SIE Prep

Series 63 vs 66?

63 = Sec Sales, 66 more advisor based and recommended - combines 63 & 65

Who cannot take SIE?

Forgery, Embezzlement, Fraud , all can take SIE if 18+ but cant register with firm

Schedule A vs Schedule B Registration Statement for government securities?

A = direct owners, corporation, domestic ; B = indirect, , foreign, >= 25% ownership

How long does shelf registration last?

3 Years

Reg statement cooling period duration and what for, what does it grant for the issuer?

20 Days, SEC Confirms docs are received, no approval or opinion from SEC

When would indication of interest be likely during issue?

During the cooling period of registration to gauge non binding interest.

Tombstone ad what is it and what is it not?

Ad about new issue, not a sales ad

When is the last time a syndicate member can back out of issue?

End of cool off period

What is a selling group and when are they used, what is different about them to normal UW?

If syndicate desk cannot manage issue size, selling group helps, they dont purchase securities

What main 3 components of final prospectus?

Offering price, underwriter spread, delivery date

Is the Registrar responsible for cancellations and issuing?

No transfer agent is responsible for those

Primary offer vs ipo vs secondary offer?

Primary = New Issues after IPO, IPO = First sale, Secondary = Reselling

How long for exempt and non exempt issues must final prospectus be available?

Exempt = 25 days, non-exempt = 90 days

Registration A and D offerings/issues and any limits on investors?

A = small issues; D = private, to mostly accredited investors & max 35 unaccredited investors

Intrastate offering requirements?

80% Business conducted in state, 50% of employees reside and work in state

Rulle 144 and 144A Issues, the reason for them and the difference?

Rules in place to ensure consumer transparency while keeping markets efficient and liquid. 144 = Restricted stock sales, must wait 6 months and max of 4 week trading volume or 1% of total shares owned 144A = Unregistered securities being sold to Qualified Investment Buyer in the U.S to increase liquidity

Order of liquidation?

Unpaid workers, irs, strong debt, weak debt, preferred stock, common stock

Residual rights of CS?

CS are last to be paid out

Statutory vs Cumulative voting - which is considered stronger?

Statutory = Voting for each board change proposed is equal to # of shares owned, even split (4x500 = 500 each) Cumulative = Can use # shares owned * changing board seats to vote, can be uneven (4x500 = 2000 to choose from) Considered equal in power although cumulative likely has more to retail investors.

Outstanding stock vs issued stock vs authorized stock?

Authorized is total to sell | Issued is total sold | Outstanding = total sold - repurchased treasuries

Tender offer?

Buying shares at a premium to gain control

3-for-1 stock split of 100 shares @ $10?

300 shares @ $3.33 (Give three to buy one)

How does the ex-dividend date determine who gets dividend and what does it do to price?

Must own shares T-1 Day before ex-dividend, therefore price drops.

How does a stock dividend work and what benefit?

Increase in stock, reduce in price, same total value; reduced cost basis per share for investors

When do preferred stockholders get voting rights?

When they are missed a payment

Non cumulative preferred stock?

Not owed back if dividend is missed

What should a convertible preferred stock holder do if conversions of $100 to 4 with CS at $28?

Convert to gain $12 on preferred par value

What are ADRs, what is there risk, and how are dividends paid, can they be traded?

Foreign securities bought in US from bank, currency risk, paid in USD through issuer, can trade

Warrant, what is it and what is it considered, are they sellable?

Allowed to purchase stock at a fixed price, sweetener

What is a rights security, are they sellable, what are it and warrants considered, how are they different?

Ability to buy CS at a discount to market, sellable, derivative securities, rights are usually shorter

What is the coupon for bond with a market price of $1020, par value $1000, and 5% coupon?

5% * 1000 / 2 = $25 semi-annually

Bond ABC 7.50s 2035 @ 101?

ABC selling at premium of 101% of par value & coupon of 7.5% of par annually, mature in 2035

What types of bonds usually have a sinking fund?

Term bonds

Serial vs Series bonds?

Serial = same issue date with different maturities; Series = Staggered issue dates

Guaranteed bonds backed by and rated from who?

Backed by other company than issuer and rated on the backup companies ability

Debentures and income bonds?

Debenture is backed by good faith; Income is most risky, paid when income is high

Nominal yield vs current yield vs ytm?

Coupon yield set at sale vs coupon/market price vs yield expected to return if held to maturity

At a discount what is the order of yields?

Nominal or coupon < current < yield to maturity < yield to call - bc discount reflects low coupon

Accrued interest calculator for munis vs government bonds?

Munis and corps = 30/360 VS # of actual days / 365

Make whole provision and step up bonds?

Make wholes can be paid off early using PV of FCF; Step ups increase in coupons at call dates

What change in interest rates would likely cause a holder to put a bond?

IR Increase so sell back and go buy better coupons at lower price

Account duration on stability?

Shorter = More stable

T-Bills vs notes vs bonds vs strips vs tips, safest?

Short term lump sum payment; mid-term w/ payments; long term w/ payments; LT w/o payments; long terms w/ payments adjusted for inflation – safest is tips bc short term stability

Which agency bonds are safest and guaranteed?

GNMA, backed by US Government

Reinvestment risk of mbs's?

As people refinance when rates fall, reinvesting coupon payments is worse.

