Series 7 Need-to-Know

Correspondence

written or electronic messaging sent by a member firm to 25 or fewer retail investors (existing or prospective)

Institutional Communication

written or electronic communication distributed to ONLY institutional investors.

ex: banks, insurance companies, registered investment advisers, government entities, employee benefit plans, broker-dealers and their registered representatives, individuals with assets of $50 million or greater,

Retail Communications

written or electronic communication distributed to more than 25 retail investors in a 30-calendar-day period; must be approved by a principal

ex: television, radio, billboards, magazines, telemarketing

Net Revenue Pledge

Operations and Maintenance are paid first

Gross Revenue Pledge

Debt Service is paid first

Correspondence

any written or electric communication distributed to 25 or fewer retail investors within a 30-calendar-day period.

Institutional Communication

any communication that is only made available to institutional investors but doesn’t include a members internal communications

Dual Listing

is when a security trades on two or more different exchanges; includes stock & options

Defeasance

when an outstanding bond issue is paid off prior to maturity through refunding

Time Spread

Calendar/ Horizontal spreads are two options with the same strike price but different expiration months.

Long Straddle

profitable when there is general market movement

MSRB Rule G-15

Callable bonds have to reflect the lowest yield; when a bond is selling at a premium, the YTC is always going to be the lowest

Equity REIT

Earn rental income from leasing properties they own

Life Insurance

only provides a death benefit

Taping Firm

The firm is required to retain copies of all mandated recordings for a period of three years from the date the tape was created

ADR

facilitate domestic trading of foreign securities

Discount Bond

Must be accreted

Premium Bond

Must be amortized

Annual Property Taxes

Mills * Assessed Property Value

Dilution of Equity

When convertible bonds are converted into common stock

Build America Bond

taxable municipal bonds with federal tax benefits; issuer BABs provide the municipal bondholder with federal income tax credit; direct payment BABs provide the municipal issuer with payments from the U.S. Treasury and tax credit

Government National Mortgage Association

only enterprise that is backed by the full faith and credit of the U.S. government

Level 2 & 3 service of Nasdaq

display firm bids, offers, and the names of the market makers

Level 1 service of Nasdaq

displays inside bids and offers

The Bond Buyer

a daily trade publication containing news about new municipal bond issues

Customer Confirmation Statement includes:

principal or agent (firm capacity), if member is a market maker, if there is a control relationship, settlement date, accrued interest, and total price

EPIC

Exporters buy puts on foreign currency to hedge

ex: Japan is an exporter receiving U.S. dollars they would buy U.S. puts or if not an option Yen Calls

Intangible drilling cost

one that after expenditure, has no salvage value

ex: labor, fuel, or drilling rig rental

Original Issue Discount Bond

the accretion is tax-exempt income if the bond is an…

discounted bond was purchased in secondary market

Annual accretion is taxable as interest income

Order ticket

Requires solicited or unsolicited disclosure

Registration Statement

effective on the 20th day after filing

Structure Products

securities that combine investments like a bond and a derivative that can offer returns that are linked to commodities, securities, or interest rates; structured to provide principal protection

When do issuers of bonds call them?

When interest rates rise

Quick Asset Ratio (Acid Test Ratio)

(Cash + Accounts Receivable + Marketable Securities)/ Current Liabilities

Support Level

bottom of a trading range; where the stock stopped decreasing

Head and Shoulder at the top

Bearish

Head and Shoulders at the bottom

Bullish

Who do Calls benefit?

The issuer (they no longer have to pay interest)

Who do puts benefit?

The bondholder (Allows the bondholder to ask for their money back earlier than maturity date)

Undivided (Easter)

Syndicate member is still liable for bonds after initial commitment

Divided (Western)

Syndicate is responsible for initial commitment only

Combination

Different Strike Price, Different Option (Call & Put)

Diagonal

Different Expiration & Strike Price

Advanced Decline Info

indicates the number of stocks that increases versus the number of stocks that decreased during a particular trading day

U.S. Savings Bonds

Nonnegotiable bonds (they cannot be resold to other investors in the secondary market)

Treasury Bill

Interest received is based on the difference between the discounted purchase price and the face value

Corporate Resolution

the form that authorizes a person to trade for a corporate cash account

Regulation A

only 30% of the offering can be sold on behalf of existing shareholders

Syndicate Member

Entitled to the additional takedown plus the concession

Syndicate Manager

Entitled to the management fee