SIE Practice Exam Questions
The hours of operation of the Chicago Board Options Exchange are: a) 9:30 am to 4:00 pm CT b) 8:00 am to 8:00 pm ET c) 8:30 am to 3:00 pm CT d) 7:00 am to 7:00 pm CT
8:30 am to 3:00 pm CT NYSE hours and CBOE hours are the same. 9:30 to 4 ET for the NYSE is the same as 8:30 to 3:00 CT. Make sure you KNOW your time zones!
A customer wishes to liquidate 100 shares of ABC common at the market. If the current inside market is 904.78 - 905.57, the client's transaction will occur disregarding commissions and other charges at a) 904.78 b) 905.57 c) at the last transaction price prior to entering this order d) at a price agreed to between the firm and the customer
904.78 The best (inside) bid is the price at which a client's liquidation (sell) order will be executed.
There are two types of do-not-call lists. What are they and how long do names stay on the list? A) A broker-dealer (firm) list and a National list. Names remain on these lists until removed by customer. B) Broker-dealer list and name remain on list for 5 years, and National list and names remain on the list for 10 years. C) Broker-dealer list and names remain until removed by the customer, and National list and names remain for 5 years. D) National list and names remain on list for 5 years, and broker-dealer list and names remain on list for 10 years.
A broker-dealer (firm) list and a National list. Names remain on these lists until removed by customer.
A significant number of public investors do not have a solid understanding of how common stock is offered to the public. Two methods are the secondary offering and the follow-on offering. Which of the below are true statements regarding these methods? a) Secondary offerings involve the sale of new shares other than the first time a company is going public (IPO). b) A follow-on is an offering of new shares other than the initial public offering (IPO). c) Secondary and Follow-on are two different terms for the same investment banking activity. d) Secondary offerings involve the resale of outstanding shares at market bid and ask pricing.
A follow-on is an offering of new shares other than the initial public offering (IPO).
Members and non-members alike can look into a broker's service and qualifications record by accessing which of the following services? A) BrokerCheck B) Municipal Securities Rule Board (MSRB) C) The Central Registration Depository D) Form U-4
A) BrokerCheck
All of the following would be considered advantages of exchange-traded funds (ETFs) as opposed to mutual funds except A) ETFs are commissionable. B) ETFs are marginable. C) ETFs are priced continuously throughout the trading day. D) ETFs trade on exchanges.
A) ETFs are commissionable. Trading on exchanges, ETFs are priced throughout the trading day making them easy to trade and liquid. They can also be bought or sold on margin. The purchase or sale of ETF shares is a commissionable transaction. However, the commissions paid can erode the low expense advantage of ETFs and this would have the greatest impact when trading in and out of ETF shares frequently, or when investing smaller sums of money.
Which of the following outcomes are possible for the writer of a covered call options? A) Profit limited and loss limited B) Profit limited and loss unlimited C) Profit unlimited and loss limited D) profit unlimited and loss unlimited
A) Profit limited and loss limited
The primary regulatory body for the securities industry would be which of the following? A) Securities and Exchange Commission (SEC) B) Federal Reserve Board (FRB) C) Municipal Securities Rule Board (MSRB) D) Financial Industry Regulatory Authority (FINRA)
A) Securities and Exchange Commission (SEC) Created under the Securities Exchange Act of 1934, the overriding or primary securities industry regulatory body is the SEC.
When a broker dealer charges a comission on a securities transaction it has acted as: A) an agent B) a principal C) an underwriter D) a market maker
A) an agent
A customer who is short against the box may close the position by all the following except A) depositing the fair market value of the shorted stock into his account. B) combining purchases of stock with stock already owned by the customer. C) purchasing twice the stock in the open market. D) covering the short with the stock in his account.
A) depositing the fair market value of the shorted stock into his account. A customer who is short against the box owns the stock he shorted. As a result, the customer may use his owned stock to cover the short position, buy back the short position in the open market, or any combination of the two. The customer cannot simply deposit funds into his account.
For a corporate bond, once issued, nominal yield A) does not change in response to interest rate movements. B) will always be equal to current yield. C) has an inverse relationship to current interest rate movements. D) moves in the same direction as current interest rates.
A) does not change in response to interest rate movements. Nominal yield (coupon) does not change from the time of issue through maturity. Current yield, yield to maturity, and yield to call, however, are impacted as bond prices react (inversely) to the movement of interest rates in the open market.
