Term
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Definition
| Also known as the "Paper Act", is often referred to as the "truth in securities" law. It requires prospectus and full disclosure filings for all new issues (primary market) of securities considered nonexempt, such as corporate stock and bond offerings. |
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Term
| 1934 Securities Exchange Act, |
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Definition
| or the "People Act", regulates the trading of securities after they have been issued (secondary market). It also created the securities and Exchange Commission. |
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Term
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Definition
| an amendment to the Securities Exchange Act of 1934, originally provided for self-regulation of the over-the-counter market and paved the way for self-regulatory organizations, such as FINRA, the Financial Industry Regulatory Authority, in 1970. |
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Term
| Investment Company Act of 1940 |
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Definition
| Regulates the organization of investment companies offering packaged products, including mutual funds. |
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Term
| Investment Advisors Act of 1940 |
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Definition
| regulates investment advisors, requiring those that are compensated for providing investment advice to register with the Securities and Exchange Commission (SEC). |
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Term
| Security Investor Protection Act of 1970 (SIPA) |
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Definition
| established procedures to protect consumer securities and funds in the event of broker/dealer insolvency. |
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Term
| Employee Retirement Income Security Act of 1974 (ERISA) |
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Definition
| established minimum standards for retirement, health and other welfare benefit plans. |
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Term
| Insider Trading and Securities Fraud Enforcement Act of 1988 |
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Definition
| provides clarification on the penalties for violating insider trading rules thatt prohibit the use of material nonpublic information. |
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Term
| Municipal Securities Rulemaking Board (MSRB) |
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Definition
| Regulates the municipal securities business. |
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Term
| The US PATRIOT Act (2001) |
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Definition
| was enacted to address homeland security and fight terrorist activities with a focus on anti-money laundering. The acronym stands for United and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism. |
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Term
| Dodd-Frank Wall Street Reform and Consumer Protection Act (2010) |
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Definition
| represents an effort to reshape the US regulatory system in the areas of consumer protection, trading restrictions, credit ratings, regulation of financial products, transparency, and corporate governance and disclosure. |
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Term
| American Depository Receipt (ADR) |
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Definition
| A negotiable instrument issued by a US bank that trades in the U.S. financial markets and represents shares of a foreign stock. |
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Term
|
Definition
| The price a seller is willing to accept for a security. |
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Term
|
Definition
| The price a buyer is willing to pay for a security. |
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Term
|
Definition
| a debt obligation in which the borrower promises to pay a set coupon rate until the issue matures, at which time the principal is repaid. |
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Term
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Definition
| a person selected by the owner of a bank or brokerage account, trust, or insurance policy, who assumes ownership or receives the benefits of the asset in the event of the owners death. |
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Term
|
Definition
| a firm that effects securities transactions for its own account or for the accounts of others. |
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Term
|
Definition
| A standardized commodities or securities contract to deliver a certain quantity at a predetermined future price and date. |
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Term
|
Definition
| a brokerage account that allows investors to purchase securities with borrowed funds using credit extended by the broker/dealer. |
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Term
|
Definition
| broker/dealer belonging to a self-regulatory organization (SRO), such as FINRA or NTSE, or both. |
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Term
|
Definition
| a professionally managed open-end investment company issuing redeemable securities in a continuous offering of shares. |
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Term
|
Definition
| a security giving the holder the choice to either purchase or sell a security at a set price for a specific period. |
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Term
|
Definition
| a full and fair risk disclosure document required by the Securities and Exchange Commission for a new offerings of nonexempt securities. |
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Term
|
Definition
| a financial instrument that has monetary value and can be traded between parties. |
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Term
| Self-regulatory organization (SRO) |
|
Definition
| an organization that is authorized to enforce standards and requirements related to securities trading and brokerage. |
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Term
|
Definition
| a type of security that represents ownership in a corporation. |
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Term
|
Definition
| a broker/dealer or investment bank that helps a company in offering and distributing securities to the public. |
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Term
|
Definition
| Broker/Dealers and federally covered investment advisers that conduct securities business in the U.S. are required to register with the SEC> |
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Term
|
Definition
| Private Regulatory Organizations |
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Term
|
Definition
| Electronic Data Gathering, Analysis, and Retrieval. |
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Term
|
Definition
| Each state has its own state regulator that enforces its "blue sky" laws. |
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Term
|
Definition
| North American Securities Administration Association |
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Term
|
Definition
| FINRA Designated Examining Authority |
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Term
|
Definition
| Municipal Securities Rule Making Board |
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Term
|
Definition
| Chicago Board Options Exchange |
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Term
|
Definition
| Every calendar year, members must provide customers in writing the FINRA contact information. |
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Term
|
Definition
| Office of The Comptroller of Currency - oversight of Banks |
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Term
|
Definition
| The MSRB has no enforcement authority. |
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Term
| Department of the Treasury |
|
Definition
| Responsible for overseeing the US economic and financial systems. |
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Term
|
Definition
| - Employee Retirement Income Security Act - also called the Pension Reform Act. |
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Term
|
Definition
| is the central bank of the US. IT performs 5 general functions to promote the effective operation of the US economy and more generally, the public interest. |
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Term
|
Definition
|
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Term
|
Definition
| the practice of pledging securities as collateral for margin loans. |
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Term
|
Definition
| Security Investors Protection Corporation |
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Term
|
Definition
| SIPC protects brokerage accounts up to $500,000 for each separate customer, which includes a maximum of $250,000 cash. |
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Term
|
Definition
| The FDIC guarantees savings accounts at banks up to $250,000 per customer. |
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Term
|
Definition
| Protects consumers from unfair billing practices with regard to charge card accounts and credit cards. |
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Term
| Fair Credit Reporting Act |
|
Definition
| Regulates credit reporting agencies to ensure that the information the gather and distribute is a fair and accurate summary of a consumer's credit history. |
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Term
|
Definition
| Protects consumers in their dealings with lenders and creditors and ensures that they are informed about the true cost of credit. |
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Term
| Fair Debt Collection Practices Act |
|
Definition
| Establishes legal protection for consumers from abusive debt collection practices. |
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Term
|
Definition
| Community Reinvestment Act - ensures that banks are helping to meet the credit needs of communities they serve, including low- and moderate income neighborhoods. |
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Term
|
Definition
|
|
Term
|
Definition
