Securities Industry Essentials Exam
Under industry regulations, an initial purchase of $3,000 of common stock in a margin account requires cash deposit of
$2,000
A customer buys 1 ABC Jan 35 put for a premium of $3 and simultaneously buys 100 shares of ABC stock for $35 per share. The customer will break even when the stock is selling at what price per share at expiration?
$38
Broker-dealer ABC seeks to underwrite a municipal securities offering by a local town in which the mayor is currently seeking re-election. A municipal finance professional who resides in the town and works fro ABC contributed $200 to the mayor's re-election campaign 13 months ago. If the employee wants to support the campaign further without impacting the municipal securities business of the firm, he is permitted to make an additional contribution of up to what amount?
$50
Company ABC announced a 20% stock dividend for its common shareholders. If a customer holds 1,000 shares at $50, what is the new price and number of shares following the payment of the stock dividend
1,200 shares at $41.67
Under normal circumstances, a customer's letter of intent on a mutual fund purchase is valid for what maximum period of time?
13 months
A decline in the GDP must last for at least how many quarters to be considered a recession?
2 quarters
The computation of dollar prices and accrued interest on municipal bonds is normally on what calendar basis?
30/360
An investor owns 100 shares of XYZ common stock at the current market price of $50 per share. If XYZ conducts a 1-for-2 reverse stock split, the investor's post-split stock position will be
50 shares at $100 per share
Annuity contract
A contract under which an insurer promises to make a series of periodic payments to a named individual in exchange for a premium or series of premiums.
Treasury Stock
A corporation's own stock that has been reacquired by the corporation and is being held for future use.
Roth IRA
A personal savings plan; contributions are not tax-deductible; earnings are tax-free
Under the securities act of 1933, registration is required for
American depository receipts (ADRs)
The call provision of a bond stipulates which of the following factors?
Call date and call price
Upon expiration, all in-the-money S&P 100 index call options are settled by the delivery of which of the following?
Cash
Which of the following actions is required of a broker-dealer's anti-money laundering (AML) program?
Designating an AML compliance officer
Under FINRA rules, this action by registered representatives requires written notification to the firm
Driving part time for a transportation network company on weekends
What is adversely impacted if the issuer's credit rating is downgraded?
Exchange-traded notes (ETNs)
A savings account at a bank is guaranteed by which of the following entities?
FDIC
What 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)
The following communications with the public can be considered misleading
Literature providing 10-year performance information to support predictions of future performance
At issue, which of the following debt securities mature in one year or less?
Money market instruments
The redemption value of an open-end investment company's shares is based on the
NAV (net asset value) computed after the order is received
No-Load mutual funds may have lower expense ratios than load mutual funds for which of the following reasons?
No-load funds are not permitted to charge a 12b-1 fee greater than 25 basis points
Difference between a primary distribution and a secondary distribution
Primary distribution involves a sale of newly issued shares by the issuer while a secondary distribution involves the sale of already issued and outstanding shares
Which of the following outcomes are possible for the writer of a covered call option?
Profit unlimited and loss limited
Under rule 144A, an issuer of restricted stock is permitted to sell to
Qualified institutional buyers (QIBs)
To offer its shareholders a privilege to obtain its shares at a fixed price, which of the following products doe a corporation issue?
Rights
When is interest on Treasury noted paid?
Semiannually
A registered representative wants to participate in a private securities transaction. which of the following actions must the RR take?
Send written notice to his supervisor outlining the activity and compensation structure
FinCEN accomplishes its mission to safeguard the financial system from the abuses of financial crime, including terrorist financing and money laundering, by enforcing
The Securities Act of 1933
Which of the following represents the effect of a stock split?
The price per share of common stock decreases
Under Federal Reserve Regulation T, a 90-day restriction is imposed when a customer opens and closes which of the following positions?
The same stock in different accounts on the same day
Qualified Institutional Buyer (QIB)
To be this type of buyer, investors must pass this three part test: 1. Eligibility is limited to insurance companies, registered investment companies, pension plans, corporations, and registered investment advisers 2. Buyer must be purchasing for its own account or for the account of other QIB's 3. The buyer must own and invest at least $100mm of the securities of issuers that are not affiliated with the buyer.
UTMA
Uniform Transfers to Minors Act. A law similar to the Uniform Gifts to Minors Act (UGMA) that extends the definition of gifts to include real estate, paintings, royalties, and patents.
