SIE practice quiz (sec 2, 7-9)

When the Securities and Exchange Commission (SEC) clears securities for sale to the investing public, this is A) the due date. B) the effective date. C) the exudate. D) the time upon which the SEC approves the securities.

B The effective date is when the SEC clears an issue to be sold to the public; the registration becomes effective. At no time does the SEC approve, disapprove, or make any representation that the information in the registration documents is accurate.

Which of the following is true regarding the primary market? A) Price is determined by supply and demand. B) Issuer transactions occur in the primary market. C) The NYSE is an example of a primary market. D) It is regulated by the Securities Act of 1934.

B The primary market is where securities are sold to the investing public through issuer transactions. It is regulated by the Securities Act of 1933. The NYSE is an example of a secondary market where price is determined by supply and demand.

A firm designated as self-clearing can 1. act in a back-office capacity for an introducing firm. 2. not act in a back-office capacity for an introducing firm. 3. clear and settle transactions executed by other firms. 4. only clear transactions it executed. A) II and IV B) II and III C) I and III D) I and IV

C Self-clearing firms not only clear and settle their own executions (transactions) but can clear the executions of other firms that would be considered introducing or fully disclosed firms. In this light, fully disclosed firms are those that introduce their business to clearing firms. Clearing and settling transactions includes providing any back-office functions needed.

Which of the following would be allowed during the cooling off period? A) Allocating shares to investors B) Distributing a prospectus C) Distributing a red herring D) Taking orders

C No selling or soliciting is allowed during the cooling off period. Distributing a red herring (a preliminary prospectus) is allowed.

A clearing corporation agent or depository for securities transactions A) can be a commercial bank. B) can never be a corporation. C) must be a broker-dealer. D) can be a bank or corporation only if they are also a broker-dealer. Explanation

A A clearing agent can be a broker-dealer but doesn't have to be. In addition to broker-dealers, commercial banks can act as clearing agencies and depositories, as can corporations that are set up specifically to clearing securities transactions and taking custody of funds and securities.

Assets offered and traded in the securities markets can include all of the following except A) life insurance. B) equities. C) currencies. D) derivative products.

A Equities (stocks), bonds, currencies, and derivative products like options can be offered and traded in the financial markets. Insurance is not an asset that can be traded in the financial markets.

An institutional investor selects a single Financial Industry Regulatory Authority (FINRA)/NYSE member firm to provide for financing and custody of securities while orders to buy or sell are placed with executing brokers. This is an example of A) a prime brokerage account. B) an investment advisory account. C) a managed account. D) an omnibus clearing arrangement.

A A prime brokerage account is one in which a customer (an institution) selects one member to provide custody and financing of securities and executes trades with other firms known as executing brokers.

An officer of a broker-dealer firm would be categorized as a restricted person if that individual attempted to purchase A) a new issue initial public offering (IPO) at the public offering price. B) closed-end funds on the secondary market. C) call or put options on a stock in the secondary market. D) a municipal bond in a state where the officer does not reside.

A As restricted persons, officers of broker-dealer firms or other institutional investors are prohibited from purchasing a new issue (IPO) at the public offering price.

After the filing of a registration for a new issue with the Securities and Exchange Commission (SEC), and still in the registration's cooling-off period, broker-dealers may A) give a red herring to prospective investors. B) never publish tombstone advertisements. C) take binding indications of interest received from prospective investors. D) distribute sales literature with the preliminary prospectus.

A During the cooling-off period, red herrings (preliminary prospectuses) may be distributed and tombstone advertisements may be published. Indications of interest can be taken but are nonbinding on all parties. Sales literature may not be distributed during the cooling-off period.

The aftermarket prospectus requirement for the IPO of nonlisted securities is A) 90 days. B) not specified in the Securities Act of 1933. C) 25 days. D) 40 days.

A For the first 90 days following the IPO, a prospectus must be provided to purchasers in the secondary market.

