SIE Prep
A company's management team has agreed to issue additional shares of common stock in part to provide an employee stock ownership plan. It is agreed the issuance of the stock is not urgent and can wait until more favorable market conditions exist. What type of registration is most suitable under these conditions?
"shelf" registration
An investor owns 500 shares of stock whose current market value is $20 per share. The stock undergoes a split, after which the investor owns 400 shares. What is the new price of the investor's stock?
$25/ reverse, uneven (not the same value before & after the split - 20 vs 25) 500*$20 = $10,000 $10,000/400 = $25
A bond with a 3% stated yield and a $1,000 par value would pay how much in annual interest?
$30 3% * 1,000
Under the rules, a penny stock is defined as an unlisted, security trading at less than
$5 per share unlisted on an exchange or Nasdaq trading at less than $5 per share
A 72-year-old customer has a $30,000 required minimum distribution (RMD) calculated to be taken from an IRA. If the customer is in the 20% income tax bracket and only withdraws $25,000 from the account, how much in taxes and penalties will be owed?
$8,500 (1) 50% penalty for not withdrawing charged towards the difference// 5,000*50%=2,500 (2) 20% income bracket // 30,000*20%=6,000 (3) sum = 6,000+2,500 = 8,500
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 rep is a resident of the state (2) the registered rep solicits business in the state
Money market debt instruments typically have maturities of
1 years or less
?? Company ABC announces a 20% stock dividend for its common shareholders. If a customer holds 1,000 shares at $50.00, what is the new price and number of shares following the payment of the stock dividend?
1,200 shares at $41.67 1,000*20% = 1,200 shares 50,000/1,200 = 41.67
Which of the following constitute a private securities transaction, or "selling away"?
1- A registered representative helps an old school friend issue securities for a small business under formation. 2- A registered representative helps an acquaintance sell some inherited stock certificates without the acquaintance becoming a customer of the firm.
Which of the following would be TRUE with regard to capital gains?
1- If an asset is sold within one year (12 months or less) of its purchase, the gain is considered to be short-term and taxed at the same rate as the taxpayer's ordinary income 2- if the asset is held for more than a year, the gain is considered to be a long-term and is taxed at a favorable long-term rate
By purchasing shares of stock in a company, investors can benefit from which of the following?
1- an increase in the price of shares 2- the receipt of profits to be distributed
What happens to the contents of a custodial account in the event of the death of the beneficial owner (the minor child)?
1- custodian's fiduciary responsibilities ceases 2- the account passes to the minor's estate - goes to its heirs
For each transaction, a customer must be sent or given a written confirmation of the trade at or before the completion of the transaction, the settlement date. Information on that trade confirmation would include
1- the commission charged on an agency transaction 2- the CUSIP number (if any)
The Advisers Act of 1940 specifically deters gaining political favor via contributions made to candidates, officials, or political parties. As such, if a political contribution is made to any of these entities then under the Act, the firm may NOT provide advisory services to any government these individuals or parties represent for how long?
2 years
A customer has just notified the brokerage firm of a change of address. How long does the broker-dealer have to provide the customer with an amended account record for confirmation?
30 days
Someone who is short 1 August 35 put at 3 will breakeven at
32 breakeven (put) = strike price - premium 35 - 3 = 32
According to the U.S. Commerce Department, the economy is in a recession when a decline in real output of goods and services lasts
6 months
The Conduct rules permit specific types of lending arrangements between RR's and their firms and customers. Which arrangement below would not be permitted?
NOT PERMITTED: the firm lends the customer's securities without a consent agreement
A married couple have 2 children, both still minors. Which of the following UTMA accounts could be opened?
Parent as custodian for one of the children one parent/custodian per child/minor - cant be JT
Which of the following offerings is most likely exempt from the registration requirements of the Securities Act of 1933?
Private (nonpublic) securities offerings
Broker-dealers who transact securities business with other BDs or customers must be registered with
SEC
U.S. government deposits securities with a trustee against which certificates are sold representing principal only with no regular interest payments. These are known as
T STRIPS
For Treasury receipts and STRIPS, which of the following is TRUE?
