MF Checkpoint Exams
Both the individual and institutional investor are able to easily buy and sell securities to meet their objectives through A) secondary markets. B) outdoor malls. C) biennial markets. D) primary markets.
A
Regulation S-P defines consumers and customers correctly in which of these statements? A customer has an ongoing relationship with the company. A consumer performs a onetime transaction with the company. A consumer has an ongoing relationship with the company. A customer performs a onetime transaction with the company. A) I and II B) III and IV C) I and III D) II and IV
A
A REIT that owns and operates an office building in the Dallas Metroplex is an example of A) an equity REIT. B) a mortgage REIT. C) a hybrid REIT. D) a leasing REIT.
A
A Suspicious Activity Report would be triggered if the broker-dealer suspects a transaction involves funds derived from illegal activity and A) involves at least $5,000 in funds or other assets. B) involves at least $10,000 in funds or other assets. C) involves more than $5,000 in funds or other assets. D) involves more than $10,000 in funds or other assets.
A
An American depositary receipt is a A) domestic security representing a foreign security in U.S. markets. B) foreign security representing a domestic security in foreign markets. C) domestic security trading in foreign markets. D) foreign security trading in U.S. markets.
A
An investor shorts 2 DEF January 55 puts, at a premium of two each, when the market price of DEF is 56.25. What is the investor's maximum potential loss? A) $10,600 B) $5,425 C) Unlimited D) $5,300
A
Before executing a short sale the broker-dealer must first A) locate the shares to be borrowed. B) have the customer deposit funds sufficient the cover the potential loss. C) check to see if the customer already owns the shares. D) do all of these.
A
Cypress Care Nurseries, Inc., owns and operates a chain of nurseries and is headquartered in Cypress, California. The company is considering selling shares of the company to the public in California. In order to be exempt from registration with the SEC, under Rule 147 it would need to meet several criteria. Which of these is not a listed criterion under Rule 147? A) 80% of the issuer's customers must be located in the state of California. B) 80% of the issuer's assets are located in the state of California. C) 80% of the issuer's proceeds will be used in the state of California. D) 80% of the issuer's revenue must be generated from the state of California.
A
Eddy is a representative for Saguaro Securities in Scottsdale, Arizona and wants to join the Maricopa County Sheriff's Department as a part-time reserve deputy. For his community service, he will receive a small payment to help defer the cost of his equipment. Before he does this, he needs to A) provide Saguaro with written notice. B) receive permission from Saguaro to enter into service for the department. C) provide written notice to both his employer and the state regulator of his intention. D) do nothing other than a good job for his employer and his community.
A
FOCUS reports, U-4 forms, and order tickets are examples of records that must be kept for A) three years. B) 10 years. C) six years. D) four years.
A
From a regulator's standpoint, a complaint refers to which of these? I.Verbal or written II.Any aspect of customer service III.Written IV. Any issue arising from a securities transaction A) III and IV B) I and IV C) I and II D) II and III
A
Joey, a registered representative for Seacoast Securities, Inc., has been approached by his close friend, Ross (who is a customer), to help him raise money for his anthropological research project. Ross wants Joey to introduce the program to his customers. If the customer invests in the program, they will receive a portion of any money earned with the sale of the research. The project is organized as a limited partnership, and Joey would receive payment for any investors he brings to the table. If Joey helps Ross and receives payment directly from him this is an example of A) selling away and is a rules violation. B) not selling away because of the long standing relationship. C) selling away, but is not a violation because it is a science project. D) not selling away because it is not a normal limited partnership program.
A
MSRB rules apply to all of the following except A) municipalities. B) municipal dealers. C) investment bankers. D) FINRA member firms performing trades with municipal bonds.
A
Many investors like to put a transfer on death (TOD) designation on their brokerage accounts. Which of these are benefits of doing so? The TOD designation avoids estate taxes. The TOD designation avoids probate. The account holder is relieved of decision making in the account. There is flexibility to change beneficiaries as conditions dictate. A) II and IV B) I and III C) II and III D) I and IV
A
Pete, a registered representative, is discussing his work as an investment banker with is family during his grandfather's birthday party. He was particularly excited about an upcoming IPO for Narcissus, a social media company. Several of his family members express an interest in purchasing the stock at the IPO. Which of Pete's family would be allowed to participate in the IPO of Narcissus Inc., stock? A) His grandfather B) His parents C) His brother D) His brother's spouse
A
Purchased 15 years ago with a coupon of 6.25%, a corporate bond in an investor's portfolio has matured. With interest rates now substantially lower at 2.75%, this investor, having no immediate need for the proceeds, is now exposed to A) reinvestment risk. B) financial risk. C) call risk. D) interest-rate risk.
A
Seacoast Securities, Inc., a broker-dealer firm, has developed a series of ongoing education courses for its registered personnel. These courses cover various developments in the industry that are pertinent to Seacoast's business. Employees must complete the assigned courses in the year they are assigned. This is an example of A) firm-element continuing education. B) broker-dealer education mandate. C) good human resource development. D) regulatory element continuing education.
A
The Big Shoe Sneaker Company is a small manufacturer of athletic shoes. It is selling $100 million of its stock. This will be its first public offering. It will use the money to enhance both marketing and production with a plan to grow the business and obtain a Nasdaq listing in two or three years. After the initial sale of the new shares, buyers of the stock in the over-the-counter market should expect to receive the final prospectus for how many days? A) 90 B) Buyers in the secondary market are never entitled to the IPO prospectus C) 40 D) 25
A
The Office of Foreign Asset Control maintains a list of people and organizations with whom U.S. citizens and companies are not allowed to do business. This list is called the A) Specially Designated Nationals List. B) Banned and Barred Individuals List. C) Known Criminal and Terrorist List. D) Persona Non Grata List.
A
The TCPA requires that businesses that solicit by phone maintain a do-not-call registry that must be republished every A) 30 days. B) quarter. C) 3 months. D) year.
A
The Telephone Consumer Protection Act of 1991 exempts all of these entities except A) booking services for commercial enterprises. B) survey takers. C) not-for-profit companies. D) debt collectors.
A
The United States Supreme Court decision that provided our current definition of a security is A) SEC v. Howey B) SEC v. Lorenzo C) County of San Francisco v. State of California D) Hawkins v. Florida
A
The preliminary prospectus for the IPO of the Big Shoes Sneaker Company indicates that the number of shares sold may be increased as much as 15% if market demand is sufficient. This is called a A) Green Shoe option B) Flex offering C) Shelf offering D) Secondary IPO offering
A
Under Rule 144, which of these sales are subject to volume limitations on the number of shares sold? Control person selling registered stock held for 1 year Control person selling restricted stock held for 2 years Nonaffiliate selling registered stock held for 1 month Nonaffiliate selling restricted stock held for more than 6 months A) I and II B) III and IV C) I and IV D) II and III
A
Which of these business structures would pass through the results of the business to the owners and protect the owners from the liabilities of the company? A) An LLC B) A General partnership C) A C Corporation D) A Sole proprietorship
A
Which type of DPP would be most likely to enable the investor to claim a deduction for depletion? A) Oil and gas income program B) Real estate limited partnership C) Oil and gas exploratory program D) Equipment leasing
A
registered representative placing trades in a customer account must have discretionary authority if they choose which of the following aspects of the trade? A) The action to be taken, the asset to be traded, or the amount of the trade B) The action to be taken, the asset to be traded, and the amount of the trade. C) The action to be taken and the asset to be traded. D) The asset to be traded and the amount of the trade.