| is a full-service broker/dealer offering investment banking and securities services to clients with more complex financial needs, such as hedge funds and other professional investors. |
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Term
|
Definition
|
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Term
|
Definition
| is a legal entity, such as a corporation, investment fund, or government entity that issues or proposes to offer securities. |
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Term
|
Definition
| is a broker/deal that helps an issuer sell securities to the public. The underwriter is also know as an "investment banker". |
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Term
|
Definition
| is a person who buys and sells securities on behalf of the broker/dealer and executes trades on behalf of the broker/dealers clients. |
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Term
|
Definition
| is a broker/dealer firm that assumes the risk of holding an inventory of shares of stock in order to facilitate the trading of that security. |
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Term
|
Definition
| The market maker makes a profit on the spread between the bid and the ask price, but is subject to risk if their inventory drops in value before they can sell the shares, thereby incurring loss. |
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Term
| Order-driven market makers |
|
Definition
| with access to the full bid/offer spread, can facilitate instantaneous trades and have contributed to the growth of high-frequency trading. |
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Term
|
Definition
| In the over-the-counter market, the difference between the bid and the ask prices is called the spread. |
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Term
|
Definition
| A market maker is a member of a stock exchange that provides liquidity in a security by holding shares of stock, which enables it to buy and sell at will. |
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Term
|
Definition
| is a financial institution, such as a bank or trust company, that is responsible for safeguarding the securities of customers. |
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Term
|
Definition
| is a fiduciary in charge of overseeing the day-to-day management of assets. A trustee is often and institution such as an investment firm or other financial institution. |
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Term
|
Definition
| Companies that have publically traded securities typically use transfer agents to keep track of the individuals and entities that own their stocks and bonds. Most transfer agents are banks or trusts. |
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Term
|
Definition
| In the event of a stock split, the transfer agent is responsible for maintaining a record of the shareholders that will receive additional shares. |
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Term
|
Definition
| are self-regulatory organizations. They are required to register with the Commission. There are two types of clearing services - clearing corporations and depositories. |
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Term
|
Definition
| Compare member transactions (or report to the members the results of exchange comparison operations), clear trades, and prepare instructions for automated settlement of the trades, and may act as intermediaries in making those settlements. |
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Term
|
Definition
| Options Clearing Corporation (OCC) - is the worlds largest equity derivatives clearing organization. It acts as guarantor, ensuring that the obligations of the contracts are fulfilled. |
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Term
|
Definition
| Commodity Futures Trading Commission |
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Term
|
Definition
| hold security certificates in bulk form and maintain ownership records of the securities. Physical securities are maintained in vaults, and ownership records are maintained on the books of the depository. |
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Term
|
Definition
| The Depository Trust and Clearing Corporation (DTCC) - through its subsidiaries, provides post-trade clearance, settlement, custody and information services for equities, corporate and municipal debt, money market instruments, American depositories, etc. |
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Term
|
Definition
| National Securities Clearing Corporation (NSCC) - subsidiary, which acts as a central counterparty (CCP), provides trade guarantee, netting risk management services for equity and debt transactions from all US stock exchanges |
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Term
|
Definition
| Depository Trust Company (DTC) subsidiary has custody of and provides asset servicing for millions of securities issues of issuers from the United States and other countries. DTC serves as a major clearinghouse for institutional post-trade settlement. |
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Term
|
Definition
| a large trade or order equal to 10,000 share of stock or a total market value of $200,000 or more. |
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Term
|
Definition
| an electronic system that reports the latest price and volume data on sales of exchange-listed stocks. |
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Term
|
Definition
| the highest price a buyer will pay for a security and the lowest price a a seller will accept, similar to a bid-ask spread but quoted in terms of price rather than the difference between them. |
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Term
|
Definition
| National Association of Securities Dealers Automated Quotations (system) |
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|
Term
| Qualified Institutional buyer (QIB) |
|
Definition
| an institutional investor with at least $100 million in assets under discretionary management. |
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Term
|
Definition
| the period after the effective date of a public offering, during which research may not be published on the offering of the company. |
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Term
|
Definition
| the number of shares issued and outstanding that are held by the public, excluding shares held by company officers, directors, or affiliates. |
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Term
|
Definition
| a regulation allowing some companies, by exemption, to sell securities without having to register the offering with the SEC. |
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Term
|
Definition
| A security that is purchased in an unregistered, private sale from the issuer. |
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Term
|
Definition
| allows a qualified institutional buyer (QIB) to purchase restricted (unregistered) securities from overseas. |
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Term
|
Definition
| The difference between the highest price a buyer is willing to pay and the lowest price a seller will accept. |
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Term
|
Definition
| as it deals with paper elements involving the issuance of securities. |
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Term
|
Definition
| which is filed by the issuing corporation with the SEC. |
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Term
|
Definition
| Additional public offering |
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Term
|
Definition
| 1 – when a company or issuer, decides to raise capital from the public by issuing securities, it is first required to file a registration statement with the SEC. |
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Term
|
Definition
| – also called the statutory prospectus – a disclosure document given to investors when the offering becomes effective and the security is available for sale to the public. |
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Term
|
Definition
| Red Herring – the disclosure document called the preliminary prospectus. |
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Term
|
Definition
|
|
Term
|
Definition
| Cooling Off Period – When the issuer files the S-1 registration statement with the SEC, the cooling-off period begins. |
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Term
|
Definition
| Cooling-Off period – usually 20 day, is the time period between the filing of the registration statement with the SEC (filing date) and the offer of the securities to the public (effective date) |
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Term
|
Definition
| Tombstone – distributed in addition to the red herring, a limited announcement which details important facts concerning the offering, such as the probable price range, description of the issue, and members of the syndicate. |
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Term
|
Definition
| KNOW THIS! – Although underwriters may distribute preliminary prospectuses, public tombstones announcements and take indications of interest, they cannot make offers or sales during the cooling off period. |
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Term
|
Definition
| Average daily trading volume |
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|
Term
|
Definition
| places restrictions on the market participants who are associated with public offerings, including IPOs, APOs, and subsequent primary offerings. |
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Term
|
Definition
| the must be registered under state security laws that govern the registration of securities and securities personnel. |
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Term
|
Definition
| Trading of previously issued securities. |
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Term
|
Definition
| Trading securities listed on an exchange |
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Term
|
Definition
| Trading of unlisted securities over the counter (OTC) |
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Term
|
Definition
| Listed securities trading OTC |
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Term
|
Definition
| Electronic trading of large blocks between institutional investors. |
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Term
|
Definition
| The Second and Third Markets are negotiated, while the exchange is an auction market. |
