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Series 7 Master Study Guide

Terms in this set (159)

common stock (equity security)
ownership in company, dividends quarterly (typical),
authorized shares
total number of shares (issued, and non-issued)
outstanding shares
shares in the public being traded
treasury stock
purchase of outstanding shares reasons: (low trading price, pension plans or stock plans, used as payment for merger or acquisition)-cannot vote
registrar
hired by corp. keeps names and address, watches transfer agent
transfer agent
cancels and reissues shares, mails dividends, reports and voting materieals,
common stock rights
vote for: (board of directors, decisions that affect ownership interest) vote required for: stock split, reverse stock split, conv. bonds, stock options to officers
1 vote per shareholder
100 shares=100 votes, statutroy (most often) voting= 5 directors up for vote 100 to 1st dir. 100 to 2nd etc,
cumulative voting- 400 to one dir. 100 to another
proxies
if shareholder cannot attend corporation must send a voting card
class stock
corporation gives set of stock issued no or some voting rights
negotiable
can be traded/sold in the market without restriction
right to dissolution
common is paid last in bankruptcy
preemptive right
secondary issue, common gets right to buy first, corporation avoids using an underwriter and offers stock at a discount in proportion to issuing costs
right to corprorate distributions
right to stock split and dividends
declaration date
date dividend is declared
record date
day corporation takes the names from the transfer agent to know who to send dividends to
payable date
date checks will be mailed by transfer agent
regular way settlement
3 business days ( 3rd business day will settle) 2 business days in between
cum-dividend
traded stock that will be settled on the record date
ex dividend
if settlement is after the record date owner does not get the dividend
ex-date
stock is bought but will not settle by the record date 2 days prior to record date price is decreased by dividend amount-cash, stock, to reflect lack of dividend
rights agent
issues secondary stock to common shareholders
standby underwriter
sells to public if shareholders do not purchase all of the secondary issue
value of rights
market price-subscription price /
Number of rights to buy 1 share-1
fractional share ownership for rights
rounded up to meet rights whole amount
preferred stock senior security
gets dividends first, and in bankruptcy gets paid first before common (similar to a bond with a par value and interest rate)
preferred dividends
paid semi annually (some quarterly decided by corporation)
fixed interest rate preferred stock
does not fluctuate based on earnings like common stock would ( not guaranteed )
tax benefit to corporation to buy pref. stock
70% of dividends not taxable if owns less than 20% , and 80% of div. is not taxable if owns more than 20% of pref. stock. individuals are taxed at 15% for div 20% for high earners
preferred stock trades on the market
not influenced by company growth but rather on interest rate fluctuation
current yield (pref. stock)
annual dividend income from security/
market price of security (times 100)
theory yield (pref. stock)
annual income/ market yield x 100
preferred stock voting
no votes, no preemptive rights
preferred stock vs. bonds
preferred has infinite life, preferred are second in line to bonds on interest payments and assets if company goes bankrupt, interest payments are legally binding to bond holders and not for preff. stock
cumulative preferred payments
if company cant pay, but then gets back on its feet and can pay they pay preferred stock holder back interest and it is paid before a common shareholder
callable preferred stock
call feature for company to save money on lower interest rate payments when interest rates fall in the market
convertible preferred
can convert preff. stock into common/ par/ conversion price
parity price
adjusted par trading price to reflect prices changes in common. par/ conversion price x increased market price
callable pref. conv stock
callable at a higher than par amount to reduce high interest payments from corp
participating feature on preff. stock
gets extra money if an extra dividend is given to common stock holders
reset preff. stock
variable interest rate once a year ( bad for customer)
warrant
long term option used in new issues as a sweetener has a waiting period usually have a 5 year life not always
perpetual warrant
usually 5 years but some offer this, trade seperately from where stock is listed
rights
short term option to buy at a discount, 30-60 days (typically) do not trade on same exchange as common stock
