foreign gov't taxes on stocks and bonds
can be used as a tax credit and are write off in the USA
munis are reported in the
RTRS (Real-time Transaction Reporting System)
2 types of Syndicate orders
pre-sale: an order placed before the syndicate has placed its order
group: all members of the syndicate share the profit
2 more types of syndicate orders
designated: large institution designates two or more members who take credit for the order
member: placed by members foe their customers
pay monthly interest + capital gains (which is NOT guaranteed since it fluctuates)
must be approved by principal. Includes summaries, reports
two reasons for rev bonds to be called
catastrophic call provisions + or ∆ in issuers tax status
must be registered b4 entering an order (90 day apprentice max 180 day)
gov't employee 401(k) - same restrictions as 401(k)
nonprofit company 401(k) - same restrictions as 401(k)
Qualified retirement plans
State Higher education plans (think highest # = higher education) Can only be used for college
$100k increments $250k FDIC protection Sold in Sec market Big bank issued w/ fixed coupon
Liabilities (debt+bonds) Inventory (assets) Shareholder equity (common+ treasury)
interest paid on bonds outstanding, revenue, expenses
modified depreciation method: higher deductions early on, followed by smaller deductions later
Simplified employee pension: EMPLOYER is the only party to contribute (25% employees sal. or $54k) Same penalties as traditional IRA. Vested immediately
Signed by the customer: Has 15 days after initial transaction to return, otherwise can only sell not buy new contracts
foreign currency transactions settle in
32nds i.e. 98.4= 4/32 = 981.25
Variable life insurance plane
Value of plan VARIES according to performance of separate account. Fixed premiums, Death benefit will never fall below a set minimum.
Variable life insurance policy's biggest risk?
Muni bond accrues interest
360 days a year or 30 days a month
Margin account statements
monthly on active accounts
quarterly on inactive accounts
Green with envy; underwriter may sell up to 15% more shares than initially allowed to if they sell all of them
benefit of defined pension plans
MUTUAL FUNDS, after a certain $ amount spent, you get a discount
RR can give up to $100 worth of goods per client. Either what its worth or what you payed for it. Exempt if you go with the client or they are a personal friend
Equity Disclosures by the RR
Debt is not included: disclose if BD is investment banker or market maker in the stock. Also if BD is 1% or greater shareholder
when options contracts are adjusted to see if more cash is needed (Think Reg T for options)
Max Limited partnership underwriting fee
$2.5 per stock over $5. For stock less than $5, 100% total price
US currency deposited in foreign banks
retail info, prospecting letters, seminar transcripts and exercise notices
Variable annuity purchasing
must be approved by OSJ and signed by RR within 7 days
Escrow accounts are used for...
protects current bond holders. ensures that no more bonds can be issued, otherwise it would lower the value of the current bonds
can't buy an issue prior to registration. you CAN buy before settlement, called when-issued
Institution on institution trading
Backed by revenue and good faith/credit of issuer
tax deferred, not good for 401(k)s or IRA. 10% penalty if withdrawal before 59.5 y/o
Indicators for analyzing GO bonds
population increase, voter registration increase, new and current business growth
Actioned off on Monday and settle Thursday of that week
Customer tells RR which stock, how many, action. RR can...
buy @ any price they seem adequate at any point in the day
FOMC buys and sells T bills to...
increase buying; decreasing the price of stocks and bonds
Dealer markup on NASDAQ stock
based on the LOWEST offer in the NASDAQ system
Type of muni bond
ARE federally taxable
Issuer receives tax reimbursement up to 35% of interest paid
out
Front page of mutual fund prospectus
Includes a Fee Table; includes all sorts of fees including expense ratio
increases as $ goes up. i.e income, estate and gift tax
everyone pays the same dollar amount and hurts the poor more. i.e. sales and gasoline tax
Federal reserve board is in charge of
monetary policy, it does not issue securities
*Restricted Stock- 6 month holding period and must file w/ SEC on day of sale. 1% 4week avg max. 90 days to sell after filling *Control stock- stock acquired by an affiliated person in the 2nd market. Held by affiliate, volume restriction. Held by nonaffiliate, no rest after holding period
*Anyone can contribute *Capped @ $2000 total annually *No % of conservative/risky investments *Account NEVER becomes property of the child once they are of age. Always belongs to parents
Day Traders minimum account balance
Inherited securities are priced...
