Securities Industry Essentials Exam
Political Contributions...
$250 total in 13 months
SIPC Coverage
$500,000 of which no more than $250,000 in cash per account. For brokerage accounts.
SARs trigger at...
$5000 or more
Regulation S-P (Privacy Notices)
-Enacted by the SEC to protect customer information -Deals with nonpublic information like SS numbers, transaction history -Firms must provide a privacy notice describing its privacy policies whenever a new account it opened and after that. -Reasonable opt-out methods must be provided to customers so information is not sent out to third party vendors. -Lastly firms must secure private information (locking laptops and computers, and locking document vaults)
annual training plan
120 days after second registration anniversary and every 3 years after
Window of time to re-qualify after leaving industry
2 years
Correspondence....
25 or fewer investors
FDIC protects
250,000 per person per account
What is the maximum number of nonaccredited investors allowed in a Regulation D exempt transaction under Rule 506(b)?
35
Top off exam for SIE after leaving industry must be completed before ____ amount of time where you will then retake
4 years
Stock rights expire after...
45 days
REITS not taxes at corporate level if...
75% or more in Real Estate and 90% or more to investors
Max Sales Charge in class A
8.5% of total Investment
Solicitations can occur..
8:00 am and 9:00 pm of the customer's time zone.
Fixed income pays...
A fixed rate of return (Preferred stock has a fixed dividend rate making it similar)
ADRs are taxed as
A withholding tax in the home country, also considered income
Rule 144
After 6 months, volume restrictions within 90 day periods for Affiliates or control persons. Max is greater of 1% of four week average or outstanding shares
M2
All of M1 + less immediate (liquid) forms of money to include savings, money market mutual funds, and small denomination time deposits under $100,000
An official customer complaint is...
Always written and must be kept by firm for four years after resolution
A call or put that can be exercised before expiration is
An American-Style option
Maturity Date for Bankers Acceptance
As short as 1 day, as long as 270 days
MSRB Rule G-37
Attempts to eliminate pay to play practice of making contributions to influence the directing of municipal securities business to your firm.
Treasury Reciepts
Brokers buy Treasury security and sell receipts against the principle and coupon payments.
Which securities give best dividends?
Callable to offset fear of potential call
Class A vs C shares
Class A are better for longer term, and also better for larger amounts
12b-1 fee associated with
Class C shares
Current Yield Formula
Coupon / Current Price
Tools of the Federal Reserve
D - discount rate O - open market operations R - reserve requirements M - margin requirements (Reg T)
General Obligation
Debt Securities meant for improvements for whole community, limits to protect taxpayers who fund principal
ex-dividend date
Dictated by FINRA
Age limit for 529
Doesn't Exist
Who can deliver U5 to new firm?
Employee or FINRA
What can you do with stock rights
Exercise, let die or sell
DPP Provides
Exposure to non-correlated assetts
Margin Requirements
FRB sets initial, FINRA sets maintenance
Regulation T
Federal Reserve Board regulation covering the extension of credit to customers by securities brokers, dealers, and members of the national securities exchanges. It establishes INTIAL MARGIN requirements.
T-Bills
Federal but no state and local Tax. Direct short term debt obligations of US Gov. Mature in one year or less (4 weeks min), bought at discount and redeemed at par instead of interest.
Interest on T-notes are taxed...
Federal but not state level
For Bankruptcy...
Filers are protected by the court from creditors. Protection is granted independent of any actions to liquidate or file a plan for reorganization.
Closed-End Companies may not sell.....
Fractional Shares
Prospectus types
Full, Summary, SAI (State of add info), omitting prospect
Money Markets are...
Highly liquid, short term maturities
Do commodities trade in Financial Markets
Hmm..no!
Tax changes are what kind of risk?
Legislative
Reverse stock split gives you more or less shares?
Less
Surplus in balance of payments
More money flowing into the country than out. If the U.S. is selling more goods to foreign countries (exporting) than our consumers are importing, we will have more money coming in than going out. When credit exceeds debit. THINK ABOUT EXPORTS THE MONEY COMES HERE
When do Options Settle?
Next day
Can Systematic Risk or Non systematic risk be mitigated?
Non-Systematic can be mitigated. Systematic is unavoidable and impacts entire market.
Can you broker and deal on same txn?
Nope, never
Treasury Receipts
Not backed by US gov but by broker dealer
Pink Quote
Not very liquid, thinly traded securities
Who oversees national banks?