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Term
|
Definition
| Intercontinental Exchange - the parent company of the NYSE |
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Term
|
Definition
| A NYSE member is an individual who has a seat on the exchange. A member firm must have an individual employee who owns a seat on the exchange, often called an Allied Seat. |
|
|
Term
|
Definition
|
|
Term
|
Definition
| The OTC is a decentralized, global, 24-hour market that takes place over telephone lines and internet. The OTC is by far the world's largest market and the largest debt market. |
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|
Term
|
Definition
| National Association of Securities Dealers Automated Quotes |
|
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Term
|
Definition
| The OTC, or unlisted market, is called the second market. It is the negotiated market. |
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Term
|
Definition
| A Market Maker's posted quote show both his bid and ask prices as well as the number of shares that he is willing to buy and sell in round lots of 100. |
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Term
|
Definition
| Qualified Institutional Buyer |
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|
Term
|
Definition
|
|
Term
|
Definition
|
|
Term
|
Definition
| exempt from registration and prospectus requirements. |
|
|
Term
|
Definition
| the gradual reduction in the value of an intangible asset. |
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|
Term
| Collateralized securities |
|
Definition
| a security that is backed by a specific asset or pool of assets. |
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|
Term
|
Definition
| (balance sheet item) - the value of an asset calculated by taking the difference between the price paid for the asset and its market price. |
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Term
|
Definition
| (balance sheet item)- non-physical assets |
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Term
|
Definition
| the date a term or dollar bond pays par value, plus the last semi-annual interest payment, or for a serial bond the date the last payment is received. |
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Term
|
Definition
| price to earnings ratio, computed by dividing the price per share of a stock by its earnings per share, and used to gauge the value of a stock. |
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Term
|
Definition
| also known as a "repo", a form of short-term borrowing for dealers in government securities. |
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|
Term
| S&P (Standard & Poor's) 500 index |
|
Definition
| a market-weighted index of the 500 largest US companies, providing a measure of overall stock performance. |
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Term
|
Definition
| also called Treasuries, long-term US government bonds with maturities ranging from 10 to 30 years. Interest is paid semi-annually and is exempt from state and local taxes. |
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Term
|
Definition
| a graph depicting the relationship between yields on short-term and long-term bonds. |
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Term
|
Definition
| Federal taxation and spending are its primary tools |
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Term
|
Definition
| John Maynard Keynes is the famous economist who during the Depression, developed the economic theory that advocated using fiscal policy to jump-start the economy to full employment. |
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Term
|
Definition
| is the opposite of Keynesian economics. This is doctrine says that as long as the government does not meddle with the economy, business will take care of itself. |
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Term
|
Definition
|
|
Term
|
Definition
| Federal Open Market Committee (FOMC) is the Federal Reserve System's top monetary policy-making body. |
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Term
|
Definition
|
|
Term
|
Definition
| The reserve requirement is an overnight cash reserve that each Federal Reserve Member bank must maintain each night. It is the FRB's most powerful tool. |
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Term
|
Definition
| a short-term interest rate, is the interest rate banks charge each other for overnight loans in order to maintain their bank reserves at the Federal Reserve. |
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Term
|
Definition
| The FED sets the discount rate. This is the rate the main Federal Reserve charges member banks for loans to meet their overnight reserve requirements. |
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Term
|
Definition
| Open Market Operations - the open market is also known as the secondary market. OMO is the purchase and sale of securities in the secondary market by the central bank to implement monetary policy. |
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|
Term
| Federal Open Market Committee (FOMC) |
|
Definition
| buys or sells Treasuries in the econdary market through primary government securities dealers to help stimulate or slow the economy. |
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Term
|
Definition
| The Federal Reserve stimulates the economy by buying bonds on the open market, typically when inflation is low, and the economy is in recession. |
|
|
Term
|
Definition
| Federal Open Market Committee |
|
|
Term
|
Definition
| The Federal Open Market Committee buys or sells Treasuries in the secondary market through primary government securities dealers to help stimulate or slow the economy. |
|
|
Term
|
Definition
| Cash and demand deposits, such as checking accounts. FOMC operations have the greatest impact on M1, the most liquid measure of the money supply. |
|
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Term
|
Definition
| M2 is M1 plus savings accounts and some money market funds |
|
|
Term
|
Definition
| M2 plus institutional investments and money markets. |
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Term
|
Definition
|
|
Term
|
Definition
| The discount rate is the lowest rate. It is set by the Federal Reserve Bank and is the rate it charges member banks for overnight loans to meet their reserves. |
|
|
Term
| Federal (or fed) Funds Rate |
|
Definition
| the fed funds rate is a slightly higher rate and is the most sensitive money market indicator. It is the first rate to be affected by changes in the discount rate. |
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|
Term
| Effective federal funds rate |
|
Definition
| is the average of all the federal funds across the country and is not set by the Federal Reserve Board. |
|
|
Term
|
Definition
| Fed funds are bank-to-bank loans, so they are NOT money market securities. Fed funds are confusing because they have nothing to do with the FED directly. |
|
|
Term
|
Definition
| Money market rates are usually slightly higher the fed funds. The banks earn money market rates when they invest on a short term. |
|
|
Term
|
Definition
| is a short-term, unsecured money market instrument issued by big corporations with excellent credit ratings to finance short-term credit needs. |
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|
Term
|
Definition
| is the interest rate that individual banks charge their most creditworthy commercial borrowers for unsecured loans. As such it is the lowest rate for commercial loans. |
|
|
Term
| Broker Call Loan Rate (or "Call Loan Rate") |
|
Definition
| The broker call loan rate is the interest rate that banks charge broker/dealers for money that they lend to margin account investors. |
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Term
|
Definition
| is the total amount over par value that investors paid when purchasing the common shares from the corporation. |
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|
Term
|
Definition
| working capital = Current Assets - Current Liabilities |
|
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Term
|
Definition
| measures the entity's liquidity or solvency - its ability to pay its short-term obligations. |
|
|
Term
|
Definition
| The working capital ratio or current ratio is current assets divided by current liabilities. |
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|
Term
|
Definition
| is the same as the acid test ratio, and is current assets less inventory divided by current liabilities, or the ability to pay short-term immediate obligations. |
|
|
Term
| Quick Ratio (Acid Test) Ratio equation |
|
Definition
| Quick ratio (Acid test) = (Current Assets - Inventory) / Current Liabilities |
|
|
Term
| Earnings Per Common Share (EPS) |
|
Definition
| Earnings per Common Share = (Net Income - Preferred Dividend) / Common Shares Outstanding |
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|
Term
| Price/Earnings (P/E) Ratio |
|
Definition
| The P/E ratio is one of the most commonly-referenced ratios. It compares the price per share of the common stock to the annual earnings per share. |
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|
Term
|
Definition
| Price/Earnings Ratio = Market Price / Earnings Per Share |
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|
Term
|
Definition
| The dividend payout ratio gauges the "generosity" of the board of directors. It measures the portion of earnings that the board decides to distribute to the shareholders. |
|
|
Term
|
Definition
| Dividend Yield measures the amount of dividend income received in relation to the price of the stock. |
|
|
Term
|
Definition
| Dividend Yield = Annual Dividend / Current Stock Price |
|
|
Term
| Dividend Payout Ratio equation |
|
Definition
| Dividend Payout Ratio = Annual Dividend / Earnings Per Share |
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Term
|
Definition
| is actual cash generated by operations, as opposed to net income reportable to the IRS. By adding back "noncash" deductions to net income, we calculate this actual cash figure. |
|
|
Term
|
Definition
| Debt/Equity Ratio = Total Liabilitiess / Shareholders Equity |
|
|
Term
|
Definition
| Net profit margin ratio is a measure of profitability that is calculated by dividing net profit (after all operating expenses, interest, taxes and preferred stock dividends are paid) by sales. |
|
|
Term
| Net Profit Margin Ratio Equation |
