Flashcards
Straight preferred stock is preferred stock with no special features. Straight preferred stock is also called non-cumulative preferred.
When a security is held in street name it is held in the name of the broker-dealer and not the individual client. Securities are often held in street name to facilitate their trading.
The strike price on an options contract is the exercise price. It is the price the owner of a call can buy shares at. It is the price that the owner of a put can sell shares at.
Subchapter M is a part of the Internal Revenue Code setting out the tax treatment of a regulated investment company. It is sometimes referred to as the conduit theory or the 90% rule.
A subordinated debenture is a debenture that is junior to regular debentures in a corporate liquidation.
The classification of a person applying for a life insurance policy who does not meet the requirements set for the standard risk. An additional premium is charged on substandard risks to provide for the probability that such a person will have a shorter life span than a standard risk.
A successor firm takes over for another firm. Successor firms must file their own registration, either Form BD or Form ADV, but do not pay a filing fee until their first renewal. They are allowed to use the unexpired portion of the previous firm’s filing fee.
Life insurance policy wording that specifies that the proceeds of the policy will not be paid if the insured takes his or her own life within a specified period of time after the policy´s date of issue.
FINRA rule 2111 is the suitability rule. The suitability rule requires that a firm or associated person have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through the reasonable diligence of the member or associated person to ascertain the customer’s investment profile. The customer’s investment profile includes, but is not limited to, the customer’s age, other investments, financial situation and needs, tax status, investment objectives, investment experience, investment time horizon, liquidity needs, risk tolerance, and any other information the customer may disclose to the member or associated person in connection with such recommendation. A broker’s recommendation is the triggering event for the application of this rule. The three main suitability obligations are reasonable-basis, customer-specific, and quantitative suitability.
The support is the lowest the security’s price has been over time. Support is used by technical analysts.
A surety bond is a bond that is required under state law for agents. A surety bond protects clients against lost or stolen money or securities. Firms that meet the minimum net capital requirements are not required to post surety bonds at the state level
A suspicious activity report must be filed any time a firm or its registered representatives notice a client whose behavior is commercially illogical. SARs are filed with FinCEN electronically within 30 calendar days of the initial behavior.
A syndicate is a group of broker-dealers that is formed to handle the distribution and sale of an issuer’s security. The syndicate typically has one firm managing the underwriting effort. Each member of the syndicate is then assigned the responsibility for the sale and distribution of the issue. The syndicate is bound by the terms of the underwriting agreement.
Systematic risk is non-diversifiable risk. Systematic risk is born by the system and is not stock-specific. Market risk, interest rate risk, and inflationary risk are all types of systematic risks. Diversification by asset class may help reduce systematic risk.
TRANs are short-term loans that municipalities issue to address cash flow issues that are created when expenditures must be incurred before tax revenues are received. Cities may issue TRANs to aid the city in meeting its financial obligations before the receipt of property tax revenues. School districts may issue TRANs to pay for necessary expenditures before tax revenue is received.
TANs are used to finance the current operations of a municipality before receipt of taxes.
The investment’s tax basis is the amount of money in the investment that has already been taxed. Also called cost basis or just basis.
The tax equivalent yield is the rate of return that a taxable bond would have to earn to be equal to the yield found on a municipal security.
Tax-exempt commercial paper is a short-term, unsecured debt instrument issued by states and municipalities. Generally, the maturities range from 30 to 90 days, although there are maturities of up to 270 days that are possible. Interest payments on tax-exempt commercial paper are exempt from federal, state, and local taxes.
Tax preference items are items that must be added back when doing an alternative minimum tax calculation.
A TSA is an annuity program available to employees of certain non-profit organizations and public school systems. In a TSA part of the employee’s income is excluded from current taxation and used to purchase an annuity. The employee pays taxes when he begins to draw the annuity. Tax-sheltered annuities are also referred to by the IRC, 403b.
Technical analysis is a form of market analysis that utilizes charts and graphs to determine which securities to buy and sell and when. Technical analysis is often called quantitative analysis and the analysts that use this practice are referred to as chartists. Technical analysts will actively manage a portfolio. Technical analysts attempt to use the past to predict the future.