The Securities and Exchange Commission (SEC) requires that notice of corporate actions be given for all of the following except A) interest payments on the issuer's debt instruments. B) a reverse split on the issuer's common stock. C) dividend payments on the issuer's common stock. D) the issuance of warrants to be attached to a bond offering.
A) interest payments on the issuer's debt instruments. Payment of bond interest is an obligation and therefore not considered a special corporate action notice. Reverse splits and warrants are not regular happenings, and even though some companies have paid dividends regularly, those dividends are not guaranteed and can be halted. Hence, these events would be considered special corporate actions and therefore require notification to the marketplace.
A mutual fund can offer all of the following to investors except A) physical custody of the fund's portfolio cash and securities. B) check-writing privileges for redemptions. C) the ability to do transfers by telephone or online. D) acting as custodian for retirement accounts.
A) physical custody of the fund's portfolio cash and securities. The services mutual funds offer may include retirement account custodianship, investment plans, check-writing privileges, transfers by telephone or online, withdrawal plans, and a number of other services and privileges. However the Act of 1940 requires that each investment company place portfolio cash and securities with a custodian for safekeeping.
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: A) prohibited as fraudulent and manupulative B) permissible if the security are deposited into escrow C) prohibited unless the firm immediately sets aside funds for the repurchase D) permissible if the customers retain the right to sell securities into the open market
A) prohibited as fraudulent and manupulative
A broker dealer is permitted to accept payment for a new issue from a new customer when the A) registration is effective B) red herring is delivered C) preliminary prospectus is amned D) transaction takes place during the cooling-off period
A) registration is effective
call protection is most valuable to a bond owner when bond prices are generally: A) rising B) falling C) stable D) fluctuating
A) rising
A registered representative enters a discretionary order for her clients account. All of the following are required except A) the order must be approved by a principal prior to entry. B) the order should be included in those required to be reviewed frequently. C) the order must be identified as or marked discretionary. D) a record of the order must be maintained.
A) the order must be approved by a principal prior to entry. Each discretionary order must be identified as such at the time it is entered for execution, a principal, officer or a partner of the BROKER-DEALER must approve each order promptly and in writing, but not necessarily before order entry, a record must be kept of all transactions including discretionary ones, and as with all trading activity, it is subject to frequent and systematic review by a designated supervisor or manager.
which of the following considerations should a registered rep explain to a customer when recommending a 529 college savings plan? A) the potential desductibility of contributions from state taxes B) the potential deducitilbity of contributions from federal taxes C) the income eligibility restrictions to contribute to the account D) the rights of the account beneficiary to the assets at the age of majority
A) the potential desductibility of contributions from state taxes
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? A) the spot exchange rate B) the counter currency's inflation rate C) the trade balance between the two countries D) the credit rating of the counter currency's government
A) the spot exchange rate
The owner of which of the following products is most exposed to inflationary risk A) utility stocks B) treasury bills C) treasury bonds D) blue chip industrial
A) utility stocks
Your firm must provide a privacy notice describing its privacy policies to customers A) every third year after the account has been opened. B) whenever a new account is opened only. C) only when the customer indicates a change be made in information previously supplied. D) whenever a new account is opened and annually thereafter.
B) whenever a new account is opened only. Privacy Notifications under Regulation S-P must be provided to customers whenever a new account is opened and annually thereafter.
Under normal circumstances, a customer's letter of intent on a mutual fund purchase is valid for what maximum period of time? A) 3 months B) 6 months C) 13 months D) 24 months
C) 13 months
ABC and MNO both have the same market price and shares outstanding for their common stock. If ABC's price-to-earnings ratio is higher, that would indicate A) ABC's net income is higher than MNO's. B) ABC's sales are higher than MNO's. C) ABC's net income is less than MNO's. D) ABC sales are lower than MNO's.
C) ABC's net income is less than MNO's. If ABC's price-to-earnings ratio is higher than MNO's, then its earnings (defined as net income ÷ shares outstanding) is lower than MNO's. The information provided does not provide enough detail to know whether ABC or MNO had higher sales.
