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FINRA BrokerCheck

FREE public tool to research brokers and brokerage firms. | • Registration and employment history | • Qualifications and exams | • Certain complaints and disciplinary actions | • Information comes primarily from CRD. | | REMEMBER: BrokerCheck = Professional background.

BrokerCheck Disclosure Requirements

FINRA member firms must tell customers about BrokerCheck. | • Provide required BrokerCheck information to new customers | • Include BrokerCheck information on qualifying retail communications and websites | | REMEMBER: Investors must be informed this resource exists.

Central Registration Depository (CRD)

FINRA-operated registration and licensing database for broker-dealers and registered persons. | | Contains registration, employment and disclosure information. | | BrokerCheck makes selected CRD information publicly available.

Transfer Agent vs. Trustee

TRANSFER AGENT: Maintains shareholder ownership records; processes ownership transfers and corporate actions. | | TRUSTEE: Represents bondholders under a bond indenture and monitors/enforces specified obligations. | | REMEMBER: Transfer agent = Stock records. Trustee = Bondholders.

Bond Indenture

Legal contract between bond issuer and trustee setting out terms of a bond issue. | | Includes interest, maturity, collateral if any, and covenants. | | REMEMBER: Indenture = Bond contract.

Corporate Resolution

Formal authorization by a corporation's board of directors. | | Identifies who may open and transact in a corporate brokerage account. | | REMEMBER: Corporate account = Authorized individuals.

Stock Split vs. Reverse Stock Split

STOCK SPLIT: Shares increase; price per share decreases proportionally. | | REVERSE SPLIT: Shares decrease; price per share increases proportionally. | | Neither automatically changes total investment value. | | Example: 2-for-1 → Twice the shares, half the price.

Cash Dividend vs. Stock Dividend

CASH DIVIDEND: Company distributes cash to shareholders. | | STOCK DIVIDEND: Company distributes additional shares. | | Cash dividends reduce company assets; stock dividends generally do not change total shareholder equity.

Ex-Dividend Date

Date a stock begins trading WITHOUT the right to receive the upcoming dividend. | | Buyer ON or AFTER ex-date does not receive that dividend. | | For ordinary cash dividends, ex-date is generally the record date under T+1 settlement.

Tender Offer

Public offer to buy shares from shareholders, usually at a stated price for a limited time. | | May be used to acquire control of a company. | | Shareholders decide whether to tender their shares.

Rights vs. Warrants

RIGHTS: Usually short-term opportunity for existing shareholders to buy additional shares, often below market price. | | WARRANTS: Usually longer-term instruments giving the holder the right to buy shares at a specified exercise price. | | REMEMBER: Rights = Shorter. Warrants = Longer.

Commercial Paper

Short-term unsecured corporate debt used to finance operations. | | • Maximum maturity typically 270 days for common registration exemption | • Usually issued at discount | • Generally issued by creditworthy corporations | | REMEMBER: Commercial paper = Corporate short-term borrowing.

Bankers' Acceptance

Short-term negotiable instrument guaranteed by a bank, commonly used to finance international trade. | | • Bank promises payment at maturity | • Often sold at a discount | | REMEMBER: Bankers' acceptance = Trade financing.

Repo vs. Reverse Repo

REPO: Dealer sells securities and agrees to repurchase them later; economically borrowing cash. | | REVERSE REPO: Counterparty buys securities and agrees to resell them later; economically lending cash. | | REMEMBER: Repo = Borrow cash from seller's perspective.

Negotiable Certificate of Deposit

Bank-issued time deposit that can be traded in a secondary market. | | • Usually larger denominations | • Pays interest | • FDIC insurance applies only within applicable limits for eligible deposits | | REMEMBER: Negotiable = Transferable.

Industrial Development Revenue Bond (IDR)

Municipal revenue bond financing a project used by a private business. | | • Often supported by private business payments | • Credit risk generally tied to private user | • Interest may be subject to AMT if classified as a specified private activity bond.

Double-Barreled Bond

Municipal bond supported by TWO sources: | • Revenue from a project or enterprise | • Government taxing power | | REMEMBER: Double-barreled = Two sources of repayment.

Ginnie Mae (GNMA)

Government National Mortgage Association. | | • Federal government agency | • Guarantees timely principal and interest on qualifying mortgage-backed securities | • Guarantee backed by full faith and credit of U.S. government | • Investors still face prepayment risk.

Prepayment Risk

Risk that borrowers repay loans earlier than expected. | | Common in mortgage-backed securities when interest rates fall and homeowners refinance. | | Investors may have to reinvest at lower rates.

Rule 147 vs. Rule 147A

Intrastate securities offering exemptions. | | RULE 147: Traditional intrastate safe harbor with in-state issuer and resident purchasers. | | RULE 147A: Allows certain out-of-state incorporation and offers to out-of-state persons, but sales must be to in-state residents. | | Both involve resale restrictions.

What is Market Capitalization?

Total market value of a company's outstanding common shares.

Formula: Stock Price × Shares Outstanding

• Large-cap: $10 billion+

• Mid-cap: $2–10 billion

• Small-cap: $250 million–$2 billion

Remember: Market cap = Company SIZE, not stock price alone.

What is a Cyclical Stock?

Stock whose performance is closely tied to the economy.

• Performs better during economic expansion.

• Performs worse during recessions.

• Examples: Automobiles, airlines, hotels, luxury goods.

Remember: Cyclical = Follows the economic cycle.

What is a Defensive Stock?

Stock of a company providing essential goods or services needed regardless of the economy.

• Generally more stable during recessions.

• Less sensitive to economic cycles.

• Examples: Utilities, healthcare, consumer staples (food, household necessities).

Remember: Defensive = People still NEED it during a recession.

• Cyclical: People spend more when the economy is ____.

• Defensive: People still buy it when the economy is ____.

• Cyclical: People spend more when the economy is GOOD.

• Defensive: People still buy it when the economy is BAD.

What happens when a company issues a stock dividend?

Shareholders receive additional shares instead of cash.

• Shares outstanding: Increase

• Market price per share: Decreases proportionally (theoretically)

• Total investment value: Unchanged initially

• Ownership percentage: Unchanged

• Cost basis per share: Decreases

• Total cost basis: Unchanged

Example: 10% stock dividend

100 shares at $50 = $5,000

After dividend:

110 shares at approximately $45.45 = $5,000

Remember: MORE shares, LOWER price per share, SAME total value!