pay for each share of this fund? |
|
Definition
To calculate the offerince price when you know the bid (NAV) and % of sales charge, divide the bid price ($9.15) by the complement of the sales charge (.915). This equals $10, the offering price.
To find the complement subtract 100% by the sales charge.
100%-8.5%= 91.5% |
|
|
Term
Net Asset Value per Share for a mutual fund can be expected to decrease if
A- The securities in the Portfolio have appreciated in value
B- The issuers of securities in the portfolio have made dividend distributions
C- The fund has experienced net redemption of shares
D- The fund has made dividend distributions to shareholders |
|
Definition
D. The NAV per share will rise or fall relative to the value of the underlying porfolio. If dividends are distributed to shareholders, the funds assets decrease and per share value will decline accordingly.
Appreciation of the portfolio and dividends received will increase the value. Redemption of shares will have no impact on the NAV per share because the money paid out is offset by the reduced number of shares outstanding. |
|
|
Term
Which of the following events will affect the NAV per share of a mutual fund?
1- Changes in the market value of the fund's portfolio of securities
2- Wholesale redemption of fund shares
3- Fund recieves cash dividends on the securities in its porfolio
A- 1 and 2
B- 1 and 3
C- 1, 3 and 4
D- 2 and 4 |
|
Definition
| C. Dividends paid and recieved by the fund directly affect NAV. Changes in the porfolio value affect NAV because the securities are marked to market daily. Although share redemption will reduced total net asset value, the number of shares outstanding decreases in proprtion, so the NAV per share stays the same. |
|
|
Term
In a seller's option, securities may be delivered before the date specified if the seller
a- gives 1 days written notice to the buyer
b- gives notice to the buyer on the day of delivery
c- cannot deliver on the specified date
d- wishes to be paid earlier |
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Definition
| A- The seller may deliver by giving the buyer written notice one day before making delivery |
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Term
| Do treasury bonds settle on the third business day after the trade date? |
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Definition
| No. Gov bonds settle the business day after the trade date. |
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Term
| How often must member firms send customer account statements? |
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Definition
| at least once per quarter |
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Term
| When a client's account is frozen, the client must ____ to make a purchase order |
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Definition
| Deposit full purchase price before a purchase order may be executed. |
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Term
| For a registered security to be good delivery, it must bear or be accompanied by |
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Definition
An assignment or a power of substitution.
Think:
REGISTERED ===> Must be transfered to someone using assignment or power of substitution |
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Term
| Instead of signing on the back of a security sold, the registered owner could sign on a separate paper called ___ |
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Definition
| A stock power. A separate piece of paper which is as good as signing the back of a certificate |
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Term
| The SEC Act of 1934 regulates or mandates _____ |
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Definition
| Creation of SEC, Manipulation of the market, and margin requirements on securities |
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Term
| Do buyers of short sale securities have to be advised that they are purchasing borrowed shares? |
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Definition
| No, but the order ticket of the person selling short must indicate that the sale is short |
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Term
| If a customer orders to have his order stopped what does "You're stopped at 41" mean? |
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Definition
| The customer is guarenteed a fill at 41 and the DMM may get him a better price |
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Term
| Immediate or cancel orders: |
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Definition
| May be executed in part or in full and MUST be executed in one attempt |
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Term
| A customer has an order to buy 400 at ABC 60 Stop. ABC declares a 20% stock dividend. On the ex-date, the order in the specialist's book will read: |
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Definition
| Buy 400 shares at 50 stop. Only orders entered below the market, buy limits and sell stops, are automatically reduced on the ex-date for cash dividends. For stock dividends, all orders on the book are adjusted. Because the order book contains only round lots, the number of shares in the order will not be adjusted upward. The stop price, however, will be adjusted (60/120%). The customer is long 480 shares as the result of the stock dividend. However, only 400 can be reflected on the book (Round Lots Only) |
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Term
| A MM buys 100 shares of LMN at $14 per share for inventory. Two weeks later, the stock is quoted at 14.50-15, and the firm sells 100 shares of LMN to a customer. What is the basis for the firm's markup? |
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Definition
| The basis for the markup is the current interdealer offering price, which is, in this case, $15 per share. |
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Term
| Someone whole sold 100 shares of GGZ short places a buy stop order at 80. The order is activated when the price of GGZ ____ |
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Definition
| Rises to 80 or above. Buy stops are always entered at a price above the current offering price. At 80, it become a market order and is filled immediately. |
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Term
| The largest portion of an underwriting spread is: |
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Definition
|
|
Term
| Restricted stock sale, according to the rule 144 ____ |
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Definition
| is considered registered stock after the sale. Also, after holding the stock for 6 months, the holding period is satisfied for nonaffiliates |
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Term
| Investor buys 200 shares of ALF at $56 per share, with 50% reg T. What is the investors credit balance? |
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Definition
| D. $16,800. Found by adding Reg T to Short Market Value. |
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Term
| Customer purchases 200 shares of ABC Health at $60 per share and it grows to 75 per share, how much cash can the customer withdraw after this market move? |
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Definition
| $1500. For every dollar increase, $.50 of SMA is created. |
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Term
SMA in a long account will be affected by:
