Series 7 Mastery Get the book

Flashcards

Series 7 Flashcards

500+ free interactive flashcards from Series 7 Mastery, organized by chapter. Flip, shuffle and mark the cards you know — your progress is saved in this browser.

Every card, by chapter

All 504 cards in list form, for quick review or printing. Open a chapter to see its cards.

Chapter 1: The Series 7 Exam and How to Pass It (12 cards)
Series 7 scored questions
125 (plus 5 unscored pretest questions)
Series 7 time limit
3 hours 45 minutes (225 minutes)
Series 7 passing score
72
SIE's role for the Series 7
Corequisite: you must pass both for the General Securities Representative registration
Who enrolls you for the Series 7?
Your sponsoring member firm, by filing Form U4 (120-day window)
Form U5
Filed by a firm when a registered person leaves (termination notice)
Series 63
State law exam most states require for agents
Registration lapse
After 2 years without association (MQP can extend to 5 years with annual CE)
Retake wait from Jan 19, 2027
15 days after 1st/2nd failure; 60 days after 3rd
Pacing on exam day
About 1 minute 44 seconds per question
EXCEPT / NOT questions
Three answers are true; find the false one
Guessing penalty
None — answer every question
Chapter 2: Prospecting, Communications and New Issues (28 cards)
Correspondence
Written to 25 or fewer retail investors within 30 days; supervised, no prior approval needed
Institutional communication
Sent only to institutional investors; supervised under written procedures
Retail communication approval
Prior principal approval (with limited exceptions)
Public appearance
Unscripted participation in a seminar, interview or forum
Static social media content
Retail communication — needs prior principal approval
Interactive social media content
Supervised like correspondence
Telemarketing hours
8:00 a.m. to 9:00 p.m., called party's local time
Established business relationship (DNC exemption)
Transaction within 18 months, or inquiry within 3 months
Cooling-off period
At least 20 days after filing a registration statement
Red herring
Preliminary prospectus: no final price or effective date
Indication of interest
Non-binding expression of interest during cooling-off
Tombstone
Limited ad under Rule 134: facts only, no recommendation
Firm commitment
Underwriter buys the issue and bears the risk
Best efforts
Underwriter acts as agent; issuer bears the risk
All or none
Offering cancelled if the entire issue isn't sold
Standby underwriting
Underwriter buys shares not taken in a rights offering
Spread components
Manager's fee + additional takedown + selling concession
Green shoe
Over-allotment option: up to 15% more shares
Stabilization
Bid at or below the public offering price; disclosed
Rule 506(b)
Unlimited accredited + up to 35 non-accredited; no general solicitation
Rule 506(c)
General solicitation allowed; verified accredited investors only
Rule 147
Intrastate offering exemption
Reg A Tier 2 limit
$75 million in 12 months
Rule 144 holding period
6 months (reporting issuer) / 1 year (non-reporting)
Rule 144 volume limit
Greater of 1% of outstanding shares or 4-week average weekly volume
Form 144 threshold
More than 5,000 shares or $50,000 in 90 days
Rule 5130
Restricted persons can't buy equity IPOs (10% de minimis)
Rule 5131
Prohibits spinning (IPO allocations as quid pro quo)
Chapter 3: Opening and Managing Customer Accounts (21 cards)
Trusted contact person
Adult the firm may contact about exploitation or the customer's welfare; no trading authority
Specified adult
Age 65+, or 18+ with an impairment (Rule 2165)
CIP
Verify identity; check OFAC's SDN list
Reg BI obligations
