SIE Exam
What is the amount of interest payable per year on a $1,000 par value of 5% bond selling at 80 and redeemable at par in 10 years? a. $10 b. $40 c. $45 d. $50
$50 annual interest= coupon rate (5%) x par ($1,000)= $50
Which of the following bond offerings would be required to have a trust indenture under the Trust Indenture Act of 1939? a. US Treasury Bond b. airport authority revenue bond c. general obligation bond d. mortgage bond
d. mortgage bond only applicable to corporate bonds
A share of ABC 8% preferred stock with a par value of 25 will pay a quarterly dividend of: a. $0.50 b. $2.00 c. $0.80 d. $8.00
a. $0.50 annual dividend= $25 x 8%=$2.00 quarterly dividend= $2/4= $0.50
When a member firm receives a sell long order for a customer account, the member must have reasonable assurance that the customer will deliver the securities within a. 2 business days b. 2 calendar days c. 4 business days d. 4 calendar days
a. 2 business days
Which of the following could be used to meet a Reg T call on an initial transaction in a customer's margin account? I. a cash deposit equal to the amount of the call II. an escrow receipt with a value that is equal to the amount of the call III. listed securities which have a loan value that is equal to the amount of the call IV. listed securities which have a market value that is equal to the amount of the call a. I & III b. II & III c. II & IV d. I & IV
a. I & III If securities are deposited, they would have to have a LOAN VALUE equal to margin purchase specified or two times (2x) the Reg T Cash Requirement Securities have loan value of 50% of their market value. cash deposit to call would also work, but not an escrow receipt
Among the various economic theories, the one that says that economic growth and stability can be promoted by the active intervention of government fiscal policies in the marketplace is referred to as which of the following? a. Keynesian b. supply-side c. Monetariest d. Libertarian
a. Keynesian supply-side- less government intervention in the marketplace monetarists- money supply is key to economic growth
A warrant that is issued with a debenture a. allows the holder a long-term ability to exercise and buy specific number of shares of common stock b. allows the holder a short-term ability to exercise and buy a specified number of share of common stock c. pays interest in relation to debenture until the warrant is exercised d. pays dividends in relation to the stock to which it converts prior to exercise
a. allows the holder a long-term ability to exercise and buy specific number of shares of common stock normally good until company no longer exists
A corporation that issued several types of securities is being liquidated. Investors who own which of the following securities will have the most junior claim to company assets? a. common stock b. convertible bonds c. preferred stock d. collateral bonds
a. common stock
As inflation increases over time, the best hedge against it has historically been provided by which of the following types of securities? a. common stocks b. preferred stocks c. government securities (t-bonds, etc) d. convertible bonds
a. common stocks
The SEC "quiet periods" for an IPO of an emerging growth company as applied to the underwriters are: a. eliminated b. shortened c. lengthened d. remain unchanged
a. eliminated quiet periods- periods of time surrounds a public offering of new issue when promotional materials are generally prohibited.
The type of policy which advocates that the federal government uses taxation and increasing spending programs to foster a growing economy is called a. fiscal policy b. monetary policy c. supply-side policy d. trade policy
a. fiscal policy monetary policy- decisions of the FRB with regard to money supply and extension of credit supply-side policy- focus on tax cuts trade policy- doesn't apply to this question
When a client opens an options account at a firm, regulations dictate that the firm must receive an account agreement signed by the customer in what time frame? a. following approval of the account, the firm must receive the signed account agreement within 15 days b. the firm must receive the signed account agreement prior to approval of the account c. following approval of the account, the firm must receive the signed account agreement within one month d. the firm must receive the signed account agreement no fewer than 10 business days before approval of the account
a. following approval of the account, the firm must receive the signed account agreement within 15 days
All of the following actions by the federal government would be effective in combating an economic recession EXCEPT: a. increasing individual income tax rates for all citizens b. the Federal Reserve lowers interest rates c. additional government projects and spending on infrastructure d. additional borrowing by the federal government
a. increasing individual income tax rates for all citizens increase in taxes would cause an increase in a recessionary period because an increase in taxes would cause a further tightening of money available for spending by the consumer thereby worsening the recession
All of the following are typically services provided in a prime brokerage account EXCEPT a. investment advice b. securities lending c. centralized trade settlement while still using multiple executing brokers d. calculating a total return on all investments
a. investment advice prime brokerage account- bundled package of services offered by a bd to hedge funds and other institutional investors that use aggressive trading strategies. a written prime brokerage agreement is required to open a prime brokerage account
The separate account of a Variable Annuity will fluctuate in value with which of the following? a. market value of securities in the account b. fixed value of bonds in the account c. the separate account does not fluctuate in value but is a set amount d. the s&p 500 index
a. market value of securities in the account has market risk
The Depository Trust & Clearing Corporation's (DTCC's) Continuous Net Settlement (CNS) System acts as central counterparty for clearance and settlement of broker-to-dealer transactions in a. most equity, corporate bond, and municipal bond transactions in the US b. mostly equity securities transactions, with little or not involvement in corporate and municipal debt transactions c. mostly corporate and municipal debt transactions, with little or no involvement in equity securities transactions d. equity options only, with no involvement in other equity or debt transactions
a. most equity, corporate bond, and municipal bond transactions in the US
