FBLA SECURITIES AND INVESTMENTS (EXPERT, ONLY DO ONCE MASTERED BASICS)

Deferred annuity

A deferred annuity delays payouts to allow tax-deferred growth. Fixed versions guarantee interest; variable versions fluctuate based on subaccount performance.

Immediate annuity

Begins payments within a year of purchase. Life annuities pay until death; period-certain pays for a set time regardless of death.

SIMPLE IRA

A small-business retirement plan allowing employee deferrals and mandatory employer matching or non-elective contributions. Lower limits than 401(k).

SEP IRA

Employer-funded plan for self-employed/small businesses. Only employer contributes, with higher limits than IRAs but no catch-up for employees.

Keogh (H.R. 10) Plan

Tax-deferred retirement plan for self-employed individuals, now largely replaced by SEP and solo 401(k), with complex contribution formulas.

Top-heavy retirement plan rules under ERISA

If >60% of assets benefit key employees, plan must meet minimum contribution and vesting standards to preserve tax-qualified status.

Unit trusts (UK) vs. mutual funds (US)

UK unit trusts are open-ended with trust structure; US mutual funds are investment companies. Key difference: legal wrapper and regulation.

Open-ended investment companies (OEICs) share classes

UK funds with corporate structure offering multiple share classes (e.g., income vs. accumulation) tailored to dividend treatment preferences.

Unit investment trusts (UITs) secondary-market behavior

UITs are not actively managed; prices in secondary markets may trade at slight premiums/discounts but trend toward NAV due to termination date.

Investment trusts (closed-end funds) premium/discount mechanics

Trade on exchanges; price driven by supply/demand. NAV may diverge, causing persistent premiums or discounts, unlike mutual funds.

Hedge-fund redemption gates & side-pocketing

Gates restrict redemptions to preserve fund stability; side pockets isolate illiquid assets to delay valuation/redemption until realizable.

Life-assurance policy surrender charges

Fees for early policy termination to recoup insurer costs; highest in early years, discouraging premature cash-out of permanent policies.

Pension vesting schedules (cliff vs. graded)

Cliff: 100% ownership after fixed period; graded: partial ownership increases over time. Regulated by ERISA to protect employee benefits.

S&P vs. Moody's vs. Fitch bond-rating scales

S&P/Fitch: AAA to D; Moody's: Aaa to C. Investment-grade: BBB−/Baa3 and above. Below = junk/high yield. Format differs, substance aligns.

Class A, B, C mutual-fund share structures & fees

A: upfront load, low ongoing fees. B: deferred load, converts to A. C: no load, high annual fees. A better for long-term investors.

Mutual-fund expense ratios: min, avg, max

Range from <0.10% (index funds) to >2.00% (actively managed funds). Average hovers near 0.50%-1.00% depending on fund class and style.

Collar strategies ("crime collars") in equity options

Protective put + covered call caps both upside and downside. "Crime collar" adds public sentiment—executives locking in large gains.

Repurchase agreements: overnight vs. term repo

Overnight: 1-day loan. Term: >1 day. Both collateralized. Repos = major short-term funding tool for dealers and institutions.

Floating-Rate Note (FRN) reset mechanics

Interest resets periodically based on reference rate (e.g., LIBOR/SOFR) + fixed spread. Reset frequency = duration sensitivity.

Auction-Rate Securities (ARS) failure of 2008

Long-term securities with short-term rates set via auctions. 2008 liquidity crisis froze auctions, trapping investors in illiquid positions.

De minimis exemption for ERISA plan managers

Allows investment in employer securities if <10% of assets; exemptions apply if plan holds only minimal "prohibited transaction" risk.

GSE vs. quasi-agency vs. full government-agency bonds

GSEs (e.g., Fannie Mae): no full guarantee. Quasi: government affiliation, limited backing. Full agencies (e.g., GNMA): explicit guarantee.

Thrift Savings Plan L Fund glide path

Target-date funds shift from aggressive to conservative allocation over time, automating risk reduction for retirement planning.

IPO blackout period

Post-IPO lockup (~90-180 days) restricts insider selling. Prevents market flooding and stabilizes early pricing.

Preemptive rights

Right to maintain ownership percentage.

Subscription rights

Right to buy new shares at discount.

Ex-rights date

Date shares trade without rights.

Zero-coupon bond pricing

Sold at discount, no periodic interest.

STRIPS

Treasury bonds stripped into individual zero-coupon components for tax-deferral strategy.

Bond duration

Measures sensitivity to rate changes.

Convexity

Adjusts for nonlinearity; high convexity results in less downside from rate increases.

