SIE UNIT 3

A 72-year-old customer has a $30,000 required minimum distribution (RMD) calculated to be taken from an IRA. If the customer is in the 20% income tax bracket and only withdraws $25,000 from the account, how much tax will be owed?

$7,500

An investor discovers that exactly 2 years and 9 months ago, the investor was given fraudulent information on a security that prompted the investor to sell it. As a result, the investor lost money. How long does the investor have to bring action?

3 months

Once a customer account has been opened at a broker-dealer, rules require that updating information on the account record occur no less frequently than once every

36 months

Which of the following is TRUE regarding accounts trading on margin?

A fiduciary account may only trade on margin if it is specifically permitted in the trust or custodial agreement.

Which of the following may receive a commission from a FINRA member firm?

A foreign nonmember firm that agrees to abide by FINRA rules

In a proxy contest, which of the following must register with the Securities and Exchange Commission?

All persons participating in proxy solicitation All persons providing shareholders with unsolicited advice

Which of the following would NOT require delivery of notice?

An interest payment on a corporate bond

Of the following, which would NOT be considered institutional communications with the public?

An internal memo promoting a new product that will be offered to your firm's institutional customers only

For which of the following investors would Class C shares be most suitable?

An investor who intends to redeem the shares within a short time

Which of the following must precede the first trade in an account?

Approval of the new account by a principal

Which of the following securities is most often used to fund international trade?

Bankers Acceptance

Which of the following are associated with manipulative, deceptive, or fraudulent devices?

Breakpoint sale Capping

Which of the following orders can be used to close a short position in CDT stock that consists of 1,000 shares?

Buy 1,000 shares of CDT

What are the 2 basic types of return on an investment?

Capital gains and income

Which of the following must be signed by a customer wanting to open a margin account?

Credit and hypothecation agreements

Which of the following must be opened as a cash account?.

Custodial accounts Individual retirement accounts

Which of the following records must be maintained for 6 years?

Customer ledgers (statements)

Which of the following oil and gas direct participation programs might be considered the riskiest?

Exploratory

While the MSRB writes the rules and regulations regarding underwriting and trading for municipal securities, it does not enforce those rules. Who does?

FINRA

Financial institutions such as broker-dealers must report when there is an event, transaction, or series of events or transactions that appear to be questionable to

FinCEN

A customer receives a Regulation T margin call for $3,200. To meet the deposit requirement, which of the following can be deposited?

Fully paid for marginable securities totaling $6,400 in market value

Under regulation S-P nonpublic personal information would not include a customers

HOME ADDRESS

A married couple have equal 50% ownership interests in a tenants in common account (TIC). If one party to the account dies, what happens to the shares in the account?

Half, or 50% of the shares, would belong to the remaining party and the balance would be distributed to the estate of the deceased party.

Which of the following are available to participants in a 401(k) plan that are not available to IRA holders?

Hardship withdrawals Loans against the vested balance

Under what circumstances could a member firm holding stock in street name vote the shares as it sees fit?

If the customer does not return the signed proxy statement by the 10th day before the shareholders' meeting If the matters to be voted on are of minor importance

A registered representative is explaining discretionary and nondiscretionary accounts to a customer. Only one of the following statements is accurate and can be made by the RR. Which is it?

In a nondiscretionary account no order can be entered without your prior approval.

Which of the following is TRUE for mutual funds and those who invest in them?

Investors must be provided with specific information when purchasing mutual funds.

Which of the following are not 3-year or 6-year records?

Minutes of directors' meetings Customer complaints

An investor has a long position in OMQ stock. After selling the stock at a loss, the investor could purchase which of the following and not violate the wash sale rule?

OMQ put options

A partnership account wants to trade on margin. When would this be permitted?

Only if it is not restricted from doing so in the partnership resolution

A married couple have 2 children, both still minors. Which of the following UTMA accounts could be opened?

Parent as custodian for one of the children

Common stockholders of a publicly traded corporation have which of the following rights and privileges?

Residual claim to assets at dissolution Right to receive an audited financial report on an annual basis

An investor needs to decide whether or not they would like to maintain their percentage of ownership in a company that has decided to increase the number of outstanding shares. Which of the following is the best description of what is taking place?

Rights will be distributed to existing stockholders with an exercise price lower than the current market value

Regarding corporate bond issues, which of the following statements best describes secured debt and unsecured debt?

Secured debt is asset backed, while unsecured debt is not.

Which of the following securities is exempt from the Regulation T margin requirements but still subject to an initial margin requirement as determined by the broker-dealer?

T-notes

Which of the following records must be kept by a broker-dealer firm for 3 years?

TRIAL BALANCES

Which of the following publishes and maintains a list of known terrorists and drug traffickers and those controlled by them or acting on their behalf?

The Office of Foreign Assets Control (OFAC)

A corporation has a shareholders' meeting coming up wherein several controversial proposals will be made. A number of persons will be actively soliciting proxies, and the corporation plans to send out up-to-date material on the proposals to shareholders to permit them to make informed decisions. Which of the following must review this material before it is sent out?

The Securities and Exchange Commission

A 40-year-old individual is not covered by a retirement plan at work. What is the maximum contribution this individual can make to an IRA this year?

The current maximum allowed by the IRS, which will all be deductible if the individual does not exceed the income limit.

What happens to the contents of a custodial account in the event of the death of the beneficial owner (the minor child)?

The custodian's fiduciary responsibility ceases. The account passes to the minor's estate.

For securities held in "street name," which of the following is TRUE?

The customer is the beneficial owner.