Office of Comptroller of the Currency (OCC)
Ex-date on a corporate dividend is...
One business day prior to record date
ESA (Coverdell)
Phases out high income, unlike 529s
3 steps of money laundering
Placement, Layering, Integration
How are options cleared?
Random selection, not an order
Prepayment Risk
Refinancing mortgages, income falls
Adjustment/income bonds used for companies...
Reorganizing
FEDs most powerful tool
Reserve Rate
1:4 is what kind of split?
Reverse
Rights/Warrants terms
Rights are short term; warrants are long term.
Capital gains formula
Sales proceeds - cost basis
CDs
Savings product you collect interest on. Penalties for withdrawing early.
An investor holding T-bonds will receive interest payments
Semi-annually
T-Notes
Semiannual interest as % of stated par value, Federal tax only
UITs
Similar to mutual funds but not actively managed or buying securities. Usually exist for a fixed amt of time.
Splits and dividends are standard or non standard?
Standard, a merger would be an example of non standard.
GNMA
State and local taxes, no federal. Gov owned corporation that supports dept of Housing, timing based on the mortgages securities are backed by
Municipal Bonds
Tax free interest, issued by State/Local Gov for public works and construction
M3
The broadest component of the money supply. Equal to M2 plus large time deposits.
M1
The most narrowly defined money supply, equal to currency in the hands of the public and the checkable deposits of commercial banks and thrift institutions.
Rule 2210
The rule allows the firm to require pre-use approval or allow for postuse review. If the firm allows postuse review, then the associates must receive education and training on communications with institutions.
Uniform Practice Code
The rules established by an exchange or securities association that establish proper methods and procedures for transactions between members
TOD
Transfer on death. Other ppl can access before but creditors will not have access to money.
Treasury STRIPS
Treasury Dept Reciepts separating interest and principle. Federal tax but no state and local
Financial Risk
Usually associated with debt financing and leverage
Warrant Prices vs Rights Prices
Warrants are often higher than stock at the moment while rights are often lower
recommendation
When a registered representative (or other associated person) provides information that a reasonable person would view as suggesting a course of action regarding a security, a class of investment, or an investment strategy, that person is making a recommendation.
Can mutual funds deliver fractional shares?
Yes
Face-Amount Certificate
You give money in lump sum or installments, they give you more later if you don't touch the money
increase marketability of bonds with..
a warrant
GPs should manage...
actively, day to day
Intangible drilling costs (IDCs) associated with oil and gas DPPs can generally be deducted...
be deducted completely in the first year of the program.
Keynesian economic theory
because prices are somewhat rigid, fluctuations in any component of spending—consumption, investment, or government expenditures—cause output to change
If a prospectus is being used to close a mutual fund sale, it must be given to the investor...
before or during the sales presentation
Convertible Preferred stock
can be converted into common stock. Fluctuates with value of common shares
Hypothecation Agreement
gives permission to the broker/dealer to pledge customer margin securities as collateral
Sellers do not...
have rights, they get premiums and obligations
A shelf registration...
is good for two years and requires a supplemental prospectus be filed before each sale.
Fully Disclosed Broker Dealer
is one that introduces its business to a carrying firm to clear transactions
If one of the numbers in a split are not 1...
it is an uneven split (moving from 500 shares to 400 is a 4:5 split)
To cover a margin call with securities
must be double call amount, if its a call for 3200, 6400 in margin-able securities must be pledged
No Load Shares...
no sales charge and are limited to a 12b-1 fee of 0.25% annually
If you make political contributions...
not provide advisory services to any government they represent for a fee for two years.
Cumulative preferred stocks
owe you missed dividends if you skip one
Treasury bills (T-bills) are
short-term debt obligations issued weekly.
Non-Discretionary Account
the broker has to contact you and get your permission before making any trades in your account
Discretionary Account
the broker is permitted to exercise their own discretion and make purchases or sales of securities without talking to you and getting your permission
Best Efforts Underwriting
the type of underwriting in which the underwriter sells as much of the issue as possible, but can return any unsold shares to the issuer without financial responsibility. In a best efforts underwriting the underwriters (syndicate) buy securities from the issuer acting simply as an agent, not as principal. This means that the underwriter is not committed to purchasing the shares and is therefore not at risk. The underwriter acts as an agent contingent on its ability to sell shares in either a public offering or a private placement.
Writing calls risk potential is...
unlimited