Disclosure, care, conflict of interest, compliance
Form CRS
Relationship summary for retail investors
Quantitative suitability
Trading frequency must not be excessive
JTWROS
Deceased owner's share passes to survivors
Tenants in common
Deceased owner's share passes to the estate
UTMA / UGMA
One custodian, one minor; gifts irrevocable; no margin
Discretion
Choosing asset, action or amount: needs written authority + principal approval
Time-and-price discretion
Allowed verbally; usually good for the day only
Full power of attorney
Agent may trade and withdraw funds
CTR
Currency transactions over $10,000 in a day
SAR threshold (broker-dealers)
$5,000 or more; confidential
Monetary instrument log
Cash purchases of $3,000–$10,000
Three AML stages
Placement, layering, integration
Structuring
Splitting cash deposits to avoid CTRs — illegal
Reg S-P
Privacy notices and opt-out rights
Account record update
Sent at least every 36 months
Statements
At least quarterly
Rule 3210
Employee of another member needs employer's prior written consent to open account
Chapter 4: Retirement and Education Accounts (20 cards)
2026 IRA limit
$7,500 (+$1,100 catch-up at 50+)
IRA contribution deadline
Tax-filing deadline of the following year
Early withdrawal penalty
10% before 59½ (unless an exception applies)
RMD age
73 (75 for those born 1960 or later)
Roth qualified distribution
5 years + age 59½ (or death, disability, first home up to $10,000)
Roth RMDs for original owner
None
Indirect rollover window
60 days; one per 12 months for IRAs
Employer plan indirect rollover withholding
20% mandatory
Rule of 55
No 10% penalty on plan distributions after separating at 55+
SIMPLE IRA early withdrawal in first 2 years
25% penalty
SEP-IRA
Employer-only contributions, same % for all eligible employees
403(b)
Public schools and 501(c)(3) organizations
Governmental 457(b)
No 10% penalty after separation from service
2026 401(k) limit
$24,500 (+$8,000 at 50+; $11,250 at 60–63)
2026 SIMPLE limit
$17,000
529 plan K–12 limit (2026)
$20,000 per year
529 five-year election
Front-load five years of gift exclusions ($95,000 in 2026)
Coverdell ESA limit
$2,000 per beneficiary per year
ERISA
Governs private-sector employer plans
10-year rule
Most non-spouse IRA beneficiaries must empty the account within 10 years
Chapter 5: Equity Securities (26 cards)
Ex-date under T+1
Same day as the record date
Payment date
Date the dividend is actually paid
Reverse split
Fewer shares, higher price, same total value
Par value of common stock
Accounting value, unrelated to market price
Treasury stock
Issued shares the company bought back: no votes, no dividends
Statutory voting
One vote per share per seat
Cumulative voting
Shares × seats, in any combination — helps minority holders
Preemptive rights
Right to keep proportionate ownership
Who sets the record date?
Board of directors
Who sets the ex-date?
FINRA / the exchange
Cumulative preferred
Missed dividends accrue and must be paid before common
Participating preferred
May receive extra dividends above stated rate
Callable preferred
Issuer can retire it; called when rates fall
Most rate-sensitive preferred
Straight (non-convertible, fixed-rate)
Conversion ratio
Par ÷ conversion price
Rights
Short-term (30–45 days), below-market subscription price
Warrants
Long-term; exercise price above market at issue; often attached as sweeteners
Sponsored ADR
Created with the foreign issuer's participation
ADR unique risk
Currency risk
Stock split effect
More shares, lower price, same total value
Outstanding shares
Issued − Treasury
Preferred dividend
Rate × Par ($100)
Parity price of stock
Convertible's market price ÷ Conversion ratio
Parity price of convertible
