Chapter 1 Notes SIE Prep

Kris Heller
Flashcards by , created 6 months ago

Examfx SIE Exam prep

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Kris Heller
Created by Kris Heller 6 months ago
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Question Answer
Securities & Exchange Commission (SEC) Created in 1934 as part of the "People Act" Governs the individuals & firms doing business in the Financial Services Industry Regulates exchanges & broker/dealers
Mission of SEC Protect Investors Maintain Fair, Orderly & Efficient Markets Facilitate Capital
Consequences of SEC Violations Revocation of registration or Referral to judicial system
Responsibility of SEC -Interpret & enforce federal securities laws -Issue new rules & amend existing -Oversee inspection of firms, brokers, investment advisors & auditing fields -Coordinate US Securities regulations with Fed, State and Foreign authorities
1934 Securities Exchange Act "People Act" Created the SEC to establish a fair & orderly market Gave authority to SRO's to enforce standards & requirements related to security trading & brokerage bus.
Overseen by SEC Capital Markets overseen by
SEC Board is called The Commission
Number of SEC members 5 members
SEC Board Terms 5 year terms staggered so only 1 ends every year
How SEC Board members acquired Appointed by US President
Rules about SEC Board No more than 3 members can be of the same political party
1933 Securities Registration Act Paper Act Required prospectus (full disclosure filings for all new issues of securities considered non exempt) ex of non exempt securities: Corp Stock & bonds
Maloney Act of 1938 Provided OTC self regulation by NASD (National Assoc. of Securities Dealers) which combined with the NYSE dept of regulations to form FINRA (Financial Industry Regulatory Authority)
1940 Addition to Maloney Act Added rules for Investment Companies & investment Advisors
American Depositary Receipt (ADR) A negotiable instrument issued by a US bank that trades in the US Financial markets & represents shares of a foreign stock
Muncipal Securities Rulemaking Board (MSRB) Created in 1975 after 1969-1974 crash Provided for industry nonprofit Insurance for customer accounts. SPIC (Securities Investor Protection Corp) Mandated national market system of consolidated quotations
NASDAQ National Assoc. of Securities Dealers Automated Quotation System Created in 1971 Along with CBOE Revolutionized the trading of OTC equities & Standard Equity options
Chicago Board Options Exchange (CBOE) Created in 1971 Along with NASDAQ Revolutionized the trading of OTC equities & Standard Equity options
Self Regulating Organization (SRO) An Organization that is authorized to enforce standards and requirements related to securities trading and brokerage
2010 Dodd - Frank Wall Street Reform and Consumer Protection Act Reshaped regulatory in areas of consumer protection, trading restrictions, credit ratings, regulation of financial products, transparency, corporate governance & disclosure.
Legislation passed in 1990's & 2000-2002 Analysts must disclose if they or affiliated persons have a conflict of interest in recommendations Any losses or potential losses must be disclosed by corps along with any securities they acquire.
Mutual Fund A professionally managed open-ended investment company issuing redeemable securities in a continuous offering of shares
Beneficiary A person who receives the benefits of an insurance policy
Bid Price Price a buyer is willing to pay for a security
Option A security giving the holder the choice to either purchase or sell a security at a set price for a specific period
Prospectus A full & fair risk disclosure required by the SEC for all new offerings of non exempt securities.
Security A financial instrument that may trade for value
Broker/Dealer A firm that effects securities transactions for its own account or for the accounts of others
Futures Contract A standardized commodities or securities contract to deliver a certain quantity at a predetermined future price and date
Underwriter A broker/dealer or investment bank that assists a company in offering and distributing securities to the public
Member Firm Broker/dealer belonging to an SRO such as FINRA or NYSE or both
Ask Price The Price the seller is willing to accept for a security
Bond A debt obligation in which the borrower promises to pay a set coupon rate until the issue matures at which time the principle is repaid
Stock A type of security that represents ownership in a Corp
Margin Account A brokerage account that allows investors to purchase securities with borrowed funds using credit from the broker/dealer
Electronic Data Gathering Analysis and Retrieval (EDGAR Database) Electronic system for companies to submit required filings with SEC
Blue Sky Laws State laws covering securities sales and who sells them in state specific boundaries
North American Securities Administration Association (NASAA) -Formed in 1919 with goal of protecting consumers of securities from fraud. -Org of volunteer members who are admins of 50 states. -They license firms, investigate violations, file enforcement, educate public
SEC vs SRO SEC writes laws that govern the securities industry SRO write rules and regs used to enforce SEC laws
SRO's are responsible for : Establishing business standards for their members Monitor members business conduct Ensure compliance of laws by members Execute discipline of members who violate
Uniform Practice Code Relates to deals between broker/dealers in non exempt securities Requires orderly Completion of dealer to dealer transactions
Rules of Conduct Also known as Rules of Fair Practice Outlines rules for public impression by broker/dealers
Code of Procedure The process of handling violations of trade practice rules.
Code of Arbitration Code used to settle disputes between broker/dealers and public
MSRB Board consists of Board consists of 21 members 11 reps from the public 10 from regulated entities All have deep expertise with securities markets