Which of the following would be a secondary market transaction? A) A broker-dealer arranges for a customer's order to be executed on the NYSE B) A broker-dealer arranges for a customer to purchase mutual fund shares C) A broker-dealer arranges for a customer to purchase an APO D) A broker-dealer arranges for a customer to purchase an IPO

A IPOs, APOs, and mutual fund transactions involve the issuer selling to the public, which are primary market transactions. Secondary market transactions are between investors (which is what takes place on the NYSE as well as other exchanges and the OTC market).

A company is considering raising capital without going through the registration process requirements mandated by the Securities Act of 1933. To be exempt from the act, which of the following offerings might they employ? A) Private (nonpublic) securities offering B) Initial public offering C) Additional public offering (APO) D) Shelf offering

A Issuers wanting relief (exemption) from the registration provisions of the Securities Act of 1933 can offer securities privately. These securities offerings are often called private placements.

A tombstone announcement may contain all of the following except A) an offer to sell the securities. B) number of shares offered. C) names of the underwriters. D) type of security.

A No offer to sell can be made with a tombstone announcement. A tombstone is just information that an offer is coming to the market.

Rules regarding restricted persons state that each of the following is considered immediate family except A) an aunt or an uncle. B) parents. C) a mother-in-law or a father-in-law. D) a brother or a sister.

A Rules regarding restricted persons define immediate family as spouses, parents, siblings, in-laws, and children. Aunts and uncles and grandparents are excluded (not considered immediate family).

Each of the following provides for an exemption from the registration requirement of the Securities Act of 1933 except A) access equals delivery rule. B) Regulation A+. C) Rule 147. D) Regulation D.

A Securities offerings may qualify for exemption from the registration statement and prospectus requirements of the Securities Act of 1933 under Regulation A+, Regulation D, Rule 147 and Regulation S.

hich of the following statements with regard to the issuance of securities is true? A) The Securities Act of 1933 provides criminal penalties for fraud. B) While the Securities and Exchange Commission (SEC) is reviewing a registration statement for a new offering of securities, the underwriters are permitted to solicit and accept orders for the securities from the public. C) Once a registration statement has been filed with the Securities and Exchange Commission (SEC) it should be expected that the securities could be sold to the public within two business days. D) The cooling-off period beginning when a registration statement is filed with the Securities and Exchange Commission (SEC) can't last longer than 20 days.

A The Securities Act of 1933 (also known as the Paper Act, Full Disclosure Act, New Issues Act, Truth in Securities Act, and Prospectus Act) ensures that the investing public is fully informed about a security and its issuer when the security is offered on the primary market. The act provides criminal penalties for fraud in the issuance of new securities. The SEC review period, known as the cooling-off period, must last a minimum of 20 days before the SEC releases the securities for sale to the public (effective date). Solicitations and the acceptance of orders may never occur before the effective date.

The requirement for a supplemental prospectus to be filed before each sale is applicable to A) shelf registration sales. B) initial public offering sales. C) sales of shares in the secondary market. D) additional issues.

A Through a shelf offering, an issuer who is already a publically traded company can register new securities without selling any of the shares until later or waiting to sell a portion of the shares. For securities offered via a shelf registration, a supplemental prospectus must be filed with the Securities and Exchange Commission (SEC) before each sale.

Which of the following would not be expected to be found in a tombstone advertisement for a new issue? A) The intended purpose for which to use the sales proceeds B) The number of shares to be offered C) The type of security to be offered (equity or debt) D) The name of the issuer or those of the underwriters

A While the intended purpose for which to use the sales proceeds would be expected to be found in a prospectus, it would not be found in a tombstone advertisement permitted to offer only bare bones facts about the new issue.

An investor is viewing a company's prospectus on the Securities Exchange Commission's (SEC's) website. Which of the following is true? A) This satisfies the access equals delivery rule for a preliminary prospectus. B) This satisfies the access equals delivery rule for a final prospectus. C) This does not satisfy the access equals delivery rule for an aftermarket prospectus. D) Access equals delivery can only mean physical delivery of the prospectus and not viewing one on a website.

