Flashcards
The Securities and Exchange Commission was created by Congress to protect investors. The SEC enforces all federal securities laws including the Securities Act of l933, the Securities Exchange Act of l934, the Trust Indenture Act of l939, the Investment Company Act of l940, the Investment Advisers Act of l940, and others. There are five commissioners on the SEC, appointed by the President and confirmed by the Senate. No more than three of the five can come from the same political party. They may not engage in any securities transactions during their time on the Commission.
The Securities Exchange Act of 1934 is the federal legislation that established the Securities and Exchange Commission (SEC). Its purpose is to provide regulation of securities exchanges and the over-the-counter market and to protect investors from unfair and inequitable practices. The SEA requires the registration of broker-dealers and registered representatives. The SEA is commonly referred to as the People Act.
A securities information processor is a system that consolidates trade and quote information related to U.S. equity securities.
The Securities Investor Protection Corporation (SIPC) is a nonprofit membership corporation created by an act of Congress to protect clients of brokerage firms that are forced into bankruptcy. Membership is composed of all brokers and dealers registered under the Securities Exchange Act of l934, all members of national securities exchanges, and most FINRA members. SIPC provides customers of brokerage firms that go broke coverage of up to $500,000 for their cash and securities held by the firm (coverage of cash is limited to $250,000). SIPC does not cover issuer insolvency or market risk.
The definition of the term security is quite broad. It does not include fixed insurance products or commodities. An investor that purchases a security expects that by the management of a third party, they will have more money over time. The term security includes any note, stock, bond, investment contract, debenture, certificate of interest in a profit-sharing plan or partnership agreement, certificate of deposit, collateral trust certificate, and all options.
A type of plan usually present in larger companies where the employer itself collects premiums from enrollees and takes on the responsibility of paying employees’ and dependents’ medical claims. These employers can contract for insurance services such as enrollment, claims processing, and provider networks with a third-party administrator, or they can be self-administered.
A self regulatory organization is an organization that has rules of conduct that it expects its members to follow. There are many SROs within the securities industry. FINRA is an SRO. All broker-dealers must be members of FINRA. Registered representatives are registered with FINRA. The MSRB and the CBOE are also SROs.
To sell is the act of conveying ownership of a security for money or other value.
A sell stop is an order that exists on the books of the specialist below the current market price. If a transaction occurs at the trigger price, the stop becomes a market order to sell. Sell stops can be used to limit a long position’s downside risk or they can be used to lock in profit when the inventory position for the stock is lower than the current market price.
Selling away is a prohibited practice. It involves a registered representative engaging in the securities business away from the employing broker-dealer.
Selling dividends is a prohibited practice under FINRA rules. It involves the practice of inducing the sale of investment company shares or common stock by use of an impending dividend. A registered representative must explain that the amount of the dividend is included within the market price and that the dividend is taxable to the investor. The market price will decrease by the amount of the dividend as of the ex-dividend date, resulting in a lower cost for the client. If the registered representative does not explain how dividends work it would be a violation of the rule that prohibits the selling of dividends.
Bonds and preferred stocks are senior to common stock regarding income distributions and repayment of principal upon liquidation of the company, they are commonly referred to as senior securities.
Simplified Employee Pension Plan. A SEP-IRA is a qualified retirement plan for the self-employed or a small business.
When purchasing a variable insurance product the insurer must keep the money contributed separately from the general investments of the insurance company. These accounts are called separate accounts. Separate accounts of life insurance companies must register as investment companies under the Investment Company Act of l940 and are set up as either unit investment trusts or open-end investment companies. There is no guarantee as to the rate of return in a separate account. The insured or the annuitant has the risk in a separate account.
A serial bond issue is one that is issued at once but with differing maturity dates. Most municipal debt offerings are serial bond issues.
A series of options are options of the same class with the same expiration date and the same exercise price.
The Series 24 exam is the general securities principal examination. A person holding this license is responsible for the supervision of the broker-dealer’s business.
The Series 26 exam is the investment company and variable contracts products principal examination. The Series 26 is a limited principal examination, overseeing only those individuals who hold a Series 6 license.
If the nature of a firm’s business includes options trading the firm must have at least one registered options principal (Series 4 exam). This principal will be responsible for supervising a member’s options sales practices with the public as well as the member firm’s investment banking and securities business as it relates to options.
The Series 6 is the investment company/variable products top-off exam. Holding an SIE and a series 6 license allows an individual to sell mutual funds and variable products.
The Series 63 is the agent’s license examination covering state securities laws, the Uniform Securities Act. Most states require a registered representative to hold a series 63 license, in addition to a product license.
The Series 65 exam is the investment adviser representative examination.
The Series 66 exam is the Combined State Law exam, allowing an individual holding a Series 7 to become both an investment adviser representative and an agent in one exam.
The Series 7 is the general securities registered representative exam. An individual holding an SIE and a series 7 license can sell all types of securities, except for commodities futures.
Different from a serial bond, a series bond is issued at once and matures all at once.
A series of options is a class of options having the same expiration date and exercise price. For example, all UTC September 40 calls.
A geographic area where a health insurance plan accepts members if it limits membership based on where people live. For plans that limit which doctors and hospitals may be used, it’s also generally the area where an enrollee can get routine (non-emergency) services. The plan may end the coverage if the enrollee moves out of the plan’s service area.
