Series 6 Lessons Audio Lessons for the FINRA Series 6 Exam

Series 6 Lessons Audio Lessons for the FINRA Series 6 Exam

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Series 6 Lessons Audio Lessons for the FINRA Series 6 Exam episodes

  • Series 6 Lesson 19 Review pt. 2
    Series 6 Lesson 19 Review pt. 2
    Series 6 Lesson 19 Review pt. 2 this is the 2nd of 3 review lessons. These lessons will be a review of the full Series 6 Audio Course.  Under FINRA regulations, you are not allowed to disclose the contents of the FINRA exam to any other person. It must be kept completely confidential to maintain the integrity of the test.

    When a broker-dealer hires a securities agent, they have to fill out a U4 Form. The agent must do everything he or she can to make sure that all information on the form is completely accurate.  You cannot omit any past convictions/problems. It has several sections, including you name, address, etc, your 5-year history of your residences, a 10-year employment history, and information about any legal trouble that you have had. You also have to submit fingerprints in order to complete a background check. You do not have to disclose your marital status or your education history.

    Form U5 is used to terminate a registered representative. It outlines the cause of the termination. These are entered into FINRA’s BrokerCheck system. This form can be filled out for any reason, whether there was an infraction, or the person is simply retiring or is taking a different job in another industry. The broker-dealer has to fill this out within 30 days of the termination. An agent's registration is not transferred from one firm to the next. If you leave one firm, you will need to go ahead and fill out another U4 Form.

    Registered representatives have to complete continuing education requirements, including a regulatory element requirement and a firm element requirement.

    The regulatory element means that they have to participate in a training exercise within 120 after a person’s 2nd registration anniversary of your initial registration date and then again every three years after that. If he or she does not do this, their registration will fall into inactive status, and they will not be able to conduct any business.

    The firm element is written training that firms developed that needs to be completed every year.  It covers overall investment features and risk factors, suitability and ethical sales practices, and regulatory requirements that apply to that person’s duties.

    Each year, every firm needs to certify to FINRA that all of its employees have complied with the regulatory requirements. They also have membership fees that are based on the number of registered representatives that are employed by the firm.

    Series 6 Lesson 18 Review pt. 1

    We also offer lessons for:

    The Series 7 Exam
    https://gumroad.com/l/ILYu

    The Series 22 Exam
    https://series6lessons.com/series-22-exam/

    The Series 63 Exam
    https://series6lessons.com/series-63-exam-lessons/

    The Life Health Insurance Exam
    https://series6lessons.com/insurance-lessons/

    The SIE Exam (Securities Industries Essentials Exam)
    https://series6lessons.com/finra-sie/

    Click on any of them to find out more
    11 min
  • Series 6 Lesson 18 Review pt. 1
    Series 6 Lesson 18 Review pt. 1

    Series 6 Lesson 18 Review pt. 1 the next 3 lessons will be a review of the full Series 6 Audio Course.  Under FINRA regulations, you are not allowed to disclose the contents of the FINRA exam to any other person. It must be kept completely confidential to maintain the integrity of the test.

    When a broker-dealer hires a securities agent, they have to fill out a U4 Form. The agent must do everything he or she can to make sure that all information on the form is completely accurate.  You cannot omit any past convictions/problems. It has several sections, including you name, address, etc, your 5-year history of your residences, a 10-year employment history, and information about any legal trouble that you have had. You also have to submit fingerprints in order to complete a background check. You do not have to disclose your marital status or your education history.

    Form U5 is used to terminate a registered representative. It outlines the cause of the termination. These are entered into FINRA’s BrokerCheck system. This form can be filled out for any reason, whether there was an infraction, or the person is simply retiring or is taking a different job in another industry. The broker-dealer has to fill this out within 30 days of the termination. An agent’s registration is not transferred from one firm to the next. If you leave one firm, you will need to go ahead and fill out another U4 Form.

    Registered representatives have to complete continuing education requirements, including a regulatory element requirement and a firm element requirement.

    The regulatory element means that they have to participate in a training exercise within 120 after a person’s 2nd registration anniversary of your initial registration date and then again every three years after that. If he or she does not do this, their registration will fall into inactive status, and they will not be able to conduct any business.

