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Series 6 Securities Licensing

Registered Representative

Term regulators use for salespeople


Managers or Supervisors of Registered Representative


Application that must be completed and sent to FINRA and SEC.

NO "Free Agent"

License must be held by employer. License is not held by individual.

Packaged goods

Products that RR's are allowed to sell. Mutual Funds, UIT's (new issue), Face Amount Certificate Companies, Closed-end funds (new issue) Variable insurance products with applicable insurance license.

Prohibitted Products with Series 6

Stocks, Bonds, ROW (rights, options, warrants), Closed-end fund (secondary market), UIT's or ETF's (secondary market)

Blue sky laws

Most states require a Series 63 license as well as state specific other licenses to sell products.

Continuing Education

Must complete CE w/in 120 days of 2nd anniversary and then every 3 years thereafter.

CE Grace period

120 days

Annual Compliance Meeting

Broker-Dealer firms are required by FINRA to conduct an annual meeting for all registered personnel.

U5 Form

If you quit current employer must file with FINRA. If you leave the business entirely, your license will be held by regulators for up to 2 years.

Failure of Exam

If you fail your Series 6 exam you must wait 30 days after 1st and 2nd attempts to pass. After that the wait to re-test is 180 days.

Required account opening information

Name, physical address, date of birth and social security number.
RR and principal MUST sign on new account.

Customer who does not provide REQUESTED information

Account may still be opened, but recommendations may not be made. Unsolicited only




Debt instruments

Capital Risk

Risk of losing invested money.

Market Risk

Risk that your investment will decline due to overal market conditions.

Non-Systematic Risk

How the news affects your company's stock price.

Selection Risk

You bet on the wrong horse!

Liquidity Risk

The risk that you will need to sell your investment at an inopportune time.


Used to measure securities volatility. Beta =1 same as the market; Beta - 1 volatility less than market; Beta + 1 more volatile.

Credit (Default) Risk

The possibility that an issuer will be unable to pay back principal/interest.

Interest Rate Risk

Fluctuations in a bond's price due to changes in the general level of interest rates.

Call Risk

The issuer of a bond will pay you back before maturity. Typically done as a refinance - rates are lower, thus the money you get paid back may not be able to be reinvested at as good a rate.

Reinvestment Risk

the possibility that a bondholder will not be able to reinvest their money at an attractive rate.

Inflation (Purchasing-Power) Risk

Inflation (rising prices) means your money will likely buy less in the future. bonds do not protect a customer against inflation. Stocks may preserve your purchasing power.

Currency (Exchange) Risk

encountered by investors in foreign securities. Occurs as the value of foreign currencies fluctuate aginst the U.S. Dollar.

Legislative Risk

A law passes that would impact your investment

Social or Political Risk

Change in government or social unrest in a country would impact your investment.

Capital Preservation

Customer wants VERY VERY safe investment. US government securities or other safe and liquid investment good.


Investor is looking for current return on their investment. Bonds, certain stocks (i.e. public utilities) good choices.


Do not need a current income. Growth investors tend to be younger and more aggressive. Many concentrate in common stocks.


Seeking very large returns and willing to take big risks. Not suitable for most customers. High yield (junk bonds) or specialized sector funds.

Middle Road

Many investors want a mix.

Suitability (not profitability)

Major regulatory concern when making recommendations. RR's can get in trouble for selling a client unsuitable investments.

Telephone Consumer Protection Act of 1991

Cold calls between the hours of 8am and 9pm CUSTOMER TIME only. RR must give their name, name of firm, contact number and reason for calling. If customer requests MUST place their name on a "do-not-call" list for 5 years.

W-9 Form/W-8 forms

W-9 for US residents/ W-8 non- US citizens. Customers who fail to sign forms will be subject to back-up withholding and withheld funds will be sent to IRS.

Customer Identification Procedures (CIP)

Federal rules require a written Customer identification PROGRAM. Must verify the identity of customer (before or after) account is opened.

Customer ID recordkeeping

All ID information must be kept 5 years from account CLOSING. Verifications must be kept for 5 years after record is made.

CIP Notice

Customer must be given written or oral notification that it is requesting information to verify their identities.

Regulation S-P(Gramm-Leach-Bliley)

regarding the handling and sharing of non-public information gathered from customer.


Infrequent or one-time user or buyer of a product.


Ongoing relationship

Non-Public Information

Information that cannot be obtained from any other source than customer.

Reg S-P Requirements

Prepair notices describing firm's privacy policy, Provide an opt-out notice; provide policy annually to customers.