Money market instruments?

Short term debt securities, 1 year or less,

Repos (money market instrument) - how do they work?

Issuer will buy back at set date and price

Corporate commercial paper - how does it work?

Unsecured ST debt from corporation, mature at par with no payments and 270 days or less

Broker CDs - how do they work?

FDIC Bank investment sold by broker dealers

Eurodollars - what are they?

USD in a foreign bank outside of the US, high yield

Banker's acceptances - how do they work?

Payments secured by bank and used mostly for global trade

T-Bills (as a money market instrument) - how do they work?

Safe government backed short term security

Tax on federal bonds vs local or muni bonds?

State exempt only VS federal and state exempt for local muni bonds

What are general obligation bonds and who backs them/votes for them?

Municipal bond where the funded project is non-profit, backed by taxes and taxpayers.

As maturity length increases, what happens to a muni bond's marketability?

Decrease

As call feature (callability) increases, what happens to a muni bond's marketability?

Decrease

As interest rates (IR) increase, what happens to a muni bond's marketability?

Increase

As block size increases, what happens to a muni bond's marketability?

Increase

As price increases, what happens to a muni bond's marketability?

Decrease

As name brand (issuer recognition) increases, what happens to a muni bond's marketability?

Increase

As sinking fund provision increases, what happens to a muni bond's marketability?

Increase

As insurance (on the bond) increases, what happens to a muni bond's marketability?

Increase

Safest option of industrial development bonds, revenue bonds, and general obligation bonds?

General obligation because backed by taxes

How do revenue bonds get started?

Feasibility study

Three covenants of Revenue bonds?

Rate, Insurance, Maintenance

What type of underwriting selection method is used by GO vs Revenue bonds?

GO will use competitive to get best bid; revenue uses negotiable because it can

Allocation of new orders for municipal bonds?

Pre sale group, syndicate members, designated buyers, member orders

Who is the underwriter in a security issue?

The party who takes on the risk of the sale, buying the securities from the issuer and selling.

Why is the public housing municipal bond considered the safest and what does that do to yield?

Backed by US Government, lowers yield

Tax credit vs direct coupon bonds, which have higher coupon?

Direct coupon because the buyer will pay tax on it vs getting deductible.

S&P vs Moody's Rating systems for securities & bonds, what are junk for them?

S&P uses +&-; Moodys uses 1,2,3; Junk = Bb or Ba

529 Plan tax benefits?

Vary state by state, always grow and withdraw tax free, contributions may be taxed

Would an identical municipal or federal bonds have lower yield?

Municipal because tax savings downstream

If you hold a non municipal 10% bond, what is the municipal equivalent yield if tax is 35%?

10% * (1-35%) = 10*.65 = 6.5%

Are bond resolutions (indentures) required for corporate, muni or federal bonds?

Yes to corporate but no to muni and federal.

What information is the preliminary statement not required to have for municipal bonds?

Coupon rate and prices

How long must ads be retained?

2 years strict, 3 years ideal

What is the primary focus of MSRB Rule G-3?

Professional qualifications

What is the primary focus of MSRB Rule G-17?

Fair dealing

What is the primary focus of MSRB Rule G-19?

Customer suitability

What is the primary focus of MSRB Rule G-30?

Fair pricing

What is the primary focus of MSRB Rule G-37?

Pay-to-play restrictions

Which self-regulatory organization creates rules for municipal securities; who enforces them?

Municipal Securities Rulemaking Board (MSRB) creates rules; FINRA and SEC enforce.

Open end vs closed end fund capitalization, pricing, issues, repurchases, bought and sold?

Open end is mutual funds, constant issuing and redeeming shares; vs shares go to exchange CE = 1 capitalization, pricing by S&D + Commish, can be any sec VS only CS, no partials, exch.

Diversified management company requirements?

75% assets spread out, no company more than 5% of total assets or 10% of voting stock

Public offering price of open end funds?

Net asset value (share price at announcement) + Sales Charge

12b-1 Fee?

Fee charged by mutual fund to cover ads and promotions

Closed end fund public offering price set by?

Supply and demand like any stock

Total actual cost of closed end funds after POP?

POP + Commission charge

Breakpoints of a security, disclosed, available to who, breakpoint sale?

Point where sale % decrease, prospectus, normal people, sale right below point must disclose it.

Letter of intent for a breakpoint sale backdate limit and how it is secured?

Intent to buy more shares in the future, 90 days limit secured in escrow

POP from NAV and Sales Percentage?

POP = NAV / (1-SALE %)

Class A, B, and C mutual fund fees?

Upfront vs At sale vs Ongoing

Unit investment trust, what is it and how is liquidity?

Unmanaged usually set portfolio with a set maturity where portfolio terminates, bad liquidity

ETFs mostly active or passive, risks?

Passive, margin and shorting risks

Mutual fund vs ETFs and which has higher fees?

Similar in that basket of stocks but ETFs trade constantly, therefore have higher fees.

Exchange traded notes?

Unsecured ST Debt securities that mature at par with no payments

Rule 17a-6 vs 17a-7?

Allows transactions with owned companies VS Cross-trading between sister funds.

Max sale % for mutual funds?

8.5%

Who bears risk from variable vs fixed annuities, investor or issuer?

Fixed = Issuer risk, Variable = Investor Risk