Knowledge of capital markets chapter 1

The transfer agent for a corporation is responsible for each of the following EXCEPT:

Acting as an intermediary between the buy and sell sides of a transaction

The primary regulatory body for the securities industry would be which of the following?

Securities and Exchange Commission (SEC)

Correspondent firms would be likely to have relationships with which of the following types of broker-dealers?

Self-clearing

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(n)

Trustee

Your broker-dealer, rather than clear its own securities transactions, chooses to introduce its business to another firm that will clear, processes and handle all back-office operations for it. The firm receiving the business is known as

a carrying firm

A firm that functions for the purpose of receiving and delivering payments and securities on behalf of both buyer and seller in a securities transaction is

a clearing agent

When a firm engages in proprietary trading, buying into and selling out of its own inventory for profit, it is acting as

a market maker

Broker-dealers must comply with SEC rules and regulations when conducting business. A broker-dealer that does not comply may be subject to all of the following EXCEPT

a prison sentence for principals of the firm ranging from 2 to 5 years

All of the following are associated with being a carrying firm EXCEPT

being a fully disclosed firm

Under the Securities Exchange Act of 1934, registration is required for

broker-dealers

A clearing corporation agent or depository for securities transactions

can be a commercial bank

A broker-dealer that executes trades and settles transactions for another broker-dealer is called a

carrying firm

All of the following are acceptable choices to function as a depository and intermediary for transactions between buyers and sellers of securities EXCEPT

credit unions

An institution or a person responsible for making all investment, management, and distribution decisions in an account maintained in the best interests of another is known as a(n)

custodian

Anyone who, as part of their business, gives investment advice for compensation must register as a(n)

investment adviser under the Investment Advisers Act of 1940.

A fully disclosed broker-dealer

is one that introduces its business to a carrying firm to clear transactions

A broker-dealer that accepts the risk of holding a particular security in its account to facilitate trading and provide liquidity in that security is BEST described as a(n)

market maker

Having been told that a firm incorporates proprietary trading in its business model buying and selling securities into and out of its own inventory you would know that it is a

market maker

Carrying firms may NOT

mix customer funds and securities with their own

A person who looks to provide advice to a city government concerning the issuance of municipal debt securities would BEST be described as a(n)

municipal advisor

Some institutions can function as a depository and intermediary for settling transactions between buyers and sellers of securities. All of the following are acceptable for this purpose EXCEPT

national banks

An institutional investor selects a single FINRA/NYSE member firm to provide for financing and custody of securities, while orders to buy or sell are placed with executing brokers. This is an example of a(n)

prime brokerage account.

All of the following are benefits of using a prime broker EXCEPT

research

An individual who purchases securities for a personal account is called a(n)

retail investor

Carrying firms, those that carry customer accounts, must

segregate customer funds and securities from the firms' funds and securities.

The Depository Trust Company (DTC)

serves the custody needs of securities industry participants

A customer has a significant amount of money in bank deposit accounts: $225,000 in a savings account titled in the customer's name; $240,000 in a checking account titled jointly with a spouse; and $100,000 in an account where the customer is custodian for a grandchild. Should that bank fail, the Federal Deposit Insurance Corporation (FDIC) insurance would cover

the entire $565,000

A market maker

trades in a proprietary account to facilitate trading of a security and provide liquidity

FINRA regulates all matters related to investment banking, including

trading in the OTC market

A company that offers sales of another company's securities would BEST be described as a(n)

underwriter

An investor opens an account with BNZ Government Securities, a broker-dealer limiting its transactions exclusively to securities issued by the U.S. government. The account holds $250,000 of Treasury bonds, $250,000 of Treasury notes, and $50,000 in cash. If BNZ's broker-dealer business should fail, the investor would receive SIPC protection in the amount of

$0.00

Certain investors are deemed "accredited" when they have a net worth of

$1 million not including net equity in the primary residence

Which of the following must be a member of the Securities Investor Protection Corporation (SIPC)?

A firm that deals only in OTC and exchange listed stocks

A registered securities broker-dealer that does not comply with FINRA and SEC rules and regulations is subject to each of the following sanctions EXCEPT:

Reductions in SIPC coverage.

All of the following are self-regulatory organizations (SROs) EXCEPT

SEC

Broker-dealers that transact securities business with customers or other broker-dealers must apply and be approved for registration with

SEC

Broker-dealers who transact securities business with other BDs or customers must be registered with

SEC

FINRA staff must submit new rules and await approval from which of the following regulatory bodies prior to becoming effective?

SEC

Broker-dealers and registered representatives may be subject to each of the following administrative and regulatory bodies EXCEPT?

SIPC

Which of the following companies was created by an act of Congress and provides securities investors limited financial coverage in the event that the investor's servicing broker-dealer fails financially?

SIPC

A broker-dealer has a line of business restricted solely to the purchase and sale of securities with trade executions being handled by another member firm. Which of the following would best describe this type of firm?

Introducing/fully disclosed

Your broker-dealer executes trades for other broker-dealers and after execution settles those transactions for them. Your firm would be classified as which of the following?

Carrying firm

A broker-dealer and its associated persons may be subjected to sanctions for violations of FINRA and SEC rules. Which of the following penalties can be levied against the associated persons?

Censure

A broker-dealer's business model allows for only the purchase and sale of securities for retail customer accounts. It does not execute, settle, or clear its customer's transactions, nor does it tend to any back-office functions such as sending trade confirmations or forwarding proxies. This broker-dealer would best be described as what type of firm?

Introducing/fully disclosed

Which of the following organizations was created to protect investors financially from a bank failure?

FDIC

Which of the following is an SRO?

FINRA

Which of the following organizations looks to promote self-discipline among members and investigate and resolve grievances between the public and members and between members?

FINRA

Which regulatory body oversees trading in the over-the-counter (OTC) market?

FINRA

While the MSRB writes the rules and regulations regarding underwriting and trading for municipal securities, it does not enforce those rules. Who does?

FINRA

All of the following SROs function under the SEC's oversight EXCEPT

FSLIC

Each SRO functions under the SEC's oversight and is accountable to the commission for enforcing federal securities laws. While the MSRB regulates all matters related to the underwriting and trading of state and municipal securities, it does not have enforcement powers of its rules. Which of the following does the MSRB rely on for enforcement of these rules?

Financial Industry Regulatory Authority

A firm designated as self-clearing can

I.act in a back-office capacity for an introducing firm III.clear and settle transactions executed by other firms

Which of the following regulatory authorities relies exclusively upon other examining authorities to enforce its rules?

MSRB

Which of the following regulatory bodies regulates but has no enforcement powers?

MSRB

Which of the following is TRUE regarding a member firm operating under FINRA membership or the membership of another self-regulatory organization (SRO)?

Member firms can offer all types of investment products, such as stocks, bonds, mutual funds, options and others, or limit the products they offer to only a few.

Which of the following pairs are NOT covered by the Federal Deposit Insurance Corporation (FDIC) at any level?

Mutual funds and annuities