Q bank

The penalties for trading on inside information include

I. civil penalties up to treble damages. II. registered representatives or broker-dealers up to $1 million. III. criminal penalties up to $25 million for broker-dealers. IIII. jail time up to 20 years

The violation of selling mutual fund shares just below the point where the customer would qualify for lower sales charges and not informing the customer that they may qualify for lower sales charges is

a breakpoint sale

In left unexecuted, a good til cancel (GTC) order will automatically be canceled when?

last day of April/October

The risk that an investor might not be able to sell an investment quickly and at a fair market price is known as

liquidity risk

Which of the following contracts are in the money if the strike price is 30 and the market price is 40?

long call and short call All calls are in the money when the market price is above the strike price.

Subject to market liquidity, which of the following orders is most likely to be executed immediately?

market order

Repurchase agreements and reverse repurchase agreements are

money market instruments Repurchase (repo) agreements and reverse repurchase agreements are short-term debt securities and are, therefore, a type of money market instrument.

A registered representative has left one firm to join another. Sometime later, the former employer discovers that some information on Form U-5 filed at the time of termination was inaccurate. The firm need not file an amended U-5 if at least how much time has gone by?

no stated time limit

A member firm is assigned an exercise notice by the Options Clearing Corporation (OCC). The member firm may assign the exercise notice to one of its short customers by any of the following methods

on a random-selection basis. C) to the customer having the oldest short position. FIFO D) in any way that is fair and reasonable.

Mutual fund shares are required to be priced at least

once a day?

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

Noncash compensation exceeding the $100 annual limit to another member firm's employee is

prohibited

To stimulate the economy during a recession by expanding the availability of credit, the Federal Reserve Board (FRB) would do any of the following except

raise the Fed Funds rate

Under which of the following conditions will an investor be able to purchase mutual fund shares and pay no sales charge?

reinvestment privilege

The de minims exemption for MSRB rule G-37 would allow municipal financial professionals to make a contribution to a municipal candidate under certain conditions up to what dollar limit per election?

$250 per election

DEF Corporation has 4% noncumulative preferred stock outstanding. The company eliminated its dividend payments for the past three years but now is in a position to resume paying them again. Before paying common shareholders a dividend, the company would be required to pay the preferred shareholders

$4

When customers open margin accounts, when must they be provided with a risk disclosure document?

- before initially opening the account AND annually after opening

The two classifications of chapters for corporate bankruptcies are

- liquidations- assets sold off and proceeds are distributed based on priority of claim - reorganizations- company continues to operate under a plan to repay creditors

A customer is given a quote for ABC as: 17.00 - 17.25 6 × 12. This quote indicates the customer can

- sell 600 shares for $17 per share OR - purchase 1200 shares at $17.25 Customers can purchase at the offer (the lowest price someone else is willing to sell) and sell at the bid (the most someone else is willing to sell). With this in mind, the customer can buy up to 1,200 shares at $17.25 or sell up to 600 shares at $17.

When speaking to a customer about exchange-traded funds (ETFs), a registered representative could make which of the following correct statements?

-fwd pricing DOES NOT apply like it does to mutual funds - ETFS can be bought on margin (Reg T set at 50%) and sold short

An order is entered by a customer to sell at 30 stop limit. Once the order is entered, the stock trades in the following sequence: 32, 29, 31, and 33. The order would be executed and the investor would receive a price of

31... check test 09/03/2020

An investor is short a January 30 call at 5. Breakeven is

35 CALL Breakeven for a call (long or short) is premium (5) plus strike price (30). In this case 35 points. Because short calls are bearish, the investor who is short the call needs the stock to be below the BE (35), while the investor who is long the call wants it to be above the breakeven point (35) to make a profit. Always remember that BE for both parties to the contract is always the same number.

Written customer complaints must be kept for how many years? and by whom?

4 years by BD

The regulatory element of training requires that all registered persons complete a computer-based training session how frequently?

A) Within 120 days of the person's second registration anniversary and then every 3 years thereafter

All of the following would generally be associated with a limited partnership (LP) except A. freely transferrable interests B. partners responsible for reporting to IRS C. tax credits for specific programs D. the pass through of gains and losses

A. freely transferrable interests .... -illiquidity.. -Extremely limited secondary market, investor who wish to sell frequently cannot find investors. - The shareholder's interest is NOT freely transferable

Q: Which of the following benchmark interest rates is considered a barometer of the direction of short-term interest rates? A. Discount rate B. Broker call loan rate C. Federal funds rate D. Prime Rate

AnswerC. Federal funds rate Explanation: The federal funds rate is the rate that commercial money center banks charge each other for overnight loans of $1 million or more. Overnight, representing the shortest of loans, makes this rate a good indicator of the direction short-term investment rates are taking. Reference: 1.3.1 in the License Exam Manual

Which class of shares use a CDSC as the main sales charge?

Class B

SIPC coverage is best described by which of the following?

Covers up to $500,000 in cash and securities but no more than $250,000 in cash

Which of the following is true of closed end funds but not of open end funds? A. Pay dividends when declared by BofD B. Can sell shares of common stock C. Can invest in a variety of securities D. Have a fixed # of shares

D other truths to closed end funds: - no prospectus post IPO - shares not redeemable BUT sellable - issues common, pref, and/or bonds - priced by S/D -commissions (pay stockbroker) - ex date is set by FINRA while ex date for open end is set by BofD

Which of the following organizations looks to promote self-discipline among members and investigate and resolve grievances between the public and members and between members?