Under the Securities Act of 1933, registration is required for which of the following securities? A) Eurodollar bonds B) municipal securities C) ADRs D) securities issued by federal gov
C) ADRs
An applicant for registration was convicted of a misdemeanor within the past five years having to do with a motor vehicle driving infraction. For purposes of filing Form U4 for registration with a member firm, the applicant must list the conviction. need not list the conviction. would be automatically subject to statutory disqualification, whether the conviction was listed or not. would not be subject to statutory disqualification. A) I and III B) II and III C) II and IV D) I and IV
C) II and IV Non-securities-related misdemeanor convictions (such as a driving infraction) do not have to be reported on an applicant's Form U-4 when applying for registration. Securities- or money-related misdemeanors and felony convictions within the past 10 years must be reported. These disqualifies an applicant from registering (statutory disqualification).
Which of the following statements is true about treasury stock? A) it has voting rights B) it receives dividends C) It is issued stock that has been subsequently reacquired by the corporation D) It is authorized stock that has not been issued and is held in the corporation's treasury
C) It is issued stock that has been subsequently reacquired by the corporation
Under rule 144A, an issuer of restricted stock is permitted to sell to which of the following investors? A) financial institutions B) Accredited investors C) Qualified institutional buyers (QIBs) D) Nonaccredited investors who have previously purchased restricted stock
C) Qualified institutional buyers (QIBs)
Your customer wants to be in a position to buy CDS stock while taking in premium. Which of the following options positions might accomplish this? A) Short calls B) Long calls C) Short puts D) Long puts
C) Short puts Long calls or short puts would meet the criteria of being in a position to buy stock, but only sellers of options take in premium (income). Therefore, to meet both criteria, shorting puts would be the only basic option position that might accomplish this.
A customer of a broker-dealer makes it known that they would like to trade options in their account. The first step to accommodate the request is which of the following? A) The firm's registered options principal (ROP) should approve the account so trades can occur immediately. B) The registered representative should provide the customer with the options disclosure document (ODD). C) The registered representative should determine the suitability of options trading for the customer. D) Options Clearing Corporation (OCC) should be apprised to see if other options accounts are maintained at other broker-dealers.
C) The registered representative should determine the suitability of options trading for the customer.
which of the following investments are generally traded according to their average life rather than their stated maturity dates. A) corporate bonds B) government bonds C) asset backed securities D) fixed rate capital securities
C) asset backed securities
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: A) positions vacant on the board B) directors present at the meetings C) shares owned by the stockholder D) proxies available for voting by the board
C) shares owned by the stockholder
All of the following self-regulatory organizations (SROs) function under the Securities and Exchange Commission's (SEC's) oversight except A) the Municipal Securities Rule Board (MSRB). B) the Financial Industry Regulatory Authority (FINRA). C) the Federal Savings and Loan Insurance Corporation (FSLIC). D) the Chicago Board Options Exchange (CBOE).
C) the Federal Savings and Loan Insurance Corporation (FSLIC). SROs function under the SEC's oversight. Each SRO is accountable to the Commission for enforcing federal securities laws, as well as supervising securities practices within an assigned jurisdiction. These include FINRA, MSRB, and CBOE.
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? A) equity put option B) perpetual preferred stock C) variable rate demand note D) tax-deferred variable annuity
C) variable rate demand note
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? A) No stated time limit B) 5 years C) 30 days D) 2 years
An amended U-5 form must be filed and a copy sent to the affected former employee within 30 days of discovery of the inaccuracy. It does not matter how long it has been since the employee's termination.
An investor opens an account with BNZ Government Securities, a broker-dealer limiting its transactions exclusively to securities issued by the U.S. government. The account holds $250,000 of Treasury bonds, $250,000 of Treasury notes, and $50,000 in cash. If BNZ's broker-dealer business should fail, the investor would receive Securities Investor Protection Corporation (SIPC) protection in the amount of A) all of the securities and all of the cash, because U.S. government securities do not go bankrupt. B) $0. C) $50,000 of the cash and $450,000 of the securities. D) $500,000 of the securities and none of the cash.
B) $0. Although the vast majority of broker-dealers are required to be members of SIPC, those who deal exclusively in U.S. government securities are exempt.