Consumers MUST be given the ability to opt out of a firms sharing information to non-affiliated 3rd parties. Must be reasonable.

Individual accounts

One person

Joint Tenants

Two or more individuals. Must obtain minimum information on all parties.

Joint Tenants w/Rights of Survivorship

If one owner dies, their ownership interest automatically passes to other owner.

Tenants in Common

No rights of survivorship. Upon death, ownership interest goes to decedants estate. May have un-equal ownership interest.

UTMA/UGMA accounts

Adult as custodian, under child's SSN, all contributions are considered a gift and are irrevocable. NOT JOINT ACCOUNTS. Convert to child when he/she reaches age of majority.

UNIFORM PRUDENT INVESTORS ACT (UPIA) for children's accounts

Should not be overly aggressive (suitable). Must be invested in prudent and diversified manner. Buyer on MARGIN prohibbited.

UTMA/UGMA Taxation

1st $950 tax free, 2nd $950 at "kiddie" rate, all gain above that at parents rates.

Corporate Accounts

Considered to e persons in eyes of law. Required to obtain a copy of corporate resolution to open accounts.

Corporate Accounts - Margin

Corporate charter required.

Limited POA

Buy stock and sell stock

Full POA

Buy/sell stock; Remove money from account; Remove securities from account.


When an RR is given in writing and approved by manger.

Time/Price Exception to Discretion - verbal

3 A's 1) Action (buy/sell); 2) Amount (dollars or shares) and 3) Asset (what) 1 TRADING DAY ONLY.

Unsolicited Trades

Trades that are the customer's idea. Must be marked as unsolicited.

Wrap Accounts

A product of an investment advisor. RR may not offer. Series 6 licensed person CANNOT sell a wrap account.

ACAT Transfer

Customer moves account from 1 firm to another. Moved electronically through Automated Customer Account Transfer.

Client Death

all unexecuted transactions be cancelled upon notification of death. Mark account 'deceased" Await instructions from estate.

Undecided Investor

"Park" their funds in a safe investment such as a money-market fund until such a time customer decides what to do with funds.

Frozen Account

Failure to pay for transactions on a timely basis will result in account being "frozen" for 90 days.

Brokerage Account Statement

Must be provided at least quarterly. In accounts with activity - monthly.

Holding clients mail

Allowed for 2 months. 3 Months if the customer is out of the country.

Consumer complaints

Must be in writing. All complaints should be directed to the RR's principal.

Securities Investors Protection Corp. (SIPC)

Non-profit corporation that is funded through member assessments. NOT PART OF US GOV'T. Protection to customers if their broker files bankruptcy.

SIPC Coverage

$500,000 of which no more than $250,000 in cash per account.

Fidelity Bonds

Protects consumer against theft by broker

Cost Basis

The amount of money that was paid for or into a product.

Mutual fund Cost Basis

Original Investment; Additional investments; any reinvestments.

Selling part of a position

Investor can designate which shares are being sold. If no designation use FIFO.

Short term holding period

1 year or less

Long term holding period

1 year plus 1 day or more


Wants to buy low/sell high


Want price of stock to fall.

Short sell investment

Sell high and buy back at a lower price later. This is stock that you do not own but borrow from a broker. Very risky - stocks MUST be replaced at a later date regardless of price. Bearish.

Capital Loss

Can deduct $3,000 per year and carryover loss above that amount in $3,000 increments to future tax years.

Non-realized Gain

Paper profit. Account made profit client did not liquidate (sold) their position. Gain is NOT taxable event.

Inherited Securities

Fair maket value on date of decent's death. Always considered long term regardless of how long decedent owned.

Gifted Securities

Fair market value - Donor's value or basis. If donor paid $10,000 for securities then recipients costs basis is same.

Wash Sales

61 day window. 30 prior - date of trade- 30 days after. Applies to the sell and repurchase of substially identical security.


Form used to report loss/gain on investments and filed with IRS.

Zero cost basis

Retirement plans funded exclusively with pre-tax funds. Distributions are taxable at ordinary income rates.

Margin Account

Account set up with brokerage to borrow from to execute trades.

Shares Vote

Not People

Statutory Voting

benefit large shareholders

Cumulative voting

benefits smaller shareholders

Cash Dividends

Typically paid quarterly.

Sales Charge Percentage formula

(23.95 - 21.22) = 2.

Public Offering Price formula

NAV/(100-Sales charge %)
22.35/(100-5.5 = 94.5) = 23.65

Average Cost

Total $ Invested/# of Shares Purchased
10,000/ 550 = $18.18

Stock Dividends

Company pays dividends in stock rather than cash. Not considered taxable event. Will decrease her cost basis per share.

