SERIES 6 Cheat Sheet (DRAFT) by Stephany21

Rights, also called "­Pre­-em­ptive rights­" or "­sub­scr­iption rights­" . They are offered to existing shareh­olders by corpor­ations that want to raise additional capital. Benefit of this is to give shareh­olders the first chance to buy new issued shares before sold to public ;can buy at a lower rate than current market price.

A hedge fund is simply an investment partne­rship set up by a money manager. Its legal form is typically a limited liability company, a limited partne­rship, or an offshore corpor­ation. if the company goes bankrupt, the creditors cannot go after the investors for more money than they’ve invested into the hedge fund.

Hedge funds pool money from investors and invest in securities or other types of invest­-ments with the goal of earning positive returns.

Hedge funds may operate as blind pools.
inappr­opriate for retail investors
hedge funds often require investors to commit to periods of illiqu­idity, called lock-up periods


They are exempt from the Investment Company Act of 1940 & Securities Act of 1933
Sold only through private placements to instit­utions and accredited investors


hedge funds are not approp­riate for an investor needing short-term liquidity, for example, an individual trying to purchase a home. Their lack of liquidity, high-risk invest­ments, and aggressive management make them most approp­riate for sophis­ticated investors with a high net worth.

Soft dollar payments that fall within the safe harbor include those for:
◆Research services provided by the broker­-dealer
◆Educa­tional or research seminars and meetings
(excluding travel, hotel, meal, and entert­ainment expenses associated with the meeting)

Federal securities laws require mainta­ining adequate books and records concerning soft dollar alloca­tions, along with disclosure of soft dollar compen­sation to investors.

Warrant entitles the holder to buy the issuer's stock at a specified price for a period of time. A warrant is a long-term instrument ( 5 years or more). The exercise price of the warrant is higher than stock price at the time of issue. Warrants only work if stock apprec­iates over time.

A real estate investment trust (REIT) owns and operates income­-pr­oducing real estate or real-e­sta­te-­related assets.

REITs provide a way for individual investors to receive divers­ifi­cation and a share of income produced from commercial real estate ownership without buying and holding proper­ties. they receive a propor­tio­n-ate share of distri­butions from the pool of assets based on the amount of their ownership.

minimum requir­ements on the investment of REIT assets and the pass-t­hrough of the income they generate:

At least 75% of a REIT’s total assets must be invested in real estate.
◆At least 75% of a REIT’s gross income must be derived from rents or mortgage interest.
◆95% of a REIT’s income must be derived from dividends, interest, and property income.
◆On an annual basis, REITs must distribute at least 90% of their taxable income to shareh­olders in the form of dividends

REITs cannot pass through losses.

publicly traded REITs may be listed on exchanges. Their price is related to their net asset value (NAV)


Publicly traded REITs trade on major exchanges and offer investors the liquidity and transp­arency advantages of publicly traded stock.

Non-traded REITs are distri­buted through broker­-de­alers. While potential returns may be very attrac­tive, these are often illiquid and fees can be high.

Private REITs, or privat­e-p­lac­ement REITs, are generally exempt from Securities Act regist­ration. They can be sold only to accredited investors and instit­utional clients, and do not trade on exchanges.

Class A shares normally have front-end sales charge.lower 12b-1 fee than other share classes. (Offer breakp­oints, which are discounts off the sales charge based on the dollar amount invested). ^{Front-end loads may be beneficial for investors who intend to hold their shares for more than several years, as well as those making large purchases who want to benefit from breakp­oints.}

Class B shares have a back-end or a contingent deferred sales charge (CDSC) that is paid when investors redeem their shares within a specified number of years. HIGH 12b-1 fees. Class B shares do not offer breakp­oints. ^{These shares may be approp­riate for investors with little investment cash and a long investment horizon}


Class C shares - no upfront sales charge. They charge high 12b-1 fees; highest annual expense charges of the share classes. (The high expense charge is often called a level load ) They do not offer breakp­oints. ^{designed for people who want to make short-term mutual fund invest­ments}


No-load funds are mutual funds that are sold at their NAV, without any sales charge added. In other words, the NAV and the POP are the same.

sector funds or specialty funds concen­trate their assets in a single industry, such as technology or health­care. present more risk than funds with greater sector divers­ifi­cation. They are most approp­riate for investors who are interested in a particular industry like ECO-FR­IENDLY companies

American Depository Receipts ( ADRs) represent ownership in shares of non-US companies that trade in the US. Made available thanks to the major commercial banks who buy a bulk of shares from foreign companies. They bundle the shares in groups and re-issue them to US exchange or OTC,

stock fund or an equity fund is a mutual fund that invests in stocks of companies that align with its investment objective.

