Exam FX SIN Chapter 1

Which of the following would be included in the definition of an investment adviser? A A broker/dealer who charges a fee for analyzing client portfolios B An individual who publishes a quarterly newsletter with a model portfolio that includes buy/sell recommendations C An attorney who works with his client on a Chapter 11 re-organization D A business professor who teaches a class in portfolio management

A A broker/dealer who charges a fee for analyzing client portfolios

When an entity makes a market in a particular security, it is deemed to be acting as A A principal. B An account executive. C A broker. D An issuer.

A A principal.

An investor and her spouse's joint income was over $300,000 for the last 2 years, and they expect to earn about the same in the current year. What type of an investor does this describe? A Accredited investor B Qualified institutional buyer C Institutional investor D Qualified investor

A Accredited investor

A legal entity that offers securities to investors is A An issuer. B An insurer. C A purchaser. D An institutional investor.

A An issuer.

A customer who failed to complete payment in 4 business days applied for an extension but was denied. What action should be taken? A Close out the transaction. B Re-apply for another extension. C Following the 2nd business day, freeze the account for 90 days. D Give the customer an extra day to pay.

A Close out the transaction. Once the extension is denied, the transaction should be reversed, and the account should immediately be frozen for 90 days.

Which entity is responsible for providing a guarantee for bank savings accounts? A FDIC B SIPC C SEC D FRB

A FDIC

An investor can be granted an extension of time by A FINRA and the transacting exchange. B Any bank covered under the Federal Deposit Insurance Corporation. C The SEC. D His brokerage firm.

A FINRA and the transacting exchange. Only FINRA and the exchange where the stock was transacted may grant extensions to investors.

Broker/dealers effect transactions in securities for A For both their own account or the accounts of others. B Accounts of others only. C Their own account only. D For neither their own account nor the account of others.

A For both their own account or the accounts of others

If a CPA also provides investment advice to his clients for a fee, the CPA is considered a/an A Investment adviser. B Fiduciary. C Broker. D Custodian.

A Investment adviser. A person who receives compensation for investment advice is classified as an investment adviser. However, if providing advice is incidental to an accountant's business and he does not charge a fee for the advice, the accountant would not be required to register as an investment advisor.

When a brokerage firm is acting as a dealer, it is acting in the capacity of a/an A Principal. B Agent. C Fiduciary. D Broker.

A Principal As a dealer, a firm is acting as a principal while buying and selling securities for its own account.

Which of the following best fits the definition of an investment adviser? A Publisher of reports on securities B Bank C Broker/dealer whose advice is incidental to their business D Lawyer

A Publisher of reports on securities

Under Regulation T, if a customer's account is frozen for 90 days, the customer may make A Purchases on a cash basis. B Purchases but not sales under any circumstances. C Sales but not purchases under any circumstances. D No transactions of any kind.

A Purchases on a cash basis.

Which of the following organizations enforces federal securities laws? A SEC B U.S. Treasury C Congress D SIPC

A SEC

Which of the following organizations enforces federal securities laws? A SEC B U.S. Treasury C Congress D SIPC

A SEC

Which of the following entities regulates "blue sky" laws? A State securities regulators B MSRB C FINRA DSEC

A State securities regulators

When a company splits their stock, who maintains a record of shareholders eligible to receive the additional shares? A Transfer agent B Issuer C Custodian D Investment banker

A Transfer agent

All of the following are functions of a self-regulatory organization (SRO) EXCEPT A Write federal securities laws. B Establish member business conduct standards. C Discipline members. D Enforce compliance of the federal securities laws.

A Write federal securities laws

Which of the following would be included in the definition of an investment adviser? A A business professor who teaches a class in portfolio management B A broker/dealer who charges a fee for analyzing client portfolios C An individual who publishes a quarterly newsletter with a model portfolio that includes buy/sell recommendations D An attorney who works with his client on a Chapter 11 re-organization

B A broker/dealer who charges a fee for analyzing client portfolios

Which of the following is NOT included in the definition of a broker/dealer? A A firm that trades for the account of others B An agent registered in the state C A company acting in an agency or principal capacity D A firm that trades for its own account

B An agent registered in the state

The largest options exchange in the U.S. is the A NYSE. B CBOE. C OCC. D ODD.