Stock price × Conversion ratio
Right value, cum-rights
(Market − Subscription) ÷ (Rights per share + 1)
Right value, ex-rights
(Market − Subscription) ÷ Rights per share
Chapter 6: Debt Securities: Prices, Yields and Risks (31 cards)
Credit spread widening
Signals rising concern about default risk
Reinvestment risk
Cash flows reinvested at lower rates
Price compression
Callable bond prices stall near the call price as rates fall
Floating-rate note
Coupon resets; price stays near par
Bond price quote
Percentage of $1,000 par
Discount bond yields
Nominal < current < YTM < YTC
Premium bond yields
Nominal > current > YTM > YTC
Yield to worst
Quote the lower of YTC and YTM
Duration
Price sensitivity; higher for longer maturities and lower coupons
Zero-coupon duration
Equals its maturity
Call risk
Bonds called when rates fall; reinvest at lower rates
Put feature
Holder can sell back at par; lower yield
Sinking fund
Issuer sets aside money to retire bonds
Accrued interest period
Last payment date up to (not including) settlement
Corporate/muni day count
30/360
Treasury day count
Actual/actual
Lowest S&P investment grade
BBB−
Normal yield curve
Upward sloping
Inverted yield curve
Short rates above long rates; possible recession signal
Dollar price
Quote (% of par) × $1,000; 1 point = $10; 1/32 = $0.3125
Current yield
Annual interest ÷ Market price
Approximate YTM
[Annual interest + (Par − Price) ÷ Years] ÷ [(Par + Price) ÷ 2]
Price change from duration
≈ −Duration × Change in yield
Accrued interest (30/360)
Par × Coupon × Days ÷ 360
T-bill price
Face × [1 − (Discount yield × Days ÷ 360)]
TIPS interest
Coupon rate × Inflation-adjusted principal
Tax-equivalent yield
Municipal yield ÷ (1 − Tax rate)
Municipal-equivalent yield
Taxable yield × (1 − Tax rate)
Property tax
Assessed value × Mills ÷ 1,000
Debt service coverage
Net revenue ÷ Debt service
Total takedown
Additional takedown + Concession
Chapter 7: Corporate Debt and Money Market Instruments (16 cards)
Convertible bond coupon
Lower than comparable non-convertible bonds
Guaranteed bond
Payment guaranteed by another company, usually a parent
Bond covenant example
Limit on additional borrowing
High-yield bond suitability
Investors seeking income who can bear default risk
Mortgage bond
Secured by real property
Equipment trust certificate
Secured by equipment (railroads, airlines)
Collateral trust bond
Secured by securities held by a trustee
Debenture
Unsecured; general creditor
Subordinated debenture
Ranks behind other unsecured debt
Income bond
Pays interest only if earned
Trust Indenture Act of 1939
Requires indenture and independent trustee for public corporate debt
Commercial paper exemption
270 days or less
Banker's acceptance
Bank-guaranteed time draft for trade financing
Repurchase agreement
Sale with agreement to repurchase — a short-term secured loan
Eurodollars
U.S. dollars deposited outside the U.S.
Negotiable CD
Bank-issued, $100,000+, tradable
Chapter 8: U.S. Government, Agency and Mortgage-Backed Securities (20 cards)
T-bill pricing
Discount yield; bid yield higher than ask
Agency interest taxation
Most agencies fully taxable (FHLB and FFCB are state-exempt)
Negative convexity
MBS gain less when rates fall because prepayments speed up
T-bill maturities
4 to 52 weeks
Treasury note maturities
2 to 10 years
Treasury bond maturities
20 or 30 years
Treasury quotes
32nds of a point
STRIPS taxation
Annual phantom interest, federally taxable; state-exempt
TIPS
Principal adjusts with CPI; at maturity get greater of adjusted or original par
I bonds
Non-marketable savings bonds; fixed rate + inflation rate
GNMA
Full faith and credit of the U.S.
