Series 27 Flashcards

Consumer price index
Terms Definitions
See expansion.
market capitalization
See capitalization.
See Consumer Price Index.
coupon yield
See nominal yield.
Rights expire in
30-60 days
Prohibited Communications
-Testimonial/endorsment of security made by 3rd party which is misleading is unlawful. Any presentation must state following:
if fee/compensation was paid for testimonial
if statment implies person is qualified by special experience/knowledge, qualifications must be listed
In statement "past performance doesn't indicate future results"
See real estate investment trust.
possession of securities
See control security.
Interest on muni bonds accrues_____Muni notes________
securities prices determined thru auction bidding, regulated by NYSE, b/d's must register with SEC & exchange members, trade only on NYSE floor
Ineligibility for
FINRA Membership
broker/dealer suspended/expelled from national securities exchange
broker/dealer barred/suspended for conduct inconsistent w/ just & equitable trade practices
broker/dealer enjoined by a court from engaging as investment advisor, underwriter, broker, dealer, or any connection w/ securities bus.
Board of Govenors refuse/discontinue membership to broker/dealer who make false/misleading statement of material fact on membership app.
Capital market
Segment of securities market deals in instrument with more than 1yr maturity (ie long term debt & equity securities)
earned income
Income derived from active participation in a trade or business, including wages, salary, tips, commissions, and bonuses.
equity (EQ)
Common and preferred stockholder's ownership interests in a corporation.
1. Call option--Right to buy (Bulls--expect up market2. Put option--Right to sell (Bears--expect down market)a. Buyer benefits from market movementb. Seller benefits from lack of movement
Who rates munis for marketability risk?
Convertible Bonds
Par Value / Conversion Px
Judas Iscariot
According to Matthew 10:4, who betrayed Jesus?
Sales Charge
-Expressed as % of public offering
-FINRA limits charge to 8.5% max
-if fund doesn't offer dividend reinvestment @ NAV, breakpts, & rights of accumulation than limit max. SC is 7.25%
-all fund expenses  reduce NAV
-SC not included in expense ratio b/cuz added to NAV/share to for sales price (NAV+SC=POP)
Sales Charge
Variable annuity contracts have sales charge requirement similar to that of mutual funds. Max. sales charge 8_1/2%.
Forward pricing
valuation process for mf shares, whereby an order to purchase/redeem shares is executed @ the price determined by the portfolio valuation calculated after order is received. Occurs @ least once per day 
Trust indenture
A written agreement b/twn insurer and creditor by which the terms of debt issue are set forth such as rate of interest, means of payment, maturity date, terms of prior payment principal, collateral, prorities of claims, and trustee
sales literature
Any written material a firm distributes to costumers or the public in a controlled manner (e.g., circulars, research reports, form letters, market letters, text for seminars).
As defined in securities law, an individual, corporation, partnership, association, fund, stock joint stock company, unincorporated organization, trust government, or political subdivision of a government.
a substantial fall in currency's value as compared to the value of gold or the value of another country's currency.
1. Marketable long term privilege to buy shares above the market2. Sweeteners
An individual represents an issuer in effecting transactions in corporate bonds
Short term muni notes are usually under__yr maturity. Issued at_______ with a stated interest rate.
Agency Basis
A transaction in which the broker/dealer acts for the accounts of others by buying and selling securities on behalf of customers. Syn. Agency Basis Related Item(s) Agent, Broker, Principal Transaction.
Calculating Equity
Market Value long
- Debit Balance
+ Credit Balance
- Short Market Value