B A prospectus will be deemed to precede or accompany a security for sale if the final prospectus has been filed with the SEC and can be viewed on the SEC website. The access equals delivery model applies to the final prospectus and aftermarket prospectus delivery obligations but not to the preliminary prospectus delivery obligations.

Mrs. Jones is an employee of a member firm and as such is a restricted person regarding the purchase of new issues. She belongs to an investment club and has a 1% interest in the club's brokerage account. The investment club A) is a restricted account and will not be allowed to purchase equity shares of an IPO. B) is not a restricted account and will be allowed to purchase equity shares of an initial public offering (IPO). C) is not a restricted account but will not be allowed to purchase equity shares of an IPO. D) is a restricted account but will be allowed to purchase equity shares of an IPO.

B Because the restricted person's interest in the club's brokerage account does not exceed 10%, the investment club account is not considered a restricted account. If not restricted, the club can purchase shares of an equity issue at the public offering price if it chooses to.

The primary regulatory body for the securities industry would be which of the following? A) Financial Industry Regulatory Authority (FINRA) B) Securities and Exchange Commission (SEC) C) Federal Reserve Board (FRB) D) Municipal Securities Rule Board (MSRB)

B Created under the Securities Exchange Act of 1934, the overriding or primary securities industry regulatory body is the SEC.

During the cooling-off period of a new registration filed with the Securities and Exchange Commission (SEC) A) indications of interest received are binding on the broker-dealers. B) a red herring may be given to prospective investors. C) sales literature may be distributed with the preliminary prospectus. D) tombstone advertisements may not be published.

B During the minimum 20-day cooling-off period, tombstone ads may be published, and a preliminary prospectus, also known as a red herring, may be distributed to prospective investors. Sales literature may not be distributed and indications of interest are not binding on either the investor or broker-dealer

Which of the following prospectus delivery requirements for negotiable securities sold in the secondary markets is not accurate? A) For an IPO if listed on an exchange or Nasdaq the delivery requirement is 25 days. B) For an additional issue if the security is non-Nasdaq there is no delivery requirement. C) For an additional issue listed on an exchange or Nasdaq there is no delivery requirement. D) For an initial public offering (IPO) if non-Nasdaq the delivery requirement is 90 days.

B For an additional issue, if the security is non-Nasdaq the delivery requirement is 40 days.

Which of the following is true regarding a member firm operating under Financial Industry Regulatory Authority (FINRA) membership or the membership of another self-regulatory organization (SRO)? A) Member firms may never incorporate proprietary trading into their business model. B) Member firms can offer all types of investment products, such as stocks, bonds, mutual funds, options, and others or limit the products they offer to only a few. C) Member firms must always accommodate dealing with retail investors and not limit business to that done with other industry professionals. D) Member firms are required to be full-service broker-dealers.

B Member firms can offer all types of investment products such as stocks, bonds, mutual funds, and derivatives like options and others (be full service) or limit the products they offer to only a few. They need not adopt proprietary trading into their business model but can if they wish to. Likewise, they need not accommodate doing business with retail customers if they wish to deal only with other industry professionals, such as institutional investors.

Which of the following would be allowed during the cooling off period? A) Allocating shares to investors B) Placing a tombstone add C) Distributing a final prospectus D) Taking orders

B No selling or soliciting is allowed during the cooling off period. Publishing a tombstone is considered an announcement, not a solicitation. The final prospectus is not available during the cooling off period.

Which of the following would be applicable to nonexempt securities (those that must be registered) being offered to the public by a corporate issuer? 1. Securities Act of 1933 2. Prospectus 3. Securities Act of 1934 4. Secondary market A) II and III B) I and II C) II and IV D) III and IV

B Offering nonexempt securities [those that must be registered with the Securities and Exchange Commission (SEC)] such as common stock to the public requires the registration of the securities under the Securities Act of 1933. The offering must be made by prospectus.