FNMA / FHLMC
GSEs; no explicit federal guarantee; fully taxable
Pass-through payments
Monthly principal and interest
Prepayment risk
Falling rates speed prepayments
Extension risk
Rising rates slow prepayments
PAC tranche
Most predictable CMO cash flows
Companion tranche
Absorbs prepayment variability — most risk
Z-tranche
Accrues interest; paid after earlier tranches
IO tranche
Gains when rates rise
PO tranche
Gains when rates fall
Chapter 9: Municipal Securities (27 cards)
GO bond backing
Full faith, credit and taxing power
Revenue bond backing
Revenues of the financed facility
Double-barreled bond
Revenue bond also backed by taxing power — analyzed as GO
Moral obligation bond
Legislature's non-binding pledge
Special assessment bond
Paid by benefited property owners
Special tax bond
Backed by a specific tax (gas, tobacco)
IDR
Backed by corporate lease payments; may trigger AMT
Feasibility study
Key for revenue bonds
Overlapping debt
Debt of other jurisdictions shared by the same taxpayers
Rate covenant
Fees must cover operations and debt service
Gross revenue pledge
Debt service paid before O&M
Net revenue pledge
O&M paid first
TAN / RAN / BAN
Repaid from taxes / other revenues / future bond proceeds
Territorial bonds
Puerto Rico, Guam, USVI: triple tax-exempt
Muni premium (secondary)
Must be amortized; no deductible loss
Muni OID
Accretion is tax-exempt
Muni market discount
Taxable as ordinary income (if beyond de minimis)
Official statement
Muni disclosure document; deliver by settlement
Legal opinion
Written by bond counsel
Syndicate order priority
Presale, group net, designated, member
Eastern account
Undivided liability
Western account
Divided liability
MSRB enforcement
None — FINRA, SEC and bank regulators enforce
G-37 de minimis
$250 per election to officials you can vote for
G-23
Financial advisor can't underwrite the same issue
RTRS reporting
Within 15 minutes
EMMA
MSRB website for disclosure and trade data
Chapter 10: Investment Companies: Mutual Funds, ETFs and UITs (26 cards)
Open-end fund
Continuous offering; redeems at NAV
Closed-end fund
Fixed shares; trades on exchanges at premium/discount
UIT
Fixed portfolio, redeemable units, no active management
ETF
Trades intraday; can be margined and shorted
ETN
Unsecured note; issuer credit risk
Forward pricing
Orders get the next computed NAV
Max sales charge
8.5% of POP
No-load label
No sales charges and 12b-1 ≤ 0.25%
Letter of intent
13 months; backdate up to 90 days
Rights of accumulation
Existing holdings count toward breakpoints; never expire
Breakpoint selling
Recommending just below a breakpoint — violation
Class A shares
Front-end load, breakpoints, lower 12b-1
Class B shares
Declining CDSC; convert to A
Class C shares
Level load; ~1% CDSC for a year
Redemption payment
Within 7 calendar days
Changing fund objective
Majority shareholder vote
Investment adviser role
Manages the portfolio for a fee
Custodian role
Holds the fund's assets
Transfer agent role
Records, issues and redeems shares
Buying the dividend
Investing just before a distribution — immediate tax, no gain
SAI
Statement of additional information, free on request
Names rule
80% of assets match the fund's name
NAV per share
(Assets − Liabilities) ÷ Shares outstanding
Sales charge %
(POP − NAV) ÷ POP
POP
NAV ÷ (1 − Sales charge %)
Premium / discount (closed-end)
(Market price − NAV) ÷ NAV
Chapter 11: Variable Annuities and Insurance-Based Products (15 cards)
Variable annuity regulation
Securities ('33 and '40 Acts) and insurance
Accumulation units
Owned during accumulation; value varies
Annuity units
Fixed number after annuitization; value varies
AIR
Benchmark: payments rise if returns beat it
Life only payout
Highest payment; nothing to beneficiaries
Joint and last survivor
Pays until the second death; lowest payment
Non-qualified withdrawals
LIFO: earnings first, taxed as ordinary income
Exclusion ratio
Part of each annuity payment is tax-free return of basis
1035 exchange
Tax-free annuity-to-annuity or life-to-annuity
Rule 2330 principal review
Within 7 business days of a complete application
M&E fee
Pays for insurer guarantees
Variable life loan
At least 75% of cash value after 3 years
Variable life exchange right
To whole life within 24 months
Death benefit tax
Life insurance proceeds generally income-tax-free