Which of the following is CORRECT about a JTWROS Account (Joint Tenants with Rights of Survivorship)? a. securities transactions may be placed by any individual listed on the account b. the account must be limited to two individuals only c. these accounts are generally taxed at a higher rate than individual accounts d. if one fo the account owners dies, the surviving member(s) of the account will receive all of the assets of the account unless the deceased individual's will states otherwise
a. securities transactions may be placed by any individual listed on the account
When helping your customer select a mutual fund all of the following would be primary considerations EXCEPT a. the NAV (Net Asset Value) of the fund b. the fund's historical performance c. sale charges d. the fund's risk and volatility profile
a. the NAV of the fund NAV is important once the investor owns a fund but not typically a consideration before
A corporation may issue refund bonds to accomplish any of the following EXCEPT: a. to increase the capitalization of the company b. to retire an existing bond issue c. to reduce its interest costs d. to take advantage of a substantial drop in interest rates
a. to increase the capitalization of the company
In order to free up time for the RR, a member firm has several non-registered persons telemarket prospective clients with a script. The script states the following: "Good morning, my name is _____________ and I'm calling you from Make Money Securities. Our firm expects market increases in ABC Fund, which is offered for sale by our RR. May I connect you with one of our representatives or send you further information?" Which of the following is CORRECT about this situation? a. under no circumstances may an unregistered person perform such activities b. all actions are permissible except projecting the future return of the ABC Fund c. the non-registered persons can perform such actions provided they obtain the appropriate registration within 30 days d. as long as the registered persons are standing by to take phone calls and the non-registered persons are closely supervised, the situation is acceptable
a. under no circumstances may an unregistered person perform such activities
When could one expect changes in the NAV of a mutual fund? a. when there are changes in the value of securities within the fund's portfolio b. when customers redeem fund shares c. when customers exchange fund shares for another fund's shares within the same family d. when shares of the fund are split
a. when there are changes in the value of securities within the fund's portfolio
A corporate bond called at 108 1/8 would pay the bondholder. a. $1,084.50 b. $1,081.25 plus accrued interest c. $1,081.25 minus accrued interest d. 1,000 plus accrued interest of $1.25
b. $1,081.25 plus accrued interest 108 x 10= $1,080 1/8= 0.125 x 10= $1.25 = $1,081.25 investor would be entitled to accrued interest
A customer buys 100 shares of ABC at 50.50 and sells 1 ABC 50 call @ 5. At what price will the customer breakeven? a. $45 b. $45.50 c. $55 d. $55.50
b. $45.50 B-5,050 S+500 = -4,550/100 = $45.50
A broker-dealer has fired a RR for cause related to a violation of securities regulations. This RR will continue to be subject to FINRA jurisdiction for what period of time following the filing of the Form U-5? a. 1 year b. 2 years c. 3 years d. 4 years
b. 2 years
Chuck is being laid off of his position at his employer. He has a Qualified 401 (k) Plan with this employer, but because of the circumstances of his termination, he refuses to maintain any contact with former employer or the 401 (k) Plan that was provided by that employer. Because of this, the employer has instructed the provider of the 401 (k) Plan to distribute a check to Chuck for the total amount. Which of the following is TRUE regarding this scenario? a. Since Chuck is being laid off, the check that is received can be deposited by Chuck into his checking account and used on a tax-free basis due to the circumstances under which Chuck lost unemployment b. Chuck should seek to roll over the funds from the 401 (k) to another 401 (k) at a new employer or to a Traditional IRA within 60 days to avoid taxes and penalties c. Because of the fact that this was a 401(k) Plan, Chuck must roll the funds into another 401 (k) Plan and is not permitted to roll the funds into an Individual Retirement Account (IRA) d. If Chuck gets a check directly from his former employer, he will have no choice but to pay ordinary income taxes on the sum of the check, regardless of whether or not he intends to reinvest or roll over the funds to a new plan
b. Chuck should seek to roll over the funds from the 401 (k) to another 401 (k) at a new employer or to a Traditional IRA within 60 days to avoid taxes and penalties
A customer does not submit payment for the securities he purchased on a timely basis. What happens in this situation? a. All future customer transactions require pre-approval of the RR's supervising principal b. For a period of 90 days, the member firm must ensure that no margin purchases are allowed in the customer's account c. the customer's account is frozen for 30 days. no transactions are permitted d. there are no consequences to the customer's in response to the late payment
b. For a period of 90 days, the member firm must ensure that no margin purchases are allowed in the customer's account
A client recently purchased a sizeable number of mutual fund shares and knows that the NAV will change daily. The customer asks the RR how the NAV number is computed. Which of the following best describes the computation to arrive at NAV per share? a. NAV per share is calculated by finding the average value on a per share basis over the previous quarter b. NAV per share is calculated by subtracting the liabilities of the fund from the total assets of the fund, then dividing this number by the total number of shares currently outstanding c. NAV per share is calculated by taking the total value of the portfolio of the fun, adding sales charges received, and then dividing this figure by the total number of share currently outstanding d. NAV per share is calculated by finding the total appreciation of the portfolio and dividing this figure by the total number of shares outstanding
b. NAV per share is calculated by subtracting the liabilities of the fund from the total assets of the fund, then dividing this number by the total number of shares currently outstanding