After the issuer files a registration statement with the Securities and Exchange Commission (SEC), the time known as the cooling-off period begins. This allows a registration to become effective as early as A) 40 business days after the date the SEC has received it. B) 20 calendar days after the date the SEC has received it. C) 40 calendar days after the date the SEC has received it. D) 20 business days after the date the SEC has received it.

B Once the registration statement has been received by the SEC, a cooling-off period begins and it must last at least 20 calendar days. This allows the registration to become effective as early as 20 calendar days after the date the SEC has received it.

During the cooling-off period, underwriters of new securities may 1. accept orders to purchase shares. 2. not accept orders to purchase shares. 3. not accept indications of interest regarding potential purchases of shares. 4. accept indications of interest regarding potential purchases of shares. A) I and III B) II and IV C) I and IV D) II and III

B Orders for shares may never be taken before the effective date; therefore, no orders to purchase shares may be taken during the cooling-off period. Indications of interest, however, are allowed to be taken but are not binding on either party.

State registration is not required if the transaction is exempt. An example of an exempt transaction would be A) one that is solicited. B) one that is unsolicited. C) one involving U.S. government bonds. D) one involving municipal bonds.

B Purchases and sales that are unsolicited (unsolicited transactions) are exempt under the blue-sky (state securities) laws. Municipal bonds and U.S. government bonds are examples of exempt securities, not transactions.

Regarding the purchase of a new equity issue, an account where a restricted person has a beneficial interest would be allowed to purchase the new shares at the public offering price A) only if the interest exceeds 15%. B) only if the interest does not exceed 10%. C) never. D) without restriction.

B Restricted persons will be able to have an interest in an account (one that is not wholly their own) that purchases new equity issues as long as no more than 10% of the account's beneficial owners are restricted persons.

The ATOP Company is planning to offer shares of both common and preferred stock to the investing public in order to raise operating capital intended to be used for expansion. Which of the following laws enacted by Congress would be the most relevant when issuing these equity securities to the public? A) The Investment Company Act of 1940 B) The Securities Act of 1933 C) The Securities Investors Protection Act of 1970 D) The Trust Indenture Act of 1939

B The Securities Act of 1933, is also known as the Paper Act, Prospectus Act, or New Issues Act. This federal law requires that issuers who want to raise capital by making a public offering of securities to the public, provide full and fair disclosure of all material facts about the company and the securities being offered.

Regarding the issuance of new securities to the public, which of the following is true? A) Underwriters are permitted to accept orders for securities during the Securities and Exchange Commission (SEC) review period. B) The Securities Act of 1933 provides criminal penalties for fraud. C) The Securities and Exchange Commission (SEC) review of a new issues filing must always be longer than 20 days. D) Registrations become effective within 10 business days of Securities and Exchange Commission (SEC) filing.

B The Securities Act of 1933, which provides for criminal penalties for fraud in the issuance of new securities, ensures that investors are fully informed about a security and its issuer when the security is offered to the public. The SEC review or cooling-off period must last a minimum of 20 days before the SEC releases the securities for sale to the public (effective date). Solicitations and the acceptance of orders may never occur before the effective date.

The Uniform Securities Act (USA) provides a legal framework for the registration of A) mutual funds at the federal level. B) securities at the state level. C) variable annuities at both state and federal levels. D) foreign securities traded abroad.

B The USA provides a legal framework for the state registration of securities. It may be adopted by individual states and adapted to their needs.

A new registered representative receives a memo discussing the distribution of a red herring. The registered representative knows that the memo is referencing A) a tombstone advertisement. B) a preliminary prospectus. C) a final prospectus. D) a registration statement.

B The term red herring is derived from the disclaimer printed in red on the cover page of a preliminary prospectus. Some key information that would be found in a final prospectus, such as price, is not found in the preliminary prospectus.

