SIE Wrong Answers
Shelf offerings are covered under which if the following?
the Securities Act of 1933
The law that provides the legal framework for state registration of securities is
the Uniform Securities Act.
For options, each is a two-party contract, which allows
the buyer to exercise the contract, with the seller obligated to fulfill the terms of the contract.
A customer wanting to open a margin account is told that the securities will be held in street name. This means that the securities will be registered in
the name of the broker-dealer
Which of the following are securities representing other securities held on deposit with a trustee where the principal and interest payments have been separated?
treasury receipts and STRIPS
Regarding the decision to dissolve a LP before its scheduled predetermined dissolution date, it would need to be
voted bon by the limited partners holding a majority interest
Who benefits more from a defined contribution plan?
younger employees
To ensure that the information obtained from each new customer is accurate, firms must furnish to each customer a copy of the account record within how many days of opening the account?
30
Firms must file a suspicious activity report (SAR) within how many days of becoming aware of a suspicious transaction?
30 days and are prohibited from notifying the customer involved that a report has been filed
Each year a bond pays semiannual interest payments of $20. This bond has a nominal yield of
4%
Records relating to a Currency Transaction Report (CTR) must be retained for
5 years
The sales charge for Class A shares may not exceed
8.5% of the total invstment
A registered representative has left a firm and joined another. The new firm must obtain a copy of the Form U-5 filled out by the old firm. Where might the new firm obtain a copy of the form?
1)From the new employee 2)From Financial Industry Regulatory Authority (FINRA)'s Central Registration Depository (CRD)
According to the U.S. Commerce Department, the economy is in a depression when a decline in real output of goods and services lasts
18+ months
An investor holds a Treasury note with a stated interest of 6%. The investor will receive
2 $30 interest payments per year
Records of advertising, customer confirmations, customer order tickets, and U-5 forms need to be retained for how many years?
3 years
The following records must be kept for how many years? A list of the offices where registered representatives conduct business Compensation records for registered representatives The firm's compliance manuals
3 years
Financial Industry Regulatory Authority (FINRA) has a continuing education requirement with the goal of making sure that all registered personnel are aware of industry changes. If a registered representative has just observed her second anniversary in the industry and did the required regulatory element CE, the next time she will be required to sit for the regulatory element is
3 years from now
Which of the following has the most liquidity risk?
Limited partnerships (TIP: LP are basically illiquid)
Which of the following contracts are in the money if the strike price is 30 and the market price is 40?
Long call and short call (TIP: all calls are in the money when the market price is above the strike price)
Which of the following is true regarding accounts trading on margin?
A fiduciary account may only trade on margin if it is specifically permitted in the trust or custodial agreement.
During the cooling off period, underwriters would be allowed to do all of the following except
A) ADVERTISE THE ISSUE B) publish a tombstone. C) distribute a preliminary prospectus. D) take indications of interest.
Each of the following activities would require prior written notification by an associated person to the employing broker-dealer
A) offering to sell a limited partnership interest in an oil and gas drilling program. B) part-time work parking cars on the weekend at a local racetrack. C) acting as a real estate sales agent, limited to the sales of individual homes only.
Which of the following would cause a change in the net asset value (NAV) of a mutual fund share?
The fund pays a small dividend. The market value of the portfolio declines.
Which of the following is an unsecured debt instrument?
Aaa/AAA-rated debentures (TIP: debentures are backed by good faith and credit of the issuing corporation)
All of the following are true of Roth IRAs
B) Contributions may be able to be made after 72 C) Withdrawals are not required at age 72 D) Contributions are made after tax
All of the following actions would cause the NAV per share of a mutual fund to decrease except
B) a large number of shareholders make withdrawals from the fund. A) the fund distributes capital gains. C) liabilities increase. D) the fund distributes dividends.
All of the following self-regulatory organizations (SROs) function under the Securities and Exchange Commission's (SEC's) oversight
B) the Municipal Securities Rule Board (MSRB). C) the Financial Industry Regulatory Authority (FINRA). D) the Chicago Board Options Exchange (CBOE).
All of the following would be required for a discretionary account except
B) the account must receive Financial Industry Regulatory Authority (FINRA) approval prior to the first trade. A) the customer must authorize discretion. C) all trades must be promptly approved by a principal at the firm. D) a principal at the firm must authorize discretion.