= Equity
What happens to outstanding fixed -income securities when market intersts rates drop...
Prices increase
75-5-10 Rule
Open end portfolio to be considered diversified
-For portion total 75% of assets
no more than 5% total assets invested in 1 company
investment co. can't own more than 10% of a company's voting stock
no restrictions on remaining 25% of assets
Variable Life
All taxes deffered until payout period whether rates exceed AIR/not . Loans against cash value are not recognized as gains for tax purposes.
Board of Directors
1. Individuals elcted by stockholders to establish corp. management policies. Decides, among other issues if dividends will be paid to stockholders
2. Body govern NYSE composed of 20 member elected for 2yr. terms by NYSE general membership
fixed annuity
An insurance contract in which the insurance company makes fixed dollar payments to the annuitant for the term of the contract, usually until the annuitant dies. the insurance company guarantees both earnings and principal. Syn. fixed dollar annuity; guaranteed dollar annuity.
period certain annuity
Settlement option that allows the annuitant to receive payments for as long as he lives, but also designates a minimum guaranteed period (i.e., 10 or 15 years) for which he will receive payments. If death occurs during this guaranteed period, then payments will continue for the remaining years of the period certain to a stated beneficiary.
reinvestment privilege
A service provided by most mutual funds for the automatic reinvestment of a shareholder's dividend and capital gain distributions in additional shares.
credit risk
A risk that applies with debt securities (bonds). The investor has extended credit to the issuer when he buys their bonds. This is the risk that the issuer will be unable to pay the investor back.
conversion price
The dollar amount of a convertible security's par value that is exchangeable for one share of common stock.
equity security
A security representing ownership in a corporation or another enterprise. Examples of equity securities include: common and preferred stock; interests in a limited partnership or joint venture; securities that carry the right to be traded for equity securities, such as convertible bonds, rights, and warrants; and put and call options on equity securities.
defined contribution plan
A qualified retirement plan that specifies the amount of money that the employer will contribute annually to the plan.
ROTH 401(K)
1. After tax (NON-DEDUCTIBLE)2. NO 5 year waiting period requirement3. NO income restriction4. MUST withdraw by 70 1/25. Employer can match a ROTH 401(k) in regular 401(k) (This means that employer contributions ARE deductible)
Anyone who receives a fee or a percentage of the business for referring clients to an investment adviser but is not directly supervised by the adviser
Agencies are quoted on a _____________- to equivalent maturity treasuries
yield spread basis
Commercial Paper
* Short term unsecured corp debt maturing in 270 days or less* Most sold @ discount, but some is interest bearing* Denominations start @ $100,000* Directly Placed = Issuer sells directly to public* Dealer Placed = Issuer sells to dealer, who then sells to public* NOT issued by commercial banks
occur when GDP decreases for 6 consec qutrs (18 mo)
A stock that allows the holder to reduce the risk of inflation
the Gentiles
Who were the disciples not to go among?
Rule 3110 d
Written Complaints

Separate file of all written complaints of customer w/ explaination of action taken by member
Separate file of all written complaints and clear references to file containing correspondence related to them
Upon Death of Insured
-Proceeds exempt from federal income taxes but subject to federal estate taxes under following circumstances
insured owner of the life insurance policy @ time of death
no beneficiaries, estate was beneficiary
insured transferred ownership of policy w/in previous 3 yrs
payment date
day which declared dividend is paid to all stockholders owning shares on record date
Person who makes a gift of money or securities to another. Once a gift is donated, the donor gives up all rights to it. Gifts of securities to minors under the Uniform Gifts to Minors Act provide tax advantages to the donor.
regressive tax
A tax that takes a larger percentage of the income of low-income earners than that of high-income earners. Examples include gasoline and cigarette tax.
income bond
A debt obligation used when a company is reorganizing and coming out of bankruptsy.  This bond that promises to repay principal in full at maturity. Interest is paid only if the corporation's earnings are sufficient to meet the interest payment and if the board of directors declares the interest payment. Income bonds are usually traded flat. Syn. Adjustment bond.
    Sec Release
maintains person who gives advice and issues reports, analyses, & recommendations on specific securities is an advisor. Also includes financial planner, pension consultants, and sports & entertainment reps
As short term rates rise closer to Long term levels the yield curve...
flattens out
Federal Funds
Excess amount of cash on deposit a bank has that's required by FRB
(1) The paying off of debt in regular installments over a period of time. (2) The Ratable deduction of certain capitalized expenditures over a specified period of time.
Treasury bills are
sold at accution and mature at par
on the rock
Where did the wise man build his house?
Procedural Rules
Code of Arbitration
Rule 10101 - Matters Eligible for Submission
Rule 10100 - Failure to Act Under Provisions of Code of Arbitration Procedure
Rule 10102 - National Arbitration Committee
Rule 10104 - Composition and Appointment of Panels
Rule 10300 - Uniform Code of Arbitration
Rule 10302 - Simplified Arbitration
Administrative Provisions
Procedural Rules
Class A Share
Class of mf issued w/ front-end sales load. mf offers different classes of shares to allow investor to choose what type of sc they will pay
authorized stock
The number of shares of stock that a corporation can issue. The number of shares is stipulated in the corporation's state-approved charter and may be changed by a vote of the corporation's stockholders.
Consumer Price Index (CPI)
Measure of price changes in consumer good and services used to identify periods of inflation or deflation.
Compares the fund to the market - Beta - Beta > 1 -- more volatile (Works best for DIVERSIFIED funds)
1. Based on funds total assets (NAV)2. Maximum: 8.5%; Must be reasonable3. Pays for: a. agent b. Advertising & sales literature c. Fund investment adviser (portfolio manager)4. 12b-1 fees are: a. Reviewed at least quarterly b. Approved annually
Features of transferable securities
The stock certificate - indicates the number of shares owned by the investor

