SIE test 2
Which statement is TRUE about Keogh Plans? A. Contributions are 100% deductible B. Contributions are not deductible C. Distributions are 100% tax free D. Distributions are partially taxed, with only the amount above what was contributed being taxed
A
A municipal securities firm based in Los Angeles that effects transactions solely on an agency basis places the following advertisement in the local newspaper: "We Are Market Makers Of Large Sizes In Los Angeles General Obligation Bonds" Which statement is TRUE regarding this advertising claim? A. This is prohibited under MSRB rules because dealer ads can only be placed in trade publications B. This is prohibited under MSRB rules because the statement is materially untrue C. This is prohibited under MSRB rules because the advertisement must be approved by the MSRB prior to use D. This is permitted under MSRB rules without restriction
B
Credit from bank to broker is controlled under: A. Regulation T B. Regulation U C. Regulation X D. Regulation Z
B
What is the "out the money" amount for the following contract? 1 ABC Jan 30 Call @ $5 ABC Market Price = $26 A. 0 B. 4 C. 5 D. 9
B
Which of the following is a redeemable security? A. Corporate debenture B. Closed-end fund C. Open-end fund D. Ginnie-Mae pass through certificates
C
Which of the following indexes is the narrowest measure of the market? A. Value Line Index B. Dow Jones Averages C. Wilshire Index D. Dow Jones Industrial Average
D
A customer has a gain on a short stock position that she wishes to protect. The appropriate order is: A. buy stop order B. buy limit order C. market order D. sell stop order
A
A customer has a large portfolio of diversified blue chip stocks and would like to increase the income from the investments. Which of the following strategies are suitable? A. Covered call writing B. Naked call writing C. Covered put writing D. Naked put writing
A
A customer sells 1 ABC Jul 90 Put at $5 when the market price of ABC is $89. The market falls to $82 and the customer is exercised. The customer then sells the stock in the market. The loss is: A. $300 B. $500 C. $800 D. $1,100
A
A husband and wife both have individual accounts at a brokerage firm and they also have a custodial account for their minor child. They have $60,000 that they wish to invest in ABC mutual fund shares, for which breakpoints start at a $25,000 investment. They wish to allocate the investment as follows: $20,000 - Husband's IRA account $20,000 - Wife's IRA account $20,000 - Custodial account As the registered representative handling these accounts, you should tell these customers that: A. These purchases will qualify for a breakpoint B. These purchases will not qualify for a breakpoint because each account is buying less than the $25,000 minimum C. These purchases should be made initially as 1 purchase in 1 account to qualify for the breakpoint and then the investment should be allocated and disbursed in $20,000 amounts to the desired accounts D. These purchases will not qualify for the breakpoint because investors cannot join together to take advantage of breakpoint sales charge reductions
A
ABC 10% $100 par preferred is trading at $115 in the market. The current yield is: A. 8.7% B. 9.5% C. 10% D. 11.5%
A
An employee of a member firm wishes to open an options account at another firm. Which statement is TRUE? A. Before opening the account, written permission must be obtained from the employing firm B. Prior approval of the employer is needed before executing each trade C. Duplicate trade confirmations must be sent to the CBOE D. An affidavit is required to be on file from the employee that none of the trades are prohibited under existing rules and regulations
A
An equity REIT would most likely invest in: A. apartment and office buildings B. raw land C. industrial parks D. single family homes
A
An investor must file a 13D report with the SEC if a: A. 5% or greater common stock holding is purchased of one issuer B. 10% or greater common stock holding is purchased of one issuer C. 15% or greater common stock holding is purchased of one issuer D. 20% or greater common stock holding is purchased of one issuer
A
As long as the firm has written policies and procedures covering borrowing from customers, a registered representative can borrow money without getting the firm's prior approval from a customer who is a: A. cousin B. friend C. colleague D. neighbor
A
In order to open a new single account for an individual customer, which information is required on the new account form? A. Date of birth B. Date of reaching legal majority C. Spouse's Social Security number D. Telephone number
A
When a corporation declares a reverse stock split, which statement is TRUE? A. Each shareholder's proportionate ownership in the corporation will remain the same B. Each shareholder's proportionate ownership in the corporation will be reduced C. Each shareholder's proportionate ownership in the corporation will be increased D. Institutional investors are less likely to buy the stock
A
