Missed SIE Exam Questions
Funds from 12b-1 fees cannot be used to pay for which of the following fund expenses?
12b-1 fees are charged to cover the costs of distributing shares. This includes sales concessions paid to an RR, printing the fund's prospectus and expenses related to creating the fund's website
If an investor asks for a copy of the mutual funds Statement of additional information. The request must be satisfied within:
3 business days, free of charge
What records must be kept for 3 years? What records must be kept for 6 years?
3 years - Customer confirmations and order tickets 6 years - new account forms and statements
A Regulation D offering may be sold to a maximum of:
35 nonaccredited investors A Regulation D (private placement) offering may be sold to a maximum of 35 nonaccredited investors. There is no limit on the number of accredited investors.
1) A client that is short stock that's trading at $35 and wants to buy, but only if he can buy at $34 or lower. He should place which type of order?
A buy limit. Can only be executed at a specific price or better
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. These are intermediaries between the buy and sell sides of a transaction that receives and delivers payments and securities on behalf of both parties
Accumulation Units
A variable annuity contract owner's interest in the separate account prior to annuitization.
Federal securities regulation the requires disclosure by issuers offering securities is:
Act of 1933
What is the intrinsic value of an XYZ 30 call sold at a premium of 3 when the current market value of XYZ is at 40?
$10 Intrinsic value = in the money. Premium of contract is not a factor. All calls are in the money when the market value of stock is above the strike price. Intrinsic value can never be -
What is the maximum contribution that can be made to a 529 plan without being subject to gift taxes?
$150,000 from a married couple if no further contributions are made for 5 years
- If a 60 year old individual is receiving $60,000 per ear from a pension and $2500 per year from a part-time job, how much can the individual contribute to her IRA?
$2500 because this is their earned income
Rate charged when a member bank borrows from the Fed Reserve?
Discount rate
Will a discount or premium bond be more susceptible to fluctuating interest rates?
Discount. Premium bonds are more sturdy
Which of the following would be a recommendation?
Discussing anything with a prospective client would not be considered a recommendation. Discussing advantages of day trading with an existing client would be
Which of the following statements describes the greatest risk associated with mortgage-backed securities?
Falling interest rates might accelerate early repayment of principal
A grant anticipation note is normally paid from?
Funds received by the federal government
Can interest rate risk be reduced by diversification?
No
A registered person who is employed by a broker-dealer has committed an offense that makes the person subject to statutory disqualification. The firm is MOST likely to take which of the following actions?
No longer be associated with the firm. Any person that is statutory disqualified can no longer associate with a FINRA firm
Many investors prefer to receive variable annuity payments under the straight-life payout option because it:
Provides maximum cash flow out of all payout options. The annuitant will receive the greatest cash flow from the straight-life annuity payout option. This option allows the annuitant to receive payments as long as the annuitant is alive. At death the payments stop. No beneficiary is designated and the insurance company is relieved of its obligation to make payments. The annuitant has the greatest degree of risk with this type of payout.
A customer owns shares of restricted stock and now intends to sell them. If the proper forms are filed with the SEC, the customer may sell these shares:
Over a 90 day period
Difference between REITs and DPP's
Passive losses. Unlike DPPs, REITs do not pass on losses to consumers
Which of the following is NOT true regarding a UGMA account?
Securities MUST be held in the name of the brokerage firm. All securities registered in the name of the custodian for the minor
Order that turns into a market order when trading at or below a certain price?
Stop order
Which of the following statements is NOT TRUE about Forms 10-K and 10-Q?
The 10-K contains financial information, while the 10-Q contains voting information. The 10-Q contains financial information as well
Where can a bondholder find the details regarding the terms and features of her bond?