at the market value at time of death, not the price that it was purchased at
Before accepting a DVP order from a customer, a broker-dealer must
Obtain the name of the customer's agent from the customer
If the brokerage firm were to go bankrupt, SIPC would provide
SIPC provides maximum protection of $500,000 for each customer (i.e., for each different account title) includes equity in margin accounts
Which of the following signatures is an invalid endorsement on a stock certificate?
A minor may not endorse a stock certificate. The signature of the custodian for the minor's account must be on the stock certificate.
Under SRO rules, the carrying firm must complete the transfer of a customer account:
Within three business days of validation of the transfer instructions
A 17-year-old, whose birthday is approaching, wants to open his own brokerage account at a firm. Which of the following choices is the BEST course of action for the RR to take?
Refuse to open the account. Must be 18
Only two individuals, either tenants in common or tenants w/ right of survivorship. UGMA are NOT joint accounts and neither are investment clubs
A customer will be taking a six-month trip to a foreign country and will not have access to her mail. If the customer provides written instructions and includes a valid reason:
The firm may hold the customer's mail for the six-month
period (because they gave a valid reason. only 3 months w/o valid reason)
When an order is executed in the ANY wrong account
Cancel and rebill after principal approval
Corp Tax rate on corp didivends
70% exempt on any equity dividend. That rate is 80% exempt if corp. owns 20% of other corp. outstanding shares. Bond interest is not exempt. Muni interest is 100% exempt
On February 22, an investor sells ABC stock at $31 for a 3-point loss. On March 10, the investor purchases ABC stock at a price of $27. New cost basis?
$30; the 3 point loss from isn't a loss b/c wash rule. add that value to new purchase price ($27)
A corporation's shareholders must vote for:
declared a quarterly dividend of 25 cents payable to stockholders of record on Friday, December 1. The dividend will be paid to all stockholders whose names appear on the record books on:
Briana Corporation, an existing public company, is offering 500,000 shares of common stock to the public through an underwriting syndicate. The prospectus states that 250,000 shares are being offered by selling stockholders and 250,000 shares are being offered by Briana Corporation. The effect of this offering will be:
A dilution in the earnings per share and The number of shares outstanding will increase
by 250,000
Participating preferred stock
Participating preferred stock allows the owners to share in the extraordinary earnings of a company. Essentially, participating preferred has a stated dividend, but these shareholders may receive more than that amount based on the profits of the issuing company.
Warrants will most likely be issued to:
Debentures may be issued with warrants attached. This allows the corporation to pay a lower interest rate on the debentures.
Preferred stockholders and rights offerings
Preferred stockholders are not permitted to participate in a rights offering. Only the common stockholders are permitted. Also they pay dividends quarterly
10 rights plus $10.50 are required to subscribe to one new share of stock Fractional shares become whole sharesMs. Jones owns 87 shares of the XYZ Corporation. How many shares can she subscribe to and how much will it cost her?
Which TWO of the following securities pay a dividend that is NOT eligible for the corporate dividend exclusion?
1.Common stock 2.Preferred stock 3.A real estate investment trust 4.A money-market fund 3&4
A registered representative receives an order from the president of XYZ Corporation to
sell unregistered XYZ shares. The client purchased the shares in a private placement 90 days ago. This order:
Is a violation of Rule 144 if executed b/c the client is affiliated and must hold for at least 6 months prior to selling
Your client is president of XYZ Corporation and is selling XYZ shares pursuant to Rule 144. A filing must be
made with the SEC:
At the time of the sale and is valid for 90 days
In a rights offering, an underwriter offers to purchase all the shares the issuing corporation may not be able to sell. This is known as a(n):
The company would like to be ready to sell the bonds quickly. It would also like the bonds to be as liquid as possible in order to attract investors. Which of the following choices is most appropriate for its needs?
