investment company outline

transfer agent

·        Work as bookkeeper

·        Clerks

·        Issue shares/certificates to show individuals own part of investment company

·        Maintain shareholder accounts-transactions, IRS, etc.

·        Send out dividend checks, capital gains distributions unless auto re-invest

·        Cancel redeemed shares

·        Send redemption checks to shareholders

Operating expenses

·        Salary/expenses for board of directors

·        Highest: management fees

·        Custodian fees

·        Service fees

·        Brokerage fees-to buy and sell in portfolio

·        Pay auditors for auditing

·        Legal fees

·        Printing and distribution costs to shareholders

Expense ratio

·        Expense ratio=operating expenses this year/total net asset value

Which of the following expenses are considered part of the costs of operation of a mutual fund?

·        Service fees

·        Brokerage fees

·        Management fees

·        Audit fees

·        Legal fees

·        YET printing prospectuses paid by sales charge

Securities Act of 1933

·        Mutual funds subject to 1933 rules

·        Advertising-oral/written/visual means to promote purchase

·        Prospectus before-or-with-ad

·        Ad can not have written application or tell customers to send fund

·        Ad must be given to FINRA within 10 days of use

·        Prospectus-must give to customer when you suggest they buy

No prospectus needed

·        Tombstone ad

·        Generic ad

Investment Company Act of 1940 says mutual funds can NOT have

·        Real estate

·        Commodities

·        Other mutual funds unless objectives met

·        Securities bought with margin

·        Securities if individual within investment company owns .5% (half of one percent) of issuer’s stock

Equity vocabulary chapter one series 7 outline

Equity vocabulary chapter one series 7 outline

Corporate charter

• description of company's purpose
• articles of incorporation
• by-laws
• other material information at time of incorporation

Board of Directors

• elected by the stockholders/owners of the company
• advise the company
• appoint officers to carry out corporate policies
• if the board fulfills its duties successfully, members will be re-elected. Otherwise new members will be elected to take their place

Which of the following describes the owners of a corporation?

• The people who own shares of common stock in the company a.k.a. stockholders/shareholders. They rely on a company's management to make operational decisions for the company and to increase shareholder's value in the company 

Capitalization

• company's sources of funds for long term use
• received from the sale of stocks

Debt capital

• through the sale of bonds

Earned surplus

• from retained profits

Equity

• means ownership, 
• composed of preferred stock and common stock
• shareholders-owners of the corporation, number of shares owned = amount of ownership an investor has in the company
• common stock-establishes ownership and raises money to do business
• common stock is issued when a corporation issues it and the company receives money from the sale
• through the securities market-the seller or a broker/dealer receives money from the sale
• allows people to become owners of the company, earn income through dividends, profit from potential appreciation in the value of the stock
• as corporation becomes more profitable, the stock price increases, the value of common stock increases
• common stockholders take on a risk that the investment can decrease in value and even become worthless
• their liability risk is limited to only the amount they originally paid for the stock-the amount originally invested
• a corporation is not obligated to issue Preferred Stock-preferred stockholders have several rights that are unavailable to common stock holders but DO NOT have all the same voting rights