Which of the following choices would best describe a follow-on offering? A) The common stock that is issued attached to a rights offering B) An offering to the employees of the issuing company C) An issue of shares by a public company that is already listed on an exchange D) An initial public offering (IPO) that has additional shares added by the issuer on the effective date

C A follow-on public offer (FPO) is an issue of shares by a public company [registered and reporting to the Securities and Exchange Commission (SEC)] that is currently listed on an exchange and has previously gone through the IPO process. FPOs are popular methods for companies to raise additional equity capital in the capital markets through a stock issue.

An institution or a person responsible for making all investment, management, and distribution decisions in an account maintained in the best interests of another who has been legally appointed to provide these services is best described as A) an investment advisor. B) a market maker. C) a trustee. D) a prime broker.

C A trustee is legally appointed to manage as a fiduciary assets in a trust

Broker-dealers who transact securities business with other broker-dealers or customers must be registered with A) the Financial Industry Regulatory Authority (FINRA). B) the Options Clearing Corporation (OCC). C) the Securities and Exchange Commission (SEC). D) the Federal Reserve Board (FRB).

C Any entity such as a broker-dealer intending to do business with other broker-dealers or customers involving securities must be registered with the SEC. LO 9.a

Carrying firms, those that carry customer accounts, must A) maintain levels of net capital equal to or lower than noncarrying firms. B) not disclose its net capital if it is higher than noncarrying firms. C) segregate customer funds and securities from the firms' funds and securities. D) commingle customer funds and securities with the firms' funds and securities.

C Carrying firms, those that carry customer accounts, must segregate customer funds and securities from that of the firm's and because carrying customer accounts entails some inherent risk, maintain net capital higher than that which would be required for noncarrying firms.

The statement "These securities have not been approved or disapproved nor have any representations been made about the accuracy or the adequacy of the information" is A) placed by the issuer in the preliminary prospectus. B) is the disclaimer placed by the underwriters in a tombstone advertisement. C) mandated to be in the final prospectus by the Securities and Exchange Commission (SEC). D) mandated by the Financial Industry Regulatory Authority (FINRA) to be placed in both the preliminary and final prospectus.

C Commonly known as the Securities and Exchange Commission's disclaimer, the SEC mandates that it be found in the final prospectus.

During the cooling off period, underwriters would be allowed to do all of the following except A) distribute a preliminary prospectus. B) take indications of interest. C) advertise the issue. D) publish a tombstone.

C During the cooling off period sales, solicitations and advertising are not allowed

During the cooling off period, underwriters would be allowed to do all of the following except A) take indications of interest. B) distribute a preliminary prospectus. C) take orders. D) publish a tombstone.

C During the cooling off period, sales are not allowed.

Under the de minimis exemption, an initial public offering of common stock may be sold to an account where restricted persons have a beneficial interest as long as their interest in the account does not exceed A) 25%. B) 5%. C) 10%. D) 20%.

C If the beneficial interests of restricted persons do not exceed 10% of an account, the account may purchase a new equity issue.

The Securities Act of 1933 protects investors who buy new issues by doing all of the following except A) regulating the underwriting and distribution of primary and secondary issues. B) providing criminal penalties for fraud in the issuance of new securities. C) requiring the licensing of persons affiliated with broker-dealers. D) requiring an issuer to provide full and fair disclosure.

C Licensing of individuals associated with broker-dealers is mandated under the Securities Exchange Act of 1934. The Securities Act of 1933 protects investors who buy new issues regulating, among other things, registration of new issues, underwriting, full disclosure, and the potential for fraud in the issuance of securities.

The Securities Act of 1933 protects investors who buy new issues by doing all of the following except A) regulating the underwriting and distribution of primary and secondary issues. B) providing criminal penalties for fraud in the issuance of new securities. C) requiring the licensing of persons affiliated with broker-dealers. D) requiring an issuer to provide full and fair disclosure.