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? A) Monthly B) Quarterly C) Semiannually D) Annually
B) Quarterly
Which of the following statements is true regarding the concept of an annuity contract? A) payouts of an investment in a nonqualified annuity are all income tax free B) The kind of annuity selected partly determines the payment amounts to the annuitant C) In the case of life annuity contracts, the age and sec of the annuitant do not affect the payment amounts D) The amounts of a periodic payments to the annuitant are determined by the performance of the insurance company's investment returns
B) The kind of annuity selected partly determines the payment amounts to the anuitant
A transaction is which a writer covers a position by purchasing an option is called: A) a closing sale B) a closing purchase C) an opening sale D) an opening purchase
B) a closing purchase
A married couple who earned income that exceeded $300,000 in each of the prio 2 years and reasonably expects the same for the current year is A) a qualified investor B) an accredited investor C) an institutional investor D) a qualified institutional buyer (QIB)
B) an accredited investor
The primary purpose of a syndicate desk in the context of an equity offering is to A) determine the list of selling shareholders B) build an order book and allocate the stock C) solicit interest from investors in the stock offering D) chaperone company management during the road show
B) build an order book and allocate the stock
The call provision of a bond stipulates which of the following factors A) maturity date B) call date and call price C) original issue discount D) coupon rate and call date
B) call date and call price
A bank trustee holds the titles to assets a corporation has purchased and utilizes in its day-to-day business. The corporation issues debt securities backed by these assets. These securities are A) debentures. B) equipment trust certificates. C) mortgage bonds. D) collateral trust bonds.
B) equipment trust certificates. Debt securities issued by corporations backed by the assets the corporation owns and uses in its daily business are known as equipment trust certificates.
All of the following risks apply to both foreign and domestic debt instruments except: A) political B) exchange C) repayment D) interest rate
B) exchange
Direct participation programs (DPPs) provide: A) liquidity and transparency B) exposure to non-correlated assets with steady returns C) market related correlations with higher average returns D) investors with direct purchases of stock from public companies
B) exposure to non-correlated assets with steady returns
Laws increasing or decreasing taxation would be best associated with A) fiscal policy enacted by the Federal Reserve Board (FRB). B) fiscal policy enacted by the president and Congress. C) monetary policy enacted by the FRB. D) monetary policy enacted by the president and Congress.
B) fiscal policy enacted by the president and Congress.
Which of the following investment risks is the greatest risk in a variable life insurance policy? A) credit risk B) market risk C) inflation risk D) interest rate risk
B) market risk
No-load mutual funds may have lower expense ratios than load mutual funds for which of the following reasons? A) no-load funds do not charge 12b-1 fees B) no-load funds are not permitted to charge a 12b-1 fee greater than 25 basis points C) sales charges for load mutual funds increase their annual expense ratios D) fund management fees for no-load funds are always lower than load funds
B) no-load funds are not permitted to charge a 12b-1 fee greater than 25 basis points
An associated person who is not a registered representative is permitted to engage in which of the following activities: A) accept an unsolicited customer order B) provide account opening forms to new customer C) discuss the attributes of a particular investment product D) prequalify prospective customers as to investment objectives
B) provide account opening forms to new customer
The requirement for a supplemental prospectus to be filed before each sale is applicable to A) initial public offering sales. B) shelf registration sales. C) sales of shares in the secondary market. D) additional issues.
B) shelf registration sales.
FinCEN accomplishes its mission to safegaurd the financial system from the abuses of financial crime, including terrorist financing and money laundering, by enforcing: A) SEC regulations B) the bank secrecy act C) the securities act of 1933 D) the investment company act of 1940
B) the bank secrecy act
The maximum gain on a short call is A) strike - premium. B) the premium. C) strike + premium. D) the strike price.
B) the premium.
Which of the following represents the effect of a stock split A) the price per share of the common stock increases B) the price per share of the common stock decreases C) Each stockholder's proportionate ownership decreases D) Each stockholder's proportionate ownership increases
B) the price per share of the common stock decreases
Which of the following statements is true about all US government agency issues? A) they are exempt from federal taxes B) they are exempt from registration under the Securities Act of 1933 C) they are issued in bearer form only D) They are general obligations of the federal government
B) they are exempt from registration under the Securities Act of 1933
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? A) $3 B) $32 C) $35 D) $38
D) $38
Your client, Janice Thomas, is an active trader and wants to invest in a managed equity portfolio that he can trade intraday. Which of the following should you recommend? A) An exchange-traded note (ETN) B) An exchange-traded fund (ETF) C) A mutual fund D) A closed end fund
D) A closed end fund A closed end fund is actively traded and most of them are equity funds. They trade on the exchanges like stocks. Mutual funds can be equity funds and can be actively managed, but because they only trade once per day, they are not good for active trading. ETF are actively traded but are not actively managed. ETNs are debt securities, not equities.
