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162 Cards in this Set
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- Back
- 3rd side (hint)
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Securities |
sold by companies to raise money for business operations |
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Companies generally raise $ by issuing these |
Equity securities aka STOCKS Debt securities aka BONDS |
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Stocks represents... |
ownership in the company
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BONDS represents... |
a liability for the company Investor = creditor Corp = debtor |
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Two types of stock |
Common & Preferred |
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Common Stock rights |
Vote buy and sell their stock receive dividends junior claim to the co. assets |
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Authorized shares |
the # of shares a corp. may sell
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issued shares |
the of authorized shares that are actually sold |
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Unissued shares |
authorized shares that have not yet been sold |
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Treasury Stock |
Stock repurchased by the corp |
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Outstanding Stock |
the # of shares that are in the hands of investors at any given time
Treasury Stock - Issued Stock = Outstanding |
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Asset |
Property, Accounts receivable, cash, inventory, ets |
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Liabilities |
Bills, Accounts payable, outstanding bonds, other debt, etc |
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Net worth formula |
Assets - Liabilities = Net Worth |
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Proxy |
limited POA that's votes in place of the s/h |
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Types of voting processes |
Statutory & Cumulative |
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Statutory |
S/h gets one vote per share that they own.
100 shares: 100 votes per position |
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Cumulative |
they can concentrate all their votes for one position
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benefits smaller and inexperienced investors
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Dates that are important to remember |
Trade & settlement |
common stock buying and selling |
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Trade Date |
Price and quantity are determined |
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Settlement Date |
date securities must be bought, paid, and delivered. Ownership changes hands |
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Settlement Date for Corp. & Muni |
T+3 |
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Gov't Settlement Date |
T+1 |
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Cash trades settlement date |
same day as the trade |
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Dividends |
When corps pay their earning to s/h |
common stock rights |
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Dividend dates |
Declaration Ex-Dividend Record Payable
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four dates
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Declaration Date or DD |
board declares that a dividend will be paid |
it becomes a liability |
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Ex-Dividend |
Stock purchased on this date will not be eligible for the dividend payout |
the underlying stock declines by the amount of the dividend
2 days before the Record date |
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Record Date |
The date stockholder have to be on record on this date in order to receive to they pay out |
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Payable Date |
the day the dividend is paid
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Dividend Yield |
measuring a stockholders return on their investment
DY= Annual Div / share price |
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Preemptive Rights |
allows current s/h to maintain their % of ownership in the corp. when new shares are issued |
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Subscription price |
the price s/h purchase newly issued shares at Lower than POP Public offering price |
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Preemptive Rights Time Limit |
30-60 days after they are issued |
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Exercise Price |
higher than current market value stock and long term warrant |
sweeter than the others |
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Warrants |
allow the purchase of stock at a set price |
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Two types of voting processes used by corporations
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Statutory and cumulative
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Shareholder has 100 shares of stock and cumulative voting how many vote can they cast
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400
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What date must the shareholders own shares
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Record date
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The settlement date for purchases or sale for cash occurs
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Same day business
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What is a nother name for debt security
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Bond
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Companies have a net worth which can be calculated by using a method called
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Balance sheet equation
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In a regular settlement a shareholder purchases stock on Wednesday July 11th when must the shareholder make a payment
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Monday July 16 3 business days
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When a security is transacted on a regular way settlement faces the settlement date occurs within
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3 business days
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What type of stock has no voting or dividend rights and reissued by corporations and repurchased
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treasury
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When a shareholder purchases. On what date is the price and quantity determine
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Trade date
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What two types of stock receive dividends when declared
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Outstanding & common
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What happens once the Board of Directors declare a dividend
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It is a current liability of the corporation and must be paid to the shareholder
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US government securities must be paid within how many days from the trade a
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1 business day
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Who is responsible for determining the corporation's policy and authorizing major transactions for a corporation
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The Board of Directors
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Most shareholders vote by proxy what does this mean
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Most shareholders grant limited power of attorney to vote on their behalf
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Shares of stock that can actually be sold to the public are
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Issued stock
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What is meant by the term detachable when used to describe warrants
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The warrant may be traded separately from the security they were issued with
