series 6 exam unit two

What’s covered under the Investment Company Act of 1940?

1. Face Amount certificates (FAC)

2. Management Companies (closed-end and open-end mutual funds)

3. Unit Investment Trusts (UIT).

What requirements does a company have to meet to file with the SEC?

1. Net assets of $100,000

2. A clearly defined investment objective

Can a company still file with the SEC if they don’t have net assets of $100K?

Only if they can meet the requirement in 90 days.

Unit Investment Trust (UITs)

Passive, fixed basket of investments with an expiration date (maturity).

Open-End Funds

Continuous offering of new shares and redeems shares directly from investors.

Closed-End Funds

Raises a fixed amount of capital through an IPO and then trades on an exchange like a stock.

The price of closed-end funds is determined by what?

Supply and demand.

Is the ex-dividend date for mutual funds before or after the record date?

After.

Exchange-Traded Funds (ETFs)

Hybrid of mutual funds and stocks—actively managed, traded throughout the day on an exchange.

Statutory Prospectus

Disclosure document containing all information about the investment.

Does a statutory prospectus need disclose its performance histories?

Yes— 1. 5. and 10-year market performance histories.

When is a mutual fund prospectus updated?

Annually.

Summary Prospectus/Rule 498

Key information in the fund’s full prospectus.

Statement of Additional Information (SAI)

Information not found in the statutory prospectus.

When must a SAI be made available?

Within 3 days of the investor’s request.

Omitting Prospectus/Rule 482

Information not included in the statutory prospectus—used in a tombstone ad.

Growth Fund

Investment in stocks with companies that are rapidly growing.

Blue-chip/Conservative Growth Funds

Investments in established companies to achieve growth with less risk.

Blue-chip/Large-cap Growth Fund

An investor who is willing to take moderate risk and is willing to invest for a minimum of five to seven years.

Performance/Aggressive Growth Funds

Funds willing to take greater risk to maximize capital appreciation.

Small-cap Funds

New companies with smaller capitalization sizes (less than $2 billion).

Mid-cap Funds

Companies with a market capitalization between $2 to $10 billion.

Large-cap Funds

Companies with a market capitalization over $10 billion.

Value Funds

Companies with undervalued stocks that are expected to exceed what performance reports indicate—opportunity to profit.

Equity Income Funds

Investing in a company’s stock that has a history of paying dividends with some capital appreciation.

Growth and Income Fund

For investors seeking dividends, capital appreciation, and moderate risk.

Sector Fund

High appreciation potential but poses a higher risk.

Special Situation Funds

Investments in a company undergoing significant events (mergers or acquisitions) that the fund manager believes will increase the company’s value in the near future.

Blend/core Funds

Investments in both growth and value stocks — often from the same asset class, like large-cap U.S. equities.

Balanced Fund

Mix of stocks (capital appreciation) and bonds (income and stability).