A broker-dealer firm has become insolvent. SIPC liquidation procedures have begun. Jill and Jack are married and each of them have individual accounts along with a joint account with each other at the firm. The following are their account balances: Jill's individual account has $275,000 in fully-paid securities, Jack's individual account has $265,000 in fully-paid securities, and Jill and Jack's joint account has $475,000 in fully-paid securities. What would SIPC cover in relation to these accounts? a. SIPC coverage would total $500,000 for the three accounts since the two parties are married b. SIPC coverage would pay $275,000 for Jill's account, $265,000 for Jack's account, and $475,000 for the joint account c. SIPC coverage would pay $1,500,000 in this case, because each account is insured for $500,000, regardless of the amount held when the broker-dealer firm became insolvent d. SIPC would not cover any of these claims
b. SIPC coverage would pay $275,000 for Jill's account, $265,000 for Jack's account, and $475,000 for the joint account
An investor is considered "uncovered" in which of the following scenarios involving option contracts? The investor: a. buys 1 XYZ Call option with no other stock positions b. buys 100 shares of ABC common stock and sells 1 ABC put option c. buys 100 shares of XYZ common stock and sells 1 XYZ call option d. buys 1 ABC put option with no other stock positions
b. buys 100 shares of ABC common stock and sells 1 ABC put option long stock positions do not cover a short put contract If an investor owns 100 shares of a stock and sells a call against the stock, the investor is considered covered
When a bank has excess reserves and the bank loans those excess reserves to other banks that need to borrow to meet their reserve requirements, the excess reserves that are loaned are called a. discount window funds b. federal funds c. excess equity d. money market funds
b. federal funds federal funds- excess reserves of commercial banks which are loaned to other banks needing overnight loans to meet their reserve requirements
If an investor is looking for information about a particular mutual fund, the BEST source of that information will be the a. fund's accounting documents such as the balance sheet and income statement b. fund's prospectus, which contains investment strategy, management style/structure, sales load and fee structure, and more c. investment manager of the fund who can provide a specific listing of all investments in the fund at any given point in time during a trading day d. SEC, which keeps detailed files and reports on the fund, all of which are available to the public
b. fund's prospectus, which contains investment strategy, management style/structure, sales load and fee structure, and more
You are comparing two bond issues. The bonds have the same coupon rate, face value, and maturity date. One is labeled high quality and the other is labeled low quality. Which of the following would you expect of the high quality issue in comparison to the lower quality issue? a. lower market value b. higher market value c. higher price volatility d. higher yield
b. higher market value when a bond is rated higher than similar bonds, one can expect that bond's market price to be higher and its yield to be lower. this is due to the fact that the bond is a safer investment. high quality bonds typically have lower price volatility in comparison to lower quality bonds
When a registered representative is determining suitability for a customer, all of the following are included in this determination EXCEPT the a. customer's net worth b. historic performance of a fund c. customer's risk tolerance d. customer's retirement or education goals
b. historic performance of a fund suitability rules are aka "know your customer" rules & relates to the customer not the prospective fund
Mr. Smith, your client, has maintained about 80% of his portfolio in fixed income securities. Interest rates are expected to decline over the next 12 month period. Mr. Smith calls you because he is concerned about this prediction and his portfolio. Which of the following recommendations would be appropriate for you to give to Mr. Smith? a. move 50% of his portfolio into equity securities b. leave his portfolio the way it is now c. move 60% of his portfolio into money market funds d. move 25% of his portfolio into limited partnerships
b. leave his portfolio the way it is now
Predictions about the future performance of mutual funds and variable annuitities are a. permitted if the basis of the prediction is provided b. not permitted, regardless of the situation c. permitted if prepared by an outside and unbiased analyst d. not permitted unless reviewed by FINRA 10 days before first use
b. not permitted, regardless of the situation predictions or guarantees about future performance of variable products and investment companies are not allowed under any circumstances
Which of the following indicates if the yield of a zero-coupon bond is currently trading at a premium or at a discount to its compound accreted value? a. original dollar price b. original yield c. maturity date d. dated date
b. original yield original yield=coupon rate
When existing shareholders are given the opportunity to subscribe to additional shares that are offered by the corporation, this is called a(n) a. secondary offering b. preemptive rights offering c. equity option d. stock dividend
b. preemptive rights offering secondary offering- sale of new of closely held shares of company that has already made IPO preemptive rights offering- existing shareholders have opportunity to subscribe to additional shares equity option- amount of ownership a stockholder has in relation to corporation stock dividend- portion of earnings of corporation that's distributed to common & preferred shareholders
In preparation for a secondary distribution a member firm decides to make purchases on the floor which would cause the price of the stock to rise so that the secondary distribution could be made at a higher price. Such activity is a. allowed since anyone is allowed to enter buy orders b. prohibited as market manipulation is not allowed c. allowed if complete disclosure is made to the public d. allowed if there are sufficient pre-sale orders received
b. prohibited as market manipulation is not allowed
Which of the following is true when the holder of put decides to exercise the put and the broker-dealer sends the exercise notice to the OCC Options Clearing Corporation? The OCC would a. forward the exercise notice on a first in first out basis to another clearing member who has a short position that satisfies the exercise notice b. randomly choose another clearing member who is short that series to satisfy the exercise notice c. assign the exercise notice to the clearing member who wrote the option d. pay the money required to satisfy the exercise price directly to the person who exercised the option
b. randomly choose another clearing member who is short that series to satisfy the exercise notice
