Chapters 11-15

A Suspicious Activity Report (SAR) (A Suspicious Activity Report (SAR) must be filed for any transaction of $5,000 or more for which the firm is suspicious (e.g., suspects any evasive or criminal activity). The Bank Currency Transaction Report (BCTR) must be filed for each currency transaction effected by a customer that exceeds $10,000 on one business day.)

A broker-dealer has become apprehensive about $9,900 deposits that a client makes each on Monday and Tuesday. Which of the following reports is it appropriate for the broker-dealer to file? A Currency and Monetary Instrument Report (CMIR) A Suspicious Activity Report (SAR) A Bank Currency Transaction Report (BCTR) A Bank Secrecy Crime Report

The order is triggered at 45.00 (Because for buy stop limit orders, the trigger price is the first price AT or ABOVE the stop price. Since the trades eventually hit 45.00, the order will be triggered AT or ABOVE 45)

A buy stop limit order is placed at 45. After the order is placed, the following trades occur: 44.88, 44.88, 45.00, 45.12, 45.00 Regarding that trade, which of the following statements is TRUE? The order is triggered at 44.88 The order is triggered at 45.00 The order is executed at 44.88 The order is not triggered

Long (Since the securities are being held in the client's account, the order ticket will be marked "long." The fact that the securities are in street name (in the broker-dealer's name) is irrelevant. The client is still the beneficial owner. The ticket is marked "long" because if a client requests a sale, they are long prior to the short position that will be established with a sale)

A client has requested for her firm to sell 2,500 shares of DFG common stock. The stock is being held in street name within the client's account. As for the location of the securities, the order ticket is marked: Short Long Street Short covered

There's an increase in the market price (and a decrease in the number of shares outstanding)

A company declares a reverse stock split. What's the initial effect on the stock's market price? There's no effect on the market price There's an increase in the market price There's a decrease in the market price There's an increase in the market price and an increase in the number of shares outstanding

Within 30 days

A customer has just moved and notified her firm of her new address. The firm must send a copy of the revised information to the customer within what period? Immediately Within 15 days Within 30 days There's no need to send this to the client since the client provided the information

Broker (When a firm takes a position in a stock, it means that it's maintaining an inventory in that stock. Firms that maintain a position and are willing to buy or sell that stock are referred to as dealers, principals, or market makers. Brokers/agents act on behalf of customers, but don't maintain positions in stocks)

A firm that takes a position in a specific stock may be referred to by all of the following terms, EXCEPT: Dealer Principal Broker Market maker

The child (For any Uniform Transfer to Minors Act or Uniform Gifts to Minors Act account that's opened, the owner is always the minor. The Uniform Prudent Investor Act allows the person who opened the account (the mother) to designate another competent person (the brother) to be the custodian (fiduciary) of the account)

A mother opens a UTMA account for her child. She asks her brother to be the custodian for the account and he agrees. Who's the owner of the account? The mother The brother The child The mother, brother, and child

The order is not triggered (Because for sell stop orders, the trigger price is the first price AT or BELOW the stop price. Since no trade price is AT or BELOW 104, the order will NOT be activated)

A sell stop order is placed at 104. After the order is placed, the following trades occur: 106.50, 106.00, 105.25, 105.12, 104.25, 105.12 Which of the following statements are TRUE regarding the order? It's triggered at 104.25 It's triggered at 104.00 It's executed at 104.25 The order is not triggered

Rights offering

A standby underwriting arrangement may be entered into with an investment banking firm to purchase all of a company's shares that remain unsold after a(n): Execution of warrants Rights offering Initial public offering Private placement

Thursday, April 10

A trade involving a corporate bond was made on Tuesday, April 8. When will the trade settle? Friday, April 11 Thursday, April 10 Wednesday, April 9 Monday, April 14

Proceeds transaction

A trade which combines the executing firm's compensation on both a sale and a subsequent purchase is referred to as a(n): Proceeds transaction Principal transaction Agency transaction Covered transaction

They apply to both private and government retirement plans (ERISA guidelines only apply to private businesses and not to government or other public retirement plans. ERISA's purpose is to protect the interests of hourly employees and to establish guidelines for receiving favorable tax treatment retirement benefits)

All of the following statements are TRUE of ERISA guidelines, EXCEPT: They apply to both private and government retirement plans They were enacted to protect hourly workers and to ensure that they're treated fairly All qualified plans must follow these guidelines to maintain favorable tax treatment They establish guidelines for when an employee is entitled to receive retirement benefits

Yes, with prior approval, it may become a numbered account

An individual has expressed interest in having a broker-dealer maintain his account, but wants his name removed from the account. Is this permissible? Under no circumstances Yes, without approval Yes, with prior approval, it may become a numbered account Only with FINRA approval