Which of the following orders can be used to close a short position in CDT stock that consists of 1,000 shares?
Buy 1,000 shares of CDT
Advantages enjoyed by the limited partners in a partnership might be all of the following except
C) being in a fiduciary position with responsibilities to others. A) owning an interest in an investment managed by others. B) having income and expenses flow directly through to them. D) having liability limited to the loss of the money invested.
Benefits of mutual funds include all of the following except
C) reinvested dividends are not taxed until withdrawal. A) mutual funds report distributions annually to investors. B) mutual funds are professionally managed. D) mutual funds can provide broad diversification inside a single fund.
Which of the following need not be included in the annual reports a mutual fund provides to its shareholders?
D) A list of the most poorly performing portfolio securities A) Factors and strategies that materially affected performance B) Names and titles of those responsible for portfolio management C) A graph comparing fund performance to an appropriate index
Which of the following investment companies do not redeem their shares?
D) Closed end funds A) Face amount certificates B) Unit investment trusts C) Open end funds
Which of the following would have no effect on the NAV per share of a mutual fund share?
D) The fund pays its monthly operating expenses like utility bills. A) The fund receives a dividend from one of the portfolio stocks. B) The portfolio's market value undergoes a large increase. C) Portfolio securities had to be sold for a big capital loss.
All the following are cyclical industries except
D) precious metals. A) heavy equipment. B) home appliances. C) automobiles.
The Securities Act of 1933 exempts all of the following securities from registration except
D) public real estate investment trusts (REITs). A) U.S. government issues. B) savings and loan issues. C) municipal issues.
A broker-dealer wants to give an employee of another firm a gift. This is permitted provided all of the following conditions are met except
D) the gift or compensation is preapproved by the firm's self-regulatory organization (SRO). A) the gift or compensation doesn't exceed the annual $100 limit. B) the gift or compensation has the employing member firm's prior approval. C) the gift or compensation is not conditional on sales.
Your client Harry Swenson is very frugal. He feels like mutual funds have too many expenses, and he doesn't believe over a long period of time that the active management of investment advisors can outperform their respective bench marks. He likes the idea of a pooled investment in the stock market rather than picking individual stocks on his own. Which of the following types of investments should you recommend?
ETF exchange-traded fund
Which of the following is a type of real estate direct participation program?
Existing properties New construction Raw land
Which of the following obligations is backed by the full faith and credit of the United States Government?
GNMA - Government National Mortgage Association
A measure of a nation's citizen's economic activity is
GNP
What is a big advantage Roth IRAs have over traditional IRAs?
Normally distributions are tax free.
Primary market transactions would include which of the following?
Sale of $10 million of CORPORATE BOND by a broker-dealer acting as an underwriter
List the following Treasury securities from the longest to the shortest maturities.
T-bonds, T-notes, T-bills
Which of the following are TRUE regarding mutual fund sales charges?
They are set by the fund's transfer agent. They are used to compensate the fund's underwriter and sales representatives.
Which of the following items may be required to be kept more than three years? U-4 forms U-5 forms Customer order tickets Customer Confirmations
U-4 forms ONLY
Two years ago Lisa Smith sold short 100 shares at $50 per share and two years later bought them back for $55 per share. The stock paid a $2.50 dividend each year. How much did Smith gain or lose per share for tax purposes?
a $5 loss (TIP: dont include dividends )
Which of the following transactions would take place in the secondary market?
a broker-dealer selling securities out of its inventory to the public
When purchasing a bond, the investor is taking on
a creditor position
Which of the following would be funded by general obligation (GO) bonds?
a new city hall
An officer of a broker-dealer firm would be categorized as a restricted person if that individual attempted to purchase
a new issue initial public offering (IPO) at the public offering price.