T STRIPS = backed by US gov T Receipts = not backed by gov - issued by institutions
Your client has a long-term investment time horizon and is willing to accept some risk to achieve a better rate of return. Of the following, which would be the least suitable recommendation?
T-bills and negotiable CDs these are the least risky and short term
An individual would most likely be statutorily disqualified from working in the securities industry for which of the following reasons?
Willful failure to disclose personal bankruptcy or unsatisfied liens keywords: bankruptcy or unsatisfied liens
All of the following statements are true EXCEPT
a bond mutual fund may issue bonds - bond mutual fund invests in the bonds of other companies
Which of the following scenarios would NOT violate general standards regarding member firm communications?
A recruitment advertisement promises substantial training to be delivered to incoming employees.
Which of the following statements is correct concerning the pricing of ADRs?
ADR pricing is dollar-based and fluctuates throughout the day - listed on exchanges (Nasdaq or NYSE) - priced in US dollars
Which of the following would be considered an isolated nonissuer transaction exempt from state registration under the Uniform Securities Act?
An individual buying stock from another individual without using the services of a registered representative this occurs in the secondary market (nonissuer) and occurs infrequently - generally don't require a securities professional
All of the following are issuer transactions where the proceeds of the offering go to the issuing company EXCEPT
a repurchase agreement (REPO) SPO, APO, and IPO are all issuer transactions where the proceeds of the offerings go to the issuing company
The transfer agent for a corporation is responsible for each of the following EXCEPT:
acting as an intermediary between the buy and sell sides of a transaction (this is the clearing corp.) transfer agent is responsible for ensuring that its securities are issued in the correct owner's name, canceling old and issuing new certificates, maintaining records of ownership, and handling problems relating to lost, stolen, or destroyed certificates
In explaining hedge funds to an investor, a registered representative might correctly characterize them as utilizing
advanced and complicated strategies entailing high risk
Regarding the potential financial exploitation of seniors, impacted accounts would be those for individuals
age 65 and older, or age 18 and older who the member reasonably believes has a mental or physical impairment that renders the individual unable to protect his or her own interests
An investor receives an unsolicited email about a startup company trading for pennies. The email notes that a patent for a new technology is forthcoming and investors need to get in now. The next day the investor sees lots of information on the same stock in an internet chat room. The hype seems to be similar to what was received in the email blast. Being cautious, the investor senses that this could be
an effort to spread market rumors in an attempt to manipulate the stock
A corporation sells shares to the investing public in order to raise capital. This is known as
an issuer transaction aka primary market
An investor has been putting aside funds for retirement in a nonqualified variable annuity for over five years. She is now age 66 and takes a lump-sum distribution. How are the earnings taxed?
as ordinary income
If a prospectus is being used to close a mutual fund sale, it must be given to the investor
before or during the sales presentation
When shareholders owning participating preferred shares receive the additional participating amount, this was determined by
board of directors (BOD) key word: additional participating amount
Regarding open-end and closed-end investment companies, all of the following are true EXCEPT
both offer an unlimited number of shares in a continuous public offering
For investors engaging in the trading of option contracts, which of the following is TRUE?
buyers pay the premium for the right to exercise the contract
Which of the following investors are bearish?
call writers and put buyers
Your customer is a limited partner in a real estate partnership. This partner has the right to do all of the following EXCEPT
choose the properties the partnership should buy or sell Limited Partners CAN 1- vote with the limited partners to remove the general partner 2- sue the general partner 3- inspect & obtain copies of all the partnership records
A registered representative with discretionary authority has been doing two or three trades per week in her customer's discretionary account. The volume of transactions is not in keeping with the historic activity in the account and the trades don't all align very well with the account objectives. A principal noted that other than generating commissions, the trades seem to have little profit potential. This is likely a red flag for
churning
In accordance with the terms of the Telephone Consumer Protection Act, all of the following statements are true EXCEPT:
cold calls may be made between 8:00 am and 9:00 pm in the time zone from which the representative is making the call. must be in the time zone of the recipient
All of the following actions must be completed before a customer enters the first option order EXCEPT
completion of (signing of) the options agreement
A person may not act as a registered representative or principal unless FINRA's eligibility standards regarding training, experience, and competence are met. Which of the following instances, may a person be statutorily disqualified from FINRA membership
conviction of a DUI resulting in a fine and probation
When investing in overseas markets in foreign securities, investors should be aware of and understand
currency risk
The allowable deduction for equipment used in an oil and gas direct participation program is taken as
depreciation over the life of the program
Which of the following would be associated with loans made to member banks of the Federal Reserve?