|
Definition
| NPMR = (Net Profit - Preferred Dividend) / Sales (Revenue) |
|
|
Term
|
Definition
| is the liquidation value per common stock share. |
|
|
Term
| Book Value Per Share Equation |
|
Definition
| BVPS = (Total Shareholder Equity - Preferred Equity) / Total Outstanding Common Shares |
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Term
|
Definition
| refers to recurring patterns of expansion and contraction in the economy. The business cycle is also called the economic cycle. |
|
|
Term
|
Definition
| Gross Domestic Product - is our total national output of goods and services. |
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|
Term
|
Definition
| Consumer Price Index - gauges inflation by measuring costs in constant dollars. |
|
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Term
|
Definition
| is defined as too many dollars chasing too few goods and services. |
|
|
Term
|
Definition
| is a period of falling prices; too few dollars chasing too many goods and services. |
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|
Term
|
Definition
| is a period of rising prices with no economic growth. |
|
|
Term
|
Definition
| the generally accepted definition of recession is two consecutive quarters (6 months) of a decline in GDP. |
|
|
Term
|
Definition
| A depression is defined as 8 consecutive quarters (24 months) of decline. |
|
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Term
|
Definition
| can only be identified after they have occured and the economy starts moving into the next phase of contraction or expansion. |
|
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Term
|
Definition
| Economists watch certain macroeconomic indicators to gauge the health of the economy. Those exhibiting predictive value are leading indicators. |
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Term
|
Definition
| Those that occur at the same time as the related economic activity. |
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Term
|
Definition
| only become apparent after the activity has occured. |
|
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Term
|
Definition
| Institute for Supply Management - an economic indicator. |
|
|
Term
|
Definition
| The S&P 500 is a leading indicator. |
|
|
Term
|
Definition
| takes a top-down approach to securities analysis, first looking at the big picture - the economy and economic cycle - which is a significant determinant of stock and bond performance. |
|
|
Term
| Bond and Equity performance |
|
Definition
| The performance of the bond and equity markets is dependent on the where we are in the economic cycle. |
|
|
Term
| Relationship between interest rates and bond prices |
|
Definition
| There is an inverse relationship between interest and bond prices. |
|
|
Term
|
Definition
| have regular, pronounced cycles of growth and contraction. |
|
|
Term
|
Definition
| in direct contrast to cyclical industries, prosper during economic declines and underperform when the economy is growing strongly. |
|
|
Term
|
Definition
| have less pronounced cyclical variation. Stocks in defensive industries do not experience dramatic growth swings in up markets or declines in weak markets. |
|
|
Term
|
Definition
| are characterized by rapid development. |
|
|
Term
|
Definition
| is an accounting of the country's international transactions over a specified period of time, typically a calendar quarter or year. It represents the sum of all transactions between individuals, businesses and government agencies in the US and the rest of the world. |
|
|
Term
| Gross National Product (GNP) |
|
Definition
| is a broader measure of economic activity. It includes the GDP plus income earned by residents from overseas, minus income earned within the domestic economy by overseas residents. |
|
|
Term
|
Definition
| is used when selling a fixed amount of one currency (base currency) to purchase another currency (counter currency). |
|
|
Term
|
Definition
| an exchange rate that is quoted and traded today but for delivery and payment on a specified future date. |
|
|
Term
|
Definition
| The spot exchange rate is the current market rate used to exchange on currency for another today. |
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Term
|
Definition
| The value of a floating exchange rate is determined by supply and demand forces in the market. |
|
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Term
|
Definition
| is one in which the exchange rate is set and artificially maintained by the government. |
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Term
|
Definition
| IS determined by supply and demand. |
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Term
|
Definition
| are typically based on how much a particular foreign currency is worth relative to the US dollar. |
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|
Term
| Currency Risk or exchange rate risk |
|
Definition
| is a form of risk that originated from changes in the relative valuation of currencies which, in turn, can influence the overall investment returns. |
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Term
|
Definition
| American Depository Receipts |
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|
Term
| Which U.S government entity manages federal finances? |
|
Definition
| Department of the Treasury |
|
|
Term
| What is the name for a member of a stock exchange that facilitates the trading of securities by holding inventory? |
|
Definition
| Market Maker Broker/Dealer |
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|
Term
| What act of legislation created The Securities and Exchange Commission? |
|
Definition
| Securities Exchange Act of 1934 |
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|
Term
| What is another name for the 1933 Securities Registration Act? |
|
Definition
|
|
Term
| When must a customer who purchases securities in a cash or margin account pay for the securities? |
|
Definition
|
|
Term
| What FINRA bylaw is concerned with the settlement of disputes between broker/dealers and customers? |
|
Definition
|
|
Term
| What entity insures customer deposits in banks? |
|
Definition
| FDIC - Federal Deposit Insurance Corporation - up to $250,000 |
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|
Term
| If a customer purchases securities and does not settle the account within 4 business days, what is the brokerage firm's first order of business? |
|
Definition
| To sell off the securities and freeze the account for 90 days |
|
|
Term
| What entity is responsible for the safekeeping of an investment company's cash and securities? |
|
Definition
|
|
Term
| What are member firms required to purchase to protect themselves against employee theft or loss of customer securities? |
|
Definition
|
|
Term
| The underwriter is also known as what? |
|
Definition
|
|
Term
| When a firm effects trades for its own account, it is known as the principal. In what capacity is it considered to act? |
|
Definition
|
|
Term
| What is the maximum amount of SIPC coverage available to each separate customer? |
|
Definition
| $500,000 total, up to $250,000 cash |
|
|
Term
| What is the name of the central bank of the U.S.? |
|
Definition
|
|
Term
| Whether the broker/dealer acted as an agent or a principal in a transaction must be disclosed on what document? |
|
Definition
|
|
Term
| What types of organizations are FINRA, MSRB and CBOE? |
|
Definition
| SROs - Self-Regulatory Organizations |
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|
Term
| Between what two parties does the underwriting agreement exist? |
|
Definition
| The issuer and the managing underwriter. |
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|
Term
| What SRO enforces MSRB rules? |
|
Definition
|
|
Term
| How can investors check the credentials of individuals and firms in the investment industry? |
|
Definition
|
|
Term
| What term describes the legislation that regulates the sale of securities at the state level? |
|
Definition
|
|
Term
| What is the larges bureau of the Department of the Treasury |
|
Definition
| Internal Revenue Service (IRS) |
|
|
Term
| Under regulation T, what can a customer do if his account is frozen for 90 days? |
|
Definition
| Purchase securities on a cash basis |
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|
Term
| What act covers the trading of securities after they have been issued, the regulation of exchanges, and the regulation of broker/dealers? |
|
Definition
| Securities Exchange Act of 1934 |
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|
Term
| What FINRA bylaw defines the proper methods for handling violations of trade practice rules? |
|
Definition
|
|
Term
| What FINRA bylaw relates to dealings between member firms? |
|
Definition
|
|
Term
| The proceeds from a sale of a security when directly to the issuer of the security. In what market did this transaction occur? |
|
Definition
|
|
Term
| Which act was designed to prevent fraud in the issuing of securities? |
|
Definition
|
|
Term
| If an investor wanted to purchase an unlisted security, where would the order be entered? |
|
Definition
| in the over-the-counter, OTC market |
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|
Term
| Which securities are exempt from registration requirements? |
|
Definition
| US Government/agencies, municipals, nonprofits, commercial paper, domestic banks/trust companies (but not bank holding companies, and small business investment companies. |
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|
Term
| What rule sets down the requirements for the resale of restricted stock to the public? |
|
Definition
|
|
Term
| What types of offerings are exempt from registration? |
|
Definition
| Rule 147 (intrastate), Reg A (small issue), Reg D (private placements), and REG Crowdfunding (Internet). |
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|
Term
| In a Reg D offering, how many accredited investors may buy the unregistered securities? |
|
Definition
|
|
Term
| What is another name for the agreement among underwriters? |
|
Definition
|
|
Term
| What type of prospectus may be distributed during the cooling-off period of a primary offering? |
|
Definition
| Preliminary prospectus (Red Herring) |
|
|
Term
| Regulation D of the Securities Exchange Act of 1933 allows a placement to be sold to what number of accredited investors? |
|
Definition
|
|
Term
| After a security is issued in the primary market, it trades in what market? |
