unit 1

how much interest in a company must you own in order to be considered a control person.

10%. if there is a 10% or more interest held by immediate family members then all those family members owning voting stock are considered to be control persons.

for restricted stock held by a non-affiliated, which of the following applies?

6 months holding., with sales allowed freely thereafter. for restricted stock held by non-affiliated, a 6-month holding. before any sale can be made applies. after the holding., sales can be made freely.

well preferred shares tend to be less volatile than common shares, one type of preferred is noted at being even more stable in price than others. this would be

adjustable rate. because the dividend payment adjusts to current interest rates, the price of the stock remains a relatively stable. in other words it is the return that fluctuates rather than the price.

straight preferred shares...

are non-cumulative and have no provision for paying missed dividends later. straight preferred shares have no special features beyond the stated dividend payment. any missed dividends are not paid to the holder, thus they are non-cumulative.

which of the following stocks would be defined as penny stocks?

bulletin board stock trading at $4 per share, OTC pink stock trading at $4 per share - a penny stock is a non NASDAQ listed stock trading under $5 per share if a stock is listed on an exchange or listed on NASDAQ it is not penny stock, regardless of price.

All else being equal which of the following preferred would pay the highest dividend? participating preferred. cumulative preferred. callable preferred. straight preferred.

callable preferred. callable preferred is the benefit to the issuer not the investor so callable has to pay a higher dividend than the others because the other features are neutral or benefit the investor.

which of the following statements is correct concerning currency risk when investing in an American depository receipt?

currency risk is still a factor when purchasing an ADR - ADRs are issued and pay dividends in US dollars eliminating the complications of currency conversion. however, ADRs are still subject to currency risk. why? The company pays dividends in its home currency, and the issuing bank pays out those dividends in US dollars. when the exchange rate changes, the amount these dividends in US dollar terms will fluctuate as well. also, the value of the ADR itself will rise and fall with the value of the underlying foreign stock which is partially due to currency swings.

what is the primary benefit for an American investor when purchasing American depository receipt ADR?

diversification. ADRs are a type of equity security designed to simplify foreign investing for Americans. ADRs provide American with an easy way to invest in foreign companies that might otherwise be difficult or impossible to own. The overseas exposure provides investors with additional diversification within their portfolio.

an American depository receipt is a

domestic security representing a foreign security in US markets. an ADR is a domestic security issued under US law and registered with the SEC. it represents ownership of non-US security. it is used to ease ownership and trading a boring securities in US markets for the US customers.

in the dividend disbursement process three of the four critical dates are determined by the board of directors but one is determined by either financial industry regulatory authority or OTC stocks or the exchange for listed stocks which one is it?

ex-dividend

The primary purpose of American depository receipts is to facilitate the trading of

foreign stocks in US markets

purchasers of common stock may generally look to all the following risks associated with that investment except

interest rate risk - investors in common stock face market risk, in that the market value of the security may fall, and business difficulties may lead to possible reduction or elimination of the dividend and even bankruptcy at leading two loss of principal. if the firm is bankrupted, a company's dead and preferred shares are considered senior securities and will have residual rights to corporate assets upon dissolution prior to common shareholders. interest rate risks applies to preferred shares, bonds, and other fixed income securities, but common stock generally bears little risk due to fluctuations in interest rates.

for registered shares held by an affiliate, which of the following applies? a 6-month holding period, with sales allowed freely thereafter. no holding., but volume limits always apply. no holding. or any volume restrictions. six months holding., with volume limits thereafter.

no holding., but volume limits always apply. - control stock would be registered shares held by an affiliate there is no holding period, but there will always be volume limits for as long as the individual is an affiliate.

for this election cycle, big trucks inc has three open board seats. Big trucks operates under a cumulative voting system. your customer owns 300 participating preferred shares of big trucks. he has...

no voting rights. your customer owns preferred stock. preferred stock carries no voting rights.

rules to protect the public during initial public offerings IPOs include all the following except... shares must be offered to the public at the public offering price. Members may not withhold shares for their own benefit. Members cannot take advantage of their insider status to gain access to shares for their own benefit. shares may be held to reward others who can direct business to the member.

shares may be held to reward others who can direct business to the member. - designed to protect the integrity of the public offering process, the rules ensure that members make a bona fide public offering of securities at the public offering price, do not withhold securities in a public offering for their own benefit or use shares to reward others in a position to direct future business to the member that members and their associated persons do not take advantage of their insider status to gain access to new issues for their own benefit at the expense of public customers. Note that this is an accept question.

rule 144 stipulates that after holding restricted stock fully paid for 6 months and affiliate may begin selling shares...

subject to volume restrictions within any 90-day period - rule 144 stipulates that after holding restricted stock fully paid for 6 months, and affiliate may begin to sell shares but it is subject to volume restrictions within any 90-day.

what is the tax status of a dividend paid to a US-based American depository receipt investor?

these dividends may be taxed at both the foreign country and the United States.

which of the following best describes the trade execution of American depository receipts?

trades are executed domestically in US dollars.