discount rate
As interest rates rise, prices of preferred stock will
fall
A registered representative is discussing fee-based and commission based accounts with a customer. All of the following are true EXCEPT
fee-based accounts are more suitable for those who do very little trading during the course of the year would be good for ppl who do a lot of trading
Which of the following actions is required when a firm receives cash in excess of $10,000 from one customer in one business day?
file a Currency Transaction Report (CTR)
Laws increasing or decreasing taxation would be best associated with
fiscal policy enacted by the president and congress
Which of the following are the most likely to make monthly or quarterly payments for the life the investor?
fixed annuities and variable annuities - annuities are designed to create a lifetime income stream
An investor owning 400 shares of CDS stock receives notice that the stock will be split. When the split is complete, the customer owns 600 shares of stock. The split must have been
forward + uneven forward = more stock, less money uneven = 3/2 split
An investor has opened an individual brokerage account for use in a small business and has given a business partner a power of attorney (POA) over the account. Which of the following persons may have access to the account for trading purposes?
investor's POA & investor who opened the account
A guaranteed bond
is backed by another company, such as a parent company
Regarding political contributions, the Investment Advisers Act of 1940
is designed to deter gaining political favor by employing what is commonly known as "pay to play" essentially no bribing
Index and foreign currency options must be settled in
CASH
Regarding corporate bond issues, which of the following statements best describes secured debt and unsecured debt?
secured debt = asset backed unsecured debt = backed by faith/credit
Under the Uniform Transfers to Minors Act (UTMA) a custodian has control over the account and can do each of the following EXCEPT
sell short and write uncovered call options
Blue-sky laws are regulated by which of the following entities?
state securities regulators
Which of the following would all be considered the same regarding yields on debt instruments?
stated, nominal, and coupon yields
All of the following would require that updated account information be sent to the customer for confirmation within 30 days EXCEPT
the account records system has been changed to a new format confirmation required for: - client changes investment objectives - account is newly opened - 36 mo. have passed since the account was opened (confirmation sent at least once every 36 months)
A representative of a dealer who solicits municipal securities business from an official of an issuer contributes $275 to the official's city council re-election campaign during the general election. Under what circumstance would the contribution invoke a ban on the dealer's municipal securities business with that issuer?
the dealer seeks to engage in a negotiable underwriting with the issuer
All of the following must be on the cover page or beginning of the summary prospectus of a mutual fund EXCEPT
the name of the investment advisor the following must be on the cover page: - fund share class or classes ticker symbols - the website where a full prospectus may be downloaded - the share class or classes offered by the fund
Under SEC Regulation S-P (Customer Privacy), which of the following information must a firm include in its customer privacy & opt-out noices?
the policies to protect the security of nonpublic information
If a preferred shareholder received a $3.50 annual dividend each year, it could be assumed that
this is a 3.5% preferred class
An investor is viewing a company's prospectus on the Securities Exchange Commission's website. Which of the following is TRUE?
this satisfies the access equals delivery rule for a FINAL prospectus
Which of the following statements best describes the term "churning"?
trading in a customer's account considered excessive and for which no discernible investment purpose is detected
After receiving a written complaint letter from a client, an RR should
turn the complaint over to the appropriate supervisor or principal
Which one of the following best describes a debenture?
