SIE final #1 questions
Which of the following would NOT be considered to be a Money Market Instrument?
ADRs (American Depositary Receipts)
Which of the following is NOT a characteristic of Notes issued by the U.S. Treasury?
All U.S. Treasury Notes have call features.
A member firm is associated with Mr. Smith, an independent contractor of the member firm. Mr. Smith sells mutual funds from his home office. All of the following are true regarding this association EXCEPT:
Since Mr. Smith is an independent contractor, he will not be supervised by the firm.
Which of the following statements is FALSE when discussing the Federal Funds Rate?
The Federal Reserve directly sets the Federal Funds Rate.
Mr. Smith advises his registered representative to sell 300 shares of his ABC common stock whenever the price is right. Later that day ABC starts to move up and the RR enters a market order to sell the stock. Which of the following statements is true?
The RR handled the order appropriately since the only decisions required were related to time and price.
What happens when an RR FAILS to complete the regulatory element of continuing education?
The RR must immediately stop performing all activities which require the RR to be registered.
One of your clients places a trade in their cash account without the funds to pay for the securities. No additional funds were added to the account and no extension was obtained for additional time to deposit funds. The firm liquidates the purchased position. In order to comply with Reg T guidelines, the customer's account must be frozen for what amount of time?
The account must be frozen for 90 days.
Which of the following statements by an RR is TRUE regarding dividends?
"An investor who owns an American Depository Receipt can expect to receive dividends from their investment when declared and paid".
A customer calls their RR. Which of the following statements by the customer would allow the RR to take action in effecting a transaction for the customer?
"When you think that the price is right today, buy 200 shares of ABC for me."
A share of ABC 8% preferred stock with a par value of 25 will pay a quarterly dividend of
$.50
The following quote appears on a consolidated tape: XYZP 25.13 +.25 B25 A25.25 How much should you expect to pay to buy 100 shares?
$25.25 per share
A customer buys 1 XYZ May 50 call for 2 and buys 1 XYZ May 35 put for 1 when XYZ is selling at $39 per share. XYZ decreases to $28 and the put is sold for the in-the-money amount while the call expires unexercised. The customer's profit or loss is:
$400 profit
A customer buys 100 shares of ABC at 50.50 and sells 1 ABC 50 call @ 5. At what price will the customer breakeven?
$45.50
A basis point equals:
1/100 of 1%
A broker-dealer has fired a registered representative (RR) for cause related to a violation of securities regulations. This RR will continue to be subject to FINRA jurisdiction for what period of time following the filing of the Form U-5?
2 years
Blake currently owns 200 shares of ABC common stock. ABC announces 83 for one stock split. After the split how many shares of ABC will Blake on?
600 shares
The manager of Introducing Broker-Dealer wants to thank the manager at Clearing Broker-Dealer for their assistance with some trading volume as of late. Which of the following gifts is permissible under FINRA Rules if limited to once annually?
A gift card to a local sporting goods store for exactly $100.
The agreement that authorizes a broker-dealer to pledge a customer's margin securities as collateral for a loan from a bank to the broker-dealer is called:
A hypothecation agreement
Which of the following would be the MOST typical portfolio make up for a mutual fund that is categorized as "balanced"?
A portfolio consisting of equity securities such as common and preferred, along with bonds from various issuers including government municipal, and corporate.
Which of the following scenarios would NOT violate SEC rules related to trading on inside information?
A registered representative of a broker-dealer with inside information related to the upcoming release of a positive research report executed an unsolicited buy order from a customer.
Which of the following accurately describes a secondary offering or secondary distribution?
An offering in the secondary market of securities owned by one or more major owners wishing to sell large volumes of their shares.
529 Education Savings Plan accounts have all of the following features EXCEPT:
Annual contributions to the account can total no more than $2,000.
In general which of the following is true in terms of orders used to protect a profit or limit a loss?
Buy stops are used to protect a short stop position while sale stops are used to protect a long stop position
Which of the following is generally NOT TRUE in relation to Corporate Commercial Paper?
Commercial paper is normally issued in callable form.
A common stockholder has all of the following rights except:
Demand dissolution of the companies assets
Eurodollars are BEST described with which of the following statements?
Eurodollars represent currency of the U.S. that is currently being held in foreign (non-U.S.) banks.
When a client opens an options account at a firm, regulations dictate that the firm must receive an account agreement signed by the customer in what time frame?
Following approval of the account, the firm must receive the signed account agreement within 15 days.
The filing of a SAR (Suspicious Activity Report) may be required for which TWO of the following? I. A $10,000 personal check deposited into an account annually II. A quarterly direct deposit for $7,000 into an account III. The deposit of a cashier's check once every other week for $9,000 IV. Wire transfers into and out of an account at frequent intervals
III & IV
Which of the following can NOT be purchased on margin?
