Securities Industry Essentials (SIE) Practice Test
A broker-dealer is permitted to accept payment for a new issue from a new customer when the: A registration is effective B. red herring is delivered C. preliminary prospectus is amended D transaction takes place during the cooling-off period
A
A firm is a participant in a public offering. To sell a substantial amount of the securities to its customers, the firm agrees to repurchase the shares at no less than the original sales price. Such agreements are: A. prohibited as fraudulent and manipulative B. permissible if the securities are deposited into escrow C. prohibited unless the firm immediately sets aside funds for the repurchase D. permissible if the customers retain the right to sell the securities into the open market
A
A savings account at a bank is guaranteed by which of the following entities? A. FDIC B. SIPC C. Federal Reserve D. Department of the Treasury
A
Broker-dealer ABC seeks to underwrite a municipal securities offering by a local town in which the mayor is currently seeking re-election. A municipal finance professional who resides in the town and works for ABC contributed $200 to the mayor's re-election campaign 13 months ago. If the employee wants to support the campaign further without impacting the municipal securities business of the firm, he is permitted to make an additional contribution of up to what amount? A. $50 B. $100 C. $150 D. $250
A
Call protection is most valuable to a bond owner when bond prices are generally: A. rising B. falling C. stable D. fluctuating
A
In the over-the-counter market, the term "spread" refers to the difference between the: A. bid and asked prices B. offered and asked prices C. indicated and firm prices D. opening and closing prices
A
In which of the following situations is an employee of a public company permitted to trade upon information without violating insider trading laws? A. An independent securities analyst explains to the employee why the earnings for the company next quarter could be markedly poorer than expected. B. The employee's neighbor works for the government and informs him that the government will award a major contract to the company next month. C. The employee's spouse works in the corporate headquarters and shares with him a conversation overheard at work regarding possible acquisition targets. D. A coworker informs the employee of a conversation he had with the administrative assistant to the company's general counsel regarding key developments in an ongoing class action lawsuit.
A
The computation of dollar prices and accrued interest on municipal bonds is normally on what calendar basis? A 30/360 B 30/365 C Actual/360 D Actual/365
A
UTMA accounts are opened under the tax ID of the: A. minor B. donor C. parent D. custodian
A
Upon expiration, all in-the-money S&P 100 Index call options are settled by the delivery of which of the following? A. Cash B. S&P 100 Index stocks C. S&P exchange-traded fund (ETF) D. The same number of S&P 100 Index put options
A
What is the cost basis of an inherited mutual fund? A. The net asset value (NAV) of the shares when the owner dies B. The NAV 30 days after the owners death C. The same cost basis as the deceased D. The same cost basis as the deceased plus capital gains distribution
A
When a broker-dealer charges a commission on a securities transaction, it has acted as; A. an agent B. a principal C. an underwriter D. a market marker
A
When selling a fixed amount of a base currency to purchase a counter currency, which of the following factors is primarily used to determine how much of the counter currency the customer will receive? A. The spot exchange rate B. The counter currency's inflation rate C. The trade balance between the two countries D. The credit rating of the counter currency's government
A
Which of the following actions is required of a broker-dealer's anti-money laundering (AML) program? A. designating an AML compliance officer B. filing the firm's AML program with FINRA C. conducting background checks of all employees D. identifying to regulators the employees responsible for Currency Transaction Reports (CTRs)
A
Which of the following actions is required when a firm receives cash in excess of $10,000 from one customer in one business day? A. File a Currency Transaction Report (CTR) B. File a Suspicious Activity Report (SAR) with the SEC C. Issue a cash transfer receipt to the customer D. Place a five-day hold on the customer's account for the funds received
A
Which of the following considerations should a registered representative explain to a customer when recommending a 529 college savings plan? A. the potential deductibility of contributions from state taxes B. the potential deductibility of contributions from federal taxes C. the income eligibility restrictions to contribute to the account D. the rights of the account beneficiary to the assets at the age of majority
A
Which of the following outcomes are possible for the writer of a covered call option? A. Profit limited and loss limited B. Profit limited and loss unlimited C. Profit unlimited and loss limited D. Profit unlimited and loss unlimited
A
A customer has a cash balance in her account together with long positions in several securities. She has made no securities transactions in the account during the past 18 months. How often must the firm send her an account statement? A. Monthly B. Quarterly C. Semiannually D. Annually
B
