SAC General Business Evaluation flashcards
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31 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Securities Act of 1933
- Federal law governing primary offerings of securities, requiring registration with the SEC and prospectus delivery unless an exemption such as Regulation D applies to the transaction.
- Rule 201 alternative uptick
- Regulation SHO rule requiring short sale orders to be entered at a price above the national best bid after a 10% intraday decline, remaining in effect for the rest of the day and next day.
- SIPC coverage limits
- Protects customers of failed broker-dealers up to $500,000 per customer, with a $250,000 sublimit for cash claims; market losses and bad advice are not covered.
- Regulation Best Interest
- SEC rule requiring broker-dealers to act in the best interest of retail customers when recommending securities, with obligations of care, disclosure, conflict mitigation, and compliance.
- JTWROS
- Joint tenancy with right of survivorship: each owner holds an undivided interest, and on death the deceased owner's share passes automatically to the surviving owner outside probate.
- Regulation T initial margin
- Federal Reserve rule requiring customers to deposit at least 50% of the purchase price of marginable securities, with payment due within one business day of trade settlement.
- Trusted contact person
- Individual designated by a client whom the firm may contact about possible exploitation or diminished capacity; required under FINRA Rule 4512 for natural person accounts.
- Modified duration
- Measure of a bond's price sensitivity to a 1% change in yield, calculated as Macaulay duration divided by one plus yield divided by compounding periods per year.
- Bond premium
- A bond trades at a price above par when its coupon rate exceeds the prevailing market yield; the premium is amortized over the bond's remaining life for tax purposes.
- Investment grade
- Credit rating of BBB-/Baa3 or higher, indicating lower default risk; below investment grade is speculative or junk status with higher yield and default risk.
- TIPS
- Treasury Inflation-Protected Securities whose principal adjusts with the Consumer Price Index; coupon rate is fixed and applied to the adjusted principal, with deflation protection at maturity.
- Mutual fund NAV
- Net asset value equals total fund assets minus liabilities divided by shares outstanding, computed at least once daily; orders receive the next computed NAV (forward pricing).
- 12b-1 fee
- Annual mutual fund distribution and marketing fee deducted from fund assets, subject to FINRA limits; excess over limits is treated as a sales charge.
- Authorized participant
- Entity that creates or redeems ETF shares in large blocks directly with the fund, supporting arbitrage that keeps market price close to net asset value.
- Variable annuity
- Insurance contract whose value fluctuates with separate account investments; it is a security requiring prospectus delivery and both securities and insurance licensing.
- Covered call
- Strategy of holding long stock and writing a call against it, generating premium income while capping upside above the strike price.
- Put-call parity
- Relationship for European options stating call price plus present value of strike equals put price plus underlying price; deviations permit arbitrage.
- Theta
- Option Greek measuring the rate at which an option's value declines as time passes, accelerating as expiration approaches for at-the-money options.
- Accredited investor
- Person with net worth over $1 million excluding primary residence, or income over $200,000 individual or $300,000 joint in each of the prior two years.
- Best execution
- FINRA Rule 5310 obligation requiring reasonable diligence to obtain the most favorable terms for customer orders considering price, speed, certainty, and order size.
- Stop-limit order
- Order that becomes a limit order once the stop price is triggered; execution is not guaranteed if the market moves past the limit price.
- T+1 settlement
- Standard settlement cycle requiring cash and securities to be delivered one business day after the trade date for most equities, corporate bonds, and municipal bonds.
- Rule 10b-10 confirmation
- Rule requiring broker-dealers to provide written notification at or before settlement disclosing capacity, remuneration, and material terms of the transaction.
- Suspicious Activity Report
- Confidential report filed with FinCEN within 30 calendar days of detecting suspicious activity; tipping off the customer about the filing is prohibited.
- Currency Transaction Report
- Report required for cash transactions exceeding $10,000 in a single business day; structuring transactions to avoid the threshold is a federal crime.
- Beneficial ownership rule
- CDD requirement to identify and verify individuals owning 25% or more of a legal entity and one individual with significant control over the entity.
- Ponzi scheme
- Fraud paying returns to earlier investors from funds contributed by new investors rather than from legitimate profits; typically collapses when new investment slows.
- Roth IRA
- After-tax retirement account offering tax-free qualified withdrawals after a five-year holding period and age 59½; no required minimum distributions during the owner's lifetime.
- Required minimum distribution
- Minimum amount that must be withdrawn annually from traditional IRAs and most employer plans beginning at age 73 under SECURE 2.0, taxed as ordinary income.
- 60-day rollover
- Indirect rollover in which the account owner receives a distribution and must redeposit it into an eligible plan within 60 days to avoid taxes and the 10% early withdrawal penalty.
- Step-up in basis
- Tax rule resetting the cost basis of assets included in a decedent's estate to fair market value at death, reducing capital gains for heirs.