Tenancy by the entirety is a form of joint ownership allowed by married couples in certain states only. When property is held tenancy by the entirety each spouse individually owns the entire property with joint control over it. Both spouses must agree to any transactions when property is owned tenancy by the entirety.
Tenants in common is a form of joint ownership. Each owner has an undivided interest in the property but all the interests need not be equal. There is no right of survivorship. When one of the tenants dies, the interest passes on to the decedent’s estate, going through the probate process.
A tender offer is an offer from the issuer to the securities holders to buy the securities for cash or for cash and securities.
With a term bond issue there is a single maturity date for all of the bonds in the issue.
A type of life insurance that provides a guaranteed fixed or decreasing amount of life insurance for a stated time period or term. Guaranteed premiums usually increase annually with the insured’s age and term products do not accumulate cash value or surrender values.
This would be the third in line to receive the death benefit, after the secondary beneficiary.
A testamentary trust is a type of trust that is created by a person’s last will and testament.
A testimonial is a statement written by a client that is then used in an advertisement attesting to the great work done by a person or firm. In the securities industry, broker-dealers may use testimonials. If more than a nominal fee is paid, the advertisement must disclose the fact that it is a paid testimonial. Investment advisers have not been allowed to use testimonials historically.
The third market is the trading of exchange-listed securities in the OTC market, done to facilitate after-hours trading.
Insurance owned by a person other than the insured.
Time horizon is the length of time money will remain invested. When planning for a client’s retirement their time horizon is their expected lifespan.
Time value is a component of the cost of an option (premium). The longer that is left until the expiration of the option, the more the premium will be comprised of time value. Time value is determined by subtracting the option’s intrinsic value from the premium paid.
A tombstone is an advertisement that announces a securities offering. It identifies the name of the issuer, the type of security, the underwriters, and where additional information is available. It may be published as soon as the issue is cleared for sale.
A company’s total capitalization includes all of the stock and all of the debt issued.
The trade confirmation must be sent to the client no later than on or before the settlement date. It is usually sent the business day after the trade date. The trade confirmation includes the settlement date, details of the transactions, and any amount of monies owed.
The trade date is the day on which the terms of a transaction, such as price and quantity, are established. The transaction will be completed at settlement.
A traditional IRA is a retirement vehicle that may be funded annually, up to the limit, by anyone with earned income. The contributions made into a traditional IRA may or may not be tax-deductible, depending upon the client’s situation and current tax code. Traditional IRAs are subject to the required minimum distribution rules. Earnings in a traditional IRA are taxable as ordinary income.
A retirement account that may be funded by anyone with earned income.
A tranche is a class of bonds.
A transfer of risk shifts responsibility for losses from one party to another in return for payment. Insurance involves the transfer of risk from the insured to the insurer.
The transfer agent is the person responsible for issuing and redeeming shares of a mutual fund. The transfer agent will have custody of clients’ shares if certificates are not issued. The transfer agent also sends confirmations, distributions, and tax forms to the client.
Treasury bills are short-term government debt sold at a discount from face value. T-bills mature in periods of 4, 13, 26, or 52 weeks. T-bills do not pay periodic interest payments. The interest income is the difference between the purchase price and the face value of the bills at maturity. The bills are sold at auction, at which time the discount is determined. The bills do not carry a stated interest rate. Treasury bills make up the bulk of the money market.
Treasury bonds are long-term debt issued by the Treasury at face value. Bonds pay interest semi-annually and mature in a period of ten years to thirty years.
Treasury notes are medium-term Treasury debt sold at face value. Notes pay interest semi-annually and mature in one to ten years.
Treasury stock is issued stock that has been repurchased by the company. While the stock is held in the company’s treasury, it has no dividend or voting rights.
Trough is a phase of the business cycle. The trough follows the contraction. It is the low point of economic decline. It precedes the expansion (recovery).
An arrangement where property is held by a person or corporation (trustee) for the benefit of others (beneficiaries). The grantor is the person who establishes the trust. The trustee manages the assets in the trust, following the trust agreement.
The Trust Indenture Act of 1939 governs debt offerings. It requires all publicly offered, non-exempt issues to be registered under the Securities Act of 1933. Additionally, it requires that the debt be issued under a trust indenture that protects the bondholders.