A customer is an officer of a company that is involved in some significant changes. All of the following items are examples of corporate affairs that could be considered inside information if the customer shares them with his registered representative except: A. pending transactions B. declared stock dividends C. top management changes. D. imminent financial liquidity problems
B
A decline in the gross domestic product (GDP) must last for at least how many quarters to be considered a recession? A. 1 quarter B. 2 quarters C. 3 quarters D. 4 quarters
B
A married couple who earned income that exceeded $300,000 in each of the prior two years and reasonably expects the same for the current year is: A. a qualified investor. B. an accredited investor C. an institutional investor D. a qualified institutional buyer (QIB)
B
A transaction in which a writer covers a position by purchasing an option is called: A. a closing sale B. a closing purchase C. an opening sale D. an opening purchase
B
All of the following risks apply to both foreign and domestic debt instruments except: A. political B. exchange C. repayment D. interest rate
B
An associated person who is not a registered representative is permitted to engage in which of the following activities? A. Accept an unsolicited customer order B. Provide account opening forms to a new customer C. Discuss the attributes of a particular investment product D. Prequalify prospective customers as to investment objectives
B
An investor owns 100 shares of XYZ common stock at the current market price of $50 per share. If XYZ conducts a 1-for-2 reverse stock split, the investor's post-split stock position will be: A. 50 shares at $25 per share B. 50 shares at $100 per share C. 200 shares at $25 per share D 200 shares at $100 per share
B
Direct participation programs (DDPs) provide: A. liquidity and transparency B. exposure to non-correlated assets with steady returns C. market-related correlations with higher average returns D. investors with direct purchases of stock from public companies
B
FinCEN accomplishes its mission to safeguard the financial system from the abuses of financial crime, including terrorist financing and money laundering, by enforcing: A. SEC regulations B. the Bank Secrecy Act C. the Securities Act of 1933 D. the Investment Company Act of 1940
B
If a market maker posts a quote of 10.00 -10.10 [25 x 10], which of the following actions is the market maker willing to take? A. Sell 1,000 shares at $10.00 and buy 2,500 shares at $10.10 B. Buy 2,500 shares at $10.00 and sell 1,000 shares at $10.10 C. Sell 100 shares at $10.00 and buy 250 shares at $10.10 D. Buy 250 shares at $10.00 and sell 100 shares at $10.10
B
Most economist would agree that the rising employment would be found during periods of: A. Deflation B. Inflation C. stagflation D. stagnation
B
No-load mutual funds may have lower expense ratios than load mutual funds for which of the following reasons? A. No-load funds do not charge 12b-1 fees. B. No-load funds are not permitted to charge a 12b-1 fee greater than 25 basis points C. Sales charges for load mutual funds increase their annual expense ratios D. Fund management fees for no-load mutual funds are always lower than load funds
B
Regular way settlement on Treasury bonds is: A .same day B. next business day C. second business day (skip day) D. fifth business day
B
The call provision of a bond stipulates which of the following factors? A. Maturity date B. Call date and call price C Original issue discount D. Coupon rate and call date
B
The last transaction in XYZ 5.50s was at 102. This bond is selling at: A. par B. a premium C. a discount D. asset value
B
The primary purpose of a syndicate desk in the context of an equity offering is to: A. determine the list of selling shareholders B. build an order book and allocate the stock C. solicit interest from investors in the stock offering D. chaperone company management during the road show
B
To offer its shareholders a privilege to obtain its shares at a fixed price, which of the following products does a corporation issue? A. Puts B. Rights C. Futures D. Preferred stock
B
When is interest on Treasury notes paid? A. quarterly B. semiannually C. annually D. at maturity
B
Which of the following investment risks is the greatest risk in a variable life insurance policy? A credit risk B. market risk C. inflation risk D. interest rate risk
B
Which of the following represents the effect of a stock split? A. the price per share of common stock increases. B. the price per share of common stock decreases. C. each stockholder's proportionate ownership decreases. D. each stockholder's proportionate ownership increases.
B
Which of the following stakeholders has first claim priority in a Chapter 11 proceeding? A. equity holders B. secured debt holders C. unsecured debt holders D. administrative claim holders
B
Which of the following statements is true about all U.S. government agency issues? A. They are exempt from federal taxes. B. They are exempt from registration under the Securities Act of 1933 C. They are issued in bearer form only D. They are general obligations of the federal government
B
Which of the following statements is true regarding a customer account held as tenants in common? A. The owners must equally share the assets B. The ownership of the decedent's assets is governed by their will or state law. C. Tenants in common is permitted for use only for two individuals D. Tenants in common is permitted for use only for married couples or family members.