Security type that provides investors with a stated maturity date, a floating interest rate, and an option to put the security back to a financial intermediary on a daily or weekly basis?
Variable rate demand note
A transaction in which a writer covers a position by purchasing an option is
a closing purchase
What Form U4 reportable event results in a statutory disqualification?
a felony conviction for a driving under the influence (DUI) charge
A member of a stock exchange responsible for providing liquidity in a security by being willing to buy and sell at all times is known as
a market maker
The last transaction in XYZ 5.50s 2030 was at 102. This bond is selling at
a premium
A registered representative (RR) who wants to place a mutual fund advertisement must obtain written approval from
a registered principal of the RR's firm
A married couple who earned income that exceeded $300,00 in each of the prior two years and reasonably expects the same for the current year is
an accredited investor
When a broker-dealer charges a commission on a securities transaction, it has acted as
an agent
Investments generally traded according to their average life rather than their stated maturity dates?
asset-backed securities
In the over-the-counter market, the term "spread" refers to the difference between the
bid and asked prices
The primary purpose of a syndicate desk in the context of an equity offering is to
build an order book and allocate the stock
If a market maker posts a quote of 10.00 - 10.10 [25x10], which of the following actions is the market maker willing to take?
buy 2,500 shares at $10 and sell 1,000 shares at $10.10
In a period of low inflation and economic recession, the Federal Reserve is expected to take which of the following actions?
buy bonds in the open market
Under FINRA rules, non-cash compensation connected with the sale of variable contracts doesn't include
commissions
Roth 401(k)
contributions with after tax dollars and qualified distributions at retirement are received income tax free
What isn't an example of inside information if the customer shares with his registered representative?
declared stock dividend
What action violates FINRA rules regarding selling away?
engaging in private securities transactions without written prior consent of the employing BD
Direct participation programs (DPPs) provide
exposure to non-correlated assets with steady returns
Advantage of index funds?
lower management fees due to passive management of the fund
What investment risks is the greatest risk in a variable life insurance policy?
market risk
Stability in the value of a debt portfolio is greatest when
maturities of the debt securities are short
UTMA accounts are opened under the tax ID of the
minor
Regular way settlement on Treasury bonds is
next business day
Accredited Investor
person who is permitted to invest in higher-risk investments such as business start-ups
Under SEC regulation S-P (consumer privacy), what information must a firm include in its customer privacy and opt-out notices?
policies to protect the security of nonpublic information
A firm is a participant in a public offering. To sell a substantial amount of the securities to its customers, the firm agrees to repurchase the shares at no less than the original sales price. Such agreements are
prohibited as fraudulent and manipulative
An associated person who is not a registered representative is permitted to engage in
providing account opening forms to a new customer
Roth 401(k) and roth individual retirement account (IRA) plans share
qualified distributions are excluded from federal income tax
How often must a firm send an account statement
quarterly
A broker-dealer is permitted to accept payment for a new issue from a new customer when the
registration is effective
Call protection is most valuable to a bond owner when bond prices are generally
rising
nonsystematic risk
risk that can be eliminated by diversification
Which stakeholders have first claim priority in a chapter 11 proceeding?
secured debt holders
Under a system of statutory voting, a common stockholder has as many votes for each vacancy on the board of directors as the number of
shares owned by the stockholder
Blue Sky laws are regulated by
state securities regulators
What is the cost basis of an inherited mutual fund?
the net asset value (NAV) of the shares when the owner dies
What is true regarding a customer account held as tenants in common?
the ownership of the decedent's assets is governed by their will or state of law
A registered representative discussing a 529 college savings plan should explain _________ to the customer?
the potential deductibility of contributions from state taxes
Rule 144A regulates:
the sale of restricted stock to institutional investors
What is primarily used to determine how much of the counter currency the customer will receive when selling a fixed amount of a base currency to purchase a counter currency
the spot exchange rate
What is true about all U.S. government agency issues
they are exempt from registration under the Securities Act of 1933
In the event of a stock split, which of the following parties is required to maintain a record of the shareholders eligible to receive the additional shares?
transfer agent
Owner of __________ is most exposed to inflationary risk
treasury bonds
At the time of issuance, which of the following securities normally has the longest period of expiration?
warrants