|
Definition
|
|
Term
| A formal offer to existing shareholders to purchase their stock above the current market rate is what kind of offer? |
|
Definition
|
|
Term
| What are the three ways to register a security at the state level? |
|
Definition
| Notification, Coordination and qualification |
|
|
Term
| A listed security trading OTC is trading in what market? |
|
Definition
|
|
Term
| Which type of Reg D offering restricts purchases to accredited investors only? |
|
Definition
|
|
Term
| Who represents member firm orders on the trading floor of the New York Stock Exchange? |
|
Definition
|
|
Term
| What is the term for the date when the SEC receives a registration statement from an issuer? |
|
Definition
|
|
Term
| A trade between two institutions executed without an intervening broker/dealer would take place in what market? |
|
Definition
|
|
Term
| What type of announcement is permitted by the Securities and Exchange Act of 1933 during the cooling-off period of a new issue? |
|
Definition
|
|
Term
| In what type of offering do the security sales proceeds go to a party other than the issuer, such as a major shareholder or another corporation? |
|
Definition
|
|
Term
| What is the term for securities that are not required to register with the SEC or meet the prospectus requirements of the Securities and Exchange Act? |
|
Definition
|
|
Term
| What term refers to the first time an issuer offers shares to the public? |
|
Definition
| Initial Public Offering (IPO) |
|
|
Term
| What are the two type of underwriting agreements between the issuer and the syndicate? |
|
Definition
| Firm commitment and best efforts |
|
|
Term
| A publicly traded company issues more share in order to finance a new factory. What type of offering is this? |
|
Definition
| Additional Public Offering (APO) |
|
|
Term
| Which rule allows the public resale of restricted and control securities under certain conditions? |
|
Definition
|
|
Term
| How long is the time period granted to an unseasoned issuer to complete a shelf offering? |
|
Definition
|
|
Term
| When a security is listed, it means that it trades on what? |
|
Definition
|
|
Term
| In a Reg D offering under Rule 504, how much money can be raised and how many non-accredited investors may purchase the securities? |
|
Definition
| $10 million; 35 non-accredited investors |
|
|
Term
| For an individual investor, what are the net worth and income requirements for accredited investors? |
|
Definition
| Net worth of $1 million (including spouse or spousal equivalent) and an annual income of $200,000 ($300,000 with a spouse or spousal equivalent) for the past two years and an expectation of the same in the current year. |
|
|
Term
| Blue Sky laws apply to what jurisdiction? |
|
Definition
|
|
Term
| What is the term that describes the monetary value of all goods and services produced within a country in one year? |
|
Definition
| Gross domestic Product (GDP) |
|
|
Term
| What is the term for the stocks of companies that thrive during economic downturns? |
|
Definition
|
|
Term
| Is inflation a leading, coincident, or lagging indicator? |
|
Definition
| Lagging indicator, measures by the Consumer Price Index (CPI) |
|
|
Term
| Floating exchange rates are associated with what type of market? |
|
Definition
| Floating exchange rates are associated with mature, stable economic markets. The U.S. dollar is an example of a floating exchange rate. |
|
|
Term
| What are the three basic tools that the Federal Reserve uses to control money supply? |
|
Definition
| Reserve requirement, discount rate, and open market operations. |
|
|
Term
| What is the name for stocks of food, tobacco, alcohol, and utility companies? |
|
Definition
|
|
Term
| What kind of FOMC activity reduces the money supply? |
|
Definition
| Sale of Treasury securities |
|
|
Term
| What does a current ratio of less than one indicate? |
|
Definition
| Insufficient funds to meet current liabilities |
|
|
Term
| What is the term for stocks that perform well in a bull market and underperform in a bear market? |
|
Definition
|
|
Term
| What is the name of the rate that the Federal Reserve charges member banks for overnight loans? |
|
Definition
|
|
Term
| What is the term that describes all transactions between the US and the rest of the world over a specified period of time? |
|
Definition
|
|
Term
| What type of government policy relies on taxes and spending to influence economic activity? |
|
Definition
|
|
Term
| What is the name for the financial statement that provides a summary of a corporation's income and expenses over a period of time? |
|
Definition
|
|
Term
| GDP (industrial production) is an example of what type of economic indiccator? |
|
Definition
|
|
Term
| What is the rate that is used when exchanging one currency for another in today's market? |
|
Definition
|
|
Term
| What effect does a weak dollar have on US exports? |
|
Definition
|
|
Term
| What type of analysis includes using ratios to analyze the balance sheet and income statements of a corporation? |
|
Definition
|
|
Term
| What kind of economic indicator is the S&P 500 index? |
|
Definition
|
|
Term
| What is the term for a downturn in the economy that lasts for two consecutive quarters? |
|
Definition
|
|
Term
| If a corporation has very little leverage, what happens to its bond ratio? |
|
Definition
| The bond ratio will be low |
|
|
Term
| What happens to the money supply when the Federal Reserve Board reduces the reserve requirements for banks? |
|
Definition
| It increases and improves lending |
|
|
Term
| What economic theory advocates stimulating economic growth through government intervention? |
|
Definition
|
|
Term
| What is the Federal Reserve Board's top monetary policy-making body? |
|
Definition
| Federal Open Market Committee (FOMC) |
|
|
Term
| What type of yield curve is characterized by long-term interest rates that are higher than short-term interest rates? |
|
Definition
|
|
Term
| What type of information is found on a corporations balance sheets? |
|
Definition
| Assets, Liabilities, and Shareholders' Equity at a specific point in time, where Shareholders' Equity = Assets - liabilities. |
|
|
Term
| Which rate do banks charge each other for overnight loans to meet their reserve requirments? |
|
Definition
|
|
Term
| What is the order of the normal business cycle? |
|
Definition
| The economic cycle has 4 phases: expansion, peak, contraction, and trough. |
|
|
Term
| What is the most liquid measure of the money supply? |
|
Definition
| M1, which includes cash and demand deposits (e.g., checking accounts) |
|
|
Term
|
Definition
| Most volatile rate - it is the most drastic tool the FRB has to influence the economy. |
|
|
Term
|
Definition
| The government doesn't intervene and the economy adjusts itself. |
|
|
Term
|
Definition
| negative, downward sloping. Happens when interest rates are high and expected to be reduced. |
|
|
Term
|
Definition
| price at which a convertible bond or other convertible security can be exchanged for common stock. |
|
|
Term
|
Definition
| formula that determines the number of share of common stock that will be received in exchange for each convertible bond or preferred stock during a conversion. |
|
|
Term
|
Definition
| unsecured bonds backed only by the general credit of the issuer, rather than a specific lien on particular assets. |
|
|
Term
|
Definition
| loan obligations that enable companies to raise capital with an agreement to repay the lender according to the terms of a contract; examples include notes and bonds. |
|
|
Term
|
Definition
| portion of a corporation's profits paid to shareholders |
|
|
Term
|
Definition
| a company's financial obligations, such as money owed to lenders, suppliers and employees. |
|
|
Term
|
Definition
| the process by which a company sells its assets to dissolve the business. |
|
|
Term
|
Definition
| a type of voting that enables an investor to vote on shareholder issues without being physically present at a shareholder meeting by authorizing another party to vote on his behalf. |
|
|
Term
| Public Offering Price (POP) |
|
Definition
| price of a new issue of securities at the time the issue is first offered to the public. |
|
|
Term
|
Definition
| a corporation's cumulative earnings that have not been distributed to its shareholders. |
|
|
Term
|
Definition
| price at which the current shareholders of a company are authorized to buy its common stock in a rights issue. |
|
|
Term
|
Definition
| is a financial instrument that trades for value baswed on the expectation of profit from the efforts of third-party management. No effort is required on the part of the investor; investors are passive. |
|
|
Term
|
Definition
| are subject to federal securities laws |
|
|
Term
|
Definition
| are not subject to any of the federal securities laws. However, no one or no security is ever exempt from fraud. |
|
|
Term
|
Definition
| Corporations issue two types of securities: stocks and bonds. The sum of all issued securities of a corporation is referred to as the corporation's capital structure. |
|
|
Term
|
Definition
| are called equity securities because each share represents ownership in the corporation. |
|
|
Term
|
Definition
| Bonds are called debt instruments. Each bond represents a loan to the corporation and creates a liability for that corporation. |
|
|
Term
|
Definition
| Bonds are temporary securities with a stated maturity data. On that date, the corporation repays the bondholder and the bond ceases to exist. |
|
|
Term
|
Definition
| Bonds are sometimes called leverage instruments. |
|
|
Term
| Corporation capitalization |
|
Definition
| A corporation's total capitalization is made up of its net worth plus long-term debt. |
|
|
Term
|
Definition
| The maximum that stock holders can lose is the price they paid for the stock. This concept is known as limited liability. |
|
|
Term
|
Definition
| Common stock is called junior security because it is the last to be paid if the corporation is liquidated through bankruptcy. |
|
|
Term
| Residual claims on assets |
|
Definition
| Common stockholders are junior to all other parties; they receive whatever remains after all other parties have been paid. |
|
|
Term
|
Definition
| Total number of shares authorized in the corporate charter. |
|
|
Term
|
Definition
| Portion of total authorized shares that are actually sold to investors. |
|
|
Term
|
Definition
| Authorized shares that have not yet been sold. |
|
|
Term
|
Definition