Annuity death benefit tax
Gains taxable as ordinary income to beneficiary
Chapter 12: Direct Participation Programs, REITs and Alternative Investments (22 cards)
Non-traded REIT risk
Illiquidity and high fees
Fund of hedge funds
Diversified but two layers of fees
At-risk rules
Deductible losses limited to amount at risk
Equipment leasing program
Cash flow plus depreciation deductions
Private equity fund
Long lock-ups; accredited/qualified investors
General partner
Manages; unlimited liability; fiduciary
Limited partner
Passive; limited liability
Certificate of limited partnership
Filed with the state
Subscription agreement
Signed by investor; GP accepts
Passive losses
Offset passive income only
Raw land
Most speculative real estate program
Existing properties
Lowest-risk real estate program
Exploratory drilling
Highest-risk oil and gas program
Income program
Lowest-risk oil and gas program
IDCs
Usually deductible in year one
Depletion
Deduction for using up natural resources
REIT distribution requirement
90% of taxable income
REIT losses
Do not pass through
MLP
Publicly traded partnership; K-1 tax reporting
BDC
Invests in small/private companies; 90% distribution
Hedge fund investors
Accredited investors / qualified purchasers
Principal-protected note risk
Issuer credit risk
Chapter 13: Options I: Fundamentals and Basic Strategies (37 cards)
Call buyer
Right to buy; bullish
Put buyer
Right to sell; bearish
Call writer
Obligation to sell; bearish/neutral
Put writer
Obligation to buy; bullish/neutral
Call breakeven
Strike + premium
Put breakeven
Strike − premium
In the money (call)
Market above strike
In the money (put)
Market below strike
Time value
Premium − intrinsic value
Long option max loss
The premium
Naked call max loss
Unlimited
Protective put
Long stock + long put
Covered call
Long stock + short call
Short stock hedge
Buy a call
OCC assignment
Random to firms
Equity option exercise settlement
T+1, in shares
Long call: breakeven
Strike + premium
Long call: maximum gain
Unlimited
Long call: maximum loss
Premium
Short call: breakeven
Strike + premium
Short call: maximum gain
Premium
Short call: maximum loss
Unlimited
Long put: breakeven
Strike − premium
Long put: maximum gain
BE × 100
Long put: maximum loss
Premium
Short put: breakeven
Strike − premium
Short put: maximum gain
Premium
Short put: maximum loss
BE × 100
Covered call: breakeven
Cost − premium
Covered call: maximum gain
(Strike − cost + premium) × 100
Covered call: maximum loss
BE × 100
Protective put: breakeven
Cost + premium
Protective put: maximum gain
Unlimited
Protective put: maximum loss
(Cost + premium − strike) × 100
Short stock + long call: breakeven
Short price − premium
Short stock + long call: maximum gain
BE × 100
Short stock + long call: maximum loss
(Strike − short price + premium) × 100
Chapter 14: Options II: Spreads, Straddles, Index Options and Rules (22 cards)
Bull call spread
Buy lower strike, sell higher (debit)
Bear call spread
Sell lower strike, buy higher (credit)
Bear put spread
Buy higher strike, sell lower (debit)
Bull put spread
Sell higher strike, buy lower (credit)
Debit spread wants
Premiums to widen; exercise
Credit spread wants
Premiums to narrow; expiration
Long straddle
Expects big move either way
Short straddle
Expects little movement; unlimited risk
Collar
Long stock + long put + short call
Index option settlement
Cash, next business day
Index hedge formula
(Portfolio × beta) ÷ (index × $100)
Importer paying euros
Buy euro calls
Options agreement deadline
15 days after approval
ODD delivery
At or before account approval
Long option margin
Paid in full if 9 months or less; 75% if longer
Call spread: breakeven
Lower strike + net premium
Call spread: maximum gain
Debit: strike difference − debit · Credit: credit
Call spread: maximum loss
Debit: debit · Credit: strike difference − credit
Put spread: breakeven
Higher strike − net premium
Straddle: breakeven
Strike ± total premium
Straddle: maximum gain
Long: unlimited · Short: premiums
Straddle: maximum loss
Long: premiums · Short: unlimited
Chapter 15: Economics, Investment Analysis and Portfolio Management (26 cards)
Leading indicators
Building permits, new orders, stock prices
Coincident indicators
Industrial production, personal income, payrolls