The indenture - for both corporate and municipal bonds. Notice of sale - used to announce new bonds being issued Legal opinion - document created for municipal bonds and used to disclose the obligation
ERISA stipulates that employers with qualified plans are not permitted to exclude employees who have worked for the employer at least one year and:
age 21 and older and have worked a minimum of 1000 hours during the last year
current yield =
annual income divided by market price
Bond conversion ratio =
par value/conversion price
Unit Investment Trusts
money pooled from many investors that is invested in a portfolio fixed for the life of the fund. Supervised, not managed
How many times can a trustee-trustee transfer happen per year?
unlimited
All of the following statements are TRUE regarding private securities transactions that are executed by an associated person of a member firm, EXCEPT:
"The transactions may not involve private p'lacements, even if the activity is otherwise acceptable Private securities transactions are defined as transactions that are executed outside of the regular scope of an associated person's employment with a member firm. An associated person who engages in these transactions must provide written notice to the employing member. In addition, if the associated person is to receive compensation for the transaction, the member must specifically approve the transactions in writing in order for the person to participate. However, personal transactions in investment company and variable annuity securities are not covered by this rule. There is no specific prohibition regarding private placements.
In a general partnership, a GP's minimum participation in profits and losses is:
1%
- When a stock splits 5 for 4, what % will the price of the stock be reduced by?
20%. The price will be 4/5 of its original price and the amount of shares the investor owns will increase by 5/4
An investor purchases 1,000 shares of ABC stock at $30 per share and receives an annual dividend of $1.20. After one year, the stock's market value has increased to $36 per share. What is the investor's total return?
24%. An investment's total return is calculated by adding all of the cash flow received from dividends and/or interest, plus any appreciation or minus any depreciation in the value of the investment, and dividing by the initial investment. Therefore, the total return is determined as follows: [($36,000 - $30,000) + $1,200 in dividends] = $7,200/$30,000 = 24%.
A corporation wishes to open a cash account. Which of the following documents is required?
A corporate resolution. A corporate resolution authorizing a person to trade for the account is necessary to open a corporate cash account.
Official Statement
A disclosure document prepared for a new municipal issue by or for the issuer. It contains a complete description of the issue and financial details about the issuer. MSRB rules require that a copy of the official statement be given to each purchaser of a new issue, if one has been prepared
An registered person has received a letter from a customer which includes a complaint about a recent new issue that declined substantially on its first day of trading. The customer purchased the shares based on a recommendation by the registered person and now claims that the recommendation was unsuitable. Which of the following statements is TRUE? .
A memo must be prepared describing any action taken in response to the complaint. All written complaints must be reviewed by a principal and must be kept in a file, along with a memo describing any action taken in response to the complaint.
In genreal, who is not a typical candidate for a variable annuity?
A senior investor. These annuities are more suitable for investors that don't need to access money for years
Are industrail production uptick considered coincidental or leading
Coincidental
Which of the following statements is NOT TRUE concerning the opening an account for a new client?
A. The RR may NOT open the account using a P.O. box as an address. B. The RR may send mail to a P.O. box. C. The client must sign the new account form. D. The RR must make an effort to obtain the client's tax ID number, such as a Social Security number. The untrue statement is that the client must sign the new account form. Although many firms have internal rules which require the customer's signature, FINRA doesn't require it. Each of the other statements are true.
ABC Brokerage, a broker-dealer, purchases 600 shares of stock from a market maker to fill a customer's buy order. ABC has acted as a:
Agent on behalf of their customer and they are charged a commission
In order for the sale of stock from a joint account to be considered good delivery:
All the owners must sign off
Practice of selling dividends is prohibited because
Amount for the dividend is already included in the price the customer pays for the fund.
Qualified Annuities
Annuities that are funded with pre-tax dollars paid through an employer-based IRA or other qualified retirement plans. In regards to contributions paid into an annuity, pre-tax dollars provide an annuitant with greater fund growth in comparison to after-tax dollars.
U-4 Form
Application for securities broker. Contains info about past employment and disclosure history, including bankruptcy, liens/judgments, criminal history, and civil litigation.
If the relative of an 85 year old account holders contacts the RR of the account and requests funds be transferred and the RR expects financial exploitation... what is the best course of action?
Attempt to resolve the matter with the customer prior to placing a temporary hold
Under the New Issue Rule, all of the following persons are defined as restricted persons, EXCEPT: A. The portfolio manager of an investment company B. A registered person of a broker-dealer C. The brother of a registered person of a broker-dealer who has an account with a different broker-dealer D. The parents of a registered person of a broker-dealer who reside in the same house as the registered person
Brother of a registered person of a broker-dealer who has an account with a different B/D
Which of the following is NOT a type of direct participation program (DPP)?