An investor decides to exchange her fund for another fund within the same family of funds. As a result, she realizes. gain. How is this gain treated for tax purposes? a. as long as the fund falls within the same family of funds, the investor need not report the gain b. regardless of whether the fund falls within the same family of funds or not, the investor must report the income from the gain for the year during which the gain was realized c. as long as the investor completes Form 1035, the gain does not need to be reported d. if the investor takes the gain as a distribution of cash, then the investor can report the gain as a dividend
b. regardless of whether the fund falls within the same family of funds or not, the investor must report the income from the gain for the year during which the gain was realized The IRS doesn't consider the switch to be a conversion, it considers it to be a sale and purchase and would therefore be taxable in the year the exchange occurred. The gain is reported as a capital gain
The Securities Act of 1933 regulates a. the exchange markets b. registration of securities before the securities are sold to the public c. issuance of municipal bonds d. the fees charged by mutual fund companies
b. registration of securities before the securities are sold to the public 1934 Act- exchange markets issuance of municipal bonds- does not require registration Investment Company Act of 1940- fees charged by mutual fund companies
When a registered person with a member firm participates in outside private securities transactions without obtaining approval of the firm, it is referred to as a. market manipulation b. selling away c. churning d. selling short
b. selling away market manipulation- false of misleading appearance of active trading in security selling away- RR engaged in sale of private securities transactions not approved nor recorded on regular books or records or BD churning- excessive trading in size and frequency in customer's account for purpose of generating commissions selling short- investment strategy by bearish investors who believe market price is going to go down
A floor broker executing an order for a public customer asks the designated market maker to guarantee a price while giving the floor broker an opportunity to obtain a better price for the customer. This is known as a. a stop order b. stopping order c. best efforts order d. a limit order
b. stopping order stopping order- a favor that a designated market maker can do for a floor broker stop order- type of trigger order. price set above (buy stop) or below (sell stop) the current market price limit order- order to buy or sell a security at a specified price or better
Mr. Smith advises his RR to sell 300 shares of his ABC common stock whenever the price is right. Later that day ABC starts to move up and the RR enters a market order to sell the stock. Which of the following statements is true? a. the RR was in violation because he did not have written discretionary authority for this customer b. the RR handled the order appropriately since the only decisions required were related to time and price c. the RR should have sought the approval of a supervisory person prior to entering the order d. the RR should have refused to take the order and asked the customer to call him back later in the day to see where the stock was trading
b. the RR handled the order appropriately since the only decisions required were related to time and price
Of the following investments, which has the highest potential for capital appreciation and also the highest risk? a. bonds issued by a municipality b. the common stocks of a corporation c. the preferred stocks of a corporation d. bonds issued by a corporation
b. the common stocks of a corporation
Broker-dealers charge their margin customers interest on the debit balances held in the customers' margin accounts. What is the interest rate called that is the basis for margin rates charged to customers? a. the current federal funds rate b. the current broker call rate c. the discount rate established by the FED d. the going prime rate found in the open market
b. the current broker call rate
One of your clients purchases a callable corporate bond. The bond is callable at 106.55. What will the customer receive i the corporation calls the bonds and the customer tenders them back to the corporation? a. the customer will receive $1,065.50 for the bond and accrued interest up to the call date will be subtracted from that figure b. the customer will receive $1,065.50 for the bond and accrued interest up to the call date will be added to that figure c. the customer will receive par value for the bond of $1,000 and will receive $65.50 in accrued interest d. the customer will receive par value for the bond of $1,000 and will receive $106.55 in accrued interest
b. the customer will receive $1,065.50 for the bond and accrued interest up to the call date will be added to that figure 106.55 x 10= $1,065.50 investor can expect any accrued interest
After taking the information from a new client for the opening of a new account, an RR submits this information to his BOM. The BOM when reviewing the new account information notes that the only address listed is that of a P.O. Box. Under what circumstances can the account be approved? a. the new client is a personal friend of the RR who will be in charge of overseeing the new account b. the new client agrees to provide a real address of a home or business, when thought he insists that all correspondence be sent to the P.O. box c. the new client submits a written statement stating that for convenience purposes, he only uses a P.O. Box for all correspondence d. the new client tells the RR and the BOM that he has not yet established a place of residence in the area and that the P.O. Box is the only fixed address he can give
b. the new client agrees to provide a real address of a home or business, when thought he insists that all correspondence be sent to the P.O. box
Which of the following statements is TRUE regarding an SEC Regulation A+ Offering? a. a prospectus must be delivered b. the offering may not exceed $75 million c. a registration statement must be filed with the SEC d. a maximum of 35 accredited investors may purchase the securities
b. the offering may not exceed $75 million
Which of the following would not be a consideration in determining whether a customer account has been excessively traded (churned) by the RR? a. RR discretionary authority over the account b. the quality of the securities c. the RR's reasons for the trades d. the account turnover
b. the quality of the securities The quality of the securities could be an important factor in whether the trades were suitable but not generally a factor for determining churning