    The firm element is written training that firms developed that needs to be completed every year.  It covers overall investment features and risk factors, suitability and ethical sales practices, and regulatory requirements that apply to that person’s duties.

    Each year, every firm needs to certify to FINRA that all of its employees have complied with the regulatory requirements. They also have membership fees that are based on the number of registered representatives that are employed by the firm.

    Series 6 Lesson 18 Review pt. 1

    We also offer lessons for:

    The Series 7 Exam

    https://gumroad.com/l/ILYu

    The Series 22 Exam

    https://series6lessons.com/series-22-exam/

    The Series 63 Exam

    https://series6lessons.com/series-63-exam-lessons/

    The Life Health Insurance Exam

    https://series6lessons.com/insurance-lessons/

    The SIE Exam (Securities Industries Essentials Exam)

    https://series6lessons.com/finra-sie/

    Click on any of them to find out more

    11 min
  • Series 6 Lesson 17 FINRA Regulations
    Series 6 Lesson 17 FINRA Regulations
    Series 6 Lesson 17 FINRA Regulations  is this lessons topic. Under FINRA regulations, you are not allowed to disclose the contents of the FINRA exam to any other person. It must be kept completely confidential to maintain the integrity of the test.
    When a broker-dealer hires a securities agent, they have to fill out a U4 Form. The agent must do everything he or she can to make sure that all information on the form is completely accurate.  You cannot omit any past convictions/problems. It has several sections, including you name, address, etc, your 5-year history of your residences, a 10-year employment history, and information about any legal trouble that you have had. You also have to submit fingerprints in order to complete a background check. You do not have to disclose your marital status or your education history.
    Form U5 is used to terminate a registered representative. It outlines the cause of the termination. These are entered into FINRA’s BrokerCheck system. This form can be filled out for any reason, whether there was an infraction, or the person is simply retiring or is taking a different job in another industry. The broker-dealer has to fill this out within 30 days of the termination. An agent's registration is not transferred from one firm to the next. If you leave one firm, you will need to go ahead and fill out another U4 Form.
    Registered representatives have to complete continuing education requirements, including a regulatory element requirement and a firm element requirement.
    The regulatory element means that they have to participate in a training exercise within 120 after a person’s 2nd registration anniversary of your initial registration date and then again every three years after that. If he or she does not do this, their registration will fall into inactive status, and they will not be able to conduct any business.
    The firm element is written training that firms developed that needs to be completed every year.  It covers overall investment features and risk factors, suitability and ethical sales practices, and regulatory requirements that apply to that person’s duties.
    Each year, every firm needs to certify to FINRA that all of its employees have complied with the regulatory requirements. They also have membership fees that are based on the number of registered representatives that are employed by the firm.
    Series 6 Lesson 17 FINRA Regulations
    We also offer lessons for:
    The Series 7 Exam
    https://gumroad.com/l/ILYu
    The Series 22 Exam
    https://series6lessons.com/series-22-exam/
    The Series 63 Exam
    https://series6lessons.com/series-63-exam-lessons/
    The Life Health Insurance Exam
    https://series6lessons.com/insurance-lessons/
    The SIE Exam (Securities Industries Essentials Exam)
    https://series6lessons.com/finra-sie/
    Click on any of them to find out more
    11 min
  • Series 6 Lesson 15 Registration and Disclosure
    Series 6 Lesson 15 Registration and Disclosure
    Series 6 Lesson 15 Registration and Disclosure is what this lesson is about. Stock that is sold under a private placement is not registered and so it is considered restricted.  Investors will have to hold it for a certain period of time before selling it.  If the sale is less than 5,000 shares and $50,000, it can be sold with reporting. A transaction that small is not big enough to interest the regulators.  When helping people buy and sell securities, you need to do your due diligence to make sure they are not trying to get around restrictions by dealing in restricted stock. These restricted stocks can be sold without restriction, however, to institutional investors, such as banks, insurance companies, etc. These sorts of buyers have over $100 million in store.
    Registration and disclosure are supposed to help protect investors. Whether something is protected by the SEC, people can still face civil liabilities if they mislead or misrepresent pertinent facts about investments.  You can sue other parties for damages through the civil courts who have done this. You have to prove that you were deceived and that you could not have know better through your diligent efforts.