B
Which of the following statements is true regarding the concept of an annuity contract? A. payouts of an investment in a nonqualified annuity are all income-tax-free B. the kind of annuity selected partly determines the payment amounts to the annuitant. C. in the case of life annuity contracts, the age and sex of the annuitant do not affect the payment amounts. D. the amounts of the periodic payments to the annuitant are determined by the performance of the insurance company's investment returns.
B
A member of a stock exchange responsible for providing liquidity in a security by being willing to buy and sell at all times is known as: A. a broker B. an underwriter C. a market maker D. a transfer agent
C
A registered representative (RR) wants to participate in a private securities transaction. Which of the following actions must the RR take? A. Request a meeting with his supervisor to lay out the structure of the deal B. Call his supervisor and inform her of the deal and the RR's potential involvement C Send written notice to his supervisor outlining the activity and compensation structure D. Initiate the paperwork required by the policies of the firm once the activity has begun.
C
A registered representative (RR) who wants to place a mutual fund advertisement must obtain written approval from which of the following parties? A. FINRA B. Each state's securities administrator C. A registered principle of the RR's firm D. The investment management division of the appropriate regional SEC office
C
At the time of issuance, which of the following securities normally has the longest period to expiration? A. rights B. options C. warrants D. repurchase agreements
C
Company ABC announces a 20% stock dividend for its common shareholders. If a customer holds 1,000 shares at $50.00, what is the new price and number of shares following the payment of the stock dividend? A. 800 shares at $62.50 B. 1,000 shares at $41.67 C. 1,200 shares at $41.67 D. 1,200 shares at $50.00
C
In a period of low inflation and economic recession, the Federal Reserve is expected to take which of the following actions? A. Decrease taxes B. Raise the federal funds rate C Buy bonds in the open market D. Require banks to increase reserves
C
The owner of which of the following products is most exposed to inflationary risk? A. utility stocks B. Treasury bills C. Treasury bonds D. Blue chip industrials
C
The redemption value of an open-end investment company's shares is based on the: A. previous offering price B. previous closing net asset value (NAV) C. NAV computed after the order is received D. offering price computed after the order is received
C
Under FINRA rules, which of the following activities by a registered representative requires written notification to her firm? A. Volunteering as a youth soccer league coach B. Gambling resulting in winnings in excess of $10,000 C. Driving part time for a transportation network company on weekends. D. Selling nonproprietary investment company securities products through her firm.
C
Under Rule 144A, an issuer of restricted stock is permitted to sell to which of the following investors? A. Financial institutions B. Accredited Investors C. Qualified Institutional buyers (QIBs) D. Nonaccredited investors who have previously purchased restricted stock
C
Under a system of statutory voting, a common stockholder has as many votes for each vacancy on the board of directors as the number of: A. positions vacant on the board B. directors present at the meeting C. shares owned by the shareholder D. proxies available for voting by the board
C
Under industry regulations, an initial purchase of $3,000 of common stock in a margin account requires a cash deposit of: A. $750 B. $1,500 C. $2,000 D. $3,000
C
Under normal circumstances, a customer's letter of intent on a mutual fund purchase is valid for what maximum period of time? A. 3 months B. 6 months C 13 months D. 24 months
C
Under the Securities Act of 1933, registration is required for which of the following securities? A. Eurodollar bonds B. Municipal securities C. American Depositary Receipts (ADRs) D. Securities issued by the federal government
C
Which of the following investments are generally traded according to their average life rather than their stated maturity dates? A. Corporate bonds B. Government bonds C. Asset-backed securities D. Fixed-rate capital securities
C
Which of the following security types provides investors with a stated maturity date, a floating interest rate, and an option to put the security back to a financial intermediary on a daily or weekly basis? A. equity put option B. perpetual preferred stock C. variable rate demand note D. tax-deferred variable annuity
C
Which of the following statements is true about treasury stock? A. It has voting rights B. It receives dividends C. It is issued stock that has been subsequently reacquired by the corporation. D. It is authorized stock that has not been issued and is held in the corporation's treasury.