A
Demand-side economics call on the federal government to do which of the following to encourage economic activity? A) Lower personal income tax rates B) Increase tax rates C) Decrease government spending D) Decrease regulation
A A demand-side approach would call for lower taxes on consumers and increased government spending. Little emphasis is placed on the regulatory burden.
When choosing to issue additional bonds to the general public in order to raise more capital, a corporate issuer is engaging in A) a primary offering. B) an initial public offering. C) a private securities offering. D) a secondary offering.
A A primary corporate offering is one in which the proceeds raised go to the issuing corporation. Primary offerings of bonds may be made by an issuer to the general public as an initial public offering (IPO) or, as is the case here, in an additional public offering (APO). Both are primary offerings.
Deanfield and Chatham Investments, LLC has recently registered as a broker-dealer with the SEC and been accepted as a FINRA member firm. They update their website to prominently display this fact at the top of their site and include large images of both organizations' logos. This is A) not allowed because it is a misrepresentation. B) not allowed because it violates principals of marketing. C) allowed with proper disclaimers. D) allowed so long as it is accurate.
A Even if only stating a fact, the prominence suggests some greater affiliation or approval
Cooper and Belle, spouses, have a checking account at Gloria City National Bank. The balance is $450,000. What is their protection from FDIC if Gloria City Bank fails? A) $450,000—split evenly between the two people B) $450,000—$250,000 for Cooper and $200,000 for Belle C) $250,000—the total maximum coverage per account D) There is no protection as FDIC only covers savings accounts
A FDIC coverage is per person, per account, split evenly. A joint account with two owners would be covered up to $500,000.
M1 is a measure of the value of A) cash and funds held in DDAs. B) cash, cash equivalents, and DDAs. C) retail CDs and money markets. D) M2 plus retail CDs and money markets.
A M1 is the tightest of the money supply measures, including only actual cash in circulation and funds in demand deposit accounts (DDAs)
All of these enforce MSRB rules except A) the MSRB Enforcement Department. B) the Federal Reserve Board. C) FINRA. D) the Securities Exchange Commission.
A MSRB has no enforcement department. FINRA and the SEC enforce MSRB rules for broker-dealers, and the Fed and the Office of the comptroller do so for banks.
Minimum maintenance requirements in a long margin account is A) 25%. B) 75%. C) 50%. D) 30%.
A Minimum maintenance for long margin is 25%. In a short account the minimum maintenance requirement is 30%. Initial requirement under Regulation T is 50%.
On August 20 of last year, when the stock was trading at $42 dollars, Seabird Airlines declared a 15% stock dividend, payable on September 15. On the close of trading, on the pay date, the stock was trading at $40. What would a customer who owned the stock all of last year report for tax purposes? A) Nothing B) $6 gain C) $2 loss D) $2 investment income
A No implications for a stock dividend
A customer of a broker-dealer sells 300 shares of stock at $50 per share and leaves the proceeds in the account. The proceeds are A free credit balance A debit balance available to the customer on demand available for withdrawal after 30 days A) I and III B) II and IV C) II and III D) I and IV
A Proceeds from a sale that are not reinvested and held in the account at the broker-dealer are considered a free credit balance. The free means that the funds are available to the customer on demand (freely available).
Darrell has an individual account at Seacoast Securities, Inc., an SIPC firm that holds $300,000 in cash; $100,000 in various stock; and $100,000 in the Seacoast Money Market Fund. If Seacoast Securities fails how much coverage does Darrell have? A) $450,000 B) $100,000 C) $250,000 D) $350,000
A SIPC covers securities and cash at a broker-dealer up to a maximum of $500,000, but no more than $250,000 in cash. A money market fund is a type of security. Darrell is covered for $200,000 in securities and $250,000 in cash for a total of $450,000.
Harry's Burgers has announced a tender offer for 20 million shares of Jim's Junkfood Corner at $30 a share. If Harry's secures all the shares then they will control Jim's. The shareholders of Jim's, that submit their shares to the tender offer, will realize which of these? A capital loss occurs if their cost basis is greater than the tender price. There is no effect. A capital gain occurs if their cost basis is less than the tender offer. Investment income is received equal to the value increase of the new shares. A) I and III B) I, III, and IV C) IV only D) II only
A Shareholders who tender their shares effectively sell the shares at the tender price ($30) and realize a gain or a loss depending on what their cost was for the shares tendered.
When consumer prices are increasing at a steady but reasonable rate this is considered a healthy level of A) inflation. B) wage increases. C) growth. D) stagnation.
A Some level of inflation is considered inevitable in a healthy economy.
On March 3, the board of directors of Seabird Airlines declares a $0.20 a share dividend payable to holders of record, as of March 30. Seabird stock jumps on the news from $35 a share to $40 a share on the news. The current yield of Seabird stock is A) 2.00%. B) 5.00%. C) 2.25%. D) 0.50%.
A The formula is (quarterly dividend x 4) / current market value. (0.2 x 4) / 40 = (.8) / 40 = .02 (2%)
Which of these is not a tool used by the Federal Reserve Board (FRB) to impact the money supply? A) Changing the prime rate B) Changing the reserve requirements C) Open market operations of the FOMC D) Changing the discount rate
A The prime rate is set by money-center banks, not the FRB. The remaining answer choices are the tools available to the FRB, which affects the money supply.
Of the standard Federal Reserve tools, which of these is considered the most powerful and used infrequently? A) Reserve rate B) Discount rate C) FOMC activities D) Quantitative easing
A The reserve rate (i.e., the amount member banks keep on deposit at the Federal Reserve for liquidity) has the most dramatic impact when changed. It is rarely changed.
To fill a customer buy order, over-the-counter, your broker-dealer requests a quote from a market maker for 800 shares. The response is 15 bid, and ask 15.25. If the order is placed, the market maker must sell A) 800 shares at $15.25 per share. B) 100 shares at $15.25 per share. C) 800 shares at no more than $15 per share. D) 800 shares at $15 per share.
A This is a buy order. The quote was for 800 shares, and the dealer did not place any qualifiers on the quote. The dealer is committed to selling 800 shares at the ask.
An investor has her registered representative enter a sell stop limit order at 50. Following the order entry, trades occur at 52, 50, 49, 51, and 53. The investor would receive A) 51 B) 50 C) 49 D) 53
A This is really two orders. The first is to stop at 50. That is, once the stock trades at 50 or lower, the order is elected (triggered) and becomes a live working order. That order is to sell at 50 or better. Therefore, the first time the stock hits 50 (or less), is the trade at 50. That triggers the sell limit order to sell at 50 or better. The next trade is at 49 and that is not an acceptable price given the limit order set at 50. The following price, however, at 51, is the next acceptable price after the order is triggered and that is where the order would be executed.
A customer is long 400 shares of BuyStuff Inc., a big-box retailer. He borrows 400 shares to sell while maintaining his long position. This sale is called A) short against the box. B) a closing transaction. C) an effective tax strategy. D) short against the long.
A his is called a short against the box. It was a popular way of locking in a capital gain and deferring the tax consequences into another year. However, this practice was restricted by the Tax Relief Act of 1997; it was so restricted that it has largely disappeared as a practice.
