SIE Practice Mastery Exam (dont get it twisted)

Your customer, Rodrigo, is 40 years old. He is married and has four sons. Five years ago, he purchased a nonqualified variable annuity for $20,000. It has grown to $25,000 by the time he withdraws $10,000 to pay for his oldest son's college tuition. How will the withdrawal be taxed? A) No taxes on the withdrawal if customer specifies it is from principal only B) $5,000 tax free and ordinary income, plus a 10% penalty on the other $5,000 C) Ordinary income and a 10% penalty on the entire amount of the withdrawal D) Ordinary income on $10,000

***** between C AND D guessed C

Any sale of securities outside an associated person's or the employing member firm's regular business is recognized as A) a private securities transaction. B) an unsolicited transaction. C) an outside business activity. D) a nonissuer transaction.

A.

For tax purposes, which of the following is not associated with being reportable as ordinary income? A) Rent or lease payments received B) Wages earned C) Gains from securities transactions D) Interest received from debt securities

A.

A new registered representative working for a broker-dealer is taking a part-time job at a restaurant on evenings and weekends to supplement current income. Regarding this activity, A) no prior notice is required, but the rules allow the firm to retain the right to prohibit all paid activity unrelated to the broker-dealer's business. B) prior written notice must be made to the member firm, who could reject or restrict the affiliation. C) no prior written notice must be made to the member firm because the firm has no authority to reject or restrict the affiliation. D) prior written notice must be made to the member firm, and the firm must expressly grant permission, in writing, prior to acceptance of the position.

B

A registered representative (RR) wants to give employees of another broker-dealer located in the same office building $20 boxes of chocolates for the holiday season. Which of the following is true? A) The gifts do not violate the annual dollar gift limit threshold and are therefore permitted in all circumstances with no approval required. B) The gifts are permitted if no condition of sales or reciprocal business is expected, and the RR's employing firm gives prior approval. C) Because the gifts are not conditional on sales or reciprocal business from the other member firm, no permission is needed from the RR's employing firm to give the gifts. D) The gifts would not be permitted, as all gifts to other member firm employees are strictly prohibited.

B

An investor is looking to increase her purchase of put options. From this, you would surmise that the customer's market outlook is A) risk oriented. B) bearish. C) bullish. D) neutral.

B

An investor owns a municipal bond fund. What is the tax status of distributions from the fund? A) Income is taxable, but capital gains distributions are tax free. B) Income is tax free, but capital gains distributions are taxable. C) Both income and capital gains distributions are tax free. D) Both income and capital gains distributions are taxable.

B

How often must a representative complete the firm element continuing education (CE) requirement? A) Biennially B) Annually C) After the second anniversary of licensure and every three years thereafter D) After the third anniversary of licensure and every two years thereafter

B

Which of the following is not true regarding convertible bonds? A) If the common stock is above parity, the convertible feature will affect the price. B) Coupon rates are usually higher than nonconvertible bond rates of the same issuer. C) Convertible bondholders are creditors of the corporation. D) Coupon rates are usually lower than nonconvertible bond rates of the same issuer.

B

An investor is selling shares of Rule 144 restricted stock after holding it the required length of time. The buyers of these shares are purchasing shares of stock that A) are now considered registered but will still be subject to a holding period. B) will still be unregistered but no longer subject to a holding period. C) are now considered registered and no longer held to a holding period. D) will still be unregistered and will still be subject to a holding period.

B) are now considered registered and no longer held to a holding period Rule 144 stocks are considered unregistered until they are held the required amount of time. After such they are considered registered.

For an owner to be paid a dividend, his name should be recorded on the stock record book of the issuer's transfer agent by A) the ex-date. B) the payable date. C) the next business day. D) the record date.

B) registering the corporation's securities with the state transfer agent- correct owner's name- cancelling old, issuing new- maintaining records of ownership- handling problems with lost, stolen, destroyed certifications

The Securities Exchange Act of 1934 covers all of the following except A) manipulative, deceptive devices. B) issuance of corporate securities. C) broker-dealers and associated persons. D) trading of corporate securities.

B.

A customer enters an order to buy 1,000 shares of XYZ at 21. Which of the following is true regarding these order instructions? A) The order must be executed immediately. B) The order can be executed at 21 or lower. C) The order can only be executed at 21. D) The order can be executed at 21 or higher.