Stock split

Corporation decides to split stock (2 for 1 etc) this is a strategy to make shares more affordable and to attract new investors. Not taxable event.

Preemptive right

Shareholders often given 1st opportunity to purchase newly available shares.

Authorized shares

Corporate charter will specify the maximum number of shares that are permitted to be sold

Issued shares

Stock that has been purchased by investors and issued.

Treasury Shares

Issuer buys back its stock. Once repurchased has no voting rights and no dividends. Is purchased by the issuer to increase earnings per share.

Outstanding Shares

The difference between issued stock and treasury stock is the amount of shares outstanding. Issued shares - Treasury shares = Outstanding shares.

Par Value for stocks

Nominal value assigned to each share of stock. Used for accounting puposes.

Book Value

Assets - liabilities = liquidation value

Market Value

What your shares are worth today if you choose to sell them.

Growth Stocks

Issued by younger companies and pay little or no dividend. Typically purchased by more aggressive investors with no need of income.

Income Stocks

Pay generous dividends to investors. Typically purchased by older more conservative investor.

Defensive Stocks

(Think sin) Less subject to economic ups and downs. Cigarettes, liquor basic foods, and gasoline.

Cyclical Stocks

Tend to rise and fall with the economy.

Countercylcical Stocks

Does better in bad economic times (think pawn shop).

Seasonal Stocks

Seasonal businesses

Blue Chip

Well known established businesses. Consistently pay dividends.

American Depository Receipts

Facilitate trading of foreign securities in the US Market. US financial institution purchases foreign shares and deposits the securities in an overseas bank. A receipt is issued for stock deposit.


Dollar dominated; pay dividends in US $; may be subject to foreign taxation on dividends; are subject to currency (exchange) risk; may lack voting rights.

Preferred Stock

Have potentially unlimited life. Lack the right to vote. Preferential treatment over common shareholders in dividend payouts. Must be paid all dividends before common stocks; In bankruptcy have priority over common stocks.

Preferred Stock Dividends

Fixed. Preferred stocks trade like a bond.

Straight (Non-cumulative) Preferred Stocks

Missed payments do not need to be made up.

Cumulative Preferred Stocks

All missed dividends must be paid up in full before common holders are entitled to any payout.

Adjustable rate stocks


Participating stock

Holders could potentially receive extra payments above and beyond the stated dividend.

Callable Stock

The issuer has the right to pay back investors and retire the issue at its discretion.

Potential Common Stock - Convertible Preferred

Exchange preferred stock for shares of common stock.

Rights, Options Warrants (ROW)

Rights are shortest term. Very limited time. Give existing shareholders the opportunity to buy more shares.


Gives the one party the right to buy and one party the obligation to sell.

Call Options

Buyer pays seller a premium for this option. This obligates the seller to deliver a certain number of shares at the strike price if asked.

Put Options

Buyer once again pays seller a premium. This time. The buyer has the right to sell the stock at the strike price and the seller is obligated to buy stock if asked.

Why use Options?

Speculation; Protection (hedging); Income generation.


Wants stock prices to go up. Call buyers/Put Writers.


Wants stock prices to go down. Put buyers/Call writers.

Options exist on?

Stocks, indexes (baskets of stocks); foreign currency; debt instruments and commodities.

Options (derivaties)

aka as derivatives

Option buyers

have rights

Option writers

have obligations


allow the holder to buy shares at a strike price. Long term some never expire. Used as a sweetener


Remember, there is no "f" in guaranty (funds)

Bond coupon

The bonds annual interest rate. Interest on bonds is paid semi-annually.

Zero Coupon Bonds

Issued at discount from par (face value). Pay no coupon at all. Move (accrete) toward par as it matures.

Registered bonds

Have bondholders name imprinted on the certificate face.

Registered to principal only

Will have physical coupons attached. Must be turned in to be paid.

Book-entry bonds

Do not receive certificates. Principal and interest payments are sent automatically.

Standard and Poors

Bond rating agency


Bond rating Agency

Interest rate risk

Affected by interest rates in the economy.

Bond Prices and Bond Yields

Move in opposite directions. Prices up - yield down. Yield up - price down.

Nominal Yield

stated return on the face of the bond.

Current Yield

Current yield = annual interest/current market price.

Yield to Maturity (YTM, Yield or Basis)

Total return at maturity

US Government Securities

US government is (big surprise) the largest debt issuer in the world. Virtually fee of default risk are subject to interest rate risk.

Treasury Bills (Tbills)

Short term securities. 1 year or less. Very safe and highly liquid. Conservative investor.

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