progress exam 2
A broker-dealer executes but does not process transactions. If the firm processing the transactions knows the identity of the customers, this arrangement is known as a(n): Prime broker Clearing broker Omnibus account Fully disclosed account
D
A customer gives his registered representative the following instructions. Buy 100 shares of General Motors whenever you think the price is right. Under current regulations, the order: May be accepted and may be executed anytime that day Must be marked discretionary and approved by a branch manager May not be accepted Must be executed immediately
a
A client owns 2,000 shares of a stock. She expects a decline in the market and instructs her registered representative to sell 1,500 shares of the stock. The order ticket will be marked: Sell short Discretionary Sell long This transaction cannot be executed
c
A stop order would NOT be used to: Protect a gain when a long stock position appreciates Limit a loss if the market price of a short position increases Receive a specific price when buying or selling Limit a loss if the market price of a long stock position decreases
c
A type of order that becomes a market order when a round-lot trades at or through a particular price is called a: Market order Limit order Stop order Stop-limit order
c
All of the following items are required on an order ticket, EXCEPT: Security name or symbol Buy or sell instructions Whether the order is for a retail customer or an institutional customer Account number/name
c
List the order of priorities that you would follow when opening an options account for a customer. Have the customer sign the options agreement Have the registered options principal approve the account Send the customer an Options Clearing Corporation risk disclosure document Enter the order III, II, IV, I II, III, IV, I II, III, I, IV III, I, II, IV
a
A customer has opened an account with ABC Brokerage that clears all trades on a fully disclosed basis with XYZ Brokerage. When opening the account, the customer must: Be notified orally of this clearing agreement Be notified in writing of this clearing agreement Be notified orally and in writing of this clearing agreement Not be notified of this clearing agreement
b
Which TWO of the following situations would be considered a joint account? A mother and her minor child in an account under the UGMA Two unrelated individuals as tenants in common Husband and wife as tenants with rights of survivorship A wrap account managed by a registered investment adviser I and III I and IV II and III II and IV
c
Which of the following choices is a benefit of an account that is designated Transfer on Death (TOD)? The ability for joint owners to each trade the account The avoidance of estate taxes The avoidance of probate The opportunity for proportional ownership
c
A customer sells short 100 shares of ABC at 95. Two weeks later, the stock drops to a price of 89. In an attempt to protect her profit, the customer enters a: Sell stop order at 90 Buy stop order at 90 Buy limit order at 87 Sell limit order at 90
b
Before accepting a delivery versus payment (DVP) order from a customer, a broker-dealer must: Notify FINRA Obtain the name of the customer's agent from the customer Receive approval of the trade from the contrabroker Notify the appropriate banking regulator
b
Securities purchased by a customer in a cash account are NOT paid for by the payment date. If the securities are sold by the customer, this is an example of: Churning Day trading Free-riding Short selling
c
The 5% Markup Policy applies when a member is acting as a(n): Investment banker Sponsor of a mutual fund Dealer when selling a security from inventory Underwriter of a security
c
When can a buy-in be initiated by the purchaser? On the trade date On the settlement date Three days after the settlement date Thirty-five calendar days after the trade date
c
An investor who has granted power of attorney to his son dies. The power of attorney: Remains in effect until cancelled by the executor of the estate Remains in effect until cancelled by the son Remains in effect only if the son is the sole heir to the estate Is cancelled on the death of the principal in the account
d
Churning is BEST defined as: Selling shares of an investment company just below the quantity where a customer would receive a quantity discount Charging a customer a higher-than-normal markup on a transaction Not honoring a firm quote Excessive trading activity in a customer's account
d
The term that defines an arrangement in which an investment manager receives research or brokerage services in exchange for placing orders through that broker-dealer is called: Trading ahead of research Front-running Hard dollars Soft dollars
d
Which of the following are needed to open a corporate margin account? Corporate charter and resolution New account form Hypothecation agreement Trust agreement I and II only I and IV only III and IV only I, II, and III only
d
A broker-dealer that accepts orders from customers but does not maintain custody of securities and assets is known as a(n): Introducing firm Clearing firm Clearing facility Omnibus firm
a
A cash trade would settle: On the trade date One business day after the trade date Three calendar days after the trade date Three business days after the trade date
a
A customer executing a short sale anticipates: A decrease in the market value of a security An increase in the market value of a security No change in the market value of a security Either a large increase or decrease in the market value of a security
a
An Operations Professional discovers that one of the firm's clients is on the Office of Foreign Assets Control (OFAC) list. The BEST action for the Operations Professional to take is: Contact compliance who should notify the federal law enforcement authorities immediately Call the client to see if a mistake has been made Investigate the matter further to see if there is any evidence of suspicious activity Notify FINRA
a
An over-the-counter trader, when talking about the spread, is referring to the: Difference between the bid and asked price of a security Difference between his cost price and his selling price Amount of his markup from his cost price Amount of commission he will charge
a
As it relates to money laundering, layering is BEST described as a client's strategy to: Use numerous accounts with multiple owners to avoid detection Make numerous deposits just below the reporting threshold Deposit large sums of illicit funds directly in a brokerage account Deposit a small amount of illicit funds in an account
