Term
| What the Series 6 allows a rep to sell: |
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Definition
Mutual funds, initial offerings of closed-end funds, variable annuities, and variable life insurance policies.
Not stocks or bonds, or closed-end funds that are in the secondary market. |
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Term
| Required information for opening a New Account: |
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Definition
-Customer's name and residence
-legal age
-signature of registered rep
-signature of person approving the acct. |
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Term
| Information that must be requested when opening a New Account: |
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Definition
- Taxpayer ID
- Customers Occuption (Employer's name and address)
- Assocation with FINRA or member
- Info. used to make recommendations (financial background, tax status, investment objectives) |
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Term
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Definition
| An account that is registered in the name of one person. |
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Term
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Definition
| An account that has more than one owner; all the parties involved in the account must sign the account documents. |
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Term
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Definition
| A type of joint account where if one party dies, their portion of the account goes to their estate. |
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Term
| Joint Tenants with the Right of Survivorship |
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Definition
| A type of joint account where if one party dies, the survivor automatically owns the entire account. |
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Term
| Uniform Gifts to Minors Act (UGMA) |
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Definition
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Term
| Uniform Transfers to Minors Act (UTMA) |
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Definition
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Term
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Definition
| This rule requires a fiduciary to act as a prudent man or woman would act with caution and consideration, and to seek reasonable income and preserve capital. |
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Term
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Definition
| A way a stock is held, that it is registered in the brokerage firm's name instead of the customer's name. It's convenient when the stock is sold, because the broker-dealer takes care of the paperwork. |
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Term
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Definition
| In a minor's account, a portion of the investment income is taxed at the child's rate; another portion may be taxed at the parent's rate. |
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Term
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Definition
The gift is irrevocable
One custodian and one minor per account.
Cannot be a joint account.
Cannot be a margin account.
Opened under the child's SSN.
Earnings taxed at the child's tax bracket if the child is above 18. |
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Term
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Definition
| In these types of accounts, one person is put in charge of managing the assets for the benefit of another. The trustee has legal control of the assets. |
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Term
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Definition
| The total of all assets that someone leaves when they die. |
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Term
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Definition
| The person in charge of administering the estate. If a person dies without naming one, then the court appoints an administrator to oversee the estate. |
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Term
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Definition
| Give a person permission to make purchases and sales without first obtaining permission. |
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Term
| 3 Steps to activate a Discretionary Account: |
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Definition
1. Get written authorization
2. Give the authorization to the firm's principal to approve it in writing.
3. Obtain signature of the person with discretionary authority and the date it was granted. |
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Term
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Definition
| A type of account that the owner is a business. Need to get a copy of the corporate resolution, which lists the individuals authorized by the company's board of directors to act on the company's behalf. |
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Term
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Definition
| An type of account for partners; all the partners must sign and have a copy of the partnership agreement. |
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Term
| Investment Adviser Account |
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Definition
| A type of account opened by an investment adviser; one can be opened up for all of her customers or each customer can open a separate account. |
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Term
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Definition
| A person who receives compensation for providing investmetn advice to others. |
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Term
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Definition
| A type of account in which the client is chared a one-fee-pays-all amount that covers the cost of trading, research, advice, and administration. The amount is based on a percentage of the assets under management. |
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Term
| What does a registered rep need to open a trust account? |
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Definition
| A copy of the trust agreement. |
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Term
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Definition
| Includes not only salaries and wages, but also any investment income they might have. |
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Term
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Definition
| Whatever income they have left over each month after the bills are paid. |
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Term
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Definition
| Equals what they own (assets) minus what they owen (liabilities). |
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Term
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Definition
| What a person owns. May include savings accounts, investments, retirement holdings, and real estate. |
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Term
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Definition
| What a person owes. May include mortgages, home equity loans, auto loans, credit card balances, and student loans. |
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Term
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Definition
| What a person would have if they sold all their assets and paid all their debts. Excludes things like houses and other things that cannot be easily sold. |
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Term
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Definition
| The hights marginal rate at which their income is taxed. |
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Term
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Definition
| The goals for which they are investing their money. |
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Term
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Definition
| This objectives wants investments that produce a steady, reliable stream of cash. Ex. bonds, utility stocks, and annuities. |
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Term
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Definition
| This objectives wants their capital to appreciate; the capital will grow at a hihger rate than other investments. Ex. Common stock |
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Term
| Preservation of Capital Objective |
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Definition
| This objective is concerned with safety. They pay lower returns, but the principal is relatively safe. Ex. Treasury bills, money-market funds. |
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Term
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Definition
This objective is to produce an income that is tax-exempt or tax-deferred.