american depository receipts ADR's
foreign stocks not listed on exchange but ADRS are registered and backed by the foreign stock, big banks will register the ADR and also hold the foreign stock, no voting or preemptive rights
ADR dividends
paid in foreign currency and then bank makes commision off of the exchange rate converting it into US dollars to disperse to the ADR owners in US
Sponsered vs non-sponsered
some foreign issuers sponsor a specific bank to hold the ADR and they will only use that one bank to do the ADR, sponsered ADR are exchange listed, other investment companies will buy the foreign stock and then convert
exchange rate risk
risk foreign currecny weakens against US dollar, or vice versa worth less or more in US dollars
taxes on ADR's
foreign country can hold taxes off of the amount they disperse in their home country but US citizens can claim the withholding as a credit against us taxes due on the dividends
quotation of equity securities
dollars and cents with minimum change of .01 cents
options quotation
quoted in cents but minimum price change is .05 cents
x, pf, wt
ex date, preferred stock, warrant
ADS
american depositary shares
Ticker symbols
NYSE is 3 letters, NASDAQ is 4 letters (majority) however now some stocks change which exchange they are listed so it is mixed
Standard and Poors Dividend record and Stock guide
S&P compiles corporate dividend announcements and publishes a monthly report, they also produce a stock guide for both common and preff. gives an internet based overall of the stocks
zero coupon bond
no interest semi annually issued at a discount and redeemed at par value
term bonds
corporate ad US government bonds, same interest rate, same maturity,
serial bond
different maturities, different interest rates, muni bonds and corporate equipment trust certificates are typically serial bond
series bond
same maturity different issuance dates, example construction projects
corporate bods quoted on percentage of par
1/8ths points
government bods % of par
in 1/32
muni bonds are serial bonds
different interest rate, quoted on a YIELD BASIS also known as a basis quote
basis point
basis point equals .01% on a bond, ten basis points equal.1%, 100 basis points =1%.
credit risk
risk that issuer cannot pay interest payments and principal payments (bonds are given ratings best AAA-BBB)
interest rate risk
risk that rising interest rates will cause bond prices to fall
purchasing power risk
risk that inflation will lower the value of the bond
marketability risk
risk that itll be difficult to sell illliquid
liquidity risk
minimal or no trading on issue
legislative risk
risk that new laws would reduce the value of your security
call risk
risk that bonds may be redeemed prior to maturity
reinvestment risk
you get interest payment and go to reinvest but get paid less due to lack of high yielding security to invest in
political risk
investing in an unstable countries securities or currency
dow jones average
65 total companies 30 industrial, 20 transportation, and 15 utility companies
capital asset pricing model CAPM
used to evaluate highest return based on risk
rule 144
restricted stock, and someone that is control person and their affiliated members
capital loss
$3000 maximum per year, any amount over this can be carried over into the next year, to offset capital gains
short sales
cannot be done in a cash account example shorting against the box
5 year holding period
Roth IRA money has to be in an account for 5 years, is not taxed when it goes in and will not be taxed when it goes out as long as it is held for 5 years and taken out after 59.5 YO
Regulator Element of continuing education:
more education must occur on the 2nd year anniversary and every 3 years after that
Nasdaq Market Center Execution System
automated order executing system for Nasdaq
Super Display Book
NYSE automated trading system
OSS order support system
CBOES automated trading system
Roth IRA max contribution
$5500/year, can only contribute to one IRA
forward settlemet
Interbank market mutually agreed day of settlement
spot settlement
settles day after trade, or 2 days after for less active traded security
equity in company
common and preferred, not bond holders they are creditors
non-durable POA
revoked after customer is mentally ill,
EMMA, bond buyer, munifacts
all information sources for new issue MUNI bonds, EMMA is a website from the MSRB-
new issues and credit
no margin until 30 days after securities completion into the market
Management companies under the Investment Company Act of 1940
face amount certificate companies; unit investment trusts; and management companies.