Firms applying for Financial Industry Regulatory Authority (FINRA) membership are required to agree to be in compliance with all federal securities laws. pay dues, assessments, and other charges the association levies. pass the appropriate qualification exam(s). attend a FINRA annual conference no less frequently that once every three years. A) II and III B) I and III C) II and IV D) I and II
I and II
Your client Mr. Jenson calls and wants to purchase T-bills and wants to know when payment is due. You should inform him A) trade date plus three business days. B) trade date. C) trade date plus one business day. D) trade date plus two business days.
Regular way settlement is T + 2 for everything except Treasuries, money market securities, and options Treasuries and options settle next business day (T plus 1).
Mitigation of the risk of loss in a bearish market can be achieved by customers with vulnerable long stock positions placing: a) Sell limit orders b) Buy stop orders c) Sell stop orders d) GTC orders
Sell stop orders
The term disclaimer is most often associated with A) The fact that no agent can guarantee a customer against loss b) The fact that unregistered securities are more risky than registered ones c) The fact that the government cannot guarantee the accuracy of the information in a prospectus d) None of the above
The fact that the government cannot guarantee the accuracy of the information in a prospectus
In a limited partnership, which of the following best describes who is responsible for tax consequences of the business? A) The general partners B) The investors C) The business D) The limited partners
The investors All tax consequences of the business flow through proportionality to the investors. All partners will have some tax impact, not just the general or just the limited partners.
Reinvestment risk is least present in: a) 2% 10 year Treasury Note b) 3% 10 year AA rated Municipal G.O. c) 4% 10 year AAA rated Corporate debenture d) Zero coupon Treasury Bond
Zero coupon Treasury Bond Since with a Zero coupon instrument there is no annual income to 'reinvest,' Zeroes have no reinvestment risk.
When the market price of a company's common stock has reached triple digits ($100 or above), the Board of Directors may elect to declare which of the below to make the shares more affordable? a) Reverse stock split b) A stock split c) A stock dividend d) any of the above
a stock split Splitting a stock provides each shareholder with more shares and the CMV (current market value) of the stock will decline proportionately. Because of the reduced price in the market, it becomes more 'affordable.'
Banker's acceptances are A) short-term time drafts issued by banks to the federal government. B) short-term time drafts issued by banks to corporations. C) intermediate-term debt instruments issued by banks to corporations. D) intermediate-term debt instruments issued by the federal government to banks.
short-term time drafts issued by banks to corporations.
The Securities & Exchange Commission was formed as part of a) the Securities Act of 1933 b)the Securities & Exchange Act of 1934 c) the New Deal legislation d) none of the above
the Securities & Exchange Act of 1934
All of the below are typical features of an ETF except: a) they are marginable b) they often are sector-driven portfolios c) they are traded each day based upon 4:00 pm NAV d) none of the above are exceptions
they are traded each day based upon 4:00 pm NAV Exchange traded funds trade on exchanges at market prices determined by supply and demand - the same as regular corporate stocks.
Call option contracts are considered to have intrinsic value: a) when CMV exceeds exercise price b) when exercise price exceeds CMV c) when CMV is equal to exercise price d) when the option holder has exercised the option
when CMV exceeds exercise price Call option contracts go 'in the money' (intrinsic value) when the current market value of the underlying security exceeds the exercise price (strike price) of the option. If a call option's exercise price is $20, and the underlying stock is trading at $25, the intrinsic value of the call option is $5.
Regulation SHO severely restricts short selling during the cooling offer period of a follow-on offering. Which of the below is true? a) shorting stock of a company undergoing a follow on offering is prohibited during the registration period. b) an investor cannot buy the new shares in a follow on deal if they have sold the outstanding shares of that issuer during the cooling off period. c) an investor may buy the new issue shares on the offering so long as any short sale has been covered at least one business day prior to the effective date. d) none of the above
an investor may buy the new issue shares on the offering so long as any short sale has been covered at least one business day prior to the effective date. SHO are the first 3 letters of the word 'short.' Answer C. best describes the basics of this regulation.
