Series 7 Frequently Missed
Terms
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- Difference between declared and paid dividends
-
Declard dividends reduce working capital. WC=current assets-current liabilities. A declared dividend is a current liability.
Paid dividends do not affect working capital. current assets decrease as do liabilities b/c the dividend is removed. - A syndicate must first determine ___
- reoffering yields to determine if it can be profitable
- A bull spread consists of:
- Buying the lower exercise price and selling the higher
- A mutual fund is redeemed at:
- the next computed BID price
- The efficient Market theory is also called____ and states that:
-
Random Walks theory
That all information is already taken into account ona stocks price - Investment Companies must send _______ statements
- semi annual
- Transfer on Death means:
- Assets avoid probate but it is not a joint account
- What type of brokers are not found on the NYSE floor?
- Institutional block traders
- Money markets declare dividends:
- Daily and reinveest monthly
- Inactive accounts will receive____ statements
- quarterly
- A change in basis means: And will have a greater effect on _____ maturities:
-
Means a change in YTM
Greatest effect on longer maturities - Straight Life annuity has _____ cash flow and _____ risk
- Best cash flow, greatest risk
- Breadth of the market:
- ADVANCE AND DECLINE NUMBERS
- Rule 144 filing must take place ____ and is effective for_____
-
Time of sale
For 90 days - IRA trasfer of funds between truestees:
- Does not = a rollover or distribution, not subject to tax or penalty
- Max Keough investment
- 20% of income max $42,000
- Pink sheets show:
- Non NASDAQ OTC MArket makers, Bid/Ask
- Regulation A
-
Exemption from 1933 given to small offerings
< $5 million in 12 month period -
FDIC cover ____, _____
May not cover _____ -
Insures bank and thrift deposits
May not apply to CDs over $100,000 - Revenue Issues are generally ____ with issuer and underwriter
- Negotiated
- GP's may/may not lend money to partnerships
- May.
- Traditional IRAs mandatory withdrawals at ___.
- 70 1/2 and no more contirbutions
- Account registration period activities of account executive
-
CAN send preliminary prospectus and receive indications of interest.
CANNOT send research reports or accept orders or payments - Issue most associated with sinking funds
- Term Issues
- Allocation of bonds would be in the _____
- Account summary distributed after the sale of a new issue
- Disinflation is _____
- reduction in the rate of inflation
- Deflation is _____
- Reduction in cost of goods
- Subscription Agreement contains ______
-
Suitability
Signatures
Inquiries of purchasers - Certificate of Limited Partnership contains _____
- Liquidation priority
- Stopping Stock
- Can be performed by a specialist and d/n require the permission of exchange officials
- Private Activity Bonds are most often
- Revenue Bonds
- M1 Funds Are _____
-
Checking (demand deposits) and cash in circulation
=the money supply - Unit Investment Trust
-
Investment company
No management fee
Low sales charge
Fixed trust
Sahres issued to investors
Liquidated at some time by selling or allowing bonmds to expire - Regulation T applies to ___ accounts
- Cash and Margin
- Prime Rate is a _____ indicator
- lagging Others include: durations (unemployment), ratios(installment credit/personal income, trade inventories/sales), and changes (CPI, index of labor costs/output))
- OPening Sale applies to:
- seller or writer of an options contract
- Depreciation is for:
- sprading the cost of an asset over the recovery period
- For tax purposes a corporation can exclude a portion of dividends received from:
- 70% of Preferred and common stocks of other corporations
- Key Leading Indicators
-
S&P
Money Supply M!
New Housing
Interest rate spread
Initial unemployment
New orders - Quick Asset Ratio
-
Current Assets - Inventory
___________________________
Current Liabilities - NASD transactions must be reported ____
- In 90 seconds by the seller
- T Bonds can be covered in an options transaction by:
- Specific Treasury bonds
- There is no 2nd market for ____, _____, _____
-
Fed funds, Repos, T Bonds
There is one for commercial paper - Muni bonds are paid for on ____
- Settlement date (exempt from Reg T)
- The FICB ___
- Makes loans to farmers
- A Position Trader:
- maintains BD inventory and trades the firms account
- Creidt balance in a short market account=
- short sale proceeds + Reg T
- A listing of 8s09 for a bond would mean
- 8% coupon maturing in 09
- The 1940 act excludes __ (5) from the definition of an investment advisor
-
Broker Dealers
Publishers
Accountants \Lwayers
Government Securities advisers - Bonds priced at ____ rise more sharply than those at ____
- At a discount rise more sharply than those at premium
- Yellow Sheets are:
- Quotation service for taxable (corporate) debt
- Members of a syndicate whose customers sell back securities to the manager____
- May be penalized during the underwriting period
- Principal Only means:
- Registered in name of owner with all coupons
- ATC
- At close, or cancel
- the symbol s/s
- IMeans a 10 share lot and is used in low volume trades
- Who distributes a DPP?