C Licensing of individuals associated with broker-dealers is mandated under the Securities Exchange Act of 1934. The Securities Act of 1933 protects investors who buy new issues regulating, among other things, registration of new issues, underwriting, full disclosure, and the potential for fraud in the issuance of securities.

For nonexempt securities being offered to the public for the first time by a corporate issuer, which of the following would be applicable? A) Securities Act of 1934 regulating issues that must be offered by prospectus B) Securities Act of 1934 regulating securities that must be offered by prospectus C) Securities Act of 1933 regulating issues that must be offered by prospectus D) Securities Act of 1933 regulating securities traded in the secondary market

C Nonexempt securities are those that must be registered with the Securities and Exchange Commission (SEC) under the Securities Act of 1933. The Securities Act of 1933 mandates that offerings of these securities must be made by prospectus.

Which of the following transactions would take place in the secondary market? A) A corporation selling its securities to the public B) The U.S. government selling its securities to the public C) A broker-dealer selling securities out of its inventory to the public D) A municipality selling its securities to the public

C Secondary market transactions are investor-to-investor transactions. Primary market transactions are issuers selling to the public. A broker-dealer selling securities from its own inventory is operating in the secondary market (likely as a market maker in the OTC market). LO 8.c

Regarding a shelf registration filed with the Securities and Exchange Commission (SEC), which of the following statements are true? 1. A supplemental prospectus must be filed before each sale. 2. This registration is for issuers who want to issue securities for the first time. 3. Portions of a shelf offering can be sold over a 10-year period without having to reregister the security. 4. Portions of a shelf offering can be sold over a three-year period without having to reregister the security. A) I and III B) II and IV C) I and IV D) II and III

C Shelf offerings are for issuers who already have publicly traded securities in the marketplace. This type of offering registration allows the issuers to register additional shares to be offered and then issue the securities when the need for raising capital arises—taking the securities off the shelf and selling them when needed. While portions of the issue can be sold over a three-year period, a supplemental prospectus must be filed with the SEC before each sale.

Under the Uniform Securities Act (USA), state laws require that registered representatives must register in a state in which of the following circumstances? 1. The registered representative is a resident of the state. 2. The registered representative solicits business in the state. 3. The registered representative vacations in a state more than twice per year. 4. The registered representative owns rental property in a state. A) I and III B) II and III C) I and II D) II and IV

C State laws require that broker-dealers with an office in the state, or those that direct calls into the state or receive calls from the state, be registered in that state. Registered representatives must register in a state if they are residents or if they solicit business in a state.

Which of the following acts created the SEC? A) The Securities Investor Protection Act of 1970 B) The Securities Market Improvement Act of 1975 C) The Securities Exchange Act of 1934 D) The Securities Act of 1933

C The Securities Act of 1933 requires the registration of most new issues; the Securities Exchange Act of 1934 created the SEC; the Securities Investor Protection Act of 1970 created the SIPC; the Securities Market Improvement Act of 1975 created the MSRB.

A firm that functions for the purpose of receiving and delivering payments and securities on behalf of both buyer and seller in a securities transaction is A) a transfer agent. B) a depository. C) a broker-dealer. D) a clearing agent.

D A clearing agent is an intermediary between the buy and sell sides of a transaction that receives and delivers payments and securities on behalf of both parties. While some broker-dealers are self clearing (act as their own clearing agent), simply being a broker-dealer doesn't always include being able to provide the services of a clearing agent.

A municipal advisor does which of the following activities? A) Advises institutions on selling municipal bonds B) Advises municipalities on buying securities C) Advises institutions on buying municipal bonds D) Advises municipalities on selling securities

D A municipal advisor acts under contract with a municipality, providing advice on the structure and sale of the municipality's securities. A municipal advisor may not switch from that role to the role of an underwriter on an issue the advisor has consulted on.