Which Treasury security is NOT sold on a regular auction schedule? A. CMBs B. Treasury Bills C. STRIPS D. TIPS
A
Which statement is TRUE about non-competitive bids placed at Treasury auctions? A. Non-competitive bids have priority over competitive bids B. Competitive bids have priority over non-competitive bids C. Both non-competitive and competitive bids have the same priority D. All bids are given priority based on the size of the bid
A
Which statement is TRUE regarding the preliminary prospectus? A. The preliminary prospectus may be sent to a potential customer prior to that customer expressing an indication of interest B. The preliminary prospectus cannot be distributed at a road show for the offering C. The preliminary prospectus constitutes an offer to sell the issue D. The preliminary prospectus contains the public offering price
A
A balanced fund is one that: A. invests in securities found in one industry or geographic area B. allocates investment among common stocks, preferred stocks, and bonds of companies in various industries C. sells futures on market indices and uses short sales to limit risks of long positions D. invests solely in the common stocks of companies that exhibit faster than average gains in earnings
B
A convertible bond is convertible into common stock at a 32:1 ratio. The common stock is currently trading at $30. The bond is currently trading at $980. What is the bond's parity price? A. $940 B. $960 C. $980 D. $1,000
B
A corporation has issued $10,000,000 of 7 1/4%, 20 year, $1,000 par, convertible debentures, convertible at a ratio of 40:1. The bond is currently trading at 120, while the company's common stock is at 24. The conversion price per share is: A. $24 B. $25 C. $30 D. $40
B
A customer buys a stock and the confirmation discloses that a $.05 mark-up was charged. What is this? A. An agency transaction B. A principal transaction C. A broker transaction D. A riskless transaction
B
A customer has a margin account at a broker-dealer who goes bankrupt. The account holds $900,000 of securities and has a $400,000 debit balance. The customer will receive: A. $400,000 in cash B. $500,000 in securities C. $500,000 in cash D. $900,000 in securities
B
A customer has invested in a real estate business that is being managed by a third party. Any income from the investment would be characterized for tax purposes as: A. portfolio income B. passive income C. earned income D. alternative income
B
A customer places the following instructions with his registered representative: "Sell 100 shares of ABC if the market falls to $50, but don't sell the stock for less than $45." What is the appropriate order to be placed? A. Sell ABC @ 45 Stop 50 Limit B. Sell ABC @ 50 Stop 45 Limit C. Sell ABC @ 45 Stop D. Sell ABC @ 50 Stop
B
A customer wishes to give a gift of securities to her nephew under the Uniform Gifts To Minors Act. When the minor reaches legal age in that state, the: A. custodian can continue in that capacity with the express permission of the minor B. account must be transferred into the name of the minor C. account must be liquidated and the proceeds paid to the new adult D. custodian must pay the minor the highest market value that the account has had over its life
B
A well that is drilled on leases not adjacent to proven reserves is known as a: A. step-out well B. wildcat well C. service well D. stripper well
B
All of the following securities can be purchased on margin EXCEPT: A. Treasury bills B. Structured products C. Bankers' acceptances D. Commercial paper
B
An "unqualified" legal opinion is one which: A. gives a conditional affirmation of the legality of the securities B. gives an unconditional affirmation of the legality of the securities C. is given by an unqualified bond counsel D. disqualifies the issue from legal issuance
B
An American Style stock option differs from a European style stock options because it can be: A. traded anytime until expiration B. exercised anytime until expiration C. issued at any time until expiration D. redeemed anytime until expiration
B
An offering made under Regulation D, where a company that is already public raises additional capital solely from accredited investors, is called a PIPE transaction. PIPE stands for: A. Private investment in private equity B. Private investment in public equity C. Public investment in private equity D. Public investment in public equity
B
An officer of a listed company calls his registered representative and tells him to buy a large block of that stock. Prior to placing the order to buy, the registered representative calls ten of his customers and tells them to buy that company's stock. Which statement is TRUE? A. This action is permitted under SEC rules B. This action is a violation of the insider trading rules C. This action is an ethical business practice D. This action is beneficial to the customer, and thus is allowed
B
Registered representatives are required to attend a compliance meeting at their firm: A. Semi-annually B. Annually C. Every 2 years D. Every 3 years
B