    The Security and Exchange Act of 1934 broadened the scope of the Act of 1933.  It included anti-fraud provisions that apply to any person and any security. It means that anyone who lies or omits the truth when trying to buy and sell securities will be subject to legal action. This act officially created the SEC as the ultimate regulatory authority. Other regulatory institutions, such as FINRA, NASDAQ, and CBOE have to register with the SEC.  When all of these SROs want to change a rule, it has to be sanctioned by the SEC. These organizations can exercise statutory disqualification, which means they can deny firms entry to their organization if they feel they are not well qualified enough.
    The Maloney Act made it so that national securities organizations have to register with the SEC. Only the NASD was actually required to do so under the act.
    The Howey Decision was a landmark Supreme Court case that determined that investment contracts are considered securities.  They are an investment of money in a common enterprise, with the expectation of profits, and derived through the efforts of others.
    If something is not a security, such as a fixed annuity, a whole/term life insurance policy, or commodities futures contracts, they are not subject to anti-fraud statues. A variable annuity is still a security, but a fixed annuity is not, because it is basically an insurance contract that is backed by the company’s general account.
    A broker is a middleman, who charges a commission in order to help you buy or sell a security. They do not have any inventory. A dealer is directly involved, who wants to sell you some of his own stock or to buy some of another person’s stock. You always have to disclose whether you were the broker or the dealer in a transaction. Firms can act as either a broker or a dealer and often function in a variety of capacities.
    Large companies register their offerings on a form called the S-1.
    Investment companies fill out a more complex form, the Form N-1A that does two things: It registers them under the Investment Company Act of 1940 and registers their shares of securities under the Securities Act of 1933.
    In your company’s prospectus, you should include a section called the Statement of Additional Information (SAI). The SEC requires the following things to be in the SAI: the fund’s history, the fund policies on things like borrowing and issuing, detailed information about officers, advisers, directors and any other related entities, information on brokerage allocation, audited financial statements, and a detailed description of portfolio securities.
    The SAI is usually posted on a company’s website and you must disclose how to obtain it in the prospectus.
    11 min
  • Series 6 Lesson 16 Communications
    Series 6 Lesson 16 Communications
    Series 6 Lesson 16 Communications is the topic of this lesson. Communications with the public have to be approved/monitored by a principal and copies have to be kept. Communication to retail investors have to be pre-approved and copies have to kept, but also, they have to be filed with FINRA.
    Correspondence is any written/electronic communication that is made available to 25 or fewer retail investors within a 30-day period.  It does not have to be pre-approved or filed with FINRA.
    Institutional communications are those only made available to institutional investors.
    Retail communications are those made available to more than 25 retail investors in a 30-day period.
    When you file copies of communications with FINRA, you have to provide the date of first use, the name, title, and CRD number of the principal approving it, and the date the approval was given.
    Communications about variable contracts have even more standards applied to them. The customer has to understand that they are being offered variable life insurance, regardless of what the official title of the product is, and not a mutual fund, and that it does not have good short-term liquidity. The tax ramifications also have be to fully explained to the customer.
    FINRA stipulates that mutual funds can only use fund rankings in their communications if they were issued by an official ranking entity that does not have a conflict of interest. These include Lippers, Barron’s and Zacks Investment Research. If you have a ranking from an official source, you still have to use all of the usual disclaimers and disclose the source of the ranking data. You also have to explaining the rating system, such as stars or something similar.
    Bonds are also rated according to their volatility, and this can be disclosed as well as long as you include a prospectus along with the sales literature.
    Some firms use investment analysis tools, programs that are meant to simulate future results. These are only meant as predictions and may or may not come true. If these results are used, you have to disclose the criteria and methods used, including the limits of the tool. That results must vary with each user and that the results are hypothetical.
    Under FINRA rules, you will need to notify your employer of any work you are doing outside the firm.  This is to help make sure there are no conflicts of interest. FINRA wants to supervise all the activities of its registered representatives.
    Selling away means that you engage in a transaction even after you were told that it was not approved by your employer.
