SIE EXAM
2 levels of qualification and reg
1. RR: generally sales personell enaged in securities business activities, 2. Principals: officers and managament or supervisorypersonal
The effect of the business cycle on securities market
Interest rate changes- bond holders need rate of return thats better than rate of inflation- calculate real interest rate
Series 99
Operations Professional- client onboarding, receipt and delivery of securities, prep and fill regulatory reports
Net Asset Value
tells you the market price for a share of a mutual fund. The NAV of the fund is calculated regularly. However, the price that it trades for on the exchange is determined entirely by supply and demand. This investor demand can lead to a closed-end fund trading at a premium or a discount to its NAV. A premium price means the price of a share is above the NAV, while a discount is the opposite, below NAV, value.
open market operations
the buying and selling of government securities to alter the supply of money- federal open market committe overses- for FRB most flecible and easiest to reserve mostly treasury bills- to influence money supply
Series 82
Registered Rep exam for PRIVATE SECURITIES OFFERINGS Limited Representative (18-461)
State registration (blue sky)
The securities, the underwriters, and the bankers themselves must all be appropriately registered in all states where the securities are sold. These state securities laws are referred to as "blue sky" laws. Unders Uniform securities act-
Gross Domestic Product
The total value of goods and services produced within the borders of a country during a specific time period, usually one year. biggest measure of output - output og all good or services produced in US without regard to producer- ex: gdp in us includes toyota plant in columbus ohio - includes consumer spending investments gove spending and net exports
Gross National Product
The total value of goods and services, including income received from abroad, produced by the residents of a country within a specific time period, usually one year.
non reg CANNOT
accept customer orders,
discount window
an arrangement in which the Federal Reserve stands ready to lend money to banks in trouble
Keynesian Theory
an economic theory stating that the government can stabilize the economy- that is, can smooth business cycles- by controlling the level of aggregate demand, and that the level of aggregate demand can be controlled by means of fiscal and monetary policies
Options
contracts that give investors the right to buy or sell stock and other financial assets at a particular price until a specified future date
buy gov secuirites in open market
increase money supply decrease interest
Futures
is a derivative because its value is affected by the performance of the underlying asset. contracts to buy or sell commodities at a particular date in the future at a price specified today
Series 50
municipal advisor rep
form u4 arbitration disclousires
person agrees to use arbitration as the process for resolving disutes that invovle employer or member firm ppl
series 57
securities trader- nasdaq equity trading OTC equity and proprietary trading
There are two classes of derivative products
"lock" and "option". Lock products (e.g. swaps, futures, or forwards) bind the respective parties from the outset to the agreed-upon terms over the life of the contract. Option products (e.g. interest rate swaps), on the other hand, offer the buyer the right, but not the obligation, to become a party to the contract under the initially agreed upon terms.
waiver
disqualified person can use waiver and apply from an SRO to reenter secruities industry, but can only be granted in an eligibility proceeding- if granred must notify SEC - SEC can overturn
inactive status- military duty
during period not permitted to function as RR or contact customers, can be compensated on securities transactions executed by clients- exempt from continuing eduction, not subect to 2 year inactive limiation
equities as an inflation hedge
equity mutual funds etfs and veriable annuities provide best protection against inflation. Securities that have payemnts at set time and reamin unchnaged regardless of inflation rate are most affected- purchasing power risk
Activities of Non-registered Persons
extend invites to firm events, inquire as to whether customer wants to discusse investments w RR, inquire if prospective customer wants to receieve investment lit from firm
Limited partnership
form of partnership where one or more partners are not active in the daily running of the business, and whose liability for the partnership's debt is restricted to the amount invested in the business. he general partner oversees and runs the business while limited partners do not partake in managing the business. However, the general partner has unlimited liability for the debt, and any limited partners have limited liability up to the amount of their investment.
cyclical stock
has a market value that tends to reflect the state of the economy. ex: basic industries rubber steel constructions transportation, automovile, energy, manufacturing
Decrease margin requirements
increase money supply, decrease interest
decrease bank reserves
increasing money supply, decrease interest
Stock option
is a derivative because its value is "derived" from that of the underlying stock. While a derivative's value is based on an asset, ownership of a derivative doesn't mean ownership of the asset.
