Types and Characteristics of Underlying Securities

What this video covers

• Why Series 6 representatives sell the wrapper (mutual funds, exchange-traded funds (ETFs), unit investment trusts (UITs), variable contracts) but must still know the underlying ingredients for risk disclosure and suitability
• How common stock differs from preferred stock in liquidation priority, voting rights, and dividend predictability, and why preferred stock is interest-rate sensitive rather than "safer"
• The rights-versus-warrants distinction: short-dated rights protect ownership percentage in follow-on offerings, while long-dated warrants sweeten bond or preferred stock offerings
• Treasury security types (T-bills, T-notes, T-bonds, Treasury Inflation-Protected Securities (TIPS)) by maturity and coupon structure, and the federal-taxable, state-local-exempt tax treatment
• Why Government National Mortgage Association (GNMA) carries an explicit full faith and credit guarantee yet remains fully taxable at all levels, unlike Treasury securities
• The 270-day ceiling on corporate commercial paper maturities and why exceeding it triggers Securities Act registration requirements
• How conduit theory governs tax character flowthrough: the fund wrapper cannot transform the tax identity of what it holds, so Treasury interest stays federally taxable and state-exempt, corporate bond interest stays fully taxable, and qualified stock payouts stay capital gains