well greetings and salutations test takers this is the series 7 Guru uh also known as Dean Tenny coming to you from my offgrid studio getting our kicks on Route 66 we have a video called your siie exam in 60 minutes oh I think it's coming up on 250,000 views unbelievable uh people found it to be a great help but it's getting a little long on the tooth and there's been some uh changes in the exam since then and I well okay well what do I want to do do I want to you know update or call the siie exam 60 Minutes part du that didn't speak to me at all so uh what I decided instead is to uh start a new series that already has one in it that's been very uh productive and people find helpful called The Mighty 90 I did a uh mighty 90 90 minutes on the uniform Securities act and so we're calling this the mighty 90 on your si exam these are designed for the night before or morning of or both before your exam you're certainly not going to learn it in 90 minutes but it might help get you in a nicer cadium Rhythm uh you know it's not a natural Flow State to be uh you know taking an siie exam so hopefully this can confirm some issues for you get your brain housing group kind of warmed up before you start taking your exam okay so let's get started on the mighty 990 SI exam in 90 minutes now there would be no Securities industry exential exam without Securities and you are held accountable for three issuers of Securities on your exam corporate issuers of Securities corporations always issue common stock there's no such thing as an is uh Corporation has not issued common stock uh May perhaps some uh debt uh municipalities Municipal issuers only issue debt Securities and the US government uh issues debt securities we'll start with the equity Securities uh issued by corporations now in terms of business structure if you want to form a corporation you're going to need a corporate charter and in that corporate charter you're going to stipulate how many shares are authorized that would be the maximum number of shares a corporation can issue under terms of its Charter you know then we're going to decide how many shares we're actually going to place with investors or issue know typically we're going to authorize more shares than we plan on issuing because we might want to come back to raise some additional Equity financing uh you know we wouldn't associate treasury stock with a new Corporation because treasury stock are shares that have been purchased by the corporation you know they go out there and retire those shares to the treasury that treasury stock has no voting rights pays no dividends and can be reissued so treasury stock is issued uh outstand um auth issued less Treasury equals what's called outstanding right so there's no treasury stock issued in outstanding would be the same number okay so that would be stipulating our corporate charter the other thing that would be stipulating our corporate charter is what style of voting are we going to use are we going to use statutory voting also known as regulatory voting where you know for each uh share I have I have a vote and if I have 100 shairs and we're voting on three board seats 100 yes no 100 yes no 100 yes no are we going to be using cumulative voting and cumulative voting if I have 100 Shar we voting on three board seats for example I'd have 300 votes I could split them in any fashion I'd like yeah that protects smaller shareholders because I can put 300 votes on one of those uh board seats maybe that's my buddy maybe it's somebody I hate whatever the case may be and I have a greater impact and then does the corporate charter have what's called super voting shares another class of stockholders who have more than one vote per share so super voting would have more than one vote per share all right so uh what might the corporation issue in terms of equity Securities well we mentioned they might uh they always are going to issue common stock they may or may not choose to issue preferred stock they may issue rights and they may issue warrants now when they issue common stock if you own common stock what you are is an owner of the corporation and you have a claim on the profits are what we call earnings per share you know the board will decide how much of those earnings if any will be distributed to shareholders as a dividend please no you do not have a right to a dividend you only have a right to a dividend if declared by the board of directors so be careful on that right uh no right to a dividend you have a right to a dividend if declared uh and again uh you have the potential for Price appreciation maybe later on you can sell that stock to someone else for more than or less than you originally uh paid so you can make money from the income stream on the stock assuming there's a dividend of some sort as well as price appreciation those are the only two ways by the way to make money in investment those two things together are called total return what I make from the dividend plus what I make from Price appreciation there is very little math on your siie exam but I would be prepared uh to do Total return you know you simply take the income from the investment plus or minus the price appreciation divide by what it cost you and that'll give you your total return uh the corporation may choose to issue preferred stock very important to know that preferred stock is a senior Security senior only to the common but it's senior in terms of dividends preferential treatment in terms of dividend you can't pay a dividend into common if you're in rear to your preferred stockholders and preferential treatment in terms of liquidation if we liquidate the business we sell off all the assets of the corporation we pay off all the liabilities of the corporation the shareholders have a residual claim after we've taken care of those preferred stockholders now the preferred stock dividends are stated as a percentage a par and so it's important that if we know we're looking at a 6% preferred stock that 6% is based on par which is a 100 and so we should know that's $6 annually per share that would be $150 every quarter right so stocks if they pay pay quarterly and a preferred stock has a fixed or stated dividend what we mean is you're not going to get more in this case than six you might get less but you're not going to get more fixed are stated the other thing we have to be able to do on the test is compare rights and warrants you know the existing owners of the corporation have a a preemptive right they have the right to maintain their proportion ownership they have the first right of refusal on the issuance of new shares and you know it makes sense that if we can get the money from our existing owners and not have to hire an investment banking firm that we could save some money we pass those savings on to our existing shareholders to give them them incentive to subscribe to participate in the rights offering they certainly don't have to if they don't want want to right we can ask politely for additional Capital but we can't as a corporation demand it so very test know those rights are going to be shortterm makes sense that the rights to purchase the additional Shares are shortterm because the issuer needs the money and they need it like now and that they're exercisable below the current market price at issuance that means you know they have intrinsic value immediately right the intrinsic value would be the difference between the subscription price on make up one for and the market price of five that's a dollar right so that's to give you an incentive you don't have to do that now they have a right they have a theoretical value and again if you don't want to exercise those rights maybe we can s sell them to someone else the issuer might also uh issue warrants warrants are usually issued as a sweeten or incentive in bonds I'll say it's an additional sweetener to make the deal more attractive to you we're giv you warrants as a bond holder to buy additional common stock buy common stock in the issuer at a fixed price now the test question about warrants is warrants are exercisable above the curve market price at issuance and their longterm so you got to be able to contrast rights with warrants on your exam tomorrow morning or today depending on when you're watching the mighty 90 right uh your health account for American depository receipts you know American depository receipts are foreign Securities that are traded in the US market you know what I'm buying is that in the foreign branch of a domestic Bank you know City Bank for example that in their Amsterdam Branch there's a thousand shares of Heineken of which I am the beneficial owner that's easier than being buying the Dutch Security in the Dutch Marketplace hin is a a brewery now what are the test questions I told you they facilitate us uh citizens accessing foreign Securities to add additional diversification of their portfolio but the uh major test question is you have foreign currency risk right if the underlying business is conducted in the foreign currency and we're turning the uh you know gilders or Euros in this case I guess EUR euros into dollars we have that risk you know that we're not going to get as many dollars so we know that adrs can best be characterized as foreign Securities trade the US market the ADR itself is a US security but remember what the receipt is for is the foreign security and you have foreign currency uh risk uh we talked about voting rights of a corporation you don't have to attend the shareholder meeting uh to vote you can vote by uh proxy without attending the uh shareholder meeting and you know broker dealers are not allowed to charge to forward proxy materials to their customers so we're going to if that proxy material comes to the broker dealer we're going to go go ahead to send that off to the customer okay so they might issue a convertible preferred stock or convertible bonds in this case we're talking about Equity Securities and this allows you to switch your status from being a preferred stockholder to becoming a common stockholder allows you to switch your status from preferred to Common now what I would know whether it's a convertible preferred stock on your exam uh tomorrow or today depending on when you're watching this is to be able to do what's called the conversion ratio and what that means is you should be able