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Number of votes= shares owned times vacancies on board
Statutory voting= must divide votes equally among candidates
Cumulative voting= divide anyway you want
Class b stock= non-voting
Company issuing new security= corporate charter + registration statement with
Shelf registration= authorized shares can remain unissued for 2 years
Preferred stock= fixed income security
Participating preferred= get fixed preferred dividend + common dividend
Cumulative preferred= missed payments must be made up
ADR (American depository receipt) = bank holds foreign securities and receipts
trade in place(div. paid in U.S. dollar)
Warrant= long term call option
Standby underwriter= sells securities that were not sold through preemptive
Cumulative right value= (market price of stock-discount price)/(number of
Ex- rights (without rights= (market price of stock-discount price)/(number of
Stockholder cannot vote for dividends
Bonds pay interest Semiannually (interest/2)
Indenture for a bond (deed of trust) = legal agreement between issuer and bond
holder (includes: maturity, par, rate, collateral, callable/convertible features

and trustee who delivers interest payments)

Bearer (coupon) bond= whoever holds it gets interest
Fully registered= no coupons, whoever is registered collects interest
Book entry bond= owner only receives a receipt, and automatically receives
payments through database Term bond= bonds issued at the same time with the same
maturity (called randomly)(sinking fund) Serial bonds= bonds issued at the same
time with equal amounts maturing at different dates (called by longest maturity
Balloon bonds= more bonds mature at a later date (called by longest maturity
Series bond= issued in successive years with the same maturity date
Sinking fund= bank account that issuer deposits money to pay off debt (term
usually have mandatory) Pre- refunded= issuer has deposited money needed to pay
off the bond already in a sinking fund
Refunding= issues new bonds to repay outstanding bonds
Senior bonds= paid first
Open ended mortgage bond= can borrow money using same property as collateral
Collateral trust= backed by stocks and bonds owned by company
Guaranteed bond= backed by the assets of the issuing company as well as a
second company
Unsecured bonds (debentures) = last to be paid in bankruptcy since no collateral
Unsecured bond (income bond/adjustment) = don’t pay interest until company
become profitable (bankruptcies)
Equipment Trust= backed by equipment (used by transportation companies)
Zero coupon= discount bond (interest + principal not received until maturity
(“trades flat”)
Bond in default= when interest payments are late
Eurodollar bonds= foreign securities which pay interest and principal in dollars
In bonds: a point= $10 and a basis point= $0.10
U.S. Bonds are quoted in 32nds (“95.8”=95 and 8/32) can be shown as 95:08 or 95-
Nominal yield (coupon rate) = face interest rate on bond (face interest x par)
Current yield= face interest/ market price
(!=down ^=up) If bond is trading at par then premium, nominal yield (coupon
rate), current yield, yield to maturity and yield to call would all be equal
Junk bonds= moody Ba/ s+p BB
Corporate and muni bonds calculate interest using 30 day month 360 day year
Corp + muni bonds settle T+3 (business days)(360 day years)
U.S. bonds settle T+1 (actual days 365 day years)
First coupon if longer than 6 months= long coupon less= short
Accrued interest= add settlement date and then subtract from previous coupon
date (assume 30 day months) (be careful to remember business days) Calendar=
Jan+1 Feb-2 Mar+1 Apr+0 May+1 June+0 July+1 Aug+1 Sep+0 Oct+1 Nov+0 Dec+1
Put bonds= right to sell bond back to issuer
Ex: ABC 7s015-20= 7% callable 2015 and matures 2020
ZR20= zero coupon maturing in 2020
Conversion ratio for bond= par (usually $1000)/ conversion price
Parity= stock and bond are trading equally (worth the same)
T- Bills= mature in 6 months or less (sold at discount +non callable) (not
quoted in
T- Notes= 1-10 year maturity (pay semi- annually)
T- Strips (receipts)= 10-30 year maturity (sold at a discount + don’t pay
Non marketable: Series EE (DISCOUNT) +Series HH (semi annual interest)
Moral obligations= not directly backed by government
Mortgage Backed securities= Ginnie Mae ($25,000 min. + pays interest and
principal monthly) + Fannie Mae ($10,000 min.)/ Freddie Mac ($25,000 min.)
CMO= Diversifies between Fannie, Freddie and Ginnie (usually AAA)
PSA (public securities association)= Publishes statistics on prepayment +
risk Prepayment= early payment because of refinancing (interest rate decline)
Extension risk= bonds repaid later than expected (interest rate increase)
Plain vanilla Tranche= no special features
PAC (planned amortization class) Tranche= safest because has sinking fund
TAC (Targeted amortization) Tranche= sinking fund but is also callable
Companion (Support) Tranche= Absorbs risk of extension + repayment from other
tranches and there for has a higher interest rate and uncertain repayment date
IO (interest only) tranche= only pays interest never repays through principal
PO (principal only) tranche= pays principle but no interest
Z (zero coupon) tranche= longest maturity
Money Market= less than a year maturity
Capital market= Over a year
Commercial Paper= unsecured debt that is sold at discount and matures in under
270 days
Bankers Acceptance= Postdated checks used for import + export
Jumbo CD’s= minimum of $100,000 and can be traded like regular bonds (pays
Fed Funds Rate= rate of loans between financial institutions (fastest to change)
Effective Fed Fund Rate= average fed fund rate of all commercial banks
Libor= Average fed fund rate of foreign banks’ lending money to each other in
dollars REPO (repurchase agreement) = overnight loan (up to 90 days) that is
secured by T-bills as collateral (fed lends banks)
Reverse Repo (matched sale) = banks lend to fed and hold T- Bills as collateral
Interbank market= unregulated market for foreign currency transactions
CHAPTER THREE: Selling group= helps syndicate sell new issues without buying the
securities (no risk) Underwriting agreement types: 1) Firm commitment= unsold
securities are retained by syndicate 2) Best effort= unsold securities returned
to issuer----All or Non 3) Best effort= Mini- Max (minimum # issues must be
Stand by rights= back up underwriter in case any left-over shares (only for
Primary Offering= authorized but previously unissued shares (within 2 years of
Secondary Offering= treasury shares or shares held by insiders)
Combined offering=primary + secondary offering
Preliminary Prospectus (red herring) = Post SEC filing but pre-issuance
Prospectus = includes relevant info + earnings of current and 3 previous years +
use of money +business description + officers + potential benefits and risks
(can’t be used as an advertisement)
Final Prospectus = available after securities are issued
SEC puts a disclaimer on the prospectus saying: does not guarantee+ judge+
approve + recommend anything
Effective date= first day the security trades (decided by the SEC)
Investor buys security within 90 days after effective date in an IPO
Other types of offerings=within 40 days after effective date
New offerings must be paid in full (no margin) within the first 30 days
Trust indenture act 0f 1939= newly issued corporate bonds file an indenture with
the SEC Rule 145= in the event of major change a company must file a new
registration statement with the SEC Exemptions from listing with the SEC= U.S.