A cash settlement trade settles A) the same day as the trade. B) in two business days. C) the next day. D) the regular way, but no margin borrowing is permitted.
A A cash settlement trade settles the same day as the trade. A cash trade is a trade that occurs in a cash account (meaning no margin).
A bond's rating is used primarily as a measure of its A) purchasing power risk. B) default risk. C) volatility risk. D) interest rate risk.
B
A guaranteed bond is A) debt backed by another company, such as a subsidiary company. B) debt backed by another company, such as a parent company. C) backed by physical assets of either a parent company or a subsidiary company. D) a secured debt instrument.
B
An institutional customer has requested that you provide an article that they can use in their quarterly retail client newsletter. Rule 2210 states that you must A) have a principal review the communication and a copy must be filed with FINRA. B) obtain preapproval from a principal and file a copy with FINRA. C) have a principal review the communication but no filing is required. D) obtain preapproval from a principal, but no filing is required.
B
FINRA rule 2210 on communications with the public would apply for all of the following except A) A flyer sent to 20 prospects B) A voicemail left for a customer C) A text message D) A website
B
Five years ago your client purchased at par $100,000 of New Brunswick City GO bonds maturing in 20 years from now and callable in six months. Interest rates have gone down over the last five years. Which of these should your client do? Your client should recognize that the bonds have a high probability to be called. Your client should recognize that the bonds are unlikely to be called. Your client should expect the bond is trading at a large discount. Your client should expect the bonds are trading at a small premium. A) II and III B) I and IV C) II and IV D) I and III
B
Harold, a representative for Seacoast Securities, is soliciting candy sales for his kid's band camp fundraiser. What permissions does Harold need to do this? A) No permission is needed, but he does need to provide written notice to Seacoast. B) No permission is needed unless his firm has rules on this activity. C) Permission from his employer is needed. D) No permission is needed, but he needs to provide a verbal notification to his supervisor.
B
If a customer had a large cash position and was interested in purchasing stock at prices below where they are today, an option strategy would be to A) buy out-of-the-money calls. B) write covered puts that are currently out of the money. C) place a buy stop order below the market. D) write uncovered calls that are currently out of the money.
B
In which circumstances may a FINRA member firm conduct securities business with a nonmember broker-dealer? A) If the broker-dealer is a Canadian firm without regard to registration B) If the nonmember broker-dealer is a foreign firm and properly registered in their home jurisdiction C) If the broker-dealer is temporarily suspended and any transaction is related to ongoing business D) Under no circumstances
B
Individual retirement accounts allow a catch-up contribution of $1,000 to be made into the account for those who are A) 59½ years old or over. B) 50 years old or over. C) over 50 years old. D) over 72 years old.
B
Mary owns 8% of Doyle Inc., a publically traded publishing company. She has recently married John, a doctor who owns 3% of Doyle. John wants to sell some of his shares to pay off the debt from the wedding and honeymoon. When he does so he will need to A) not file Form 144 because only owns 3% and is not a control person. B) file Form 144 because he is a control person. C) not file Form 144 due to the spousal exception. D) file Form 144 because he is a doctor.
B
New Haven Farms is a producer of specialty foods. They recently received a notice that the Wetlands Maintenance and Drainages Act (The WMD Act) passed indicates that a significant portion of their current land used in food production falls under the act's protection and may no longer be used for agriculture. This is an example of A) political risk. B) legislative risk. C) regulatory risk. D) business risk.
B
Rihanna resigns from her position as a Series 7 registered representative with Princeton Securities, a FINRA member firm, where she has worked for five years. After completing an accelerated graduate studies program, and receiving a Ph.D. in 30 months, she wishes to return to her prior position as a registered representative. In order to do so she A) must retake the Series 7 exam and the SIE exam. B) must retake the Series 7 exam but not the SIE exam. C) does not need to take the exams because she is returning to the industry within 36 months. D) does not need to take the exams due to the education exemption
B
Shares held in electronic form at a clearing house under a broker-dealers account are A) in trust name. B) held in street name. C) held in safe keeping. D) are in custodial name.
B
Shortly after the branch opens, a customer, Martin, deposits $4,000 in cash into a business account. About midday, his spouse Cindy deposits another $4,000 in cash into the same account. Just before closing, Martin returns and makes another identical $4,000 deposit as he did that morning. What is this action called and which report should be filed? A) Structuring, and and only a CTR should be filed B) Structuring, and both a CTR and a SAR should be filed C) Integration, and an SAR should be filed D) Extraction, and a CTR should be filed
B
The Bank Secrecy Act requires that all financial services firm must appoint A) a chief compliance officer. B) an anti-money laundering officer. C) a privacy officer. D) a bank security associate.
B
Under rules found in the Investment Advisers Act of 1940, if a political contribution to certain elected officials or candidates is made then an adviser may A) not provide advisory services to any government they represent for a fee until the next election. B) not provide advisory services to any government they represent for a fee for two years. C) not provide advisory services to any government they represent for a fee for three years. D) have to suspend the providing of advisory services to any government they represent until it is determined if the election campaign was successful or not.
B
Under the Investment Company Act of 1940, which of the following is not considered an investment company? A) Face-amount certificate company B) Hedge fund C) Separate account within a variable annuity D) Unit investment trust
B
Which of these may be found in the final prospectus that is not in the preliminary prospectus? Next year's sales Public offer price Release date Planned use of the proceeds A) II and IV B) II and III C) I and IV D) I and II
B
Which of these statements regarding Treasury bills is correct? A) They are issued with initial maturities of 3, 12, 24, and 50 weeks. B) Treasury bills are the only type of Treasury security issued without a stated interest rate. C) They have the highest interest rate risk of all Treasury securities. D) They are usually issued at a slight premium to par value.
B
Which of these would be unlawful regarding the use of a mutual fund prospectus? A) Leaving a typographical error in the text unmarked B) Calling an investor's attention to a section that may be interesting C) Failing to highlight a small section the customer has specifically asked about D) Sending a prospectus to someone who has shown no interest in the fund
B
Your customer is a resident of the state of Utah. She owns bonds issued by Puerto Rico. The interest from these bonds is A) taxable at all levels because the bonds are not issued by a state. B) tax free at all levels for U.S. citizens. C) taxable at the state level only. D) taxable at the state and local level because she is not a resident of Puerto Rico, but still tax free at the Federal level.
B
Which of these is not a division of the Treasury Department with some level of oversight for the securities industry? A) Office of the Comptroller of the Currency B) Financial Industry Regulatory Authority C) Financial Crimes Enforcement Network D) IRS
B (FINRA) is not a government agency,
A document that substitutes for the owners signatures on the back of a stock or bond certificate is called a A) security substitution letter. B) stock or bond power. C) signature substitution letter. D) certificate power.
B A stock (or bond) power signed by the owners may be used in lieu of the customer's signature on the back of the certificate.
All of the following would decrease the U.S. balance of payments deficit except A) an increase in exports of domestic goods from the United States. B) a decrease in purchases of U.S. securities by foreign investors. C) a decrease in imports of foreign goods into the United States. D) a decrease in dividend payments by U.S. companies to foreign investors.
B Anything that will bring foreign money to the U.S. will decrease the balance of payments. Foreign investors pulling their money out of the U.S., or investing less in the U.S. will increase the U.S. deficit.
