What is the *3 Pronged Approach*? - correct answer ✔✔Test used by SEC to determine if an entity
meets the definition of an investment adviser.
1. Does the Person provide investment advice relating to securities and based on the client's situation?
2. Does the person receive compensation as a result of providing investment advice?
3. Is the person in the business of providing investment advice?
What is a *Form 8-K*? - correct answer ✔✔SEC report required by the Securities Exchange Act of 1934
of public companies announcing unusual material events. A report of unscheduled material events or
corporate changes at a company that could be of importance to the shareholders or the Securities and
Exchange Commission.
What are 5 examples that qualify for a Form 8-k to be filed? - correct answer ✔✔1. Acquisition
2. Bankruptcy
3. Resignation of directors
4. Loss of major customers
5. Change in the fiscal year. Also known as Form 8k.
What is a *Form 10-K?* - correct answer ✔✔SEC report required by the Securities Exchange act of 1934
annually by public companies to report financial statements over the past fiscal year.
What is a *Form 10-Q"? - correct answer ✔✔Unaudited comprehensive quarterly report that is
mandatory for public companies to disclose performance. Only needs to be filed for the 1st, 2nd, and 3rd
quarter.
When is a *Form 10-Q due?* - correct answer ✔✔Within 45 days of the end of the quarter
What is a *12b-1 Fee*? - correct answer ✔✔A Fee deducted from a mutual fund's assets to cover
distribution and marketing costs. It is an operational expense that is a part of the total expense ratio.
,What is *Rule 72-t?* - correct answer ✔✔An Internal Revenue Service (IRS) rule that allows for penalty-
free withdrawals from an IRA account. The rule requires that, in order for the IRA owner to take penalty-
free early withdrawals, he or she must take at least five "substantially equal periodic payments" (SEPPs).
The amount depends on the IRA owner's life expectancy calculated with various IRS-approved methods.
Allows you to take advantage of your retirement savings before the age of 59.5, when there is otherwise
a 10% penalty on early withdrawal. The withdrawals, however, are still taxed at your income rate.
What is the drawback to taking advantage of Rule 72-t? - correct answer ✔✔You may deplete your
retirement accounts well before the end of your life expectancy.
What is the *75-5-10 Rule*? - correct answer ✔✔Diversification formula for a fund advertising itself as
diversified. 75% of the portfolio must have no more than 5% of assets invested in any one security and
no more than 10% of the company's outstanding shares may be owned.
What is a *401(k) Plan?* - correct answer ✔✔Qualified defined contribution plan offering employer-
matched contributions.
What is a *403(b)?* - correct answer ✔✔Qualified plan for tax-exempt, non-profit organizations
What is a *404(c)?* - correct answer ✔✔Safe-harbor provisions allowing employers to pass off risk to
participants of defined contribution plans.
What is a *457 Plan*? - correct answer ✔✔Tax-advantaged retirement accounts for state and municipal
government employees. AKA Section 457 Plan
What is a *529 Plan?* - correct answer ✔✔Education savings plans offering tax-free distributions at the
federal level for qualified education expenses.
What is a *Section 1035 Contract Exchange?* - correct answer ✔✔Section 1035 Exchange refers to the
replacement of an annuity or life insurance policy for a new one without incurring any tax consequence
for the exchange. The following exchanges of insurance contracts are considered tax-free by the IRS:
replacing one annuity contract for another annuity contract with identical annuitant replacing one life
insurance policy for another life insurance policy, endowment policy or annuity contract replacing one
endowment policy for an identical endowment policy or an annuity contract Any other variation from
,those acceptable exchanges listed above (annuity contract for life insurance) will not be considered a tax-
free exchange. The IRS has provided strict guidelines that the owner, insured and annuitant must be the
same on the new contract as listed on the old in order to qualify for the tax-free treatment. The contract
must also exchange directly between the insurance companies to retain the tax-free status. The IRS has
ruled in several previous cases that if an owner cashes out of a current contract and immediately applies
the proceeds to a new contract it will not be treated as a tax-free event or Section 1035 Exchange.
Why does the IRS allows holders of annuity and life insurance policy to use Section 1035 Contract
Exchange? - correct answer ✔✔In order to replace outdated contracts with new contracts with improved
benefits, lower fees and different investment options.
What is the 1040EZ? - correct answer ✔✔
1041 - correct answer ✔✔Tax form used by trusts and estates
1065 - correct answer ✔✔Tax form used by partnerships
1099-DIV - correct answer ✔✔Tax form sent to investors showing dividends and capital gains
distributions from a mutual fund for the tax year.
1099-OID - correct answer ✔✔Tax form used to pay annual accretion on a zero coupon or any taxable
original issue discount (OID) bond
1120 - correct answer ✔✔Tax form used by corporations
A-Shares - correct answer ✔✔Mutual fun shares sold with a front-end sales load/charge. Lower annual
expenses than B and C shares.
Account at Maintenance - correct answer ✔✔The point at which a customers equity in a margin account
is just high enough to avoid a margin call
Account Freeze - correct answer ✔✔Temporary restrictions placed on a customers account for violations
of Regulation T.
, Accounts Payable - correct answer ✔✔What a company owes its vendors in the short-term a current
liability
Accounts receivable - correct answer ✔✔What a customer owe a company in the short-term a current
asset.
Account Statement - correct answer ✔✔Document sent to a broker-dealer customer showing the recent
value of all cash and securities, plus all recent activity in the account.
Accredited Investors - correct answer ✔✔Large institutional investors, and individuals meeting certain
income or net worth requirements allowing them to participate in for example a private placement
under Reg D of the Securities Act of 1933 or hedge funds.
Accretion - correct answer ✔✔Increasing the cost basis of a discount bond for tax purposes.
Accrued Interest - correct answer ✔✔The interest that a buyer of a debt security owes the seller. Bond
interest is payable only twice a year, and the buyer will receive the next full interest payment. Therefore
the buyer owes the seller for every day of interest since the last payment up to the day before the
transaction settles.
Accrued Taxes - correct answer ✔✔Taxes that are owed by a company over the short-term a current
liability
Accrued Wages - correct answer ✔✔Wages that are owed by the company over the short-term a current
liability
Accumulation Stage/ Period - correct answer ✔✔Period during which contributions are made to an
annuity during which the investor holds accumulation units.
Accumulation Units - correct answer ✔✔What the purchaser of an annuity receives in exchange for his
purchase payments during the accumulation phase and accounting measure representing a proportional
share of the separate account.
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