SIE - CHAPTER 3

The trade would need to be placed in a discretionary account if the registered representative chooses which of the following? I. The time of execution of the trade II. Which security to buy III. How much of the security to buy IV. At what price to execute the trade A) II and III B) I and II C) I and IV D) II and IV

A) II and III

Which of the following best describes the calculation for gains or losses for tax purposes? A) Proceeds minus cost basis B) Proceeds minus dividend, plus cost basis C) Proceeds plus dividends, minus cost basis D) Proceeds plus cost basis

A) Proceeds minus cost basis

Records of advertising, customer confirmations, customer order tickets, and U-5 forms need to be retained for how many years? A) Three years B) Four years C) Six years D) Five years

A) Three years

A weak U.S. dollar leads to more A) U.S. exports and a balance of payments surplus. B) U.S. imports and a balance of payments surplus. C) U.S. exports and a balance of payments deficit. D) U.S. imports and a balance of payments deficit.

A) U.S. exports and a balance of payments surplus.

A person who is vested with legal rights and powers to be exercised for the benefit of another is known as A) a fiduciary. B) a dealer. C) a sponsor. D) a broker.

A) a fiduciary.

All of the following accounts would allow all parties with access to the account to authorize withdrawals except A) individual account with a limited power of attorney (LPOA). B) tenants in common account (TIC). C) individual account with a full power of attorney (FPOA). D) joint tenants with rights of survivorship account (JTWROS).

A) individual account with a limited power of attorney (LPOA).

Meeting the location requirements and the borrowing of securities when a customer wants to sell short is done by A) the broker-dealer on behalf of the short-selling customer. B) the customer or entity that the shares will be borrowed from. C) the purchaser of the securities being sold short. D) the customer who wants to sell short.

A) the broker-dealer on behalf of the short-selling customer.

With a discretionary account A) the customer may still enter orders. B) churning is permitted by the party given the discretion. C) a full power of attorney is needed on file to grant discretion. D) the customer may refuse any trades done by the party given the discretion.

A) the customer may still enter orders.

Discretion given to a registered representative to make transactions applies to all of the following EXCEPT A) timing and price only. B) the number of shares or units for the transaction. C) the security for the transaction. D) whether to buy or sell.

A) timing and price only **Discretion is defined as the authority to decide, what security, the number of shares or units, and whether to buy or sell. Discretion does not apply to decisions regarding only the timing of an investment or the price at which it is bought or sold.

Which of the following records must be kept by a broker-dealer firm for six years? I. Customer new account forms II. Advertising the firm has published III. Stock records IV. Minute books A) I and IV B) I and III C) II and IV D) II and III

B) I and III

Which of the following are true of qualified plans but not true of non-qualified plans? I. Contributions are not tax deductible II. Contributions are tax deductible III. Plan needs IRS approval IV. Plan does not need IRS approval A) II and IV B) II and III C) I and III D) I and IV

B) II and III

All of the following are true of a revocable living trust EXCEPT A) the grantor is subject to the tax consequences of the trust while alive. B) the primary purpose of the trust is to avoid estate taxes for the grantor. C) the grantor can remove items from the trust. D) the grantor can add items to the trust

B) the primary purpose of the trust is to avoid estate taxes for the grantor. **In a revocable living trust the grantor has complete control over the trust while alive and because of this, the grantor is also subject to any tax implications of the trust.

Records of original entry must be recorded no later than the next business day and must be kept readily available for A) three years. B) two years. C) six years. D) four years.

B) two years. Must be kept for six years but READILY AVAILABLE for two years

200 shares with a 2:1 stock split. The stock price at the time of the split was $50, what would the investor's adjusted position be? A) 100 shares at $25 B) 100 shares at $200 C) 400 shares at $25 D) 400 shares at $100

C) 400 shares at $25 **The number of shares doubles to 400 (2 × 200) and the price per share would be $25 ($50 ÷ 2).

A married couple opens a new account with a broker-dealer as tenants in common. In explaining the details of the account to the couple, the registered representative would not indicate which of the following? A) Mail may be sent to either party with the permission of the other party. B) Orders may be given by either party. C) Certificates may be registered in the name of either party. D) In the event of death, the decedent's interest in the account goes to the decedent's estate.

C) Certificates may be registered in the name of either party. **With a joint account, certificates must be registered in the names of all parties to the account.

An investor has some stock held in street name and has just received proxy statements forwarded by the broker-dealer for an upcoming shareholders' meeting. If the investor wishes the shares to be voted as recommended by the issuer's management, which of the following must the investor do? A) Sign and return the proxy statements by the fifth day before the meeting B) Nothing in this case C) Sign and return the proxy statements by the tenth day before the meeting D) Inform the broker-dealer by letter or phone call how the shares are to be voted

C) Sign and return the proxy statements by the tenth day before the meeting

A customer wishes to sell short 1,000 shares of ABC. Prior to executing the order, the registered representative must A) receive principal permission to execute the trade. B) receive permission from the customer to borrow shares. C) locate shares that can be lent to effect the sale. D) have the customer pledge personal collateral to cover the sale.

C) locate shares that can be lent to effect the sale.

Jackson Raleigh, a registered representative in Memphis, TN, has a client who is a pension fund manager for the Tiger Pension Fund. Raleigh creates several flyers of informational literature about the funds available in the Tiger Pension Fund and emails them to the fund manager so that the fund manager can prints copies of the flyers and make them available to the participants in the pension fund. FINRA would classify these flyers as A) institutional communications. B) sales literature. C) retail communications. D) correspondence

C) retail communications. Institutional communication is going to banks, insurance companies, mutual funds, etc

All of the following are true of Roth IRAs except A) Contributions may be able to be made after 72 B) Contributions are made after tax C) Withdrawals are not required at age 72 D) Contributions may be deductible depending on income limits

D) Contributions may be deductible depending on income limits

The MSCI-EAFE Index tracks which of the following? A) Corporate bonds B) Mid-cap stocks C) Municipal bonds D) Foreign equities

D) Foreign equities

Under the Uniform Transfers to Minors Act (UTMA), a custodian may invest in all of the following except A) mutual funds in growth shares. B) non-investment grade (junk) bonds. C) U.S. Treasury notes with less than one year to maturity. D) blue-chip stocks on margin.

D) blue-chip stocks on margin. A custodian may not purchase securities in an account on margin or pledge them as collateral for a loan.

Holding customer mail is consistent with your broker-dealer's in-house rules. Considering this, if requested to do so, the broker-dealer must A) request approval from the Securities Exchange Commission (SEC). B) await approval from Financial Industry Regulatory Authority (FINRA). C) have the customer request anew after six months and then each three months thereafter. D) verify at reasonable intervals that the customer's instructions still apply.

D) verify at reasonable intervals that the customer's instructions still apply.

Which of the following must be kept for the life of the firm? A) General ledger B) Customer account records C) Written customer complaints D) Stock certificate book

D. STOCK CERTIFICATE BOOK MUST BE KEPT FOR THE LIFE OF THE FIRM