An industry whose products stay in high demand, and whose companies grow, without regard to the business cycle are called A) emerging industries. B) growth industries. C) cycling industries. D) defense industries.
B Growth industries do just that, grow. The business cycle has less impact on these growing businesses.
The Federal Reserve is concerned that the economy is slowing. With this in mind, which of these actions would the Federal Reserve most likely engage in? A) Raise the margin requirements under Regulation T B) Pursue an easy-money policy to lower interest rates C) Engage in open market sales of T-bills D) Double the reserve requirements for member banks
B If the FRB believes the economy is sluggish and needs to be stimulated, it will attempt to lower interest rates by pursuing an easy-money policy.
Margin Maintenance requirements are set by A) the SEC. B) FINRA. C) the FBI. D) the FRB.
B Maintenance requirements are set by the governing SRO. FINRA is the best answer of this set. FRB sets the initial margin requirement along with the SRO minimum. The FRB does not set maintenance requirements.
An investor has a long position in ABC Chemical Corp. (ABCCC), with a substantial unrealized loss. Wishing to use that loss to offset realized gains, the investor sells the stock. In reinvesting the proceeds of the sale, the investor could avoid violating the wash-sale rule by purchasing A) ABCCC convertible bonds. B) ABCCC put options. C) ABCCC call options. D) ABCCC warrants.
B Note that when put options are exercised, the owner now has the right to sell the stock, not purchase it. Therefore buying puts in no way violates the wash-sale rule.
Dwight was appointed a principal for Seacoast Securities in June of 1996. He continued in the position until 2012, when he left to start his own firm. How long did Seacoast need to maintain the record of his principal designation? A) Until 2002 B) Until 2018 C) Until 2004 D) Until 2016
B Principal designations are retained for six years after the designation ends. Six years after Dwight left is 2018.
A broker-dealer may extend credit under Regulation T for which of these transactions? A) A variable annuity purchase B) A closed-end investment company purchased on the NYSE C) The purchase of an IPO that went public 25 days ago D) A mutual fund purchas
B Regulation T governs customer payment and the extension of credit to clients in margin accounts. A closed-end fund is an existing listed security and is eligible for purchase on credit. IPOs and other new issues, such as mutual fund purchases, may only receive loan value (and credit) after 30 days from issuance. Variable annuity may not be purchased with margined funds. These products are hybrid insurance and investment contracts that must be fully funded at time of purchase.
A signature endorsement on a stock certificate would not be required for good delivery if the shares were A) are in custodial name. B) held in street name. C) held in safe keeping. D) in trust name.
B Shares held in street name are normally registered to the broker-dealer, who hold them on behalf of the client. As these shares are likely only in electronic form no signature is required to transfer them.
Which of the following records must be kept for only three years? Customer statements Customer new account forms Customer confirmations Customer order tickets A) III and IV B) II and III C) I and IV D) I and II
B The buy and sell and quantity information on the order tickets and confirmations statements will show up on the customer's monthly or quarterly statements. Monthly and quarterly statements must be kept for six years. The confirmations and order tickets must be kept for three years.
The economy appears to be moving into a strong expansion. Which of the following companies will likely benefit the most from this expansion? A) Dino Oil and Gas, Co. B) Old Bess Steel, Inc. C) Hinckley Gold and Silver Corp. D) Daisy Dairy Company
B The steel plant is an example of a cyclical industry and will likely do well in the upcoming expansion. Daisy and Dino are both producers of consumable goods and the defensive industry; the gold miner is countercyclical.
Narcissus, Inc., a social media company, has shares selling at $50. Your customer is bearish. He would like to sell the stock short, but not until it retreats at least 10% from its current price. In order to catch the drop he could A) enter a sell long at 50. B) enter a sell short at stop 45. C) enter a buy stop at 45. D) sell calls at strike price of 45.
B The uncovered call does not help. If exercised he would have to buy the shares before he delivers them, leaving him flat (no position). The buy stop at 45 would trigger immediately and would become a market order to buy. As there is nothing that indicated he owns the shares now, the sell long would be rejected. The sell stop short at $45 would become a market order to sell the stock short when it trades at 45.
Ron buys 522 shares of Narcissus Inc., common stock in a cash account on Monday, March 19. He deposits cash in the account sufficient to cover the trade on March 20. How soon would he be able to withdraw those shares? A) Thursday, March 22 B) Wednesday, March 21 C) Friday, March 23 D) Tuesday, March 20
B This is a regular way settlement of a corporate security (T+2). The trade is fully paid for so the customer may request the shares be moved on or after settlement on Wednesday, March 21.
An investor purchased 100 shares of MJS on June 19, 2015 at a price of $40 per share. On June 1, 2016, MJS declared a 25% stock dividend. On July 1, 2016, the investor sold 50 shares of the MJS at $50 per share. Which of these statements is correct? The adjusted cost basis of the shares is $30. The adjusted cost basis of the shares is $32. There is a short-term capital gain on 25 shares and long-term gain on the other 25 shares. There is a long-term capital gain on all of the shares sold. A) I and IV B) II and IV C) I and III D) II and III
B When a company declares a stock dividend, the cost basis per share is always reduced. The computation is the original total cost ($4,000) divided by the new number of shares. 100 × .25 = 25 additional shares for a total of 125. $4000 / 125 shares equals a new cost basis per share of $32. When any of the shares are sold, including those received in the stock dividend, the holding period for capital gain or loss, is always the original purchase date. In this case, that was more than 12 months ago so any gains are long term.
During the cooling-off period the disclosure document that may be delivered to interested parties is called the A) final prospectus. B) summary prospectus. C) preliminary prospectus. D) cool off period prospectus.
C
Seacoast Securities is a syndicate member for the initial public offering of WeariTech, Inc., WeariTech is a hot new issue in the wearable technology space. The S-1 registration statement has been filed but the effective date has not yet been released. This is A) the pre-filing period. B) the mandated waiting period. C) the cooling-off period. D) the posteffective period.
C
A 73-year old client in the 25% income tax bracket withdraws $20,000 from her traditional IRA. Based on her life expectancy, the withdrawal should have been $30,000. How much tax will she owe? A) $5,000 B) $10,000 C) $12,500 D) $7,500
C
A FINRA member broker-dealer has a new hire with the sole responsibility of training associated persons. She will not have any dealings with the firm's customers. In order to hold this position, the new hire A) would only have to register as a registered representative if she dealt with customers. B) must only register as a registered representative. C) must register as a principal. D) does not need to be registered as this job is strictly administrative.
C
A client phones his registered representative in September and informs the representative that he will be studying abroad in Europe for the remainder of the year. The client wants the firm to hold his mail. What action should the representative take? A) The representative should have all mail forwarded directly to the branch to protect against identity theft. B) The representative should temporarily change the client's address to a secure PO box to prevent the theft of his mail. C) The representative must instruct the client that the request must be made in writing. D) The representative should send duplicates to Paris since the SEC customer protection rules state mail cannot be held.
C
A margin account allows a customer to borrow a portion of the funds needed to complete a trade. Currently, the required minimum is 50%. Which regulator sets the requirement? A) The SEC B) FINRA C) The FRB D) The OCC
C
A supply-side approach to fiscal policy will use all of these tools except A) decreasing government regulatory costs. B) decreasing tax rates on business entities. C) personal income tax rebates. D) providing tax credits to small business.