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common stockholders have preemptive rights that permit them to do the following three things
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Let the them expire
exercise the right to purchase new stock sell their rights to another shareholder |
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When exercising a preemptive right at what price is the shareholder allowed to purchase new stock
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Subscription
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Your client owns stock in the Corporation has announced a stock rights offering if the shareholder does not subscribe, his percentage of ownership his interest will
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decrease
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when shareholders have preemptive rights they are entitled to
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The opportunity to purchase new shares before they offer to the public
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Name two characteristics of warrants
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Long term and exercise price above current market value
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ADR are used to facilitate
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Domestic trading of foreign securities
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An American investor can purchase shares of a foreign company domestically and have the protection of the US securities regulators through which of the following transactions
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By purchasing ADR for the foreign company
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Sellers of call contracts and buyers of put contracts are blank investors
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Bearish
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Buyers of call contracts and sellers of put contracts are blank investors
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Bullish
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Which of the following regulations protect from fraudulent practices in the sale of new issues of securities
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The Securities Act of 1933
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Sec review this information and ensure that
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Full and fair disclosure of all materials facts to the potential investors
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The sum of all issued security of a corporation is referred to as the corporation
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Capital structure
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What is the cooling off period for security under Sec review
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20 days
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True or false the final offering price of the security is included in the preliminary statement
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True
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Blank and blank are exempt from the provisions of the Securities Act of 1933
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Commercial paper and municipal bonds
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The FOMC has used monetary policy to reduce interest rates and encourage spending. As a result, what will happen to the value of outstanding bonds? |
they go up in value |
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Monetary policy attempts to control Blank, blank, and blank |
money supply credit in the economy inflation |
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If a company decides to liquidate its assets; What the order of liquidation regarding stock and bond holders |
1. bondholders 2. preferred stockholders 3. common stockholders |
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Who has the authority to establish margin requirements for broker/dealers |
the Federal Reserve Board |
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Sustained inflation over time will erode the value of a dollar. This is known as |
Purchasing power risk |
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Blank is a type of preferred stock that would allow a shareholder to exchange for shares of common stock |
convertible preferred |
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Blank stock gives its owner the right to be paid dividends before stockholders |
preferred |
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True or False... Business risk are those relating to the operational success of the particular business in question as opposed to the influence of trends in the broad securities markets |
True |
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Income, Gasoline, & Sales taxes are general obligation bonds of this branch of gov't |
state |
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where do negotiated or OTC transactions not take place?
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The New York Stock Exchange NYSE
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Which quality of bonds have higher yields and lower market prices |
the lower quality bonds |
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Which preferred stock can be called by the corp? |
convertible |
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who has the most volatile interest rate |
Fed Funds rate |
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Formula for Current Yield |
Divide the annualized dollar yield by the current market value |
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What type of risk includes influences such as competitive pressures, market share and competence of management and is usually managed with a long term focus |
Business risk |
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If a corp secured a bond issue by pledging the stock it owns in another corp as collateral, it has issued ... |
collateral trust bonds |
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Whether the investment can be sold as quickly and profitably as expected, should the investor wish to sell describes the blank of an investment |
liquidity |
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True or False... A commercial bank can issue commercial paper |
false |
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When a customer buys a security in the 2nd market, he/she will pay the blank price |
Ask |
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Investors can be granted an extension of time by |
FINRA and the transacting exchange |
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During periods of economic expansion, the demands for goods and services overtake supply and prices rise. this causes |
inflation |
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Which of the following bonds is normally issued by a transportation co |
equipment trust certificate |
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a convertible bond yield will decrease when the price of its underlying stock |
increases |
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The investor outliving his/her income is a risk associated with a |
mutual fund withdrawal plan |
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Investors who own common stock have certain rights of ownership including the following:
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The right to vote
the right to transfer ownership the right to receive dividend once declared a junior claim to assets of the corporation in the event of a liquidation |
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No corporation may sell all or portion of authorized shares creating the following subclasses
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issued shares unissued shares treasury stock outstanding stock
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A company has been authorized to issue 1000 shares and decides to issue only 700. this means it still has 300 unissued shares the company later decides to repurchase 200 out of the 700 shares previously issued. now the company holds 200 treasury shares and the remaining 500 are still outstanding.