CUSIP Number - each issue of a stock or bond has its own CUSIP

Negotiability - shareholder can give, transfer, assign or sell shares that he owns with few restrictions
Effective Federal Funds Rate
Daily average of the interest rates many banks are charging for Fed Fund loans.
prune rate
base rate on corp loans at large US money center
those who disown him before men
Who will Jesus disown before God?
Financial Industry Regulatory Authority
Fromed July 2007 by merger of NASD & NYSE Regulation inc. It's the self regulatory agency organization for OTC securities market & members of NYSE
Dow Jones Industrial Average (DJIA)
The most widely used market indicator, composed of 30 large, actively traded issues of industrial stocks.
1. Best-efforts: No obligation to buy unsold securities (act as an agent)2. Firm Commitment: Buys entire issue and proceeds to sell it (acts as principal)3. All-or-none underwriter: Must sell entire issue or unsold issues become null and void4. Standby underwriter: Used in rights offerings (UNDERWRITER HAS BIGGER COMMITMENT THAN SELLING GROUP)5. Principal: An issuer that sells its own securities
A person that has no place of business in the state AND only transacts business with issuers, other BDs, financial institutions, or institutional buyers.
NOT a broker-dealer
Negotiable Certificates of Deposit
* Issued by banks in exchange for time deposits* Min. denom. = $100,000* Min. maturity is 7 days, non-callable* Issuer pays par plus accrued interest upon maturity* Jumbo CD is denom of $1 Mil or more
yield to maturity (YTM)
the annualized return of bond if hdlt to maturity
Forms Of Ownership of Mutual Fund Shares
Joint Tenants with Right of Survivorship
Tenants in Common
Trust Accounts
Custodial Accounts Under the Uniform Gifts to Minors Act
Unit Investment Trust (SAME THING AS CONTRACTUAL)---------------------------------------Need 2 Prospectuses (ONE for the plan & ONE for the fund)
The largest money market instrument is:
T billsAny treasury security with 1 year or less to maturity is considered a money market instrument
How do you calculate the current yield on a bond?:

A:Yield to maturity/ Par value
B:Yield to maturity/ Dollar market price
C:Annual interest payment/ Par value
D:Annual interest payment/ Dollar market price
Correct Answer: D

Rationale: The current yield on a bond is calculated by dividing the coupon by the market price of the bond. Choice A is incorrect because the current yield is calculated by dividing the coupon by the market price of the bond. Choice B is incorrect because the current yield is calculated by dividing the coupon by the market price of the bond. Choice C is incorrect because dividing the annual interest payment by the par value does not give the current yield. It gives the nominal yield.
Violations of SEC Rules & Act of 1934 subject to criminal penalty which includes misleading/false statements on any report or application. Maximum penalty for individual is ...
$1,000,000, imprisionment for 10yrs, or both.
What is the equation for parity price of bond?Parity price of stock?
Conversion ratio x stock market priceBond market value/conversion ratio
for this sums up the Law and the Prophets
Finish Matthew 7:12: "So in everything, do to others what you would have them do to you..."
How can you purchase HH bonds
only by trading in EE bonds, HH bonds pay semiannual interest
which of the following is appropriate justification to sell a stock short
to benefit from a decline in the price of the stock.
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