C
According to the Uniform Securities Act, who is charged with enforcing state securities laws and regulations? A) FINRA B) The SEC C) The administrator D) NASAA
C
All of the following statements regarding penny stocks are true except A) if an account holds penny stocks, broker/dealers must provide a monthly account statement to the customer. B) the SEC rules require that prospects, before their initial transaction in a penny stock, be given a copy of a risk disclosure document. C) penny stock rules apply to both solicited and unsolicited transactions. D) established customers of the firm need not sign a suitability statement.
C
All of these are true regarding no-load shares except they A) offer more return-per-dollar invested versus load funds if investing results are the same. B) are redeemed with no charges or fees of any kind. C) have sales charges associated with sales and redemptions. D) are sold by the fund with no sales charges or fees of any kind.
C
An institutional customer, such as a hedge fund, utilizes the services of a broker-dealer who provides custody of securities, as well as other back-office functions, while allowing the customer to establish relationships with other broker-dealers for the purpose of executing orders. This account would be known as a A) self-clearing account. B) fully-disclosed account. C) prime account. D) clearing account.
C
Five years ago, Tom, a resident of State A, was convicted of driving under the influence (DUI). At the time, the conviction was considered a misdemeanor. Last year, State A's legislature made DUIs a felony. Which of these is true for Tom when filing his Form U4 for registration with a member firm? Tom must indicate that he has been convicted of a felony. Tom would not have to list the conviction. Tom would be subject to statutory disqualification. Tom would not be subject to statutory disqualification. A) I and III B) II and III C) II and IV D) I and IV
C
Good delivery of a stock certificate requires all of the following except A) certificates in good condition. B) the correct number of shares are delivered. C) proper signatures of a firm principal on the certificate. D) proper endorsement by all owners.
C
Hudson is a representative for Saguaro Securities in Scottsdale, Arizona. During the months of May through September, Hudson operates his business from a summer home in Flagstaff. Which of these statements about his home office is false? A) The home office is subject to visits from Saguaro Securities compliance department. B) The home office will be treated as a branch of Saguaro Securities. C) The office must be separated from the residence and have its own entrance. D) The home office is subject to regulatory visits.
C
One difference between an UTMA account and an UGMA account is A) an UTMA account transfers at the age of majority, an UGMA account can go until the beneficiary turns 30 year of age. B) UTMA assets are considered an irrevocable gift, an UGMA account allows the custodian to reclaim the assets. C) an UTMA account has a wider set of allowed investments. D) an UGMA account is tax deferred and a UTMA account is not.
C
Sam Malloy owns a small business and has built a substantial estate both with his business success and his early career as a pro athlete. He would like to begin to move assets out of his estate in a way that will allow him to benefit from the assets, but also allows for an easy transfer to his heirs when he dies. He needs to lower the size of his estate before he passes and hates the idea of a public hearing that is part of probate. Sam should A) place his assets in a transfer on death account. B) create a last will and testament. C) establish an irrevocable living trust. D) establish a revocable living trust.
C
The Hoffman Equipment company of Anaheim, California is preparing to sell shares to the public in an IPO. They plan to sell exclusively to residents of the state of California and use the proceeds to build a new showroom in Long Beach, California. This offer would need to be registered with A) no one, this is an exempt transaction. B) MSRB. C) the administrator of the state. D) the SEC.
C
The SEC has established rules regarding delivery of a prospectus when a secondary market transaction occurs after the effective date. Which of these comply with those rules for initial (IPO) and additional (APO) public offerings? An IPO of a stock to be listed on the NYSE requires delivery for a period of 25 days. An IPO of a stock that will not be listed nor quoted over Nasdaq requires delivery for a period of 40 days. An APO of a stock listed on the NYSE requires delivery for a period of 25 days. An APO of a stock that will not be listed nor quoted over Nasdaq requires delivery for a period of 40 days. A) II and III B) III and IV C) I and IV D) I and II
C
The Telephone Consumer Protection Act mandates that unsolicited sales calls must occur A) no earlier than 8:00 am and no later than 9:00 pm solicitor's time. B) no earlier than 9:00 am and no later than 9:00 pm recipient's time. C) no earlier than 8:00 am and no later than 9:00 pm recipient's time. D) no earlier than 9:00 am and no later than 8:00 pm recipient's time.
C
The risk that a stock will not appreciate in value due to poor cash flow is an example of A) sales risk. B) systematic risk. C) nonsystematic risk. D) market risk.
C
The strike price is A) the cost per share of the contract. B) the amount the writer of a call pays the seller of the call for the shares. C) the price that will be paid for the shares if the option is exercised. D) the amount the buyer of a call must pay for the shares.
C
When opening a new account with margin, all of the following documents are required except A) hypothecation agreement. B) account agreement. C) consent to loan agreement. D) credit agreement.
C
Which of these features does the Roth IRA include? There are no minimum required distributions after age 72 with a Roth IRA. There are higher contribution limits to a Roth IRA than to a traditional IRA. Withdrawal of earnings in the Roth IRA may be made without any taxation as long as a Roth IRA has been open for a minimum of one year and the participant is age 59. There is the ability to contribute to both a Roth IRA and a traditional IRA. A) II and III B) I and III C) I and IV D) II and I
C
Which of these reasons would allow for a municipality to issue revenue bonds easier instead of general obligation bonds? Revenue bonds do not require voter approval. Revenue bonds generally have a higher rating than GO bonds from the same issuer. Revenue bonds are not constrained by a statutory debt limit. Revenue bonds are supported by ad valorem taxes. A) I and IV B) II and III C) I and III D) II and IV
C
Which of these would not affect the NAV per share of a mutual fund share? A) The fund receives a dividend from one of the portfolio stocks B) The fund pays its monthly operating expenses like utility bills C) Portfolio securities that had to be sold for a big capital loss D) The portfolio's market value undergoes a large increase
C
Who benefits most from a defined benefit plan? A) Younger employees B) Employees with more years until retirement C) Older employees D) All benefit the same
C
Your customer asks to buy a bond that carries a very attractive yield. When checking the bond you see that it has a B rating from the major credit rating agencies. When communicating this information to the customer, all of the following terms are commonly used in describing a B rated bond except A) high-yield. B) noninvestment grade. C) lower grade. D) junk bond.
C
Your customer, Ford, wrote 5 SPX (S&P 500 equity index) 2990 call options. Today, Tuesday, he received word that his options have been exercised. The SPX closed at 3000. He will have to deliver A) 500 shares in two days. B) cash in two days. C) cash tomorrow. D) 500 shares tomorrow.
C
Your customer, Jim, wants to deposit money into a 529 College Savings plan for his great-niece Penelope. He states four reasons why he likes the 529 plan. Unfortunately, you need to tell him he is incorrect on one point. Which of his following points is not considered a feature of a 529 College Savings Plan? A) The growth can be tax free if used for qualified education expenses. B) If she gets into a good prep school the money can be used for that as well as college. C) She has to use the money by the time she turns 30, so she will not be able to put it off too long. D) The money grows tax deferred.
C
Yusef would like to save money for his 10-year-old daughter's college tuition costs. She has her heart set on a small liberal arts school with a growing reputation in the arts. His biggest concern is the potential increase in cost over the next several years. The program best suited to hedge against the increasing cost of college tuition at the school is a A) Coverdell ESA account. B) 529 college savings program. C) 529 prepaid tuition program. D) custodial account in the child's name.