A shelf registration under Rule 415; it's more liquid than Reg D private placement or intrastate 147
Volume and holding-period restrictions do NOT apply to the resale of private placements when:
The purchaser is a qualified institutional buyer (QIB). This is under rule 144(a) of Securities act of 1933
Why is the maturity of commercial paper 270 days or less?
Commercial paper has a maximum maturity of 270 days in order to be exempt from the registration requirements of the Securities Act of 1933. Most commercial paper is purchased by institutional investors.
An underwriting syndicate that offered a new issue at $21 could stabilize the offering at which TWO of the following prices?
20.90 21.01 21.20 20.20An underwriter can stabilize a new issue at or below the offering price. so 20.90 & 20.20
A registered representative's broker-dealer is an underwriter of an initial public offering of stock. The RR's father-in-law may purchase:
The IPO from a different broker-dealer
All of the following statements are TRUE concerning preconditions
for sale requirements under the New Issue Rule, EXCEPT:
The verification may be made through oral communication. It is done electronically PRIOR to the sale of the new issue and is reverified once a year with records dating back at least 3.
Winco Securities has made no guarantee that it will be able to raise the full amount of the offering. Which TWO of the following statements regarding this scenario are TRUE?
This is a best efforts underwriting and Winco is acting as an agent in this scenario since it assumes no liability for unsold shares
Which one of the following persons is permitted to purchase an equity IPO in her personal account?
1. The cousin of a registered representative 2. The mother-in-law of a registered representative 3. A portfolio manager of a mutual fund 4. A person employed by an insurance company who buys and sells securities (1) because a cousin is not immediate family, everyone else is considered restricted for bing in the industry
exception for corporations who has 80% of everything within the state. 100% of shares are to be sold within the state
Which TWO of the following persons may be permitted to purchase issuer-directed shares of an equity IPO?
employees of the issue and fam members of employees of the issuer
A corporation is planning to
issue new stock to the public but has not yet filed a registration statement with the SEC. As a registered representative of the firm that is expected to do the underwriting, you are permitted to take which of the following actions?
Discuss the offering with investment bankers at your firm. If they file the registration statement, then you can send out a red hearing (prelim prospectus)
Your firm is the managing underwriter of an initial public offering. How many days must the firm's research analyst wait before issuing a research report on this IPO?
40 days. If syndicate member, 25 days. if secondary offering, 3 days
Under Rule 144A, a registered representative is NOT
permitted to sell unregistered securities to which of the following?
An accredited investor! Because they arent considered a QIB, advisors are!!
A broker-dealer is underwriting an initial public offering (IPO) for a company that will be listed on the NYSE. The broker-dealer is required to deliver prospectuses:
For 25 days after the effective date
What is the maximum allowable percentage that may be sold above the original size of the offering through a Green Shoe option?
Rule 145 applies to a(n):
there is a restriction on the sale of both restricted and control stock.
(restricted=6m/o holding by anybody) (control= affiliate; no hold if bought in 2nd market. volume limits. Nonaffiliate, no volume limits after holding)
There is no limit placed on the number of registered shares an insider may purchase
Which TWO of the following investors would NOT be permitted to purchase shares of an IPO of KMF?
Restricted persons include finders and fiduciaries (such as attorneys and accountants) involved in the new issue as well as portfolio managers who buy and sell securities on behalf of institutional investors.
Which TWO of the following new issues may be purchased by an employee of a broker-dealer under the New Issue Rule?
An exchange-traded fund & convertible debt
An equity security that is distributed under Regulation S may be resold by:
Immediate sale in a designated offshore market 1 year hold to be sold in usa
45 defines certain types of reclassifications of securities as sales subject to the registration and prospectus requirements of the Securities Act of 1933
Dedicated Securities has been invited to join a syndicate selling a new offering of common stock. The head of the firm's syndicate department notices that the agreement among underwriters mentions a penalty bid. Which of the following choices is an example of a penalty bid?