securities+ muni + commercial paper +
non-profit +banks issues+ insurance and annuity policies+ rule 147 offerings
within corporations own state) +reg A offering ($5million or less within 12
+ reg D (private placement/up to 35 unaccredited investors and unlimited
Accredited investors= Financial institutions+ insiders and family or owners of
than %10+ annual income over 200,000/ (300,000 joint) +Net worth over a
million+ Corporation worth over 5 million
Restricted stock= Private placement Rule 144= Restricted stock must be held for
at least 1 year After waiting period you can sell up to %1 of outstanding shares
or average weekly trading volume of the last four weeks whichever is greater
Must file a 144 w/ sec when selling and it is valid for 90 days
If selling 500 shares or less worth $10000 or less then exempt from filing a 144
Portal Market (rule 144a)= able to sell before a year to a qualified
buyer ($100mm+ in assets)
Blue Sky= Must be registered in the customers state
“Cooling off period”= 20 day period between registration of new issue and the
approval of the SEC Green shoe clause= Underwriters can indicate interest for up
to %15 more than securities available
Rule 145= Major changes in a company must re-file with SEC
Order of allocation= Pre-sale/ syndicate/designated/member (“please give Dave
Takedown= Profit for syndicate members
Reallowance= profit of non-syndicate sellers
Concession= Profit for selling group member
Managers fee= Fee received by managing under writer for a sale by anyone
Spread= Takedown+ Managers fee
Western Account Syndicate (divided) = each syndicate member sells what they are
responsible for Eastern Account (undivided) = If a firm sells all of their own
they are responsible for a percentage of the unsold (percentage of their
allotment in respect to total offering is reapplied to leftover shares)
Stabilization= Agreement to be a market maker Market out clause= ability to
withdraw from offering due to negative market conditions
Sticky issue= hard to sell
Hot issue= easy to sell
Debentures must be filed with the SEC CHAPTER FOUR
Unlisted Securities= only trade on the OTC
Muni +Gov’t bonds always trade on the OTC
Within the secondary markets:
1) First market= listed securities trading on an exchange
2) Second market= unlisted securities trading OTC
3) Third Market= Listed security trading OTC
4) Fourth market= Trading of securities between institutions without using a
broker-dealer Instinet= reporting system for the fourth market
Broker (agent)= does not use own inventory to execute trades
Dealer (principal/market maker)= uses own inventory
A firm must disclose if they are a broker or dealer for each trade (on receipt)
cannot be both for same trade
Commissions must be disclosed (markups/markdowns don’t have to be disclosed)
A specialist order of priority= 1) best price 2) which order was placed first 3)
if same
time and price then bigger order goes first Stopping Stock= Specialist
guaranteeing a certain price (only done with public orders)
Stops= immediately executed (becomes market order when triggered)
Limits= Specific price or better
Sop limit= when entered starts as a stop order and when triggered becomes a
order (wont execute until at a better price than order) Buy limit and Sell stops
(bliss) are reduced on dividend days (SLoBS remain the same)
Inside the market= highest bid and lowest ask (does not include stops)
Size of the market= number of shares available “inside the market”
Specialist can only bid inside the market
Immediate or cancel order= fill as much as possible and cancel the rest
Discretionary order= order without prior verbal permission carried out by broker
(need power of attorney) If an order does not include one of the following it is
discretionary: which security/ buy or sell/ quantity Not held order= order which
the rep has the ability to decide when to execute an
order at a price he thinks is right (power of attorney is NOT needed) (can’t be
executed by specialist)
Either Or= Execute one order and cancel the other Market on Close= Execute as
close to the market close as possible (cancelled if not executed at the close)
Market on Open= If order not executed on the opening price or better it is
Unsolicited order= customer order that rep never suggested
Tape A= NYSE listed stocks (shows all secondary market)
Tape B= Amex listed stocks (shows all secondary market)
Round lot= normal unit (100 shares)
ABC 9s15.50= 900 shares of ABC @ $15.50
.R/RT= Rights
.W/WT= warrant
.X=mutual fund
“SLD” on a ticker means a trade occurred out of sequence (can’t trigger stop or
limit) Super dot= System that by passes floor brokers and goes straight to
(used for 3 million shares or less and is only available to public customers)
orders CANT be broken up)
NASQAQ is divided into two parts: NASDAQ Global Markets= Largest and mostly
actively traded stocks that are OTC (majority of stocks) (can be bought on
margin) NASDAQ Capital Markets= actively traded stocks that don’t meet earning
requirements of NGM Level 1= shows inside of the market
Level 2= shows all bid and asks entered
Level 3= Allows market makers to enter their own quotes
Super Montage= System used by NASDAQ to automatically execute orders of under
1 million shares (bigger orders may be broken down) OTCBB (OTC bulletin board)=
FINRA’s quotation system for non- exchange traded securities
Pink sheet= newsletter for non- NASDAQ securities
Yellow sheet= newsletter for OTC corporate bonds
Blues list= newsletter for quotes of municipal bonds
Non-NASDAQ stocks are not marginable
Firm Quotes= entered by market makers
Backing Away= Failure to honor a firm quote
Subject (nominal) quotes= are subject to change
Workable indication= likely bid price
Firm with a recall option= used by a firm to give another broker-dealer a chance
sell the firms inventory and then both firms split commission. (Recall= time the
lending firm, must give before taking back the loaned security)(firm cant change
Long sale= sale of security an investor owns
Reg SHO= uptick rule on short sales
Threshold Security= FINRA determined non- liquid security. (If sold short must
delivered to buyer within 10 business days of settlement)
Tender offer= Arbitrage for Mergers and Acquisitions
Risk arbitrage= in anticipation of an acquisition or merger being short the
and long the one being acquired
Selling short against the box= selling short a security you already own
Securities Exchange act of 1934= created the SEC and made price manipulation
illegal Bonds are not shown on consolidated tape CHAPTER FIVE
Progressive tax= more you make the more you are taxed
Regressive tax= flat rate
Capital gains= profit when selling a security above price you paid
Short term= Capital gains made in 1 year or less
If net capital gains loss you can deduct up to $3000 dollars per year against
ordinary income and rollover the rest (no limit to how much you can roll over)
Ordinary income= Interest on bonds+ dividends
Cash dividends are taxed a maximum of %15 if stock is held for more than 60 days
In order to calculate loss/gain for taxes you must determine LIFO or FIFO and
the stocks sold with the first/last one bought If claiming a stock as a loss
cannot by back within 30 days (you can buy bonds+ preferred) Tax (bond) swap=
selling a capital loss bond and buying a new bond (higher coupon rate/shorter
maturity/ better rating) while using as tax write off If corporation buys stock
(common or preferred) of another company %70 of dividends are tax free (if corp.
