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Dragon Hellfire
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#Post#: 113--------------------------------------------------
FINRA Exam Prep
DIR By: Dragon Hellfire
Date: June 9, 2019, 10:07 pm
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FINRA Manual
HTML http://legcounsel.house.gov/Comps/Securities%20Exchange%20Act%20Of%201934.pdf
1933 Securities Act
HTML https://legcounsel.house.gov/Comps/Securities%20Act%20Of%201933.pdf
1934 Securities Exchange Act
HTML http://legcounsel.house.gov/Comps/Securities%20Exchange%20Act%20Of%201934.pdf
1939 Trust Indenture Act of 1939
HTML https://legcounsel.house.gov/Comps/Trust%20Indenture%20Act%20Of%201939.pdf
1940 Investment Advisors Act
HTML https://legcounsel.house.gov/Comps/Investment%20Advisers%20Act%20Of%201940.pdf
1940 Investment Company Act
HTML https://legcounsel.house.gov/Comps/Investment%20Company%20Act%20Of%201940.pdf
1991 Telephone Consumer Protection Act
HTML https://en.wikipedia.org/wiki/Telephone_Consumer_Protection_Act_of_1991
1970 Bank Secrecy Act
HTML https://en.wikipedia.org/wiki/Bank_Secrecy_Act
Flashcards for the Official Practice Exam
HTML https://quizlet.com/339078318/sie-exam-finra-example-flash-cards/#
#Post#: 115--------------------------------------------------
Re: FINRA Exam Prep
DIR By: Dragon Hellfire
Date: June 20, 2019, 5:06 pm
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Glossary
Preemptive Rights: A corporation's offer to existing
shareholders to purchase shares at a fixed price.
Formulae
NAV = (NetAssets)/(#Shares)
POP = NAV + SalesCharge
#Post#: 116--------------------------------------------------
Re: FINRA Exam Prep
DIR By: Dragon Hellfire
Date: June 20, 2019, 6:31 pm
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Types of Risks
-Market: The tendency for securities to move with the market
-Inflationary
-Credit
-Liquidity
-Political
-Nonsystematic
-Expense
-Mortality
-Prepayment
Types of Investment Companies
-Unit Trust
-Open Ended (POP >= NAV)
-Closed (POP < NAV)
Types of Annuitization
-Life/Straight
-Life w/ Period Certain
-Jointlife w/ Last Survivor
-Unit Refund
Types of Bonds
-Debentures
--Subordinated Debentures
-Industrial Development Bond
-T-Bond
-General Obligation Bond
-Revenue Bond
-Secured Bond
-Income Bonds (Adjustment Bond)
Fund Types
{Aggressive Growth, Growth, Growth+Income, Income,
International}
{Equity, Fixed Income, Money Markets}
{Load, No-Load}
-Index Funds
-Funds of Funds
-US Government
Types of Retirement Plans
-Profit Sharing Plans
-Individual Retirement Account
-Money Purchase Plans
Vulnerable Securities
-Bonds
-ETNs
-Direct Participation Programs
-{Poorly Diversified}
#Post#: 117--------------------------------------------------
Re: FINRA Exam Prep
DIR By: Dragon Hellfire
Date: June 20, 2019, 6:32 pm
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Prohibited Conduct
Certain types of conduct in the securities industry are
prohibited, including the following:
- Recommending to a customer the purchase or sale of a security
that is unsuitable given the customer's age, financial
situation, investment objective and investment experience.
Investment in a particular type of security may be unsuitable,
or the amount or frequency of transactions may be excessive and
therefore unsuitable for a given customer.
- Purchasing or selling securities in a customer's account
without first contacting the customer and receiving the
customer's authorization to make the sale or purchase, unless
the broker has received from the customer written discretionary
authority to effect transactions in the account or the broker
was given discretion as to price and time.
- Switching a customer from one mutual fund to another when
there is no legitimate investment purpose for the switch.
- Misrepresenting or failing to disclose material facts
concerning an investment. Examples of information that may be
considered material and that should be accurately presented to
customers include: the risks of investing in a particular
security; the charges or fees involved; company financial
information; and technical or analytical information, such as
bond ratings.
- Removing funds or securities from a customer's account without
the customer's prior authorization.
- Charging a customer excessive markups, markdowns or
commissions on the purchase or sale of securities.
- Guaranteeing customers that they will not lose money on a
particular securities transaction, making specific price
predictions or agreeing to share in any losses in the customer's
account.
- Private securities transactions between a broker and a
customer that may violate FINRA rules, particularly where the
transactions are done without the knowledge and permission of
the sales representative's firm.