1- Sale of securities in the account
2- decline in market value of securities
3- Cash deposited by the customers
4- Interest Charged on debit Balances
a- 1,2,3
b- 1,3
c- 1 and 4
d- 1,3,4 |
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Definition
B. Sale of securities deposit half of proceeds to SMA. Nonrequired cash deposits are credited to SMA in full.
SMA goes down only when a customer uses it to borrow from the account or purchase securities, no affected by declines in market value or interest changes. |
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Term
| A member firm may commingle the securities of 1 or more customers ________ |
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Definition
| With the customer's written permission |
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Term
| A customer is long 200 shares of MTN at $30 per share and 400 shares of DWQ at 20 in a margin account. The Debit Balance is $8000. The customer sells 200 shares of DWQ for $4000. The Credit to SMA is _____ |
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Definition
| $2000. Because this account is below 50% margin, the account is restricted (6K equity divided by $14k market value = 42.8% equity). When securities are sold in a restricted account, 50% of the proceeds are released to SMA. Becuase $4000 worth of securities were sold, $2000 (50%) is credited to SMA. |
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Term
| n a new margin account, a customer buys 300 XYZ at 48 and simultaneously writes 3 XYZ Jan 50 calls at 1. The Reg T margin req is _______ |
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Definition
| 7200. The Reg T req for purchasing $14400 of stock is $7200. The reg t req for writing covered calls is 0. Therefore the req T requirement for estaplishing both these positions is 0. The margin call would be 6900. The requirement can be reducedt by the $3000 premiums recieved. By depositing the 6900 the customer will have 7200 in the acccount |
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Term
| Customer has a restricted margin account with SMA of 2500. If the customer wishes to purchase $10,000 of stock, the customer must deposit ___ |
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Definition
| $2500. The customer can purchase $5k of stock without making a deposit. Buying power is twice SMA. This leaves 5k which requires a deposit of 2500. |
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Term
| A customer has a margin account with market value of $50,000 and a debit balance of $20,0000. Your firm is permitted to rehypothecate stock with a total market value of |
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Definition
| 28,000. 140$*20,000 debit balance = $28000 |
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Term
| When is an account considered discretionary? |
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Definition
| When the broker has the power to decide when and what to trade, without specific customer authorization for those trades |
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Term
Which of the following are fiduciaries?
1- Executor of an Estate
2- Administrator of a trust
3- Custodian of a UGMA account
4- Registered rep granted the authority to choose the security, quantity, and action in a customer's account
a- 1,2
b- 1,2,3
c- 2,3,and 4
d- 1,2,3,4 |
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Definition
|
|
Term
| Document that establishes the municipal syndicate as either Eastern or Western and establishes the terms for operation of the syndicate is known as the |
|
Definition
| Agreement Among Underwriters (Syndicate Agreement). |
|
|
Term
All of the following deal with the secondary market EXCEPT
a-Dealer Quotes
B-Broker's Broker
C-Notice of Sale
D-Munifacts |
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Definition
|
|
Term
The MSRB is authorized to adopt rules concerning all the following except
A- Form/content of price quotations
B- Sale of new issues to related portfolios
C- Information to be provided by municipal issuers
D- records to be maintained by municipal dealers |
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Definition
| C. MSRB does not regulate issues, but rather the underwriting of municipal securities and the secondary trading market. Disclosure requirements for issuers are mandated by the SEC |
|
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Term
Which of the following have the authority to enforce MSRB rules?
1- FDIC
2- FINRA
3- Comptroller of the Currency
4- Fed Reserve Board |
|
Definition
|
|
Term
| Good faith deposits are usually ___ of total par value and are ____ if unsuccessful |
|
Definition
| 1-2%, returned to the underwriting syndicate |
|
|
Term
| If IDB Bonds are called because of condemnation, this would be covered under which of the following clauses in the bond indenture? |
|
Definition
| Catastrophe. Only applies to revenue bonds |
|
|
Term
Which of the following would be found in the agreement among underwriters for a municipal bond offering?
