Type 2 Securities Sales Representative Examination flashcards

33 cards. Read the term and the definition here. The deck at the top of this page is optional.

FIEA Type 2 registration

Registration category permitting solicitation of interests in collective investment schemes and certain other products; it does not authorize underwriting, dealing, or proprietary trading in listed shares and bonds.

Professional investor regime

Under FIEA, qualified investors (tokutei toshi-ka) may consent to reduced conduct protections, allowing lighter disclosure and solicitation rules for certain products, subject to documented confirmation.

JSDA self-regulatory rules

Rules adopted by the Japan Securities Dealers Association that bind member firms in addition to FIEA, covering solicitation, suitability, advertising, and order handling standards.

Loss compensation prohibition

FIEA Article 39 bars a financial instruments business from compensating a client for investment losses or promising advance profits, whether before or after the trade.

Silent partnership interest

A tokumei kumiai interest giving the investor a share of profits and losses but no voting rights, management authority, or direct claim on the operator's assets.

Investment trust structure

A contractual scheme with an asset management company as manager, a trust bank as trustee, and investors as beneficiaries holding beneficiary interests rather than shares.

Convertible bond conversion value

The value obtained by multiplying the conversion ratio by the current share price; the bond floor supports the price when the equity falls below conversion parity.

Leverage in derivatives

A small premium or margin controls exposure to a larger notional amount, amplifying both gains and losses relative to the capital committed.

TSE trading unit

The standard lot size for auction trading on the Tokyo Stock Exchange, generally 100 shares for domestic stocks, with odd lots handled outside the auction.

Daily price limit

A per-stock band set by the exchange around the previous close that caps how far the price may move in a session; trading halts at the band.

Shareholder allotment rights issue

A wariate zōshin granting existing shareholders the right to subscribe new shares, usually at a discount; the rights are tradeable only if the terms provide.

Tender offer period

Under FIEA, a public tender offer generally runs for 30 business days unless a shorter period is permitted, with a required registration statement and public notice.

Insider trading prohibition

FIEA Article 166 bars trading on material undisclosed corporate facts by insiders and tippees before public announcement of the information.

Bond price-yield relationship

Bond prices move inversely to yields; for a given maturity, lower-coupon bonds have higher duration and greater price sensitivity to yield changes.

Modified duration

Macaulay duration divided by (1 + y/n); it approximates the percentage price change for a 1% change in yield.

DV01

The change in a bond's price for a one-basis-point change in yield, computed as price times modified duration times 0.0001.

Accrued interest

Interest earned from the last coupon date to settlement; the dirty price equals the clean price plus accrued interest.

Credit spread

The difference between a bond's yield and the yield on a comparable-maturity government bond, reflecting perceived credit and liquidity risk.

Net asset value

A fund's total assets minus liabilities divided by units outstanding; open-end funds issue and redeem at NAV struck at the close of business.

Fund of funds

A scheme investing in other funds, adding a second layer of fees and requiring look-through analysis to assess true exposure and total cost.

Tracking difference

The gap between an index fund's return and its benchmark return, driven by fees, sampling error, and cash drag; a large persistent gap is a red flag.

Redemption gate

A fund provision limiting or suspending redemptions when liquidity is strained, protecting remaining investors from forced asset sales at distressed prices.

Suitability assessment

Matching a product's risk and return profile to the client's knowledge, experience, financial position, and objectives, with documented evidence of the assessment.

Know-your-customer

Identity verification, beneficial ownership checks, and source-of-funds review required at account opening and refreshed for higher-risk clients under anti-money-laundering rules.

Pre-contract disclosure

Delivery of a prospectus or equivalent document explaining the product, fees, and risks before the client subscribes, as required by FIEA.

Client asset segregation

Client money and securities must be held separately from the firm's own assets, with custody arrangements that prevent commingling.

Best execution

The duty to execute client orders on terms most favorable to the client, weighing price, cost, speed, and likelihood of execution under a disclosed policy.

Front-running

Trading ahead of a known client order to profit from the anticipated price impact; it is prohibited market conduct and an enforcement priority.

Churning

Excessive trading in a client account to generate commissions rather than to serve the client's objectives; a conduct breach and enforcement target.

T+2 settlement

The standard settlement cycle for Japanese equities, under which trades settle two business days after the trade date, with buy-in rules for fails.

Fiduciary duty

The obligation to act in the client's best interest, avoid conflicts where possible, and disclose any conflict that cannot be avoided.

Market manipulation

Conduct such as wash trades, marking the close, or spreading false rumors intended to distort prices; it is a criminal or administrative violation under FIEA.

Fair advertising rule

Advertising must be balanced and not misleading; past performance must carry required caveats and must not be presented as a guarantee of future results.