Flashcards
The range is the difference between the security’s high and low price, for a particular period of time.
The process of charging a substandard risk a higher premium, assuming that they are older than they are.
A policy issued at a higher premium to cover a person classified as a greater-than-average risk, usually due to impaired health or a dangerous occupation.
Determined by the underwriter, the insured’s rating is their premium classification for life or health insurance.
Bonds are rated for safety by various organizations such as Standard & Poor’s and Moody’s. These firms rate the companies issuing bonds as to their ability to repay and make interest payments. S&P ratings are from AAA, AA, A, BBB to C or D, with AAA representing the highest rating and C or D representing a company in default.
A REIT is a pooled investment vehicle that holds either buildings or mortgages or a combination of the two, in its portfolios. REITs may be listed or unlisted. Listed REITs trade in the secondary market and are used to expose an investor to real estate as an asset class. A mortgage REIT has mortgages in its portfolio. An equity REIT owns properties and depends upon rental income to be successful. It is the hybrid REIT that would have both mortgages and properties in its portfolio.
A realized gain occurs when an investor sells a capital asset for more than its cost basis. Realized gains are taxable. The rate at which the gain is taxed depends upon the investor’s holding period.
Rebating occurs when the agent (producer) returns part of their commission to the insured as an inducement to buy the policy. Rebating is a prohibited trade practice under insurance law.
A recession is an economic contraction that is defined by at least two consecutive quarters of decline in GDP.
The record date is the date on which the corporation determines which stockholders are eligible for dividends. All stockholders of record on that date receive the dividend even though they may subsequently have sold their stock.
A disability that recurs within 90 days of when a person returns to work. There is no waiting period.
Red flags are warning signs. Broker-dealers must have anti-money laundering programs that are alert for red flags. Privacy requirements also require financial services firms to look out for red flags related to identity theft and misappropriation of client funds.
A red herring is a preliminary prospectus used for informational purposes only. It cannot offer a security for sale. Also known as a preliminary prospectus.
Open-end mutual funds issue redeemable securities. Redeemable securities do not trade in the secondary market. The transfer agent of a mutual fund must redeem mutual fund shares within seven calendar days of the request, at the price next determined after the redemption request was received.
Redemption of a mutual fund share is the return of a client’s interest (net asset value per share). By law, open-end mutual fund shares must be redeemed within seven calendar days.
A form of insurance available as a non-forfeiture option. It provides for continuation of the original insurance plan, but for a reduced amount, without further premiums.
A written order from your primary care doctor for an insured to see a specialist or get certain medical services. In many Health Maintenance Organizations (HMOs), the insured must get a referral before they can get medical care from anyone except their primary care doctor. If they don’t get a referral first, the plan may not pay for the services.
A refund life annuity is a life annuity that provides that a guaranteed number of units will be paid. If the annuitant dies before they are paid, the remaining units are paid to a beneficiary.
Refunding is a procedure in which the issuer of a bond retires the debt by using the proceeds received from the sale of another debt issue.
A registered options principal is responsible for approving new clients who desire to engage in options trading. This approval must be in writing.
Broker-dealer firms must have at minimum two registered principals unless the firm is a sole proprietorship (then it can have only one). Series 24 is the license to be registered as a general securities principal. Firms must also have at least one individual registered as a financial and operational principal (series 27). If the firm offers options trading it must also have at least one registered options principal (series 4). It is the registered principals of a firm that are responsible for managing and supervising the daily activities of the firm.
The term registered representative refers to the individual who works for the broker-dealer in the securities or investment banking business. Registered representatives are registered with FINRA. At the state level, these same individuals are referred to as agents.
The registrar is the entity that keeps track of the issuer’s outstanding securities.
When an issuer has not sold securities across state lines before they must follow the rules of registration by coordination, under the Uniform Securities Act. Registration by coordination is a form of dual registration, with a full registration statement being filed at both the state and federal levels. The security may be sold in a state when it is cleared for sale federally by the SEC.
When an issuer has sold securities before and will be selling more securities across state lines they must follow the rules of registration by notification, under the Uniform Securities Act. A full registration statement must be filed with the SEC, but at the state level, a short form of registration may be filed (notice filing). The new issue may be sold in a state when it is cleared for sale federally by the SEC.
Registration by qualification is used when an issuer will be selling new securities in one state only, and intrastate offering. The full registration statement is filed with the Administrator. The security may be sold in the state when it is cleared for sale by the state. A security that has been registered by qualification may only be purchased by residents of that state for the first six months. After six months, the issue is freely saleable across state lines.