IPO's
All of the following are true in regarding IRA contributions EXCEPT:
If an extension for a tax return is obtained, the IRA contribution may be delayed until the date the tax return is filed.
Which of the following gifts would exceed the gift and gratuity limitation is established by FINRA?
In celebration of a clearing firm reaching 20 years in business and introducing firm who uses a clearing firm buys Rolex watches (each valued over $2000)for 20 executives and principles at the clearing firm.
An investor, Mrs. Smith, is seeking a mutual fund offering a high yield. Which of the following is the best choice for Mrs. Smith?
Income fund
When an investor buys either a corporate or municipal bond, how frequently is interest paid?
Interest is paid on a semi-annual basis
Good-till cancelled orders have all of the following characteristics EXCEPT:
They are permitted for common stock only.
Jane left the securities industry 5 years ago to raise her two children. The children are now in school full time and Jane has decided to go back to work at the same broker-dealer where she previously worked. Which of the following is true regarding Jane's registration status with the firm?
Jane's licenses have lapsed and she will be required to take the qualification exams again.
Which of the following options positions would give the investor maximum protection when hedging using options?
Long calls and long puts
A customer buys U.S. government bonds on Friday, March 6. Regular way settlement is?
Monday, March 9.
A client recently purchases a sizeable number of mutual find shares and knows that the Net Asset Value will change daily. The customer asks the RR how the NAV number is computed. Which of the following best describes the computation to arrive at NAV per share?
NAV per share is calculated by subtracting the liabilities of the fund from the total assets of the fund, then dividing this number by the total number of shares currently outstanding.
When an investor regularly trades in and out of five or six different stocks daily and does not maintain any positions over night would be a:
Pattern Day Trader
Preferred stock has which of the following traits?
Preferred stockholders have a priority claim to the assets of a corporation over common shareholders in the event of a dissolution of the company
Which of the following statements about preferred stock is true?
Preferred stocks is considered an equity security
Customers of member firms are required to receive statements of their accounts at a minimum of
Quarterly
Which of the following statements about REPOs (Repurchase Agreements) is FALSE?
REPOs are often though of as risk-free investments.
Which of the following types of bonds secures its income from fees charged to users?
Revenue bond
A broker dealer firm has become insolvent. SIPC liquidation procedures have begun. Jill and Jack are married and each of them have individual accounts along with a joint account with each other at the farm. The following are their account balances: Jill's individual account has 275,000 in fully paid securities, Jack's individual account has 265,000 in fully paid securities and Jack and Jill's joint account has 475,000 in fully paid securities. What would SIPC cover in relation to these accounts?
SIPC coverage would pay $275,000 for Jills account, $265,000 for Jack's account, and $475,000 for the joint account.
Form letters, telemarketing scripts, and seminar texts are examples of:
Sales literature
A new client opens up a margin account at the firm. The client wishes to perform a short sale as their first transaction. They wish to sell short 1,000 shares of MNO corporation, which is currently trading at $2.25 per share. How much must this client deposit assuming no other deposits have been made at this time?
The client must deposit $2,500.
Which of the following is TRUE when a corporation declares a split in its common stock?
The common stick's par value would be affected.
Which of the following is true when a corporation declares a split and it's common stock
The common stocks par value would be affected
One of your clients purchases a callable corporate bond. The bond is callable at 106.55. What will the customer receive if the corporation calls the bond and the customer tenders them back to the corporation?
The customer will receive $1,065.50 for the bond and accrued interest up to the call date will be added to that figure.
An RR is explaining a section 529 education savings plan to clients who are the parents of a college bound child. They are interested in making provisions for the college cost. The RR should disclose all of the following characteristics of a 529 plan except?
The maximum contribution limit can be set at more than $300,000 depending on the state and the contribution is exempt from federal gift taxes
Which of the following statements about Roth IRS plans are TRUE?
The qualified distributions of a Roth IRA plan are not taxable.
Common stockholders have all of the following rights except
The right to vote for the senior management of the company
And investor wants to exchange shares of one fund with shares of another fund that is within the same family of funds. Which of the following is not an important consideration when making such an exchange?
The sales load of the new fund
An investor, whose investment objective is speculation, would MOSTLY be concerned with which of the following?
Their exposure to capital risk
A client has held a long position in BCD Common for several years and has seen a sizeable increase in price since initially buying the stock. The client fears that BCD is headed for a slight downturn in price and wishes to protect the profits that he holds from the previous increase. Which option strategy provides the MAXIMUM protection for this client?
This client would be best suited by buying puts on BCD.
A pharmaceutical company plans to release a new drug next month. Prior to the release, one of your clients buys 1,000 shares. Two weeks prior to the release, the FDA publicly announces a delay in the approval of the drug. Your customer's shares drop approximately 20% in value. Which of the following types of risk is BEST represented by this scenario?