- "Trading ahead," which involves placing an order for the
firm's account before entering a customer's limit order, without
having a valid exception.
- Failure by a market maker to display a customer limit order in
its published quotes, without a valid exception.
- Failing to use reasonable diligence to see that a customer's
order is executed at the best possible price, given prevailing
market conditions.
- Purchasing or selling a security while in possession of
material, non-public information about an issuer.
- Using manipulative, deceptive or other fraudulent methods to
effect a transaction in, or induce the purchase or sale of, a
security.
- Selling dividends, the act of convincing customers to buy just
before record date.
#Post#: 118--------------------------------------------------
Re: FINRA Exam Prep
DIR By: Dragon Hellfire
Date: June 20, 2019, 6:42 pm
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Anti Money Laundering Program Requirements
(1) Policy assuring compliance with Bank Secrecy Act
(2) AML compliance officer
(3) Training program
(4) Independent Auditor
Direct Participation Program Requirements
(1) Pooled entity
(2) Not traded
(3) Partners pay taxes
(4) No corporate tax
(5) Partial ownership of physical assets
EXAMPLES: {REITs, BDCs, Energy Exploration, Equipment Leasing}
#Post#: 119--------------------------------------------------
Re: FINRA Exam Prep
DIR By: Dragon Hellfire
Date: June 25, 2019, 1:12 am
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Content Outline
HTML https://www.finra.org/sites/default/files/SIE_Content_Outline.pdf
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Section 1. Knowledge of Capital Markets (16%)
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[1.1] Regulatory Entities, Agencies and Market Participants
[1.1.1] Securities and Exchange Commission (SEC)
-Independent Agency of the US federal government
-Created by The Securities Exchange Act of 1934 after the peak
of The Great Depression as a mechanism for restoring confidence
in capital markets.
Jurisdiction: United States securities industry.
Mission: To protect investors, maintain fair, orderly, and
efficient markets, and facilitate capital formation.
HTML https://www.oreilly.com/library/view/crash-course-in/9780470047019/9780470047019_ch01lev1sec5_image01.gif
[1.1.2] Self Regulatory Organizations (SRO's)
-A Non-Governmental Organization which has the power to create
and enforce stand-alone industry and professional regulations
and standards.
Examples: Financial Planners Association (FPA), American Council
of Life Insurers (ACLI), FICC, OCC, AICPA
--Financial Industry Regulatory Authority (FINRA) has
jurisdiction over any member firms and associated persons.
Regulates CBOE, NYSE, NASD...
--Municipal Securities Rulemaking Board (MSRB) has jurisdiction
of municipal securities (bonds, notes, etc.)
--American Council of Life Insurers represents 290 companies
that account for 95% of the US life insurance industry's total
assets.
[1.1.3] Other Regulators and Agencies
HTML https://upload.wikimedia.org/wikipedia/commons/thumb/c/cb/Seal_of_the_United_States_Department_of_the_Treasury.svg/175px-Seal_of_the_United_States_Department_of_the_Treasury.svg.pngDepartment<br
/>of the Treasury: Manages government revenue
--Prints all paper currency and mints all coins in circulation.
--Collects all taxes through the IRS (which maintains tax laws).
--Manages US government debt instruments
--Licenses and supervises banks and thrift institutions
--Advises the legislative and executive branch on matters of
fiscal policy.
HTML https://upload.wikimedia.org/wikipedia/commons/thumb/1/1a/Seal_of_the_United_States_Federal_Reserve_System.svg/110px-Seal_of_the_United_States_Federal_Reserve_System.svg.pngThe<br
/>Federal Reserve: Central banking system
--Created by the Federal Reserve Act of 1913 for controlling
monetary policy
--Mission: Maximize employment, stabilize prices, and moderating
long-term interest rates.
--Manipulates interest rates to maintain the value of money and
spur economic growths
HTML https://upload.wikimedia.org/wikipedia/en/thumb/a/a3/Securities_Investor_Protection_Corporation_logo.svg/250px-Securities_Investor_Protection_Corporation_logo.svg.pngSecurities<br
/>Investor Protection Corporation (SIPC)
--Non-governmental, federally mandated, non-profit,
member-funded, US corporation
--Mandates membership of most US-registered broker-dealers
--Created under Securities Investor Protection Act (SIPA)
--Mission: To expedite the recovery and return of missing
customer cash and assets during the liquidation of a failed
investment firm.
HTML https://upload.wikimedia.org/wikipedia/commons/thumb/b/bd/Seal_of_the_United_States_Federal_Deposit_Insurance_Corporation.svg/150px-Seal_of_the_United_States_Federal_Deposit_Insurance_Corporation.svg.pngFederal<br
/>Deposit Insurance Corporation (FDIC)
--US Government corporation that provides deposit insurance to
depositors in US banks and savings institutions.