    FINRA and the SEC accommodate those who are called away for military service.  While they are away, their license is placed on inactive status. Their continuing education requirements are waived, along with their dues and assessments. The two-year expiration period does not apply. They can still earn commissions but cannot perform any duties of a registered representative while on inactive status.
    If you are telemarketing, you will need to abide by certain rules.
    Never call before 8 a.m. or after 9 p.m. in a person’s local time zone unless you have express permission.
    Check any established “do-not-call” lists, including the firm’s and that FTC’s
    You have to disclose your purpose, your employer, and your company’s contact information.
    You must honor people’s requests to be put on the do-not-call list.
    If any of your employees have previously worked for a disciplined firm, who was busted by the SEC or something similar, you are required to record and store their conversations for up to three years.
    When filling out a new account form, a person will be asked if they are associated with a member firm. If they are, your firm has to notify the person’s employer that you are opening up the account. The employer can also request copies of confirmations, statements, and other pertinent information.
    11 min
  • Series 6 Lesson 13 Code of Procedure
    Series 6 Lesson 13 Code of Procedure
    Series 6 Lesson 13 Code of Procedure is this lessons topic. FINRA has a Code of Procedure (COP) that can be used to investigate violations of its law. It gives FINRA the power to “suspend, expel, bar, and censure” those under its jurisdiction who have violated the rules.
    A person who has violated the rules will be notified of the infraction and will be asked to respond in writing. These requests must be met within 25 days. You will be required to cooperate with the investigation and produce any documentation that is required of you. If you do not respond or cooperate in the process, a decision will be made without your input, known as a default decision.
    You can file an appeal to the National Adjudicatory Council (NAC), then to the SEC, and finally to federal courts. You will have to come up with legal fees, however. You can choose not to dispute the charges, which is called Acceptance, Waiver, and Consent. You will sign a waiver that you will accepted the decision handed down.
    For a minor rule violation, you will likely be fined, but the maximum amount is still quite low. You will also get a letter of censure in your file. The following actions happen for major violations:
    Censure
    Fine
    Suspension, which is temporary
    Expulsion, which means the firm is kicked out
    Barred, a person is permanently banned.
    Disputes between brokers and member firms are settled through an arbitration process, which means that there is only one chance and no appeals. They cannot go to civil court. It is a faster and cheaper process than civil court and can be initiated up to six years after the inciting event.
    A non-public arbitrator is one that is an industry professional. A public arbitrator is a person who is not a financial industry professional. They are also not immediately related to anyone who is.
    For a claim of $50,000 or less, FINRA will appoint a public arbitrator, or it can be qualified for simplified arbitration, where the director of arbitration takes in all the facts and makes a ruling.
    For $50,000 to $100,000, FINRA will appoint a public arbitrator, unless both parties agree to having three (two public and one non-public).
    For greater amounts, or those which are not seeking monetary damages, the default is three arbitrators, (two public and one non-public) unless both parties agree to having one.
    Arbitration should take less than 30 business days. The arbitrators then give out a document called an award, which details a summary of the incident, the findings of the arbitrators, the damages sought and the damages awards. These documents are publicly available. The person has 30 days in which to pay the damages. If they do not pay, FINRA will punish them and then report them to collection agencies.
    FINRA firms and members are required to report any charges or convictions with 30 days.  These will be reported by the BrokerCheck system.
    Members can try to have their bad records expunged by going through the courts and providing documentation.
    Series 6 Lesson 13 Code of Procedure
    We also offer lessons for:
    The Series 7 Exam
    https://gumroad.com/l/ILYu
    The Series 22 Exam
    https://series6lessons.com/series-22-exam/
    The Series 63 Exam
    https://series6lessons.com/series-63-exam-lessons/
    The Life Health Insurance Exam
    https://series6lessons.com/insurance-lessons/
    The SIE Exam (Securities Industries Essentials Exam)
    https://series6lessons.com/finra-sie/
    Click on any of them to find out more
    11 min
  • Series 6 Lesson 12 Secondary Markets
    Series 6 Lesson 12 Secondary Markets
    Series 6 Lesson 12 Secondary Markets is this podcasts subject. The secondary market is for people to buy and sell securities to each other. The “first market” they are sold at is called the auction market. The main part of this is the New York Stock Exchange (NYSE), but there are also regional exchanges in Chicago, Boston, Philadelphia and San Francisco.
