1 of 537
Definition
missed dividend payments don't accumulate, only current year
dividends need to be paid out before common stock owners
(preference is only for the current year)
-so if a company was not paying out full dividends bc the market
was poor, the year in which they are able to pay out the dividends,
they do not need to make back tracking (missing) payments and only
current year preference applies
Give this one a try later!
, firm specific rules outstanding stock
non cumulative preferred
treasury stock
stock
Don't know?
2 of 537
Term
why bond prices fluctuate from par (discount vs premium) (interest
rate risk/credit risk)
Give this one a try later!
par value differs from price investors pay to purchase the bond (market
price) although most are sold at par value
-if sold below par = discount
-if sold above par = premium
2 reasons why these discounts or premiums exist
1) interest rate risk: this implies that as market prices increase, investors will
not be interested in purchasing existing bonds at par since they're able to
obtain higher yields by purchasing new bonds SO existing bonds will need
to be offered at discount to attract buyers and conversely if I-rates fall, the
bond will trade at a premium since they can't get higher yields elsewhere
2) credit risk: recognition that issuer may default and may not be able to
meets obligations to pay interest and principal, those issuers that are a
higher credit risk must pay higher interest to induce buyers (lower bond
value if co. is risky)
, - under main suitability rule = 3 requirements
1) reasonable basis obligation= suitable for someone=a b/d shouldn't recommend
a product unless it is suitable for some of its clients
2) *MOST IMPORTANT* customer specific obligation=suitable for THAT client=a
recommendation is suitable for a particular customer based on investment
profile (not applicable to inst customers) when they say this may be suitable for
this client, but not for this one... they are exercising this... they look at the various
products available and decide what is suitable for this client
3) quantitative obligation=suitable for client in limited quantities=even if product
is suitable for the client maybe shouldn't have 80% of the portfolio in it
*buyer for all sellers and seller for all buyers*
DTCC: clearing services, guarantees settlement, completed through
computerized system, does not interact with customers JUST FIRMs, stocks and
bonds, no counterparty risk
OCC: the DTCC for options, options clearing corp, they issue/guarantee option
contracts and deals with brokers ONLY
both are triggered/activated when a trade occurs @ or through the stop price (a
price set by the investor). but may not provide protection bc possible they won't
execute
-sell stop orders will activate at stop price or lower
-buy stop orders will activate at stop price or higher
-once stop order activated --> it becomes a market order and immediately is
executed. the risk is you don't know the price
-once stop limit order is activated (when you enter a stop and limit price... once
stop is activated it becomes limit...) --> becomes a limit order=uncertain
execution. risky bc it can be activated but never executed
Don't know?
3 of 537
Definition
, ** important to remember that they are still subject to antifraud
provisions of the 33 act (no one is exempt from this)....only exempt
from registration requirements****
1) there are exempt list of securities no matter how they are issued
2) there are exempt transactions (private placement)=way it's sold
not what is sold
1) us government/agency securities, municipal securities/securities
issued by banks or non profit organizations (have their own
registrations already, no need to double up), short term corporate
debt (maturities can't except 270 days), and securities issued by
small business investment companies
2) exempt transactions:
Give this one a try later!
MF broker dealer = brokerage firm (2
underwriter/wholesaler/distributor capacities)
exempt securities=ways passive (strategic) asset allocation
around registration with 33 act (3 kinds)
Don't know?
4 of 537
Definition
-for breakpoint sale: a violation is when an RR is trying to prevent
client from getting breakpoint by failing to disclose letter of intent as
Definition
missed dividend payments don't accumulate, only current year
dividends need to be paid out before common stock owners
(preference is only for the current year)
-so if a company was not paying out full dividends bc the market
was poor, the year in which they are able to pay out the dividends,
they do not need to make back tracking (missing) payments and only
current year preference applies
Give this one a try later!
, firm specific rules outstanding stock
non cumulative preferred
treasury stock
stock
Don't know?
2 of 537
Term
why bond prices fluctuate from par (discount vs premium) (interest
rate risk/credit risk)
Give this one a try later!
par value differs from price investors pay to purchase the bond (market
price) although most are sold at par value
-if sold below par = discount
-if sold above par = premium
2 reasons why these discounts or premiums exist
1) interest rate risk: this implies that as market prices increase, investors will
not be interested in purchasing existing bonds at par since they're able to
obtain higher yields by purchasing new bonds SO existing bonds will need
to be offered at discount to attract buyers and conversely if I-rates fall, the
bond will trade at a premium since they can't get higher yields elsewhere
2) credit risk: recognition that issuer may default and may not be able to
meets obligations to pay interest and principal, those issuers that are a
higher credit risk must pay higher interest to induce buyers (lower bond
value if co. is risky)
, - under main suitability rule = 3 requirements
1) reasonable basis obligation= suitable for someone=a b/d shouldn't recommend
a product unless it is suitable for some of its clients
2) *MOST IMPORTANT* customer specific obligation=suitable for THAT client=a
recommendation is suitable for a particular customer based on investment
profile (not applicable to inst customers) when they say this may be suitable for
this client, but not for this one... they are exercising this... they look at the various
products available and decide what is suitable for this client
3) quantitative obligation=suitable for client in limited quantities=even if product
is suitable for the client maybe shouldn't have 80% of the portfolio in it
*buyer for all sellers and seller for all buyers*
DTCC: clearing services, guarantees settlement, completed through
computerized system, does not interact with customers JUST FIRMs, stocks and
bonds, no counterparty risk
OCC: the DTCC for options, options clearing corp, they issue/guarantee option
contracts and deals with brokers ONLY
both are triggered/activated when a trade occurs @ or through the stop price (a
price set by the investor). but may not provide protection bc possible they won't
execute
-sell stop orders will activate at stop price or lower
-buy stop orders will activate at stop price or higher
-once stop order activated --> it becomes a market order and immediately is
executed. the risk is you don't know the price
-once stop limit order is activated (when you enter a stop and limit price... once
stop is activated it becomes limit...) --> becomes a limit order=uncertain
execution. risky bc it can be activated but never executed
Don't know?
3 of 537
Definition
, ** important to remember that they are still subject to antifraud
provisions of the 33 act (no one is exempt from this)....only exempt
from registration requirements****
1) there are exempt list of securities no matter how they are issued
2) there are exempt transactions (private placement)=way it's sold
not what is sold
1) us government/agency securities, municipal securities/securities
issued by banks or non profit organizations (have their own
registrations already, no need to double up), short term corporate
debt (maturities can't except 270 days), and securities issued by
small business investment companies
2) exempt transactions:
Give this one a try later!
MF broker dealer = brokerage firm (2
underwriter/wholesaler/distributor capacities)
exempt securities=ways passive (strategic) asset allocation
around registration with 33 act (3 kinds)
Don't know?
4 of 537
Definition
-for breakpoint sale: a violation is when an RR is trying to prevent
client from getting breakpoint by failing to disclose letter of intent as