Volcker Rule

Bans proprietary trading by banks; effective 2015. Revisions in 2019 eased compliance, especially for smaller institutions and funds.

Uptick Rule (Rule 10a-1)

Prohibited short selling unless last trade was uptick; repealed in 2007 and reintroduced as circuit-breaker rule post-Flash Crash in 2010.

Securities Act 1933 § 11

Civil-liability framework that holds issuers liable for material misstatements/omissions in registration statements.

Securities Exchange Act 1934 Reg FD

Mandates simultaneous public disclosure of material info to prevent selective disclosure to analysts/investors.

Sarbanes-Oxley Act 2002 § 404

Requires management and auditor attestation of internal controls over financial reporting.

Financial Services and Markets Act 2000

Split UK regulation post-crisis: PRA (prudential) vs. FCA (conduct). FSMA sets framework for both.

Data Protection Act 1998 (UK)

Pre-GDPR law regulating personal data use in financial services.

AML/KYC requirements

Firms must verify identity (KYC), monitor transactions, and report suspicious activity to FinCEN via SARs under BSA/Patriot Act.

UK Financial Ombudsman Service

Resolves disputes between UK consumers and firms with legally binding decisions and compensation limits.

Glass-Steagall Act 1933

Separated commercial and investment banking; repealed in 1999 allowing universal banking.

IRS Code § 501(c)(3)

Charitable, tax-deductible donations.

IRS Code § 501(c)(4)

Social welfare, not tax-deductible; political activity rules differ sharply.

IRS Code § 1244

Allows up to $50K/$100K ordinary loss treatment on qualifying small-business stock—bypassing capital loss limits.

IRS Code § 871(m)

Foreign holders of equity-linked derivatives face U.S. withholding tax if derivative mimics dividend exposure.

Stamp Duty Reserve Tax (SDRT)

0.5% tax on paperless UK share transfers; applies automatically on CREST-settled trades.

EU's MiFID II

Requires separate pricing of research vs. execution, increasing transparency.

Japan's TOPIX vs. Nikkei 225

TOPIX = market-cap weighted; Nikkei = price-weighted.

MSCI EAFE index

Tracks developed markets outside N. America; country weights by market cap; sector caps avoid concentration.

China's QDII program

Allows domestic Chinese institutions to invest in foreign securities under quota system.

SELIC

Brazil's benchmark rate, derived from secured overnight lending. Key policy tool for inflation targeting.

Financial Services Compensation Scheme (FSCS)

Covers deposits and investments up to £85,000 per person per institution. Last-resort safety net for failed firms.

Registrar

Maintains record of owners.

Transfer agent

Executes transfers, handles certificates, dividends, and investor services.

Captive insurer

Owned by insured.

Risk-retention group (RRG)

Group self-insurance.

Surplus-lines insurer

Unlicensed in state, used when standard carriers won't underwrite.

Durable Power of Attorney

Survives incapacity.

Springing Power of Attorney

Activates upon event.

Limited Power of Attorney

Narrow scope (e.g., sign documents during absence).

Trust Indenture Act of 1939

Requires formal agreements between bond issuers and trustees for public debt offerings >$5M. Protects bondholders' rights.

Investment Company Act of 1940

Regulates mutual funds, UITs, and closed-end funds. Defines diversification, leverage limits, board structure, and disclosures.

Investment Advisers Act of 1940

Governs fiduciary conduct, registration, and fee disclosures for advisers managing >$100M in assets.

Securities Investor Protection Act of 1970 (SIPA)

Established SIPC to protect brokerage clients up to $500K ($250K cash) if firm fails. Doesn't cover market losses.

Gramm-Leach-Bliley Act (1999)

Repealed Glass-Steagall. Permitted banks, securities firms, and insurers to consolidate. Added consumer data privacy rules.

Bankruptcy Abuse Prevention & Consumer Protection Act of 2005

Raised filing standards, imposed means test for Chapter 7. Aimed to reduce strategic bankruptcies and lender losses.

JOBS Act Title I

Reduced disclosure and audit requirements for small IPO issuers with < $1B revenue.

JOBS Act Title II

Permits general solicitation in Reg D offerings if all investors are accredited. Expanded private market fundraising.

Tax Cuts and Jobs Act (TCJA) 2017

Lowered corporate tax to 21%, capped SALT deduction, doubled standard deduction, and changed pass-through taxation.

SECURE Act of 2019

Raised RMD age to 72, allowed long-term part-timers into 401(k)s, killed stretch IRA for most non-spouses.

Foreign Account Tax Compliance Act (FATCA) 2010

U.S. law requiring foreign financial institutions to report U.S. account holders or face 30% withholding on U.S. income. Targets offshore tax evasion.