C
A company announces a tender offer to its shareholders with the intent to buy a maximum of 1 million shares of its outstanding stock at $10 per share and sets no minimum number of shares to be purchased. An investor wants to participate in this offer and tenders his 1,000 share position. At the close of the offer period, only 90,000 shares have been tendered. How many, if any, of the investor's shares will the company purchase? A. 0 B. 100 C. 900 D. 1,000
D
A customer buys 1 ABC Jan 35 put for a premium of $3 and simultaneously buys 100 shares of ABC stock for $35 per share. The customer will break even when the stock is selling at what price per share at expiration? A. $3 B. $32 C. $35 D. $38
D
A registered representative is reviewing the following portfolio: *30% ABC Energy Company *30% XYZ Health Care Company *30% Exchange-traded fund (tracks the S&P 500) *10% Money market funds Which of the following risks is inherent in this portfolio? A. credit B. liquidity C. political D. nonsystematic
D
ABC Corporation has filed a registration statement with the SEC for the sale of 1 million shares of common stock. This will be the first public offering for ABC. Twelve days into the cooling-off period, ABC receives a deficiency letter from the SEC requesting further information. Five days later, ABC submits the required corrections. Assuming no other problems, this issue should become effective in: A. 15 days B. 3 days C. 20 days D. 8 days
D
At issue, which of the following debt securities mature in one year or less? A. FNMA bonds B. GNMA bonds C. Treasury notes D. Money market instruments
D
Blue-sky laws are regulated by which of the following entities? A. SEC B. MSRB C. FINRA D. State securities regulators
D
In the event of a stock split, which of the following parties is required to maintain a record of the shareholders eligible to receive the additional shares? A. DTC B. Issuer C. Custodian D. Transfer agent
D
Roth 401 (k) and Roth individual retirement account (IRA) plans share which of the following features? A. Contributions are made pretax B. Neither account has maximum contributions limits. C. Neither account is subject to early distribution penalties D. Qualified distributions are excluded from federal income tax.
D
Stability in the value of a debt portfolio is greatest when: A. interest rates are rising B. interest rates are falling C. maturities of the debt securities are long D. maturities of the debt securities are short
D
Under FINRA rules, noncash compensation connected with the sale of variable contracts includes all of the following items except: A. gifts B. meals C. lodging D. commisions
D
Under Federal Reserve T, a 90-day restriction is imposed when a customer opens and closes which of the following positions? A. The same stock on the same day in a margin account B. The same stock in different accounts on the same day C. The same stock in different accounts in the same household. D. The same stock in cash account without paying for the stock
D
Under SEC Regulation S-P (Consumer Privacy), which of the following information must a firm include in its customer privacy and opt-out notices? A. The address of the firm's website B. The fee to opt out from the privacy program C. The deadline by which to opt out from the privacy program D. The policies to protect the security of nonpublic information
D
Which of the following Form U4 reportable events results in a statutory disqualification? A. A personal bankruptcy filing B. A written customer complaint alleging misappropriations of assets C. A felony theft charge D. A felony conviction for driving under the influence (DUI) charge
D
Which of the following actions violates FINRA rules regarding selling away? A. Recommending to a customer the services of another broker-dealer (BD) B. Sharing commissions with another registered representative in the same BD C. Advising customers to buy mutual funds at amounts just below a discount level D. Engaging in private securities transactions without written prior consent of the employing BD
D
Which of the following communications with the public is considered misleading? A. Historical illustrations based on factual performance B. Product comparisons that illustrate material differences C. A research report that includes a buy recommendation for a specific security D. Literature providing 10-year performance information to support predictions of future performance.
D
Which of the following comparisons best describes the essential difference between a primary distribution and a secondary distribution? A. A primary distribution can only be made for equity issues while a secondary distribution can be made for both equity an debt issues. B. A primary distribution can only be made for issues that exceed a specified dollar amount while a secondary distribution can be made for issues of all sizes. C. A primary distribution must be made at a fixed public offering price (POP) while a secondary distribution must be made at the current market price. D. A primary distribution involves a sale of newly issued shares by the issuer while a secondary distribution involves the sale of already issued and outstanding shares.
D
Which of the following products is adversely impacted if the issuer's credit rating is downgraded? A. Mutual funds B. Unit investment trusts (UITs) C. Exchange-traded funds (ETFs) D. Exchange-traded notes (ETNs)
D
Which of the following responses describes an advantage of index funds? A. The protection of principal during bearish markets B. High turnover to take advantage of market opportunities C. Higher management fees due to active management of the fund D. Lower management fees due to the passive management of the fund.
D
Which of the following types of broker-dealer would most likely have correspondent firms? A. fully disclosed B. introducing C. market maker D. self-clearing
D