B. The order can be executed at 21 or lower

A client buys stock on Monday, May 2, in a cash account. Under Regulation T, when is the client's payment due? A) In four business days B) The same day C) At or prior to the time of order placement D) In two business days

C) 4 business days Cash account will settle regular way T+2. Fully payment would be required two business days after T+2, in other words T+4

For common shareholders, which of the following true? A) Dividends declared by the board of directors represent growth or capital appreciation. B) An increase in the value of shares owned represents income. C) Dividends declared by the board of directors represent neither income nor growth. D) An increase in the value of shares owned represents growth or capital appreciation.

C) Dividends declared by the board of directors (BOD) represent neither income nor growth.Decreases in working capital - dividends declared, paying off long term debt,

Which of the following terms best describes a corporate debt instrument secured by a pledge by the issuer of property that consists of stocks or bonds of other corporations? A) Unit investment trust B) Equipment trust certificate C) Collateral trust certificate D) Debenture

C. Collateral

Member Bank A wants to borrow from the Federal Reserve Bank's window. What would be the interest rate on this loan? A) Zero percent, since members are prohibited from charging other members interest B) The federal funds rate C) The discount rate D) The prime rate

C. Discount rate

In a prime brokerage account, the prime broker A) provides execution services only, while another broker clears transactions and provides any other account services required. B) subcontracts out all services to other brokers. C) provides custody and clearing services, while other brokers provide execution services. D) provides custody, clearing, and execution services.

C. Provides custody and clearing services, while other brokers provide execution services.

Your client asks about exchange-traded notes (ETNs) for his portfolio, and during the course of the conversation, she makes several statements. Which of the following is true? A) ETNs are equity securities backed by the exchange they trade on. B) ETNs are equity securities backed by the issuer. C) ETNs are debt securities backed by the exchange they trade on. D) ETNs are debt securities backed by the issuer.

D.

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 sponsor. C) a broker. D) a dealer.

The correct answer was - a: fiduciary.Explanation:A fiduciary places the interest of the beneficial owner first and is morally and legally responsible for acting in that capacity.

Under the Uniform Transfers to Minors Act (UTMA), Oscar wants to give some stock to his brother's son, whose father is the legal guardian over. However, if Oscar wants to name himself as custodian, which of the following needs to be done? A) Oscar must open the account and name himself as the custodian. B) Oscar must have the permission of the guardian. C) Oscar must file the proper legal documents. D) Oscar must receive legal permission to act as custodian.

a

All registered persons must complete a computer-based training session within 120 days of the person's second registration anniversary and every three years thereafter to comply with A) both continuing education (CE) regulatory requirements. B) FINRA's regulatory element regulation. C) the Uniform Securities Act state regulation requirements. D) FINRA's firm element regulation.

b

You are recommending the purchase of the XYZ Growth Fund to one of your clients, and you explain that the fund operates pursuant to a 12b-1 plan. Under the terms described in the prospectus, the fee is A) included in the sales charge when shares are purchased. B) part of the expanse ratio of the fund. C) reduced on purchases that reach or exceed specified breakpoints. D) a part of the fee paid to the fund's investment manager.

b

In a split offering, A) shares are issued from existing shareholders only. B) all shares are issued from existing shareholders to the public. C) shares are issued from the corporation and existing shareholders. D) shares are issued to existing shareholders only.

c

A corporation enlists the services of a transfer agent, who would be expected to handle all of the following functions except A) replacing lost or destroyed stock certificates. B) maintaining records of shareholder ownership. C) canceling old certificates and issuing new ones. D) registering the corporation's securities with the state.

d, registering the corporation's securities with the statetransfer agent- correct owner's name- cancelling old, issuing new- maintaining records of ownership- handling problems with lost, stolen, destroyed certifications

Which of the following transactions may be made on margin? A) The purchase of open-end funds B) The purchase of listed stock in a custodial account C) The purchase of option contracts D) The purchase of NYSE-listed closed-end fund shares

dThe purchase of NYSE-listed closed-end fund shares.Explanation:Closed-end company shares may be purchased on margin like other listed securities that trade in the secondary market. Open-end shares, however, are continuous primary offerings, and new issues of securities are not marginable. Custodians are not permitted to purchase on margin in custodial accounts and not all OTC stocks are marginable