SEC Phase 2-7B Equities Securities Salesman (ESS) Exam - Philippines flashcards

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

Securities Regulation Code

RA 8799, enacted in 2000, is the Philippine law governing registration, licensing, and conduct in the securities market, enforced by the Securities and Exchange Commission.

Material non-public information

Information a reasonable investor would consider important and that has not been disclosed to the public; trading on it while subject to a duty of trust is insider trading.

Registration statement

The disclosure document filed with the SEC to register securities for public offering, containing business, financial, management, and risk information about the issuer.

Prospectus delivery requirement

A final prospectus must be furnished to every offeree before any sale of registered securities, and must be dated and consistent with the registration statement.

Broker versus dealer

A broker executes securities transactions for clients' accounts; a dealer buys and sells securities for its own account, often as a market maker.

Salesman registration

An individual must be registered with the SEC and associated with a registered broker-dealer to solicit or effect securities transactions; registration is not transferable.

Fit-and-proper standard

The requirement that registered persons have no disqualifying convictions for fraud or dishonesty and disclose administrative or disciplinary history to the regulator.

Common versus preferred shares

Common shares carry voting rights and residual earnings claims; preferred shares carry a stated dividend priority and usually limited voting rights.

Ex-dividend date

The date on which a share trades without the right to the declared dividend; a buyer on or after that date does not receive the dividend.

Theoretical ex-rights price

The adjusted share price after a rights offering, computed as the pre-offering market value plus subscription proceeds divided by total shares after issuance.

Stock split effect

A stock split increases share count and reduces par value proportionally, leaving total equity and each holder's proportionate ownership unchanged.

T+2 settlement

Philippine equities settle on trade date plus two business days, with SCCP clearing and PDTC holding securities in book-entry form.

Board lot

The standard trading unit for a security, set by price level on the PSE; orders below one board lot trade as odd lots with reduced liquidity.

PSEi index

A capitalization-weighted, free-float-adjusted index of selected large and liquid Philippine listed companies, reviewed periodically by the exchange.

Limit order

An order to buy or sell only at a specified price or better; it may remain unfilled if the market does not reach the stated price.

Best execution duty

The obligation to seek the most favorable terms reasonably available for client orders, considering price, speed, execution likelihood, and order size.

Discretionary account

A client account in which the broker may trade without prior approval for each order, requiring a written power of attorney and enhanced supervision.

Know-Your-Customer rule

The requirement to identify and verify each client, understand beneficial ownership and source of funds, and monitor the relationship for unusual activity.

Suitability obligation

The requirement that recommendations match the client's objectives, risk tolerance, financial situation, and experience, with the basis documented.

Suspicious Transaction Report

A confidential filing to the AMLC for transactions with no apparent lawful purpose, regardless of amount, when suspicion of money laundering arises.

Covered Transaction Report

An AMLC filing required for covered transactions exceeding the threshold, currently PHP 500,000 in a single banking day for covered institutions.

Front-running

Trading ahead of a known client order to profit from the expected price impact, breaching the duties of loyalty and best execution.

Wash sale

A transaction in which there is no change in beneficial ownership, used to create a false appearance of trading activity and prohibited as manipulation.

Churning

Excessive trading in a client account to generate commissions relative to the client's objectives, a suitability and fair-dealing violation.

Price-to-earnings ratio

Market price per share divided by earnings per share; a higher multiple generally reflects expected growth or lower perceived risk.

Gordon growth model

A dividend discount model valuing a stock as next year's dividend divided by the required return minus the sustainable growth rate, valid only if growth is below return.

Enterprise value

Market capitalization plus total debt minus cash; used with EBITDA to compare companies across differing capital structures.

Beta

A measure of a security's sensitivity to market movements; portfolio beta is the weighted average of constituent betas used in the CAPM.

Systematic risk

Market-wide risk that cannot be eliminated by diversification, arising from economic, interest rate, and political factors affecting all securities.

Sharpe ratio

Portfolio return minus the risk-free rate, divided by the standard deviation of returns; it measures excess return per unit of total risk.

Chinese wall

An information barrier separating investment banking from sales and trading to prevent the misuse of material non-public information within a firm.

Recordkeeping obligation

Registered firms must retain order records, confirmations, account agreements, KYC documents, and complaints for the period prescribed by SEC rules, generally at least five years.