Primary Market
What market does the '33 Act cover?
Bonus: After what major event was this Act created?
The ~Primary~ market
Bonus: created in response to the stock market crash in '29
What is the name of the act that created the SEC?
The '34 Act.
How many years of employment and residency is needed when completing form U4?
Employment: 10 years
Residency: 5 years
What is the order of the business cylce?
Expansion -> Peak -> Contraction -> Trough -> Recovery
(EPiC TREP to remember the order and that it's continuous)
List the priority in liquidation when a corporation goes under.
Secured Creditors, (unpaid administrative claims, unpaid wages, taxes, etc. (optional)), Unsecured Creditors, Subordinated Creditors, Preferred stockholders, Common Stockholders
What is the two purposes of the '33 Act?
1. requiring companies to publicly disclose all relevant financial info BEFORE offering them for sale
2. prohibiting fraud and deceit in the sale of securities.
Why was SIPC created and what are its thresholds?
Securities Investor Protection Act of 1970:
Created to protect customers in the event of a broker-dealer insolvency (think insurance if broker-dealer goes under).
Protects $500,000 of cash and securities per customer (no more than $250,000 can be cash).
How long after a person is terminated does a U5 form need to be filed?
Must be filed with FINRA within 30 days of termination.
Of the rates listed, which one is the lowest and which one is the highest?
Federal Funds Rate
Discount Rate
Broker Loan Rate
Prime Rate
Lowest: Federal Funds (between member banks)
Highest: Prime (between banks and commercial customers)
(Discount rate: 2nd lowest, Fed Funds +1%. Fed reserve and member bank; Broker loan rate: 2nd highest, DR + 2%, for margin)
List the appropriate ages for the following:
- Typical retirement age
- Minimum age to withdraw from Roth IRA
- RMD age
Retirement: 65 (unless otherwise stated in Q)
Roth: 59&1/2 (must hold acct for 5 years)
RMD: 73 (first withdrawal Apr 1st after 73, then Dec. 31st for remaining years)
After a registration statement is filed with the SEC for a new offering, how long does the SEC have to review the information?
What types of advertising, if any, is allowed during this period?
Cooling-off period minimum of 20 days.
Tombstone Ads only providing general information about the product (no offers/sales allowed)
The Federal Telephone Consumer Protection Act designates what hours to make unsolicited phone calls?
Bonus: What exceptions to this rule are available?
8a - 9p (in the recipient's time zone)
Bonus: established customers or someone that's given written consent may be called at any time.
Which entity enforces rules for broker-dealers written by MSRB?
SEC (federal agency) and FINRA (SRO).
(Remember: the MSRB writes its own rules but does NOT enforce them)
At what levels are each of these securities taxed:
- Treasuries
- Corporate bonds
- Municipal bonds
Treasuries: Federal level only
Corporate: All levels
Municipal bonds: State and Local only unless investor resides in the municipality, then exempt from all
Who bears the investment decisions and risks in a Defined Benefit Plan?
What about for a Defined Contribution Plan?
DBP: employer; periodic payments are defined and guaranteed for life.
DCP: employee; not defined or guaranteed payout.
What are the holding period restrictions of a restricted security that is not held by an affiliate?
Are there any trading volume limits for this investor?
1. Reporting companies: 6 months; Non-reporting companies: 12 months.
2. No, only for affiliates that hold restricted securities.
John overhears his leader sharing some piping hot tea, related to a security, that has not yet been made public. John, being the gossip that he is, goes home to tell his day-trader cousin about the news. His cousin, excited to be 'in the know', takes action with the security because of this new info.
Did any violations occur? If any, who would be held liable?
Yes, this is insider trading! Both John and the cousin would be held liable (no one likes a gossip!!)
What is the MAJOR difference between Correspondence and Retail Communication?
Correspondence involves 25 or fewer retail investors within any 30-calendar-days. Retail Communication involves more than 25 retail investors with any 30-calendar-day period.
Both include any written or electronic communication.
Name the difference between short-term and long-term capital gains. At what rates are each taxed?
Short-term: 12mos or less; Ordinary income tax bracket
Long-term: Greater than 12mos; 15 or 20%
What are the 3 annuity payout options?
List them from smallest paycheck to biggest.
Joint with last survivor (covers 2 lifetimes); Life with period certain (payments made to beneficiary if annuitant dies before period certain expires); Life income (pays for remainder of annuitant life only)
What are the two ways an underwriter may be selected?
Once selected, what are the two underwriting commitments?
A. Negotiated (most common); Competitive bid (common with municipal security offerings)
B. Firm commitment (underwriter assumes all risk including unsold shares); Best efforts (AON or mini-max; not responsible for unsold shares)
What is the timeframe for bringing up a civil lawsuit?
Must be brought within 2 years of discovery and no later than 5 years after the violation occurred
To what threshold can a Municipal Finance Professional (MFP) donate to an election campaign without any repercussions?
Up to $250 per election campaign in which the MFP is entitled to vote.
(If more is given or if any amount is donated to campaign in which they cannot vote, they will be banned from engaging in municipal securities business with that issuer for 2 years.)
What are the 3 Business Cycle Indicators?
Bonus: Can you list one example for each or tell me what each of them indicate?
Leading: predict what's coming in the b.c.
Coincident: est. the current phase of the b.c.
Lagging: shows where economy was
Recreate an options chart listing the following for each option type:
Right/Obligation
Bullish/Bearish
BE, MG, ML
One member from each team draws a quadrant on the board :-)