to take par let's say it's a preferred stock 100 and I tell you conversion price is $25 take 100 divide by 25 and be able to tell me that's four shares all right so before we move on to uh debt Securities in this Mighty 90 one more thing we want to talk about is Rule 144 uh control stock control persons and volume restrictions so control persons are insiders and all the stock they own is called control stock so officers directors principal stockholders they own control stock now they either got the stock in the secondary market and that stock is registered or they did not get in the secondary market and that stock is unregistered you know it never been registered well the way we turn unregistered stock into registered stock is we have to to hold it at least 6 months so if it's stock that is unregistered sometimes we refer that as restricted because it's restricted in terms of its transfer you have to hold it for 6 months sometimes we call that Legend stock because in the old days when there were stock certificates there' be legend that says stop transfer you know those letters would be in Red so we call Red lettered stock or Legend stock the point is if you're a controlled person you own that stock and it's stock you got directly from the issuer not in the secondary Market you have a six-month hold as an Insider control person if you got in the secondary Market there's not a six-month hold but you're always going to be subject to the volume restrictions of 144 you're going to file the form at or prior to your intended sale that form is good for 90 days and during that 90day period you can sell up to 1% of the outstanding stock or the average of the last four weeks trading volume whichever is greater up to four times a year every 90 days right so four times a year so 144 144 is a good way to remember that and I told you about that form all right let's move on and talk about debt Securities that you're going to en counter on your exam we said there are three issuers of debt Securities we said the three issuers of debt Securities are corporate issuers we'll talk about corporate debt Municipal is assures we'll talk about Municipal debt and uh US Treasury and we're going to talk now about treasury debt and so treasury debt we have t- bills t-notes treasury receipts and treasury bonds you should know on your exam that t- bills are issued a discount as are other money market instruments like commercial paper like Bankers acceptances you should know that t notes are 2 to 10 years and they trade in 30 seconds and you should know that bonds treasury bonds also uh more than 10 years trade in 30 seconds and a treasury receipt is a type of zero coupon Bond where you buy them at a steep steep discount you get no interest payments you know bonds pay typically semiannually but uh not treasury receipts any kind of a zero coupon Bond and here what you would have is an imputed interest you're receiving and you would owe taxes on that so when you buy a treasury receipt or any other type of a zero coupon Bond you have to do straight line amortization upward called accretion and you owe taxes on that imputed amount uh we also have uh agency Securities the one that you should be prepared for is jiny May you know there are three test questions about jiny May Jenny May is the only uh debt instrument the only investment we we have that pays interest in principal monthly Jenny May has the full faith in credit of the United States government the US Treasury the other agencies you know Fanny May Freddy Mack have an implied backing but they don't have a direct backing and they're fully taxable so as you know they pay interest in principal monthly they have a full faith and credit of the United States Treasury and they're fully taxable now in as it relates to a kind of a weird low probability question but the Jenny May trade on a basis of the average maturities of the mortgages in the portfolio so very low probability but you know maybe you bump into that uh corporate bonds we have secured bonds and secured bonds are senior to unsecured Bonds in terms of liquidation of the corporation right so assets minus liabilities liabilities long-term liabilities and those uh secured bonds could be equipment trust certificates by Major movable equipment collateral trust bonds marketable Securities placed in escrow um mortgage bonds secured by real property we have unsecured bonds the unsecured bonds would include debentures debentures just is a fancy word for bond that has no collateral behind it just the issuers promise to pay and we also have a convertible bonds and the same deal you should be able in a convertible debenture to be able to tell me the conversion ratio so in my previous example par was 100 because we were talking about a preferred stock in a bond par is going to be a th000 so 1,000 divided by 25 where's my calculator you know hey I'm arithmetically challenged so anybody offers me a calculator I say thank you very much and we find out the conversion ratio is 40 all right so Municipal Securities the two basic types of municipal bonds we have are Goos and revenues cheers I'm coming to you early in the morning here so oh caffeine tastes pretty damn good you know I was teaching a class one time and I asked where I could get a cup of coffee they said Dean we have no bad cats on this campus I said what are the bad cats I said caffeine alcohol and tobacco there's no caffeine there's no alcohol there's no toback on said oh man that's a deal breaker for me I need to start the morning with caffeine in the evening with a little adult beverage maybe smoke a snow gy every now and again so it wouldn't work now the biggest testable distinction about Goos and revenues is that Goos are backed by the taxing authority of the issuer whereas revenue bonds are backed by the uh user fees user fees are insufficient you know those bonds will default right we have a short-term Municipal obligations that municipalities used to even out the cash flow of their uh you know monies and those would be tax anticipation notes uh Revenue anticipation notes Tax and Revenue anticipation notes those are short-term Municipal obligations you know they have a unique rating associated with them I doubt you'll see it low probably but they're called Mig ratings Mig stands for M's investment grade so Mig one would be better than Mig 2 uh other debt instruments you're held accountable for would include uh Bankers acceptances negotiable jumbo CDs and Commercial paper so you know the definition of money market instruments that would be found in a money market fund is high quality debt maturing in less than 12 months like a negotiable jumbo CD negotiable means that it's a CD that can be sold to a third party so that's what the word negotiable means jumbo means $100,000 or more you should definitely know that bankers acceptances like t- bills are issued a discount they have a 270-day Max maturity and they're used to facilitate foreign trade commercial paper is large unsecure bwing by corporations it too is issued at a discount and it too has a 270-day uh Max maturity now we have varying maturities we have what's called ter maturity for bonds where all the bonds come due at once and we have what is called serial maturity where the bonds are coming du at different times so you know you buy a bond to generate income the bond is going to pay you interest semiannually so we have again it's like learning a foreign language they say when you dream the foreign language I guess that's when you know it right so uh we have uh bonds pay semiannually and that is called the nominal yield the fixed or stated rate of return or the coupon what will they tell you call it on the test whatever you're not prepared for now that does not fluctuate what the issuer is going to pay someone doesn't fluctuate in the secondary market so if it's a 6% uh coupon rate or a 6% nominal yield or 6% fixed or stated rate of return all of that means the same thing 6% times par you're going to get $60 in two semiannual installments of $30 per Bond right so it's again important that you can turn the 6% into $60 in this case remember be careful 6% of the preferred was $6 you got to be a little careful about that par value we said is a th000 I would be prepared to calculate current yield on your test tomorrow morning or today depending on when you're watching this and current yield is what an investment pays you divided by what it costs you current yield is what it pays you divided by what it costs you right a good way to remember this is a amp A is for annual interest or annual dividend depending on the stock or Bond divided by market price MP market price um is there test at math if you tell me you missed your mark this morning because of the math I'm going to say well you had bigger problems there is some practical application I told you perhaps Total return uh most certainly I think you'll see current yield but there's not a lot of math that will make or break yet the other yields you should be aware of are yield to maturity most people who buy bonds don't buy them based on the coupon they based on what they would make by either holding it to maturity or holding it to the call and you will get a question or two about the relationship of those yields based on interest rates right you should know that if interest rates go up the bond price is going down that will not affect the nominal yield as we said previously but that would affect whatever the current yield or yield of maturity yield of call would be the main one that shows up on the test is about a bond that you would buy at a premium and recognizing yield of call would be the effective or lowest yield and you would expect to receive that the two risks in bonds are interest rate risk and credit risk and credit risk is identifiable or can be uh Quantified by looking at What's called the credit rating and the one they test on you on is recognizing below what credit rating is a bond less than invest M grade so Triple B is investment grade Double B Is Not So Below Triple B bonds are less than investment grade now another risk you have we said one risk you have with bonds is interest rate risk interest rates go up and your Bonds on the secondary Market go down we said another risk you have is credit risk another risk associated with bonds counterintuitively is the risk that you don't