requirements for opening a portfolio margin account
$100,000 and be approved for naked options writing
cross over point
the point when taxable income exceeds tax deductions
ETF
trades and has capital appreciation, ETN's trade but do not appreciate
mutilated security is considered
good delivery if validated buy the issuer and the transfer agent
vertical merger
when 2 companies merge that are not in the same industry to try and bring down costs
odd lot
order less than 100 securities, commision set by broker dealers
MSRB rules
customer complaints, statements and trade comparisons must be kept on file by broker dealer
short stock
short put increases income in a flat market
Keogh plan
everything goes in non-taxed, at retirement distributions are taxed, builds tax deffered
limited partnership is
completed when General partner accepts contract
FED reserve
sets margin
trading in their own account for options
reg. options trader, market maker
bankers acceptance
negotiable, eligible to trade with the fed,
adjusted income bonds
trade flat
options comm with reccomendations
must have an options disclosure document,
first collection of funds on a revenue bond
revenue fund then dispersed accordingly to the Trust indenture
REIT income
must be 75% from real estate related income:
rental income, interest from mortgages, real estate tax refunds,
commercial paper
no need for prospectus
insiders
10% share holder, president, anyone with inside information on the company
SEC was created
by the Security and exchange act of 1934
net overall debt
net direct debt + overall debt
fidelity bond
member firms are required by FINRA to have insurance against loss of securities, theft, embezzlement
GMIB
guranteed minimum interest benefit, creates a floor where payments can get to
Exchange traded index funds
SPDR (standard and poors 500 index), DIAmonds dow jones industrial average, QQQ qubes nasdaq 100
SRO exchanges do not
...
DMM "stops stock"
gives a guaranteed price to floor broker for a short time
fiduciary account
where someone else is acting in behalf of the owner, trust, custodian account
restricted long margin account
in a restricted margin account, 50% of the proceeds of any sale must be retained in the account (the retention requirement). The other 50% is released to the customer.
new margin account requirement
the minimum initial margin of $2,000 is needed to open an account.
Money laundering
file a SAR (suspicious activity report) with Financial Crimes Enforcement Network FinCen
trades and markup
trades do not have a mark up reported to the tape because they are reported within 10 seconds
discretionary accounts restricted purchases
cannot buy a municipal bond that has a control relationship between the firm and the municipality
morningstar
rates mutual fund performance
Moodys
rates bond issues
Standard and poor
rates bonds and also stock
Value line inestement survey
rates 1700 stock issues
stabilization of new issues
are allowed and regulated under the sec. act of 1934
Rule 15a-6,
allows foreign broker dealers to perform trades for us customers if unsolicited, deal with major institutional investors ($100 million of investments)
US agency securities
offered via negotiation and through a selling group
special tax bonds
non-self supporting debt, from taxes outside of ad valorem taxes
self supporting muni debt
backed by revenue that pay their own way
variable rate demand note
bond that gives the holder a tender option feature, usually at par, as of the reset date
tactic asset management
The permitted variation from the asset allocation percentage that is given to the asset manager, so that the manager can take advantage of market opportunities, is called
treasury receipt
...
MIG rating
rating used for short-term municipal debt commonly referred to as notes GAN TAN
breakpoint letter of intent
a letter indicating that an additional order will be placed within 13 months and qualifies for a lower percentage sales charge, dividend payments do not qualify as additional purchases for the breakpoint
ex date
set by FINRA
purchasing power risk
Inlfation that your dollar will not buy as much as it is worth
basis
sometimes called YTM
TRACE
corporate bond reporting system
RTRS
real time reporting system for municipal bonds
Network tape A
NYSE reporting system
Network Tape B
AMEX reporting system
Network Tape C
Nasdaq reporting system
Foreign currency option
Foreign currency options are quoted in terms of US DOLLArs
euro dollar bonds
US gov does not issue but most everyone else does, issued in US dollars,
do not call list
maintained by Federal trade commision and each firm keeps their own also
Advanced refund
defeacement
fiduciary accounts
3rd party account, only cash accouts no margin
UGMA account
any adult can open for minor, no cash for long periods must be invested in MF, 1:1, cash accounts only, gifts are irrevocable, ss# of minor needed
short margin account
no interest charged due to having sold securities money is all ready in the account
customer info
must be verified (excluding ssn and bday) within 30 days and sent to customer, must be resent for reverification every 36 months
exercise of option
occurs regular way trade
passive income
Passive income and loss is defined as that derived from real estate investments and limited partnership investments.
breakpoint sale
when a rep sells a Mutual Fund just under a breakpoint and does not tell the client, this is violation of FINRA rules
floating rate CMO
similar to a VRDN or Step up Step down when interest payments are reset periodically
1099 DIV
interest rate and capital gains distributed to investors from a MF,
Treasury Bill auctions
weekly on Monday and Tuesday. The Bills are issued to the winning bidders, and must be paid for, on the Thursday immediately following the auction date.
raw land
not depreciable, hold for capital increase on value of land
THIS SET IS OFTEN IN FOLDERS WITH...