SIE Final #1
Immediate family members of employees of member firms that are prohibited from buying new issue offerings under FINRA's IPO rules would NOT include:
Grandchildren of member firm employees
Where do trades of foreign currency take place?
in the interbank market
FINRA defines a "customer complaint" as one that is received by the member firm:
in writing or by e-mail
All of the following are accredited investors under the provisions of Regulation D EXCEPT a(n):
individual that invests $50,000, which is approximately 20% of that person's liquid net worth
The essential difference between an open end fund and closed end fund is that a(n):
open-end fund has a different capital structure than a closed-end fund
A customer has fully paid marginable securities in his vault at home that he wishes his brokerage firm to hold. Which statement is TRUE?
The brokerage firm may charge for this service
If a municipal bond, callable at par, is quoted on a yield basis that is higher than the nominal yield, the price of the bond to a customer would be calculated based on:
yield to maturity
A "SPDR" is a(n):
ETF
Which investment gives the greatest protection against purchasing power risk?
10 year TIPS
Which one of the following orders requires specific customer authorization?
"Buy 100 shares of any computer stock priced at under $40" (the choice of the security is left to the registered representative, so a power of attorney is required.)
A customer sells short 100 shares of ABC stock at $60 and sells 1 ABC Oct 60 Put @ $6. The market rises to $68 and the put expires. The customer buys the stock in the market covering his short stock position. The gain or loss is:
$200 loss (the customer buys the stock at $68 to cover his short stock position that was originally sold at $60. There is an 8 point or $800 loss, that is partially offset by the $600 in premiums received. Thus, there is a net loss of $200.)
A customer sells 1 ABC Jul 40 Put at $6 when the market price of ABC is $38. The maximum potential loss to the writer is:
$3,400 (the put writer agrees to buy the stock at $40, but collected $6 of premiums, for a net outlay of $34. If the stock is worthless, this is the maximum loss per share ($3,400 for the contract).)
A customer is short 1,000 shares of ABC stock, valued at $6 per share. The minimum maintenance margin requirement is?
$5.00 per share
The minimum asset size threshold for an investor to be considered an "institutional client" for purposes of the FINRA communications rules is:
$50 million
A customer buys 100 shares of XYZ stock at $80 and buys 1 XYZ Oct 80 Put @ $3 on the same day in a cash account. The stock rises to $88. The put expires and the customer sells the stock in the market at the current price. The customer has a(n):
$500 gain
The maximum coverage provided by Securities Investor Protection Corporation for securities held in a customer's account is:
$500,000
A customer buys 200 shares of GE at $72 and sells 2 GE 70 Calls @ $6. The market rises to $80 and the calls are exercised. The customer has a(n):
$800 gain
A customer buys 5M of 3 1/2% Treasury Bonds at 101-16. How much will the customer receive at each interest payment?
$87.50
A customer bought a $1,000 par convertible subordinated debenture at par, convertible into common at $31.25 per share. If the bond's market price increases by 20%, the conversion ratio will be:
32.00:1 (the bond is issued with a conversion price of $31.25, based upon converting each bond at par. $1,000 par / $31.25 conversion price = 32:1 conversion ratio. Thus, for every bond that is converted, the holder receives 32 shares.)
At what age must RMDs commence from a Traditional IRA?
72
Which of the following would be a quote for a manufacturing company bond?
99 1/2
Which of the following money market instruments is eligible for Fed trading?
A 10-year T-Note which matures within a year
When comparing fixed annuities to variable annuities, which statement is TRUE?
A fixed annuity account grows at a guaranteed rate
Which statement is TRUE about a numbered account?
A numbered account is only permitted if the client signs an attestation of ownership that is retained by the member firm
If an investor wishes to open a margin account, which paperwork is typically NOT required?
ACATS Form
Under Regulation D, which statement is TRUE?
An Offering Circular is used to provide disclosure
For the past 5 years, an individual earning $40,000 per year, who was not covered by another retirement plan, has made annual contributions to an Individual Retirement Account. That individual has changed jobs at the same salary and has been included in that company's qualified retirement plan. Which statement is TRUE?
Annual contributions to the Individual Retirement Account can continue and are an adjustment to income each year
Which statement is TRUE when comparing BAs to ADRs?
BAs are money market instruments while ADRs are capital market instruments
Which of the following are equity security holders of a company?
Both Common and Preferred shareholders
All of the following orders are placed above the market EXCEPT:
Buy - MKT
What is the benefit of a zero coupon bond?
Capital appreciation
Which of the following activities is prohibited during the "cooling off" period?
Confirming an indication of interest
Which statement is FALSE about Regulation S-P?