B CBOE

A customer's account would be frozen for 90 days if the customer A Failed to deliver stock within 10 business days following sale. B Failed to deliver payment within 4 business days of purchase. C Bought and sold the same stock in the same account. D Bought and sold the same stock in different accounts.

B Failed to deliver payment within 4 business days of purchase.

Which of the following best fits the definition of an investment adviser? A Lawyer B Publisher of reports on securities C Bank D Broker/dealer whose advice is incidental to their business

B Publisher of reports on securities

All of the following describe the Municipal Securities Rulemaking Board (MSRB) EXCEPT A Principal regulator of the municipal securities market. B Regulates state and local government issuers of municipal securities. C Writes rules and regulations for municipal firms. D Regulates municipal advisors.

B Regulates state and local government issuers of municipal securities. This is an EXCEPT question. MSRB does not regulate or govern issuers of municipal securities. As the principal regulator of the municipal securities market, it regulates the activities of broker/dealers, banks that buy, sell and underwrite municipal securities, and municipal advisors.

Under Regulation T, the 90-day restriction applies to a customer who purchases and subsequently sells A Same stock in a margin account without fully paying for the purchase. B Same stock in a cash account without having first fully paid for the purchase. C Different stocks in the same account. D Same stock in different accounts.

B Same stock in a cash account without having first fully paid for the purchase.

Which of the following entities regulates "blue sky" laws? A SEC B State securities regulators C MSRB D FINRA

B State securities regulators

Which of the following entities manages federal finances? A Internal Revenue Service B Treasury Department C Congress D FINRA

B Treasury Department

If a member resigns from an SRO, when will the resignation take effect? A Immediately B Within 10 days of the resignation C 30 days after receipt of formal resignation by the SRO D 90 days after receipt of formal resignation by the SRO

C 30 days after receipt of formal resignation by the SRO

A customer who purchases securities in a cash or margin account must pay for the securities in A 1 business day. B 3 business days. C 4 business days. D 7 business days.

C 4 business days.

If a customer purchasing securities on margin does not pay for the securities in the required time period, the account is frozen, and no credit may be extended to them for A 30 days. B 60 days. C 90 days. D 180 days.

C 90 days.

Which of the following is excluded from the definition of investment adviser? A A lawyer whose investment advice is central to their practice B A publisher of a newsletter rendering advice about specific investment situations of individual clients C An economics professor who occasionally advises other faculty members on their portfolios D An accountant who charges a client for constructing a financial portfolio

C An economics professor who occasionally advises other faculty members on their portfolios

FINRA's main functions include all of the following EXCEPT A Monitoring compliance with rules of ethical practice. B Writing rules enforcing broker/dealer behavior. C Approving SEC rules and violations. D Governing broker/dealer and registered representative trading activity.

C Approving SEC rules and violations.

If a customer purchases securities and does not settle the account in 4 business days, the brokerage firm's first order of business is to A Notify FINRA and the exchange. B Freeze the account for 90 days. C Cancel the trade and sell the purchased securities. D Notify the SEC.

C Cancel the trade and sell the purchased securities

Which of the following is the parent company of CBOE? A OCC B S&P 500 C Cboe D FINRA

C Cboe

A member's blanket fidelity bond provides insurance against all of the following EXCEPT A A registered representative embezzling cash from a customer's account. B Lost stock certificates. C Customers' investment losses in the event of a stock market crash. D Employee theft of stock certificates.

C Customers' investment losses in the event of a stock market crash.

The North American Securities Administrators Association (NASAA) is an A Organization that does not have the authority to file enforcement actions. B Association mandated by the federal government. C Organization of securities regulators whose goal is to protect customers from fraud. D Association with mandatory participation.

C Organization of securities regulators whose goal is to protect customers from fraud.

All of the following describe the Municipal Securities Rulemaking Board (MSRB) EXCEPT A Regulates municipal advisors. B Principal regulator of the municipal securities market. C Regulates state and local government issuers of municipal securities. D Writes rules and regulations for municipal firms.