A client enters an order for the purchase of a block of 200,000 shares of Company X. Just prior to entering the large order, the RR enters an order in their own personal account for 5,000 shares. What BEST describes what the RR has done? a. the rr has engaged in free-riding on the purchase b. the rr has engaged in front running on the purchase c. the rr has engaged in churning on the purchase d. the rr has engaged in insider trading on the purchase
b. the rr has engaged in front running on the purchase front running- entering an order ahead of another order to benefit from fluctuations in the market due to a large volume purchase free-riding- failure of an underwriter to make a bona fide public distribution on a hot issue churning- excessive trading in customer's account insider trading- individual trades on material non-public information
Of the following statements which are true about market orders made "at the opening"? a. their priority is at parity with limit orders on the book b. their priority is above limit orders on the book c. they are subordinate to limit orders d. "at the opening" orders cannot be used for market orders
b. their priority is above limit orders on the book market order at the opening always have precedence over limit orders on the NYSE
Which of the following would contain the conditions and agreements of an upcoming issue of bonds by a corporation? a. these would be contained in the Tombstone Ads produced for the bonds b. these would be contained in the bond's indenture c. these would be contained in the underwriter's agreement d. these would be contained in the legal opinion of the bond
b. these would be contained in the bond's indenture indenture- legal document that protects the rights of bondholders. it's a formal agreement between the issuer of the bonds and the bondholder
When an investor is deciding whether to buy puts or sell the stock short, buying the puts offers all of the following advantages EXCEPT? a. the same of greater profit potential versus selling the stock short b. time value dissipates c. smaller capital required d. limited loss potential
b. time value dissipates
When an individual passes a licensing examination required by FINRA, that individual will then be required to complete the Regulatory Element of Continuing Education a. within 1 year of initial registration and every year thereafter b. within 2 years of initial registration and every 3 years thereafter c. within 3 years of initial registration and every 3 years thereafter d. within 4 years of initial registration and every 4 years thereafter
b. within 2 years of initial registration and every 3 years thereafter
Which of the following statements by an RR is TRUE regarding dividends? a. "It is possible for a long-term equity anticipation security to pay dividends" b. "An investor can expect to receive dividends on the underlying security in the event that they own a call option" c. "An investor who owns an American Depositary Receipt can expect to receive dividends from their investment when declared and paid d. "When an investor owns a warrant or right, they are entitled to receive dividends in accordance with these securities"
c. "An investor who owns an American Depositary Receipt can expect to receive dividends from their investment when declared and paid only ADRs out of all the answers pays dividends
Which of the following is NOT a function performed by the designated market maker of a stock? a. Each day, the designated market maker opens the market in their respective security b. the designated market marker ensures that a fair and orderly market exists and is maintained in their respective security c. "not-held" orders are taken and processed by the designated market maker d. the "designated market maker's book" is updated and maintained by the designated market maker
c. "not-held" orders are taken and processed by the designated market maker "not-held" orders are handled by "floor brokers"
A customer buys 100 shares of ABC at $80 per share. Two days later, before the customer pays for the stock, the market price of ABC increases to $90 per share. What is the customer's initial margin requirement? a. $2,000 b. $2,500 c. $4,000 d. $4,500
c. $4,000 $80 x 100 shares= $8,000 $8,000 x 50%= 4,000 4,000 > 2,000
A client purchases 100 shares of XYZ at $33/share and buys 1 XYZ July 35 put @ 5. The stock subsequently rises to $44/share and the customer closes the option at 1 and sells the stock in the market. What is the customer's gain or loss? a. $400 loss b. $500 gain c. $700 gain d. $1,100 loss
c. $700 gain B-3,300 B-500 S+100 S+4,400 = $700 gain
Greg has been investing in stocks for years and now decides to buy some Treasury Securities in the secondary market. He enters an order to buy 10 US T-Bonds on Friday, September 15th. When can Greg expect settlement? a. Wednesday, September 20th, trade date plus 3 business days b. Tuesday, September 19th, trade date plus 2 business days c. Monday, September 18th, trade date plus 1 business day d. Friday, September 15th, for same-day settlement
c. Monday, September 18th, the trade date plus 1 business day government securities- T+1 business day common stocks in secondary market- T+2 business days settlement of US government securities in primary market from auction- T+3 business days
Which of the following statements about REPOs (Repurchase Agreements) is FALSE? a. typically REPOs denominations start at a minimum of $1,000,000 b. REPOs are considered money market instruments c. REPOs are often thought of as risk-free investments d. REPOs typically have maturities of less than 3 months
c. REPOs are often thought of as risk-free investments have a very low risk but not riskless
Which of the following entities provides a physical and electronic location where listed options transactions are performed during trading hours in the US? a. The Options Clearing Corporation (OCC) b. The Securities and Exchange Commission (SEC) c. The Chicago Board Options Exchange (CBOE) d. The Financial Industry Regulatory Authority (FINRA)
c. The Chicago Board Options Exchange (CBOE) CBOE- largest US options exchange facilitating majority of listed option transactions during trading hours in US OCC- responsible for accepting, guaranteeing, and clearing the exercise of listed option contracts and majority of option activity in US SEC- regulatory commission for financial purposes is US FINRA- SRO charged with majority of regulatory duties within US
Which of the following entities or systems is used to settle the majority of equity transactions, corporate bond transactions, and municipal bond transactions in the United States? a. The New York Stock Exchange (NYSE) b. The National Association of Securities Dealers Automated Quotations (NASDAQ) c. The Continuous Net Settlement (CNS) System offered by the Depository Trust & Clearing Corporation (DTCC) d. The Order Audit Trail System (OATS), established by the Financial Industry Regulatory Authority (FINRA)