| Stock that has been issued (sold to the public) and subsequently bought back by the corporation. The company may use treasury stock to fund employee bonus plans, or it may be redistributed to stockholders in lieu of a cash divadend. It might eventually be reissued to the public or simply "retired". Note: that shares of treasury stock have no voting rights and receive no divadends. |
|
|
Term
|
Definition
| The number of shares in the hands of investors at any given time. This number is calculated by subtracting the number of shares of treasury stock (stock repurchased by the corporation) from the number of issued shares. |
|
|
Term
| Outstanding stock = Issued shares - Treasury stock |
|
Definition
|
|
Term
| Market Cap (Capitalization) |
|
Definition
| The number of outstanding common shares multiplied by the amrket price. |
|
|
Term
| KNOW THIS! - Treasury stock |
|
Definition
| Treasury stock is stock that has been issued and, subsequently reacquired by the corporation. |
|
|
Term
|
Definition
| Each common stock share has the right to vote. Common stockholders control the vote on each share they own. |
|
|
Term
|
Definition
| usually do not have voting rights. However, preferred shares take priority over common shares in several ways. |
|
|
Term
|
Definition
| shareholders are permitted one vote for each share they own for each vacancy. |
|
|
Term
| KNOW THIS! - Statutory voting |
|
Definition
| Statutory voting allows you to cast the same number of votes for each vacancy. That number of votes equals the number of shares you own. |
|
|
Term
|
Definition
| the shareholder has the same number of votes (total # of votes =number of shares owned x number of vacancies), however, the shareholder may divide those votes among the vacancies in any way he or she desires. |
|
|
Term
| Right to Transfer Ownership |
|
Definition
| Stockholders have the right to buy and sell shares that they own. As owners of the corporation, they are free to transfer ownership. |
|
|
Term
|
Definition
| Are legal documents that certify the stockholder's share ownership. |
|
|
Term
| Rights to Receive Dividends |
|
Definition
| As owners, common stockholders have the right to participate in the earnings of the issuing company in the form of dividends. |
|
|
Term
|
Definition
| Dividends are only paid when and if declared by the board of directors. |
|
|
Term
|
Definition
| when investors receive additional shares in lieu of a cash dividend. |
|
|
Term
|
Definition
| in which a product sample, or other company or subsidiary asset. is distributed instead of cash. |
|
|
Term
|
Definition
| Dividends have to be declared (DD) |
|
|
Term
|
Definition
| a customer places an order to buy a security with his broker/dealer. |
|
|
Term
|
Definition
| the purchase completed , that is, the customer becomes the legal owner of the security. |
|
|
Term
|
Definition
| Stocks settle 2 business days after trade date T+2. |
|
|
Term
|
Definition
| If the broker/deals involved in the transaction agree on cash settlement, the trade is completed on the same day, or T. |
|
|
Term
|
Definition
| The date on which the board of directors declares the dividend. |
|
|
Term
|
Definition
| The first trade date on which the stocck purchaser is not legally entitled to receive the dividend. Also on this date, the current market value of the underlying stock declines by the amount of the dividend and the stock is said to be trading ex-dividend. |
|
|
Term
|
Definition
| The date on which the corporation consults the stockholder record. Only those owners recorded in the stockholder record receive the dividend. |
|
|
Term
|
Definition
| The date on which the corporation actually distributes dividends to those shareholders of record (as of the record date). |
|
|
Term
|
Definition
Declaration date
Ex-date
Record date
Payable Date |
|
|
Term
|
Definition
| When a stock trade is done for cash settlement, remember that the trade date and the settlement date are the same. |
|
|
Term
|
Definition
| The ex-dividend date for a cash transaction is the day after the record date. |
|
|
Term
|
Definition
| the ex-dividend date - the date on which a buyer would no longer receive the dividend. |
|
|
Term
|
Definition
| This is a prohibited practice for a registered representative to advise an investor to purchase a stock for the sole purpose of receiving the dividend. |
|
|
Term
|
Definition
| Mutual funds. DREP (Declaration-Record-Ex-dividend-Payable) |
|
|
Term
|
Definition
| also known as current yield, is a method for measuring a stockholders return on investment. |
|
|
Term
|
Definition
| Dividend Yield = Annual Dividend / Current Share Price |
|
|
Term
| When a quarterly dividend is given, it must be converted into an annual yield. |
|
Definition
|
|
Term
|
Definition
| is the right to maintain the same percentage of ownership in a corporation when new shares are issued. Current shareholders are given the first opportunity to purchase enough shares to maintain their current percentage of ownership. |
|
|
Term
|
Definition
| The fixed price for share when exercising the premptive rights. |
|
|
Term
|
Definition
|
|
Term
|
Definition
| Rights are typically short term, expiring 30 to 60 days after they are issued. For every share outstanding, the corporation will issue one right. |
|
|
Term
|
Definition
| When a corporation issues rights, it is giving its shareholders the privilege of obtaining shares at a fixed price. |
|
|
Term
|
Definition
| derived from the fact that preferred stockholders have preference over common stockholders with respect to dividends or in order of liquidation if the company goes bankrupt. |
|
|
Term
|
Definition
| meaning the stock can be recalled from the stockholder at the discression of the issuer. |
|
|
Term
|
Definition
| Bonds and preferred stock have a higher claim. |
|
|
Term
|
Definition
|
|
Term
| Par value of a preferred stock |
|
Definition
| The securities face value is typically $100. Dividends are expressed as a percentage of par or a cash value. |
|
|
Term
|
Definition
| represents the maximum dividend that the stock will pay. |
|
|
Term
|
Definition
| or dividend preferred, stock offers the stockholder any unpaid dividend in arrears. |
|
|
Term
|
Definition
| -or noncumulative, also pays a stated dividend but does not "catch up" dividends that may have gone unpaid during any given period. |
|
|
Term
|
Definition
| offers investors the potential to receive dividends in addition to the stated dividend. (Excess earnings) |
|
|
Term
|
Definition
| permits owners to convert, or exchange, their preferred stock for a designated number of common shares. |
|
|
Term
|
Definition
| represents the price at which shareholders may convert to common shares. |
|
|
Term
|
Definition
| determines the number of shares that will be received for each share of preferred stock, and can be calculated by dividing the par value of the preferred stock by the conversion price. |
|
|
Term
|
Definition
| is the reducing in earnings per share and proportional ownership that occurs when holders of convertible securities convert those securities into common stock. |
|
|
Term
|
Definition
| or preemptive right, is a security giving shareholders the opportunity to purchase new shares issed by the corporation prior to the shares being offered to the public. |
|
|
Term
|
Definition
| when two or more stocks are trading together. |
|
|
Term
|
Definition
| Warrants are long-term instruments, while rights are short-term. |
|
|
Term
|
Definition
| The value of a warrant is the difference between its subscription price and the market price of the underlying stock. |
|
|
Term
|
Definition
| American Depositary Receipts (ADRs) are certificates issued by a US commercial bank. They represent ownership of a foreign company's shares listed on a foreign exchange. |
|
|
Term
|
Definition
| ADRs must be registered under the Securities Act of 1933. |
|
|
Term
|
Definition
| tac imposed on the value of property |
|
|
Term
|
Definition
| method of recording stock ownership electronically rather than issuing physical stock certificates. |
|
|
Term
|
Definition
| a bond that can be redeemed or paid off by the issuer prior to its maturity date |
|
|
Term
|
Definition
| Collateralized Mortgage Obligation - a type of mortgage-backed security that contains a pool of mortgages bundled together. |
|
|
Term
|
Definition
| an agreement or a guarantee. |
|
|
Term
|
Definition
| securities that derive their value from an underlying security and include options, futures contracts, and forward contracts. |
|
|
Term
|
Definition
| a formal legal agreement, contract, or document. |
|
|
Term
|
Definition
| securities that have a relatively low risk of default. |
|
|
Term
|
Definition
| the rate or coupon stated on the face of the bond certificate. |
|
|
Term
|
Definition
| the face value of a bond ($1,000), or preferred stock ($100). |
|
|
Term
|
Definition
| pessimistic market sentiment characterized by a belief that a security, market sector or the overall market will fall. |
|
|
Term
|
Definition
| optimistic market sentiment characterized by a belief that a security, market sector or the overall market will rise. |
|
|
Term
|
Definition
| a financial contract with a value that is derived from and whose performance is based on an underlying asset, such as an index, asset, or interest rate. |
|
|
Term
|
Definition
| a type of brokerage account in which clients pre-authorize their broker to buy and sell securities on their behalf without prior consent for each individual transaction. |
|
|
Term
|
Definition
| the difference between the price of the underlying security and the strike price of the option (or the price at which the option may be exercised). |
|
|
Term
| Warrants are usually issued in connection with what other type of securities? |
|
Definition
|
|
Term
| A shareholder owns 100 share of stock with cumulative voting rights. If there are four vacancies being voted upon, what is the maximum number of votes the shareholder may cast for any one vacancy? |
|
Definition
|
|
Term
| What is the term for securities purchased in unregistered, private sales from the issuer or an affiliate of the issuer? |
|
Definition
|
|
Term
| Who is responsible for transferring ownership of the stock certificate? |
|
Definition
|
|
Term
| Typically, preferred stock has a par value of what amount? |
|
Definition
|
|
Term
| Which stakeholders are the last to be paid in a corporate bankruptcy? |
|
Definition
| Common stock shareholders |
|
|
Term