Before securities can be offered to the public, they must be registered under the Securities Act of l933. The statement that discloses all the pertinent information about the corporation that wants to make the offering is the registration statement. This statement is submitted to the SEC in accordance with the requirements of the l933 Act.
A regressive tax is the same no matter a person’s income. Sales tax is a regressive tax. Regressive taxes hurt low-income earners.
Regular way settlement is a type of delivery that allows for one full business day following the trade date for the broker-dealer to deliver the securities and for the buyer to pay. Regular way settlement is set by FINRA under the Uniform Practice Code. All securities (stocks, corporate bonds, Government bonds, and options settle T + 1 business day.
A regulated investment company is an investment company that follows IRC Subchapter M, acting as a conduit for income distributions. If 90% of income is passed through to shareholders, the company is not subject to tax on the distributed earnings, only on the earnings that the company retained. If the company does not meet the 90% minimum then 100% of the fund’s net investment income is taxable at the fund level.
SEC Regulation D is the federal private placement rule. A private placement is a type of securities transaction in which very specific rules are followed. A private placement allows for the legal sale of unregistered non-exempt securities. Regulation D allows for the sale of securities to an unlimited number of accredited investors and up to 35 non-accredited investors.
Title V of the Gramm-Leach-Bliley Act (GLBA) required that the SEC and certain other federal agencies adopt rules relating to the privacy of nonpublic personal information of consumers and customers. Regulation S-P includes the securities industry’s privacy rules.
Regulation T is the Federal Reserve Board regulation that governs the amount of credit brokerage firms and dealers may extend to clients for the purchase of securities in a margin requirement. Regulation T sets the initial margin requirement at 50% of the market value or $2,000 whichever is greater, not to exceed the value of the securities being purchased. Regulation T also governs cash accounts by establishing the latest that a customer can pay. A customer purchasing securities must pay no later than by the end of the fourth business day following the trade date (when regular way is T + 2).
The Federal Reserve Board regulation governing loans by banks to brokerage firms to refinance clients’ margin accounts.
Regulatory risk is the risk that a change in regulations could harm the operation of a business.
In a margin account, the client pledges their securities in the margin account as collateral for the loan in a process called hypothecation. Rehypothecation occurs when the broker-dealer pledges those same securities again, this time to the bank, for the loan that the broker-dealer will then offer to the client in their margin account.
Restoring a lapsed policy to its original premium paying status, upon payment by the policy owner, with interest, of all unpaid premiums and policy loans, and presentation of satisfactory evidence of insurability by the insured.
Reinsurance occurs when the insurance company buys insurance on the risks it insures, done to reduce the insurance company’s risk.
For mutual funds, distributions (dividends and gains) may be reinvested in the fund to purchase additional shares instead of being sent to shareholders. Reinvested distributions are subject to tax. Reinvestment distributions increase the investor’s cost basis.
The remainderman is the person to whom the assets in the trust are distributed at the end of the trust’s lifespan.
Remuneration is money paid for work performed.
Term insurance that may be renewed, regardless of health, by paying the next premium based upon the insured’s higher age.
The act of replacing one life insurance policy with another. Replacement is perfectly legal if the rules are followed. Replacement that is to the detriment of the insured is illegal and called twisting.
Representations are the truth to the best of your knowledge. Life and health insurance applications ask the applicant to make representations.
A repurchase agreement is a device for using government securities as collateral for a short term loan; a borrower will sell an investor the securities with the agreement that he will repurchase the securities a few days later at a set price, higher than the original selling price. Repos are money market instruments.
Qualified plans, including traditional IRAs, are subject to the required minimum distribution rules. Unless a participant is still working, minimum distributions from the qualified plan must begin no later than April 1st of the year after the participant turns 73. This age is subject to legislative risk. The age for RMDs is set to rise to age 75 in 2033.
Rescission is the act of buying back securities from a client that were inadvertently sold in violation of state law. To rescind the contract is to make it go away. When offering a client the right of rescission, the registered representative must offer to pay what was paid for the security, plus interest (as set by the Administrator), minus any income received. An offer of rescission is good for 30 days. If the client does not take up the registered representative’s offer, after 30 days the client may no longer sue the representative.
The reserve requirement is how much cash and readily convertible into cash the bank must have on hand. It’s a percentage of the deposits held by the bank.
Funds held by the insurance company to help fulfill future claims.
A disability that affects the ability of a person to work full-time. Residual disability must be preceded by the insured’s total disability. Residual disability is more accurate than partial.