c. The Continuous Net Settlement (CNS) System offered by the Depository Trust & Clearing Corporation (DTCC) NYSE- physical exchange where listed securities transactions take place NASDAQ- electronic exchange where transactions take place FINRA OATS system- used to provide a means of recreating the chain of events tied to orders that are received & executed by member firms
An investor who is interested in purchasing Class A mutual fund shares would have which of the following characteristics? a. a small amount of money to invest b. a short-term time horizon c. a moderate to large amount of money to invest d. speculation as an investment objective
c. a moderate to large amount of money to invest Class A mutual fund share typically have a front-end shares load and sales charge breakpoints but generally have lower annual 12b-1 fees. Usually well suited for investors with moderate to large amount of money to invest because the sales charge breakpoints would reduce the sales charge significantly for investors with a long-term investment horizon
The Statement of Additional Information must be delivered a. within 10 days of opening a new customer account b. when the prospectus is sent to clients or prospective clients c. at the request of a client or prospective client d. at least once a year to each client
c. at the request of a client or prospective client
A 45-year-old customer leaves his employer and takes payout on their 401 (k) Plan assets with the intent to toll the plan into a Traditional IRA. The client fails to do so within the required time period. The client will have to pay a. a 10% penalty on the amount paid out with no other tax consequences b. ordinary income tax on the amount paid out with no other tax consequences c. both a 10% penalty on the amount paid out and ordinary income tax on the amount paid out d. no taxes associated with the 401 (k) Plan payout, because he left his employer
c. both a 10% penalty on the amount paid out and ordinary income tax on the amount paid out
According to anti-money laundering regulations, which of the following must be reported to federal authorities? a. cash and wire transfer combined that total $10,000 per week b. cash deposits of more than $10,000 per day c. cash deposits of more than $10,000 per day d. wire transfers that total $10,000 per week
c. cash deposits of more than $10,000 per day
Which of the following is an accurate statement regarding the delivery of trade confirmations to clients? a. confirmations need NOT be delivered to clients in most cases b. confirmations MUST be delivered as requested by the client c. confirmations MUST be delivered at or prior to completion of the trade d. confirmations MUST be delivered no later than 4 business days after trade date
c. confirmations MUST be delivered at or prior to completion of the trade
A broker should disclose all of the following characteristics of a Section 529 Prepaid Tuition Plan to clients who are the parents of a college bound child and who are trying to make advance provision for the costs of college EXCEPT: a. these plans fo not have investment risks b. these plans do provide hedge against increases in tuition costs c. contributions to these plans are tax deductible for federal income tax purposes d. these plans typically charge enrollment and administrative fees
c. contributions to these plans are tax deductible for federal income tax purposes
An individual receives her paycheck and pays for her rent and groceries for the month. After all the essential needs are paid for the remaining income is called a. disposable income b. gross income c. discretionary income d. residual income
c. discretionary income gross income- individual's income from employement before taxes are removed disposable income- (net income) after taxes are removed; can be spent on essentials, non-essentials, or saved and invested discretionary income- money which can be spent after essentials are paid
An "exchange privilege" offered by a group of mutual funds allows the investor to a. sell their shares on the New York Stock Exchange b. exchange shares of an open-end fund for an ETF c. exchange shares of one fund in the group for another different fund in the group at a reduced or no sales charge d. withdraw cash from investments in fund shares without losing the option of continuing to reinvest dividends and capital gains
c. exchange shares of one fund in the group for another different fund in the group at a reduced or no sales charge
A customer opens an account at a member firm and gives the minimum amount of information necessary to open the account, refusing to answer several questions. The customer deposits multiple checks into the account over a period of a month, all of which are just below $5,000. Shortly thereafter, the customer liquidates the majority of the assets in the account with checks drawn over a period of several days, all of which are below $5,000. An Operations Professional or RR who notices this behavior should a. file a CTR immediately if the various transfers exceeded $10,000 and report the customer to FINRA's Whistleblower Department b. completely freeze the customer's account so that the customer cannot deposit, withdraw, or invest any assets c. file a SAR, even though the amounts that are deposited or withdrawn never exceed $5,000 in any one transaction d. personally take possession of the customer's assets into the firm's error account, since opening an account for this customer was clearly an error in judgement
c. file a SAR, even though the amounts that are deposited or withdrawn never exceed $5,000 in any one transaction
Which of the following activities would NOT be done by a designated market maker on the floor of an exchange? a. handle the execution of odd lot orders b. record limit orders in the book c. handle the distribution of new issues d. trade for their own account
c. handle the distribution of new issues
All of the following are true regarding IRA contributions EXCEPT: a. although a tax return is filed prior to April 15th, the IRA contribution may be delayed until April 15th b. contributions may be made at any time between January 1st and April 15th of the following year c. if an extension for a tax return is obtained, the IRA contribution may be delayed until the date the tax return is filed d. persons not participating in any other type of retirement plan may deduct their IRA contributions up to certain limits
c. if an extension for a tax return is obtained, the IRA contribution may be delayed until the date the tax return is filed
