SIE cheat sheet

transfer agent is responsible for:

- maintaining a record of the shareholders that are eligible to receive additional shares after stock splits - handling lost, destroyed, or stolen certificates - acting as a proxy agent

Roth IRAs:

- only IRA that offers tax-free distributions after age 59.5 - amount contributed is limited to the LESSER value of either 100% of earned income or $6,000 per year. - Non-deductible contributions and must satisfy a 5-year holding period

premium (> par value) vs. discount (< par value):

- premium: high price, low yield - discount: low price, high yield

Retail Communication vs. Correspondence

- retail communication: > 25 retail investors, broadest form of communication - correspondence: < 25 retail investors

broker-dealer's privacy notice includes:

- type of personal info. collected - fact that clients can opt. out of having their info. shared with non-affiliates - types of 3rd parties --> does NOT need names of other financial institutions listed!

one "basis point" is equal to:

.01% or 1/100th of 1% (I.e. 3 basis points = .03% or 3/100th)

a general partner must have at least _____ participation in profits/losses in a limited partnership to maintain status

1%

Total Return

= (ALL cash flow including dividends + appreciation - depreciation) / initial investment

12b-1 fees:

are used to cover the costs of distributing the shares, they are NOT used to cover the commissions cost of executing trades in the fund's portfolio

limited partner would jeopardize losing their limited liability if they..

assisted in the decision of which properties to acquire

industrial revenue bonds

backed by the corporation that leases the facility

institutional investors include:

banks, insurance companies, pension plans, endowments and hedge funds. NOT an accredited investor!

"in-the-money" S&P 500 index call options are:

settled at expiration in the delivery of CASH

cooling-off period allows for:

soliciting indications (non-binding) of interest

immediate family members who can borrow funds w/out approval include:

spouses, parents, children, siblings, and in-laws of RR

US Treasury notes are exempt from:

state/local taxes and are only subject to federal taxes since they are US government obligations

market risk is a form of ____________

systematic risk and cannot be avoided

529A or "ABLE" accounts have:

tax-deferred growth

selling dividends is prohibited because..

the amount of the dividend is already included in the price a customer pays for the fund

dollar-cost averaging

the avg. price of securities purchased will be more than the avg. cost of securities over a long-term period (price > cost)

opening an account for a new client:

the client's signature is NOT required on the new account form

Ex-date for stock

the first day stock trade without its dividend included in its price

short sale happens when..

the market value of a security decreases --> "bearish"

for a buyer of an option, the premium paid is considered:

the maximum risk (LOSS)

call rate

the rate commercial banks charge on loans to broker-dealers for margin purposes

"vested"

time when employees are eligible to receive some of the retirement benefits contributed to the plan by the employer

firm commitment

type of offering which the issuing corporation assured of receiving the full amount of offering and anything unsold is retained by underwriter

NASAA is responsible for:

updating state securities laws

hedging

using options to limit losses, to "hedge" an existing position --> BUY an option

interest on a revenue bond:

usually paid from earnings of the facility where the bond was issued at

interpositioning

when a broker-dealer places another broker-dealer between itself and the market

purchaser of a call option:

would limit the amount of money they could lose if the underlying stock were to decline

benefits of a 529 plan:

- beneficiary changes are allowed - contributions are after-tax basis - limit on the # of contributions --> varies by state

broker (agent) vs. dealer (principal)

- broker (Agent): buys from a market maker for others' accounts, charges commission - dealer (principal): buys from its OWN inventory/accounts, charges markup/markdown

private securities transactions:

- compensation must be approved in writing - if there is no compensation, then notify firm of person's anticipation - personal transactions are NOT covered by rule

delivering a prospectus for listed IPO vs. unlisted IPO:

- listed IPO: 25 days after closed deal - unlisted IPO: 90 days after closed deal

CIP

anti-money laundering compliance program, customer's identity must be verified within a reasonable period following the opening of an account

corporate resolution vs. hypothecation agreement for corporations

- corporate resolution: required for a corporation to open a CASH account - hypothecation: required for opening a MARGIN account

private placement

- exempt from SEC registration - limited to 35 non-accredited investors - general solicitation is prohibited - usually an illiquid investment

Form 10-K:

- financial info. about the company - annual filing - filed w/SEC within 60 days of end of fiscal year

IRAs vs. UTMAs vs. 529 plans and Roth 401Ks

- IRAs: tax-deferred withdrawals - UTMAs: are NOT tax-deferred withdrawals - 529 plans & Roth 401Ks: both are tax-free withdrawals but contributions are after-tax (non-deductible)

Margin accounts:

- NO extensions of time for maintenance calls - can lose more than deposited - cannot choose securities to be sold to meet margin calls - firm is not required to contact the customer when it sells securities

preferred stock:

- NO voting rights - fixed dividend, but no guarantee on dividend - board of directors declares dividends

two methods to sell 529 plans to customers:

1. sell directly 2. sold by an adviser

maximum amount of time an investor has on a letter-of-intent to meet a breakpoint is _____________.

13 months

if someone fails a qualified exam on the 3rd attempt in a row, wait time is _______.

180 days (6 months)

a person must provide written consent within _________ of being hired by a broker-dealer with already having a brokerage account on an online trading securities firm

30 days

Reg. D (private placements) may be sold to a max. of ______ ____________ investors.