owns over %20 then %80 tax free)
Up to $13,000 per year in gifts per person is tax free
Cost basis gets transferred if gain but if market loss then new cost basis of
is market price on day of transfer (for gift and inheritance)
Withdrawals on retirement plans are taxed as ordinary income
Money withdrawn from a retirement plan before age 59 and a half has a %10 tax
Exempt from penalty if death or disability
Some plans allow early withdrawal in case of buying a 1st time home/ medical
expenses/ college tuition Payout must start the April that the investor has
turned 70 and a half (% 50 tax penalties on what should have been withdrawn)
Qualified retirement plans= pretax dollars+ withdrawals are fully taxed at
investors tax bracket Non-Qualified retirement plans= after tax dollars +
withdrawals are only taxed for
money beyond contributions (capital gains) (both plans are only taxed after
Keogh Plan (Hr-10)= self-employed income only + may deposit $49k per year and up
to %20 of gross income max. IRA’s= for employed people+ max contribution of $5k
w/ excess contribution taxed an extra %6 + joint account treated like two single
accounts with a $10k max If covered by another retirement plan deductions are
only possible for those making under $56k or jointly making under $89k Ira’s can
only invest in securities and not: commodities/ life insurance/ stamp and coin
collections Educational IRA (Coverdell)= $2k per child under 18 + must be used
before student turns 30
529 educational plan= by the state and similar to a Coverdell
SEP IRA= small business IRA where contributions are made by employer and
employee (all contributions are vested)
Vesting= pension benefits belong to employee even if they leave the company
Fixed annuity= fixed amount of payout
Variable annuity= variable and based on underlying portfolio
ERISA= act that regulates qualified retirement plans (only private pensions)
Defined contribution= variable benefit (based on portfolio)
Defined benefit= variable contribution
401k= percentage of salary is contributed by employee and sometimes employer
Profit sharing plans= percentage of company profits are placed in tax deferred
accounts for employee retirement
Deferred compensation= receives part of salary after retirement
Payroll reduction plan= part of employee salary is used to pay for mutual funds
that the company has the ability to acquire at a cheaper price Rollover=
transferring between retirement plans (must be done within 60 days of
withdrawal) (have to wait one year to rollover again) Trustee to trustee
transfer is without withdrawal Accretion= difference between market value and
par(when buying at a discount)-
difference is split over time until maturity and every year that amount of
is taxed as ordinary income and there is a new cost basis every time you add
Amortization= difference between market value and par (when buying at a
premium) - difference is split over time until maturity and every year that
amount of
amortization may be written as a tax write off while lowering the cost basis
Fundamental analysis=what to buy
Technical analysis= when to buy
Market risk= systematic risk
Business risk= non systematic risk which is based on company performance
Liquidity (marketability risk)= possibility of future illiquidity
Interest rate risk= possibility that interest rates will increase causing value
of bonds
owned to decrease
Reinvestment risk= risk of dividends and interest received
Purchasing power risk= risk of inflation
Capital risk= risk of losing all money invested (options)
Regulatory risk= legislative risk
Assets= liabilities + equity
Current assets = assets that are convertible into cash within one year
Fixed assets= assets that are not easily convertible into cash (land +
Intangible assets= assets based on reputation of a company
Current liabilities= debt owed within the year
Long term liability= debt maturing in over a year
Working capital= current assets – current liabilities
Current ration= current assets/ current liabilities (ratio of over 2 means
liquid) Quick ratio (acid test)= quick assets( current assets- inventory)/
current liabilities (ratio over 1 means liquid)
Net worth= total assets- total liabilities
Paid in capital= amount received over par for stock issue
Retained earnings= after expenses + interest+ taxes + dividends
Inventory turnover ratio= sales/ inventory cost (low turnover ratio means
inefficiency) Read pages 173 - 177 (balance sheet + income statement + EPS
ratios…) (empire training institute)
Blue chip stock= high earnings and high dividends consistently for several years
Cyclical company= performance depends on economy
Counter cyclical= companies that do well when economy is slow
Defensive= company that remains stable regardless of the economy
Utilities= are high leveraged and have good ratings (stock price is sensitive to
interest rates)
PE= Market price / EPS
Growth companies have high PE’s
Fed controls monetary policy (12 regional fed banks)
Interest rate increase= decrease in money supply (tight money)
Reserve requirements= percentage of a banks money that can’t be lent out
Discount rate= rate fed charges banks for loans (lowest possible rate)
Fed funds rate= rate that banks and financial institutions charge each other
overnight loans) Call loan rate= rate that banks charge brokerage firms to use
for customer margin accounts Prime rate= rate that banks charge their best
customers (usually corporations) Open market operations= most common tool that
fed uses to control money supply (controlled by the FOMC) Fed increases money
supply by buying T-bills and other securities from banks
M1= currency+ checking deposits+ NOW accounts (interest paying accounts)
M2= everything in M1 + savings + money market accounts
M3= everything in M2+ jumbo CD’s
Trade deficit= strong dollar + more imports than exports
Trade credit= weak dollar+ more exports than imports (more competitive)
Recession= mild 6 month decline in business and stock activity
Depression= 18 month economic decline
CPI= measures change in prices of consumer goods
Deflation= price of consumer goods decrease
Disinflation= when inflation rates decrease
Stagflation= increased inflation in a slow economy (price of commodities
increase is
common cause) Gross domestic product= sum of all goods and services produced in
an economy (considers inflation) Disintermediation= people take money out of
savings to put in to short term money markets (tight money is common cause)
Fiscal spending= taxes and government spending and use towards controlling the
economy Keynesian= theory that government should stay active through spending
and intervention to ensure economic growth Supply side= theory that governments
should stay inactive and let the economy grow by itself Monetarist= theory that
money supply needs to be controlled for economy to prosper Moral suasion= when