Regarding FINRA rules, if an RR will be paid to find investors for a limited partnership that he is affiliated with, which of the following is TRUE? a. the member firm must contact the limited partnership to notify it that the RR is employed by the member firm b. no action is needed unless the RR is a limited partner c. if the member firm approves of this activity it must record it and supervise it d. if approved, FINRA has 10 business days to review the activity
c. if the member firm approves of this activity it must record it and supervise it any "private securities transactions" done away from the member firm must inform BD before engaging in such activity and after approval, they must maintain records and supervise activity
Which of the following taxes would be deferred on contributions made by an individual to her 401 (k) plan? a. unemployment tax at the Federal level b. capital gains tax c. income tax d. real estate taxes
c. income taxes
In order for a firm to effectively enforce an anti-money laundering program, which of the following would be most important a. not allowing cash deposits b. filing a SAR report on time c. knowing its customers d. reviewing accounts for churning
c. knowing its customers
The Alternative Minimum Tax (AMT) may be applied to shareholders of a mutual fund that has which of the following securities contained within? a. US Treasury bills b. convertible bonds c. municipal bonds issued for private industry purposes d. investments in blue chip securities
c. municipal bonds issued for private industry purposes AMT= taxable income + tax preference items items= interest earned on private activity municipal bonds
When a company does a Rights Offering, the rights are a. sold to the general public b. sold to existing shareholders c. only given to existing shareholders, proportionately to shares held d. given to the public on a first come, first serve basis
c. only given to existing shareholders, proportionately to shares held
A "hedge fund" is a form of investment that involves: a. investment in landscaping companies b. pooled investment by multiple investors where no specific criteria must be met to participate c. pooled investment by multiple investors where, due to high levels of risk, only high net worth investors are permitted to participate d. investment in securities on both the upside and downside of the market with the goal of limiting risk and protecting an investor's assets
c. pooled investment by multiple investors where, due to high levels of risk, only high net worth investors are permitted to participate
You are an RR and one of your clients informs you that they will now be participating in a pension plan offered at work. The plan takes the average salary of the employee over the last 3 years of service and pays 50% of that figure. Which of the following best describes this type of plan? a. the client has an annuity plan that is tax-deferred b. the client has a defined contribution plan c. the client has a defined benefit plan d. the client has a deferred compensation plan
c. the client has a defined benefit plan defined benefit plan- type of pension plan where income or other benefits that the employee will receive after leaving employment are "defined" by the plan defined contribution plan- type of pension plan in which the amount of pension the employee will receive depends on the contributions made to the employee's account plus actual earnings on contributions
Mr. Smith has been considering the purchase of a mutual fund and has decided he wants to buy $8,000 of the fund buy only has $4,000 to invest now. He asks you, his RR to lend him the other $4,000 which he will repay in 2 months. Which of the following is correct about this situation? a. the rep may lend the customer the funds as long as the agreement is in writing b. the rep should establish a margin account for the customer and buy the fund shares on margin c. the rep must deny the customer's request for a loan d. the rep may lend the customer funds with the firm's prior approval
c. the rep must deny the customer's request for a loan reps can't make loans to customers and couldn't establish a margin account since mutual funds may not be purchased on margin
A client has held a long position in BCD Common for several years and has seen a sizeable increase in price since initially buying the stock. The client fears that BCD is headed for a slight downturn in price and wishes to protect the profits that he holds from the previous increase. Which option strategy provides the MAXIMUM protection for this client? a. this client would be best suited by buying calls on BCD b. this client would be best suited by selling calls on BCD c. this client would be best suited by buying puts on BCD d. this client would be best suited by selling puts on BCD
c. this client would be best suited by buying puts on BCD
Bobbie purchased 100 shares of ABC common stock several years ago. Which of the following rights does Bobbie have by owning common stock that preferred stock holders do not have? The right to a. sell his shares b. receive dividends c. vote on important matters such as stock splits d. inspect certain books of corporation
c. vote on important matters such as stock splits
The Investment Company Act of 1940 requires that certain transactions use "forward pricing" (the valuation of mutual fund share prices as of the next computation). Which of the following transactions does NOT require "forward pricing"? a. shares are purchased directly from the principal underwriter by individual investors b. shares are sold on behalf of an investor by the investor's broker-dealer through a wire order c. share are redeemed directly to the fund by a customer d. ETF shares are purchased by a customer in the secondary market
d. ETF shares are purchased by a customer in the secondary market investors who purchase ETFs in the secondary market pay the market price at the time of purchase, so forward pricing is not used. ETF- funds that have a portfolio of securities that mirrors a specific index or industry sector. these securities trade like common stock
All of the following are true about a registration statement EXCEPT: a. it is filed with the SEC by the managing underwriter on behalf of the issuer b. it describes the issuer's business c. it describes the intended use of the proceeds d. a copy is sent to prospective investors
d. a copy is sent to prospective investors must be signed by principal executive officer, the principal financial officer, and a majority of board of directors not sent to investors- they get a prospectus once registration is effective
All of the following are considered to be "custodial property" that can be given by a donor to a minor under the Uniform Gifts to Minors Act or the newer Uniform Transfer to Minors Act except: a. bearer bonds b. a life insurance policy c. an annuity contract d. a futures contract