C
An investor owns 300 shares of a Silicon Valley high tech firm whose shares are quoted on the Nasdaq Stock Market. A month prior to the company's annual meeting, the broker-dealer holding the stock in street name forwarded the voting proxy to the client. As it happens, the investor had to be at a business meeting in San Francisco that ended the day before the annual meeting. If the investor took advantage of the proximity to attend the meeting A) only the broker-dealer could rescind the proxy and permit the investor to vote at the meeting. B) only those with reservations would be able to attend the meeting so the proxy vote would stand. C) the voting proxy would be revoked and only the vote at the meeting would count. D) the voting proxy would stand because it would have already been counted.
C A proxy is automatically revoked if the stockholder attends the shareholder meeting and votes.
An account that charges a set fee on a monthly or quarterly basis, which covers all trading activity, is called a A) set commission account. B) wrap account. C) fee-based account. D) schedule account.
C A wrap account charges a fee that includes all costs, including management and advice. An account that charged a set fee for trading costs is a fee-based account. The other choices are not actual account types.
A trade of an equity option settles in ( ) days, while an exercise of an equity option must be completed in ( ) days. A) 2,2 B) 2,1 C) 1,2 D) 1,1
C An option trade settles next business day (T+1); the exercise of an equity option settles in two days from exercise.
You should expect which of these to occur when the dollar strengthens against other currencies? Imports will become more expensive Imports will become less expensive Inflation will go down Inflation will rise A) I and III B) I and IV C) II and III D) II and IV
C As the dollar gains strength against other currencies, the cost of imports goes down in dollar terms. Domestic producers will need to compete with the less expensive imports. That keeps prices overall from rising, reducing inflationary pressures.
Which class of shares have a 12b-1 fee as the primary sales charge? A) No load B) Class A shares C) Class C shares D) Class B shares
C Class C shares charge a level load built into the expense ratio, usually as a 12b-1 fee. Class B shares have back-end loads that reduce over time (contingent deferred sales charge, or CDSC). Class A shares charge an upfront load. No load funds have no sales charge.
Investigations and hearings into alleged violations of FINRA's Code of Procedure are performed by A) the Arbitration Panel. B) the Division of Engagement. C) the Department of Enforcement. D) the National Adjudicatory Council.
C DOE decisions may be appealed to the NAC
Which of the following is not a measure of a company's short-term liquidity? A) Acid test ratio B) Working capital C) Debt ratio D) Current ratio
C Debt ratio is the measure of a company's long-term debt as a percentage of net worth. The others are derived from current asset and current liabilities, focusing on a company's short-term liquidity and cash demands.
All of these are leading economic indicators except A) manufacturer's new orders. B) building permits. C) duration of unemployment. D) the stock market as measured by the S&P 500.
C Duration of unemployment (i.e., how long unemployed people stay unemployed) is a lagging indicator
Skye purchased 100 shares of Moreno, Inc., for $20 a share. One year later, she sold the shares for $21 dollars. Over the year, Moreno paid a $0.25 quarterly dividend. What was Skye's gain or loss and how much investment income did she earn? A) $2 total gain B) $2 in income C) $1 gain and $1 in income D) Cannot be determined from this information
C Gains are derived from opening and closing trades buy and sell in this example). She bought at $20 and sold for $21, so there is $1 in gain. She collected four quarterly dividends for $0.25 each, so a total in $1 in investment income.
A new client of the member firm has just opened a margin account. After account approval, the client's initial trade is an order to purchase 100 shares of LMN common stock at $25. With Regulation T at 50%, in order to be in compliance with all regulations, the client would need to deposit A) $2,500. B) $1,250. C) $2,000. D) $1,000.
C No borrowing can take place in a margin account without at least $2,000 in equity. It is only necessary to pay in full when the purchase is less than $2,000. It is only necessary to deposit more than $2,000 when the trade exceeds $4,000.
Your customer has performed the following trades Bought 200 shares of ABC at $40 Bought 400 shares of ABC at 50 Sold 600 shares of ABC at 55 What is the result of these trades? A) A $6,000 loss B) A $5,000 loss C) A $5,000 gain D) A $6,000 gain
C They bought 200 at 40 for $8,000; then 400 at 50 for $20,000; then sold 600 at 55 for $33,000. $33k - $28k = profit of $5,000.
Your customer purchases 200 shares of Seabird Airlines (the ticker is SBRD) at $30 a share in a cash account. Under Regulation T, the Federal Reserve has set the initial margin requirement at 50%. How much does your customer need to deposit for this trade? A) $1,500 B) $2,000 C) $6,000 D) $3,000
C This is a cash account. There is no margin borrowing, so 100% of the trade's value must be deposited. 200 shares at $30 = $6,000.
When the Federal Open Market Committee (FOMC) directs that Treasury securities be sold in the open market, this will do which of the following? A) Have no impact on lending rates to consumers B) Decrease interest rates on loans to consumers C) Increase interest rates on loans to consumers D) Loosen the money supply
C When the FOMC directs that Treasury securities be sold in the open market, this will tighten the money supply; securities go into the economy, and money comes out of the economy. Less money available increases interest rates to consumers.
A customer has an account with a broker-dealer who provides a group of services, such as asset allocation, portfolio management, trade executions, and administration, for a single fee. This is known as a A) discretionary account. B) commission-based account. C) wrap account. D) margin account.
C rap accounts are accounts for which firms provide a group of services, such as asset allocation, portfolio management, executions, and administration, for a single fee rather than charging commissions for individual transactions.
American Liquidators Corporation (the ticker is LQDT) has 100 million outstanding common shares. The company would like to raise capital by selling 100 million new shares. In order to do this they must give their existing shareholders an opportunity to buy shares sufficient to maintain the shareholders percentage of ownership. In order to accomplish this they would A) perform a stock split. B) suggest that existing shareholders go to the market and double their existing position. C) offer warrants to existing shareholders. D) offer stock rights to existing shareholders.
D
Modulux, Inc., a NYSE listed manufacturing company, was founded by Clarence Mod. Clarence is now 82 years old and is looking to divest his significant interest in Modulux to capitalize the Mod Family Foundation, a charity. He has enlisted the help of Seacoast Securities, a FINRA member broker-dealer based in Seattle, to run the sale. Seacoast Securities is acting as A) an issuer. B) an owner. C) a dealer. D) an investment banker.
D
A CMO consists of A) bonds and money market instruments. B) different sorts of nonmortgage debt. C) various government backed mortgages. D) an FNMA, FHLMC, and other mortgage backed securities.
D
A broker-dealer has hired an individual for the position of a registered representative. The individual is struggling to pass the necessary qualification exam and has failed four times. After that fourth failure, the applicant faces a waiting period of A) 60 days. B) 30 days. C) 90 days. D) 180 days.
D
A mutual fund has been in existence for 15 years. The prospectus must disclose the fund's performance A) broken out as an average over the last 10 years. B) over the last 1, 5, 10, 15, 20, and 25 years. C) for each year over the last 10 years. D) over the last 1, 5, and 10 years.