    The second market is known by the names Over the Counter Market (OTC) or the negotiated market. This market shares round lots of 100 shares of stock and is done at individual computers and devices instead of a physical building.  NASDAQ is one such market. If a stock does not trade on NASDAQ, it will not be as liquid or desirable.
    The 3rd market is when there is an OTC transaction of a NYSE-listed security.
    The 4th market is direct institutional trading.
    GDP is the gross domestic product or the total output of the economy. If it is increasing, the economy is growing and vice versa.  The economy goes through a series of growing and shrinking actions called the business cycle: expansion, peak, contraction, trough, recovery.  A downward turn is known as a recession, and a longer recession becomes a depression.
    Inflation is when prices rise too quickly. It is measured by the consumer price index, (CPI) which surveys prices customer are paying for common goods, such as groceries, gas, and clothing and compares them.  This is known as “too many dollars chasing too many goods”.
    The opposite of inflation is deflation where goods become too cheap and businesses cannot make a profit.
    The Federal Reserve Board is always raising and lowering the interest rate in order to grow or shrink the economy as a way to keep it closer to a state of balance. This is known as monetary policy. They can also change the reserve requirement, which is the amount of money that banks are required to keep in reserve. This changes the amount of money that banks have available to lend, etc. They can also change the discount rate, which is the rate that the Federal Reserve charges to banks that borrow from it. Banks lends money to each other at the fed funds rate. The banks will then pass the higher or lower costs to their customers.
    Fiscal policy refers to what the President and Congress do to affect the economy. To grow the economy, they can cut taxes and increase government spending. If they want to shrink the economy, they can increase taxes and cut government spending.
    The Call money rate is the rate broker-dealers pay when borrowing money on behalf of their margin clients.
    The prime rate is the rate at which the best qualified corporate clients get when borrowing money.
    There are certain ways to invest that are known as tax advantaged. These are often used for retirement savings. Taxes usually eventually come due, but they can be deferred for a long time.
    For profit companies offer 401k plans and schools/charities offer 403b plans. It is a tax-sheltered annuity. They indicate how much of their paycheck should go into the account. It gives you a tax break now and saves for retirement later. The employer usually matches the contribution up to a certain amount.
    One type is called an IRA or Individual Retirement Account. There are several kinds of these.
    A traditional IRA can be contributed to by anyone who is 70.5 years old or younger. You can put up to 100% of your earned income into the account. If you are past 50, you can contribute more. Contributions are pre-tax, which means that they are tax deductible from your income, which reduces the burden.
    If you take out money from your IRA before 50.5 years old, you will take a 10% penalty. There is also a penalty of 6% if you overfund your IRA.
    A Roth IRA is made with after-tax, non-deductible contributions. The money comes out tax free after age 59.5 and you have had the account for at least five years. If your income gets over a certain threshold,
    11 min
  • Series 6 Lesson 11 Investment Risk
    Series 6 Lesson 11 Investment Risk
    Series 6 Lesson 11 Investment Risk is the topic covered in this lesson.
    In a savings account, the only risk is that your money will lose purchasing power. This is known as purchasing power risk that comes from inflation. These affect fixed-income investments the most, because the amount remains the same, while the purchasing power of the money may decline.
    Capital risk means investing money and possibly losing your investment.
    Systematic risk is something that affects securities in general, such as natural disasters.
    Interest rate risk means that there is a risk that your interest rate will change, making you lose value of your securities. The longer a bond’s duration, the more chance it has for the interest to change.
    Unsystematic risk is something that affects only certain bonds or sectors. This sometimes comes because government regulates a particular sector or industry and so it only affects that part of the market. This is one of the reasons it is a good idea to diversify your investments. If all of your investments are in the same industry, an unsystematic risk will cause a much larger effect on your investments.
    A business risk happens when you invest in a company. This means you do not know how the business is going to perform. They may become obsolete, they might experience a labor strike, or they might be crushed by a large competitor.
    Legislative/Regulatory risk means that laws or regulations can change that negatively impact your investments.
    Natural event risk is the risk from things like storms and sickness outbreaks.
    Call risk is the risk that a bond will be called up sooner than expected when interest rates are down.
