SIE flashcards
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32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Primary market
- Market in which new securities are sold to investors by the issuer, with the proceeds going to the issuing company or government rather than to a selling shareholder.
- Money market securities
- Short-term debt instruments with original maturities of one year or less, including Treasury bills, commercial paper, negotiable certificates of deposit, and bankers' acceptances.
- Federal funds rate
- Overnight interest rate at which banks lend excess reserves held at the Federal Reserve to other banks; the FOMC sets a target range for this rate.
- Open market operations
- The Federal Reserve's buying and selling of government securities; purchases add reserves and push short-term rates down, while sales drain reserves and push rates up.
- Inverted yield curve
- A curve where short-term rates are higher than long-term rates, reflecting tight monetary policy and historically associated with an increased risk of recession.
- Firm commitment underwriting
- An arrangement in which the underwriting syndicate buys the entire issue from the issuer and bears the financial risk of any shares that go unsold.
- SIPC protection limits
- Coverage of up to $500,000 per customer of a failed broker-dealer, including a $250,000 sublimit for cash; it does not cover declines in market value.
- Common stock
- Equity ownership with a residual claim on assets and earnings, usually voting for directors and receiving declared dividends; holders are paid last in liquidation.
- Preferred stock
- Equity with a stated dividend rate that ranks ahead of common stock for dividends and liquidation, usually carries no voting rights, and behaves like a fixed-income security.
- Warrants
- Long-term securities giving the holder the right to buy a company's stock at a set price, often above the current market price and attached to bonds as an inducement.
- General obligation bonds
- Municipal bonds secured by the issuer's full faith, credit, and taxing power, repaid from general revenues rather than from the income of a specific project.
- Treasury Inflation-Protected Securities
- Treasury notes or bonds whose principal is adjusted semiannually for changes in the Consumer Price Index, with coupon interest paid on the adjusted principal amount.
- Systematic risk
- Risk that affects the whole market, such as interest rate shifts, inflation, or political events, and cannot be reduced by diversifying among many securities.
- Interest rate risk
- The risk that a bond's price falls when market interest rates rise; it increases with longer maturities and lower coupons, and is measured by duration.
- Put option buyer
- Holds the right to sell the underlying security at the strike price before expiration, pays a premium up front, and profits when the stock price declines.
- Open-end fund pricing
- Fund shares are bought and redeemed at net asset value, computed once each day at 4:00 p.m. Eastern, with orders receiving the next price calculated under forward pricing.
- Limit order
- An order to buy at or below a stated price, or sell at or above it; the price is protected but execution is not guaranteed if the market never reaches the limit.
- Stop order
- An order that becomes a market order once the stop price is reached; it protects against losses but does not guarantee the price at which it executes.
- Regulation T initial margin
- Rule requiring a customer to deposit at least 50 percent of the purchase price when buying securities on margin; FINRA maintenance is 25 percent for long positions.
- Short sale
- The sale of borrowed securities with an obligation to repurchase them later; losses are theoretically unlimited and the short account requires 30 percent maintenance margin.
- Churning
- Excessive trading in a customer account relative to the customer's investment objectives, done without authorization and mainly to generate commissions; a prohibited practice.
- JTWROS
- A joint account in which a deceased owner's interest passes automatically to the surviving owner, avoiding probate; both owners share control of the account.
- UGMA custodial account
- An irrevocable gift account in which an adult custodian invests and manages assets for a minor, who gains control of the account at the state's age of majority.
- T+1 settlement
- The standard cycle since May 2024 in which stocks, corporate bonds, municipal bonds, and options settle one business day after the trade date.
- Reg BI care obligation
- Requires a broker-dealer to use reasonable diligence, care, and skill so that a recommendation is in the retail customer's best interest, considering cost and alternatives.
- Wash trade
- Buying and selling the same security to create the illusion of trading activity while beneficial ownership does not really change; a form of prohibited market manipulation.
- Securities Act of 1933
- Federal law requiring new securities offerings to be registered with the SEC and sold with a prospectus, and prohibiting fraud in the primary market.
- Securities Exchange Act of 1934
- Created the SEC and regulates secondary market trading; it requires registration of broker-dealers and exchanges and governs proxy solicitation and insider trading.
- FINRA
- The self-regulatory organization for broker-dealers that writes and enforces rules on sales practices, communications, and registration, under SEC oversight.
- MSRB
- Self-regulatory organization that writes rules for firms and advisers dealing in municipal securities; it does not enforce them, which FINRA and the SEC do.
- Form U-5
- Uniform termination notice a firm files with FINRA within 30 days after a registered representative leaves, stating the reason for the termination.
- Statutory disqualification
- A bar to registration for persons convicted within ten years of certain felonies or of misdemeanors involving securities, investments, or dishonesty, absent SEC relief.