An institution or a person responsible for making all investment, management, and distribution decisions in an account maintained in the best interests of another who has been legally appointed to provide these services is best described as
a trustee
Which of the following is the best description of a limited partnership?
an investment that permits both gains and losses to pass through to the investors
Intangible drilling costs (IDCs) associated with oil and gas DPPs can generally
be deducted completely in the 1st year of the program
If a customer sold puts to open, which of the following transactions would be allowed if the options agreement was not returned signed within 15 days?
buy puts to close
Index and foreign currency options must be settled in
cash
Your client, Janice Thomas, is an active trader and wants to invest in a managed equity portfolio that he can trade intraday. Which of the following should you recommend?
closed end fund (TIP:A closed end fund is actively traded and most of them are equity funds.)
A corporation has issued debt securities backed by the shares of another corporation that it owns. These debt securities are known as
collateral trust bonds
Which of the following securities is the underlying asset used to create an American depository receipt (ADR)?
common shares
Which of the following preferred issues is most likely to fluctuate in line with the issuer's common shares?
convertible
Shares to sell short have been located in order to be borrowed. Once sold short, these shares will be known as
covered (TIP: These shares, because they have already been located to be borrowed, are known to be covered.)
Which of the following would lead to a standardized cost-base adjustment for stockholders?
dividend
All of the following are possible actions of an investor who has received stock rights
exercise the rights to purchase the new stock at a discount. sell the rights for a short-term capital gain or loss. allow the rights to expire unexercised.
For preferred shares, the annual dividend payment is
fixed and states as a percentage of its par value
Which of the following investment companies terminates business on a predetermined date?
fixed unit investment trust (UIT)
If long one equity call option, the owner
has the right to purchase 100 shares of the underlying stock
Which of the following is true of closed end funds but not of open end funds?
have a fixed number of shares (TIP:Open end funds can issue an unlimited number of shares. Closed end funds have a fixed number of shares.)
An officer of a public company buys 1,000 shares of the company's registered stock in the open market. Regarding the sale of these shares, the officer may sell
immediately, subject to Rule 144 volume limitations (tip: b/c they are public=no holding period)
Which of the following is true regarding a registered person who wishes to move her registration from one broker-dealer to another?
in no circumstances can a registration be transferred from one firm to another
When XYZ is trading at 30, an XYZ 40 put bought at 3 would be
in the money (TIP: all puts are in the money when the market price is below the strike price)
Holding a callable bond with call protection is least impactful for the investor when
interest rates are rising
When a company wants to issue additional shares of stock, the preemptive right given to existing shareholders allows those shareholders to
maintain their proportionate ownership in the corporation.
Which of the following are considered systematic risks—those that would impact all businesses?
market risk inflation risk
Under Regulation T, when must a corporate stock transaction be paid for in full in a cash account?
no later than regular ways settlement plus two business days (TIP: b/c of regulation T)
A registered representative has left one firm to join another. Sometime later, the former employer discovers that some information on Form U-5 filed at the time of termination was inaccurate. The firm need not file an amended U-5 if at least how much time has gone by?
no stated time limit
A customer who has written an option contract receives an assignment notice. This customer is
now obligated to either buy or sell the underlying stock at the strike price
Tools available to the Federal Reserve Board (FRB) include`
open-market operations setting the discount rate & setting reserve requirements
A mutual fund has been in existence for 25 years. The prospectus must disclose the fund's performance
over the last 1, 5, and 10 years
CDT Corporation has issued 4.5% callable preferred shares. If these shares are ever called in, stockholders should expect that the shares would be called in at
par value or higher
Real estate investment trusts (REITs)
pay dividends and pass gains through to investors but not losses
Subordinate debentures are senior to which of the following fixed income securities?
preferred stock (all debt securities are senior to equity securities)
Which of the following projects would be funded by general obligation (GO) bonds?
public schools (TIP: b/c they're backed by state and local taxes)
A REIT can avoid being taxed as a corporation would by
receiving 75% or more of its income from real estate and distributing 90% or more of its net investment income to its shareholders
A bank issues and guarantees certificates of deposit, and those that are negotiable are considered money market instruments. What makes a CD negotiable?
secondary market trading
Your client Alice Tate with no other positions in her margin account is bearish on ABC stock. Which of the following transactions would you recommend?
sell ABC to open
The requirement for a supplemental prospectus to be filed before each sale is applicable to
shelf registration sales
Which of the following projects would most likely be funded with a revenue bond?
sports stadium
For tax purposes, investment income is
taxed at either ordinary income tax or capital gains tax rates.