35 NON-accredited investors, there is no limit on the amount of accredited investors

calculate public offering price (POP)

= NAV / (100% - sales charge)

how to calculate sales charge

= POP-NAV / POP

current yield

= annual dividend / current price

real interest rate

= current - inflation

transfers from one retirement account to another:

are unlimited and NO tax or penalties

Rule 147 (exemption rule):

applies if 80% of assets located within the state of selling assets, 80% proceeds are used within the state, and 80% of revenue derived --> 100% of purchasers must be residents of the state in order to qualify for exemption

bond trading at par value:

ALL yields (nominal, current, YTM) will be equal to coupon rate

hedge funds

are EXEMPT from the investment company act of 1940

ETFs (exchange-traded funds)

are based on stock indexes, have lower fees than actively managed portfolios

reinvestment risk

result of not being able to 'reinvest' funds at the same rate after a bond matures or is called

open-end investment company class A vs. class B shares:

Class A shares: front-end sales charge Class B shares: contingent deferred sales charge

European style vs. American style options:

European: can only be exercised on the expiration date American: exercised at anytime up until the expiration date

SRO rules:

FINRA permits a brokerage firm to put a temporary hold on a securities transaction

blue-sky laws

State Securities Laws; enacted to protect the public against securities fraud, regulates the offering and sale of securities, require registration of all securities, brokers, and brokerage firms.

breakpoint sale of a mutual fund at $100,000 would equal

a SOLICITED purchase at $99,000, just below the selling price

if a customer makes a complaint (FINRA rules)

a memo must be prepared describing any action. taken in response to the complaint. According to FINRA rules, complaint records must be kept for at least 4 years

proxy

allows shareholders to vote without attending the meeting

for mortgage-backed securities, a decline in interest rates leads to:

an increase in repayment of principal and/or refinancing

during a recession (declining inflation) the federal reserve should..

buy bonds in the open market

arbitrage

buying and selling a security on different exchanges to take advantage of price difference

an investor of a Variable Rate Demand Obligation (VRDO):

can receive par value + accrued interest prior to maturity

industrial production is a ___________________ indicator.

coincident economic, moves at the same time as the economy

ETFs transaction costs are considered _____________.

commissions

beneficiary of Coverdell ESA:

contributions are made up until age 18 and must be used by age 30

feasibility study

determines whether to issue a revenue bond or not

3-month and 6-month US treasury bills are sold by the Fed. reserve:

each Monday (weekly)

payout on a variable annuity is based on:

fixed # of annuity units with fluctuating value per unit

US balance of payments are due to:

foreign investments in the US (helps the US by directing money into the country)

DPPs

have steady returns and are non-correlated investments

ERISA eligibility

have to be age 21+ and have worked a minimum of 1,000 hours

integration

illicit funds that appear to be legitimate

a bond with a put provision benefits:

investors who do NOT want to hold a bond until maturity

Reg. T

is set by FRP (T+2) days after regular-way settlement

no-load funds' expense ratio is _______ than the sales load funds' expense ratio:

less than, because no-load funds cannot assess a 12b-1 fee that exceeds 25 basis points or 0.25% of its average net assets

if interest rates decline, then the market value of _____________ increases.

long-term bonds

variable life insurance policies are most concerned with __________ risk.

market

ETNs (Exchange-traded notes) have both ________ and _________ risk.

market and credit, since they are unsecured debt instruments traded on exchange

sales breakpoint

minimum dollar amount of a purchase where volume discount is given

Repos vs. reverse Repos (repurchase agreements)

most likely used by institutions that have a need to borrow on a short-term basis OR have money to lend on a short-term basis, reverse repo is also known as a "matched sale"

sector rotation

moving funds from one industry/sector to another as the economy changes

Form U5 requirements:

must list the reason for termination

a notice must be sent within 30 days to the customer if there are changes in _________, _____________, or _____________ in their account:

name, address, or investment objectives. - change in net worth is irrelevant!

for a bond trading at a premium..

nominal yield > current yield and current yield > YTM

REITs (Real Estate Investment Trusts)

non-exempt securities under the 1933 act and are NOT regulated investments, can be traded on either OTC or exchange

Ex-date for small stock dividends (< 25%) is:

one business day before the record date

a security with high beta (>1.0, high volatility) __________ the market when ___________ and _____________ the market when ___________. (vice versa with low beta)

outperforms when gaining, underperforms when losing

holders of both common AND preferred stock have..

outstanding equity

convertible preferred stock:

pays a fixed amount on a quarterly basis since preferred stock pays dividends and also allows the holder to profit if common stock rises (since it is "converted" into common stock it tends to move with the price of stock)

portfolio weighted with mortgage-backed securities are most subject to _____________ risk.

prepayment, as interest rates decline --> prepayments on underlying mortgages increase

straight-life payout option for variable annuities:

provides maximum cash flow of ALL payout options --> receives payments as long as the annuitant lives

fed. funds rate

rate a bank charges another bank on a short-term (usually overnight) period, this rate fluctuates the most because of its shorter-term

rights of accumulation

reduces sales charge by adding up all purchases towards a breakpoint