Flashcards

A feasibility study considers the need for the municipal project.

A federal covered adviser is an investment adviser that is required to register at the federal level, with the SEC. Federal covered advisers are exempt from state registration.

A federal covered security must be registered federally but is exempt from state registration. Securities listed on an exchange and mutual fund shares are both federal covered securities.

The FDIC is a federal agency that provides deposit insurance for member banks. The FDIC protects the clients of insolvent banks.

Banks lend their excess reserves to other member banks, overnight, to meet reserve requirements, charging the federal funds rate. The federal funds rate is the most sensitive indicator of interest rate direction. The Federal Reserve sets a target for the federal funds rate.

Freddie Mac is a publicly-traded, government-sponsored enterprise. FHLMC was created in 1970 to expand the secondary market for mortgages in the United States. Freddie Mac issues corporate debt securities that are backed by loans for residential mortgages and are fully taxable at all levels of government.

Fannie Mae is an agency of the U.S. government that buys FHA and VA mortgages, then issues debt backed by the pools of mortgages. Interest paid by Fannie Mae is fully taxable at all levels of government. The bonds issued are book-entry and non-callable.

The Federal Reserve Board is a federal governmental body responsible for the country’s monetary policy. There are seven members on the FRB, each appointed by a President and confirmed by the Senate.

A fiduciary is a person in a place of financial trust.  The custodian of a minor’s account is a fiduciary. The trustee of a trust is a fiduciary. Section 404(c) of ERISA, Safe Harbor Provisions, defines a fiduciary as a person who can exercise discretion or control in administering and/or managing/controlling a plan’s assets.   Investment advisers must act in a fiduciary capacity in making recommendations to clients, fully disclosing all conflicts of interest.

A fill-or-kill order instructs the broker to fill the entire order right away, and if it can’t be filled in its entirety immediately, it must be canceled.

The final prospectus must be delivered to a client who is buying a new issue. It includes the price of the securities, the delivery date, and the underwriting spread.

Financial risk is a type of nonsystematic risk related to the financial health of the company that issued the security.  Financial risk is also known as credit risk or default risk.

The Financial Industry Regulatory Authority (FINRA) is the largest independent regulator for all securities firms and registered securities representatives doing business in the United States.  FINRA is dedicated to investor protection and market integrity through effective and efficient regulation of the securities industry.

FINRA Bylaws are the body of laws that describes how FINRA functions, defines its powers, and determines the qualifications and registration requirements for broker-dealers and registered representatives.

FINRA’s Department of Enforcement is a committee appointed from among the members of the FINRA that acts in accordance with the FINRA’s Bylaws, Rules of Conduct, and Code of Procedure to handle trade complaints.

A firm commitment is the most common type of underwriting agreement. In a firm commitment, the underwriter purchases the entire issue at a guaranteed specific price. The underwriter acts as a dealer and assumes the risk of resale.

A firm quote is an actual price at which a trading unit of the security may be bought or sold by dealers. The trading unit is 100 shares of stock or five bonds.

First in, first out is an accounting method in which the assets sold are assigned a cost basis from the first purchases, generally resulting in the largest gain, thus the largest tax bill due.

Fiscal policies are those policies set by the President and Congress designed to control the economy. Fiscal policies include tax laws and budgetary changes (government spending).

A fixed annuity promises to pay the annuitant a minimum guaranteed interest rate. Once annuitized a fixed annuity promises to pay a guaranteed income stream for life. Usually purchased to supplement retirement. Most annuities are non-qualified, funded with after-tax dollars.

A fixed annuity is a contract in which the insurance company makes fixed (guaranteed) dollar payments to the annuitant for the term of the contract (usually until he or she dies). The insurance company guarantees both the interest rate paid and the principal amount.

Fixed assets are those assets that have a physical quality. Fixed assets include land, building, and machinery. Generally, fixed assets are written down over time through depreciation, depletion, or amortization, depending upon the asset and applicable tax rules.

Fixed-dollar option is a mutual fund withdrawal plan pay-out option under which the client receives payment of a predetermined dollar amount monthly, for an undetermined time.

Fixed-percentage option is a mutual fund withdrawal plan option under which the client receives a payment equal to the liquidated value of a set percentage of the mutual fund account, monthly, for an undetermined time.

Fixed-shares option is a mutual fund withdrawal plan pay-out option under which the client receives payment of the value from the liquidation of a set number of shares, monthly, for an undetermined time.

Fixed-time option is a mutual fund withdrawal plan option providing for the liquidation of the client’s account by a set future time. Monthly payments will vary.