get to hold the bond of maturity as I mentioned you might have what was called call risk and call risk is associated with declining interest rate environment you know the issuer reserves the right to call the bonds away from you and replace high cost debt with low cost debt right so that's one of the risks you have call risk is associate with the declining interest rate environment now there are two types of bonds where we do have no call risk those are zeroc coupon bonds and treasury uh Securities if a bond has a call risk well also the is will provide what's called call Protection uh they'll give you call Protection in terms of time the issor say we won't call the bonds for at least five years I just made that up and if we do call the bonds we'll give you a prepayment penalty so you know if a client says what's the call Protection they're asking me how long before the issuer can call the bond and at what price can the issuer call the bond uh shortterm versus long-terms we should know that long-term bonds have a more vol volatility than shortterm bonds the way to remember this is long and low the bond with the longest term maturity and the lowest C coupon is going to have the greatest volatility long and low uh we talked about the inverse relationship in terms of how we underwrite bonds there's two types of underwritings you know there's negotiated underwritings where the issuer selects the uh underwriter you know I think the analogy here would be how to do your mortgage right and a negotiated mortgage I simply walk into my bank and say I need a mortgage and if you don't give me a good deal well then you're not only jeopardizing this transaction but future transactions competitive is hey don't kid yourself and I walk out of here I'm going to see who can give me the mortgage at the best deal so if it's a competitive underwriting it's going to be the one who wins The Syndicate that provides the isser with the lowest net interest cost what that means is the higher price because you remember the higher the price the lower the yield so we're going to put it out to auction that's how that would uh be done now uh if you're going on to your Series 7 you know you may as well overlearn options as it relates to your siie exam but like math options aren't going to be something I'm going to believe you had a material impact on whether you pass or do not pass your exam most of the questions you're going to get is it relates to options or going to be recognition questions now practical application not judgment you now we have two types of option contracts we have calls and puts and you can either buy them or sell them so that means we have four basic option positions we have long call short call Long put short putut I think a lot of people get hung up on options unnecessarily there's you know only two types of options you can buy them or sell them that means there's four basic option positions a long call or buying a call gives you a choice to buy the stock at the strike price a short call gives you an obligation to sell the stock at the strike price a long put gives you a choice to sell or put the stock to somebody at the strike price and we're going to have put ear we get a put ease a short put is an obligation to buy the stock at the strike price now we also have option contracts that are not uh based on stocks so we also have what are called index options now I would know that index options settle in cash what does that mean that means if I am short an oex that's the standard and pores U 100 um I don't have to deliver 100 shares of 100 stocks if I'm short I simply deliver whatever the intrinsic value is the cash equal to that you know in an equity option if I'm short in apple 220 go I actually got to deliver the stock so that's what that means it's a name and shoot point and click question that Equity options do not settle in cash in other words what we mean by that is you have to deliver the underlying the stock whereas index options do now you're either coming to the options Market to either speculate on the stock price or to offset risk so we have two players in the option Mark we have hedgers hedgers hedge is a fence right keeps good things in bad things out and if I'm hedger I'm coming to the options Market to hedge my stock position and the stock would be the you know dominant position and if I'm speculating I'm simply betting on the stock price that would be our basic option positions so the two stock positions we have are long stock and short stock if I'm long a stock the appropriate hedge would be to buy a put a protective put on my stock position I also might want to generate additional income on my stock position that would be a short call covered call uh I do get reports on uh short uh long the stock and buying a put right and if you get the I told you very few strategy questions but if you're along the stock and you buy a put the break even is going to be what you paid for the stock plus what you paid for the protection where people get hung up on that sometimes and they go oh it's a put I'm subtracting well oh not if you have the stock position right and if you're short the stock I always say don't be a dumb bear you know there's two things here that could subject you to unlimited risk one is a naked call where you agree to sell stock you don't own the naked uncovered call another is shorting the stock without inappropriate hedge and so if you could establish the choice to buy back the borrowed stock at a set price any time between now and some future date you'd be okay right so the effective hedge on a short stock position is to buy a call uh I think you should fail the entire exam if you miss expiration date I can't imagine any draw of your siie in which you do not get asked when do options expire 11:59 eastern time the third Friday the xpre month that's very very testable you know contract specifications I've hinted at Contract specifications contract specification would be what type of contract is it call or put plus the stock Plus the strike plus the expiration you know the premium is not part of the contract specification the premium is what you pay or receive for that option position now you should know on your exam that opening purchases are how you establish a long position so if you want a choice to buy the stock or choice to sell the stock long call or long but you're going to an opening purchase an opening purchase would be used to establish or add to a long position if you want to uh create an obligation to sell the stock short call sell a call or an obligation to buy the stock short putut you're going to do an opening sale opening sales test question are used to establish or add to a short position and then you know you can decide you know what well I shouldn't say you can decide if you doing the opening purchase you can then decide whether you want to trade the option exercise the option or let the options expire right so that's what happens to an option contract T it can be traded it can be exercised it can expire uh we talked about cash sell for index options we talked about delivery the stock and an equity option we said index options settle in cash uh every once in a while you get uh asked about this relationship of the market price to the strike price and a good memory aid device for this is call up put down you know not asking about Investors be careful we're simply asking about the relationship of the market price of the stock to the strike price of the option right so vle is 221 it's a 220 call 220 221 call up the market price is up from the strike price so that contract is in the money by one point it has what we call intensive value if it's an apple 225 call and Apple at 221 the contract is out of the money it has no intern of value please note I'm not asking you about an investor I'm simply asking about the relationship of the market price the strike price so just be careful on that uh this is these are terms not that aren't about the investor it's about the relationship of the market price of the strike price uh we talked about uncovered uncovered means you don't have the stock right so the one here that you could test on again is uncovered or naked is a call where you agree to sell a stock you don't own and the test question to recognize that subjects the investor to unlimited risk uh you should definitely know the difference between American style and European style uh American style means you can exercise any time European style means you can only do so at the end uh American is typical of equity options and European is typical of non Equity options exercise and expiration um various strategies I wouldn't worry about but I would certainly worry about the options disclosure document this is extremely testable so how do we get the account open dat5 is a good memory a device for your test either today or tomorrow now remember we're not saying you're going to learn this siie watching this 90minut video we never said such a thing we said this is helpful the night before or morning of or both to get you thinking about these issues confirm what you know kind of set you up for uh you know a good nice Rhythm Flow State uh before your exam so I give you the OC Disclosure document at or prior to you know this this thing right typically it's going to be prior here right so I give you the Disclosure document I go back to my ROP he says Dean did you give them the Disclosure document I say yes he looks it over and he says okay I'm going to approve it so that's the a DAT 15 disclosure document account approvable now we do our first trade that's the T I tell you within 15 days I need back from you the option agreement that you read and understood that document you can't possibly read it while I wait so that's why you know we give you this 15 days now if it's a 15th Day Has Come and gone and this isn't come back to us we're going to only allow you to do closing transactions will let you get rid of the stuff you already got right now the OCC publishes that disclosure document and the OCC is the issuer and guarantor of all option contracts that true is a test question so you say Dean how do I know if an exercise Apple 220 call they're going to deliver 100 shares of the stock to me I well how do they know you're going to deliver $22,000 well what you're asking about it to me me about is Contra party