SEC Regulation FD covers: A. notification to customers of a member firm's privacy policies and practices B. selective disclosure of material non-public information by issuers C. standardization of disclosure of financial and non-financial information by issuers D. registration filings with the SEC by small business issuers
B
Stocks that are listed on the New York Stock Exchange can also typically be listed and traded on: A. the American Stock Exchange (NYSE American) B. the Chicago (Midwest) Stock Exchange C. the Chicago Board Options Exchange D. Instinet
B
The Public Offering Price for a new issue is set at $25 per share. Which of the following is most likely to be the stabilizing bid? A. $20.00 B. $24.88 C. $23.01 D. $26.00
B
The Third Market is a(n): A. auction market B. negotiated market C. unregulated market D. primary market
B
The sending of customer account statements and confirmations by e-mail is: A. prohibited B. permitted if the customer submits a valid e-mail address C. permitted if the customer makes the request verbally D. permitted only if the branch manager approves
B
To stimulate the economy using Fiscal Policy which of the following actions could be taken? A. Tax rates could be reduced and Government spending could be reduced B. Tax rates could be reduced and Government spending could be increased C. Tax rates could be increased and Government spending could be reduced D. Tax rates could be increased and Government spending could be increased
B
Trades of which of the following instruments will settle in Fed Funds? A. General Obligation Bonds B. Treasury Notes C. Municipal Revenue Bonds D. Corporate Bonds
B
Under MSRB rules, a registered representative can perform all of the following functions EXCEPT: A. offering new municipal issues to retail customers B. approving municipal advertising that will be sent to customers C. trading municipal issues in the secondary market D. offering call and put options on municipal securities to customers
B
Under Rule 144, how much of the issuer's outstanding shares can be sold every 90 days? A. 1% of the outstanding shares or the average of the last 4 weeks' trading volume, whichever is less B. 1% of the outstanding shares or the average of the last 4 weeks' trading volume, whichever is greater C. 10% of the outstanding shares or the average of the last 4 weeks' trading volume, whichever is less D. 10% of the outstanding shares or the average of the last 4 weeks' trading volume, whichever is greater
B
Under the rules of the Options Exchanges, if there is a material change in a customer's financial condition: A. the account must be restricted from options trading until the effect of the change is ascertained B. the customer new account form must be updated and the options agreement must be amended to reflect the change C. the customer can only place closing orders in the account; opening transactions are prohibited D. no special procedures need be followed
B
Which agency issuing mortgage backed pass through certificates is permitted to purchase conventional home mortgages that are not VA or FHA insured? A. Ginnie Mae B. Freddie Mac C. Sallie Mae D. Federal Farm Credit System
B
Which of the following terms are synonymous? A. Open end fund / Publicly traded fund B. Open end fund / Mutual fund C. Closed end fund / Mutual fund D. Closed end fund / Privately traded fund
B
Which statement is TRUE about Roth IRAs? A. Contributions are tax deductible; distributions after age 59 1/2 are not taxed B. Contributions are not tax deductible; distributions after age 59 1/2 are not taxed C. Contributions are tax deductible; distributions after age 59 1/2 are taxed D. Contributions are not tax deductible; distributions after age 59 1/2 are taxed
B
Which statement is TRUE about a Certificate of Participation (COP)? A. COPs are subject to statutory debt limits B. COPs are backed by a pledge of lease revenues C. COPs have a higher credit rating than G.O. bonds of the same issuer D. COPs are full faith and credit obligations of the issuer
B
Which statement is TRUE regarding RMDs (Required Minimum Distributions) from IRA accounts? A. The RMD is fixed at 10% per year B. The RMD is based on the life expectancy of the account beneficiary C. If the RMD is not taken, a penalty tax of 10% is applied D. If the RMD is not taken, a penalty tax of 25% is applied
B
A company's common stock is selling in the market at a "multiple of 15". If the market price of the common stock is currently $10, what is the earnings per share? A. $.15 B. $.16 C. $.67 D. $1.50
C
A corporation is preparing a registration statement for a new issue offering consisting of 300,000 new shares and 200,000 existing shares held by officers. The Public Offering Price is $30 per share. The spread taken by the underwriters is $2 per share. All of the following will be changed as a result of the offering EXCEPT: A. Net working capital B. The number of outstanding shares C. Retained earnings (earned surplus) D. Net worth
C