    Prepayment risk happens during mortgage-backed securities when the mortgages that are backing it are paid back sooner than expected.
    Extension risk means that it sometimes takes longer for people to pay off than expected.
    Currency exchange risk comes if you are trading with other currencies besides the dollar, because the strength of currencies can change relative to each other.
    Political risk comes from investing in developing/emerging markets where financial markets are underdeveloped/immature and so are more volatile than established markets.
    Credit risk means that there is a risk that the bond issuer will not be able to pay the interest or return the principal and so may default on the loan.
    Liquidity risk means that some investments are easy to turn into cash, such money market securities, and some investments are not, such as selling real estate, which takes a long time to liquidate.
    Opportunity cost is how much the cost of a missed opportunity is going to cost you. If you could have made a 4% profit on a transaction, but you passed it up, this is a 4% opportunity cost.
    IPO = Initial public offering, which is the first time a company sells stock to investors. Securities are issued to customers in the primary market and then they are traded among investors in the secondary market. Often, they are sold for a lower price on the primary market and then sold for a higher price on the secondary market.
    Those who create an IPO have to file a registration statement with the SEC. This shows what is going to be told to investors in the prospectus. It needs to give a thorough overview of the company and its history, and be written in plain, understandable language. Investors have to be able to understand the potential risks and rewards of investment. If not, the company can get a deficiency letter from the SEC and be required to revise their materials.
    After the registration statement has been filed, there is a cooling off (waiting) period of at least 20 days. The company can gather statements of interest during this time, but they cannot yet sell anything to anyone. They can send out draft prospectus documents that do not include the effective date or the final public offering price (POP).
    11 min
  • Series 6 Lesson 10 Annuities
    Series 6 Lesson 10 Annuities
    Series 6 Lesson 10 Annuities are covered in this lesson
    This is an investment sold by an insurance company that promises a minimum rate of return or allows the investor to allocate payments to different mutual funds that invest in stock and bond markets. They pay out regular payments throughout the rest of the investor’s life, or they can take out money in lump sums as needed. They are often used as part of retirement plans.
    Three kinds: fixed, indexed, and variable.
    A fixed annuity promises a minimum rate of return in exchange for a large payment once, or a series of smaller payments over time. These are known as purchase payments. This is good for someone who needs safe money, but the rate of return is not good.
    An indexed annuity gets a minimum rate of return, but can get a higher rate of return if a certain index, such as the S&P 500, has a good year. There is often a cap on how much more a person can get from this kind of annuity.
    A variable annuity does not promise a particular rate of return. The rate can fluctuate The investor bears the risk rather than relying on the insurance company to guarantee a certain rate of return. People who own these can vote about decisions dealing with the annuity.
    Annuities are pretty complex and so a person has a 10-day grace period in order to change their mind about purchasing annuities. (Free-look period) They provide a death benefit so that when the person dies, their beneficiary will receive a benefit paid out from the annuity.
    For a deferred annuity, a person purchases the annuity and then waits for some time to receive payments. If the person wants to receive payments right away, they would buy an immediate annuity.
    When payments are made out, several things are deducted, such as the sales charge, the administrative fee, and the state premium tax.
    Life only annuities are only good for a person’s life and don’t pay out to another beneficiary upon their death. You usually get the largest monthly payout with these annuities.
    A period certain annuity will be paid out no matter what for a certain time period. The person can name a beneficiary and the annuity will make regular payments until the term runs out. There is also an either/or option called life with period certain. If you have a 15 year period and then die after a year, the annuity will continue for the remaining 14 years.
    The joint with last survivor gives the smallest monthly payment, because they have to pay out for the life of annuitant or his or her survivors.
    Annuities have two phases: the accumulation period (pay-in) and the annuity period (pay-out). In the accumulation period, you either make one very large payment or you can make a series of smaller payments over time. Every time you make a payment, you get annuity units. The payment is created based on the annuitant’s age, the value of the account, the person’s gender, and the settlement option chosen. You will not have a health exam.