D
After working for several years as a retail sales manager, Marsha decided to seek employment at a FINRA member firm. Marsha was successful on her first attempt on the qualification exam and during her first three years as a registered representative she opened a number of accounts. During a market correction, her commission income fell and she decided to devote her time on weekends to a part-time retail sales position. Under FINRA, rules regarding outside business activity (OBA), Marsha must A) receive approval from the FINRA district office. B) choose her occupation; she cannot do both of these simultaneously. C) provide prior written notice to, and receive written permission from, the employing member. D) provide prior written notice to the employing member firm.
D
All of these are true for an Achieving a Better Life Experience account except that A) the onset of the disability must have occurred before the owner turns 26. B) the income is tax-free. C) the account owner and beneficiary must be disabled. D) the account must be opened before the beneficiary turns 26.
D
All of these are true regarding correspondence except correspondence A) must be to 25 or fewer retail customers or prospects within 30 days. B) must be in good faith. C) may be reviewed after use (postreview). D) must be filed with FINRA within 10 business days.
D
Before an option trade may be entered for a customer, that customer's account must be approved for option trading by A) a branch manager. B) a firm principal. C) an executive officer. D) a Registered Options Principal.
D
Electronic market centers designed primarily for institutional investors describes A) the third market. B) the OTC market. C) the exchanges. D) the fourth market.
D
Five years ago Thompson, an investor, ran across a board game that he enjoyed and believed the game would become very popular. He purchased 1,000 shares of the corporation that publishes the game. Unfortunately, the game was too complex for most casual game players and sales never amounted to much. Over the five years, the stock of the publisher has remained steady, but has not increased in value. This is an example of A) social risk. B) regulatory risk. C) timing risk. D) business risk.
D
Josephine takes and passes the Securities Industry Essentials exam while employed as an intern at Seacoast Securities, Inc. She then returns to school full time to complete her undergraduate degree in Business Administration at the University of San Francisco. How many years does she have to affiliate with a member firm and complete a top-off exam before she would be required to retake the SIE? A) Two years B) 10 years C) Five years D) Four years
D
Last year Brownstone Properties, LP distributed $200 per unit to investors and reported a $500 business loss per unit on the K-1. For tax purposes the investors received A) a net $300 loss. B) $200 per unit of passive income. C) a $500 reduction in ordinary income. D) a $500 per unit passive loss.
D
People who enter trades at or near the same time, in the same security as a person who has inside information, are known as A) informers. B) tippers. C) tippees. D) contemporaneous traders.
D
Ron the representative is opening the branch's mail and finds a letter of complaint about a trade he entered. What should Ron do next? A) Reverse the trade. B) Drop the letter in a shredder accidentally. C) Contact the customer and attempt to resolve the problem. D) Forward the complaint to a principal.
D
Sam Malloy owns a small business and has built a substantial estate both with his business success and his early career as a pro athlete. He wants to set up his estate in a way that he will control the assets until he passes away or becomes incapacitated. Once that time comes, he wants control to transfer easily and he wants to avoid probate. Sam should A) create a last will and testament. B) establish an irrevocable living trust. C) place his assets in a transfer on death account. D) establish a revocable living trust.
D
The Alta Loma High School District is asking voters to approve a bond to fund the purchase of new computers and software. The bond will mature in 40 years and the interest and principal payments will be funded from real estate taxes. This is an example of a A) an equipment trust bond. B) a debenture. C) revenue bond. D) GO bond.
D
The investment return of a variable annuity comes from A) the insurance company's general account. B) the assumed rate stated in the policy documents. C) computing the excess of the premiums received over the mortality experience. D) the performance of the selected subaccounts within a separate account.
D
The primary risk associated with ETNs is A) business risk. B) reinvestment risk. C) call risk. D) risk of default.
D
The three stage of money laundering include A) insertion, processing, and integration. B) placement, layering, and insertion. C) soak, rinse, and spin. D) placement, layering, and integration.
D
Tony was fired for cause from Great Plains Investments. A U-5 Form was promptly filed stating that the cause was rude treatment of coworkers creating a hostile work environment. Great Plains will keep the U-5 record for a minimum of A) indefinitely. B) six years. C) two years. D) three years.
D
What government organization maintains the Specially Designated Nationals List? A) The FBI B) FinCEN C) FINRA D) The OFAC
D
Which of these are considered violations to the FINRA Conduct Rules? I. Engaging in a private securities transaction without compensation with an immediate family member with notification to the employing broker-dealer II. Parking a license for a former registered principal III.A registered representative accepting a complimentary registration and accommodations at a seminar presented by a mutual fund sponsor at an exclusive offshore island resort IV. A member firm waiting 30 days after termination to provide the terminated employee with a copy of the Form U-5 A) I and IV B) II and IV C) I and II D) II and III
D
Which of these broker-dealers would most likely have correspondent firms? A) A market maker B) A fully disclosed broker-dealer C) An introducing broker-dealer D) A self-clearing firm
D
Which of these statements regarding a 529 plan is correct? A) The beneficiary must be below age 18 B) The assets in the plan belong to the beneficiary C) Contributions are limited to $2,000 annually D) One person can be both the beneficiary and owner
D
Which of these would not make Nikki subject to a statutory disqualification? A) Eight years ago, Nikki was convicted of felony assault in a fight. B) Nikki was barred from the industry by the securities administrator of Wyoming. C) Nikki made a false statement on the U4 Form. D) Eight years ago, Nikki was charged with a misdemeanor involving securities fraud.
D
Who is responsible for meeting the desired returns on a defined benefit plan? A) The employee B) The custodian C) The Pension Benefit Guaranty Corporation D) The sponsor
D
Your customer buys 300 shares of Steel Tools common stock on Tuesday and will be an owner of record as of the close of business that same Tuesday. This must be A) not possible. B) a quick settlement trade.0 C) a mutual fund. D) a cash settlement trade.
D
Your customer purchased 300 shares of XYZ stocks six months ago and sold the shares last week. The actions your customer took in relation to XYZ were to A) buy long and sell long. B) buy short and sell long. C) buy short and sell short. D) buy long and sell short.
D
Your customer, MJ, has a strong preference for investing in equity securities; however, she is hoping to increase the amount of current income her portfolio generates. Which of these is the least suitable for her? A) Long Beach Electric, a utility B) BuyMore, Inc., a big-box retailer with a long history of healthy dividend payments C) Generic Motors, Inc., 4 ¾% preferred stock D) Duratech common stock, an exciting new tech manufacturer
D
A client entering a sell limit order at 43 would accept which of these trades? A) 42.50 B) 42.90 C) 42 D) 44
D A sell limit at 43 means the investor will only accept a price of 43 or better (higher). Certainly, if the client is willing to sell at 43, she would be even happier to receive 44.
FinCEN is a bureau of what department within the federal government? A) Interior B) Justice C) Defense D) Treasury
D FinCEN is part of the Treasury Department.
Which of these would not be fully covered by SIPC insurance? A) Holding $300,000 in a money market and $200,000 in mutual funds B) Holding $400,000 in junk bonds and $100,000 in cash C) Holding $250,000 in cash and $250,000 in the Windmill Commodity ETF D) Holding $250,000 in index funds, $200,000 in Treasury bonds, and $50,000 in gold
D Gold is not a security and is not covered by SIPC
A client and his spouse own shares in the KAPCO Fund as tenants in common. He has a 60% ownership interest in the account and the spouse has the balance. If the client dies, what happens to the shares in the account? A) Ownership of the shares would be determined by probate court. B) 50% of the shares would belong to his spouse and the remaining half would be distributed to his estate. C) His interest would automatically be transferred to the spouse. D) 40% of the shares would belong to his spouse and the remaining balance would be distributed to his estate.