A customer buys 1,000 shares of XYZ at $60 in a margin account, regular way settlement. Two days after the trade, XYZ has risen to $80. The minimum maintenance margin requirement is: A. $15,000 B. $18,000 C. $20,000 D. $24,000
C
A customer holds 1,000 shares of ABC stock valued at 80 in a margin account. The debit balance in the account is $35,000. ABC declares and pays a 20% stock dividend. The tax consequence of the distribution to the investor will be: A. portfolio income when received B. capital gain when received C. reduction of cost basis per share D. passive income at time received
C
A registered representative is invited by a very satisfied customer to that customer's ski house in Vail, Colorado during Christmas. Which statement is TRUE about the representative accepting this invitation? A. If the representative accepts the invitation, this is a violation of FINRA rules because the value is more than $100 B. If the representative accepts the invitation, this is a violation of FINRA rules because there is a conflict of interest C. The representative can only accept the invitation if he or she notifies the member firm and follows the firm's policies and procedures D. The representative can accept the invitation without restriction
C
A registered representative wishes to give a speech to a group of 35 potential retail clients at a restaurant. The speech is scripted and is a general discussion about investing in securities. Which statement is TRUE? A. Registered representatives are prohibited from making speeches at locations other than the representative's branch office B. A registered principal must be in attendance when the speech is given C. Prior principal approval must be obtained and a copy of the speech must be retained in your firm's Office of Supervisory Jurisdiction D. A copy of the speech script must be filed with the SEC at least 10 business days prior to the date the speech is to be given
C
All of the following investment company securities are redeemable EXCEPT: A. Open end fund shares B. Fixed unit investment trusts C. Closed end fund shares D. Participating unit investment trusts
C
All of the following statements are true about both bonds and preferred stock EXCEPT: A. Both bonds and preferred stock are "Senior" securities over common stock in a dissolution B. Both bonds and preferred stock can be convertible C. Payments to both bondholders and preferred stockholders are subject to approval of the Board of Directors D. Both bonds and preferred stock have a stated fixed payment rate
C
All of the following statements are true for both mutual funds and variable annuities that are in the accumulation phase EXCEPT: A. both are regulated a under the Investment Company Act of 1940 B. the underlying portfolios are managed C. both investments grow tax-deferred D. the return to investors is dependent on the performance of the securities in the underlying portfolio
C
An elderly client has a $400,000 portfolio that is conservatively invested in blue chip stocks and government bonds. He calls his representative and tells him that he wants to liquidate the entire portfolio and buy growth stocks. His son also has an account serviced by the same representative, so the representative calls the son to ask him about how his father is doing, to which the son responds: "Dad has not been himself lately." What step should the representative take? A. The representative should follow the customer's instructions, liquidate the portfolio, and buy growth stocks B. The representative should refuse to follow the customer's instructions C. The representative should contact the client and explain the risks inherent in the customer's strategy D. The representative should contact compliance and ask them to file a SAR
C
An investor sells short 200 shares of ABC stock at $60 and sells 2 ABC Jan 60 Puts @ $4 on the same day in a margin account. The breakeven point is: A. $52 B. $56 C. $64 D. $68
C
An underwriting commitment where the underwriter is not liable for any unsold securities is a(n): A. Firm Commitment underwriting B. Bought Deal C. Best Efforts underwriting D. Principal relationship
C
At the account opening stage, which of the following customer actions would NOT be an indicator of potential money laundering? A. Concern regarding the firm's government reporting requirements B. Difficulty describing his or her work or lack of industry knowledge C. Uncertainty about his or her investment objectives and needs D. Ordering transactions that are inconsistent with his or her stated objectives
C
Common stockholders have all of the following rights EXCEPT: A. voting for the Board of Directors B. transferring share ownership without restriction by the issuer C. inspecting minutes of executive meetings D. maintaining proportionate ownership in the company
C
Corporate officers who wish to trade their own company's stock must comply with all of the following rules EXCEPT: A. filing change of holding reports with the SEC B. prohibitions on short sales of that company's stock C. purchase restrictions through the exercise of stock options D. trading is restricted to decisions based on publicly available information