risk the risk the other party doesn't uh you know come make good I say you don't have to worry about that in between the players it's the OC test question they are the issuer and guarantor of all options all right you're going to get three or four option questions I probably gave you three or four right there I think what I just did is sufficient uh for siie it's certainly not sufficient for the seven but for siie I think that's sufficient you're going to get tormented on mutual funds mutual funds mutual funds are the number one product that most people get where they're going without crashing and burning and you're going to get very te very much tested on the difference between closed end funds and open end funds and the major testable distinction between a closed in fund is to trade supply and demand in the secondary Market whereas an openend fund is continually offering new shares to the public so those are the major testable distinction between those two you know the number one reason you buy a mutual fund is to access Professional Management the second major reason to buy a mutual fund is to get diversification and the third reason is just ease of ownership if we're going to start our own mutual fund I don't know why we would but if we're going to start our own mutual fund more mutual funds than uh Taco Bells we have to classify ourselves on under the Investment Company Act of 1940 as either an open-end fund a closed in fund or perhaps low probability a unit Investment Trust in a unit Investment Trust the assets are professionally selected but they're not actively managed and if you get that that would be the question we also have what are called variable annuities I think of a variable anity as a mutual fund with an insurance wrapper and and what's nice about that insurance wrapper on the variable annuity is you're not getting constructive receipts of any dividends or capital gains distributions and so that money is going to grow tax deferred that's why we've refer to variable annuities as a nonqualified retirement plan non-qualified meaning it doesn't meet the qualifications of the IRS to be using pre-tax money you're funding it with after tax money you have a cost basis and you can access those funds after your 59 a half now if you've been uh you know uh you're going to uh access these funds it's going to be done last in first out the last money's into that variable annuity that mutual fund the mutual fund by the way the variable anity is called the separate account the separate account or sub account is a mutual fund so you have the investment risk there just like you would in any other mutual fund but the way you access that money is lifeo now in mutual funds we have various share classes we have the traditional a share the a share typically has a front end load and it's good for somebody who has a long-term time Horizon and a large amount to invest because they might qualify for what's called a breakpoint a quantity discount we also have B shares uh B shares have a contingent deferred sales charge if you stay in the fund long enough you might be able to turn the B shares into a shares and avoid that load now the tus question about the B Shar is that's going to be suitable for somebody who has a long-term time Horizon in a smaller amount to invest something that that not enough to qualify for that uh break point now we got to be careful on that because if they don't understand they got to stay in that fund a certain length of time they don't meet that that could be the most expensive kind of proposition because they'll get back flagged on that and then we have C shares and the Seas shes typically have an ongoing uh 12 B1 fee I would know very testable that a 12 B1 fee is a promotional expense paid by the fund promotional expense paid by the fund not an expense associated with managing the money in the portfolio no a promotional expense to promote the fund I would know that if you are no load fund the maximum 12 B1 fee is one4 of 1% you want to sound like a player that would be 25 bips or 24 basis points and still refer yourself as no Lo if you go past one quarter of 1% you can no longer refer to yourself as a no load fund and then in any circumstance you can't go past over the life 75 uh. 75 3/4 1% or 75 basis points or 75 bips you are going to get tested on the nav the net asset value the assets of the uh Securities in the portfolio minus the liabilities of the portfolio in AV we have to calculate that every day every business day and we're always doing business based on the next calculation of the nav and that's called forward pricing right and there is a as I always say a problem with having monkeys harvest bananas and the problem with monkeys harvesting bananas is they eat the product right so uh there's a management fee that you're going to be paying uh you know for this uh you know professional manager the uh be careful the management fee is typically the largest single expense to the fund uh break points we said be careful break points are coiny discounts and that's a good thing a breakpoint is a good thing it's like Costco right I said man I don't need two tons of salsa but it's so cheap a breakpoint sale is a bad thing a breakpoint s is where I'm trying to maximize my commission by avoiding the breakpoint right so the easiest way way understand of trouble here is to tell the client how to get the best deal and so even if they don't have enough to meet that break point maybe I say hey do you think over the next 13 months you might be able to come up with this additional money because if so we should fill out very testable letter of intent a letter of intent is good for 13 months it can be backdated for 90 days we don't allow uh investment clubs to pull their purchases for purposes of meeting a breakpoint so the easiest way to make sure we're doing the right thing for the customer is tell them all the ways they can get the reduced sales charge and a letter intend is a good one for that now under no circumstances can we charge more than 8 and a half% for a mutual fund and that too is uh testable uh we have 529s uh are mutual fund Securities these are where you're either buying a uh it's kind of similar to mutual fund investment right uh Nevada I'm coming to you from formerly Las Vegas but Nevada and UNLV has a 529 plan available and it's managed by Vanguard and so you would put money into this 529 plan and it would grow and you know you're using it a finance a college education now what you need to be able to do on your uh exam is contrast a 529 with a coverdell and the 529 is um and the beauty contest is always the winner because it's just so much more competitive that I know of no financial institutions any longer even offering covertail one of the major advantages of a 529 is it is not means tested you know we're Coverdale you can only going to put in two grand and you know it's means tested um if you're worried about investment risk and you're worried about inflationary risk you might choose a 529 prepaid plan and a prepay plan where you're just buying the bachelor degree off the shelf you don't have to worry about any Investments or any inflationary risk uh the msrb the municipal Securities rulemaking board uh has no enforcement power but they do publish rules and they have said a 529 is a municipal security they've also said that local government investment pools are municipal Securities and a local government investment pool is simply a money market mutual fund for cities counties that want to pull their uh cash to get some kind of Return by buying commercial paper bankers acceptances T bills negotiable jumbo CDs very much uh similar to a money market fund it's just for municipalities and that's called a local government investment uh able accounts have been deemed by the msrb to be Municipal Securities and if you get this the test question is about the uh eligibility of uh 26 uh direct participation program uh Partnerships you need to know about limited Partnerships you need know limited partners provide the capital whereas the general partner provides the uh expertise you uh should know the Partnerships have a pass through of both profits and losses so the direct you're making a direct investment in the underlying asset direct participation program and so you're going to get what's called not testable a K1 which shows the past through of either income or losses from the investment to you now Partnerships very testable or not liquid you can't get in or out of a direct participation program a partnership without the permission of the general partner so not liquid uh I would know that REITs are very similar to mutual funds uh REITs are very similar that they provide you Professional Management diversification ease of ownership but they do so in a portfolio of real estate Investments both mutual funds and REITs pass through not losses no no no not losses but pass through at least 90% of their net investment income uh I think a good rate to remember this is D90 die 90 if it's a mutual fund die 90 D is for dividends on the stocks and the portfolio plus interest on the bonds and the portfolio less expenses diie die 90% most do much better than that remember it's pass through of income not losses uh reats are either offered in a private or public uh deal so you can buy re like buying a stock but you can also buy re in a private placement if you're an accredited investor you may able to parate in a re re that is being distributed as a regd uh private placement and again if you're buying any kind of a private placement any kind of a private security unregistered security you should definitely understand and that you're not going to have liquidity uh well we have two types of exchange product uh traded products that you get tested on very testable you get tested on ETFs exchange traded funds and you get tested on how are they different than a traditional uh open-end mutual fund they unlike an open-end mutual fund are not doing business based on the next calculation of the nav like a closed in fund they're trading in secondary Market you know ETFs can be purchased on margin they're marginable you know under reg te you're not allowed to extend credit as a broker dealer on new issues openend funds are new issues these are not considered to be that and so they're marginable for test purposes when I say for