1- Legal Opinion
2- Amount of concession
3- Appointment of the bond counsel
4- Establishment of the takedown |
|
Definition
|
|
Term
|
Definition
| the debt limit is the maximum amount a municipality can have outstanding |
|
|
Term
| The buyer bond revenue index includes ____ |
|
Definition
| 25 revenue bonds with 30 year maturities, It is compiled weekly. |
|
|
Term
| A final official statement of a muni bond must be delivered _____ |
|
Definition
| on or before the the settlement date. MSRB does not regulate issuers |
|
|
Term
| A legal opinion evaluates which of the following features of a municipal issue? |
|
Definition
| Legality and Tax Exempt status |
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|
Term
| The interest in what bond would be included in alt. min tax calculation? |
|
Definition
| Industrial Development Revenue Bond |
|
|
Term
Arrange the following bonds in order of safety, from safest to most speculative
AA rated Unlimited Tax general Obligation
PHA
IDR
AAA Rated Revenue Bond |
|
Definition
| PHA, AAA rated rev, AA rated unlmtd tax gen ob, IDR |
|
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Term
|
Definition
| Income Bonds. Also, zeroes, bonds in default, and bonds that settle on an interest payment date. |
|
|
Term
Accrued interest on a bond confirmation is
___ to the buyer;s contract price and ___ to the selller's contract price |
|
Definition
Added to the buyer's contract price,
Added to the seller's contract price |
|
|
Term
| A bond is selling at a premium over par value, there for its ___ is is less than its nominal yield |
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Definition
|
|
Term
| Which preffered shares allow an investor to participate in growth of the stock and offers the likelihood of assured income |
|
Definition
| Convertible and Cumulative |
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|
Term
|
Definition
| Protect short position. Tells you to buy a security when the market price gets to a certain price or higher. At the designated price point, it becomes a market buy order at the next available price. |
|
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Term
|
Definition
| Protect a long position. Sells a security if market price gets to a certain point or lower. Entered BELOW market price. |
|
|
Term
|
Definition
| Buys at a certain price or lower. Entered below market price. |
|
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Term
|
Definition
| Directive to sell at a limit price or higher. |
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Term
|
Definition
| If a sell stop limit order is entered, the price reaches a certain threshold and then becomes a limit order. Sell stop 41, limit 40.75 means once the stock drops to 41, the investeor wants to sell but wants to receive at least 40.75 per share. |
|
|
Term
| BLiSS. Buy Limit or Sell stop |
|
Definition
| Entered At or Below the market price. Gets reduced on the ex-dividend date. |
|
|
Term
| SLoBS. Sell Limit or Buy Stop |
|
Definition
Entered at or above market price of the security. Remains the same on ex-dividend date.
REMEMBER: Once a SLOB, always a SLOB |
|
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Term
|
Definition
| Highest bid price and lowest ask price. IGNORE ALL STOP ORDERS NIGGUH |
|
|
Term
|
Definition
Shares at highest bid * Shares at lowest ask.
IGNORE ALL STOP ORDERS |
|
|
Term
|
Definition
| Difference Between Highest Bid and Lowest ASK, Ignoring stop orders. |
|
|
Term
| Where can a DMM enter a bid for personal inventory? |
|
Definition
| In between the highest bid and lowest ask |
|
|
Term
| Who is responsible when someone makes a gift to UGMA account? |
|
Definition
|
|
Term
| In the event of a gift, the recipienct assumes _______ in event of appreciated securities and _______ in the the case of depreciated securities. |
|
Definition
the donor's purchase price as cost basis.
the market value of the share at date of gift. |
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|
Term
| Who pays the taxes in the case of inheritance (Estate Tax)? |
|
Definition
| The recipient, taxes are usually paid before the transfer is made, applicable to transactions of $5m or more. |
|
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Term
| Characteristics of Qualified Plans |
|
Definition
| Made Pre-tax, deductible against taxable income. Grow tax defrred. Defined contribution or defined benefit. Include 401(k)s, profit sharing plans, and money purchase plans. Most corporate pensions are tax qualified. Distributions before 59 1/2 are subject to a 10% penalty. |
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Term
| Characteristics of Non-Qualified Plans |
|
Definition
| Made with after tax funds, no not meet IRS and ERISA standatrds. Withrawals are partially taxed at the rate determined on the investors tax bracket, only amount in excess of contributions made are taxed. |
|
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Term
|
Definition
| Tax Qualified retirement plans. Permissable investments: stocks, bonds, MFs, US gold and Silver Coins and Real Estate. MAx contribution of 5k per year with catch up contribution of 1k per year for investors aged 50 or older. Excess contributions taxed at 6%. Fully deductible for individuals not covered by employer pension plans. Taxed on ENITRE amount, contribution plus funds gained. |
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|
Term
| Chararcteristics of Roth IRA's |
|
Definition
| Made with after tax, withdrawals are tax free. No required date to withdraw. Only for those who make less than $122k a year. |
|
|
Term
| Maximum an employer can contribute to SEP-IRA |
|
Definition
| 25% of salary or $49,000, whichever is less |
|
|
Term
| All margin accounts must be in ____ name |
|
Definition
|
|
Term
|
Definition
| Federal Deposit Insurance Corp. Insures against ban bankruptcy up to $250k. |
|
|
Term
|
Definition
| Securities Investor Protection Corp. Insures against broker-dealer bankruptcy up to $500k, of which no more than $250k can be cash. |
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