An amount that's equal to the proportionate number of shares accepted (When a tender offer is made for a fixed number of shares and more shares are tendered, a proportionate number of shares will be accepted from those who tender their shares. For example, if twice as many shares are tendered than those for which the offer is made, each shareholder will have half of her shares accepted)

An individual has made a tender offer for a fixed number of shares of XYZ Corporation. If more shares are tendered than desired by the individual, a shareholder who has offered her shares will have what amount of them accepted? All of her shares will be accepted Shares are accepted on a first offered basis An amount that's equal to the proportionate number of shares accepted None of her shares will be accepted

Rule 144

An individual owns more than 10% of a company's outstanding shares. What rule determines the amount of this stock that the individual is able to sell at any given time? Rule 144 Regulation A Regulation D There is no rule determining the amount of stock the individual may sell

She must execute the short sale in a cash account (Short sales MUST be executed in a margin account)

An investor who sells stock short should understand each of the following, EXCEPT: She wants the stock to decline in value She's potentially subject to unlimited loss She's borrowing stock She must execute the short sale in a cash account

Obtain information on a trusted contact person (When opening any accounts, registered representatives should request from the client the name and address of a trusted contact person for the account. A trusted contact person is a person that the account owner authorizes her brokerage firm to contact in limited circumstances, such as if her firm cannot reach her or if the firm has a reasonable belief that her account may be exposed to possible financial exploitation)

An older client is opening an account with a firm and the registered representative has some concerns about possible financial exploitation of this client. What step should be taken when opening this account? Obtain information on the fiduciary for the account Obtain information on a trusted contact person Refuse to open the account Open the account without any further action

25 or fewer retail investors within any 30 calendar-day period

As defined by FINRA, the term "correspondence" includes any written or electronic communication that's distributed or made available to: 25 or fewer retail investors within any 30 calendar-day period Institutional investors Registered broker-dealers and registered representatives An unlimited number of prospective retail customers

Quarterly (monthly for active trading accounts)

At least how often must a customer receive an account statement? Monthly Quarterly Semi-annually Annually

Selling group

During the underwriting of a new offering, which of the following firms doesn't assume any liability? Underwriting manager Syndicate members Selling group Co-managers of the offering

Listed stocks

Each of the following are exempt from the FINRA 5% Markup Policy, EXCEPT: Mutual funds Listed stocks New issues Municipal bonds

It only applies to equity securities (applies to debt securities as well)

Each of the following statements are TRUE regarding Rule 144A, EXCEPT: It may eliminate the holding period requirement for Rule 144 stock It applies to QIBs It only applies to equity securities It creates a more liquid market for restricted securities

The plan must be filed with FINRA (The BCP is NOT required to be filed with FINRA, but it must be made available to an SRO upon request)

FINRA's requirement for maintaining a written business continuity plan includes all of the following, EXCEPT: The plan must be filed with FINRA The plan must cover regulatory reporting in an emergency A description of the plan must be available to customers The plan must cover backing up and restoring data in an emergency

To provide a legal opinion as to whether a bond issue will qualify for tax-exempt status

For a municipality, what's the purpose of the bond counsel? To provide a legal opinion as to whether a bond issue will qualify for tax-exempt status To guarantee that a bond issue will qualify for tax-exempt status To represent bond investors in any litigation with the issuer To review any bids that are submitted for a competitive offering

The beneficiary must be a relative (by blood) of the donor

For any person who's considering whether to contribute to a 529 college savings plan, each of the following statements are TRUE, EXCEPT: Withdrawals that are used for qualified educational purposes are not subject to federal taxation There are no income limits placed on contributors, but contributions may subject them to gift tax The beneficiary must be a relative (by blood) of the donor A married couple may make a lump-sum contribution of up to $150,000 without incurring federal gift tax

Market order

If a client wants to place an order that will be given priority over all other type orders, what type of order should be entered? Stop order Market order Limit order Day order

On the same day as the trade

If a municipal bond is sold on a cash basis, when will the trade settle? On the same day as the trade T + 1 T + 2 T + 3

The transfer agent

If a security has been damaged in such a way that good delivery is in question, who's able to make the determination as to whether the security is acceptable? The custodian The distributor The transfer agent The registered principal

Firm commitment

If an underwriter agrees to purchase an issuer's entire offering, what type of agreement has been made? Best efforts Best efforts mini-maxi Best efforts all-or-none Firm commitment

A day order

If no order qualifier is given, an order is assumed to be: A day order A good-til-cancelled (GTC) order An open order A not held order