| What term describes the number of shares of stock that are held by investors? |
|
Definition
|
|
Term
| Which term describes that the most a stockholder can lose is the amount of his or her investment? |
|
Definition
|
|
Term
| What is the term for a portion of total authorized shares that are actually sold to investors? |
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Definition
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Term
| What type of preferred stock would a corporation issue if it wants to maintain the right to repurchase the shares at a specified price? |
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Definition
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Term
| Which rights allow stockholders to maintain the same percentage of ownership when new shares are issued? |
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Definition
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Term
| A convertible preferred stock with a conversion ratio of 4:1 is trading at $100 and is at parity with the common stock. What is the price of the common stock? |
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Definition
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Term
| If a shareholder owns 100 shares and there are three vacancies on the Board of Directors, how many votes per vacancy are available with statutory voting? |
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Definition
|
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Term
| What are the 4 important dates related to stock dividends? |
|
Definition
| Declaration date, Ex-dividend date, Record Date, and Payable Date (DERP) |
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Term
| When is the ex-dividend date for a stock? |
|
Definition
| The day before the record date |
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Term
| How is the number of outstanding shares calculated? |
|
Definition
| Issued shares minus treasury stock |
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Term
| What type of transactions do ADRs facilitate? |
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Definition
| Domestic trading of foreign securities. |
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Term
| What type of long-term security can be purchased at a specified price for a set period of time and is issued with an exercise price above the current market value? |
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Definition
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Term
| What is the term for the number of outstanding shares of a corporation multiplied by the stock price? |
|
Definition
| Market Cap (market capitalization) |
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|
Term
| What type of preferred stock allows and investor to receive dividend in addition to the stated dividends? |
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Definition
|
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Term
| What is paid out first in bankruptcy liquidation? |
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Definition
|
|
Term
| What does the capitalization of a corporation consist of? |
|
Definition
|
|
Term
| What are two types of voting processes used by corporations? |
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Definition
|
|
Term
| What is regular way settlement? |
|
Definition
| T+2, which is two business days after a trade. |
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Term
| What type of common stock has no dividend or voting rights? |
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Definition
|
|
Term
| What type of preferred stock pays unpaid dividends in arrears? |
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Definition
| Cumulative preferred (also called dividend preferred) |
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Term
| What is the formula for dividend yield? |
|
Definition
| Dividend Yield = Annual Dividend / Current Share Price |
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Term
| What type of security has an ex-dividend date the day after the record date? |
|
Definition
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Term
| What is a general obligation bond backed by both revenue collections and taxes called? |
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Definition
|
|
Term
| What is the dollar equivalent of a basis point? |
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Definition
|
|
Term
| What type of bond is issued at a deep discount from the US Treasury? |
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Definition
|
|
Term
| What is the term for bond interest paid in arrears? |
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Definition
|
|
Term
| What is the name attributed to revenue bonds that allow the state legislative authority to appropriate money to pay off the debt in the event of any debt service deficiency? |
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Definition
|
|
Term
| What is a regular-way settlement for corporate, municipal, and government agency bonds? |
|
Definition
| T+2, Trade date plus two business days. |
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Term
| A convertible bond is converted into stock at whose discretion? |
|
Definition
|
|
Term
| What is measured by the yield to maturity? |
|
Definition
| The total performance of a bond from the time of purchase until maturity. |
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Term
| What are the major bond rating agencies? |
|
Definition
| Moodys and Standard & Poors |
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Term
| When a bond is sold, who receives the accrued interest? |
|
Definition
|
|
Term
| What types of bonds settle in one day? |
|
Definition
| Government notes and bonds settle T+1 |
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|
Term
| What is the term for the relationship between bond prices and interest rates? |
|
Definition
|
|
Term
| What is the maturity of a Treasury Note? |
|
Definition
|
|
Term
| Who obtains the CUSIP number for new issues of municipal securities? |
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Definition
|
|
Term
| What is the fixed yield on a bond called? |
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Definition
|
|
Term
| What is the name of the disclosure document for a new issue of municipal securities? |
|
Definition
|
|
Term
| Which government agency issues are backed by the full faith and credit of the US government? |
|
Definition
| GNMA - Government National Mortgage Agency |
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|
Term
| For discount bonds, name the yields from highest to lowest. |
|
Definition
| Yield to maturity, current yield, nominal yield |
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Term
| What is the name of a tax-exempt municipal bond issued by a local government to raise money for a private company? |
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Definition
|
|
Term
| What is a derivative security that has a value based on an underlying pool of mortgage-backed securities called>? |
|
Definition
| Collateralized mortgage obligation (CMO) |
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Term
| A municipality issued bonds to finance improvements to its sewer system. Bondholder will be repaid through increased rates for water and sewer services. What types of bonds are these? |
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Definition
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|
Term
| Mortgage bonds, equipment trust bonds, and collateral trust bonds are all examples of what type of bonds? |
|
Definition
|
|
Term
| Which types of bonds are never taxed at the federal level? |
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Definition
|
|
Term
| What are some types of money market debt? |
|
Definition
| Commercial paper, bankers' acceptances, negotiable CDs, repurchase agreements (repos), and reverse repos. |
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|
Term
| On a premium bond, the yield to worst must be quotes. What is it called? |
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Definition
|
|
Term
| What is another name for high yield bonds? |
|
Definition
| Junk Bonds or speculative bonds |
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Term
| What type of bonds are associated with greater price volatility? |
|
Definition
|
|
Term
| What calendar basis is used to calculate dollar prices and accrued interest on municipal bonds? |
|
Definition
| 30/360 - 30 days per month and 360 days per year |
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Term
| What are the terms to maturity for a bond, and how long is each term? |
|
Definition
| Short term: less than two years, intermediate term 2 to 10 years, and long-term: more than 10 years |
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Term
| How is a bond different from a stock? |
|
Definition
| A bond has a finite life whereas a stock is ongoing. |
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Term
| IF the underwriter is selected by the issuer to purchase bonds, what status does this give the offering? |
|
Definition
|
|
Term
| Which type of municipal bond is backed by the full faith, credit and taxing power of the issuer? |
|
Definition
|
|
Term
| What type of municipal bond need voter approval? |
|
Definition
| General Obligations Bond (GO) |
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Term
| Upon annuitization, the accumulation units of a deferred variable annuity are converted to a fixed number of what? |
|
Definition
|
|
Term
| What is the maximum potential loss for writing uncovered calls? |
|
Definition
|
|
Term
| What is another name for the exercise price of an option? |
|
Definition
|
|
Term
| An investor who deposits money into a deferred annuity is purchasing what type of units? |
|
Definition
|
|
Term
| Who must approve all options accounts prior to trading? |
|
Definition
| Registered Options Principal (ROP) |
|
|
Term
| Who bears the investment risk of a variable annuity? |
|
Definition
|
|
Term
| How is the intrinsic value of a call option calculated? |
|
Definition
| The price of the underlying security minus the strike price. |
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|
Term
| What type of contract entitles a buyer to purchase shares of a security at a specific price prior to a fixed expiration date? |
|
Definition
|
|
Term
| What is the best option hedge for a short stock? |