C Corporation
What is the rate that commercial banks charge on loans to B/D's for margin purposes?
Call Rate
Regarding call options, which of the following is true?
Call buyers have the right to purchase underlying securities & put writers may be obligated to purchase the underlying
During periods of high inflation, which investments will typically provide the best returns?
Commons stock. Historically provide a good hedge against inflation
In which of the following situations can a registered person of a broker-dealer borrow funds from a customer without approval of her firm?
Customer is the brother-in-law of the RR. Registered individuals may not borrow money from, or lend money to, a customer unless certain conditions are met. These conditions include implementing written procedures permitting such activity and satisfying one of the following provisions: The customer and the registered person are immediate family members. The customer is a financial institution that's regularly involved in the business of extending credit or providing loans. Both parties are registered with the same firm. The loan is based on a personal relationship between the customer and the registered person. The loan is based on a business relationship that's independent of the customer-broker-dealer relationship.
An individual wants to buy a real estate investment that offers tax benefits as well as the ability to share in the earnings of the business, which of the following BEST meets these objectives?
DPP as they invest directly into real estate programs and the owners benefit from tax benefits and also can share directly in the revenues. REIT's are similar but deductions and revenue don't flow through the trust
ABC brokerage purchases 600 shares of stock from a customer and places these into their own inventory, they are acting as a:
Dealer
Which of the following statements is NOT TRUE of a Coverdell Education Savings Account?
Distributions can only be made for higher education expenses
What type of investment is based on the credit rating of the issure?
ETN. These are unsecured debt securities.
In order for an RR to receive compensation after terminating employment, al the following are true EXCEPT
Earnings from referred business from existing clients would be eligible for payment
B/D's are required to send a balance sheet to customers how often?
Every 6 months
Each calendar year, the firm must provide customers with what in writing?
FINRA website, broker check hotline number, statement regarding availability of investor brochure
The interest rate that fluctuates the most is the:
Federal funds rate Explanation: Short-term rates fluctuate more than long-term rates. The federal funds rate, which is the rate of interest one bank charges another bank for the use of excess reserves for short-term periods (usually overnight), fluctuates the most since it has the shortest maturity. Although long-term bond prices fluctuate more than short-term bond prices, the yields of short-term securities fluctuate more than those for long-term securities.
What helps the US balance of payments?
Foreign investment in the US. Foreign investments in the U.S. will direct money into the country, helping the U.S. balance of payments.
A broker-dealer's anti-money laundering (AML) compliance program must be approved:
In writing be a senior management member
If a firm places a temporary hold on a customer's account
It can apply to either the entire account or specific disbursements
If a RR sells a property to cover his mortgage what is this considered?
It is considered settling with creditors and he must report it to FINRA
Are manufacturing new orders considered leading or coincidental
Leading
A customer wishes to sell short 1000 shares of ABC. Prior to executing the order, the RR must:
Locate the shares that can be lent to effect the sale. DO NOT need to have customer pledge personal collateral
A project financed through revenue bonds is experiencing difficulty in that revenues are not sufficient to meet debt service payments. If, through legislative approval, the state pays interest and principal in a timely manner, the issue is MOST LIKELY:
Moral Obligation bond. These are bonds that are payable by the state if revenues from the project do not satisfy debt obligations. In order for this to happen though, state legislature must approve. Double barrel bonds are backed by both revenue and a general obligation from the start
Who sets the Ex dividend date?
NOT the companies board of directors. The ex-div date is set by SRO's. Orders beneath market price will be adjusted. The rest of the dates as in declaration and record are set by the Board of Directors
The bid price represents:
Price at which broker-dealer is willing to buy a security AND price at which the customer will customer will receive when selling a security
The OTC Bulletin Board (OTCBB) is BEST defined as:
Quotation system for stocks not listed on NYSE
Certificates of Deposit (CDs)
Savings accounts that guarantee a depositor a set interest rate over a specified interval as long as the funds are not withdrawn before the end of the period—six months or one year for example
Which of the following statements about Regulation T is correct?