After-tax dollars

In a Roth IRA, contributions are made with: Pre-tax dollars After-tax dollars Tax-exempt dollars A combination of pre- and post-tax dollars

A stock or bond power may be used

In lieu of a customer's signature, what (if anything) may be used as proper endorsement of a certificate? Nothing; the customer's signature must be on the certificate A stock or bond power may be used A signature approved by a registered principal may be used A signature approved by a registered representative may be used

When issued (In the new issue market, securities may be authorized, but not yet available and therefore unissued. In this situation, settlement is done on a when issued basis)

In the primary market, what form of settlement may be used when certificates are not ready for delivery? When issued Special settlement Seller's option Prepared for delivery

Rule 147

Public offerings that occur entirely in one state may be exempt from SEC registration under which rule or regulation? Rule 144 Regulation D Rule 147 Rule 145

The confirmation of the sale

The final prospectus for new issues of common stock must be delivered to the client by no later than: The confirmation of the sale The trade date 10 days after the confirmation 25 days after the confirmation

Not accept the order unless specific instructions are received from the wife

The husband of a customer calls to place an order in his spouse's account. He informs the registered representative that his wife is traveling, but she gave him the authority to place the order. The registered representative should: Accept the order from the husband Not accept the order unless specific instructions are received from the wife Accept and place the order, but make a note that it was placed by the husband Not accept the order unless it's been approved by a principal

Anti-money laundering (The Bank Secrecy Act (BSA) is the primary U.S. anti-money laundering (AML) law)

The provisions of the Bank Secrecy Act address which of the following? Anti-money laundering Insurance fraud Protection in the event of a broker-dealer's bankruptcy Commercial banks executing securities transactions

To stipulate that the client's securities will be used as collateral

To open a margin account, a hypothecation agreement is required. What's the purpose of this agreement? To stipulate that the broker-dealer's securities will be used as collateral To stipulate that the client's securities will be used as collateral To set the specific requirements for short margin accounts To determine the suitability of a margin account for a client

If the firm intends to disclose information about the consumer (Firm must provide a privacy notice to consumers before it discloses non-public, personal information to any unaffiliated third party)

Under Regulation S-P, when is a firm required to provide a privacy notice to a consumer? If the consumer is part of a call list or other record that's maintained by the firm If the firm intends to disclose information about the consumer At the time the account is opened Annually

To the beneficiary's estate

Upon the death of a trust beneficiary, where are the assets directed? To the fiduciary To the beneficiary's estate They remain in trust To the state

Three months

Upon written request, how long can a broker-dealer can the mail of a client who's engaged in extensive travel? One month Two months Three months Six months

The SEC allows the securities to be sold

What does it mean when a registration statement becomes effective? The SEC allows the securities to be sold The SEC has found that the registration statement is accurate The SEC has endorsed the offering The SEC has approved the final prospectus and recommends the offering

Markup or markdown

When a firm's compensation is built into the net price of a trade, it's considered to be the: Markup or markdown Commission Sales charge Dealer concession

T + 1

When an investor either opens or closes an option position, when is the settlement date? T + 1 T + 2 T + 4 Same day

Loan consent agreement

When opening a margin account, a customer is NOT required to sign which of the following? Loan consent agreement Credit agreement Hypothecation agreement All documents must be signed.

Quantitative suitability obligation

Which FINRA suitability obligation requires a broker-dealer that has control over a customer account to have a reasonable basis to believe that a series of recommended securities transactions are not excessive? Quantitative suitability obligation Firm-specific suitability obligation Customer-specific suitability obligation Reasonable-basis suitability obligation

It's an authorization to vote on behalf of the shareholder

Which of the following is TRUE of a proxy? It's a transaction to exchange shares within a company It's a contract which outlines shareholders' rights It's an established date on which an investor receives a dividend It's an authorization to vote on behalf of the shareholder

Offering Memorandum

Which of the following is used as the disclosure document for a private placement? Official Statement Offering Memorandum Statutory Prospectus Free Writing Prospectus

In this type of account, ownership may be unequal

Which of the following statements is TRUE about a Joint Tenancy in Common (JTIC) account? This type of account can only be established by legally married couples If one account owner dies, the proceeds automatically go to the remaining account owner(s) In this type of account, ownership may be unequal The account carries the Social Security numbers from all tenants for tax reporting purposes

The rights will be sent to the issuer's transfer agent for exercise

Which of the following statements is TRUE if a shareholder wants to exercise the rights he has received? Rights cannot be exercised; they must be sold in the secondary market Rights must be exercised through the Options Clearing Corporation The rights will be sent to the issuer's transfer agent for exercise The NYSE handles the exercise of all rights