- A syndicator
- The dow composite consists of:
-
30 industrial
20 transportation
15 utility - The symbol s:
- Indicates a round lot sale of 100
- GO Bond sources of revenue include
- taxes, license fees, fines
- A limited tax bond indicates
- a max tax rate
- A bond bought a discount and selling at a premium is an example of:
- appreciation (if sold it is a capital gain)
- Once created SMA ____
- Can only be reduced if used
- Rule 415
- Shelf registration = 2 years to comply with registration requirements after going public
- Profit on bond interest is-
- ordinary income
- Customers are charged interest on which balance in a margin account?
- The debit balance only
- Variable annuities require registration with:
- SEC and state insurance regulator
- AN insider is:
-
An owner of >10% of outstanding stock
Member of senior management or Board of Directors - When securities are used as margin collateral:
- The debit balance will equal the market value because no cash is deposited
-
A wash sale is triggered on bonds with:___, ___, ____
___, ___ are not factors -
Same issuer, coupon and maturity
Par and Yield are not factors - The index with 65 stocks is the:
-
Dow Jones Composite
DOW I=30
S&P=500 - The member discount is equal to:
- Total takedown
- Nominal Yield=
- Coupon
- Short swing sales are____
- capital gains by insiders selling stock within 6 months. Results in lawsuit.
- What security would ahve the least capital risk
- Bonds
- A nondilutive feature means
- If there is a stock split or dividend the conversion feature must be adjusted. The conversion ratio would be increased, price reduced and aumber of shares increased.
- IRA annual contribution limitation:
- 100% of earned income not to exceed 4500/4000. Retirement benefits and investment income do not count as income.
- Negotiable CDs
-
1,000 but typicall trade in 1 million
Issued by banks and secured only by banks credit
Maturities of less than 1 yr are common but the is no limit - T Bill Auctions
-
Weekly for 13/26 wk
Issued and traded at discount
Noncompetitive tenders are first, but not determined until competitive tenders are awarded - If a registered rep leaves a brokerage, ____ must occur.
- The account records must be amended. This does not require the approval of the customer
- DPP Subscription agreement contains:
- suitability standards, amount to contribute
- DPP prospectus contains
- Sharing arrangement, provisions for dissolution, GPs background
- Ina margin account, same day substitutions are ____
- netted against each other
- REITs
-
invest in mortgages or real estate (equity or real estate)
90% of income must be passed to shareholders - Municipal bid form contains ___, ___, ____
-
Signatures, coupons and the NIC
NOT reoffering yields - Dividends are / not required for listing on NYSE
- NOT
- In a forward stock split the number of shares ____ and par value ____
- Number increases and par decreases.
- MSRB rules are enforced by ___,___,___,___
- FRB, Comptroller, FDIC, NASD
- Payment of regulation T ocurrs:
- Transaction date + 5 days
- Good delivery of muni bonds can be in ____ forms
- Fully registered or bearer
- Quotes on the CQS
-
All listed securities
NOT non-NASDAQ - OCC risk disclosure document must _____
- Be delivered before approval for trading
- Mutual Fund shares settle
- SAme Day
- Under Rule 144, restricted securities can be sold at
- Any negotiated price between buyer and seller
- The seller of restricted securities must:
-
Conform to rule 144
Provide current financial information to prospective purchasers
Allow a brokerage to act as a agent or principal - A pre refunded bond will always be priced to:
- The first call
- REPOS
- dealer to dealer transactions collateralized by the individual security
- Withdrawals from a Qulaified variable annuity are ______
- Ordinary income
- _____, ____ and _____ are short term debt issues sold at a discount
- BAs, Commercial paper, T bills
- Denominations for negotiable CDs
- 100,000
- To qualify for max Mutual Fund sales charge it must offer
- Breakpoints, dividend reinvestment and ROA
- Block Size:
- full face value of bonds in the market
- NASD preconditions of sale
-
May not be orally transmitted
May be electronic
Are prior to the new issue sale
After vrification an annual negative consent is permitted - An inverted yield curve indicates:
- Interest ratesare High and Falling
- For bond options, 1 point=
- $1,000
- Rule 144 volume and holding restrictions do not apply to:
- Sales to qualified institutional borrowers
- Serial bonds are sold on a:
-
Yield basis/YTM
Term bonds are dollar bonds - NASD 2790 states that:
-
BDs may not purchase new issues of equity securities.