PE Ratio
market price per share/earnings per share. ex: ABC is trading at 180 per share and its earnings are 10 per share. 180/10= 18. Divident payout ratio = dividents per share/earnings per share. if dividend is 2, 2/20 = 20% divident payout ratio
GIFTS UNDER FINRA
may not provide gifts that exceed 100 to any oner person principal employee from firms if related to business
De Minimis Gifts
minimal value gifts- personal gifts not business like notepades, promotional gifts such as logo w firm on a t- must be ell below $100.
coincidental economic indicators
mirror moveoments of business cycle- employees on non agricultural payrools. personal income- transfer payments,
Unit Investment Trusts
money pooled from many investors that is invested in a portfolio fixed for the life of the fund
Fixed income investors fear inflation
more vulnerable than equity- dual risk to bondholders 1. rising interest wil cause market price of their holdings to fall, 2 purchasing power of their interest rates decrease- if higher rates foreseen bond investors will shorten their maturities ro minimize downward pricing pressure. or use TIPS
examples of closed end funds
municipal bond funds. These large funds invest in debt obligations of state and local governments and government agencies. Managers of these funds often seek broad diversification to minimize risk, but also often rely on leverage to maximize returns.
Expansion Phase
production, employment, and income are increasing, consu,ers borrow money to expand so rising interest rate
real interest rate
rate bond holder expecrs to receieve after allowing for decline of his purchasing power bc inflation. ex: buy 5 percent bond, while inflation rate is 2% his real interest is 3%. Yield- inflation rate-= real interest rate
margin requirement
s the percentage of marginable securities that an investor must pay for with his/her own cash. by increasing, FRB reduces amount of money that dealers and banks may lend causing money to tighten - least effective way to control credit- ontl affects securities transactions
repurchase agreements (repos)
short-term sales of government securities with an agreement to repurchase the securities at a fixed price from dealers it is lending monet and increasing money supply
growth stock
stock from growing at faster rate than overall economy - often reinvest earnings to keep expanding and pay little dividends to bondholders, riskier than others, have high PE ratio and low dividend payments
value stocks
stocks that tend to have lower price-earnings ratios and are priced low in relation to company's fundamentals- dividental yeild, earnings per share, sales to price earnings, etc - undervalued by investor=- risk is there may be a reason why undervalued and ignored by investors= which results in price not to rise- contrarian= not popular
Real GDP
the production of goods and services valued at constant prices- key measure of aggregate acpn activitie- rising gdp means econ growth and potential inflation
money supply
the quantity of money available in the economy
Increasing bank reserve requirements
tightens money, increase interst
Form u6
used to report disciplinary actions and final arbitration awards against an RR or a firm
Lagging Economic Indicators
variables that follow, or trail, changes in overall economic activity; examples include the interest rate and the average duration of unemployment- change after economoy has gone thru given stage
Discount rate
what depository instituitons are chagred when brorow from fed reserve
Open-ended funds
- shares are issued and redeemed by the investment company at the request of investors - Investors can buy and sell shares at Net Asset Value (NAV) -An open-end fund is a diversified portfolio of pooled investor money that can issue an unlimited number of shares. The fund sponsor sells shares directly to investors and redeems them as well. These shares are priced daily, based on their current net asset value (NAV).
Classifications of common stock
- cyclical stock. defemsive stock, growth stock
principal designation needs to take one of these exams
- series 9/10: general securities sales rep- corp securities (equity and debt) investment company products, variable contracts- municipal securities, options, gov securities, DPP- CANNOT underwrite trade firm compliance - series 24: general securities princiapl: all areas of IB and securities. underwriting, trading, compliances, ads- CANNOT handdle municipal offerings -series 26: investment companies and variable contracts principle- compliance over sales of mutual funds, closed end (ipo only) variable annuities, variable life insurance - series 27: financial ops princioalL back office ops, books -series 51: municiapl funds securities limited principal: underwrite municipal sec, trade them, comm w customers safe keeping of securities, training reps - series 53: muncioal securities principal: underwrite municpal. tradee municpal, buy or sell to customers, advisory services, comm, clearning, safe keeping amnd trading
Central Registration Depository (CRD)
A computerized information system that is maintained by FINRA to provide registration information regarding broker-dealers and registered representatives concermning discipline history of RR
derivative
A contract between two or more parties whose value is based on an agreed-upon underlying financial asset (like a security) or set of assets (like an index). Common underlying instruments include bonds, commodities, currencies, interest rates, market indexes, and stocks. Futures contracts, forward contracts, options, swaps, and warrants are commonly used derivatives.
index
A group of similar stocks and bonds. Investors follow different market indexes to gauge market movements. The three most popular stock indexes for tracking the performance of the U.S. market are the Dow Jones, S&P 500 and Nasdaq Composite.
hedge fund
A private investment organization that employs risky strategies that often made huge profits for investors. edge funds may be aggressively managed or make use of derivatives and leverage in both domestic and international markets with the goal of generating high returns (either in an absolute sense or over a specified market benchmark). It is important to note that hedge funds are generally only accessible to accredited investors as they require less SEC regulations than other funds. Legally, hedge funds are most often set up as private investment limited partnerships that are open to a limited number of accredited investors and require a large initial minimum investment. Investments in hedge funds are illiquid as they often require investors to keep their money in the fund for at least one year, a time known as the lock-up period. Withdrawals may also only happen at certain intervals such as quarterly or bi-annually.