Employee Retirement Income Security Act (ERISA) 1974

Sets minimum standards for private pension plans, including fiduciary duties, funding rules, reporting, and participant rights.

Public Utility Holding Company Act (PUHCA) 1935

Repealed in 2005 (EPACT). Ended SEC control of utility holding structures, enabling broader M&A and deregulated market competition.

Commodity Exchange Act (CEA) 1936

Regulates futures and derivatives markets; gives CFTC oversight. Core law behind anti-manipulation and clearing requirements.

Federal Reserve Act (1913)

Established the Fed and authorized use of open-market operations (OMOs) as a primary tool for managing monetary policy via T-bill buying/selling.

Sarbanes-Oxley Act Section 806

Protects employees reporting securities law violations from retaliation. Covers public companies and affiliates under federal law.

Dodd-Frank Section 741

Defines swap dealers and major participants, subjecting them to capital, registration, and clearing mandates under SEC/CFTC joint regulation.

Dodd-Frank Section 762

Mandates central clearing for certain swaps to reduce counterparty risk. Enforced via swap execution facilities (SEFs).

Dodd‑Frank Title VII derivatives regulation

Overhauls OTC derivatives: requires registration, clearing, trade reporting, margin rules for dealers, and transparency via SEFs.

CFTC vs. SEC jurisdictional boundaries

CFTC: futures, most swaps. SEC: securities and security-based swaps. Both regulate derivatives post-Dodd-Frank with some overlap.

SEC's Office of Credit Ratings under Dodd‑Frank

Created to oversee NRSROs (e.g., Moody's, S&P), enforcing transparency, internal controls, and ratings performance tracking.

IRC § 1031 like‑kind exchanges for real estate

Defers capital gains tax on real estate swaps of similar use. Only real property qualifies post-2017 TCJA.

IRC § 401(k) salary‑deferral limits

Employee deferral limit = $23,000 (2025); catch-up = $7,500 for 50+. Employers can add match up to IRS-defined total limit.

IRC § 403(b) tax‑sheltered annuities

Retirement plans for non-profits and schools; similar to 401(k) but may include annuity contracts and additional catch-ups.

IRC § 457 deferred‑compensation plans

Government and nonprofit plans allowing pre-tax deferral. Subject to separate limits; not aggregated with 401(k)/403(b).

IRC § 72(t) early‑withdrawal penalties

10% penalty on IRA/qualified plan withdrawals before 59½ unless exception (disability, SEPPs, etc.) applies.

IRC § 199A QBI deduction mechanics

Allows 20% deduction on qualified business income (QBI) for pass-throughs, phased out for high-income service businesses.

Net Investment Income Tax (NIIT) 3.8% threshold

Applies 3.8% surtax on net investment income above $200K (single)/$250K (joint). Targets high earners' passive income.

Alternative Minimum Tax (AMT) basics

Parallel tax system with fewer deductions; ensures high-income taxpayers pay a minimum rate. Key triggers: ISO gains, state taxes.

Wash‑sale rule for capital‑loss disallowance

Disallows a capital loss if repurchasing substantially identical security within 30 days before/after sale.

IRC § 382 ownership change limitations

Limits use of NOLs post-major ownership change (>50%) in corporations. Prevents tax sheltering via shell M&A.

Step‑up in basis at death provisions

Heirs inherit assets at FMV on date of death, erasing unrealized gains. Reduces capital gains tax if sold immediately.

Kiddie tax under IRC § 1(g)

Taxes unearned income of minors above threshold at parents' rate. Applies to dependents under age 19 or full-time students under 24.

Estate‑tax unified credit & portability

Unified credit shelters $13.61M (2025) from estate/gift tax. Portability lets surviving spouse use unused exemption.

Generation‑skipping transfer (GST) tax rules

40% tax on transfers to "skip" generations. Separate lifetime exemption ($13.61M in 2025) from estate/gift tax limits.

Section 529 qualified tuition programs

Tax-free growth for education expenses. Contributions are post-tax but may get state deductions; penalty for nonqualified withdrawals.

Section 530 Coverdell ESA

Education savings account with $2K/year cap. Broader usage than 529 (includes K-12), but income limits apply.

Section 1035 tax‑free annuity exchanges

Allows tax-free replacement of annuity or life insurance with another of same type. Preserves deferral, avoids gain recognition.

T+1 settlement cycle rollout for US equities

From May 2024, trades settle one business day after execution (T+1). Reduces counterparty risk and margin needs.

Regulation T initial margin requirements

Sets 50% initial margin for stock purchases with credit. Applies to brokers under Fed Reserve Board authority.