If a registered representative is sharing in profits and losses with a customer, all of the following statements apply EXCEPT

The representative's expertise must be considered part of the contributions to the account

Which of the following securities are most likely deemed marginable by either the Federal Reserve Board (FRB) or regulatory bodies such as FINRA and the New York Stock Exchange?

Treasury bonds

A corporate stock is purchased on Friday, April 2, regular way. When will the trade settle?

Tuesday, April 6

Which type of accounts bills a single fee annually for a group of services that might include asset allocation, portfolio management, and executions?

Wrap account.

Mr. Smith enters a trade in a stock at the same time as Mr. Jones, who has inside information regarding that company. Mr. Smith is considered

a contemporaneous trader

An investor owning 400 shares of stock receives notice that the stock will be split. When the split is complete, the customer owns 1,200 shares of stock. The split must have been

a forward, even split

A customer leaves the sale proceeds from a recent transaction in the account. This amount would be considered

a free credit balance available to the customer at any time

SKRAM corporation is appealing directly to the shareholders of IDNIC corporation to acquire shares of IDNIC stock. This appeal is best described as

a hostile takeover with IDNIC the target company

A corporation divests itself of all of the shares of another company it owns. This is known as

a spin-off.

Sales for new issues of securities may be solicited

after the cooling-off period

Regarding the potential financial exploitation of seniors, impacted accounts would be those for individuals

age 65 and older, or age 18 and older who the member reasonably believes has a mental or physical impairment that renders the individual unable to protect his or her own interests.

The category of correspondence, one of the three identified as being communications with the public, is defined as

any written or electronic communication that is distributed or made available to 25 or fewer retail investors within any 30 calendar-day period

Each of the following are likely to be found on a trade confirmation EXCEPT

bond credit rating

All of the following may be purchased on margin EXCEPT

call and put contracts

Margin calls can be met with deposits of

cash or fully paid for marginable securities

Shares to sell short have been located in order to be borrowed. Once sold short, these shares will be known as

covered

All of the following are possible actions of an investor who has received stock rights EXCEPT

hold the rights for a possible long-term capital gain

For the risk disclosures found in the options disclosure document (ODD), all of the following would be accurate disclosures EXCEPT

if a maintenance call is not met, the customer must direct which securities to sell

An associated person of a FINRA member firm has been found guilty of forging a customer's signature on a document relating to a securities transaction. Under the Code of Procedure, FINRA could impose any of the following sanctions EXCEPT

imprisonment for a specified period

Short sellers have

limited profit potential and an unlimited loss potential

A broker-dealer firm opening a corporate account must establish all of the following EXCEPT

location of any account records the corporation will keep when received

For margin transactions taking place through introducing broker-dealers, those who do not clear their own transactions, extension requests are

made by the clearing firm

All of the following are true regarding customer account statements EXCEPT

monthly statements need not be sent if the only account activity is the receipt of interest or dividends

A member firm believes that financial exploitation of a senior customer is being attempted. While not required to, but allowed to, they put a temporary hold on disbursements of cash and securities from the account. The temporary hold should be

no longer than 15 business days unless a state regulator or agency of jurisdiction extends it longer

Those who look to hide money from government agencies and law enforcement to avoid the payment of taxes or to fund criminal enterprises often look to launder money in the following order:

placement, layering, integration

Broker/dealers who reserve the right to disclose nonpublic private information about their customers to unaffiliated third parties must

provide notice to customers at the time of the account opening and provide reasonable means for customers to opt out of such disclosures

Shareholders who own the stock on a certain date receive a dividend when one has been declared. That date is known as the

record date

On behalf of a customer, a broker-dealer requested an extension for payment that was not granted. The broker-dealer must

sell out the securities purchased and freeze the account for 90 days

For tax purposes, investment income is

taxed at either ordinary income tax or capital gains tax rates

A company offers to repurchase outstanding debt securities it has issued directly from its bondholders for cash in what would commonly be known as a

tender-offer

Listed options expire on

the 3rd Friday of the expiration month

Meeting the location requirements and the borrowing of securities when a customer wants to sell short is done by

the broker-dealer on behalf of the short-selling customer

A broker-dealer firm has just rehypothecated a thousand shares of MMS stock. This means

the customer pledged the stock to the firm, which has now pledged it to a bank

The benefits of designating a brokerage account as "transfer on death" (TOD) are that

the designation avoids probate the account holder may still make beneficiary changes for the account

All member firm communications are held to certain standards by FINRA. All of the following characterize those standards EXCEPT

the nature of the audience (age, investment experience) need not be a consideration at an open seminar

Your firm must provide an account statement to a customer this month if

there are penny stocks in the account actitivty has occured in the account this month

Calls made regarding of all of the following under the Telephone Consumer Protection Act of 1991 (TCPA) are exempt EXCEPT

those made that are unsolicited for the purpose of prospecting new clients

Each of the following investments and practices are deemed ineligible for an IRA or any other retirement plan EXCEPT

variable annuities

Holding customer mail is consistent with your broker-dealer's in-house rules. Considering this, if requested to do so, the BD must

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

Your firm must provide a privacy notice describing its privacy policies to customers

whenever a new account is opened and annually thereafter

Three brothers open a joint account instructing you that if they die, they want the cash and securities in the account to go to the remaining parties to the account. The account should be opened:

with rights of survivorship.

A customer receives a voting proxy from a broker-dealer for shares owned by the customer and held in street name. The customer returns the proxy but later decides to attend and vote at the shareholder meeting in person. The voting proxy

would be revoked, and only the vote at the meeting would count