test purposes that means I too know that outside of our discussion what I'm saying may not be true but for test purposes exchange traded funds are passively managed and therefore they're more tax efficient uh you have to be able to contrast an etn with an ETF and an etn test question exchange traded note is not an equity investment you know an ETF there's a custodian holding the monies and securities and etn it's a note and the sponsor or distributor is agreed to pay you whatever based on the referenced index that's interest they're agreed to pay and therefore that means T question as a debt instrument you have the risk of default you have a creditor relationship to the sponsor or distributor of that exchange traded note so very testal um if we are buying a a different type of investment for example a hedge fund hedge funds are organized as Partnerships and they're sold as private placements and we said in any kind of a partnership including a hge fund they're going to be a liquid because you can't get in or out of the hedge fund without the permission of the general partner and hudge funds typically charge 2 and 20 2% of the asset of their management 20% of the profits and therefore you know they have a incentive to take greater risk if they're getting 20% of the profits but they're not taking any of the the loss all right well so what are some of the investment risks uh associated with various types of investment so you know somebody says Dean is my Capital At Risk if I uh purchase a security I go absolutely your capital is at risk you how you going to feel if you lose this money if you're not comfortable with your Capital being at risk well then maybe you shouldn't be in the Security's markets right uh we have credit risk associated with the risk of default we have currency risk associated with adrs if we're worried about inflationary or purchasing power risk one good hedge for that is Common Stocks Common Stocks are good inflationary hedge purchasing power hedge over the long-term Common Stocks have proven to do better than inflation I should say in my sleep past performance is not indicative future results fixed income investment vehicles uh typically are bad I would add to this uh tips treasury inflation protected securities at at least keep Pace we've talked about the interest rate risk you have interest rates go up your bonds go down interest rates go down the bonds go up but they get called away from you we talked about that inverse relationship uh we talked about liquidity risk you know stocks are very uh liquid because if it's a stock and you we assume we're talking about a NASDAQ or New York Stock Exchange stock you can turn that back into money on t+1 very very liquid even an open-end mutual fund the open-end mutual fund would cash you out at the next calculation of nav within seven calendar days the thing we said to be very uh looking for on your exam is Partnerships Partnerships have that uh liquidity risk uh Market systematic risk so risk in the system you know the way I think of Market risk is the tendency of securities prices to move together you know when bad things happen to good stocks and so here even if you're proper L Diversified risk prevails despite your diversification so the test question here is in I say listen one of the things you want to try and avoid is non-systematic risk or selection risk the easiest way to avoid nonsystematic risk nonsystemic systemic risk is to diversify you know Bernard Baro somebody like Manu you already spread it around and so the easy way to do that is in a mutual fund so at a mutual fund you don't have non-systematic risk or selection risk but you still have uh systematic or Market risk in that mutual fund right so that's the test uh Point uh we talked about prepayment risk prepayment risk is associated with mortgage Securities because when mortgages go uh remember interest rates come down people refinance those mortgages so we associate this with call risk and bonds but also more importantly mortgage pass through Securities like JY Mays right and a jiny May portfolio of mortgages if interest rates come down every refinances is it's going to end sooner rather than later and that's called prepayment risk uh strategies for mitigation of risk we talked about diversification uh we also said you could hedge using options for example right you could if you want to hedge your entire portfolio you might buy an index put you know and there'll be negative correlation as the market comes down and your portfolio goes down the value of your index put goes up right so we can mitigate some of that risk all right well that's the biggest part of uh your exam is Securities uh we're halfway through the might 90 90 minutes on your siie exam and now we're moving on going to be talking about uh uh types of orders again I think people get really hung up on this uh there's not a zillion types of orders there's just two there's Market orders and limit orders that's it now there are a zillion qualifiers or contingencies you can add to an order but at the end of the day it's either a market order or it's a limit order the only order that has no contingency no qualifier is a market order in a market order I want immediate execution at the best available price in a limit order I want to do business at my price or better nobody has to do business business with me at my price or better now if I'm going to place a limit order with my broker I want my price or better so if Apple's at 220 a share and I want to buy on a limit I'd say I want to buy at 219 or less my buy limit would be placed below the market if I want to sell Apple Apple's at 220 I would put in my sell limit at 221 I want to sell for 221 or more so limit means again price is more important than execution right I used to joke with my Brokers I de de are you buying the office lunch they say yes I'm buying buy the office lunch on a limit of a th000 I hand them 10 $100 bills and say $1,000 or less right so there's an implied or better now if you want you can add another qualifier to your order you can say I don't want this to become a live market or limit order until it trades at or through I want to have this be a contingent or qualified order and I don't want it to go live unless the contingency or qualifier has been met it trades at or through that's called a stop order because the number one use of a stop order is to stop a loss and so you could have a sell stop that You' Place below the market to stop the loss in a a long position right you can have a buy stop to stop the loss in a short stock position so that's why we call them stop loss orders because that's the number one use now we have a great memory aid device to help you remember where you place orders in relationship to the current market price that memory a device is slobs over Bliss slobs over Bliss sell limits that's the slob SL and buy stops or buy stop turns and Market or limit order goes above Bliss buy limits and sell stops go below right so all orders are considered day orders unless you tell me differently so unless you tell me GTC good tell cancel it's going to be considered to be a day order uh we have discretionary versus non-discretionary if I am going to make the decision about action asset or amount a whether to buy or sell asset which security to buy or sell the amount quantity 3a's if I'm going to make a decision about one of two or all three of those A's I need discretionary Authority I do not need discretionary authority to make a decision about time and price you know maybe I have discretionary Authority but I call you and say Hey listen I'm I'm not comfortable using discretion in this particular example uh you know scenario so what I'd like to do is with your permission let me share the idea with you and get your permission that would be solicited discretion not exercised solicited means it was my idea unsolicited means the customer's idea the customer calls me and I said well that's very foolish uh when we're trading Securities if the security is trading over the counter in a negotiated quote driven Market there are going to be what we call market makers and a market maker is going to post a quote a bid and an ask a price at which they're willing to buy the security into their inventory their bid in a price at which they're willing to sell the security out of their inventory the ask now the market maker buys it the bid and sells it the ask the customers on the opposite side of that quote the customer when looking at a price always pays the high price always receives the low price what's that called the Securities industry I'm joking it's called the spread the spread always means difference right the spread means difference so if I say as a market maker you work at an entary firm and you call me and I'm the market maker you say Dean I'm looking for a quote I say my quote is 156 8 by seven so what does that mean in plain English that means I'm willing to buy eight round Lots into my inventory at 15 and I'm willing to sell seven round Lots out of my inventory at 16 so that's what that means 8 by seven round Lots 100 shares you say de we're buying 700 shares I say changed my mind very testable they'll say on your exam a Market maker fails to honor a firm quote this is a prohibited practice and is known as and you got to come up with selling away or excuse me selling away my bad backing away backing away so we'll say a broker dealer fails to honor a firm quote there's a prohibited practice known as backing away uh by the way selling away is also a test question but that's when an agent of a broker dealer sells an investment not sponsored by the employing broker dealer without per so that's a different violation now on your confirmation we're always going to tell you capacity what does capacity mean you know we're all called broker dealers but in any one trade where you're going to be a broker or dealer so you know I work at Goldman Sachs you say Hey Dean at Gman sa your broker dealer I say yes what that means in some transactions you do with us at Gman Sachs we're going to be acting in our broker agency capacity and on your behalf we're going to get the security elsewhere and you're going to owe us a commission and other transactions you do with those at Goldman Sachs we'll be acting in our dealer principal capacity and we'll be charging on mark up or