C
High earning individuals are prohibited from making contributions to: A. Traditional IRAs B. 401(k)s C. Coverdell ESAs D. 403(b)s
C
Jumbo Certificates of Deposit are issued in amounts in excess of: A. $100,000 and are fully insured by the Federal Deposit Insurance Corporation B. $1,000,000 and are fully insured by the Federal Deposit Insurance Corporation C. $100,000 and are not fully insured by the Federal Deposit Insurance Corporation D. $1,000,000 and are not fully insured by the Federal Deposit Insurance Corporation
C
Municipalities will issue which of the following to "pull forward" funds that will be collected as taxes in later months? A. BAN B. RAN C. TAN D. CLN
C
The Federal Reserve is: A. a primary purchaser of Treasury securities and an active participant in the secondary market for these issues B. a primary purchaser of Treasury securities but not an active participant in the secondary market for these issues C. not a primary purchaser of Treasury securities but an active participant in the secondary market for these securities D. not a primary purchaser of Treasury securities and not an active participant in the secondary market for these securities
C
The amount by which the purchase price of a municipal bond exceeds the par value of the bond is termed the: A. spread B. discount C. premium D. takedown
C
When comparing Real Estate Investment Trusts (REITs) to Real Estate Limited Partnerships (RELPs), all of the following statements are true EXCEPT: A. REITs allow for flow through of gain B. RELPs allows for flow through of gain C. REITs allow for flow through of loss D. RELPs allow for flow through of loss
C
When interest rates have fallen, an issuer will: A. call the outstanding low interest rate bonds and issue new bonds with lower interest rates B. call the outstanding low interest rate bonds and issue new bonds with higher interest rates C. call the outstanding high interest rate bonds and issue new bonds with lower interest rates D. call the outstanding high interest rate bonds and issue new bonds with higher interest rates
C
Which characteristics make a security most subject to liquidity risk? A. Short term maturity and low credit rating B. Short term maturity and high credit rating C. Long term maturity and low credit rating D. Long term maturity and high credit rating
C
Which of the following actions taken by a fiduciary would NOT be consistent with the obligations imposed under the "Prudent Man Rule"? A. Diversifying a fixed income portfolio with securities of varying maturities B. Selecting AA rated corporate convertible bond investments to meet an investment objective of both income and capital gains C. Investing in small capitalization unlisted new issue investments for long term growth D. Writing covered calls against securities positions held in the account to increase income
C
Which statement is FALSE about 401(k) Plans? A. The plan is established by the corporate employer B. The corporate employer can make matching contributions into the plan based on the contribution made by the employee C. All corporate employees must participate in the plan D. All contributions into the plan are made with pre-tax dollars
C
Which statement is FALSE about Regulation S-P? A. Sharing of customer account information with others is not permitted unless the customer approves B. New customers must be provided with a copy of the firm's privacy policy at account opening and customers must be given the opportunity to opt out of the sharing of their personal information with others C. Customers must be given the opportunity to opt out of the sharing of their personal information between their firm and its clearing broker-dealer D. A privacy notice update must be made available to customers annually
C
Which statement is TRUE about a cash account? A. Only non-marginable securities can be purchased B. Only cash settlement is permitted C. Full payment is required on settlement D. Only new issue securities can be purchased
C
Which statement is TRUE about index option contracts? A. They are custom OTC contracts where the terms are negotiated between buyer and seller B. They are available in either American or European style C. Exercise settlement is in cash D. Trade settlement is the same day
C
Why does a no-load mutual fund have lower expenses than a load mutual fund? A. Because it does not charge an annual management fee B. Because it cannot charge an annual 12b-1 fee C. Because it can only charge a maximum annual 12b-1 fee of .25% D. Because it can only charge a maximum annual 12b-1 fee of .75%
C
A customer buys 100 shares of ABC stock at $41 and buys 1 ABC Oct 40 Put @ $4. The breakeven point is: A. $36 B. $37 C. $44 D. $45
D
A customer buys 100 shares of ABC stock at $48 and buys 1 ABC Jan 50 Put @ $7. The maximum potential gain is: A. $700 B. $4,300 C. $5,500 D. unlimited
D
A customer sells 1 ABC Feb 40 Call @ $2 when the market price of ABC is $39.50. The customer's maximum potential loss is: A. $200 B. $3,950 C. $4,200 D. unlimited
D