Dedicated sells some of the issue to a customer, who later sells the stock back to the syndicate at the stabilizing bid, Dedicated will forfeit the concession on those shares
A designated market maker (DMM) may not accept which of the following orders?
Which TWO of the following statements are TRUE concerning a company that becomes delisted from the
NYSE or Nasdaq?
It may be quoted on the OTC Bulletin Board or Pink Market
Firm quotes may still be available
A market maker has displayed a firm quote of 15 - 15.50, 5 x 8 for a stock. If a broker-dealer contacts the market maker and wants to purchase 1,000 shares, how many shares is the market maker obligated to sell at 15.50?
15 - 15.50, 5 x 8 which means the MM is obligated to buy 500 @ 15 and sell 800 @ 15.50
The Securities Exchange Act of 1934 prohibits insiders from making short-swing profits. A short-swing profit is a profit made on stock held by insiders for less than six months.
Only for restricted stock (control stock bought in secondary market)
A customer is short 100 ABC at $120. The market is moving up sharply and the customer decides to cover her short position. The customer instructs her registered representative to cover the short position at the market on the close. The order:
A market-on-close (MOC) order will be executed as close as possible to the closing price of the day
When trading equity securities, the term dark pool is BEST defined as trading:
Between investors, allowing them to buy and sell securities anonymously without quotes being displayed
A customer is willing to accept a partial execution on an order to buy up to 800 shares of XYZ stock at 30. If the client does not want the unexecuted portion to be left open, this order should be entered as:
An immediate-or-cancel (IOC) order must be executed immediately but does not need to be executed in its entirety. Part of the order may be executed.
Orders placed in the market makers books?
The unexecuted portion of a day order or a GTC order is placed on the designated market maker's book. NOT HOLD orders give discretion to the floor broker
Which of the following interest-rate environments makes call protection MOST valuable to a purchaser
of bonds?
call protection would be most beneficial to bond holders in times of DECREASING interest rates because the call feature would most likely be exercised by the corporation, and since the call price is usually at a small premium above par, the holder would stand to benefit from a call
XYZ Corporation has issued $50 million 7% bonds at a premium. The bonds have a
current yield of 6% and a yield to maturity of 5%. An investor purchasing $1,000,000 face value of bonds at the offering will receive a yearly income of:
Relative to a convertible bond, which of the following choices will produce a desirable arbitrage situation?
If the stock is selling above parity, the value of the stock received from converting the bond is more than the value of the bond. An investor could sell the stock short and buy the bond, and then convert the bond and use the stock to cover the short position.
A corporation is NOT considered to be in default if it fails to pay interest on which of the following bonds?
A 7% convertible bond has a conversion
ratio of 40. The bond has a nondilutive feature and the common is selling at $43 a share. If the company distributes a 10% stock dividend, which of the following statements is TRUE regarding the convertible bond?
conversion ratio x 10% = 44. $1,000 (par value) / 44 = $22.73. Conversion ratio increases and conversion price decreases
If a
corporation is in liquidation, the holder of a subordinated debenture is paid: ture is paid:
After bank loans and after accounts payable (but before stock holders)
Which TWO of the following statements are TRUE regarding brokered CDs sold by registered representatives?
These instruments are insured by the FDIC if the issuer (bank) declares bankruptcy. These instruments are covered by SIPC if the broker-dealer declares bankruptcy
For a new municipal issue, which of the following choices is the responsibility of the underwriting syndicate?
To submit the official statement to the MSRB's EMMA system
In a new municipal issue, what is a group order?
An order allowing all members to benefit
Which TWO of the following statements are TRUE about a divided account?
It is called
a Western account & Each member is liable only for its own participation in the syndicate
A municipal securities broker-dealer has a control relationship with an issuer. When selling the bonds subject to the control relationship, the broker-dealer must disclose this relationship to customers:
Prior to the trade In writing at or
prior to settlement & For all accounts and for all types of transactions
Which TWO of the following statements are TRUE regarding the cash value in a variable universal life policy?
It can fluctuate with the performance of the separate account & Any loans taken will reduce the cash value