Unit investment trusts (UITs) are another type of investment company regulated under the Investment Company Act of 1940. One of the main charac­ter­istics that distin­guishes UITs from open-end and closed-end funds is that UITs are not actively managed.

The creation of a UIT involves the drafting of an organi­zation document, the trust indenture, by the fund’s sponsor, which initiates the formation of the trust. In the indenture, the sponsor names a trustee, which handles the admini­str­ative duties.


UITs do not have a board of directors; they have a sponsor.

termin­ation date establ­ished at the inception of the trust. Because the portfolio is fixed, a buy-an­d-hold strategy is followed, and the securities are not actively traded. UITs are often substa­ntially cheaper than mutual fund shares because there is no fee for active management

An advantage of a fixed portfolio is that it allows investors to know what securities are held within a UIT through the lifetime of the trust. The UIT is dissolved and is no longer active when it reaches its termin­ation date.

payment includes either;

◆Receive proceeds in cash—The trust will liquidate, and unit holders will receive a cash distri­bution of the trust’s proceeds based on their ownership interest.
◆Rollover at a reduced sales charge- trust sponsor may offer a new series of the same trust, or may have new UITs available for investment


Has units, not shares.

◆Growth stock funds, also called growth stocks, invest in stocks of companies that are expected to grow at a rate faster than the market average. Mid-cap and small-cap stocks often represent strong growth potential and are held within the portfolios of growth stock funds.

◆Aggressive growth funds seek long-term growth by investing in stocks of small to midsized companies. Stocks of these companies tend to have greater upside potential than the overall market trend, but also greater risk and volati­lity. Stocks of these companies rarely pay dividends. Instead, corporate earnings are reinvested for further research and develo­pment.

◆Value stock funds invest in value stocks, which are the stocks of companies that investors or mutual fund managers believe are selling at a price lower than their market value. They are considered “cheap” Value stocks commonly pay dividends to investors.

◆Blended stock funds attempt to achieve cost-e­ffe­ctive returns and apprec­iation potential for investors by investing in both growth and value stocks

.◆Income stock funds invest in divide­nd-­paying companies, stressing steady income over apprec­iation. These funds might include preferred stocks, blue chip stocks, and utility stocks.

◆Growth and income funds, also known as combin­ation funds, include some stocks for growth and others that pay high dividends

Stock funds are most approp­riate for investors seeking long-term growth through capital apprec­iation, although dividends and capital gains may also supply income for investors that have an income objective.

Intern­ational funds and global stock funds invest in stocks issued by companies located throughout the world. Global stock funds can also include stocks in the U.S.
Stock funds can also invest in only a specific geo-gr­aphic region, such as Europe or the Pacific rim.

Stock funds are most approp­riate for investors seeking long-term growth through capital apprec­iation, although dividends and capital gains may also supply income for investors that have an income objective.

Each equity fund has its own unique risks. Some major risks associated with equity funds include:
◆Market risk, which is the risk that downturns in the market­place will negatively impact a specific investment
◆Business risk, which is the concern that the management of a specific company will not be able to meet operating expect­ations


Equity funds that include foreign securities also might incur:
◆Political risk, which is the risk that invest­ments in a foreign security will be impacted adversely by unfavo­rable political develo­pments
◆Currency risk, which is the risk that invest­ments denomi­nated in foreign currencies will lose value as exchange rates fluctuate

ETFs are designed to closely track the perfor­mance of a specific sector, market benchmark, or index.

It is important to note that ETFs, like UITs, are passive investment vehicles; they are not actively managed to outperform the current market. One advantage of this passive strategy is that ETFs are typically a lower-cost option for investors because there are no management fees.

Investors who want exposure to indices in a tax-ef­ficient manner and without incurring management fees or high trading costs should consider ETFs

ETFs, like closed-end funds, are exchan­ge-­traded.

investors must still pay commis­sions when purchasing these shares

The fact that the shares are extremely liquid might lead investors to overtrade their positions, creating timing risk and increased commission charges.