Investment Analysis Flashcards

Which SEC database offers free public access to company filings such as 10-Ks, 10-Qs, and proxy statements?

Answer: EDGAR

EDGAR is the SEC's electronic filing system and gives free public access to corporate filings.

Which Supreme Court case set the test for deciding whether an investment arrangement is a 'security'?

Answer: SEC v. W.J. Howey Co.

Howey defines an investment contract as an investment of money in a common enterprise with an expectation of profits from the efforts of others.

A trader buys shares just before a merger is announced, using a tip from a friend who works at the target company. What violation is most likely?

Answer: Insider trading

Trading on material nonpublic information received in breach of a duty is insider trading under Rule 10b-5.

Which public record would help an investigator find a subject's pledged assets, such as securities or equipment used as loan collateral?

Answer: UCC financing statement

UCC-1 financing statements filed with the Secretary of State record a creditor's security interest in personal property.

A fraudster recruits victims mostly through their church and ethnic community, relying on shared trust. What is this type of fraud called?

Answer: Affinity fraud

Affinity fraud targets members of identifiable groups and exploits the trust within those groups.

Which ratio compares a company's total liabilities with its shareholders' equity, showing financial leverage?

Answer: Debt-to-equity ratio

The debt-to-equity ratio divides total liabilities by shareholders' equity to measure leverage.

Investment advisers registered with the SEC must give clients a brochure describing fees, conflicts, and disciplinary history. What is this disclosure document called?

Answer: Form ADV Part 2

Form ADV Part 2 is the adviser's brochure disclosing services, fees, conflicts of interest, and disciplinary information.