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What is Form 8891?
IRS Link to Form — Found Here Form 8891 was previously used by individuals with retirement plans held in Canada when they were living in America, each time they took distributions. The process proved to be cumbersome for many good-natured Canadians, and caused the IRS a lot of trouble as well. This form has been retired in favor of an acknowledgement on the IRS Form 1040. Form 8891 is no longer used, which came as a relief to many Canadian-Americans who had retirement plans from work they did in Canada. Certain filing requirements still exist, such as a new form replacing the FBAR, for foreign bank accounts, now called the FinCEN Form 114. Continue reading...
What is Private Equity?
In the world of finance, private equity is a relatively new industry whereby private companies finance other businesses through direct investment, often in exchange for equity in the company and in some cases, decision-making capabilities. Private equity companies generally use capital of the principals or of high net worth investors to strategically invest in growing companies that need growth capital or seed capital to expand operations. Continue reading...
What is a Private Placement?
Investing in a private placement opportunity is done off-exchange, and usually involves a small number of investors who are either institutions or accredited private investors. There are many possibilities when it comes to the types of private placement investments that can be made, but the nature of the offering is that it is not public, it is made to a small number of institutional level or individual accredited investors (see Regulation D, Rule 505 and 506), and the offering is not registered with the SEC. Continue reading...
What is a Letter of Credit?
A letter of credit is a provided by a bank or financial institution on behalf of a borrower or buyer, to ensure the seller that payments will be made on time and in full. In the event that the buyer is unable to make payment on the purchase, the bank will have to step-in to cover the full or remaining amount of the purchase. Letters of credit are often used in international transactions to guarantee that payment will be received. Continue reading...
Should I invest in private placements?
Different opportunities to invest in private placements may present themselves to wealthy individuals over time. Unless the opportunity comes from someone that you know and trust, and you have the ability to research the opportunity, it is probably something you should avoid. Private Placements are sometimes complex deals that cost people a lot of money. You should definitely have your guard up if one is pitched to you. In general, the company or partnership seeking the private placement will not have to register with the SEC or report their books accurately on a public record. Continue reading...
What should I know about private placements?
Private placements fall under Regulation D, usually, which stipulates the rules by which investors can be sought and placed into privately arranged contracts for equity investments. Private placements may be for non-public companies, or it may be a private offering of a publicly traded company. Regulation D stipulates the guidelines by which investors can engage in private investment without many reporting requirements. Continue reading...
Where can I get information about private placements?
The short answer is, you can’t. Private placements have no reporting or registration requirements with the SEC or other entities. Sometimes this can be good for investors who enjoy the discretion. But it can also be a shield for unethical business people who prefer to avoid regulatory oversight. There is no source for detailed information about private placements unless you personally know a general partner who can describe to you his project, or who comes highly recommended with a lot of references. If an offering seeks to raise over $2 million in the capital in a year’s time, they are obligated under Regulation D to provide audited financial statements to the investors. Continue reading...
What Are the Vesting Rules for My SIMPLE IRA?
Employer contributions to SIMPLEs are immediately vested to the employee. The employer’s contributions into SIMPLE IRAs do not have any vesting restrictions. In other words, the contribution belongs to you immediately after it has been made, notwithstanding standard IRS rules for withdrawals from retirement accounts. SIMPLEs do have some restrictions during the first two years, however, that are known as the ‘Two Year Rule.’ Continue reading...
What are the Withdrawal Rules for My SIMPLE IRA?
SIMPLE IRAs have the same withdrawal rules as Traditional IRAs, with one notable exception. SIMPLE IRA contributions and earnings may be withdrawn at any time, but there are certain penalties that apply. If you are under the age of 59½, you must pay a 10% penalty fee in addition to income taxes on your withdrawal. If the early withdrawal occurs within two years of receiving your first employer contribution, the 10% penalty is increased to 25%. Continue reading...
What is a Bank Guarantee?
When a lending institution offers a Bank Guarantee, they are reducing the risk involved in a transaction by guaranteeing payment to the seller. Bank Guarantees often come into play with deals made internationally, where the participants in the deal prefer to have some assurances before they do business. The guarantee acts as insurance to protect the parties involved in transactions where they are not fully able to assess the strength and reliability of the other, such as when small companies bid for projects or when bids for a job come-in from around the world. Continue reading...
What are the Withdrawal Rules From My Self-Employed 401(k)?