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What are assets
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Property, accounts receivable cash, inventory etc
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what are a company's liabilities
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What the company owes, such as bills, inventory, current bills, accounts payable, outstanding bonds and other debt e.t.c
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What is a proxy
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A proxy is a limited power of attorney that stockholders grant to someone to vote the stock either at their own discretion or at the instruction of the board of directors
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What is statutory voting
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Shareholders are permitted one vote for each share they own
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If a shareholder owns 100 shares and there are four vacancies in the Board of Directors elections, the shareholder can vote 100 shares for each director to be elected, for a total of 400 shares
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What is cumulative voting
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Shareholders can concentrate all they're available votes on one director
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Is there are 4 positions to be filled and a shareholder owns 100 shares under the cumulative method, you can vote 400 shares for 1 position and none for the other three
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What happens on the settlement date
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Securities bought must be paid for and delivered
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What is the regular way settlement for corporate and municipal securities
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t + 3
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What is the regular way settlement date for government securities
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T + 1
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What happens on the declaration date
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The date on which the Board of Directors declares the dividend and it becomes a current liability
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What happens on the ex dividend date
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The first trade date on which stock purchaser is not legally entitled to receive the dividend also on this date the current market value of the underlying stock declines by the amount of the dividend
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What happens on the record date
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The date on which the corporation consult the stockholder record. Only these owners recorded in the stockholder records receive the dividend
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What happens on the payable date
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the date on which the corporation is actually distributing dividends to shareholders of record
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Who sets in be ex dividend date
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the SRO
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This occurs two days prior to the exdividend date
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record date
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What is the dividend yield equation
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Dividend yield equals annual dividend divided by the share price
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What can be used as a sweetener to lower the interest rate on a bond issued by a corporation
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Warrants
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What are ADR's
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Certificate issued by commercial United States banks to represent ownership of shares of a foreign company
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What three problems do aDr allow investors to avoid associated with financial transactions in foreign markets
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Currency conversion
certificate registration and trade administration |
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What are options
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They are legally binding contract between buyers and sellers
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When a corporation is already Publix but distributes additional security it is engaged in this
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A primary offering for primary distribution
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When referring to primary offerings what does the word primary refers to
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It refers to the fact that the issuing corporation receives the proceeds
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What is a secondary offering or secondary distribution
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It is a registered offering by current shareholders, of a large number of outstanding shares of a security notes that the proceeds of the sale go to the seller not the issue and company and the number of shares outstanding does not change
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When a corporation is participating in a primary offering, it typically utilizes the services of this professional
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Investment banker
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What does the investment banker receive as an exchange for their expertise
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A portion of the sales proceeds when the corporate securities are sold to the public
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What is the underwriter spread
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A portion of the sales proceeds when the corporate securities are sold to the public
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The difference in the price between the issuer receives and what the public pays for the offering
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When a corporation wants to sell securities to the public what must they do in regards to sec
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And registration statement must be filled out with the sec
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What is the filing date
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The day that day the sec the registration date
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What is the cooling off period
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a20 day cooling off period During which the sec reviews the information
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What information is required in the registration statement
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A description of the issuer's business the shareholdings of officers directors, and underwriters, and identification of all insiders (including individuals who hold at least 10% of the company's securities) biographical data on the officers and directors
the company's capitalization supported with certified financial statement and proposed usage for the issue's proceeds |
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What does the issuer of securities prepare during the cooling off period
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The issuer prepares a red herring prospectus
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What does the perspective red border around the cover manchester about the registration statement that has been filled with the sec
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The registration statement has been filed SEC but has not yet become effective
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What information does the Red Herring Prospectus not contain
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The final offering price for the issue
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But it may contain a range 15 to 20 dollars for example
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What can the red herring not be used to collect indications of interest but not
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Actual solicitations and offers of the cell cannot occur prior to the effective date
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If an issuer or intends to sale in a blue skied States what must they do
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They must be registered under the state security laws that govern the registration of security and security personnel commonly referred to as blue sky laws
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What meeting must be held with the underwriter, officers, directors, and syndicate members just prior to the issuance of the final prospectus in order to review all aspects of the issue and determine if its close your information is accurate and sufficient
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Due diligence meeting
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What securities are exempt under the 1933 act registration in prospectus requirements
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US government and agency securities municipal securities issues of non profit organizations commercial paper issues of domestic banks and trust companies but not bank holding companies issues a small business investment companies
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What is Regulation D
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One type of exemption under the 1933 Securities Act that allows companies to save the expense of an underwriter and avoid registration requirements by engaging in a private placement
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What are the conditions required for Regulation D
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The securities cannot be sold to more than 35 non accredited investors. The 35 person maximum does not apply to accredited investors. Non accredited investors must designate a purchaser representative for each offering an accredited investor is a financial institutions such as a Bank Trust pension plan, a private business development company, director of the issuer, or an individual with either a net worth of 1 million dollars or an annual income of at least 200,000 dollars for the past two years (or a joint account, the income that Trust go to $300,000 )the corporation must have adequate reason to believe that the buyer is a sophisticated buyer, meaning that the buyer has enough experience to evaluate the risk involved. The buyer must be provided with the same information that would be found in a prospectus. This information is made available in a document referred to as an offering memorandum.