|
Definition
|
|
Term
| Which regulatory body or bodies has authority over a variable life policy? |
|
Definition
| FINRA and state departments of insurance |
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|
Term
| When must the disclosure document of the Options Clearing Corporation be sent? |
|
Definition
| At or prior to account approval |
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|
Term
| Which options position would provide the best hedge for long stock? |
|
Definition
|
|
Term
| What option contract gives the holder of the contract the right to sell the underlying security at the strike price? |
|
Definition
|
|
Term
| What phrase describes an option that has intrinsic value? |
|
Definition
|
|
Term
| When is a call option out of the money? |
|
Definition
| When the market price is less than the strike price. |
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|
Term
| In an options contract, which party receives the premium? |
|
Definition
| Writer (also called the seller) |
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|
Term
| When can American style options be exercised? |
|
Definition
| Any time until the expiration date |
|
|
Term
| What is a call option that is backed by ownership of the underlying asset called? |
|
Definition
|
|
Term
| What is a protective put purchase? |
|
Definition
| Purchasing puts on a long stock position to protect the profit. |
|
|
Term
| If a customer authorizes an account executive in writing to buy and sell securities on the customers behalf, the customer owns what type of account? |
|
Definition
|
|
Term
| What is the difference between a call buyer and a call writer? |
|
Definition
| The call buyer has the right to purchase, while the call writer has the obligation to sell. |
|
|
Term
| How are most options settled? |
|
Definition
|
|
Term
| An investor who owns a variable annuity contract is assuming what type risk? |
|
Definition
|
|
Term
| When do monthly options expire? |
|
Definition
| Third Friday of the month at 11:59pm |
|
|
Term
| What type of options position provides a partial hedge and income? |
|
Definition
|
|
Term
|
Definition
| a price below par (a bond selling below its par value) |
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|
Term
|
Definition
| portfolio strategy that seeks to minimize risk by spreading investments over different securities, industry sectors and asset classes. |
|
|
Term
|
Definition
| the final payment date on a bond when interest and principal are repaid by the borrower |
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|
Term
|
Definition
| mutual funds sold without commission or sales charge. |
|
|
Term
|
Definition
| a basket of stocks, bonds, and other securities holdings owned by individual investors or managed by financial institutions. |
|
|
Term
|
Definition
| a price above par; a bond selling above its par value. |
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|
Term
|
Definition
| Real Estate Mortgage Investment Conduit, a type of real estate trust that invests in mortgages as opposed to the actual real estate. |
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|
Term
|
Definition
| Shares of beneficial interest (SBIs) - issued by Unit Investment Trusts |
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|
Term
|
Definition
| No single shareholder has any right or claim the exceeds the rights or claims of other shareholders. |
|
|
Term
|
Definition
| Unit Investment Trust - is established as a trust and operates as a holding company for the portfolio. |
|
|
Term
|
Definition
|
|
Term
|
Definition
| is a financial institution that holds customers' securities for safekeeping, providing administrative and operational support. |
|
|
Term
|
Definition
| means that shares are owned, recorded and transferred electronically without issuing a physical stock or bond certificate. |
|
|
Term
|
Definition
| Direct Registration System - facilitates the transfer of securities electronically. |
|
|
Term
|
Definition
|
|
Term
|
Definition
|
|
Term
|
Definition
| Commodities Futures Trading Commission |
|
|
Term
|
Definition
| this would mean that less than 75% of the investments are known in advance. |
|
|
Term
|
Definition
| is one with no specific business plan. |
|
|
Term
|
Definition
| Commodities Futures Trading Commission |
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|
Term
|
Definition
|
|
Term
|
Definition
| Local government investment pools |
|
|
Term
|
Definition
| income after all taxes are deducted |
|
|
Term
|
Definition
| not subject to an obligation |
|
|
Term
|
Definition
| the ease with which an asset can be converted into cash quickly |
|
|
Term
|
Definition
| a federal and state funded program for those whose income and resources are insufficient to meet the cost of necessary medical care |
|
|
Term
|
Definition
| a group of underwriters that is formed to distribute an issue of securities to the public |
|
|
Term
|
Definition
| the original record that documents a buy-or-sell transaction |
|
|
Term
|
Definition
| a measure of risk related to a security's price stability (movement in the market) |
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|
Term
|
Definition
| a trader without inside information who enters a trade at the same time as a trader with inside information. |
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|
Term
|
Definition
| the original purchase price of a security, inclusive of sales charges, used to calculate capital gains and losses |
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|
Term
|
Definition
| the feeling or the tone of the market; the prevailing attitude of investors as to the direction of the market. |
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|
Term
|
Definition
| an equity index that is used as a benchmark for small-cap stocks and mutual funds |
|
|
Term
|
Definition
| a market cap-weighted index that is a common benchmark for the broader US equity market. |
|
|
Term
|
Definition
| allows an investor who is selling securities that have been acquired through a series of purchases to select those shares that provide the most favorable cost basis for tax purposes. |
|
|
Term
|
Definition
| is the cost recovery system for wasting natural resources. |
|
|
Term
|
Definition
| A market maker does not honor a published quote (bid or ask price) |
|
|
Term
|
Definition
| A trader or group of traders attempt to push down the price of a security by heavy selling or short selling. |
|
|
Term
| Excessive trading (Churning) |
|
Definition
| A broker engages in excessive buying and selling of securities in a customers account to influence the price of a security or to generate commissions. |
|
|
Term
|
Definition
| A customer buys shares and then sells them before paying for the original purchase. |
|
|
Term
|
Definition
| This occurs when a broker buys a stock for its own account in front of a large (or block) trade or trades ahead of customer orders |
|
|
Term
|
Definition
| This involves spreading false or misleading information about a company to impact the price of a security |
|
|
Term
|
Definition
| This is the practice of attempting to influence the closing price of a security by executing purchase or sales orders near the close of normal trading hours |
|
|
Term
|
Definition
| Similar to marking the close, marking the open involves entering a trade when the market opens to influence the price of a security |
|
|
Term
|
Definition
| Traders buy and sell a security among themselves to create an artificially high level of activity that doesn't exist in order to influence the price of a stock |
|
|
Term
|
Definition
| This involves artificially increasing or pumping up the price of a stock, by making positive statements that are false and misleading, in order to sell or dump the stock at a higher price. |
|
|
Term
|
Definition
| prohibited practice of combining the funds of the firm with those of its customers |
|
|
Term
|
Definition
| an individual who obtains products or services from a financial institution, but who usually has no contact with that institution beyond the one-time delivery of products or services |
|
|
Term
|
Definition
| any written or e-mail messages distributed to either existing customers or to 25 or fewer prospective customers within any 30 calendar-day period |
|
|
Term
|
Definition
| an individual or entity with which a financial institution expects to have a continuing relationship |
|
|
Term
|
Definition
| securities carried in a special cash account or in a margin account in which the customer has made full payment |
|
|
Term
|
Definition
| collateralizing securities, as in a margin or hypothecation agreement, permitting the broker/dealer to pledge them as collateral to a bank or another broker/dealer |
|
|
Term
|
Definition
| securities held for a customer in a margin account as defined by Regulation T |
|
|
Term
|
Definition
| the process of making illegally-gained proceeds appear legal. |
|
|
Term
|
Definition
| any written or electronic communication distributed or made generally available to customers or the public |
|
|
Term
|
Definition
| a faster and less expensive alternative to litigation and mediation whereby all parties agree to comply with the legally binding decision of an independent third party, called an arbitrator. |
|
|
Term
|
Definition
| the misappropriation of funds by someone who has been entrusted with safeguarding them |
|
|
Term
|
Definition
| a fee paid to someone who acts as an intermediary for another party in a transaction |
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|
Term
|
Definition
| a legal claim against an asset that is used to secure a loan. |
|
|
Term
| Predisputed arbitration clause |
|
Definition
| a clause in the agreement between registered securities representatives and their employers mandating that any employment disputes will be handled through binding arbitration, rather than through the court system. |
|
|
Term
|
Definition
| a person or organization required to answer a legal proceeding |
|
|
Term
|
Definition
| a prohibited activity in which a broker sells securities that are not offered or overseen by their member brokerage firm. |
|
|
Term
|
Definition
| a law designed to protect employees from retaliation after reporting suspected illegal activities on the part of their employers or co-workers |
|
|
Term
|
Definition
| the process of bringing a new security issue public. |
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