chairmen of the fed asks banks to expand or contract their lending levels
Economic indicators: 1) Leading indicators= how the economy is going to do:
money supply/ stock
prices/ fed funds rate/ discount rate/ reserve requirements/ housing and new
construction+ unemployment+ orders for durable goods
2) Coincidental indicators= how the economy is performing right now: industrial
production+ personal income+ GDP 3) Lagging indicator= mirror leading indicators
but reach peaks and trough at
later dates: prime rate+ call loan rate + corporate profits+ credit cards+
duration of unemployment
Contraction= high levels of consumer debt+ bearish stock market+ decreasing
GNP+ rising corporate inventories+ rising number of bond defaults and
Expansion then peak then contraction then trough Whip theory= change in interest
rates cause long term bonds to change more in price than short term debt however
short term debt changes more quickly
Breakout= when price breaks out of normal trading range by at least %3
Trading channel= area between resistance (upper portion of trading range) and
support (lower portion)
Advance-decline ratio= determines whether the majority of stocks are up or down
Odd lot theory= small investors are usually wrong so if odd lot volume increases
you should be bearish Short interest theory= based on number of short sales
because investors must eventually cover their shorts (if shorts increase then
bullish) Random walk/ dartboard/ efficient market theory= every security is
correctly priced and undervalue/ arbitrage does not exist Beta = volatility in
respect to overall market (beta>1 more volatile if beta=1 then equally volatile
if beta<1 then less volatile) Alpha(Sharpe ratio)= volatility of a stock in
comparison to that companies industry(large alpha means performed better than
expected compared to its beta) Accumulation/distribution line= tracks
relationship between stock price and trading volume
Moving average chart= line graph of prices of a security over a period of time
Capital asset pricing model= model that prices stock by evaluating risk to
return Narrow based index= tracks performance of a particular industry Broad
based= tracks an overall market
S+P 500=500 listed and OTC common
Wilshire= largest index tracking 6000 listed and OTC
Russell 2000 = index of small cap
Lipper= mutual fund index
DJ composite= 65 common stock (63 NYSE and 2 OTC)
DJ: Industrial (30) transportation (20) utilities (15)
Circuit breaker=NYSE will restrict trading if DJIA moves up or down dramatically
Rule 80a= restricts program trading if DJIA changes up or down by more than 2%
Rule 80b= all trading is halted for a period of time because of dramatic
decreases in
the DJIA Decreases in DJIA: 1) Level 1= declines by> 10%
2) Level 2= declines by >20%
3) Level 3= declines by at least 30% exchange halts for remainder of the day
Self-regulatory organizations: NYSE +NASD= FINRA
FINRA cannot imprison since note affiliated with the government
MSRB= regulates municipal bonds (can’t enforce its own rules)
Maloney act= created the NASD
Securities amendment Act established the MSRB
Discretionary account= registered rep can execute trades without verbal approval
of client (needs written power of attorney) Limited power of attorney= reg. rep
cant withdraw securities or cash without permission of customer
Full power of attorney= no restriction on transfer of assets
Corporate account needs: 1) tax ID of Corp. +copy of corporate resolutions+
corporate charter when opening a margin account Trust account= grantor opens
account for a beneficiary with the trustee managing the account+ need a trust
agreement when opening that specifies details on what type of assets+ when to
transfer Transfer on death= investor designates a beneficiary which avoids going
to court upon death Omnibus account= opened in name of reg. rep for customer
Uniformed gifts to minors account (UGMA)= 1 minor and 1 custodian per account+
minor is responsible for taxes (14 and over =pays at minors tax rate)+
registered in name of custodian for the benefit of minor+ securities can’t be
sold on margin or sold short+ anyone can give cash or securities and the
custodian cannot refuse+ custodian cannot allow rights received by account to
expire+ custodian cannot give anyone else power of attorney UTMA= extension of
UGMA that allows the account to receive art, real estate etc.
Fiduciary= anyone who makes decisions for another investor
Prudent man rule= fiduciary must act in the best interest of the investor
Legal list= state guideline of investments for fiduciary accounts
If customer dies firm needs copy of the following:
1) Affidavit of domicile 2) Letters of testamentary 3) Death certificate 4) An
inheritance tax waver Joint with rights of survivorship= if one investor dies
the remainder of the account belongs to survivor Joint with tenants in common=
if one investor dies their portion is transferred to their estate Partnership
account= if one partner dies: freeze account+ cancel open orders+ cancel power
of attorney Account transfer= customer must give notice to firms receiving
assets+ new firm
notify old firm+ old firm must verify instructions within 3 business days of
notification+ old firm must deliver securities within 3 business days of
Street name accounts (numbered accounts)= accounts registered in the name of a
broker dealer with an ID# (can be changed to regular accounts at any time) Reg
rep needs written statement attesting to ownership of account Margin accounts
must be in street name Transfer and ship = certificates are printed in the name
of and delivered to the investor
Transfer and hold= printed in name of investor and held by brokerage firm
Cash accounts are opened in street name or transfer and hold/ship accounts
All accounts need a street address but can have certificates mailed to a P.O box
Broker dealer can hold mail for 2 months if traveling and 3 months if over seas
Even if a customer has multiple accounts it is as if they have 1 account
Insiders= officers/directors/anyone with over 10% of outstanding shares/ anyone
who has access to non- public info and their immediate family
Control stock= stock held by insiders that was purchased publicly
Form 3= when buying enough stock to become an insider must notify SEC within 10
business days Rules for insiders= all trades must be reported to SEC within 2
business days after the trade by filling a form 4 (form 3= when becoming / form
4= after becoming)
Insiders cannot short their corporation
Insiders cannot sell short against the box unless covering their short position
20 days Insiders must hold onto their stock for at least 6 months (only if at a
capital gain/ may sell at loss earlier) NASDAQ Market watch= system that
monitors unusual price and volume activity for insider trading Regulation FD
(full disclosure)= insider information must be released to entire public