Lagging indicators
Duration of unemployment, prime rate, unit labor costs
Fed easing
Lower rates; buy securities
Fed tightening
Higher rates; sell securities
Fiscal policy
Congress and the President: spending and taxes
Current ratio
Current assets ÷ current liabilities
Quick ratio
(Current assets − inventory) ÷ current liabilities
Working capital
Current assets − current liabilities
Debt-to-equity
Measures financial leverage
Support
Price where buying halts declines
Resistance
Price where selling halts advances
Beta
Volatility relative to the market
Alpha
Actual return − expected return
Sharpe ratio
(Return − risk-free) ÷ standard deviation
Systematic risk
Can't be diversified away
Real return
Nominal return − inflation
Strategic allocation
Long-term targets with rebalancing
Tactical allocation
Short-term shifts based on outlook
Dollar-cost averaging
Fixed dollars at regular intervals; lower average cost
EPS
(Net income − Preferred dividends) ÷ Common shares
P/E ratio
Price ÷ EPS
Dividend payout
Dividends per share ÷ EPS
Dividend (current) yield
Annual dividend ÷ Price
Total return
(Income + Price change) ÷ Beginning value
Capital loss deduction
Up to $3,000 per year; excess carried forward
Chapter 16: Taxation of Investments (15 cards)
Long-term holding period
More than 1 year
Net capital loss deduction
Up to $3,000 per year; rest carried forward
Inherited basis
Fair market value at death; always long-term
Gifted basis (gain)
Donor's basis and holding period
Gifted basis (loss, value below basis)
Fair market value at gift date
Wash sale window
30 days before or after the loss sale
Wash sale result
Loss disallowed; added to new basis
Default cost basis method
FIFO
2026 gift exclusion
$19,000 per recipient
2026 lifetime exemption
$15 million
Net investment income tax
3.8% above $200,000 single / $250,000 joint MAGI
Qualified dividend rates
0%, 15%, 20%
Return of capital
Reduces basis; not taxed until basis is zero
Reinvested distributions
Taxable and added to basis
Stock dividend basis
Total basis spread over more shares
Chapter 17: Margin Accounts (24 cards)
Reg T set by
Federal Reserve Board
Reg T initial
50%
FINRA minimum equity
$2,000
Long maintenance
25%
Short maintenance (stocks $5+)
30%
Long call level
Debit ÷ 0.75
Short call level
Credit ÷ 1.30
Long equation
LMV − DR = EQ
Short equation
SMV + EQ = CR
Restricted account
Equity below 50% but above maintenance
SMA
Excess equity line of credit; not reduced by market declines
Buying power
SMA × 2
Selling stock and SMA
SMA credited with 50% of proceeds
Hypothecation agreement
Required; firm may pledge securities
Loan consent agreement
Optional; firm may lend securities
Rehypothecation limit
140% of the debit balance
Intraday margin standards (2026)
Maintenance must be met throughout the day; PDT rule eliminated
Not marginable at purchase
New issues, including mutual funds (until held 30 days)
Long account
LMV − DR = EQ
Short account
SMV + EQ = CR
Reg T requirement
50% of market value
Excess equity (SMA)
EQ − Reg T requirement
Long maintenance call level
DR ÷ 0.75
Short maintenance call level
CR ÷ 1.30
Chapter 18: Orders, Trading, Settlement and Confirmations (26 cards)
Principal
Trades for own account; markup/markdown
Agent
Arranges trades; commission
Market maker
Quotes two-sided markets
Third market
Listed stocks traded OTC
Fourth market
Institution-to-institution, no broker
Buy stop
Above market; triggered at or above stop
Sell stop
Below market; triggered at or below stop
Stop-limit risk
May not execute after trigger
Fill or kill
Entire order immediately or cancel
Immediate or cancel
Partial fills allowed; rest cancelled
All or none
Entire order, not necessarily immediately
Orders reduced for cash dividends
Buy limits and sell stops (BLiSS)
Markup basis
Prevailing market price (inside quote)
Riskless principal
Offsetting trade after receiving a customer order
Interpositioning
Inserting an unnecessary party — violation
Manning rule
Can't trade ahead of customer limit orders
Front running
Trading ahead of a block order
Reg SHO locate
Must locate borrowable shares before a short sale
Rule 201
10% decline triggers short sale price test
Regular-way settlement
T+1
Cash settlement
Same day
Reg T payment
2 business days after settlement (T+3)
Freeriding
Selling before paying; 90-day freeze