d. a futures contract UGMA- gifts of cash or securities UTMA- custodial property: any type of asset including real estate and tangible and intangible personal property. future contract specifically excluded from coverage in most states
The calculation of the contingent deferred sales load upon the redemption of a mutual fund is based on a. the NAV at the time the fund shares are redeemed b. the NAV at the time the fund shares were purchased c. either the NAV at the time of purchase or the NAV at the time of redemption, whichever is greater d. a percentage of either the NAV at the time of purchase or the NAV at the time of redemption, whichever is less, and generally the fee may not exceed 2%
d. a percentage of either the NAV at the time of purchase or the NAV at the time of redemption, whichever is less, and generally the fee may not exceed 2%
All of the following documentation is required to open a customer margin account for the president of a bank EXCEPT: a. a new account report form b. a margin agreement c. a hypothecation agreement d. authorization from the bank's board of directors
d. authorization from the bank's board of directors requires a new account report form margin agreement/hypothecation agreement also required
Which of the following instruments/asset classes would generally be considered to be the least liquid? a. over the counter stock b. listed stock c. general obligation municipal bonds d. direct participation program units
d. direct participation program units limited partnership, can be difficult to sell because there isn't an active secondary market for limited partnerships & limited partners need approval of general partners before they can sell
All of the following are required prior to when an employee of a member firm wants to open an investment account at another member firm EXCEPT: a. the employee must notify in writing the employing member firm b. the employing firm must advise the employee of approval or disapproval of the request c. the employee must notify in writing the executing firm before the account is opened d. duplicate confirms and statements must be provided to the employing firm
d. duplicate confirms and statements must be provided to the employing firm AFTER approval, duplicate confirms and statements are requested
All of the securities listed below can be purchased on margin in a margin account EXCEPT? a. US government securities b. listed securities c. NASDQZ securities d. new issues
d. new issues any securities sold with a prospectus can not be bought on margin, new issues must be paid in full
Which of the following is TRUE when a corporation declares a split in its common stock? a. the corporation's working capital would be affected b. the corporation's retained earnings would be affected c. the market price of the common stock will remain unchanged d. the common stock's par value would be affected
d. the common stock's par value would be affected
All of the following information is required from an individual customer when completing a new account report form EXCEPT a. the customer's residential street address b. the customer's employer's name and address c. verification of the identity of the customer d. the source of funds the customer deposits when opening the account
d. the source of funds the customer deposits when opening the account required: customer name residential address email address telephone number annual income, net worth, and bank references occupation, name, and address of employer whether person is citizen date of birth social security or tax id government issued photo id identity of associated person's rr trusted contact person
Which of the following would determine the current value of a variable annuity's accumulation units? a. the number of purchased units multiplied by the assumed interest rate of the annuity b. the holder's life expectancy determines the value c. the holder's anticipated date of annuitization d. the underlying securities' value as seen in the variable annuity's separate account
d. the underlying securities' value as seen in the variable annuity's separate account accumulation unit- used to determine the contract owner's interest in separate account annuity unit- determines amount of each payment to the annuitant
Foreign exchange rates are determined in which of the following markets? a. they are determined in the equity securities market b. they are determined in the primary market c. they are determined in the fourth market d. they are determined in the interbank
d. they are determined in the interbank interbank- system where currencies are traded between certain banks and financial institutions
When a customer opens a margin account at a broker-dealer, they are required to sign certain documents. Which of the following best describes the agreement between the customer and the broker-dealer related to the terms and conditions of financing involved in purchasing on margin? a. this is covered in the customer's new account form b. this is covered in a consent by the client to the loan from the broker-dealer c. this is covered in the customer's hypothecation agreement d. this is covered in the credit agreement for a line of credit with the customer
d. this is covered in the credit agreement for a line of credit with the customer hypothecation agreement- discloses that securities purchased on margin may be pledged by the broker-dealer as collateral in order to finance such margin accounts
A RR thoroughly reads a preliminary prospectus and then writes a brief review of the prospectus which he wants to send the clients he believes are suitable a. this may only be done with the branch office manager's approval b. this may be done without restriction c. this may only be done with the approval of a supervisory analyst d. this may not be done under any circumstances
d. this may not be done under any circumstances prospectus must be sent to clients without any attachments, comments, or reviews
Mrs. Jones has a conservative investing approach. She has a large portfolio of blue chip common stocks and wants to use options to receive additional income from the portfolio. Which of the following would be the MOST suitable recommendation for Mrs. Jones? a. buy puts options on the portfolio of securities b. write put options on the portfolio of securities c. buy call options on the portfolio of securities d. write call options on the portfolio of securities
d. write call options on the portfolio of securities
The exercise price of a listed equity option would be adjusted for all of the following EXCEPT? a. a 2:1 stock split b. dividends paid in cash c. rights issued on common stock d. dividends paid in stock
b. dividends paid in cash no change in number of shares that the customer will own or that the option will represent. all others answers represent a change in number of shares