simultaneously (8k) Max criminal penalty for insider trading= 1 million (2.5
million for a business) or years in prison per violation Max civil penalty= 3
times gains or losses avoided based on inside information or 1 million dollar
fine (whichever is greater)
SEC may offer bounties of up to 10% of penalty charged
Trade date= date a trade is executed
Settlement date= day issuer updates its records and the delivery of certificates
is completed
Payment date= day that the buyer must pay for trade
Corp stocks+ bonds : settlement- t+3 and payment-t+5
Muni: t+3 for both
U.S. bonds: t+ 1 for both
Option: settlement t+1 payment- t+5
Cash trades always settle same day
Stocks+ corp. bonds+ muni= settle in clearinghouse funds
U.S. gov. bonds= settle in federal bonds
Extension from payment date may be acquired from NASD/ FED/ any exchange
Sell out= when customer fails to pay for trade by the payment date the brokerage
sells securities that customer did not pay for and the customer’s account is
frozen for 90 days Buy in= when seller fails to deliver certificates to
brokerage and the customer’s account is frozen for 90 days Sellers option=
extension of normal settlement date arranged between firms (if seller can
deliver earlier than agreed upon then must give 1 day written notice)
Comingling= mixing a customer’s fully paid and margined securities
Inter positioning= executing a trade through a third party
Reg. reps can’t give or receive gifts of over $100
Free riding= buying a security with intention of selling a security to pay for
(freeze account up to 90 days)
Backing away= failure to honor a firms quote
Churning= excessive trading for the purpose of generating commission
Matching orders (wash sales)= illegal manipulation of the price of a
a security back and forth (painting the tape)) Front running= trading based on
knowledge of an upcoming block trade Pre arrange trades= a firm cannot make a
deal with a client to buy back a security at a fixed price Trading ahead= firm
cannot trade its inventory based on forthcoming research reports unless
Marking the close/ open= can’t manipulate the open/ close price
Paying the media= brokerage firms cannot pay employees of the media to affect
the price of a security Freeriding and withholding= hot issues cannot be
withheld for firm employees or family members Rule 2790= IPO’s can’t be sold to
brokerage firms or affiliates (lawyers, accounts etc.) Telephone act of 1991=
(excluding non-profit) calls to potential customers (excludes current clients)
can’t be made before 8 am and after 9pm of the potential customers local time
Caller must give name +company name+ company address+ phone number
If person requests then must put on “do not call list”
Moonlighting= if receiving outside employment the employee must notify the firm
Private securities transaction (selling away)= if reg rep executes trades
outside of
their employment they must notify their firm in writing and if compensated they
must receive permission in writing If a reg. rep enters bankruptcy they must
notify their firm. The firm must send them an updated u-4 form Office of
supervisory jurisdiction= compliance office or any office in which
marketing/structuring/holding of assets takes place (needs principle w/ series
and inspected annually by FINRA and the firm
Principals must approve: new accounts+ all trades (same day)+ advertisement+
Principals do not need to improve a prospectus or recommendations over the phone
FINRA rules are divided into rules of fair practice (member+ customer) and
practice code
Fines over $2,500 are major fines
Person being complained against has 25 days to respond to a complaint
Arbitration (mandatory between members) is binding and non-appealable
Statue of limitations for arbitration is 6 years
Simplified arbitration is used fir disputes under $25k
Mediation= arbitration alternative where fee is split between both parties
In case of corporate distribution occurs in the following order: 1)IRS 2)Unpaid
workers 3) secured creditors 4) general creditors 5) subordinated creditors
6)preferred stock 7)common stock SIPC= protects each customer account up to
$500k of which no more than $100k is
cash in the case of a broker-dealer bankruptcy (does not cover commodities
accounts) (cash and margin accounts are 1 account)
Regularity of sending out account statements: active accounts= monthly //
inactive accounts= quarterly// mutual funds = semi annually Firm must send copy
of balance sheets to costumers semiannually (if requested send immediately)
Declaration date=date that corporation announces that a dividend will be paid to
Ex- dividend date= first day that a stock trades without dividends
Record date= day the corporation inspects records to see who gets dividends (2
business days after ex- dividend date) (trade must settle on or before record
date to receive dividend)
Payment date=day the corporation pays the dividend
Registrar= financial institution hired by issuer to maintain a list of
Transfer agent= sends items to investors (proxies/dividends etc.)+ can act as a
rights agent
Rights agent= if investor wants to exercise rights
Stock denominations= multiples of 100/ divisors of 100/ units that add up to 100
Mutilated certificates may only be validated by issuer
CUSIP#= ID of securities that were issued at the same time
Stock power= signing on separate piece of paper instead of on certificate
Rejection= refusal of securities at time of delivery
Reclamation= refusal of securities previously accepted at delivery Nine bond
rule= any order for 9 listed bonds or less must be executed on the
exchange unless 1)the customer wants OTC 2)there is a better price OTC 3)it’s a
muni/ govt. bond
Flow of order through brokerage: 1) Wire room= execution of all orders 2)
Purchasing and sales= enter all transactions into firms blotter and sends out
confirmation date
3) Margin= determines the status of margin account after trades executed
4) Cashier= determines the cost of the trade and how much the investor gets
back (also responsible for receiving and delivering securities) Rule 405
(suitability)= reg. rep should know customers investment objectives+ employment+
financial background+ marital status Reg rep does not need to know= Investment
experience+ educational background+ previous employment Currency and foreign
transactions reporting act of 1970= must report cash/money withdrawals of over
$10k through the CTR to FINCEN (must be reported within 15 calendar days)
Suspicious activity of $5k or more must be reported to FINCEN immediately
3 stages of money laundering= Placement/ Layering/ Integration
CIPs= customer identification program which is required to be implemented by
brokerage firms Employees of financial institutions need written permission from
employer when opening a margin account (officers and cash accounts don’t) Reg.