Ex. Municipal bonds, annuities, retirement plans. |
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Term
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Definition
| This is how much fluctuation in the value of investments a person can handle. |
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Term
| Age (in relation to Risk Tolerance) |
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Definition
| Younger investors can tolerate more risk in their portfolios than older ones. |
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Term
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Definition
| The length of time an investment is able to exist without distributions. Those with longer time horizons can tolerate more volatility. |
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Term
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Definition
| The risk that investors will not fully recover their entire investment. |
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Term
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Definition
| The risk than an issuer may be unable to pay interest and/or principal when due on fixed-income securities. |
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Term
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Definition
| The risk that an investor may not be able to ssell a security quickly at a reasonable price compared to recent transactions. |
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Term
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Definition
| The risk, that due to inflation, the value of a dollar will decline causing a decline in purchasing power. |
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Term
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Definition
| The risk that if interest rates rise, the price (value) of an investor's bond holdings will decline. |
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Term
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Definition
| The risk that a bondholder will be unable to reinvest interest payments at a rte equaling the yield to maturity. |
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Term
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Definition
| The risk that bondholders will have their investments redeemed (called) by the issuer before the stated maturity date. |
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Term
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Definition
| The risk of a govenment becoming stable or some other unfavorable government action taking place that affects the value of securities. |
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Term
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Definition
| The risk that the profit potential from securities investment pay be adversely affected by new or revised legislation. |
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Term
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Definition
| The risk that income received from foreign investments will be worth less due to currency fluctuations. |
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Term
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Definition
| The risk that a security's value may decline, not because of a change in the specific company, but due to the decline in the market as a whole. |
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Term
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Definition
| Is a way of measuring the market risk of a particular security (or mutual fund) compared to the market. |
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Term
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Definition
| The risk is likely to rise less than the market as a whole in a bull market, but fall less in a bear market; less volatile. |
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Term
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Definition
| It is more volatile than the market. |
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Term
| Three Basic Asset Classes: |
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Definition
1. Equities (Stocks)
2. Debt Instruments (Bonds)
3. Cash Equivalents (highly liquid, money-market instruments) |
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Term
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Definition
| The higher the risk of the invesment, the greater the return the investor expects and vice versa. |
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Term
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Definition
| The amount that an investment produces after inflation is taken into consideration. |
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Term
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Definition
| The longer an investor has to acheive their goal, the larger the percentage of their portfolio should be invested in equities. The shorter time horizon, should focus more on bonds. |
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Term
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Definition
| This theory assumes investors are "risk averse"; it shifted emphasis away from individual securities to the different classes of assets and their submdivisions. This uses a computer to create an optimal portfolio for each client given their risk tolerance and investment objectives. |
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Term
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Definition
| If a client wanted to pay no more than a specific price for the stock, this type of order would be entered. |
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Term
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Definition
| The day by which the transaction must be completed between the broker-deal representing the buyer and the seller. |
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Term
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Definition
| The fund's board of director's sets teh date when the fund's shares will trade ex-dividends; usually the same as the record date. |
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Term
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Definition
| The only time when a rep may act on a client's behalf without having written power of attorney. If the client tells the rep to buy or sell an exact amount of a specific security, but leaves the price and the exact timing of the purchase open, the rep may accept the client's instructions. |
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Term
| Securities Investor Protection Corporation (SIPC) |
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Definition
| A non-profit organization funded by assessments on brokder-dealers. |
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Term
| The Securities Investor Protection Action |
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Definition
| This act was established for the protection of customers' funds and securites in the event a broker-dealer becomes insolvent. |
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Term
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Definition
| Is a type of brokerage account that allows investors to buy securities on credit. |
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Term
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Definition
| This type of bond indirectly protects a client in the event of theft of embezzlement by an employee. An insurance company compensates the firm in the event of employee misconduct and the firm uses this payment to reimburse the client. |
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Term
| Death of a Customer, the following are required: |
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Definition
1. Death Certificate copy
2. Leters testamentary
3. An inheritance tax waiver
4. Affidavit of domicile |
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Term
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Definition
| A sworn written statement made by the executor of an estate certifying the decendent's place of residence at the time of death. |
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Term
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Definition
| The primary purpose of this act it to fight terrorism and as a result, it imposes new obligations on broker-dealers under the anti-money laundering laws. |
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Term
| Three stages of Money Laundering: |
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Definition
1. Placement - buy securities
2. Layering - have multiple transactions
3. Integration - put back into commerce |
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Term
| Currency Transaction Report (CTR) |
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Definition
| A rep is required to file one of these reports if all transactions by a customer during one day exceed $10k. |
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Term
| Currency and Monetary Instrument Transporation Report (CMIR) |
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Definition
| One of these reports must be filed whenever anyone physically transports or receives cash in an amount of more than $10k into or our of the US. |
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Term
| AML Compliance programs must include: |
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Definition
-Policies/procedures that can detect and report suspicious transactions.
-A compliance officer.
- Ongoing employee training program.
- An independent audit function to test the effectiveness. |
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Term
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Definition
| A list of known and suspected terrorists and other criminals, as well as pariah nations, maintained by the Treasury Department's of Foreign Asset Control. |
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Term
| Anti-Money Laundering Law Penalties: |
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Definition
-Jail up to 20 years
- Fines up to $500k or twice the amount of $ involved.
-A rep doesn't need to know about a money laundering scheme or participate in it to be prosecuted. |
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