Exemptions are debt, investment company, mutual funds, ETFs, preferred stock - Secondary market joint accounts must:
- publish the same quotes
- The document required to open a cash account for a corportation is:
-
the resolution
Charter is required for margin accounts - Tennants in Common
-
Pass down holdings to the estate
JTWROS-does not - A BD may borrow what amount of customers margin accoun from the bank?
- The Debit balance
- A BD may rehypothecate what amount of a customers margin account:
- 140% of debit balance
- What amount of acustomers account must be segregated in a Margin account?
- All securities must be segregated (Market value-140%Debit)
- The NASD 5% markup does not apply to:
- Any security issued witha prospectus
- UTMA/UGMA ____ require supplemental paperwork
-
Do Not
They are common enough tha they are on most new account paperwork - The ____ department of the BD tenders stock
- Reorg department
- A mutual fund Net Investment Income =
- Interest + Dividends-expenses
- Refunded issues would most likely be those with _____ interest rates
- Higher
- Seminars must save waht information?
-
Date
Topic Sponsor - The biggest risk for Mortgage backed securities is:
- Prepayment
- Foreign currenct options expire-
- the Friday before the 3rd wednesday
- Discount bonds get their highest returns at
- highest call and shortets term
- Secondary muni offerings are found in ____, ____, _____ but not _____
-
brokers broker list
munifacts
dealer offering list
NOT bond buyer - Proxies are regulated by ____, required by ___ and ___ be sent.
-
Regulated by SEC under 1934
NYSE
must be sent by BD even if client doesn't want them - Working capital=
- Current assets-current liabilities
- current ratio=
- current assets/current liabilities
- Acid ratio=
-
cash+marketable securities
___________________________
Current assets - Debt to equity=
-
Long term debt + preferred stock
____________________________
Common stock equity - Cash flow=
- Net income + depreciation
- Earnings per share
-
Net income after pref dividends
____________________________
Common shares outstanding - P/E
-
Price of common stock
_________________________
EPS - Dividend payout
-
Div per share
_____________
EPS - Sharing arrangements in oil/gas programs:
-
cost revenue
Functional non ded %
Overriding 0 share
Revisionary 0 aft costs
Disproportionate % % - Restricted persons under rule 2790 include ____, _____, ____, _____
-
Immediate family members of member firm portfolio managers, owners of a BD, buy side traders
Aunts and uncles are NOT immediate - Income bonds require interest payments ____
- only if the corporation has earnings
- Purpose of writing covered calls:
- to increase the rate of return
- REITs are considered ____ and are ____ by state laws
-
Securities
Regulated - Income in a minors account is taxed:
- As it is received, not when they become an adult
- A gift of securities for a minors account will become the minors property:
- At the time of execution
-
Disintermediation describes:
It occurs when rates at ___ are ___ and money is ___. - money being withdrawn from banks and savings and loans and reinvested in higher yield money market instruments. Ocurrs when rates at banks are lower and money is tightening
- When interest rates move higher due to tight monetary policy the yield curve may___ causing ____.
-
Invert
Causing causing short term rates to be higher than long term - Negotiable CDs have a ___ yield than T bills which are of ___ quality
-
Higher
Better - MSRB rules state that in a negotiated sale the customer must be infomed of ____, ____, ______
-
Amount of underwriting spread
initial offering of each maturity
any fee received as agent for issuer - GDP is___
- total value of goods and services produced in one year
- Fully paid customer securities held at a firm must be:
- segregated and identified
- Funded debt is:
- long term corporate debt with more than one year to maturity