C Regulates state and local government issuers of municipal securities

All the following are considered self-regulatory organizations for the regulation of securities offerings and trading EXCEPT A FINRA. B CBOE. C SEC. D MSRB.

C SEC

Under the Uniform Securities Act, the definition of an investment adviser includes A A trust company. B A lawyer advising clients on pension plan investments without accepting a fee. C The publisher of an investment newsletter who provides investment advice based on client situations for a fee. D A general circulation newspaper that has an investment column.

C The publisher of an investment newsletter who provides investment advice based on client situations for a fee.

The IRS is a bureau of the A FINRA B MSRB C Treasury Department D Securities and Exchange Commission

C Treasury Department

Which of the following entities manages federal finances? A FINRA B Internal Revenue Service C Treasury Department D Congress

C Treasury Department Among other functions, the Department of the Treasury is responsible for managing federal finances, collecting taxes, issuing currency and coinage, and managing government accounts and public debt.

The IRS is a bureau of the A FINRA B MSRB C Treasury Department D Securities and Exchange Commission

C Treasury Department The Internal Revenue Service is the largest bureau of the Department of the Treasury. It is responsible for collecting personal and corporate taxes.

A natural person may be considered an accredited investor if, in each of the past 2 years, his or her income exceeded A $10,000 B $50,000 C $100,000 D $200,000

D $200,000

Your client has not paid for a stock purchase in the allotted time period. According to Regulation T, this account will be frozen for A A period of time necessary to receive payment for the transaction. B 7 days. C 30 days. D 90 days.

D 90 days

Which of the following describes a market maker? A A person who may accept payment from the issuer of a security when acting in a market maker capacity B Anyone who earns a commission for their efforts C A person who buys or sells securities on behalf of the broker/dealer and its customers, but carries no inventory D A broker/dealer that assumes the risk of holding an inventory of shares of a stock in order to facilitate the trading of that security

D A broker/dealer that assumes the risk of holding an inventory of shares of a stock in order to facilitate the trading of that security

When broker/dealers effect trades for the accounts of others, they are acting in what capacity? A Dealer B Principal C Individual D Agency

D Agency

If an investor is considering working with a registered representative, which resource is available to review the person's professional background? A SEC B NASAA C EDGAR D BrokerCheck

D BrokerCheck

Which entity enforces MSRB rules that pertain to NYSE member firms? A MSRB B SIPC C NYSE D FINRA

D FINRA

Which of the following is a function of depositories? A May act as intermediaries in making settlements B Clear trades C Compare member transactions D Move securities from one participant's account to another participant's account

D Move securities from one participant's account to another participant's account

A customer has not paid for a stock transaction in 4 business days and has been refused an extension. The member firm A May grant an extension if they desire. B Must close the account. C May sue the customer for the money. D Must cancel or liquidate the order by immediately selling the securities.

D Must cancel or liquidate the order by immediately selling the securities

Which of the following is the function of the Department of the Treasury? A Conduct monetary policy B Promote consumer protection C Regulate retirement, health and welfare benefit plans D Oversee the U.S. economic and financial systems

D Oversee the U.S. economic and financial systems

All the following are considered self-regulatory organizations for the regulation of securities offerings and trading EXCEPT A MSRB. B FINRA. C CBOE. D SEC.

D SEC.

Under FINRA by-laws, which of the following relates to trade practice violations and enforcement? A The Code of Arbitration B The Uniform Practice Code C The Rules of Conduct D The Code of Procedure

D The Code of Procedure

The Investment Company Act of 1940 requires that most investment companies register with A FINRA. B NASD. C The NYSE. D The SEC.

D The SEC.

The Federal Act that established procedures for the protection of customer funds and securities in the event that a broker/dealer becomes insolvent is called A The Securities Act of 1933. B The Securities Exchange Act of 1934. C The Securities Advisers Act of 1940. D The Securities Investor Protection Act of 1970.

D The Securities Investor Protection Act of 1970. The Securities Investor Protection Act of 1970 (SIPA) established procedures for the protection of customer funds and securities in the event that a broker/dealer becomes insolvent. This act created the Securities Investor Protection Corporation (SIPC). The SIPC collects assessments from broker/dealers to protect customers from loss due to a failed broker/dealer.