a
As principal of your firm's trading department, you notice that 200,000 shares of a stock covered by your firm have traded in the last 10 minutes of the session with the stock closing up strongly. The average daily trading volume (ADTV) of the security is normally 300,000 shares. Upon investigation you realize that these trades have been executed by one trader at your firm. You should be concerned about what manipulative activity is taking place? Marking the close Pegging Capping Pumping
a
Broker-dealers must provide a privacy notice to every customer: When the account is opened When the first trade occurs Before disclosing nonpublic, personal information If requested
a
When a carrying firm receives a transfer request from the Automated Customer Account Transfer Service (ACATS) system, it must validate or protest the transfer within: One business day Two business days Three business days A reasonable period
a
Which of the following organizations provides clearing services for equity securities? The National Securities Clearing Corporation (NSCC) The Fixed Income Clearing Corporation (FICC) Automated Customer Account Transfer Service (ACATS) Direct Registration System (DRS)
a
Which of the following persons or entities would be covered at a broker-dealer in a Securities Investor Protection Corporation (SIPC) liquidation? An individual investor with a $19,486 credit balance A local power utility owed $500 by the liquidating broker-dealer Another broker-dealer, owed $70,000 by the liquidating broker-dealer A customer with a $55,000 equity in a commodities account
a
A Suspicious Activity Report (SAR) should be filed: Only in the event that the firm has actual knowledge that the client is laundering money When a transaction equals or exceeds $5,000 and the firm suspects illegal activity Only for transactions of more than $10,000 Only for transactions with parties on the Office of Foreign Assets Control (OFAC) list
b
A U.S. Treasury bill is sold in the secondary market on Thursday, March 14. It has a regular-way settlement of: Tuesday, March 19 Friday, March 15 Wednesday, March 20 Thursday, March 14
b
A customer enters a stop order to sell 100 shares of stock at 20. The current market price of the stock is 22. If the stock trades at 20, the stop order: Will only be executed at 20 or better Becomes a market order for immediate execution Will be cancelled Will be executed at the discretion of the floor broker
b
A customer gives you an order to sell 100 shares of ATT. All of the following must be noted on the order ticket, EXCEPT: The customer's account number The customer's original purchase price of the stock The location of the securities Solicited or unsolicited
b
The Direct Registration System (DRS) may be used to: Transfer physical certificates that are registered in the customer's name Transfer securities that are held in book-entry form at a transfer agent Register securities into bearer form Eliminate proof of ownership
b
To ensure that a security registered in a customer's name has been signed properly when transferring the security to a broker-dealer, would require a: Letter of authorization Medallion signature guarantee Stock power Fidelity bond
b
Which of the following statements BEST describes an omnibus account? All of the clearing firm's proprietary trades are entered into one account An introducing firm combines its trades into a consolidated account for clearance purposes An introducing firm separates its trades for clearance purposes The clearing firm combines its proprietary trades with customers' trades into one account
b
Which of the following statements is FALSE regarding a broker-dealer acting as a market maker in a stock? It trades for its own account when buying and selling securities It makes money by charging commissions for executing transactions When making a market, it is acting as a principal It must be prepared to honor the prices it quotes unless it clearly qualifies them
b
As it relates to money laundering, which of the following choices BEST describes structuring? A client bribes someone to accept the deposit of funds The client uses fake companies to launder money The client makes small deposits to evade AML reporting thresholds A client buys and sells securities illegally with foreign nationals
c
On Monday, July 20, a customer purchases $1,000 shares of stock that is listed on the New York Stock Exchange. The trade would settle on: July 20 July 21 July 23 July 24
c
Which of the following choices would be acceptable as a custodian on a Uniform Gifts to Minors Act (UGMA) account? A corporation A married couple An individual A partnership
c
A broker-dealer is acting as a principal in which of the following scenarios? Selling bonds from inventory to an individual Selling bonds from inventory to another broker-dealer Buying bonds from another broker-dealer for inventory Buying 500 bonds to fill an insurance company's order for 250 bonds I and III only II and III only I, II, and III only I, II, III, and IV
d
A husband and wife have a joint account. If the wife instructed the firm to sell securities and send a check, the check could be made payable to: The husband only The wife only Either the husband or the wife The husband and wife jointly
d
A prime brokerage account would MOST likely be established for a(n): Individual opening an account for a minor Mutual fund Corporation Hedge fund
d
A registered representative should update a customer's account records for a change in: Address Net worth Employer Investment objectives I and III only II and IV only I, II, and IV only I, II, III, and IV
d
A special disclosure document may be required for investing in: Municipal bonds Convertible bonds Mutual funds Penny stocks
d
Listed options are issued and guaranteed by: FINRA The company whose stock underlies the contract The exchange where the options trade The Options Clearing Corporation
d
The DTCC performs all of the following activities, EXCEPT: Clearing transactions in equity securities Clearing transactions in fixed-income securities Hold securities in book-entry form Issue new certificates to shareholders
d
When a broker-dealer sells a security to a client and charges a commission on the transaction, it is acting as the client's: Market maker Principal Designated market maker Agent
d
Information barriers are usually used to prevent which of the following prohibited activities? Charging higher-than-normal commissions Trading ahead of a research report Detecting outside business activities of registered persons Churning
B