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Ch. 1 FINRA SIE Flashcards
Terms in this set (61)
Identify the acronym: RR
Where may quotes for non-Nasdaq (OTC equity) stocks be found?
Pink sheets or the OTC Bulletin Board
True or false: An individual with $100 million in assets is a QIB
False; even with $100 million in assets, individuals are not considered QIBs
Define the term dealer
a person engaged in the business of buying securities for, and selling securities from, own account
The new issue market is also known as the ____ market
True or false: a hedge fund is an example of a client that may benefit from a prime-brokerage arrangement
An RR's employer is referred to as a _______
True or false: both stocks and bonds represent ownership in a corporation
false. bonds are debt instruments, while stocks represents ownership interest in a corporation
What does it mean for a client to use a prime brokerage account?
The client trades through multiple BDs, but has its trades cleared and settled with one prime BD
The _______ market refers to direct institution-to-institution trading and doesn't involve public exchanges
Define a prime broker
A BD that clears and settles trades effected by one or more executing brokers at the direction of the customer
What is the price at which a dealer is willing to sell?
ask or offer price
What are the pink sheets?
a real-time electronic quotation system for OTC equities
A ______ is any person that executes _____ transactions in securities for its own account
define the term broker
any person engaged in the business of effecting transactions in securities for the account of others
in general, what are the two types of securities markets?
primary and secondary
BD employees who are involved in the investment banking and securities business are called ______
What is the OTCBB
Over-the-counter bulletin board -- provides electronic quotes for non-Nasdaq (OTC equity) stocks
What is the federal law that governs investment advisers?
Investment Advisers Act of 1940
A ______ _____ is a type of advisor that provides advice either to a state, county, or city
The ______ is where trades of NYSE or AMEX exchange-listed securities occur in the over-the-counter market
true or false: Nasdaq is a securities exchange registered with the SEC
which department of a broker-dealer executes securities transactions?
in an ____ arrangement, a clearing firm doesn't have information on each individual customer of an introducing firm
identify the acronym: OTC
who can charge a client for buying or selling securities?
only registered broker-dealers can levy transactions-based charges. remember, investment advisers charge fees for advice
who guarantees and issues all exchange-listed option contracts?
the Options Clearing Corporation (OCC)
explain the secondary market
the market on which existing securities are traded
what is the price at which a dealer is willing to buy?
the bid price
define an introducing BD
a BD using another BD to handle cash and securities, trade execution, reporting, clearing, and confirmation
list some responsibilities of a transfer agent
issue and cancel securities, pay dividends and interest, mail shareholder reports, handle lost or stolen certificates
where can you find quotes for stocks not listed on an exchange or Nasdaq
the OTCBB and pink sheets
explain the concept of holding securities in street name
this is when client securities are held by and registered in the name of the BD
What is a clearing firm?
a firm that is responsible for the efficient confirmation, settlement, and delivery of securities transactions
who can charge a client for securities-related advice
only registered investment advisers. remember BDs charge a commission for executing trades, not for advice
true or false: a market maker publishing a firm quote is obligated to honor the price and the number of shares quoted?
true. a BD providing a firm quote is obligated to honor both the price and size displayed
explain a prime-brokerage arrangement
a situation in which multiple BDs execute a client's trades and report them to one independent BD for settlement
the third market is the term used to describe ____ and ___ listed securities trading
list some examples of issuers
corporations, the U.S. Treasury, foreign governments, states, and other municipalities
list the two main types of secondary markets
exchange markets (ex. NYSE or Nasdaq) and electronic, nonexchange markets (ex. the pink sheets or the OTCBB)
in a ____ ____ account, information about each customer of the introducing firm is sent to the clearing firm
what is a market maker?
a person who enters quotes and stands ready to buy and sell securities for their own account on a regular basis
true or false: the offer (ask) is the price at which a broker-dealer is willing to buy shares from a customer
false. the bid price is the price at which a firm will buy, while the offer (ask) is the price at which it will sell
what does it mean to clear a trade?
it is the end-of-day process of matching trades executed by a BD to determine what is owed
to be considered an investment adviser, what are the three parts of the ABC test?
which department of a broker-dealer handles the underwriting and issuance of securities for clients
a nasdaq-listed stock trades in the ____ market
which department of a broker-dealer writes reports about markets and securities for investors?
the research department
what are the two types of arrangements that an introducing firm can have with a carrying firm?
fully disclosed and omnibus
a BD that does not hold a customer's cash or securities is known as a
QIB stands for _____
Qualified institutional buyer (QIB)
what is an ECN?
electronic communication network; any one of the several systems which permit the entry and dissemination of quotes
explain the primary market
the market on which new securities are offered
what is the role of a broker-dealer's operations department?
to process paperwork, handle funds and securities transfers, and settle and confirm transactions
true or false: unlike equities, bonds do not have organized exchanges
true. unlike equity securities, corporate, municipal, and U.S. government bonds don't have organized exchanges
what is the general definition of a QIB?
an entity that owns and invests on a discretionary basis at least $100 million in securities of unaffiliated issuers
what is a dark pool?
a dark pool is a place for large institutional investors and high-frequency traders to trade directly with one another
a _____ is any person that executes _____ transactions in securities for the account of others
for what types of securities is a trustee required?
what service does the depository trust and clearing corporation (DTCC) provide to its members?
clearing, settlement, and information services
which market is the decentralized, negotiated market?
the over-the-counter market (OTC)
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