Individual 401(k)s will have the same withdrawal rules as regular 401(k)s. The withdrawal rules for a Self-Employed 401(k) are identical to the rules for a traditional 401(k). If you want to avoid a 10% early withdrawal penalty, you’ll need to keep the money in your account until you reach age 59½, but if you separate from service after 55 you may be able to make withdrawals penalty-free. If you really need the money early, certain exceptions for disability, medical expenses, 72(t) annuitized distributions, and plan loans can allow you to sidestep the penalty. Withdrawals for any other reason, including hardships, are still subject to the penalty. Continue reading...
What is an Investment Banker?
Investment bankers are proficient analysts themselves, but they have subordinate financial analysts that crunch the numbers for them. They are primarily in the business of procuring clients for deals such as IPOs which their investment bank will underwrite. Investment bankers are employees of investment banks whose role is to acquire clients for the bank and to be the liaison between clients and the back office of the investment bank. Continue reading...
What is Probate?
Probate is the legal process that takes place after a person’s death, during which legal documents (such as wills and trusts) are reviewed and enforced. A person’s will generally must be validated by the court, after which the person’s assets are distributed to the heirs accordingly. If there is no will, then the probate court will decide how to distribute the assets, which may not be consistent with the deceased’s actual wishes. Continue reading...
What is a Plus Tick?
A plus tick is a transaction which occurs at a price higher than the transaction before it, also called an uptick, but often used in relation to a zero plus tick, which is explained below. A plus tick is an indication that the security in question is not declining at a given moment in time. In other words, the most recent traded price of a security is higher than the price it traded at prior. The term ‘uptick’ refers to the same thing, but "plus tick" is used in reference to the first part of a zero plus tick event: an uptick occurs in which the price traded is higher than the previous price, and then a trade occurs in which the price remains the same. Continue reading...
What is Ether?
Ether is the currency that powers the Ethereum network, which is a platform of distributed blockchain computing on which transactions, smart contracts, and distributed applications operate. Ethereum is a blockchain code environment through which distributed applications, smart contracts, and financial transactions using the Ethereum protocol are tested, validated, and added to distributed ledgers by the mining computers acting as nodes in the network. Ether is the currency, or token, in the Ethereum world which is used to pay the miners and transaction fees which are specific to its blockchain. Continue reading...
What is an Uptick?
An uptick is an incremental increase in the trading price of a security. Uptick is a slight increase in the trading price of a security. The word comes from the "ticker price" of a stock, which used to be printed out on ticker tape from a printer connected to telecommunication lines which reported updates in trading information throughout the day. Now tickers run electronically across the bottom of television screens and so on. Continue reading...
What is an Investment Club?
An investment club can be a term used for a group that organizes itself for the purpose of pooling investment dollars and participating in the market, or for a group that meets for informational and educational purposes. Clubs that actually invest sometimes organize themselves as LLCs and establish a system for how to choose and manage their investments as a group. Even though “investment club” may sound like an informal and relatively unregulated way to invest with pooled assets, they are actually subject to regulation by the SEC. Continue reading...
What is Investment Banking?
Investment banking activity is different than traditional banking. Investment banks often serve as intermediaries that underwrite a new issue of stock and help to distribute it. They also trade in their own accounts, run hedge funds, and generally invest and speculate in ways that most institutions can’t. Investment banks can assist with new issues of stocks and bonds, purchasing large blocks of them to distribute at a premium. Continue reading...
What can I learn about venture capital?
Many people know about venture capitalists that help provide the funding for startup companies in Silicon Valley and other areas. In reality, only a small portion of venture capital is directed at seed money for startups. The rest of it is directed at companies in various phases of growth that need capital to fuel a new expansion or to turn their business around. Venture capital comes from individual investors or venture capital firms who agree to infuse new money into a business in exchange for an equity stake in the business going forward. Continue reading...
What is the Glass-Steagall Act?
The Glass-Steagall Act was passed in 1933 to place a dividing wall between commercial banking and investment banking. It was in an effort to protect consumers and the economy from the risks of speculative investment banking. JP Morgan and other large institutions were targeted. The act was partially repealed and replaced in 1999 by the Gramm-Leach-Bliley Act. After 2008, some opined that the repeal of the original act contributed to the financial crises, and they instituted the Volcker Rule, which reinstated part of the original Glass-Steagall act. Continue reading...