markdown we will always disclose to you in each and every transaction in what capacity we acted and our broker agency capacity or our dealer principal capacity and we'll never do both it'll be one or the other so that's called trade capacity good way to remember this is ABC agent broker commission or dipam dipam dipm dipam dealer inventory principle markup markdown all right so uh in terms of bullish and bearish transactions right there's all kinds of different we said the two basic ones are selling a stock would be bearish again that' be an opening sale you're going to sell borrowed Securities now if you're going to sell borrowed Securities there is a requirement a locate requirement that we find the Securities before we sell them Short Selling borrowed Securities and so I'm going to call stock loan and see if we have a client who signed what's called a loan consent form and then we said that long stock would be bullish uh we said investment returns you should be prepared to know the investment return from an investment would be the what you get from the income stream plus or minus what you you get in price appreciation or depreciation and we said one component of a Stock's return would be a dividend if declared right some stocks have dividends some do not but you know dividends if it's declared uh a cash dividend is going to be taxable you know stock dividends are not so you know if you get a Bank of America pays a 21 cent quarterly dividend so that's 84 Cent 84 cents um per share and let's say own a th000 shares times 84 cents that's $840 in dividend income I'm going to receive from Bank of America and that $840 is taxable now if Bank of America pays a stock dividend that's not taxable they give you a 10% stock dividend in my example 10% of a th000 is I'm getting 100 shares so now I own 1,00 shares the way to get this right on your test tomorrow or today depending on when you're watching this is don't get too hung up on the math you're just going to have more shares at a lower price now a dividend of one Corporation paid to another Corporation is 50% tax excludable now there is a process that is testable for receiving the dividend a chronological sequence and remember in the secondary Market you know uh people are buying and selling Bank of America stock the shareholder list is always changing and so when Bank of America declares the dividend they're going to say we're going to look at our shareholder list on uh I'll just make up one Thursday September 16th and if you're a owner shareholder of Bank of America on Thursday September 16th you get the 21 C dividend if you're not a shareholder on Thursday September 16th you do not get the 21 C quarterly dividend interesting so here we know that it should we should know that it takes on the uniform practice code one business day for ownership to change the uniform practice code standardizes trading practices within the Securities industry and regular R settlement settlement is when ownership changes in so trade days when we greeted terms settlement is when ownership changes is t+ one so if I'm going to buy Bank of America stock it takes one day to show up on the shareholder list in my example let's say they say we're going to pay the dividend to shareholders as of record um October 1st or excuse me as a record uh Thursday September 16th we're going to actually pay the dividend on October 1st okay so the these three dates are set by Bank of America the declared date the record date the payable date those are set by the board of directors now X is Latin for without the X date very testable is the first date on which the stock no longer trades with the dividend detached so in my example if I buy Bank of America Wednesday the 15th t+1 I'm on the shareer list I get the 21 cents right so Wednesday would be the last Daye I could buy the stock and still receive the dividend if I buy it on Thursday the 16th the record date I'm not going to be on the shareholder list I won't be on the shareholder list until Friday the 17th so I'm not entitled to the dividend so the first date on which the stock no longer attached is going to be the same as the record date the X date two test questions when is The X date what is the X date what is the X date it's the first date on which the stock no longer trades with a dividend detached when is it it's the same as the record date so that is one of the reasons I'm redoing the mighty 90 here is because the very popular your siie and 6 minutes I still think it's worthwhile I disclose everywhere in the video description I've got half a dozen videos and updates uh but this is the major update that people are always complaining about that the uh settlement dates used in some of the older material has that even though I have six videos that walk you through this I'll tell you what I'll do I'll link in the video description to the little you know update and how this uh plays out in terms of practice questions now we would assume that the Bank of America stock is going down by the amount of the dividend on Thursday September 16th right so uh very testable we said we also should be able to do current yield and have a general understanding of Total return relationships of yields right uh cost basis they might ask you again to recognize this idea of uh cost basis as it relates to a stock div Endor stock split I'm not going to go over that in this because this is the mighty 90 and I told you in almost every circumstance you can get this by just knowing I'm going to have more shares at a lower price you know some of us I get paid based on our performance against a benchmark or an index and I would know the uh Benchmark for the stock market as a whole is the S&P 500 I would know the Benchmark or index for a small cap Market is the Russell 2000 I would know the index that best approximates the total US Stock Market is the Wilshire 5000 and I would know that the only uh index or Benchmark that is price weighted is the Dow Jones Industrial Average uh we've talked about uh settlement we said settlement is T plus1 that's called regular way settlement there are irregular ways to settle trades you know but we always own people doing regular way uh but if you want to have it settled same day you can do cash settlement now be careful not talking about a cash account where you intend to pay in full cash settlement cash settlement is when you want ownership to change the same day uh some Securities are book entry settlement meaning there is no physical certificate and book entry settlement would be us treasuries and state Goos uh some corporate actions you get tested on one of the uh things that corporations do as we mentioned is buy stock into their treasury you know and uh some people some companies do this uh by simply going in the open market and buying their own uh stock other companies buy the treasury stock by making a tender an offer to their existing shareholders and whether it's a tender that comes from the ISS where to buy treasury or was there a tender offer from X to buy Twitter uh I would know that any tender offer made has to remain open for 20 days right uh we talked about the isorm doing a stock split which now we would assume uh a stock split is going to be a forward split right so if it's a two for one split you had twice as many shares at half the price but every once while embarrassing a stock will do a reverse split and there you would have less shares at a higher price right uh customer accounts and uh uh types of accounts we have the two basic types of accounts we have are cash accounts where you intend to pay in full and margin accounts where you intend to pay part of the purchase price and I would know that there are some accounts that have to be cash accounts the big ones on the test are uniform transfer to miners accounts you know from gift minor X custodial accounts and retirement accounts should be cash accounts margin accounts are where you intend to pay part of the purchase price and you like to brok or dealer lender the balance and there we're going to have additional documentation very testable we're going to have a credit agreement which is mandatory that tells you you're borrowing money you're paying interest we're going to have a hypothecation agreement mandatory saying you understand you're pledging your securities as collateral for the loan and therefore your securities are going to be in street name the name of the broker dealer so we can sell you out if you don't meet your responsibilities and remember we have a loan consent form which is not mandatory which we say Hey you know we'd like to be able to lend Securities uh to your securities our customer wants to go short that's not mandatory we talked about the again documentation required to open an option account we said dat 15 we got to give them the Disclosure document get the account approved through the first trade within 15 days get back that uh option agreement otherwise there's going to be nothing left allowed except offsetting transactions uh discretionary versus non-discretionary if we have a discretionary account we get have discretionary Authority in the how prior to the first trade uh some of you are on the first L of a testing Journey that will include A7 and A6 66 and you know 66 means you're going to be an agent of a broker dealer and an investment advisor representative and the number one reason you would be doing that is so you can offer what are called wrap accounts where we wrap the products and services of our broker dealer and our investment advisory service into uh one fee it's called a wrap account test question there is we'd have to give you a brochure that tells you what's included in that fee what's excluded in that fee so fee based accounts we don't have a 66 some of you are going to take a 663 763 there you're being compensated your firm and yourself typically by commissions uh we talked about educational accounts we offer uh we said the 529 versus the Coverdale and you always tell me the 529 is better how does the customer want the account registered very testable so what you got to be able to do here on your exam is contrast joint tenants with rights or survivorship with tenants in common with join tenants with rights or survivorship there's no fractional interest ownership the deeding share goes to the surviving party with tenants in common there is a