The settlement date is the date on which payment is made for the purchase of a security. FINRA regular-way delivery requires settlement by the next business day following the trade date (T + 1). FRB Regulation T requires settlement by the third business day following the trade date (allowing for two additional business days).
The several ways, other than immediate payment in cash, in which a policyholder or beneficiary may choose to have policy benefits paid. These options typically include the following:
Interest: Death benefit left on deposit at interest with the insurance company with earnings paid to the beneficiary annually.
Fixed Amount: Death benefit paid in a series of fixed amount installments until the proceeds and interest earned terminate.
Fixed Period: Death benefit left on deposit with the insurance company with the death benefit plus interest paid out in equal payments for the period of time selected.
Annuity (Life Income Payout): Death benefit plus interest paid through a life annuity. Income continues under a straight life income option for as long as the beneficiary lives or whether or not the beneficiary lives, under a life income with a period certain option.
Share identification is an accounting method whereby the shares selected for liquidation are identified in any order. Specific share identification is often the most beneficial for the investor.
With a shelf offering one registration statement is filed and the issuer is allowed to sell shares over a two-year period of time.
To short an option is to sell an option. To short a stock is to sell shares that the investor does not own, but has borrowed from the broker-dealer. Shorting a stock is only allowed in a margin account.
A short-term capital gain or loss occurs when the securities being sold have been held by the investor for 12 months or less. Short-term capital gains are taxed as ordinary income.
The short-term disability income policy provides benefits, often a portion of lost income, for a temporary time defined in the policy. The likelihood is that the insured can return to work or restore the lost income.
Savings Incentive Match Plan for Employers. A SIMPLE is a qualified retirement plan for a business with up to 100 employees.
A Savings Incentive Match Plan for Employees (SIMPLE) is a qualified retirement plan for small businesses. Employees vest immediately in employer contributions. Businesses with up to 100 employees can establish SIMPLEs. The employer can set the SIMPLE up to be an elective or non-elective contribution amount. Employees who earned $5,000 or more during the preceding year are eligible to fund a SIMPLE.
A simplified employee pension plan is a qualified plan for a self-employed person or small business.
A type of limited-payment policy that requires only one premium payment.
sinking fund is the money set aside to retire an outstanding bond issue.
Services from licensed nurses in a person’s own home or a nursing home. Skilled care services are from technicians and therapists in a person’s own home or in a nursing home.
Skilled nursing care and rehabilitation services are provided on a continuous, daily basis in a skilled nursing facility. Examples of skilled nursing facility care include physical therapy or intravenous injections that can only be given by a registered nurse or doctor.
SLM Corporation, commonly known as Sallie Mae (originally the Student Loan Marketing Association), is a publicly-traded U.S. corporation that provides consumer banking services. When it was first set up in 1973 it was a government entity that serviced federal education loans. It also originated federally guaranteed student loans and worked as a servicer and collector of federal student loans on behalf of the Department of Education. Then it became a private company and started offering private student loans. In 2014, Sallie Mae spun off its loan servicing operation and most of its loan portfolio into a separate, publicly-traded entity called Navient Corporation. Navient funds most of its operations by manufacturing student loan asset-backed securities; bundling loans and selling them to investors as financial instruments.
Social media includes online platforms that allow communications between financial services professionals, firms, and their clients. Social media platforms include Facebook, Instagram, TikTok, LinkedIn, and the firm’s website. Social media must comply with all applicable securities regulations.
Social Security provides financial protection, supporting Americans throughout all of life’s journeys. While working, a person pays taxes into the Social Security system. When they retire or become disabled, the person, their spouse, and the dependent children may get monthly benefits that are based on the reported earnings. Survivors may be able to collect Social Security benefits if a person dies. Social security includes various benefits including retirement, disability, survivor, and family benefits, as well as Medicare. Sometimes you will see Social Security referred to as OASDHI (old age, survivor, disability, and health insurance).
The amount an enrollee gets from Social Security Disability, Retirement (including Railroad retirement), or Survivor’s Benefits each month.
Social Security benefits based on a decedent’s record that are paid to their widow/widower age 60 or older, 50 or older if disabled, or any age if caring for a child under age 16 or disabled before age 22; children, if they are unmarried and under age 18, under 19 but still in school, or 18 or older but disabled before age 22; and parents if the decedent provided at least one-half of their support. An ex-spouse could also be eligible for a widow/widower’s benefit on the decedent’s record. A special one-time lump sum death payment of $255 may be made to your spouse or minor children.
Socially responsible investing involves choosing investments that meet certain requirements or that can pass a screening test. Socially responsible investing focuses on ethical investing and encourages corporate practices that include sustainability, limited environmental footprint, human rights, and diversity.
Soft-dollar compensation is non-cash compensation received by an investment adviser in exchange for brokerage transactions. Soft-dollar compensation is allowed when disclosed to the client in the firm brochure.
A solicited order is one in which the security was recommended to the client by either an agent or an investment adviser representative. Solicited orders must be suitable for the client.
A one-participant 401(k) plan is sometimes called a Solo 401(k), Solo-k, Uni-k, or a One-participant k. The one-participant 401(k) plan isn’t a new type of 401(k) plan. It’s a traditional 401(k) plan covering a business owner with no employees, or that person and his or her spouse. These plans have the same rules and requirements as any other 401(k) plan. With a solo 401(k) the business owner wears two hats: employee and employer. Contributions can be made to the plan in both capacities.