When an issuing company sells securities to primarily institutional investors and a small number of wealthy individuals, as opposed to the general investing public in an exempt offering, this is known as A) a secondary placement. B) a primary placement. C) a secondary offering. D) a private placement.

D A private placement occurs when the issuing company sells securities that are exempt from registration to private investors, as opposed to the general investing public. These investors tend to be institutional investors and small groups of wealthy individuals who meet certain net worth and income criteria.

Regarding primary and secondary offerings, which of the following are true? 1. An offering can only be either a primary or secondary. 2. An offering can be a combination of primary and secondary. 3. An initial public offering (IPO) is a secondary offering. 4. An additional primary offerings (APO) is a primary offering. A) I and IV B) II and III C) I and III D) II and IV

D An offering can be a combination of primary and secondary. These are known as split offerings. Both IPOs and APOs are primary offerings, where the issuer receives the sale proceeds.

A corporation needs to build a new manufacturing facility costing several hundred million dollars. In which of the following markets could this new capital be raised? A) Municipal bond market B) Secondary market C) Government bond market D) Capital market

D Capital markets are a source of financing for corporations, municipalities, and governments. Capital can be raised by issuing equities or debt and offering the securities to investors in an initial public offering (IPO) or an additional public offering (APO). Note that bonds might be issued by a municipality or the federal government to raise money, but corporations (as noted in this question) do not issue government bonds, either federal or municipal.

The aftermarket prospectus requirement for exchange-listed securities is A) 90 days. B) 25 days. C) 40 days. D) 0 days.

D For exchange-listed additional public offerings, there is no aftermarket prospectus requirement

Indications of interest taken during the cooling-off period are binding on the selling issuer and underwriters. nonbinding on the issuer and underwriters. binding on the investor. nonbinding on the investor. A) I and III B) I and IV C) II and III D) II and IV

D Indications of interest are binding on neither buyers nor sellers.

Regarding registration for the sale of securities, those registered under the Investment Company Act of 1940, such as mutual funds, would be considered A) securities required to register at both the federal and the state level. B) securities that are exempt from registration at all levels. C) federal covered securities required to register at the state level only. D) federal covered securities and not required to register at the state level.

D Investment companies registered under the Investment Company Act of 1940 offer securities that are deemed to be federally covered. The effect of this designation is that states do not have jurisdiction over the registration requirements of these securities; no state registration can be required. Therefore federally covered securities are required to register at the federal level only.

A broker-dealer that accepts the risk of holding a particular security in its account to facilitate trading and provide liquidity in that security is best described as A) a direct participation program. B) a holding company. C) a clearing corporation. D) a market maker.

D Market makers are broker-dealers with a line of business to stand ready to buy or sell securities (make markets) with the view of being profitable by buying low and selling high or selling high and buying low (short selling). Market making is risky. Firms that do this must demonstrate to FINRA that they can manage the operational and financial risk.

Which of the following statements would describe the Fourth Market? A) These transactions take place through electronic communications networks (ECNs). ECNs are open 24 hours a day and act solely as principals B) The after-hours market C) These transactions take place through electronic communications networks (ECNs) which are open during normal trading hours and act solely as principals D) A market for institutional investors in which large blocks of stock, both listed and unlisted, trade in transactions unassisted by broker-dealers

D The Fourth Market is a market for institutional investors in which blocks of stock trade through ECNs that are open 24 hours a day acting as agents.

If an officer of a bank with the authority to purchase and sell securities on behalf of the bank wants to purchase new issues, which of the following statements is true? A) The officer may not purchase a new issue unless the amount he wishes to purchase is considered small in relation to the total offering. B) The officer may purchase a new issue because anyone is allowed to purchase new issues. C) The officer may purchase a new issue because no banking rules prohibit it. D) The officer may not purchase a new issue because he is considered a restricted person.

D Under the rules regarding the purchase of new issues, bank officers would generally be characterized as restricted persons. They may not, therefore, purchase new issues.