Market-wide circuit breakers
7% and 13%: 15-minute halts (before 3:25 p.m.); 20%: rest of day
TRACE
Corporate and agency bond trade reporting
ACATS
Validate within 1 business day; complete within 3 after validation
Chapter 19: Regulation, Prohibited Practices, Complaints and Records (20 cards)
Securities Act of 1933
New issues
Securities Exchange Act of 1934
Secondary markets; created the SEC
Investment Company Act of 1940
Regulates investment companies
Investment Advisers Act of 1940
Regulates investment advisers
Churning
Excessive trading for commissions
Selling away
Private securities transactions without approval
Rule 3240
Borrowing/lending with customers only under exceptions and firm procedures
Sharing in accounts
Written approval; proportionate share (except immediate family)
Painting the tape
Wash or matched trades to fake activity
Insider trading civil penalty
Up to 3× profit gained or loss avoided
Outside business activities
Prior written notice (Rule 3270; Rule 3290 from Oct 25, 2027)
Regulatory Element CE
Annually
Gift limit (Rule 3220)
$300 per person per year
Complaint records
Keep at least 4 years
Rule 4530 reporting
Specified events within 30 days; statistics quarterly
Arbitration eligibility
6 years from the event
Simplified arbitration
Claims of $50,000 or less
SIPC limits
$500,000 per customer, including $250,000 cash
Life-of-firm records
Articles, partnership agreements, minute books, stock certificate books
BrokerCheck
FINRA's public database of firm and rep backgrounds
Glossary terms (70 cards)
Accredited investor
An investor meeting SEC wealth, income or credential tests (for individuals: net worth over $1 million excluding primary residence, income over $200,000/$300,000, or a Series 7, 65 or 82 license).
Accrued interest
Interest earned since the last payment date, paid by a bond buyer to the seller.
ACATS
The Automated Customer Account Transfer Service, used to move accounts between firms.
ADR (American depositary receipt)
A receipt issued by a U.S. bank representing shares of a foreign company.
AIR (assumed interest rate)
The rate used to set the number of annuity units at annuitization; payments rise or fall as actual returns exceed or trail it.
Alternative minimum tax (AMT)
A parallel tax calculation that adds back certain preference items, such as interest on private activity municipal bonds.
Basis point
One one-hundredth of one percent (0.01%).
Best efforts
An underwriting in which the underwriter acts as agent and the issuer bears the risk of unsold securities.
Beta
A measure of a security's volatility relative to the overall market.
Breakpoint
A purchase level at which a mutual fund's front-end sales charge is reduced.
Callable
A feature allowing the issuer to redeem a bond or preferred stock before maturity.
Churning
Excessive trading in an account to generate commissions.
CMO (collateralized mortgage obligation)
A mortgage-backed security divided into tranches with different payment priorities and risks.
Cooling-off period
The period of at least 20 days between filing a registration statement and its effective date.
Correspondence
Written communications to 25 or fewer retail investors within 30 days.
Credit spread
The yield difference between a bond and a comparable Treasury.
Cumulative preferred
Preferred stock whose missed dividends accumulate and must be paid before common dividends.
Current yield
Annual interest or dividends divided by the market price.
Debenture
An unsecured bond backed only by the issuer's general credit.
Direct participation program (DPP)
An investment, typically a limited partnership, that passes income and losses through to investors.
Discretion
Authority to choose the asset, action or amount of a trade without the customer's specific approval.
Duration
A measure of a bond's price sensitivity to interest-rate changes, expressed in years.
EMMA
The MSRB's Electronic Municipal Market Access website.
Ex-dividend date
The first date on which a buyer is not entitled to a declared dividend; the same day as the record date under T+1 settlement.
Firm commitment
An underwriting in which the underwriter buys the entire issue and bears the risk of unsold securities.
Form CRS
The client relationship summary broker-dealers must deliver to retail investors.