Customers must be given the opportunity to opt out of the sharing of their personal information between their firm and its clearing broker-dealer
Which type of real estate limited partnership could be eligible for governmental subsidies?
Government Assisted Housing
Which of the following is a non-qualified retirement plan?
Deferred compensation plan
During the 20-day cooling off period when a non-exempt new issue is in registration, which of the following is permitted?
Distribution of a preliminary prospectus
Which of the following is NOT defined as "portfolio income" under IRS guidelines?
Distributive share of income from limited partnership holdings (Income from partnership interests is defined as "passive income" under IRS rules.)
If a customer does not give a broker his or her instructions, cost basis reporting on Form 1099-B for a stock holding where there have been multiple purchases at different times is done on a:
FIFO basis
All of the following are primary purchasers of Treasury securities EXCEPT:
Federal Reserve Banks
Which regulator is responsible for enforcing provisions of the Bank Secrecy Act and the PATRIOT ACT?
FinCEN
All of the following must be disclosed on municipal bond trade confirmation EXCEPT:
For general obligation bonds, the source of income backing the issue
Under MSRB rules, all of the following statements are true about a registered representative sharing in a customer account EXCEPT the:
MSRB must be notified in advance of the sharing arrangement (Sharing in a customer account is prohibited unless the registered representative gets written approval for the account from the principal; opens a joint account with the customer; and shares in gain and loss in proportion to the capital contributed. There is no requirement to give notice of such an arrangement to the MSRB - if this were the case, the MSRB couldn't do anything about it anyway since they do not enforce their rules (enforcement for broker-dealers is performed by FINRA).)
The minimum price at which a closed end fund share can be purchased is:
Market Price plus a commission
Under MSRB rules, if a customer refuses to disclose sufficient financial information to make a suitable recommendation, which statement is TRUE?
No recommendations are permitted
If an investor does not pay within the time period specified under Regulation T, all of the following statements are true EXCEPT:
No trading is permitted in the account for 90 days
The issuer of listed options contracts is the:
Options Clearing Corporation
A customer must be sent which of the following at, or prior to, opening an options account?
Options Disclosure Document
If a registered representative wishes to engage in a private securities transaction, which statement is TRUE?
Prior written permission of the employing member firm is required
A smaller company with 75 employees wishes to establish a retirement plan. Some of the employees are highly paid, but most are part-time low wage earners. The company would like to maximize contributions for the highly-paid employees to keep these talented individuals. The company has erratic cash flow but is profitable overall. What type of retirement plan would be the best for the company?
Profit Sharing Plan
Under IRS rules, if a customer selling shares of stock wishes to use specific identification instead of FIFO for cost basis reporting, the broker-dealer effecting the trade must be notified of this no later than:
Settlement date
Which statement is TRUE?
Stop orders guarantee execution but not price while limit orders guarantee price but not execution
To smooth out cash flow, a municipality will issue all of the following:
TAN, RAN, TRAN
Which of the following is a characteristic of Coverdell ESAs?
Tax free distributions are to be used only for educational purposes
To stimulate the economy using Fiscal Policy which of the following actions could be taken?
Tax rates could be reduced and Government spending could be increased
Which statement is TRUE regarding corporate reports sent to shareholders?
The 10K report consists of the annual financial statements
A new customer has come into your firm to open an account. He tells you that he is 21 years old, recently graduated from college and that he is looking for a job. He is contacting you because he recently inherited $250,000 and wants to invest it for growth and income. When you are completing the new account information, you ask him for his street address and he tells you that he was just evicted from his apartment and has moved into a long-stay hotel until he finds a new place to live. Which statement is BEST about this situation?
The address to be used for Customer Identification purposes is the address of a close relative
A 529 Plan is set up for a child in state A. The child attends a college in state B. Which statement is TRUE?
The funds in the 529 Plan are portable and can be used to pay for college in state B
Which statement is TRUE about the expense ratio of a mutual fund?
The lower the ratio, the more efficient the fund is
Which statement is TRUE about a Life Annuity?
The periodic payment for a Life Annuity will be higher than the periodic payment for a Period Certain annuity
An officer of a listed company calls his registered representative and tells him to buy a large block of that stock. Prior to placing the order to buy, the registered representative calls ten of his customers and tells them to buy that company's stock. Which statement is TRUE?
This action is a violation of the insider trading rules
A registered representative conducts a seminar about investing in the meeting room of a local apartment complex. At the end of the talk, he hands out his business card and tells the attendees that if they want additional information, please write their contact information on the reverse side of the business card and return it to him. When he gets back to the office and starts to re-contact some of the attendees who returned the business card, he finds that one of them is blocked because the client name is on the National Do Not Call Registry. Which statement is TRUE?