If a bond is trading flat it is trading without accrued interest. This is done if the issuer is in default, if it is a zero-coupon bond, or if the settlement date is the same as the interest payment date.

When the yield curve is flat, the yields on the debt, short-term, mid-term, and long-term are all about the same.

An arrangement through your employer that lets a person pay for many out-of-pocket medical expenses with tax-free dollars. Allowed expenses include insurance copayments and deductibles, qualified prescription drugs, insulin, and medical devices. The money put into an FSA is in pre-tax dollars. It is up to the employer if the money in an FSA must be used that year. The employer may choose to allow an individual an additional 2 ½ months to spend the money after the year’s end or allow a carryforward amount that varies by year.

Both floating rate and adjustable rate preferred stock have dividends that may be adjusted, the difference is the reference benchmark. Floating rate preferred stocks’ benchmark has historically been LIBOR (London Interbank Offered Rate – which is currently being phased out). Today floating rate preferred stocks’ benchmark is SOFR (Secured Overnight Financing Rate). The dividend payment is based on the benchmark, plus a fixed spread, which is primarily a reflection of the issuer’s credit risk. The calculation of the dividend and the linked benchmark rate is set when the shares are issued. The dividend typically has a minimum rate and a rate cap, to prevent the issuer from having to pay inordinately large dividends.

The flow of funds is a statement found in the bond resolutions of municipal revenue issues showing the priorities by which municipal revenue will be applied. Typically, under a net revenue pledge, the flow of funds in decreasing order of priority is operations and maintenance, bond debt service, expansion of the facility, and sinking fund for the retirement of debt prior to maturity. Under a gross revenue pledge, debt service is paid first.

A follow-on offering is when a corporation offers shares to the public after an IPO. A follow-on offering can be dilutive or nondilutive. In a dilutive follow-on offering, the issuer is selling new shares, causing the earnings per share to decrease. In a nondilutive offering, the shares being offered to the public are not new shares but shares that were already issued (often held by insiders and control persons). A nondilutive follow-on offering does not reduce earnings per share. A nondilutive follow-on offering is also called a secondary offering.

Foreign currency is a currency issued in a country other than the one in which the investor resides.

The foreign exchange rate is the rate at which one currency is exchanged for another.

A foreign insurer is one whose home office is in another state. The foreign insurer is doing business in this state.

 Form 1040 is an individual’s income tax form. It is due by April 15th. Sole proprietorships declare their business income on Schedule C of the owner’s 1040.

Form 1041 is the income tax form for estates and trusts. It is due by April 15th.

Form 1065 is the tax form for partnerships. It is an information return only. It is due by March 15th. An LLC taxed like a partnership would file 1065.

Form 1120 is the tax form for corporations. It is due by April 15th.

Form 1120 is the tax form for S corporations. It is an informational return only. It is due by March 15th.

Form 706 is the estate tax form, it is due within nine months of a person’s death.

Form ADV applies an investment adviser for registration. The form is filed either at the state or federal level. It includes Part 1 which is the application. It also includes Part 2A which is the firm brochure. Part 2B are brochure supplements, describing the investment adviser representatives. Firms that charge wrap fees must prepare Appendix 1 of Form ADV.

Form D is the form that is required to be filed with the SEC when an issuer is selling a private placement under Regulation D.

A list of prescription drugs covered by a prescription drug plan or another insurance plan offering prescription drug benefits. Also called a drug list.

A forward contract is a contract between two parties for the delivery of a commodity at a date in the future. Forwards are specialized contracts and are considered illiquid.

Forward pricing is a process used in pricing mutual fund shares for purchase or redemption. The client will always pay and received at redemption, the next price determined. The fund is required to determine its net asset value per share at a minimum once per business day, at the close of business of the New York Stock Exchange. The client purchases at the ask price, next determined, and redeems at the net asset value per share, next determined.

Forward pricing is a process used in pricing mutual fund shares for purchase or redemption. The client will always pay and received at redemption, the next price determined. The fund is required to determine its net asset value per share at a minimum of once per business day, at the close of business of the New York Stock Exchange. The client purchases at the ask price, next determined, and redeems at the net asset value per share, next determined.

The fourth market is where direct trading of securities between large investors occurs. The fourth market consists of alternative trading systems, many of which are dark pools. The fourth market is also referred to as the institutional market.

Fraud is the deliberate concealment or misrepresentation of a material fact.

Insurance fraud occurs when an insurance company, agent, adjuster, or consumer commits a deliberate deception in order to obtain an illegitimate gain. It can occur during the process of buying, using, selling, or underwriting insurance.