Front running
Trading ahead of a customer's order to profit from the expected price movement.
General obligation (GO) bond
A municipal bond backed by the issuer's full faith, credit and taxing power.
Hypothecation
Pledging securities as collateral for a margin loan.
Indication of interest
A non-binding expression of interest in a new issue, taken during the cooling-off period.
Intrinsic value
The amount by which an option is in the money.
Letter of intent (LOI)
A non-binding pledge to invest enough in a fund family within 13 months to qualify for a breakpoint.
Liquidity risk
The risk that an investment cannot be sold quickly without a significant price concession.
Market maker
A dealer that continuously quotes bids and offers in a security.
Markup
The difference between the prevailing market price and the price a dealer charges a customer.
MSRB
The Municipal Securities Rulemaking Board, which writes rules for municipal securities dealers and municipal advisors.
Municipal note
A short-term municipal obligation, such as a TAN, RAN, BAN or GAN.
NAV (net asset value)
A fund's assets minus liabilities, per share.
OCC
The Options Clearing Corporation, which issues and guarantees listed options.
Official statement
The disclosure document for a municipal bond offering.
Parity
The price at which a convertible security and the underlying common stock are equal in value.
Passive income
Income from limited partnerships and other businesses in which the investor does not materially participate.
Premium (option)
The price paid by an option buyer to the seller.
Prepayment risk
The risk that mortgage borrowers repay early when rates fall.
Preliminary prospectus (red herring)
The disclosure document used during the cooling-off period; omits the final price.
Prospectus
The disclosure document for a registered securities offering.
Regulation Best Interest (Reg BI)
The SEC standard requiring broker-dealers to act in a retail customer's best interest when making recommendations.
Regulation T
The Federal Reserve rule governing credit extended by broker-dealers; sets 50% initial margin.
REIT
A real estate investment trust; must distribute at least 90% of taxable income.
Restricted person
Under FINRA Rule 5130, a person prohibited from buying equity IPOs, such as broker-dealer employees.
Retail communication
Written communications distributed to more than 25 retail investors within 30 days.
Revenue bond
A municipal bond backed by the revenue of a specific facility.
Rights offering
An offer to existing shareholders to buy new shares, usually below market, in proportion to their holdings.
SAR
A suspicious activity report, filed with FinCEN for suspicious transactions of $5,000 or more.
Selling away
Selling securities outside the scope of one's employment without the firm's approval.
SIPC
The Securities Investor Protection Corporation, which protects customers of failed broker-dealers up to $500,000 ($250,000 cash).
SMA (special memorandum account)
A line of credit created by excess equity in a margin account.
Spread (options)
The simultaneous purchase and sale of options of the same type with different strikes or expirations.
Straddle
A call and a put with the same strike and expiration, both bought or both sold.
Systematic risk
Market-wide risk that cannot be eliminated by diversification.
T+1
Regular-way settlement one business day after the trade date.
Tax-equivalent yield
The taxable yield needed to equal a tax-exempt yield after taxes.
Time value
The portion of an option's premium above its intrinsic value.
TIPS
Treasury Inflation-Protected Securities, whose principal adjusts with the CPI.
Trusted contact person
An adult the firm may contact about a customer's welfare or possible financial exploitation.
UGMA/UTMA
State laws governing custodial accounts for minors.
Unsystematic risk
Risk specific to a company or industry that can be reduced by diversification.
Wash sale
A loss sale followed by a purchase of substantially identical securities within 30 days before or after; the loss is disallowed and added to the new basis.
Yield to maturity (YTM)
The total annualized return on a bond held to maturity.
Zero-coupon bond
A bond issued at a deep discount that pays no periodic interest and matures at par.

Flashcard FAQ

How many Series 7 flashcards are there?

More than 500: key concepts, rules, numbers and formulas for all 19 chapters, plus the glossary terms.

How should I use flashcards for the Series 7?

Study one chapter at a time right after reading it, mark the cards you know, and come back daily to the rest. In the last two weeks, shuffle all chapters together.