Flashcards

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.

Flood insurance is insurance that compensates for property damage arising from flooding. The federal government is the primary underwriter of the coverage, which offers the coverage in federally designated flood areas. Flood coverage is excluded on most homeowners and dwelling fire policies.

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.

A certain amount of time provided (usually between 10-30 days) to an insured in order to examine the insurance policy and if not satisfied, to return it to the company for a full refund.

Freeriding is the buying and selling of securities, without fully paying for them. Freeriding is prohibited under Federal Reserve Board Regulation T.

A front-end load is a sales charge that is charged when mutual fund shares are purchased. Class A shares have a front-end load. The front-end load is included in the public offering price (ask).

Front running occurs when a broker-dealer or investment adviser places a trade for their own account ahead of a trade for a customer. Front running is a prohibited practice.

A frozen account occurs when an investor engages in freeriding. When an account is frozen under Regulation T subsequent transactions must be paid in cash in advance for the following 90 days.

A general obligation muni bond is backed by taxes. GO bonds are sometimes referred to as full faith and credit bonds.

A full power of attorney is a written authorization for someone other than the account owner to make deposits and withdrawals and to execute trades in the account. Also referred to as full trading authorization.

Fundamental analysis involves the study of an issuer’s financial statements, the overall economy, and the management of the company in an attempt to determine the value of the stock.

Funding is a requirement found under ERISA regulations requiring the employer to keep retirement plan assets segregated from the other assets that are owned by the business.

Specific life insurance policies or annuities having a low initial face amount (often $20,000 or less) that are designated by the purchaser for the payment of funeral and burial expenses.

Futures are contracts between two parties for the sale or purchase of a commodity. Futures are standardized and traded on an exchange.

Generally Accepted Accounting Principles (GAAP) are the accounting standards that public accountants must use in the United States.

The general account of the insurance company is conservatively invested and promises the investor a minimum guaranteed rate of return. Fixed annuities and traditional whole life utilize the insurer’s general account. The insurer has the risk in the general account.

A general obligation bond is a municipal bond backed by the general taxing power of the issuer. Payment of the obligation may be backed by a specific tax or just the issuer’s general tax fund. General obligation bonds are sometimes referred to as full faith and credit bonds.

In a partnership, there must be one or more general partners. The general partners have unlimited liability and are responsible for the management of the partnership. General partners are active and must maintain a minimum of 1% ownership in the partnership.

In a general partnership there are two or more general partners who have joint and several liability, fully responsible for the actions of the other general partner(s). General partnerships are flow-through tax entities with the partners receiving form K-1 annually with their percentage of the profits or losses.

Geopolitical risk is the risk associated with tensions or actions between actors (state and non-state) that affect the normal and peaceful course of international relations. Geopolitical risk tends to rise when the geographic and political factors underpinning country relations shift.

Good delivery is when the securities are delivered in such a form that the ownership is clearly assigned from the seller to the buyer and can be easily transferred. Good delivery includes proper assignment, good condition of the securities, the proper number of units, at the proper time, not in the name of a deceased person, and with a permanent certificate, if available.

When an order is GTC it is left on the order book until it is either executed or canceled.

Goodwill is an accounting entry made to intangible assets representing the reputation of the business.

Ginnie Mae is a wholly-owned government corporation. Its mission is to expand funding for mortgages that are insured or guaranteed by other federal agencies. Ginni Mae bundles these mortgages into securities, providing a full-faith guarantee. Ginnie Mae bonds are fully guaranteed by the United States government. Ginnie Mae instruments represent an undivided interest in a pool of FHA, VA, or FMHA mortgages that are fully taxable at all levels of government.

The time during which a policy remains in force after the premium is due but not paid. The policy lapses as of the day the premium was originally due unless the premium is paid before the end of the grace period or the insured dies.

The Gramm-Leach-Bliley Act seeks to protect consumer financial privacy. Its provisions limit when a financial institution may disclose a consumer’s nonpublic personal information to nonaffiliated third parties.