rep can only open a joint account with a customer if he gets written permission
from principle
%5 markup maximum on transactions is a guide line not a rule
Dealer cost= price dealer paid for a security
Don’t know notice= when a firm receives a confirmation for a trade that it does
Corp. must always pay for mailing costs
Proxy contest= when a group of shareholders try to throw out the board of
Form 13d= filed by an investor who becomes a 5% owner of a company who is trying
to gain control of a company (tender offer) Form 13g= filed by an investor who
becomes a 5% owner of a company who is planning on remaining a passive investor
Factors that a company needs to be listed on NYSE: pretax earnings+ number of
outstanding shares+ total market value of outstanding shares+ national interest
(spread out share holders geographically)+ trading volume+ common stock must be
voting If a company wants to delist from the NYSE: approval from the majority of
the board
of directors+ majority of accountants+ notification to 35 largest shareholders+
application to the SEC
To be listed on the NASDAQ a company needs at least 3 market makers initially
and 2 continuing
Penny stock= stock valued under $5 that’s not traded on an exchange
Customers must receive a risk disclosure document when purchasing penny stocks
Exceptions to risk disclosure= accredited investor/unsolicited/established
Advertisements must be filed with FINRA within 10 days after first use (new
firms=10 days prior)
Corporate/partnership documents must be kept for the lifetime of the firm
Blotters (records of trades)+ ledgers(customer account statements)= must be kept
for 6 years All records must be easily accessible for 2 years CHAPTER EIGHT Unit

investment trusts= invests in fixed portfolio of securities with no management

Net asset value= indicates the performance of a fund
If NAV>public offering price then must be a close ended fund
Regulated investment company= not taxed like a corporation of at least 90% of
income is derived from interest/capital gains/dividend and it distributes at
least 90% of dividends and interest received to investors each year Diversified
investment company= at least 75% of assets are diversified : <5% of 75% is put
into any one company’s security+ can’t own more 10% of outstanding shares of the
any company that is owned
A mutual fund must have at least 80% of assets meeting the objectives of the
Hedge fund is most speculative
Aggressive growth fund= speculative in new companies
ETF= close ended and traded between investors
Breakpoint= reduced sales charge for large investments in a mutual fund
Letter of intent= allows you to receive breakpoint immediately (valid for
13months+ may be backdated for up to 90 days) Rights of accumulation = allows
investor to contribute money at their own pace to qualify for a breakpoint later
Dollar cost averaging= depositing a fixed dollar amount into the same mutual
fund periodically
Fixed share averaging= buying a fixed amount of shares periodically
Constant dollar plan= invest a constant dollar amount invested at all times
Sales charge=( POP- NAV)/POP = (ASK-BID)/ASK
Mutual funds cannot charge more than 8.5% of the amount invested
No load funds usually charge redemption fees
Types of mutual fund shares:
1) Class A= front end load
2) Class B= back end load
3) Class C= level load (pays a sales charge each year)
Investment Company must have at least $100,000 from at least 100 investors
before public offering
Board of directors must be at least 75% outsiders
12b-1 fees= investor must pay for all advertising+ promotional expenses of fund
Investment company distributions are taxed as income and capital gains
Distributions are taxed even if reinvested
Reinvested capital gains cannot have a sales charge If fund charges 8.5% sales
charge they must offer reinvestment of distributions and rights of accumulation
for free
A fund is not required to provide a letter of intent
New prospectus of mutual fund must be filed annually with the SEC
Redemption of mutual fund must be completed in 7 calendar days
Break point sales= selling right below breakpoint without telling client about
to qualify (illegal) Anti-reciprocal rule= recommendations can’t be based on
sales charges or commissions Continuing commission= automatic commission given
to a reg. rep who promotes the fund REIT= (not redeemable) at least 75% must be
invested in real estate + at least 90% of net income must be distributed
Fixed annuities do not have to register with the SEC variable annuities do
Accumulation units= units purchased during the paying period of an annuity
Annuity units= units liquidated during the payout period
Annuitize= withdrawing money
Assumed interest rates= annual rate of interest rate necessary to receive
payouts Single payment immediate= pay lump sum and immediately start receiving
Deferred= start receiving payments at a later date
Straight life (life annuity)= stops payout when investor dies (highest payout)
Life with period certain= minimum period of payout even if investor dies
Joint and survivor= in case of death payments are transferred (lowest payout)
Investors cannot outlive their annuities guaranteed
403b (public school) + 501c3(non profit)= only qualified annuities (can
pre tax) CHAPTER NINE Fed determines what can be traded on margin (OTCBB+ Pink
Sheets stocks are usually not marginable)
New issues can’t be purchased on margin for the first 30 days
Current market value – debit balance (DR) = equity
Reg T= Margin requirement (50% unless otherwise stated)
Margin call= amount investor must deposit when buying on margin
Sma (special memorandum account) = taking excess equity after reg t of new cmv
Withdrawing sma is borrowing (DR increases and equity decreases)
You can also use sma to buy more stock on margin
You cant lose SMA even if the stock goes down in price (like line of credit)
You cant use SMA to lower a debit balance
Restricted account= when equity is below reg T requirement (same calculation as
Investor cant use sma to pay off a restricted account (can still withdraw)
When selling stock from a reg T account the money received pays off DR
(although equity stays the same SMA increases which they can borrow) In long
margin account EQ must be at least 25% of the CMV (FINRA) if goes below then
maintenance call is required for the difference
1.33 x DR= minimum value before maintenance call
If investor fails to meet margin call then the broker must sell double the
worth of the call (within 5 days of trade)
U.S. + Muni bonds don’t have the same reg T (between 1-6%)
If customer does not pay enough for a security by less than $1000 the deficiency
added to DR
Withdrawing SMA= DR increases
Depositing cash= DR decreases
Buying stock on margin= DR increases
Selling stock= DR decreases and EQ decreases
Interest charges= DR increases Cash dividends= DR decreases and SMA increases by
the full amount of the dividend (stock dividend makes no impact)
New long margin account= minimum $2000 (for reg T) deposit or pay trade in full
If EQ falls below $2000 no money is necessary until making another trade
Hypothecation= firm lends money to a customer to buy a security
All margin accounts require a Hypothecation agreement to be signed by customer+
credit agreement which sets terms for loans (interest rates etc.) Re-
Hypothecation= brokerage firm uses margined securities as collateral to borrow
money from a bank (up to 140% of DR can be re hypothecated in case of decreased
value of customers securities) Max amount of money that can be borrowed through
using customer’s securities as collateral through re-hypothecation is 100% of
the DR
Amount that must be segregated and cant be used=CMV- 140% of DR
When selling short (reg T is 50% unless otherwise stated)= CMV+ EQ=CR (credit
balance stays the same even if CMV changes)
Maintenance requirement in a short account is 30% of CMV
10/13 of CR is the highest the market value can increase too in a short account
before maintenance call To open a new short margin account= minimum requirement
is $2000 no matter what Cheap stock rule= when selling short a low priced stock=
$0-$2.50 the
maintenance requirement is automatically $ 2.50…..from $2.50-$5.00 requirement
is 100% of CMV…..$5-%10 req. is $5.oo per share
Combined account (both long and short) find maintenance requirement for each
separately then add Securities in lieu of cash= fully paid securities deposited
to meet margin call =Margin call/%100- Reg. T
Reg U= using securities as collateral to borrow money from a bank
Reg. G= using securities as collateral to borrow money from another financial
institution besides for a bank or broker dealer Loan consent agreement= optional
agreement by customer allowing the firm to loan their securities to short
Loan value= max a broker dealer can lend to customer ( 100%- Reg. T)
Margin requirements= Arbitrage 10% Short against the box 5%
Option= derivative
Sell/short/write= investor has obligation to meet terms of the contract
@#= premium of option
Same type options= both calls or both puts
Same class= same stock + same type
Same series= same stock+ same type+ same expiration+ same strike price
When deciding if in or out of the money ignore the premium
At the money= stock price= strike price
Premium= Intrinsic value (how much in the money…can never be 0) + Time value
More volatile the higher the premium
If out if the money then Premium= Time value
(For anyone using these notes, I did not include option gain/ loss pages
Closing an option= trading the opposite way of first trade
Closing purchase= buying an option to cover an option you wrote
Options are considered capital gains/losses
Long straddle (volatility) = buying a call and a put with the same stock,
and strike price Short straddle (stability) = selling a call and a put with the