D In a TIC account, securities owned by the decedent pass to the deceased owner's estate—in this case, 60% of the assets. The 40% belonging to the spouse is retained by the spouse.
Irksome Inc., makes components and peripherals for smart phones. Their line of bright florescent sparkly earbuds has taken off in Asia and is starting to gain popularity in the Americas and Europe, even in countries experiencing harder economic times. Irksome is an example of a A) cyclical company. B) countercyclical company. C) defensive company. D) growth company.
D Irksome is considered a growth company because its products are selling well and steadily everywhere, even in contracting economies. The company's future looks bright.
The nation has passed through very trying economic times. Many have lost jobs and are tapping into savings to maintain their lifestyles. The economy is not weakening and shows a few signs of growth, but the damage from the downturn is very visible. The nation is likely entering a period of A) deflation. B) trough. C) disaster. D) recovery.
D Recovery is the best answer. A recovery occurs when the economy begins to show some signs of growth after a period of contraction.
When a registered person terminates from a FINRA member firm, filing Form U-5 is the responsibility of A) the registered person. B) FINRA. C) the depository trust company. D) the member firm.
D Should a person registered with a member resign or be terminated, the member must file Form U-5 with the Central Registration Depository (CRD) within 30 days of termination date.
Which of the following is not a function of the Office of Foreign Assets Control (OFAC)? A) Block assets of persons on the Specifically Designated Nationals list B) Prohibit broker-dealers from dealing with certain individuals and businesses C) Maintain the Specifically Designated Nationals list D) Control the assets of U.S. broker-dealers in foreign countries
D The OFAC maintains a list of individuals and other entities that are involved in money laundering, drug trafficking, and terrorist activities that financial firms in the United Sates are prohibited from dealing with and will block assets of those individuals and entities if attempting to open financial accounts in the United States. It does not control assets for broker-dealers overseas.
Seabird Airlines common stock is listed on the NYSE. Appalachia Securities is an over-the-counter market maker and has a posted quote for Seabird of 55.25-55.50. If Appalachia wants to enter a new quote, the smallest incremental change is A) $ 0.001. B) $ 0.05. C) $ 0.25. D) $ 0.01.
D The correct answer is $0.01. This stock is quoted in increments of no less than one cent ($0.01). Sub-penny pricing is only allowed on stocks trading below a dollar.
Sparkly florescent earbuds made in the U.S. by Irksome, Inc., are suddenly popular in Asia. People from Canton to Calcutta are buying them in huge numbers. This is most likely to cause A) the trade surplus to decrease, or deficit to increase . B) something, but the impact is unpredictable. C) no effect on the balance of trade. D) the trade deficit to decrease, or surplus to increase.
D The increased demand for a U.S. produced good will increase what is exported, causing a deficit to shrink, or a surplus to grow.
Which of the following statements regarding $1,000 par value 6.5% bond trading offered at 110 is true? A) The bond's yield to maturity (YTM) and stated yield are the same. B) The bond is offered at a discount. C) The bond's current yield is lower than its yield to maturity (YTM). D) The bond's current yield equals $65 ÷ $1,100 or 5.9%.
D This bond is trading at a premium (110 or $1,100). Given the bond is trading at a premium, the current (stated) yield will be higher than its YTM. A bond's current yield is calculated by dividing its annual interest ($65) by its current (market) price ($1,100), which in this case equals 5.9%
The economic indicator that reflects activity of U.S. entities without regard to where the activity takes place is A) FUN. B) CPI. C) GDP. D) GNP.
D This is a description of gross national product. GDP measures activity within the U.S., regardless if it is domestic entity or not.
Limited partnerships A) can either exist in perpetuity or be designated to end on a specific date. B) must end on a predetermined vote with no exceptions. C) must exist in perpetuity. D) must end on a predetermined date or can be dissolved earlier by vote.
D Unlike with a corporate charter, which has corporate entities existing in perpetuity, limited partnerships are scheduled to end on a predetermined date. The exception to ending on that predetermined date would be when all partnership assets are sold earlier than anticipated and a vote to dissolve the partnership occurs.
First Amalgamated Bank of Buffalo, a large commercial bank, is a member of the Federal Reserve System. Should the bank need to increase its reserves, it could do which of these? Borrow from the FRB and pay the discount rate. Borrow from the FRB and pay the federal funds rate. Borrow from another member bank and pay the discount rate. Borrow from another member bank and pay the federal funds rate. A) I and III B) II and IV C) II and III D) I and IV
D When a bank needs to borrow money to increase its reserves, it can borrow from the Federal Reserve Bank or it can borrow from another member bank like itself. When borrowing from the FRB, the banks pay the discount rate. When borrowing from another member bank, the banks pay the federal funds rate.
Securities sold in an issuer-related transaction would best be described as A) a secondary offering. B) a split offering. C) a balance of payments. D) a primary offering.
D When an issuer offers stock and the proceeds from the sale are added to the company's capital, it is called a primary offering. By contrast, a secondary offering is one in which one or more shareholders in the corporation sell all or a portion of their equity holdings to the public. The proceeds of a secondary offering are paid to the selling shareholder(s), not the company.
The nation is experiencing a rapid increase in the cost of living, but wages are not keeping pace with the increase in cost. The nation is experiencing A) disinflation. B) stagnation. C) inflation. D) stagflation.
D When prices are increasing but the economy is not growing, it is stagflation.
U.S. government deposits securities with a trustee against which certificates are sold representing principal only with no regular interest payments. These are known as A) Treasury bonds. B) Treasury receipts. C) Treasury notes. D) Treasury STRIPS.
D When the U.S. government deposits securities with a trustee, against which it issues certificates representing principal payments only, and no regular interest payments, these are known as Treasury STRIPS.
The current quote for Generic Motors stock is bid 32-ask 32.05 5 × 2. Your customer places an order to sell 300 shares. How much will they likely receive, before commission? A) Cannot be determined because only 200 shares are available on this side of the quote B) $9,615 C) $3,200 D) $9,600
D Your customer will sell at the bid (32), or likely very close to it. The bid size is 500 shares so the market can absorb the entire order. 32 × 300 = $9,600. Customers who are selling receive the bid. Those who are buying pay the ask. The size shows bid × ask; 500 shares may be sold at 32 and 200 shares are available to buy at 32.05.
All of the following are exempt issuers except A) Alta Loma Community Foundation. B) the Southwest Railroad Co. C) the City of Alta Loma. D) Modulux, Inc., a home manufacturer.
D Common carriers (e.g., railroads), municipalities, and charities are all examples of exempt issuers under the Securities Act of 1933. A for-profit corporation is not exempt.
Modulux, Inc., a NYSE listed manufacturing company, was founded by Clarence Mod. Clarence is now 82 years old and is looking to divest his significant interest in Modulux to capitalize the Mod Family Foundation, a charity. He has enlisted the help of Seacoast Securities, a regional investment banker based in Seattle, to run the sale. This is an example of A) a CRUT. B) an IPO. C) a secondary offering. D) an APO.
c