business cycle
Alternating periods of economic expansion and economic recession- expansion (recovery) peak contraction (recession) and trough
Selling Away
An associated person engaging in private Securities transactions without the employing broker/ dealer's knowledge and consent. This violates the Conduct Rules.required to disclose even if doesnt receive compensation
Firm Element
At least once per year, each firm must demonstrate to the regulators that it has analyzed and prioritized the training needs of its covered personnel and developed a written training plan. Covered person: any person w direct contract to customers in conduct of firms securities sales trading IB- app reg rquirements, suitability and sales practice considerations, gen investment features and associated risks
prime rate
COmmercial banks charge their best corporate clients
Which shares of preferred stock may increase the most if the value of the company's common stock appreciates?
Convertible preferred stock can be exchanged for the common stock of the issuer. For that reason, if the common stock's value increases, the market value of the convertible preferred stock will also increase.
when analyzing SD application
FInra considers nature of event, time that passed, if misconduct occured. aggravating events, nature of securities related activites, disiplianary history
Buying securities to stimulate activity and increase money supply
FRB buys- puts money in banking system to stimulate activtity
Federal Funds
Funds in the accounts of commercial banks at the Federal Reserve Bank- when bank has excess reserves lend addtional funds to borrowers (commerrcial banks) that are in deficit - short term over night pyrposes - money market instruments- MOST VOLATILE INTEREST RATE bc short term loan
fiscal policy
Government policy that attempts to manage the economy by controlling taxing and expenditure programs to maintain a stable growing econ. ex: in recession or trough may increase its spending (gov) to increase demand
series 52
Municipal Securities Representative- underwrite trade sale of municpal securities
open end funds examples
Mutual funds, hedge funds, and exchange-traded funds (ETFs) are types of open-end funds - Open-end shares do not trade on an exchange and are priced at their portfolio's net asset value (NAV) at the end of each day need prospectus
regulatory element
That portion of the securities industry's continuing education requirement that is administered in a 3 hour training session at a testing center. All RRs must complete a training session within 120 days of their second registration anniversary and every 3 years thereafter. RRs who fail to complete this requirement will have their registration deemed inactive
moral suasion
The effort to move others to a particular course of action through appeals to moral values and beliefs, without the use of enticements or force. thru public media
Series 7
The general securities registered representative license, which entitles the holder to sell all types of securities products, with the exception of commodities futures (which requires a Series 3 license). The Series 7 is the most comprehensive of the FINRA representative licenses and serves as a prerequisite for most of the principals examinations.- corp securities municpal funds options direct particiaption programs variable contracts allowed
FORM U4
Under SRO rules, each individual who seeks registration with a member firm must complete form U4. This form is filed with the Central Registration Depository (CRD). U4 Form contains information about the person and answers questions including residential and business history - criminal legal reg disciplanry actions, customer complains, civil judicial actions, terminations, finance events
leading economic indicators
Variables that predict, or lead to, a recession or recovery; examples include average weekly hours manufacturing, average weekling initla claims for unemplpoyment insurance. ISM index of new orders, manufacturing new orders, building permits, s and p index common stocks, ccredit indec, av consumer expectations of econ conditions
Form U5
When a registered representative resigns or is terminated from employment with a member firm, the firm is required to notify FINRA within 30 days by filing Form U5 with the applicable details. includes reasons for RRs departure and must be ipdated
Inflation
a general increase in prices and fall in the purchasing value of money. too much money chasing too few goods. Demand > Supply
Series 22
Registered Rep exam for DIRECT PARTICIPARTION PROGRAMS Limited Representative (18-461)- real estate oil gas and equip leasing limited partnershops and limited liability companies, s corps
RR persons required to participate in an industry mandated continuing education program- 2 parts
1. regulatory element" created and admin by regulators 2. firm element: responsibility of broker-dealer
Deflation
A situation in which prices are declining bc reduction in money or credit
Direct Participation Program
A type of investment whereby the results of a business flow through directly to the investors. Typically structured as a limited partnership. Has 2 classes of partners: limited and general. A direct participation program (DPP) is a pooled entity that offers investors access to a business venture's cash flow and tax benefits. Also known as a "direct participation plan," DPPs are non-traded pooled investments in real estate or energy-related ventures over an extended time frame.