same stock, expiration and strike price Long Combination (volatility) = Buy a
call and buy a put with the same stock, but different expiration dates and/or
strike price Short combination (stability) = Sell a call and a put with the same
stock, but different expiration dates and/or strike price Spread= buying and
selling a call or put of the same class
Vertical spread= different strike prices
Horizontal spread = different expiration dates
Diagonal spread= different expiration dates and different strike prices
Bullish spread= buying at a lower strike price and selling at a higher strike
Bearish= Buy high sell low
An investor who is receiving more from premiums then paying wants premiums to
narrow and remain unexercised in a spread To determine if credit (more money
coming in from premiums) or debit (more going out) in a situation where there is
no premiums listed, use difference in expiration dates to determine
When bullish you can reduce risk by either buying a put or selling a call
If reducing risk by buying an option= protection
If reducing risk by selling an option= partial hedge (“increase yield”)
Married put= when an investor buys and a put on the same day (holding period
starts immediately) If buying a put option after buying a stock the holding
period for the stock doesn’t start until put is closed or expired Covered
option= when seller has a position to reduce the risk of the trade (owning
stock/convertible/option, If the option you bought is in the money first) Naked=
uncovered (must be executed in a margin account, as do selling short+ spreads)
When buying an option you must pay in full
Options cant be used as collateral to borrow money
Cash dividends do not affect options
Stock dividend= # of shares per contract increases and the strike price
Even split (2:1) = # of contracts increase (# of shares per contract stays the
+ strike price decreases Uneven split (3:2) = # of contracts remains the same+
number of shares increase+ strike price decreases Options Clearing Corporation=
issuer and guarantor of all listed options (decides which stocks may have
publicly traded options) also establishes contract size+ expiration dates+
strike price When opening a new options account: 1) Reg. rep must send client a
copy of the “options risk disclosure document” at or prior to the approval of a
new account 2) Reg. rep determines the suitability of a customer by way of a new
account form
3) The registered options principal approves the account
4) Execute the transaction
5) The reg. rep must send an “options account agreement” to the customer
(must be signed within 15 days after approval of the account)
Options trade on the Chicago Board Options Exchange
Expiration= 11:59 pm on the Saturday after the third Friday of the expiration
(last trade=4:02 and last exercise=5:30 pm of the business day prior to
expiration) Any option that is at least a penny in the money will be
automatically exercised by the OCC at expiration An investor can’t have more the
75,000 option contracts on the same side of the
market for a particular stock (buying calls and selling puts count together)
order support system= used for smaller orders on the CBOE and is used to bypass
floor brokers
Index options: 1) OEX- S+P 100= 100 Blue chip companies
2) SPX- S+P 500=S+P 500 INDEX
3) MMI (major market index)20 stocks= based on 15 DJIA stocks and 5 other
large cap NYSE stock Index options always settle in cash (index options can only
be exercised at the close of the market) Capped index option= automatically
exercised once 30 points in the money (if not
in the money by 30 points then can only be exercised the business day before
expiration (European style)
Leaps= long term option which expire in 39 months instead of 9 months like a
regular option Debt option= option based on bond Yield options= based on
interest rates (buy calls if believe imminent interest rate hike) Foreign
currency options= traded on the Philadelphia exchange (PHLX) and the Pacific
Exchange (PSE) Priced by units in which each point= $0.01 besides for the Yen
which is in denominations of $0.0001 CHAPTER ELEVEN Direct participation
programs (limited partnerships)= allows partners to participate
and use for write offs and often invests in real estate/ oil and gas (must have
least 1 general partner (manages) + 1 limited partner (invests)
DPPs’ can be used as tax shelters and are considered “passive” income/losses
Must file K-1 tax form that shows the income and write offs passed through
investors DPP needs: 1) Certificate of limited partnership (like a corporate
2) Agreement of limited partnership (includes rights and responsibilities)
3) Subscription agreement (general partner signs application given upon
payment to accept new partner ) General partners make decisions for partnership
(can demand money from other partners if needed)
General partners can’t compete and have unlimited liability
Limited partners cannot make management decisions+ limited liability+ can
compete+ voting rights Corporate characteristics a DPP must avoid at least 2 of
in order not to be taxed: 1) Profit directed business
2) Providing limited liability
3) Having 2 or more individuals
4) Having a central management (hardest to avoid)
5) Having perpetual life (easiest to avoid)
6) Have free liquidity of shares (second easiest to avoid since application need
for new partner)
Land can’t be written off for depreciation
Accelerated (ACRS/MACRS)= depreciates more in the early years
Write offs= interest payments+ business expenses+ depreciation+ depletion of
natural resources
Revenue- write offs = Net income
Cash flow= net income+ write offs
Passive loses can only be used to offset passive gains
Alternative minimum tax= mostly used by DPPs’ when write offs cause to low of a
tax base Cost basis= maximum loss for limited partnership (tax deduction limit=
any money put in and then decreased by cash distribution/depreciation/depletion
Types of partnership:
Real estate:
1) Raw land= looking for long term capital appreciation (riskiest +no cash flow
cannot depreciate) 2) New construction= appreciate property by constructing
(risk of higher than expected cost+ no cash flow) 3) Condominiums= cash flow
depends on economy (according to IRS limited
partners cannot stay for more than 14 days or 10% of the days rented out per
year whichevers greater)
4) Public housing (section 8)= backed U.S. govt. subsidies (receives tax
deductions on income received)(govt. subsidizes any deficient payment +
safest+ guaranteed cash flow)
5) Existing properties= cash flow depends on economy, buys property that is
fully operating already (high maintenance cost) 6) Blind pool= offers
diversification of different types of properties Oil and Gas: 1)
Exploratory(wildcatting)= drilling in unproven areas (riskiest+ long term
appreciation potential+ high intangible drilling cost) 2) Developmental=
drilling in proven areas(high drilling cost+ lower risk since proven) 3) Income=
drilling in an area which is already producing and developed(no risk) 4)
Combination= diversified between three above
Operating lease= buy equipment and lease it out for a short time
Full payout lease= lease payments cover the entire cost of equipment
Functional agreement= general partners are responsible for tangible costs and
limited partners are responsible for intangibles The reg rep must make sure
client is suitable for DPP= proof of financial
background+ ability to tie up money for long periods of time+ ability to sustain
loss+ need for tax benefits
Compensation of underwriter for DPP can be up to 10% of the gross amount of the
securities+.5% of due diligence cost Crossover point= point in which partnership
income exceeds the deductions (becomes profitable) Recourse debt= loans taken by
partnership which the limited partners can be personally responsible for
Non- recourse debt= lender has no claims on limited partners personal assets
Recapture= IRS takes back excessive deductions claimed in the previous year
Abusive shelter= when a partnership does not attempt to make a profit
In the dissolution of a partnership the limited partners are paid before general
partners (creditors first)CHAPTER TWELVE General obligation bond= issued to fund
non-revenue projects (backed by full taxing power of muni) voter approval is
required Ad valorem tax (property tax) = largest source of revenue for GO bonds
(based on assessed value)
There is a maximum that a muni can borrow
Limited tax bond= type of GO that limits tax rates used to pay off bonds
Unlimited tax bond= normal type of GO
Revenue bond= issued to fund revenue producing projects (voter approval not
necessary) Industrial development revenue bond= issued to fund construction of a
commercial facility for the benefit of a corporation (riskiest because not
backed by muni)
Substantial user rule= company cant buy its own IDR and receive tax free
Private purpose (activity) bond= interest is taxable at a regular tax rate on
all levels
Qualified private purpose bond= interest is taxable only to investors subject to
the Alternate Minimum Tax Double barrel bond= combo if revenue + GO bond (if
revenue fails then backed by taxing power)
Special tax bond= backed by regressive (excise)taxes (sales/tobacco)
Special assessment bond= backed by charges on those that benefit from project
More obligation bond= if muni fails to pay the state has a moral obligation to
Public housing authority (PHA)= backed by U.S. govt. (considered safest)
All muni’s must be issued with a legal opinion(validates+ makes sure indenture
binding+ verifies federally tax exempt) Unqualified legal opinion
(unconditional)= issuer meets all conditions without restrictions Qualified
legal opinion= issuer meets conditions with potential restrictions (lean on
property etc.)
