Chapter 14: Investment Risks, Returns and Disclosures

Chapter summary

Chapter 14 covers investment risk types, cost basis methods, books and records requirements, and senior investor protections. Systematic risk affects the whole market; unsystematic risk is specific and diversifiable. The wash sale rule disallows a loss if the same security is repurchased within 30 days. Long-term capital gains (held >12 months) are taxed at preferential rates; short-term gains are ordinary income. Trusted contact persons are designated for customer wellbeing — they have no account authority.

Key concepts

• Required Disclosures
• Soft-Dollar Arrangements
• Client Notifications
• Books and Records
• Financial Exploitation of Specified Adults - FINRA Rule 2165
• ACATS-Transferring Accounts
• Investment Risks
• Investment Returns
• Cost Basis, Capital Events, and Return of Capital
• Required Disclosures
• Soft-Dollar Arrangements
• Client Notifications

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