Series 7

68 flashcards

Direct Registration System (DRS)

Allows investors the option to register book-entry securities in their own names

Holding Customer Orders

Representative are prohibited from holding customer orders

Holding Customer Payments

Broker dealer are required to send customer payments for mutual fund to investment companies within 1 business day of the receipt of order payment

Anti-reciprocal Rule

mutual fund managers and brokerage firms from colluding in transactions that would harm the client

Laddering to works to reduce

Interest Rate Risk

Rights to transfer can be associated with

liquidity of a share

Crossover Refunding

the proceeds of the refunding issue are used to pay interest on the refunding bonds themselves, rather than paying interest on the refunded bonds

Transactions in municipal securities must be reported to:

Real Time Transaction Reporting System (RTRS)

Corporate Bonds

Most suitable for investors interested primarily in current income

Bond Anticipation Notes

Enable work to start on a capital project before the municipality completes its issuance of a long term bond

Nonsystematic Risk

Can be diversified away by adding more and more stocks to a portfolio

Balance of Trade

Exports minus imports of goods and services

Balance of Payments

Money flowing into and out of US from transactions

Appreciation

When Asset increases in value

Custodial Accounts

Opened as Cash Account; Examples: UGMA & UTMA

Minimum Maintenance Requirements

Long - 25% Short - 30%Based on closed market each day

Regulated Investment Company (RIC)

At least 90% of net income to shareholders Not required to pay taxes on distributed income to shareholdersSubject to capital gains tax (Fed & local) Governed by IRS

BETA

Beta of 1: Track the market exactly Beta of 2: Is twice as volatile as the market or 100% more volatile than the market

Income Bonds (Adjustment Bonds)

Obligate the issuer to pay interest only if the company meets a specified earnings test

Pre-Arranged Trading Plan

Corporate insider might use this as an affirmative defense against insider trading allegations

In-Kind Redemption

Delivers underlying portfolio securities to the shareholders instead of cash

Direct Participation Program (DPP)

Investment structured so that tax consequences "pass through" or "flow through" to the investor

Step - Coupon Bond

Pays a coupon that increases at predetermined intervals on a schedule set when the bond is issued

Planned Amortization Class (PAC)

low yield & low risk Principal payments go to planned amortization class tranche first ProtectionAgainst Contraction

Equity Value

Market Value - Amount Owed

Value Investing

Investment strategy that involves paying a lower price for a security based on the expectation that the market is mispricing the issue

Trade "and interest"

Treasury Notes Treasury Bonds Municipal Bonds

Blind Pool Limited Partnership

One where the specific investments of the partnership are not known at the time the partnership is formed

Inverted Saucer

Bearish since the market has topped out and is trending down "Reverse upward trend"

Delivery vs Payment/Receipt vs Payment (DVP/RVP)

Payment for securities purchased is made to. the selling customers agent and/or delivery of securities sold is made to the buying customers agent in exchange for payment at time of settlement, usually cash

A firm can wait until after a customer account is opened to comply with ..

Customer Identification Program

Duration

A measure in years of how long it takes for the price of a bond to be repaid by its cash flows. Measures how sensitive a bonds price is to changes in interest rates.

Calamity Call Covenant

Occurs when the issuer calls in bond when the bond issues underlying collateral is destroyed by an event such as fire or natural disaster, proceeds used to pay for bonds

Business Development Company (BDC)

type of investment company that makes private equity investments in small, private held start up companies -higher risk investments

Participating Preferred Stock

Pays a fixed dividend rate but also participates w/ common in "extra" dividends declared by BOD. Therefore, the dividend is fixed as to the minimum amount but not as to the maximum amount.

Form 1099-DIV

Reports to the IRS by issuers of cash dividends paid & capital gains distributions made by mutual funds

Managing Underwriter

acts as stabilizing market maker

Proceeds Transaction

Selling a stock at the direction of a customer and using proceeds to buy another stock for that customer

Intrastate Offerings

Exempt from Federal (SEC) still subject to registration within state

Authorized Shares

Total shares a company is authorized to issue in a offering

Eurodollar Bonds

US dollar denominated bonds issued and sold outside the US

Regulation U

Controls credit from bank to broker

Regulation S-P

Must provide customer with privacy notice

Regulation T (Initial Margin)

50% long and short

Can be purchased on margin :

Listed Stocks Listed Bonds Listed Stock Options

Spinning

Member firm gives officers of public companies IPO allocations in return for receiving underwriting business from the company

T-Bills

Short Term securities issued w/ 1,2,3,6, and 12 month securities interest paid on maturity - Discount Yield

T-Notes

Intermediate Terms issued w/maturities 2,3,5,7, and 10 years

TIPS

Treasury Inflation Protection Securities ; Avoids purchasing power risk; long term-fixed rate; Adjusted every 6 months by amount equal to the change in CPI

T-Bonds

Long term (20-30 years)

STRIPS

Separate Trading of Registered Interest and Principal Securities ; Zero Coupon ; Avoid reinvestment risk; subject to interest rate risk -- Long term

Quotes found in ADF (Alternative Display Facility) are primarily bids and offers from:

ECNs

Creation of more shares of common stock

will cause a dilution of equity among shareholders

Alternative minimum tax (AMT)

Alternative way of calculating income taxes; adds back in certain" tax preferences items " that are deducted for purposes of regular income tax

Special Memorandum Account (SMA)

Closest to the idea of excess equity in the account, over and above reg t margin requirement

Stock Alpha

Difference between its actual return and its expected return

Depletion

The expensing of natural resources such as oil, gas, timber, or mineral reserves, as they are used over time

Regulation NMS

Rule 610 requires all market centers to electronically link and provide automated extension within 1 second for orders that are executable

Interval Funds

Funds are redeemed periodically

Capital Preservation Portfolios

Bank CDSUS Treasury Money Market Funds

Dollar Cost Averaging (Constant Dollar Investment)

Purchases same dollar amount of a security at different intervals (Typically equity securities)

Independent Consultant

Conducts the feasibility study prepared in connection with a new municipal revenue bond

Annuitization

Process of converting the accumulated value of an annuity into a stream of periodic payments

Deflation

Decrease - in general price level of goods and services Expectation of further declines delayed spending

International investors use currency hedging to:

Reduce volatility

Escrow Agents

All checks in best efforts commitment must be transmitted to an escrow agent - put in escrow account

Equity %

Equity Value/Market value

Discretionary Account

T - Trading authorization signed by customer P - Principal Approval N - New Account Completed