Ex legal= Bond delivered without legal opinion
Muni notes= mature in less than a year
TAN (tax anticipation note)= issued with expectation of receiving
corporate/individual tax in next few months RAN (revenue anticipation notice)=
anticipation of revenue producing facility in the next few months
TRAN= tax and revenue anticipation note
BAN= bond anticipation note (anticipation of writing long term bonds)
CLN (construction loan note)= notes issued to finance large construction
for muni
PLN (principal note)= provides interim financing from public housing projects
Rating for muni notes:
Moody’s investment grade= MIG 1-4
Standard and Poor’s= SP 1-4
Prime= P1-4 (only used for tax exempt commercial paper (short term IDR)
Interest+ accretion+ amortization on muni are federally tax free
State tax free if investing in home state/ or Protectorates(Puerto Rico, Guam
Muni have the lowest yields of all bonds
TEY= yield that investor needs on a taxable investment to be equal to a muni
after taxes
TEY= Muni yield/(100%-tax bracket)
Muni equivalent yield= taxable bond yield x (100%- investor tax bracket)
Margin requirements for muni= 7% of total par value or 15% of CMV whichever is
greater Negotiated offering= issuer chooses an underwriter directly with no
competition (revenue bonds/IDR)
Competitive offering= auction (GO bonds) (muni advertises through “notice of
TIC (true interest cost)= considers inflation
Good faith deposit= entry fee and partial payment for bond issue(1-2% of par
of bonds being auctioned)(winners use towards money necessary to buy
bonds/losers get deposit back) Official statement= disclosure of facts about
muni issuer (does not have to be filed with SEC)+included in advertisements and
GO bonds have a higher rating and lower yield than revenue bonds
Direct debt= outstanding debt that a muni owes which has not matured
Overlapping debt (coterminous)= debt that muni has to assist a higher
in paying
Overall debt= direct +overlapping
Debt per capita= debt per person
Traffic fines+ licensing fees can be used to pay off GO bonds
Feasibility study= engineering report done by independent consultants to see if
facility can generate enough revenue to pay off revenue bonds Covenants= promise
on indenture meant to protect investors(rates/maintenance/insurance) Catastrophe
call= call used when facility can no longer produce revenues Project completion
clause= allows issuer to borrow more money to properly construct facility Flow
of funds= 1)Net=operating and maintenance fund>sinking fund(debt)>reserve
fund(principal and net for next 2 years)> renewal and replacement
fund(improvements) 2) Gross= sinking fund> operating and maintenance fund>
reserve fund (principal and net for next 2 years)> renewal and replacement
Assume net
Debt service coverage ratio= net or gross revenue/ principal+ interest
Debt per connection= debt per person using the facility
The “Bond Buyer” is the best source of information for new muni bonds
Bond buyers index= average yield of 20 , 20 year GO bonds that are investment
grade Eleven bond index= average yield of 11 , 20 year GO bonds that are rated
AAA or AA Revdex(revenue bond index)= average yield of 25 revenue bonds with 30
year maturity Visible supply= par value of all new issues expected to become
public within the next 30 days Placement ratio= percentage of competitive issues
in which the auction was completed (measured weekly)
“blue list”= best source of info for outstanding bonds
Blue list total= total par value of all muni bonds in the blue list except for
coupon bonds 50M Chicago P/R @ 102 AON 3/1/07 M12 : Pre refunded+ All or none+
3/1/07= 1st call date M12 = years to maturity
Quotron= wire service for muni
Muni insurance agencies= MBIA+ AMBAC+FGIC
MSRB= self regulatory(does not apply to issuers)
Reg reps have to do 90 day apprenticeship during which they cant discuss any
with public customers+ cant earn commission Confirmation (receipt of trade)=
must disclose YTM or YTC whichever is lower (discount bond YTM is lower)
In whole call= first time entire issue is callable
All MSRB complaints are kept for 6 years (FINRA for 3 years) and must be settled
through arbitration Control relationship= firm/employee has a position of
authority over issuer being recommended (must be disclosed)
Completion of the transaction= buyer= payment date + seller= settlement date
If an advisor is chosen to underwrite an offering:
Negotiated offering= relationship must terminate+ disclose potential conflict of
interest+ disclose spread Competitive offering= relationship does not need to be
terminated+ adviser needs written permission from issuer to participate in the
G- rules (page 441+442 of the empire stock broker institute)
and should only be used after reading the actual book at least once. Good luck!!
YY 6/7/2010
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Complete Series 7 notes summarizing the Stock broker training institute book
series 7book notesseries sevenfreenotes seriessoldseven
notesnasdperformancefinradaysseries 7book notesseries sevenfreenotes
seriessoldseven notesnasdperformancefinradays(fewer)Followybigalow
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