Introduction

Welcome to Characteristics of Equity Securities: the unit that covers what it means to actually own stock, from your rights as a shareholder to how you can (and can't) sell your shares.

Exam Weight: Part of 17 questions

What You'll Learn

In this unit, you'll cover:

• Shareholder Rights: Voting methods, preemptive rights, and where common stockholders stand in a liquidation
• Restricted Stock and Resale Restrictions: SEC Rules 144 and 144A, holding periods, volume limits, and institutional resale
• Dividends: Cash vs. stock dividends, the four key dates, and how the ex-dividend date affects price
• Employee Stock Options: Incentive Stock Options (ISOs) vs. Non-Qualified Stock Options (NQSOs), who gets them, how they're taxed, and the Alternative Minimum Tax (AMT) trap

Why This Matters

The Series 66 assumes you already know what common and preferred stock are (that was the Series 7). This unit goes deeper into the practical characteristics of equity ownership: the rights, restrictions, income features, and compensation structures that show up repeatedly on the exam. Cumulative voting, Rule 144 holding periods, and ISO tax treatment are frequently tested topics.

Let's start with shareholder rights: the foundation of equity ownership.