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FINA Final Exam

Terms in this set (66)

Cyclical Stocks
stocks that track the business cycle
-do well during expansion
-do poorly during contractions
Examples of cyclical stocks
auto, retail, airlines, furniture
Defensive Stocks (Non-Cyclical)
stocks that are not as sensitive to economic changes
Examples of defensive stocks
healthcare, food, utilities, tobacco, alcohol
Monetary policy
controls the money supply with interest rates
-done by the Fed
Fiscal policy
adjusts tax rates & government spending
-done by the government
Balance of payments
tracks money going INTO and OUT of the US economy
Trade surplus
when a nation exports more goods than it imports (weak dollar)
Trade deficit
when a nation imports more than it exports (strong dollar)
EWIS
exporters prefer a weak dollar
importers prefer a strong dollar
Business cycle
Expansion, peak, contraction, trough....
Documents required when customer dies:
-letters testamentary (defines executor)
-inheritance tax waivers (transfers shares)
-death certificate (certified copy)
-affidavit of domicile (where they lived at time of death)
Reg BI
required broker-dealer to act in client's best interest when recommending an investment
Corporate resolution
names who has trading authority at a corporation
FDIC (Federal Deposit Insurance Corporation)
backed by US government
-insures deposits up to $250,000
SIPC (Securities Investor Protection Corporation)
backed by broker-dealer members of SIPC
-insures investors' accounts up to $500,000
Revocable Living Trust
can be changed prior to death of trustor
Irrevocable Trust
cannot be undone
Testamentary Trust
initiated upon death
Charitable Trust
leaves assets to a charity
Qualified contributions (defined contribution) to retirement accounts are pre-tax or after-tax?
pre-tax
Non-qualified contributions (defined benefit) to retirement accounts are pre-tax or after-tax?
after-tax
Defined contribution plans
401k and 403b
Defined benefit plans
pensions
IRA (Individual Retirement Account)
contributions made with pre-tax dollars
-withdrawals taxed at ordinary income rate
Roth IRA
contributions made with after-tax dollars
-withdrawals are tax-free
At what age can withdrawals be made from IRAs or Roth IRAs without penalty?
59 1/2
Insider Trading
trading based on non-public, material information to avoid a loss or enhance a gain
Front-Running
Trading on your own account when you know a client is going to have a large order to avoid a loss or enhance a gain
Trading ahead of research reports
cannot trade ahead of the release of a research report
Churning
making excessive trades to increase commissions
Trade shredding
splitting up orders into smaller transactions to increase commissions
Interpositioning
inserting a third party between the client and broker-dealer to increase commissions
Telemarketing
can only be done between 8am - 9pm
-must check National Do-Not-Call List & firm's Do-Not-Call List first
Communications with the public (correspondence) must be kept on file for how many years?
3 years from last use
Communication with MORE than 25 customers within 30 days is:
retail communication
new member firms must file retail communications with FINRA:
10 days PRIOR to first use
Rules for Testimonials:
-cannot guarantee future performance
-cannot represent the views of other clients
-must disclose if paid for
SEC is in charge of:
SROs (self-regulatory organizations)
Examples of SROs
FINRA, NYSE, Nasdaq
Member
a firm that is a member of FINRA (Financial Industry Regulatory Authority)
Associated person
an individual who is registered with FINRA and works at a member firm
Registered representative
person who conducts business at the firm such as making trades
Registered principal
managers at member firms
Form needed for registration:
Form U4
Info needed for Form U4:
job history, residential history, criminal history
Form needed for termination:
Form U5
Form U5 must be filed with FINRA:
within 30 days after termination
SIE exam results good for:
4 years
Specific exam & license good for:
2 years
How long do you have to wait to retake the SIE after three failed attempts?
180 days
Who interprets and enforces federal securities laws?
SEC
Who registers and approves for membership broker-dealers operating in the US?
FINRA
Continuing education requirements:
-Regulatory element
-Firm element
Regulatory element of CE:
registered persons must take a FINRA-sponsored training session within 120 days after 2 years of being registered and every three years after that
Firm element of CE:
member firms must prepare an annual training plan for their registered persons
Outside business activities:
must be reported (except PASSIVE investments)
Selling away:
selling private transactions (violation of FINRA rules)
Gifts cannot exceed how much per person?
$100
Gifts that are restricted do not include:
personal gifts (like wedding gifts) or promotional items
Business entertainment
not considered a gift if both client and rep attend, so not restricted to $100 rule
Complaints
-must be in writing
-must be reported to FINRA within 30 days and kept on file for 4 years
Pay to Play rules:
prevent firms & reps from winning business through campaign donations to elected officials
How much can be donated per election?
$250
What candidate campaigns can you make donations to?
Only ones you can actually vote for
CANNOT GUARANTEE AGAINST LOSS!!!
CANNOT GUARANTEE AGAINST LOSS!!!
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