This is an example of legislative or regulatory risk.
When a customer opens a margin account at a broker dealer they are required to sign certain documents. Which of the following best describes the agreement between the customer in the broker dealer related to the terms and conditions of financing involved in purchasing on margin?
This is covered in the credit agreement for a line of credit with the customer
A Registered Representative thoroughly reads a preliminary prospectus and then writes a brief review of the prospectus which he wants to send to clients he believes are suitable.
This may not be done under any circumstances.
All of the following are defensive except
Tool and die manufacturer
Regular way settlement for corporate securities such as common stocks, preferred stocks, and bonds is
Trade date +2 business days
Which of the following U.S. Government securities are classified as money market instruments?
Treasury Bills
In order to free up time for the registered representatives, a member firm has several non-registered persons telemarket prospective clients with a script. The script states the following: "Good morning, my name is _____ and I'm calling you from Make Money Securities. Our firm expects market increases in ABC Fund, which is offered for sale by our registered representatives. May I connect you with one of our representatives or send you further information?" Which of the following is CORRECT about this situation?
Under no circumstances may an unregistered person perform such activities.
Which of the following provides a long term opportunity to purchase A certain number of common shares at a specific price?
Warrants
When could expect changes in the new asset value of a mutual fund?
When there are changes in the value of securities within the fund's portfolio
Mrs. Jones has a conservative investing approach. She has a large portfolio of blue chip common stocks and wants to use options to receive additional income from the portfolio. Which of the following would be the MOST suitable recommendation for Mrs. Jones?
Write Call options on the portfolio of securities
One of your clients holds a preferred stock on ABC and ABC has not paid dividends for the past 2 quarters. ABC requires that unpaid dividends on preferred stock be paid prior to paying any dividends to common stockholders. What kind of preferred stock does your client hold?
Your client has a cumulative feature on their preferred stock
Assume that interest rates have remained stable while stock prices have been declining. An investor is most concerned about the loss of principal when investing and asks his registered representative whether a balanced fund or a growth fund would provide better preservation of capital. The RR should tell the customer that the:
balanced fund is better because the debt securities and preferred stocks in the portfolio will provide downside protection in this scenario.
An RR in California has a client in Colorado. To make trades for the Colorado client, the RR MUST:
be registered in Colorado
the term "spread" in the OTC market refers to the difference between the
bid and ask prices of a security
One of your clients refers a friend. After talking with the referred friend, she opens an account with you, deposits $20,000, and states that she wants you to choose some stocks that will have good growth potential whenever you feel it is the right time to buy. The next step you should take would be to:
get written discretionary authorization from her prior to executing any transaction.
SEC Rule 144A permits the resale of non registered securities to all of the following EXCEPT:
individuals
Mr. Smith, your client, has maintained about 80% of his portfolio in fixed income securities. Interest rates are expected to decline over the next 12 month period. Mr. Smith calls you because he is concerned about this prediction and his portfolio. Which of the following recommendations would be appropriate for you to give to Mr. Smith?
leave his portfolio the way it is now.
When a bond is trading at a discount, the current yield on the bond is:
less than its yield to maturity
In preparation for a Secondary distribution a member firm decides to make purchases on the floor which would cause the price of the stock to rise so that the secondary distribution could be made at a higher price. Such activity is
prohibited as market manipulation is not allowed
The appreciation of the value of a variable annuity during the accumulation period is
tax deferred until annuitization
A market maker is quoting ABCD common stock, a NASDAQ security. The spread in this security is best described as the difference between
the dealer's quoted bid and ask price
When a company calls an issue of bonds, all of the following would typically be FALSE EXCEPT:
the holders of called bonds will receive the face value of the bond plus a call premium.
Which of the following are true about the purchase of variable annuities?
the monthly payout varies
Who receives an annuity contract's surrender value?
the owner of the contract receives the surrender value
Which of the statements below on open-end funds is FALSE?
the secondary market is here such funds are traded.
SEC rule 415 allows "Shelf Registration." This permits one registration statement to cover all securities to be issued during the next:
three years
A day trader of blue chip common stocks would be most concerned with which of the following risks?
timing risk
Which of the following statements is TRUE in relation to Coverdell Education Savings Accounts?
total contributions may not exceed $2,000 per beneficiary in any year, regardless of the number of donors.
Which of the following investments allow a maximum contribution limit of 100% of earned income not to exceed $6000 (tax year 2021) and assuming the investor is less than 50 years of age?
traditional IRA
An RR must explain sales charges to prospective mutual fund clients so that they
understand breakpoint discounts and maximum charges related to buying mutual fund shares
Common stockholders have all of the following rights EXCEPT:
vote for senior management of the company