unsecured (uncollateralized) corp. debt obligation
Exempt from the penny stock rules are
unsolicited transactions ONLY unsolicited transactions are initiated by the client solicited transactions are nonexempt to the penny stock rules
Each of the following investments and practices are deemed ineligible for an IRA or any other retirement plan EXCEPT
variable annuities ineligible for an IRA or any other retirement plan: - collectible fine art - margin account trading - life insurance
Your customer has purchased $10,000 in U. S. Treasury bonds. These securities
will have evidence of ownership recorded in book entry form ALWAYS
Regarding the sale of a new issue, a customer is considered a restricted person if the person is
working as a salesperson who works for the issuing firm's underwriter
Of the following strategies, which is considered most risky in a strong bull market?
writing calls selling calls = most risky in a strong bull market bc if the stock price goes up, it can go up an unlimited amount
Three brothers open a joint account instructing you that if they die, they want the cash and securities in the account to go to the remaining parties to the account. The account should be opened:
rights of survivorship
A customer has requested that your BD hold mail for them while they are traveling. Which of the following is TRUE?
Firms may choose or choose not to hold customer mail when requested to.
A stock trade took place on Tuesday, July 2. When would regular way settlement normally take place?
Friday, July 5 Regular way for a stock trade is T+2 National holidays are excluded and will delay the trade
A broker-dealer has a line of business restricted solely to the purchase and sale of securities with trade executions being handled by another member firm. Which of the following would best describe this type of firm?
Introducing (fully disclosed) firm
If a registered representative is involved in a securities transaction outside the scope of employment with the firm, a practice known as "selling away," and will receive compensation for it, which of the following must see that the representative is properly supervised for the transaction?
The employing firm The employing firm is responsible for their rep. the outside firm where the firm is taking place is responsible for their own reps
If a registered representative is sharing in profits and losses with a customer, all of the following statements apply EXCEPT
The representative's expertise must be considered part of the contributions to the account Statements that DO apply: - the rep must receive prior written permission from the principal before the arrangement may be made - the rep may share in gains/losses but only in proportion to the rep's share of the investment money - if the customer is an immediate family member of the representative, sharing in gains and losses need not be proportional
At expiration CDT stock is trading at 43. A January 40 put would be
left to expire unexercised price of the stock is 40, value is 43 you wouldn't want to sell a stock that is undervalued
Short sellers have
limited profit potential and an unlimited loss potential this is equivalent to a short/put/bull attitude is bull, so they want the stock to go up, but if it goes down the loss is unlimited
The two classifications of chapters for corporate bankruptcies are
liquidations and reorganization
A broker-dealer firm opening a corporate account must establish all of the following EXCEPT
location of any acct. records the corporation will keep when received must establish - any limitations the corp has placed on account activities - the names of those who will have access to or authority over the account - the legal right of the corp to open a brokerage acct.
A bank is likely to do which of the following when the Federal Reserve Board (FRB) eases the money supply?
lower its prime rate more money in circulation = lower lending rates
Stability in the value of a debt portfolio is greatest when
maturities of the debt securities are short
Bonds can be issued with additional features attached, making them more attractive to investors. All of the following can be considered such features EXCEPT
maturity additional features: - callable - puttable - convertible
Those persons employed by a FINRA-registered broker-dealer to do nothing other than provide training for its associated persons
must be registered as a principal
Preferred shareholders have
no preemptive rights or voting rights
The coupon on a bond can be described as its
nominal yield
Regarding the purchase of new equity issues (IPOs), restricted persons may
not purchase shares of a new issue
A member firm receives an order to purchase shares in a common stock IPO from another broker-dealer for a customer. Regarding restricted persons, the member must
obtain a written representation that the buyer is not a a restricted person
Tools available to the Federal Reserve Board (FRB) include
open-market operations, setting the discount rate, and setting the reserve requirements
An investor has just received stock rights in the mail allowing the purchase of 250 shares of a stock offering at a discount. With these rights, the investor may take any of the following actions EXCEPT
purchase 125 shares at double the discount
What method is used to assign exercise notices to broker-dealers with short positions by Options Clearing Corporation (OCC)?
random-selected basis
For real estate program partners, tax credits will
reduce tax liability dollar for dollar
An individual who purchases securities for a personal account is called a(n)
retail investor may be accredited
