| Q Intro Securities Industry | Answer |
| Capital Market | Free flow of capital between corps, gvt bodies & investors |
| business raise money to build & expand by | selling stocks and bonds |
| what is stock | investors purchase equity ownership in issuer's business |
| how do bonds wprk? | investors lend money in exchange for debt = bond |
| what are securities? | stocks & bonds |
| who could be the issuers of bonds? | businesses/govts (fed/state/local) |
| what happens with capital raised in govt bonds? | govet raises money to provide service to public. |
| what are the types of capital markets? | primary & secondary |
| what is primary capital market? | sale of securities to investors directly. |
| example of primary capital market | IPO |
| what is an IPO | corporations' 1st attempt to attract capital from financial institutions & general public |
| is t-bill primary of secondar capital market? | primary |
| what is a t-bill? | Short-tm US govt debt w mty <1 year. High credit rating |
| what is secondary capital mkt? | Trading of fin instrumts btn investors |
| example of secondary capital mkt | NYSE |
| does sec capital mkt have direct effect on issuer? | no |
| how does secondary capital mkt affect issuer? | willingness of investors to invest increases likelihood of corps to raise cap in future |
| what might have caused the great depression? | unlmtd opportunities, investors invested, borrowed, stock mkt grew. Mkts were unltd |
| when did the bubble burst? | 1929 |
| when did fed govt intervene? pres? | 1932, franklin roosevelt |
| what act resulted after great depression? | securities act of 1933 |
| When was Securities Act? | 1933 |
| What does Securities Act do? | Full & Fair Disclosure |
| Securities Act is in what market? | Primary |
| Securities Act Provides what to investors? | Info needed to make informed investmt decidions |
| Securities Act Provides what to issuer/IB? | rules to conduct on sales & mktg of securities |
| When was Securities Exchange Act? | 1934 |
| What does Securities Exchange Act do? | Est. SEC & regulate domestic secs in prim & sec mkts + extnd credit in secs industry to Fed Res Board |
| What is SEC fn? | Regulate domestic secs dealings in both primary & sec mkts. + regulatory overst re:extnsn of credit in secs industry |
| SRO | self regulatory org. ex: NYSE |
| What is Maloney Act? | Enables creation of non-exchange SROs |
| What yr is Maloney Act? | 1938 |
| Which Act enabled MSRB? | Maloney Act |
| MSRB | Municipal Securities Rulemaking Board |
| MSRB year | 1975 |
| NASD | National Association of Securities Dealers |
| NASD year | 1939 |
| NASD function | Self regulatory organization for OTC |
| What did Trust Indenture Act do? | Security for bond investors by requiring agmt between issuer and trustee if corporatn liquidates |
| Trust Indenture Act year | 1939 |
| What is indenture? | Agreement between issuer and trustee of bonds |
| What is Trustee? | Acts for the owner of bonds |
| Investment Company Act year | 1940 |
| What does Investment Company Act do? | Mandates mutual funds to register with SEC as Investment Investment Company |
| Why do mutual funds need to register with SEC? | Mutual Funds are companies formed to pool investors' money & invest that in securities |
| Investment Advisors Act year? | 1940 |
| What does Investment Advisors Act do? | Mandates firm managing assets of mutual funds as Investment Advisor |
| Could lawyer, accountant, teacher, engineer, publishers be Investment Advisors? | No, unless they charge separate fee for investment advise |
| Examples of Investment Advisors | Portfolio Manager of mutual funds |
| Securities Investor Protection Act - SIPC year | 1970 |
| What does SIPC do? | It is an insurance that covers customers of brokerage firms if they're insolvent |
| What is ERISA? | Employee Retirement Income Securities Act |
| ERISA year | 1974 |
| What does ERISA do? | Establish standards for funding, vesting etc of private retirement accounts & fiduciary responsibilities of trustees |
| ERISA example | 401(k) |
| Securities Acts Amendments year | 1975 |
| What does Securities Acts Amendments do? | Created MSRB |
| What is MSRB? | It is SRO for firms doing transactions in muni securities. |
| Does MSRB have an enforcement arm? | No |
| How is muni transaction rules enforced? | By other regulatory entities |
| What is Insider Trading Act? | Penalizes insider trading |
| Insider Trading Act year | 1988 in response to 1980 scandals |
| Did Acts of 33 & 34 prohibit insider trading? | Yes |
| Did Acts of 33 & 34 penalize insider trading? | No |
| What is the penalty of Insider Trading in '88 Act? | Penalties up to $1MM &/or 10 yrs prison |
| Federal Telephone Consumer Protection Act year | 1991 |
| What does Federal Telephone Consumer Protection Act do? | Cold Callers must have do not call list |
| Penny Stock Rule year | 1991 |
| What does Penny Stock Rule do? | Requires trading firm of penny stocks to sign disclosure with potential buyers as they're risky |
| What are Penny Stocks? | securities trading less than $5 per share - risky |