This prospect can be called by the registered representative
The formula for the expense ratio of a mutual fund is:
Total Expenses / Total Net Assets
All of the following are prohibited trading practices under FINRA rules EXCEPT:
Using a correspondent
All of the following are major tax benefits of real estate limited partnerships EXCEPT:
When the real estate is sold, all profits are taxed at preferential short term rates
An order for a New York Stock Exchange listed issue is routed by the member firm to an Electronic Communications Network (ECN) rather than to the exchange floor. This practice is permitted:
if the price offered by the ECN is better
If a publicly traded corporation declares bankruptcy:
an 8K report must be filed within 4 business days (Corporations are required to file 8K reports within 4 business days of significant events such as a declaration of bankruptcy, merger, change in the Board of Directors, etc. The 8K is filed with the SEC, and is a public document.)
The "death benefit" associated with a variable annuity contract:
applies during the accumulation phase - if the contract holder dies, a beneficiary will receive at least the amount invested in the contract
New issues of municipal short term notes are available in which form?
book entry
The most efficient way for a client to hedge a broadly diversified $2,500,000 stock portfolio is to:
buy SPX 2500 put options
A registered representative recommends the purchase of a GNMA pass-through certificate to a customer that seeks safety of principal and a moderate level of income. When doing so, the registered representative states to the customer "GNMA certificates are guaranteed by the U.S. government and each month you will receive a check, all of which is income to you." This statement is:
deceptive because GNMA certificates make payments that are a combination of both principal and interest
Dividends on preferred stock may only be paid in:
cash
Individual Retirement Account contributions can be made with:
cash
Which of the following money market instruments is rated on a "P" scale?
commercial paper
Gross Domestic Product is measured in:
constant dollars
Short positions in margin accounts are marked to market:
daily
X Corporation stock has been trading at $1 per share recently and the exchange where the stock trades will delist the stock if the price "breaks the buck." The company would like the share price to be around $10, which is comparable to other companies in its industry. To increase the price of the stock, the company can:
declare a 1:10 reverse split to reduce the number of shares outstanding
All of the following events would require a corporation to file an 8K report with the SEC EXCEPT declaration of (a):
dividend
Common stockholders and preferred stockholders BOTH have:
dividend rights
A registered representative ("RR") manages a corporate account. The corporation recently elected a new CEO who contacts the "RR" and gives trade instructions. Which statement is TRUE? The trade should be:
entered once the "RR" verifies that the CEO is an authorized trader in the account
An oil and gas program that provides high initial deductions and low mineral rights cost would be a(n):
exploratory program
A guaranteed corporate bond is one which is:
guaranteed by another corporation
A 5-year 3 1/2% Treasury Note is quoted at 101-4 - 101-8. The note pays interest on Jan 1st and Jul 1st. All of the following statements are true regarding this trade of T-Notes:
interest accrues on an actual day month; actual day year basis the trade will settle in Fed Funds the trade will settle next business day if performed "regular way"
All of the following are participants that offer municipal bonds in the secondary market EXCEPT:
issuers
Which option position is used to hedge a short stock position?
long call
A customer buys 1 ABC Feb 50 Call @ $7 when the market price of ABC is 52. If the market value of ABC falls to $48 and stays there through February, the customer will:
lose $700 (If the market falls to $48, the 50 call expires out the money and the holder loses the $700 premium paid.)
Under MSRB rules, a registered representative may perform a municipal securities transaction for a customer that he or she believes is unsuitable:
only at the specific direction of the customer
A variable annuity is a:
non-fixed unit investment trust
Under Regulation D, all of the following are accredited investors EXCEPT a(n):
partnership with assets in excess of $5,000,000 formed for the specific purpose of acquiring the securities offered
A married couple opens a joint margin account. The brokerage firm will send the Internal Revenue Service Form 1099 (Report of Interest and Dividends Earned) to the:
person whose social security number was given on the account form
The amount by which the purchase price of a municipal bond exceeds the par value of the bond is termed the:
premium
Initial Public Offerings (IPOs) are sold for the first time in the:
primary market
Common dividends are usually paid:
quarterly
The Securities Acts Amendments of 1975 which established the Municipal Securities Rulemaking Board allow the MSRB to do all of the following EXCEPT create regulations:
setting maximum mark-ups and commissions
All of the following corporate bonds are secured EXCEPT:
sinking fund debentures
If the writer of an equity call contract is exercised, the writer must deliver:
stock in 2 business days
Under FINRA rules, a specific reason must be cited by a customer who requests in writing that mail be held for more than:
three months
The "after hours" trading market for exchange listed and NASDAQ securities:
typically has wider dealer bid-ask spreads than regular trading sessions
The purchase of a put has all of the same characteristics as selling stock short EXCEPT:
unlimited loss potential in a rising market