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These offerings cannot be advertised through the media to the general public. And investor seminar is prohibited unless attendance is limited to potential purchasers who are represented by their purchaser representatives according to what regulation
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D
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Where can a security that has already been sold in the primary market be traded
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After market or secondary market
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What does the secondary market consists of
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The Exchange and the over the counter OTC market
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What does the exchanges represent
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Exchanges represent an auction market with competitive buyers and competitive sellers
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What does the over the counter or OTC market consist of
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The OTC market is a negotiated market where one buyer negotiate with one seller
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What does the secondary market equal
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Trading of issued securities
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What does the secondary market include
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The first market equals trading of listed securities exchanges. The second market equals trading of unlisted securities on the OTC or over-the-counter market
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What is the NY se New York Stock Exchange
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The oldest and largest exchange market in the United States a physical location where brokers and dealers execute investor orders to buy and sell securities
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What is a NYSE New York Stock Exchange member
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An individual who has membership on the exchange. A member firm must have an individual employee who has a seat on the exchange, often called and allied member
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How are orders executed on the NYSE
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Orders that are sent directly to the exchange floor from a member's firm office are executed by the firm's floor broker or executed electronically
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Where do trades take place for the OTC or over-the-counter market
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Trades of these unlisted securities take place between the buyer in the cellar through a telephone and computer and network there is no physical exchange for for the exchange listed securities.
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Who or what is a market marker
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Dealers who are capable of making continuous offering to buy and sell stocks
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What is the Nasdaq system (National Association of Securities Dealers automated quotation system)
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The Nasdaq system provide subscribers with terminal that allow them to obtain current offers and bids for over-the-counter securities
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issues that do not trade on NASDAQ are
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The lesser known and more speculative issues that do not need to meet listing requirements
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Where can information on non NASDAQ that trades be found
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Listings can be found on the over-the-counter publication board or a weekly publication known as The Pink Sheets. This term comes from the pink sheets that were formerly printed weekly to provide quotation information about this category of securities
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What is market value
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it is the current price of the security and represents the price that the owner would receive if he or she were to sell at that time
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What two prices with the dealer quote
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the bid price or the price at which the customer can sell shares and the offer price the price at which the customer can buy shares
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The following factors are used to determine if a member use reasonable diligence in routing a customer's order to the best market:
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The markets characteristics: price volatility, liquid liquidity, price on communication
the price in type of the transaction the number of market member the number of markets the member firm check before entering the price the accessibility of and the terms and conditions of the order |
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What is a margin account
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It is possible to make purchases with extended credit by broker dealer
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What is the current regulation T margin requirement
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50%
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What does the regulation T margin requirement mean
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Customers who purchase securities must deposit at least 50% of the value of the securities
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What is hypothecation
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Only cash or fully pay security may be used as collateral and margin account the practice of pledging securities as collateral for margin loan is known as hypothecation
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What are securities that can be purchased on a margin
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Marginable securities
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What is regulation u
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Under the jurisdiction of the Federal Reserve Board it deals with the extension of credit by banks and other financial institutions
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Under Regulation T the Federal Reserve or requires that customers purchasing securities on a margin or in cash accounts to pay for the securities within
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5 business days
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What happens if a customer does not pay there for their security within t + 5 days
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The member firm must liquidate aka sell the Securities and freeze the customer's account for 90 days if payment is not received on time the customer's account is frozen for 90 days during the 90 day. No credit can be extended to the customer however the customer may continue to purchase securities on a cash basis
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orders that are used by institutional factors and clear through the Depository Trust Corporation aka DTC are called what
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C.o.d. Collect on delivery
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what is the maximum settlement time for cod orders
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35 days
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What does callable mean
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Meaning it can be recalled from the stockholder at the discretion of the issuer
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In a liquidation what is the order of payout
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Unsecured bonds in general collectors then preferred stockholders lastly, common stockholders
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