Comprehensive SIE Practice Exam

Under industry regulations, an initial purchase of $3,000 of common stock in a margin account requires a cash deposit of:

$2,000

A customer buys 1 ABC Jan 35 put for a premium of $3 and simultaneously buys 100 shares of ABC stock for $35 per share. The customer will break even when the stock is selling at what price per share at expiration?

$38

Under normal circumstances, a customer's letter of intent on a mutual fund purchase is valid for what maximum period of time?

13 months

A decline in the gross domestic product (GDP) must last for at least how many quarters to be considered a recession?

2 quarters

Under the Securities Act of 1933, registration is required for which of the following securities?

American Depositary Receipts (ADRs)

In which of the following situations is an employee of a public company permitted to trade upon information without violating insider trading laws?

An independent securities analyst explains to the employee why the earnings for the company next quarter could be markedly poorer than expected.

Roth 401(k) and Roth individual retirement account (IRA) plans share which of the following features?

Qualified distributions are excluded from federal income tax

Under Rule 144A, an issuer of restricted stock is permitted to sell to which of the following investors?

Qualified institutional buyers (QIBs)

Which open market activity is defined as a central bank purchasing bonds and securities in the open market?

Quantitative easing

A customer has a cash balance in her account together with long positions in several securities. She has made no securities transactions in the account during the past 18 months. How often must the firm send her an account statement?

Quarterly

How long are shelf registrations with the SEC good for?

Three years

A member of a stock exchange responsible for providing liquidity in a security by being willing to buy and sell at all times is known as:

a market maker

The last transaction in XYZ 5.50s 2030 was at 102. This bond is selling at:

a premium

A married couple who earned income that exceeded $300,000 in each of the prior two years and reasonably expects the same for the current year is:

an accredited investor

When a broker-dealer charges a commission on a securities transaction, it has acted as:

an agent

In the over-the-counter market, the term "spread" refers to the difference between the:

bid and asked prices

The primary purpose of a syndicate desk in the context of an equity offering is to:

build an order book and allocate the stock

Under FINRA rules, noncash compensation connected with the sale of variable contracts includes all of the following items except:

commissions

A customer is an officer of a company that is involved in some significant changes. All of the following items are examples of corporate affairs that could be considered insider information if the customer shares them with his registered representative except:

declared stock dividends

Stability in the value of a debt portfolio is greatest when:

maturities of the debt securities are short.

UTMA accounts are opened under the tax ID of the:

minor

Broker-dealer ABC seeks to underwrite a municipal securities offering by a local town in which the mayor is currently seeking re-election. A municipal finance professional who resides in the town and works for ABC contributed $200 to the mayor's re-election campaign 13 months ago. If the employee wants to support the campaign further without impacting the municipal securities business of the firm, he is permitted to make an additional contribution of up to what amount?

$50

A company announces a tender offer to its shareholders with the intent to buy a maximum of 1 million shares of its outstanding stock at $10 per share and sets no minimum number of shares to be purchased. An investor wants to participate in this offer and tenders his 1,000 share position. At the close of the offer period, only 900,000 shares have been tendered. How many, if any, of the investor's shares will the company purchase?

1,000

Company ABC announces a 20% stock dividend for its common shareholders. If a customer holds 1,000 shares at $50.00, what is the new price and number of shares following the payment of the stock dividend?

1,200 shares at $41.67

The computation of dollar prices and accrued interest on corporate bonds is normally on what calendar basis?

30/360

The computation of dollar prices and accrued interest on municipal bonds is normally on what calendar basis?

30/360

An investor owns 100 shares of XYZ common stock at the current market price of $50 per share. If XYZ conducts a 1-for-2 reverse stock split, the investor's post-split stock position will be:

50 shares at $100 per share

Failing to make a customer aware of an upcoming quantity discount available through a mutual fund is:

A breakpoint sale and is prohibited

Which of the following Form U4 reportable events results in a statutory disqualification?

A felony conviction for a driving under the influence (DUI) charge

Which of the following comparisons best describes the essential difference between a primary distribution and a secondary distribution?

A primary distribution involves a sale of newly issued shares by the issuer while a secondary distribution involves the sale of already issued and outstanding shares.

A registered representative (RR) who wants to place a mutual fund advertisement must obtain written approval from which of the following parties?

A registered principal of the RR's firm

Which of the following investments are generally traded according to their average life rather than their stated maturity dates?

Asset-backed securities

If a market maker posts a quote of 10.00 - 10.10 [25×10], which of the following actions is the market maker willing to take?

Buy 2,500 shares at $10.00 and sell 1,000 shares at $10.10

The main function of a market maker in the context of an equity offering is to:

Buy and sell the shares at quoted bid and ask prices.

In a period of low inflation and economic recession, the Federal Reserve is expected to take which of the following actions?

Buy bonds in the open market

When market interest rates go up, a bond's:

CY goes up

The call provision of a bond stipulates which of the following factors?

Call date and call price

Upon expiration, all in-the-money S&P 100 Index call options are settled by the delivery of which of the following?

Cash

Investors purchase real estate for:

Cash flow

Which of the following is a banking product rather than a security?

Certificate of deposit

An individual would be barred from association with a FINRA member firm for which of the following?

Conviction of a securities-related misdemeanor 9 years ago

Which of the following actions is required of a broker-dealer's anti-money laundering (AML) program?

Designating an AML compliance officer

A mutual fund can only consider itself no-load as long as it:

Does not carry a sales charge and does not charge more than 25 basis points in annual 12b-1 fees

Under FINRA rules, which of the following activities by a registered representative requires written notification to her firm?

Driving part time for a transportation network company on weekends

Which of the following products is considered a cheaper alternative to a mutual fund?