Set by the FRB
Which of the following statements best describes the difference between Settlement date and Regulation T payment date?
Settlement date is the date the two broker-dealers exchange security and money and Regulation T payment date is the date the customers must pay their broker-dealer.
A 529 plan may be offered by which of the following methods?
Sold directly or by an advisor
A town has started the construction of public sewers. This project is likely paid by a(n):
Special Assessment bond. A special assessment is a charge against property that receives a benefit from the improvement.
The person who distributes interest in a DPP is referred to as:
Syndicator
RR gifts should be valued at what?
The Market value
In order to met federal budget needs, the types and quantity of government securities to be issued are determined by:
The U.S. Treasury department
Regarding registration statements that are filed with the SEC, when new securities are issued what is NOT true?
The accuracy and adequacy of the registration documents is the responsibility of underwriters
The current yield on a $1,000 par value 5% bond selling at $800 maturing in 10 years is:
The current yield is found by dividing the yearly interest payment of $50 by the market price of $800. This equals 6.25%. The fact that the bond will mature in 10 years is not necessary to find the current yield (but it is needed to find the yield to maturity).
When determining the suitability of the recommendation of a 529 college savings plan, which of the following should a registered representative consider?
The deductibility from state taxes
Who is responsible for meeting the desired returns on a defined contribution plan?
The employee chooses how money is invested.
The net asset value (NAV) of an open-end investment company is $22.20 and its sales charge is 8%. What is the public offering price?
The public offering price (POP) or asked price is $24.13. To find the POP, the net asset value is divided by the complement of the sales charge, as follows: NAV / (100% - sales charge) $22.20 / (100% - 8%) $22.20 / 92% $22.20 / 92% = $24.13 Remember, a mutual fund's sales charge is always expressed as a percentage of the POP. For this reason, it is incorrect to multiply the sales charge (8%) by the NAV ($22.20).
Cpaital risk
The risk of a person losing all or part of their investment
Gross Domestic Product
The sum total of the value of all the goods and services produced in a nation
Which of the following activities is NOT performed by a transfer agent?
The transfer agent is responsible for the issuance and cancellation of certificates to reflect changes in ownership, acting as company's paying agent for interest payments, acting as proxy/mailing agent. HOWEVER, maintaining the issuer's ownership register for each issuance of securities is the role of the REGISTAR
The cash flow received from dividends and/or interest, plus any appreciation or depreciation in the value of an investment, is referred to as the:
Total return.
A quote of 5.90 - 5.75 is a quote for which of the following securities?
Treasury Bills. These are quoted on a discount yield basis
What is the investment most subject to inflation risk?
Treasury Bonds
1) The Federal Reserve's Board Open Market Committee sells which of the following to accomplish its aims?
Treasury bills
Which of the following securities are exempt from state taxes?
Treasury notes - exempt from state but get taxed federally
A disciplinary action concerning a registered representative (RR) is reported by the firm through which of the following?
U4 Form
Under what circumstance may a husband and wife both be custodians in a minor's account?
Under no circumstance
U-5 Form
Used to terminate employment with an RR
May a brokerage firm place a temporary hold on the transfer of securities?
Yes for an account of a senior investor. They also can put a transfer out for transfer of funds or securities but not on purchasing securities
Which of the following amounts may a customer contribute each year to a 529 college savings plan without incurring any taxes?
an amount equal to the annual gift tax exclusion. $15,000. On an annual basis, a person may contribute to a 529 college savings plan up to the federal annual gift tax exclusion ($15,000) without paying a gift tax. Another choice is that the contributor can make a single, lump-sum gift of up to the five-year cumulative limit ($75,000) for tax free gifting.
Broker-dealers must provide a privacy notice to every consumer:
before disclosing nonpublic, personal information. CONSUMER is different than CUSTOMER
Gross National Product
measure of the economic output of a country's citizens and companies, regardless of location
Coverdell Savings Accounts
tax-free accounts that can be used for a variety of school expenses. Can only contribute 2k a year. CAN transfer to a family member. Investment options are self directed
Accumulation units are converted to annuity units when the:
the annuitant wants to start making withdrawals