    An insurance company separates its investments into two accounts: the general account and the separate account. Investments from the general account has a certain guaranteed rate of return. Investments from the separate account deal with the stock and bond markets, where there is a great degree of risk and fluctuation.
    Life Insurance
    Term life insurance is basically renting life insurance for a certain time period. You will pay a low monthly premium. If the insured person dies within the period, there is a death benefit for a beneficiary, such as a spouse or other family member. At the end of the term, the insured person can renew their coverage if they want. Because he is older, the premiums will likely go up. It does not build up any cash value over time.
    Whole life insurance is like buying instead of renting.  It builds up cash value over time and it does not an expiration date. The insurance company guarantees a minimum cash value that will be paid o...
    11 min
  • Series 6 Lesson 9 Mutual Funds pt 2
    Series 6 Lesson 9 Mutual Funds pt 2
    Series 6 Lesson 9 Mutual Funds pt 2 Fund of Funds = a mutual fund that holds shares of many other funds
    Principal Protected Funds = These funds are focused on protecting the investor’s principal. They take many steps in order to keep everything stable. These can be expensive.
    Every mutual fund will have a prospectus that can help you understand their strategy, such as what kinds of investments they go after or what kind of strategies they employ. It is a good place to start when comparing mutual funds. They will often show the historical performance of the fund over time as a way to show what investors might expect in the future. They always have the disclaimer “past results are not predictive of future results”.
    All funds have different expenses that are usually deducted from the proceeds. Some funds have a sales expense. This is detailed in the prospectus.
    Capital appreciation happens when a mutual fund goes up in value. The mutual fund will pay out dividend on all the stock and bonds that are part of the fund. They will also give capital gains dividends to shareholders if they can. After fulfilling these requirements, the fund is then compared to where it was when it started to calculate the net asset value. If you start with $15 per share and end at $17 per share, that is $2 in capital appreciation.  You also have to take any applicable taxes into consideration.
    Fees can either be classified as A-shares, which charge fees up front or B-shares, which charge fees when you sell. Some funds charge a percentage fees called 12b-1 fees. C-shares do not charge an upfront fee, but they have high 12b-1 fees.
    A shares: long term with over $50,000
    B shares: mid or long term with a small investment
    C shares: short term investor with less than $500,000 to invest
    Series 6 Lesson 9 Breakpoints
    The more that you invest, you can qualify for breakpoints, which is a reduction in the sales charge. The more you invest, the more you can save, based on different breakpoints.
    When you want to cash in your shares, this is known as redeeming your shares. When you do this, you get the NAV per share, minus any charges if they are A-shares. This will require a signature under certain conditions:
    -If the redemption is over $75,000.
    -If the redemption is to someone other than the registered shareholder
    -If the redemption is sent to an address other than the address of record.
    Some funds will charge a redemption fee if you try to redeem them during the first year. They want you to hold onto your investment.
    Investors can also set up an automatic withdrawal plan. They can get a fixed periodic payment, such as $500/month or a certain percentage every so often, quarterly, etc. You can say that you want to sell X number of shares every so often, or you can have it withdrawn over a specific amount of time, two years, etc.
    A mutual fund has a Board of Directors. They establish investment policy, they appoint other people oversight positions, establish policies about capital gains and dividends, and review/approve 12b-1 plans. They oversee operations, but do not make the investment decisions themselves, just like any normal company.
    The investment adviser/portfolio manager is appointed by the BOD. He or she is the one who actually manages the fund’s investments according to the fund’s stated policies.  They are paid a percentage of the fund’s net assets.
    The custodian is a bank that holds all of the assets of the mutual fund, such as cash and securities. They are the container for all of the fund’s securities.
    The transfer agent is the party that issues shares of the mutual fund to buyers and redeems shares from sellers. They distribute dividends to investors.
    Mutual fund shareholders are like normal company shareholders and so they get to vote about matters of fund business, such as when there are changes in investment strategies, changes in fees,
    11 min

About Series 6 Lessons Audio Lessons for the FINRA Series 6 Exam

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The Series 6 Lessons is a podcast for those preparing for the FINRA Series 6 Exam. It consists of portions of lessons designed to help the student prepare and pass for the series 6 Exam. The series 6…

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