fractional interest and the student share goes to their state or beneficiary very testable if we're opening a corporate account we need a copy of the corporate resolution if they want to do margin we need a copy of the corporate Charter uh to see whether margin is specifically permitted within that uh corporate charter so corporate accounts corporate resolution which corporate officers can be allowed to turn I'm sorry trade the account and we need to have a corporate charter if they want to do margin if we're doing a trust account we need to copy the C trust agreement uh we said custodial accounts no margin very testable one minor one custodian per account very testable the minor tax ID number goes on the account if we're opening account for a partnership we need a partnership resolution which partner is authorized to transact if they want to do margin we need a copy of the partnership uh agreement make sure that's specifically permitted now retirement accounts are funded with pre-tax money and I would definitely know for the vast majority of retirement accounts except for Roth the required minimum distribution is 73 uh this is another reason I'm updating the to the mighty 90 so you know when people say oh man this thing says it's 72 and it says it's t plus2 I go well that's because you know they change things change they don't change a lot do I think that I need to delete any of my existing videos that refer to t+ 2 or rmds is 72 I do not because again in every video description and P comment I tell you those updates however this is uh an updated version called The Mighty 90 I would know rmds are 73 except for except for Roth irus there is no rmd for Roth IRA anti-money laundering definition of money laundering well what we're doing in money laundering is three stages to clean turn our dirty money into clean money and the definition of this is going to be placement layering integration and the easiest place to prevent money laundry is in the placement stage right where are we going to put the dirty money you know stages of money laundering what we just talked about structuring is when somebody's avoiding trying to avoid the CTR a currency transaction report test question is for $10,000 or more that's going to trigger a CTR it doesn't mean I'm a crook and you know I like to carry I'm a guy who gets cash and sometimes I get more than 10,000 cash that's going to trigger a CTR we all have to have an A AML now stru would be where Dean says you know I was getting a chunk of money and it was taking long my mom was with me and I was going to give Mom some money so that's why she's at the teller window with me and she goes man what takes so long to get your own money I said well I said you know she's got to fill out a CTR and then she kind of looked at me like you know what the heck that is I go you know and then my mom said why don't you get like you know you know make three withdrawals for less than 10 that's called structuring where it looks like dea is trying to avoid triggering the CTR every firm has to have in its wsps a section on a Ming laundry you know anti-money laundering those are called the wsps the written supervisory procedures SARS so we talked about two here a CTR and assar a suspicious activity report test questions for 5,000 or more and that would be for something that's commercially illogical like structuring uh origin of the funds something that is uh you know uh doesn't make any sense uh those are going to be filed with finson and when we open an account we want to check and make sure that client is not on ofac uh with the office of foreign asset control to make sure this is not a person we're not supposed to be doing business with now what gives us the authority to give this information uh to these uh to uh the Department of Treasury and that's testable that's no it's called the bank secrecy act don't you love they name things the actual opposite of what they are so the Banking syncrasy Act gives us the uh financial institution the authority to release this uh you know information uh books and Records the vast majority of brokerage from records are three-year records there are very few records of a broker dealer that are lifetime or six the vast majority or three the exception would be customer complaints which is a four-year record uh confirmations and account statements we're going to have to give you a statement quarterly very testable there's a testable exception to a quarterly delivery of a statement it would be monthly if you have a penny stock in your account very testable a penny stock is a non- NASDAQ stock under five uh can we hold uh your customer mail the answer is yes we can with written you know authorization of yourself and if you want to extend that it can't be just because of convenience got to be something like security all firms have has a business continuity plan that's linked on the site and also have to have a link to broker check so the BCE and what happens how we going to continue to conduct business in the event of a natural disaster or terrorist attack whatever the case may be uh we have to make sure we're have protection of your identity and your proprietary information so you know we're can have access to non-public personal information the confidentiality how we do what are we doing to protect that if we want to use that for any other purpose than what you gave it to us we would have to have your permission to do so uh Communications with the public you should definitely know the difference uh definition of retail communication more than 25 in a 30-day period you should know that requires pre-distribution approval by a principal you should definitely know correspondence is 25 or less and that we can be approved by a principal pre or post distribution you should know that if we're we're going to be doing cold calling we can't cold call before 8:00 in the morning we can't cold call after 9:00 in the evening we have to main a d not call list and people ask Nat not to be bothered we're not supposed to engage and rumor mongering we're not supposed to engage in a pump and dump a pump and dump if you saw Wolf of Wall Street uh that's a real guy Jordan bford His Fromm with Strat Oakman and that's what they did they did pumps by selling the stock not allowing anybody to sell and they sold frud running big no no trading ahead of customers excessive trading again very testable very prohibited that's churning trades are excessive in size and frequency uh you know those are all things we're not supposed to do uh if a customer uh buys and sells without paying for the buy that's called a free ride and when a customer does a free ride we're going to freeze their credit privileges for 90 days uh I would definitely know that in our wsp wsps besides having a section on anti-money laundering we also have to have a section on insider trading uh I would know that insider trading uh what is Insider information it's material nonpublic information I would know who is involved in this anyone who has access to material nonpublic information uh I would know the fines are both civil and criminal I would know the uh civil f is three times the profit so if you make 3 million you owe 9 million um boom uh can you uh participate in a customer account this one's kind of a unique one the answer is yes with proportionate capital and principal approval right uh every firm in its wsps have to have a section on how we're protecting seniors how we're preventing the exploitation of a senior I would know a senior is 65 or older I would know that most of us do it by asking politely to have a trusted contact person so this is not somebody who has control over the account it's just somebody can we can reach out and we can put a temporary hold on the transactions until we you know contact that trusted contact person the initial hold is 15 days it can go longer depending on the circumstances all right so we're doing our Mighty 90 we're call those in on our 90 minutes on the siie which is a revision of our 60-minute version and I told you our 60-minute version uh was uh people who were asking about gee Dean can we do an update even though I think that is uh very much uh something we should have a handle on all right so another thing we get tested on is the regulatory authorities we should definitely know that the SEC has Prim primary jurisdiction interpretation and enforcement of the uh you know uh domestic Securities Law of the United States of America the two big ones here on the test are 33 known as the paper or prospectus act 33 says you're going to sell brand new Securities to the public you have to make a registration statement hence the term registered Securities you know and if they haven't gone through that process then they're unregistered Securities there are some safe harbors of available under 33 and then 34 is the people uh can get right by cover screen PE uh people and places right so cover up the screen are they ask me about prospectuses paper that's 33 people in places that's 34 uh finra the msrb the sibo are what we call self-regulatory organizations right they're sro's they don't have a badge they don't have a gun uh we have the department treasury we said the Department of Treasury is responsible for finson you know those ctrs those uh SARS money laundering we have state Regulators some of you are coming back to take another test 63 65 66 those are the state Regulators so on the federal level as a retail investor I get protected by the secc on the state level as a retail investor I'm contracted by my state administrator and those are they have a club called the nation North American Securities administrator Association you will be taking an exam based on that uh we have the Federal Reserve board which is the regulator for banks we have very testable cpic cpic the Securities investor Protection Corporation which is for 500,000 which covers you if your broker dealer fails uh for $500,000 of which no more than 250 can be cash that's very testable per separate customer and on the banking side we have FDIC that is very testable and that protects you for up to 250 Grand uh Market participants we said that we have broker dealers we have investors now in the investor category of Market participants which you would definitely know what an accredited investor is the purpose or the reason you are an accredited