FINRA

While the Municipal Securities Rule Board (MSRB) writes the rules and regulations regarding underwriting and trading for municipal securities, it does not enforce those rules. Who does?

FINRA

A measure of a nation's citizen's economic activity is

GNP

The penalties for trading on inside information include civil penalties up to treble damages. registered representatives or broker-dealers up to $1 million. criminal penalties up to $25 million for broker-dealers. jail time up to 20 years.

II

WRJ stock is quoted as 21 bid, 21.15 offer. Which of the following is true? I. A purchase can be made at $21 per share if buying at the market. II. A purchase can be made at $21.15 per share if buying at the market. III. The spread is $0.15. IV. A sale can be made at $21.15 per share if selling at the market.

II and III A quote always represents the bid and an ask (offer) price. Investors pay the current ask price when purchasing (21.15) and receive the current bid price when selling (21). The spread is the difference between the bid and the ask price—in this quote, 0.15.

A broker-dealer's business model allows for only the purchase and sale of securities for retail customer accounts. It does not execute, settle, or clear its customer's transactions, nor does it tend to any back-office functions such as sending trade confirmations or forwarding proxies. This broker-dealer would best be described as what type of firm?

INTRODUCING B/D A fully disclosed introducing broker-dealer is what the word implies—it introduces its customer's business to a clearing firm. Clearing firms (often called carrying firms or agents) hold funds and securities and settle transactions (clear and process) for their correspondent introducing firms. Essentially, the clearing firm acts as the introducing firm's back office.

Which of the following best describes the size of a quote?

It tells the number of shares the broker-dealer is willing to buy or sell at that price.

Regular way settlement for Treasury bonds is

T+1

Isaac James has some call option in his account that he would like to exercise. He wants to know when the resulting purchase of the stock would settle.

T+2

A representative of a dealer who solicits municipal securities business from an official of an issuer contributes $275 to the official's city council reelection campaign during the general election. Under what circumstance would the contribution invoke a ban on the dealer's municipal securities business with that issuer?

The dealer seeks to engage in a negotiated underwriting with the issuer.

A broker-dealer that accepts the risk of holding a particular security in its account to facilitate trading and provide liquidity in that security is best described as

a market maker Market makers are broker-dealers with a line of business to stand ready to buy or sell securities (make markets) with the view of being profitable by buying low and selling high or selling high and buying low (short selling). Market making is risky. Firms that do this must demonstrate to FINRA that they can manage the operational and financial risk.

If a stock is at risk of failing to maintain the minimum price requirements to remain listed on the NYSE, the most likely corporate action taken to preserve the listing could be

a reverse stock split

An investor with no existing positions in MMS stock sells 100 shares. This is

a short bearish position- With no other existing positions, this sale transaction would have to be opening a position. Sell to open a position = short = bearish.

Which of the following transactions has the least risk?

buy to open

Which class of shares have a 12b-1 fee as the primary sales charge?

c shares explanation: No load funds have no sales charge and are limited to a 12b-1 fee of 0.25% annually. Class C shares charge a level load built into the expense ratio, usually as a 12b-1 fee. Class B shares have back-end loads that reduce over time (Contingent deferred sales charge, or CDSC). Class A shares charge an upfront load.

interest rate risk

cannot be reduced by diversification. B) is often called purchasing power risk. C) occurs when interest rates fall, pushing bond prices lower. D) occurs when interest rates rise, pushing bond prices higher.

Examples of investments in assets that would be considered illiquid would be all of the following except

common stock

When investing in overseas markets in foreign securities, investors should be aware of and understand

currency risk

All of the following are identified as types of investment companies in the Investment Company Act of 1940 except

face-amount certificate company. B) mutual fund. C) unit investment trust. D) municipal bond pool.

Written customer complaints must be kept for how many years?

four years

Brokers placing orders for their own account ahead of notably large customer orders that are known to be entering the market in an attempt to gain from the price movement that is likely to occur is an example of what prohibited activity?

front running

If long one equity call option, the owner

has the right to purchase 100 shares of the underlying stock

When a bond is purchased at a discount the current yield will be

higher than the coupon rate

Bondholders should expect that interest payments would always be forthcoming for all of the following except

income bonds

The effect of continually rising retail prices on the investment returns of one's portfolio is best described as

inflation risk - reducing purchasing power

Unique tax advantages associated with oil and gas direct participation programs are

intangible costs and depletion allowances

An investor purchased and then sold a security eight months later for a gain. This gain

is considered a short term gain; taxed at ordinary income

A statutory debt limitation imposed on a municipality restricts its authority regarding

issuing GO Bonds

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; either exercise or let it expie

Match the following statement to the best expression: Government should allow market forces to determine prices of all goods and that the federal government should reduce government spending as well as taxes.

supply side economic theory Supply-side economics holds that governments should allow market forces to determine prices of all goods. Supply-side adherents judge that the federal government should decrease government spending and taxes. In this way, sellers of goods will price them at a rate that allows them to meet market demand and still sell them profitably.

Which of the following would be required for a good-til-canceled order to remain in force for more than six months?

the customer would need to re-confirm the order

Treasury receipts are backed by

the issuing broker-dealer. Treasury receipts are issued by broker-dealers. Although Treasury securities (T-notes and bonds) are held in trust at a bank and collateralize the Treasury receipts, unlike Treasury securities backed by the U.S. government, these Treasury receipts can only be backed by their issuer, the issuing broker-dealer.