All of the following are true statements about managed wrap accounts EXCEPT: A. a single annual fee is charged for account maintenance B. no separate commission charges are imposed for each transaction performed in the account C. no separate charges are imposed for safekeeping of securities in the account D. no options transactions are permitted in such account types
D
All of the following must be disclosed on municipal bond trade confirmations EXCEPT: A. In Whole call dates B. For industrial revenue bonds, the name of the corporation guaranteeing the issue C. For revenue bonds, the source of revenue backing the issue D. For general obligation bonds, the source of income backing the issue
D
An individual who has successfully passed the SIE exam may: A. only sell equity securities B. only sell securities that are either issued or guaranteed by the U.S. Government or its wholly-owned agencies C. only sell redeemable securities of investment companies registered under the Investment Company Act of 1940 D. not sell any securities until successfully completing the appropriate representative qualification exam
D
During the accumulation phase of a variable annuity: A. funds can be distributed to unit holders B. funds can only be distributed to unit holders above the age of 59 1/2 C. as interest, dividends, and capital gains are received, the investor has the option of reinvesting in more shares D. as interest, dividends, and capital gains are received, these must be reinvested in more accumulation units
D
If a customer has a gain on a short stock position that he or she wishes to protect, which statement is TRUE? A. A sell limit order will be entered B. A sell stop order will be entered C. A buy limit order will be entered D. A buy stop order will be entered
D
If the federal reserve tightens credit via open market operations, which of the following interest rates will likely NOT increase? A. Fed Funds Rate B. Discount Rate C. Broker Loan Rate D. Credit Card Interest Rates
D
In January, 20XX a customer buys 100 shares of ABC stock at $30 per share and pays a $2 commission per share. The customer receives $1 in cash dividends during the year. The customer's cost basis in the stock is: A. $28 per share B. $30 per share C. $31 per share D. $32 per share
D
Section 529 plans generally permit: A. tax deductible contributions by the donor B. tax free withdrawals for first time home buyers C. taxable distributions to the recipient to pay for higher education D. non-taxable distributions to the recipient to pay for higher education
D
The breakeven point for the holder of a call is: A. the premium paid B. unlimited C. strike price minus premium paid D. strike price plus premium paid
D
To open a joint account for a husband and wife, the social security number to be used for IRS reporting purposes is: A. the husband's social security number B. the wife's social security number C. both the husband' and wife's social security number D. either the husband's or wife's social security number
D
Under Keogh rules, distributions from a Keogh Plan must commence the year after the individual turns age: A. 55 B. 59 1/2 C. 65 D. 72
D
When a proposed new issue securities offering is "in registration," what statement could NOT be made to an interested institutional investor? A. "The lead underwriters on the issue are PDQ and RFP investment banks" B. "The road show on the issue is scheduled to be in your city on November 5th" C. "The issue is expected to be priced on or around November 20th" D. "Our research report shows that the expected POP is undervalued"
D
Which of the following annuity payment options will pay the estate of the annuitant if the full value of the account was not received? A. Life Annuity B. Life Annuity with Period Certain C. Joint and Last Survivor Annuity D. Unit Refund Annuity
D
Which of the following information is NOT required to be verified with the customer every 36 months? A. Customer investment objective B. Customer address C. Net worth D. Date of birth
D
Which procedure is NOT required for discretionary accounts? A. A written power of attorney must be obtained from the customer before discretionary trades are effected B. Every discretionary order ticket must be approved promptly by the manager or principal C. Every order ticket initiated by the registered representative must be marked "discretionary" D. The customer must be contacted before each discretionary trade is executed
D
Which statement is TRUE about preferred stock? A. When interest rates rise, preferred stock prices rise B. Interest rates and preferred prices move in the same direction C. Preferred stock dividends are typically adjusted for interest rate swings D. When interest rates fall, preferred stock prices rise
D
Which statement is TRUE regarding sponsored American Depositary Receipts? A. Sponsored ADRs trade exclusively over-the-counter B. Sponsored ADRs are created to facilitate the trading of U.S stocks overseas C. Sponsored ADRs are not required to provide quarterly reports to shareholders D. Sponsored ADRs provide annual reports to shareholders
D