investor is is that would allow you to participate in a regd private placement a good way to remember the definition very testable of a credited investor is one two three million dollars net worth exclusive of your primary residence or $200,000 for the last two years with the expectation of2 200,000 this year or mared and filing jointly $300,000 uh for the last two years with the EXP of this year if you're going on to take your seven you too would be an accredited investor a seven in good standing is also considered accredited on the institutional front we should know there's a particular type of Institutional Investor called a quib a qualified institutional buyer of Securities if you encounter this on your exam the test question is what is a quib it's an Institutional Investor with a hundred million do or more in assets under management test question number one test question number two it allows them to buy unregistered public and private Securities I should say unregistered forign and domestic Securities and one of the transactions you get test on is what's called a pipe a private investment and public Equity a private investment and public equity and that typically would be equip or it doesn't have to be but that's where we're buying unregistered stock in a public entity and then keep it for six months and we hold to you know uh be able to make some money on it investment advisors uh an investment advisor is a firm that gives ABC gives investment advice tells people they're in the business of giving investment advice they want compensation for that uh Municipal advisors provide advice to Municipal issuers so we have typically a broker de or corporate finance men and women who raise money for corporations and Public Finance men and women who raise money for municipalities you know the msrb says that if I'm a municipal advisor I can't switch my role from being the advisor to being the underwriter because you know that'd be a conflict of interest to be representing the issuer representing my broker dealer and representing my clients and selling the bonds to them uh we have issuers we said again three issuers you're held accountable for corporate issuers Municipal issuers US Treasury and again we have primary and secondary Market transactions uh we you should be able to contrast an auction order driven market like the New York where they're matching buyers and sellers hybrid a little bit a bit with the over the-counter Market excuse me where we're negotiating or quo driven right so we get held on uh held accountable for the primary Market where the issuers receiving the proceeds we get held about the secondary Market where the previous owners receiving the proceeds another Market I would be is the third market so this would be like ABCD third Market is listed Securities traded over the counter and then the fourth Market test question is direct trading between institutions so those are the type of markets you're able to account for uh you do get tested on economic factors and you get tested on monetary and fiscal policy monetary policy is the money supply controlled by the Federal Reserve board we don't want to have too much money or tooo little money in the economy we want price stability you know the uh mission of the FED is price equilibrium and full employment fiscal policy test question is government spending and Taxation uh tools of the FED to make sure we don't have too much money inflation too little money deflation is open market operations you know through open market operations the FED buys government securities when they buy government securities the money supply goes up and interest rates go down when the FED sells government securities the money comes in money supply goes down interest rates go up right the interest rates is the important you do get tested on the various interest rates and there's four year held accountable for the discount rate set directly by the fed that's the only rate directly set by the fed the FED funds rate which they target to ask question the FED funds rate is the most volatile of all the rates that's a test question the FED funds rates is banks with excess reserves lending banks with deficient reserves and uh you know um uh the other two are prime rate that's what banks charge their best commercial customers and broker call that's what banks charge broker firms and that's the rate used for financing margin accounts uh we uh I doubt you're going to get too much on financial statements but the financial statement would be the balance sheet in the income statement and if we're using the balancing the income statement to make analysis that's called fundamental analysis and we're either doing fundamental analysis where we start with the economy then the industry then the stock or bottom up stock industry economy and what we'll be interested in the economy is the business cycle and it is very testable to know that two calendar quarters of declining GDP is considered the definition of a recession um I would definitely know about defensive stocks a defensive stock is a stock a corporation delivers products and services resilient to the business cycle like food for example like utilities nobody wants to go back to the Stone Age right so defensive stocks um in terms of economic theories there's one that is based on uh demand side founded by Lord John mayard KES and Lord John Maynard Kane said the government when the economy is weak it's because there's a lack of demand and so what the government should do is step on the accelerator stimulating demand through fiscal policy government spending in taxation Mr KES would have been you know approval of what was done during covid in terms of fiscal policy fiscal policy you know of course now there's some people say maybe the government over stimulated demand and sparked inflation through through using demand side economics oh well you know whatever vote you're vote so one of the economic theories your theory isn't truth just a way explaining things the more a theory can explain the better that theory is uh you do get test on balance of payments the trade deficit right balance of payments you know us money going out foreign currency coming in this idea of debit and credit so you know what we like to do is like uh our Japanese friend buy $10 billion they're bowing airplanes we give them the planes they give us the Yen that's a credit to the balance of trade right if uh we buy $300 million of tequila my Mexican friends give us the tequila we give them the dollars that's a debit to the balance of trade uh DDP test questions the total goods and services an economy produces uh when we refer to What's called the spot rate that's the the current exchange rate of the Yen to the dollar or the peso of the dollar whatever the case may be so when I say what's the spot rate on the peso I'm asking what is that right now uh we have various safe harbors very very testable various safe harbors you know ways to sell Securities without running a foul of 33 so types of offering public versus private so we do get tested on various uh exempt transactions under 33 one of them we get tested on is regd very testable regd is a private placement I have an unlimited number of institutional investors and a credited investors we talked about that definition right the regd and in a regd offering we have two versions 506b where I can have up to 35 non accredited investors uh but I can't solicit 506c where I can't have any un accredited investors uh I can have institutional only and a credit only but I can solicit we have rega offerings where I can raise up to a Max of 75 million uh we have rule 147 interestate offerings of Securities where the issuer has to have 80% of their business and assets within the state I can only sell it to residents of the state and we have uh what else rule 147 Rd reg a I think that's good enough for for that as a banger when I'm doing a public distribution of Securities is an underwriter uh my Syndicate is either going to tell the issuer we'll extend our be best efforts we're do our damnedest to sell all these Securities but we're not willing to buy them personally or we're so confident we can sell these Securities we're going to do a firm commitment underwriting firm commitment means as far as the issuer is concerned the Securities are sold now as a banker I say listen we might want to come back and raise additional money so what I'd like to do is a shelf registration better to have these Securities on the Shelf at the SEC registered and not need them then need them and not have them so with a shelf registration if we're wellknown season dish Securities our Shelf registration would be good for up to three years so for up to three years we can take down our Shelf and use it for example um Disney used their shelf registration to pay for Fox they gave the fox shareholder Disney shares to make that acquisition by the way for the fox shareholders cash would be taxable but stock in Disney is not right so that's a shelf registration um okay well by the way there's different documents and and munis are exempt from 33 so we don't have prospectuses when selling munis we have what's are called official statements and in you know private placements we have what's called a private placement memorandum a PPM in regay we have offering circular so we have different things and remember just because we're exempt under 33 doesn't necess necessarily mean that we're exempt with the state administrator we may still have to regular uh register that's what we're called Blue Sky laws Blue Sky are laws or how we register a security within the state uh you're going to take a whole exam on that later right 63 65 uh 66 okay well I think I came in under the mighty 90 in about 90 damn minutes so pretty impressive now uh let me know your thoughts on the mighty 90 as it compares to the siie in 60 minutes we are now update we're now current uh remember inch by inch your si exam is a inch yard by yard your s exam is hard and I will see you on the SI well I guess I won't see you on the S playlist assuming you're watching this the night before morning of or both I guess I'll see you next on the series 7 or Series 6 playlist and I hope to have a Min 90 up shortly for that I'm coming to you in uh the beginnings of January 2025 alrighty everybody uh thanks for spending 90 minutes with me