If the portfolio of a variable annuity separate account is directly and actively managed by the insurance company, the separate account must be registered as A) a face-amount certificate company. B) an open-end management investment company. C) an equity unit investment trust. D) a closed-end management investment company.
an open-end management investment company. If managed by the insurance company's own investment advisor, a separate account must register as an open-end company. If it is managed by a third party, it must register as a unit investment trust.
Accumulation units are most often associated with: a) life insurance b) annuities c) mutual funds c) ETFs
annuities Variable annuities sell 'accumulation units' to purchasers, whose price each day is based upon the 4 pm net asset value of the separate account.
Sweeteners as that term is used in the investment banking community refers to issue enhancements which include: a) warrants b) insurance c) convertibilty d) any of the above
any of the above Each of these when associated with a bond issue makes the bond more attractive from a client's point of view.
Which of the following investment instruments trades on an exchange at a market price not directly related to its net asset value? a) open end investment company b) private hedge fund c) put and call option contracts d) closed-end investment company
closed-end investment company Only the closed-end investment company trades at supply & demand pricing on an Exchange, and has no specific relationship to the fund's underlying asset value.
The principal difference between a selling syndicate and a selling group would be: a) commissions earned b) Eastern versus Western liability c) commitment d) all of the above
commitment Syndicate implies a firm commitment; group implies best efforts.
The least liquidity in the securities shown below would be found: a) in securities traded on the Pink Quote system b) in securities listed on regional stock exchanges c) in T-bills d) in general obligation issues
in securities traded on the Pink Quote system Pink sheets: the Pinks: the Pink quotes: All these terms in your textbook speak of thinly traded, closely-held, low daily volume stocks, where liquidity is not especially present when compared to NYSE and NASDAQ stocks.
The so-called 5% policy pertains to a) mark ups on retail OTC transactions excepting new issues b) commissions on NYSE trades exclusively c) mark ups, mark downs and commissions on retail secondary market trades in municipal bonds d) none of the above
mark ups on retail OTC transactions excepting new issues The FINRA markup markdown and commission policy does not apply to new issues as well as municipal bonds --- MSRB has its own such policy.
When a corporate Board announces a 10% stock dividend, shareholders know they will be receiving: A) more shares b) money c) both of the above d) neither of the above
more shares stock dividends are not cash dividends- they are dividends in the form of additional shares
One of the most frequently issued money market instruments is commercial paper. Typically, this investment has a maximum maturity: a) of one year v) of 90 days c) of 270 days d) 180 days
of 270 days The maximum maturity is 9 months or 270 days.
Certain securities are marginable under Regulation T of the Securities & Exchange Act of 1934 except: a) listed stocks b) options c) NASDAQ stocks d) all of the above are marginal under Reg. T
options Regulation T does not permit margin under normal circumstances on Option contracts.
The maximum coverage offered per separate customer under SIPC insurance was set by Congress at: a) $250,000 for cash and securities combined b) $500,000 for securities and cash combined c) $1,000,000 for securities and cash with no more than $250,000 for cash claims d) $500,000 for cash and securities coverage with no more than $250,000 for securities claims
$500,000 for securities and cash combined
The Securities & Exchange Commission (SEC) was created by Congress in 1929 1933 1934 1940
1934
A member of the stock exchange responsible for providing liquidity in a security by being willing to buy and sell at all times is know as A) broker 2) underwriter 3) market maker 4) transfer agent
3) market maker
A customer has held an account with a broker-dealer for over one year. A registered representative associated with the firm recommends the purchase of an unlisted security trading at $3.50. What documentation, if any, is required prior to the trade? A) No documentation is required. B) A suitability statement is needed, but not a disclosure statement. C) Both suitability and disclosure statements must be obtained. D) A disclosure statement is required, but not a suitability statement.
D) A disclosure statement is required, but not a suitability statement. Established customers are exempt from the suitability statement requirement but not from the disclosure requirements when penny stocks are being solicited. An established customer is someone who has held an account with the broker-dealer for at least one year (and has made a deposit of funds or securities); or has made at least three penny stock purchases of different issuers on different days. forgot penny stocks are anything below $5
Which of the following products is adversely impacted if the issuers credit rating is downgraded? A) mutual funds B) UITS C) ETFS D) ETNS
D) ETNS
Which of the following accounts can only be opened in a cash account? Individual transfer on death (TOD) account Individual account Individual retirement account (IRA) Individual custodial account A) II and III B) I and II C) I and IV D) III and IV
D) III and IV IRAs and custodial accounts prohibit the use of margin, so they must be done in cash accounts. These other accounts can be cash or margin.