Variable Annuity
Annuity that has a varying rate of return based on the mutual funds in which one has invested. a type of annuity contract that allows for the accumulation and disbursement of capital on a tax-deferred basis. There are two elements to an annuity - the principal, which is the amount paid into the annuity over a period of time, and the returns on that principal. Once an individual enters into a contract with the insurance company offering the annuity, they begin the process of paying into the account which is often termed the accumulation phase. The second part, and probably the one that is of the utmost importance to the investor, is the payout phase. This is triggered when the investor annuitizes the annuity, which is the process of converting this investment into a series of periodic income payments. Most annuities will not allow the investor to withdraw funds from that account once the payout phase has commenced.
exchnage rates and interest
As demand for dollars increases, price will (exchange rate) decrease, when us interst rates higher than foreign, leads to stronger dollar, decline in us interest rates= weaken dollar
series 6
Investment Company Products/Variable Contracts Limited Representative- purchase sell mutual funds closed end funds for IPO UITS variable annuities life insurance municipal fund securities
Statutory Disqualification
Prohibiting a person from associating with a self-regulatory organization because the person has been expelled, barred, or suspended from association with a member of an SRO; has had his registration suspended, denied or revoked by the SEC; has been the cause of someone else being suspended, barred, or having their license revoked; has been convicted of certain crimes; or has falsified an application or a report that he must file with or on behalf of a membership organization.- to hire someone who is SD, must file application w finra requesting permission thru eligbility prceeding
Increase margin requirements
decrese money supply/credit and increase interest
Consumer Price Index
The key measure of inflation- the change in the cost of buying a fixed basket of goods and services. If prices are rising, economy experiencing inflation - caused by rising interest rates. interest rate securities affected- utilities and fin servces companies.
Call Rate
The rate of interest a bank charges a brokerage firm on collateralized loans for its margin account clients
call rate
The rate of interest a bank charges a brokerage firm on collateralized loans for its margin account clients the investor receives scheduled debt payments from the underlying loans, assuming most of the risk in the event that borrowers default
Market Capitalization
Total market value of issuing company's outstanding shares, equal to share price times number of shares outstanding - large capitliazation stocks: more than 10 bil -middle: 2 bil-10 bil 0small 300 mill- 2 bill micro: 50-300 mill nano- below 50 mil example: 10,00,000 outstanding, 25 per share= 250,000,000 - micro
Real Estate Investment Trust (REIT)
Trust ownership of real estate by a group of individuals who purchase certificates of ownership in the trust, which in turn invests the money in real property and distributes the profits back to the investors free of corporate income tax. What it is: A real estate investment trust (REIT) is a closed-end investment company that owns assets related to real estate such as buildings, land and real estate securities.
peak phase
demand for goods overtakes money supplt large amount of funds by consumers w limited goods, prices rise, causes inflation, purchasing power decrese
yield curve
a graph showing the relationship between bond yields and maturities - during easy money when interst rates increase, yields on short term debt lower than long term debt securities, upward slope from shorter to longer (normal) - during periods of tight money, invetered, downward sloping- short term interest higher than those w long term interest
ETF (exchange traded fund)
a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. a collection of securities—such as stocks—that tracks an underlying index. The best-known example is the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 Index. -open ended fund
closed-end fund
a mutual fund with a fixed number of shares that are issued by an investment company when the fund is first organized- fixed amount of capital through an initial public offering (IPO) and then lists shares for trade on a stock exchange. Like a mutual fund, a closed-end fund has a professional manager overseeing the portfolio and actively buying and selling holding assets. Similar to an exchange-traded fund, it trades like equity, as its price fluctuates throughout the trading day. However, the closed-end fund is unique in that, after its IPO, the fund's parent company issues no additional shares. Nor will the fund itself redeem—buy back—shares. Instead, like individual stock shares, the fund can only be bought or sold on the secondary market by investors.
defensive stock
a stock that have smaller reaction to state in the economy- utility tobacco alc cosmetic food pharmaceutical- needde to exist
Mutual fund
an institution that sells shares to the public and uses the proceeds to buy a portfolio of stocks and bonds. Mutual funds are operated by professional money managers, who allocate the fund's assets and attempt to produce capital gains or income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus.
Both closed-end funds and open-end funds
are run by an investment advisor, through a management team that trades the portfolio. Both also charge an annual expense ratio and can make income and capital gain distributions to shareholders.
contraction phase
as prices rise demand diminshes and econ activity decreases- recession= employers lay off workers and unemploymen increase, rate at whch prices rising (inflation) deacreases (deflation)
Trough Phase of Business Cycle
bottom of econ decline, lower prices stimulate demnand and cause econ to move into a new period of expansion known as recovery
Commodities as an Inflation Hedge
commodities such as gold and silver perfrom well during inflation- get thru direct invesment in commondoties or futures/derivative products such as mutual funds and etfs
monetary theory
control supply of money and credit in economy- will affect interst rates and cause increase or decrease in econ activities- tighten or ease money supply. easy money policy = increase money supply at lower rates to stim econ, tight: reduce money supply- Fed reserve bpard, to raises rates, to diminish econ activity and control inflation
sell gov securities
decrease money increase interest
Selling securities FRB
decrease money supply - sell to banks and dealers - dealers pay by withdraw mioney from checking account
Increase discount rate
decrease the money supply, increase interest