--Created by the 1933 Banking Act.
[1.1.4] Market Participants and Their Roles
-Investors: A person or organization that puts money into
financial schemes, property, etc. with the expectation of
achieving a profit.
--Accredited: +allowed to deal in securities that may not be
registered with financial authorities
-Broker-Dealers: A brokerage firm that buys and sells securities
on its own account as a principal before selling the securities
to customers.
-Investment Advisors: Any person or group that makes investment
recommendations or conducts securities analysis in return for a
fee
-Municipal Advisors: Provides services relating to the structure
and sale of securities and to ultimately assist issuers in
obtaining the lowest financing cost
-Issuers and Underwriters: Brings a company's securities to
market.
-Traders and Market Makers: Dealer in securities or other assets
who undertakes to buy or sell at specified prices at all times.
-Custodians and Trustees: A person who has responsibility for or
looks after something.
-Transfer Agents: Trust company, bank or similar financial
institution assigned by a corporation to maintain records of
investors and account balances.
-Clearing Corporations: An organization associated with an
exchange to handle the confirmation, settlement, and delivery of
transactions.
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[1.2] Market Structure
[1.2.1] Types of Markets
(1) Primary Market: (E.g. IPO) Where firms sells new stocks and
bonds to the public for the first time.
(2) Secondary Market: (E.g. NYSE, Nasdaq) Where securities are
traded among investors.
(3) Third Market: Where OTC transactions occur between
broker-dealers and large institutions.
(4) Fourth Market Where transactions take place between large
institutions.
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[1.3] Economic Factors
[1.3.1] The Federal Reserve Board's Impact on Business
Activities and Market Stability
-Monetary policy concerns interest rates and total money supply.
--Interest rate: The proportion of a loan that is charged as
interest to the borrower, typically expressed as an annual
percentage of the loan outstanding.
--Discount rate: The minimum interest rate set by the Federal
Reserve for lending to other banks.
--Federal funds rate: The interest rate that banks charge other
banks for lending them money from their reserve balances on an
overnight basis.
-Fiscal policy is concerned with taxing and spending.
--Purchasing government securities -> increases commercial bank
reserves
[1.3.2] Business economic factors
Purpose of financial statements
--(1) Balance Sheet: Shows the firm's assets, liabilities, and
net worth on a stated date
--(2) Income Statement (also called profit & loss account):
Shows how the net income of the firm is arrived at over a stated
period
--(3) Cash Flow Statement: Shows the inflows and outflows of
cash caused by the firm's activities during a stated period
Business Indicators
--(1) Leading Indicators: Point toward future events.
--(2) Lagging Indicators: Confirm a pattern that is in progress.
--(3) Coincident Indicators: Occur in real-time and clarify the
state of the economy.
Basic effects on bond and equity markets (e.g., cyclical,
defensive, growth)
--(1) Cyclical Equity: A equity security whose price is affected
by macroeconomic, systematic changes in the overall economy.
--(2) Defensive Equity: An equity that provides a constant
dividend and stable earnings regardless of the state of the
overall stock market.
--(3) Growth Stock: A share in a company that is anticipated to
grow at a rate significantly above the average for the market.
-Principal economic theories (e.g., Keynesian, Monetarist)
[img]
HTML https://s.yimg.com/ny/api/res/1.2/fI.h31o9PLjSgoSEGx0yjg--~A/YXBwaWQ9aGlnaGxhbmRlcjtzbT0xO3c9MzAwO2g9Mjg3/https://marketrealist.imgix.net/uploads/2015/04/business-cycles.jpg?w=300&h=287&fit=max&auto=format[/img]Business<br
/>cycle
[1.3.3] International Economic Factors
-U.S. balance of payments
-Gross domestic product (GDP), gross national product (GNP)
-Exchange rates
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[1.4] Offerings
-Private placement offering: Security released for sale only to
accredited investors such as investment banks, pensions or
mutual funds.
-Shelf offering: A type of public offering where certain issuers
are allowed to offer and sell securities to the public without a
separate prospectus for each act of offering and without the
issue of further prospectus.
-Initial Public Offering: A type of public offering where
shares of a company are sold to institutional investors and
usually also retail investors
-Best efforts: The underwriter agrees to do the best it can to
sell as many of the issuer's securities as possible to the
public.
-Firm Commitment: The underwriter acts as a dealer and assumes
responsibility for any unsold inventory
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Section 2. Products and Risks (44%)
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Section 3. Trading, Accounts, and Prohibited Activities (31%)
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Section 4. Regulatory Framework (9%)
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