Series 65: Unit 23 Quiz 1

If a clearing firm receives a text message from a customer complaining about the activities of an associated person at one of its introducing broker-dealers, the clearing firm must do all of the following except A. follow the complaint procedure because a complaint through a text message is considered to be a written complaint. B. forward the complaint to the introducing firm. C. forward the complaint to the SEC. D. notify the customer that the complaint was received and forwarded.

Forward the complaint to the SEC

All of the following are potential benefits of high frequency trading (HFT) except A. arbitrage opportunities increase market efficiency. B. lower costs for institutional purchasers. C. greater trading opportunities for the small investor. D. increased liquidity, especially in very active stocks.

Greater trading opportunities for the small investor

Large investors, such as hedge funds or institutions, using high-speed systems to monitor and submit large number of orders to the markets are engaging in A. market manipulation. B. market making. C. high frequency trading. D. front running.

High frequency trading

A client of your broker-dealer accepts your recommendation and turns in a market order to purchase 600 shares of MNOP Corporation common stock. Based on the following market maker quotes, it would be expected that the firm's trader would direct the market order to A. MMD: 22.11 - 22.30, 6 x 6. B. MMC: 22.10 - 22.28, 10 x 6. C. MMB: 22.08 - 22.25, 6 x 5. D. MMA: 22.05 - 22.25, 10 x 8.

MMA: 22.05 - 22.25, 10 x 8

A client of a brokerage firm purchases 100 shares of ABC common stock at a price of $50 per share. On settlement date, the firm journals $2,500 from the client's money market account to pay for the trade. No further call for money is made. This trade must have taken place in a A. depository account B. wrap fee account C. cash account D. margin account

Margin account

An investor purchased 100 shares of GRA stock at $100 per share in a margin account. Two years later, the GRA was sold for $120 per share. If the investor's account was charged $700 in margin interest, it would be proper to state that this is an example of A. a long-term capital gain of $1,300. B. negative margin. C. positive margin. D. a speculative investment.

Positive margin

A customer representing an institution calls the securities agent to complain that a security bought one year ago is showing a loss. The customer's job will be lost unless he is able to get out of the security at breakeven or a small loss. The market is 78-81 in the security and the customer's cost is 85. The agent can legally: A. buy back the security at 85 and place another security in the account at a price high enough to cover the loss B. offer to buy the security at 85 if the customer agrees to buy another security in its place C. sell the security at the best available bid price in the market D. execute the trade at 81, but show the confirmation at 85

Sell the security at the best available bid price in the market

Margin regulations are determined by the Board of Governors of the Federal Reserve System. The authority for them to do so is found in A. the Securities Exchange Act of 1934 B. the Maloney Act of 1938 C. the Securities Act of 1933 D. the Federal Reserve Act of 1913

The Securities Exchange Act of 1934

An investor wishing to buy US Treasury bonds receives a quote from the dealer of 98.16. This represents A. the offer price B. the bid price C. an indication of falling interest rates D. a discount

The offer price

It would be correct to state that 1. the specialist stands ready to buy or sell stock on the floor of an exchange in an effort to keep an orderly market 2. the specialist stands ready to buy or sell stock on the over-the-counter market in an effort to keep an orderly market 3. the market maker stands ready to buy or sell stock on the floor of an exchange in an effort to keep an orderly market 4. the market maker stands ready to buy or sell stock on the over-the-counter market in an effort to keep an orderly market

The specialist stands ready to buy or sell stock on the floor of an exchange in an effort to keep an orderly market and the market maker stands ready to buy or sell stock on over-the-counter marker in an effort to keep an orderly market

The minimum size order that would be considered a block trade is A. 1,000 shares B. 10,000 shares C. 100,000 shares D. 500 shares

$10k shares

A client owns 300 shares of BACH common stock in a margin account. The stock was originally purchased at a price of $40 per share and the Reg. T call was met. If the BACH is now selling for $50 per share, disregarding interest charges, the client's equity is now A. $9,000 B. $1,000 C. $6,000 D. $3,000

$9k

A client enters an order as follows: Sell stop 100 shares of LTC at 45 limit 45.50. Following the entry of that order, trades occur in the following sequence: 47; 46; 45.12; 44.97; 45.28; 45.97; 46.05. More than likely, the client received A. 45.97 B. 45.28 C. 46.05 D. 44.97

45.97

Mr. Berg has been charting DMF stock prices. The stock usually fluctuates between 71 and 86. The stock is currently at 84, and the increasing upside volume makes him believe that a breakout is possible. Which of the following would he most likely enter? A. A sell limit at 88 B. A sell stop at 70 C. A buy limit at 85 D. A buy stop at 88

A buy stop at 88

A client owns 300 shares of BACH common stock in a margin account. If there were to be a significant decline in the market price of the BACH, the client would likely receive A. a Regulation T margin call. B. a maintenance margin call. C. a rehypothecation call. D. a short margin call.

A maintenance margin call

Under the Securities Exchange Act of 1934, an exchange is A. any transaction involving a security B. an organization that provides facilities for bringing together buyers and sellers of securities C. an organization of securities professionals designed to promote fair practices in doing business with the public D. a disposition of a security for value

An organization that provides facilities for bringing together buyers and sellers of securities

When a broker-dealer acts in the capacity of a principal in a trade, the firm has acted A. for the benefit of the client B. in an unethical manner C. as a contra party to the trade D. as an agent

As a contra party to the trade

One of the primary differences between trading on listed exchanges and trading in the over-the-counter market is that only on the exchanges are prices determined A. by an auction process. B. by the exchange itself. C. through a negotiation process. D. by the FINRA 5% markup policy.

By an auction process

A client of a broker-dealer is obligated to replace stock she sold after borrowing it from the broker-dealer. From this information, you can conclude that she A. engaged in a short sale of the stock B. took a short position in a call option C. was straddling a commingled arbitrage D. took a short position in a put option

Engaged in a short sale of the stock

The bulk of "dark liquidity" represents trades A. engaged in by institutional traders and trading desks on the exchange markets. B. where the identity of the participants is disclosed. C. involving noninstitutional investors. D. engaged in by institutional traders and trading desks away from the exchange markets.

Engaged in by institutional traders and trading desks away from the exchange markets

Which of the following has the power to close a stock exchange for up to 90 days? A. The Administrator in the state where that stock exchange is located B. The president of that stock exchange C. The SEC D. The president of the United States

The SEC