ETF

All of the following are types of economic theories EXCEPT:

Efficient market hypothesis

Which of the following actions violates FINRA rules regarding selling away?

Engaging in private securities transactions without written prior consent of the employing BD

Which of the following products is adversely impacted if the issuer's credit rating is downgraded?

Exchange-traded notes (ETNS)

A savings account at a bank is guaranteed by which of the following entities?

FDIC

Which of the following actions is required when a firm receives cash in excess of $10,000 from one customer in one business day?

File a Currency Transaction Report (CTR)

All of the following investment companies carry investment risk to the holder EXCEPT:

Fixed UIT

Which stock can be expected to rise rapidly in a period of economic expansion?

Growth stock

Which of the following financial statements lists operating profit?

Income statement

All of the following would be profitable in a rising market EXCEPT:

Inverse ETFs

Which law covers the registration of mutual funds?

Investment Company Act of 1940

Which of the following statements is true about treasury stock?

It is issued stock that has been subsequently reacquired by the corporation

What risk do DPPs have that makes it harder for the investor to retrieve their funds?

Liquidity risk

Which of the following communications with the public is considered misleading?

Literature providing 10-year performance information to support predictions of future performance

Which of the following responses describes an advantage of index funds?

Lower management fees due to passive management of the fund

When a stop order is triggered, what does it become?

Market order

Which of the following investment risks is the greatest risk in a variable life insurance policy?

Market risk

At issue, which of the following debt securities mature in one year or less?

Money market instruments

The redemption value of an open-end investment company's shares is based on the:

NAV computed after the order is received

No-load mutual funds may have lower expense ratios than load mutual funds for which of the following reasons?

No-load funds are not permitted to charge a 12b-1 fee greater than 25 basis points

A registered representative is reviewing the following portfolio: • 30% ABC Energy Company • 30% XYZ Health Care Company • 30% Exchange-traded fund (tracks the S&P 500) • 10% Money market funds Which of the following risks is inherent in this portfolio?

Nonsystematic

What document is given to an investor who purchases a municipal bond?

Official statement

Which of the following outcomes are possible for the writer of a covered call option?

Profit limited and loss limited

An associated person who is not a registered representative is permitted to engage in which of the following activities?

Provide account opening forms to a new customer

To offer its shareholders a privilege to obtain its shares at a fixed price, which of the following products does a corporation issue?

Rights

Which of the following securities is issued below the CMP of the stock and has intrinsic value at issuance?

Rights

Which of the following securities is a form of T-bond where the coupon and principal payments are detached from the bond itself and sold separately?

STRIPS

Which of the following stakeholders has first claim priority in a Chapter 11 proceeding?

Secured debt holders

Which piece of legislation deals with the secondary market?

Securities Exchange Act of 1934

When is interest on Treasury notes paid?

Semiannually

A registered representative (RR) wants to participate in a private securities transaction. Which of the following actions must the RR take?

Send written notice to his supervisor outlining the activity and compensation structure

The difference between the bid and ask prices is known as the:

Spread

Blue-sky laws are regulated by which of the following entities?

State securities regulators

Which of the following statements is true regarding the concept of an annuity contract?

The kind of annuity selected partly determines the payment amounts to the annuitant

What is the cost basis of an inherited mutual fund?

The net asset value (NAV) of the shares when the owner dies

Which of the following statements is true regarding a customer account held as tenants in common?

The ownership of the decedent's assets is governed by their will or state law.

Under SEC Regulation S-P (Consumer Privacy), which of the following information must a firm include in its customer privacy and opt-out notices?

The policies to protect the security of nonpublic information

Which of the following considerations should a registered representative explain to a customer when recommending a 529 savings plan?

The potential deductibility of contributions from state taxes

Which of the following represents the effect of a stock split?

The price per share of common stock decreases

Under Federal Reserve Regulation T, a 90-day restriction is imposed when a customer opens and closes which of the following positions?

The same stock in a cash account without paying for the stock in full

When selling a fixed amount of a base currency to purchase a counter currency, which of the following factors is primarily used to determine how much of the counter currency the customer will receive?

The spot exchange rate

Which of the following statements is true about all U.S. government agency issues?

They are exempt from registration under the Securities Act of 1933

In the event of a stock split, which of the following parties is required to maintain a record of the shareholders eligible to receive the additional shares?

Transfer agent

The owner of which of the following products is most exposed to inflationary risk?

Treasury bonds

Which of the following security types provides investors with a stated maturity date, a floating interest rate, and an option to put the security back to a financial intermediary on a daily or weekly basis?

Variable rate demand note

At the time of issuance, which of the following securities normally has the longest period to expiration?

Warrants

Which of the following would be considered the broadest market index?

Wilshire 5000

A transaction in which a writer covers a position by purchasing an option is called:

a closing purchase

All of the following risks apply to both foreign and domestic debt instruments except:

exchange

Direct participation programs (DPPs) provide:

exposure to non-correlated assets

Regular way settlement on Treasury bonds is:

next business day

A firm is a participant in a public offering. To sell a substantial amount of the securities to its customers, the firm agrees to repurchase the shares at no less than the original sales price. Such agreements are:

prohibited as fraudulent and manipulative

A broker-dealer is permitted to accept payment for a new issue from a new customer when the:

registration is effective

Call protection is most valuable to a bond owner when bond prices are generally:

rising

Under a system of statutory voting, a common stockholder has as many votes for each vacancy on the board of directors as the number of:

shares owned by the stockholder

FinCEN accomplishes its mission to safeguard the financial system from the abuses of financial crime, including terrorist financing and money laundering, by enforcing:

the Bank Secrecy Act