Craig and Judy have just married. It is a second marriage for both of them and they both have kids from a prior marriage. Craig would like his portion of their account to go to his kids when he dies and Judy would like her portion to go to her kids when she dies. As new partners in marriage, while they are both alive they would both like to have full access to the account. What type of account(s) should they set up? A) Each should set up their own individual TOD account with limited POA B) Joint tenants with rights of survivorship C) A partnership account D) Joint tenants in common (TIC)
D) Joint tenants in common (TIC)
Blue- sky laws are regulated by which of the following entities: A) SEC B) MSRB C) FINRA D) State securities regulators
D) State securities regulators
Which of the following records must be kept for the life of a broker-dealer firm? A) The general ledger B) Customer ledgers C) Forms U-4 and U-5 D) Stock certificate books
D) Stock certificate books
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? A) DTC B) Issuer C) Custodian D) Transfer agent
D) Transfer agent
Which of the following Form u4 reportable events results in a statutory disqualification? A) a personal bankruptcy filing B) a written customer complaint alleging misappropriation of assets C) a felony theft charge D) a felony conviction for a driving under the influence (DUI) charge
D) a felony conviction for a driving under the influence (DUI) charge
All of the following is true about local government investment pools (LGIPs) except A) LGIPs operate similarly to a money market instrument. B) pools are not required to register with the Securities and Exchange Commission (SEC). C) the pool maintains a fixed $1 net asset value. D) investors must be provided a prospectus at or before they purchase shares in the investment portfolio.
D) investors must be provided a prospectus at or before they purchase shares in the investment portfolio. The operating characteristics of LGIPs are similar to those of money market funds, and they keep a $1 net asset value (NAV). They are not required to register with the SEC and therefore there is no prospectus but do provide information statements, which include details of the management fees.
In a prime brokerage account, the prime broker A) subcontracts out all services to other brokers. B) provides custody and clearing, but no margin financing. C) provides execution services only, while another broker clears transactions and provides any other account services required. D) provides custody and clearing services, as well as margin loans.
D) provides custody and clearing services, as well as margin loans. In a prime brokerage account, the prime broker provides custody and clearing services (including margin loans). The prime broker may provide some execution services and contract with other brokers to provide additional execution services.
SIPC, the securities investor protection corporation is: a) An insurance entity which protects investors investments again market losses up to $500,000 b) An insurance entity which protects investors who are sold worthless securities c) A Congressional guarantee against losses in the securities markets d) None of the above
None of the above SIPC was set up to protect customer ACCOUNTS in the event of a broker-dealer bankruptcy, not protect investments against loss. Be careful of the wording in this question. Cash & securities in customer accounts are 'insured' up to $500,000 in the event the B/D goes bankrupt and the cash and securities can't be located and properly returned to the customer.
All of the following are full disclosure documents used in the sale of securities with the exception of: a) official statement b) notice of sale c) offering circular d) prospectus
Notice of Sale A notice of sale is an advertisement published by a municipality in order to get bids from interested broker-dealers who wish to underwrite the sale of that issuer's upcoming bond offering. The other answers are different names for documents which make full disclosure to purchases of securities.
SIPC is an insurance organization designed to protect investors against loss: a) When their brokerage firm makes provably unsuitable recommendations b) When their brokerage firm fails to notify them of an impending stock market decline c) When their broker-dealer goes bankrupt d) When their brokerage firm loses or misplaces their securities.
When their broker-dealer goes bankrupt Securities Investor Protection Act of 1970 created an insurance entity called the Securities Investor Protection Corporation. Its purpose is to provide protection to customers of bankrupt brokerage firms in the event the customers' cash and or securities have not been found during the bankruptcy proceedings. It is not investment insurance.
If a market maker posts a quote of 10.00-10.10 (25x10) which of the following actions is the market maker willing to take?
buy 2,500 shares at $10 and sell $1000 shares at $10.10
