SIE Benchmarks
Which of the following would NOT be considered to be a Money Market Instrument?
ADRs (American Depositary Receipts)
When a company calls an issue of bonds, all of the following would typically be FALSE EXCEPT:
The holders of called bonds will receive the face value of the bond plus a call premium.
A customer calls their RR. Which of the following statements by the customer would allow the RR to take action in effecting a transaction for the customer?
"When you think that the price is right today, buy 200 shares of ABC for me."
a point basis
(B) 1/100 of 1%
Jane left the securities industry 5 years ago to raise her two children. The children are now in school full time and Jane has decided to go back to work at the same broker-dealer where she previously worked. Which of the following is true regarding Jane's registration status with the firm?
(D) Jane's licenses have lapsed and she will be required to take the qualification exams again.
An underwriting syndicate is formed using a western agreement. Firm A has 25% participation of the $100 million issue. Firm A sells $25 million. At the end of the offering, $10 million remains unsold. Firm A's liability for the unsold portion will be:
10,000,000
In 2020, an attorney who is not an active participant in a retirement plan earns $110,000 annually and the attorney's spouse is unemployed. The maximum tax deduction allowed under IRS tax rules for IRAs for this couple is
12000
A broker-dealer has fired a registered representative (RR) for cause related to a violation of securities regulations. This RR will continue to be subject to FINRA jurisdiction for what period of time following the filing of the Form U-5?
2 years
If a covered member or covered associate makes a political contribution that exceeds the limitations provided in the SEC's "Pay-to-Play" rules, that member is the prohibited from engaging in distribution or solicitation activities with or for that government entity for what period of time?
2 years
A customer contributes the maximum $2,000 to an educational savings account which she will use for elementary school education costs. This account is most likely what type?
529 maybe
Which of the following bonds currently trading at an 8% basis would most likely be refunded?
8 1/2% of 2030, callable at 100.
If a customer's cash account is frozen due to the failure to make prompt payment:
Additional purchases (except for exempt securities) are not permitted unless sufficient funds are already in the account before the order is processed.
Which of the following is NOT a characteristic of Notes issued by the U.S. Treasury?
All U.S. Treasury Notes have call features.
The client of a Registered Representative has moved from California to Maine. The RR's firm is registered in Maine but the RR is not registered. Which of the following is true? The Registered Representative may (A) execute no further trades until the RR becomes registered (B) execute trades but allocate the commissions to a rep who is registered in Maine (C) execution unsolicited orders only (D) continue to execute trades for the client using the limited use exemption.
A
Which of the following regulations govern distributions of new issues? [A] Securities Act of 1933 [B] Securities Act of 1934 [C] Maloney Act of 1938 [D] Trust Indenture Act of 1939
A
Which of the following statements about preferred stock is true?
Preferred stock is considered an equity security.
Common stockholders could take which of the following actions with regard to the corporation's business activities? (i) Vote on a stock split (ii) Inspect the minutes from the Board of Directors meetings (iii) Attend the annual shareholders meeting (iv) Vote on a cash dividend [A] I and III [B] II and III C] I, II and III [D] I, II, III and IV
A
While working one day, a 17-year old walks into the office. He has already graduated from high school and wishes to open an account at the firm. How should this situation be handled?
Unfortunately, the RR has no choice but to refuse to open an account for the 17-year-old.
Which of the following would NOT be considered a "contribution" under the Pay-to-Play rules?
A donation of time by an individual at campaign headquarters
Which of the following BEST describes a call feature?
A feature that allows the issuer of a bond to redeem the bond ahead of the final maturity date, typically including a premium above face value of the bond and most commonly used when interest rates have decreased.
The manager of Introducing Broker-Dealer wants to thank the manager at Clearing Broker-Dealer for their assistance with some increased trading volume as of late. Which of the following gifts is permissible under FINRA Rules if limited to once annually?
A gift card to a local sporting goods store for exactly $100.
The agreement that authorizes a broker-dealer to pledge a customer's margin securities as collateral for a loan from a bank to the broker-dealer is called:
A hypothecation agreement
Which of the following would be the MOST typical portfolio make up for a mutual fund that is categorized as "balanced"?
A portfolio consisting of equity securities such as common and preferred, along with bonds from various issuers including government, municipal, and corporate
Which of the following investments would be subject to the greatest degree of financial risk for an investor? (A) Common Stock (B) Corporate Bonds (C) Municipal Bonds (D) Preferred Stock
[A]
Which of the following describe two classifications associated with municipal bonds issued by state and local governments? (A) No Load and Insured (B) Zero Coupon and Bills (C) Revenue and General Obligation (D) Income and Tax-Exempt
[C]
An investment company that only offers non-redeemable shares is which of the following types? (A) Variable Life company (B) An open-end investment company (C) A Whole Life company (D) A closed-end investment company
[D]
Which of the following statements by an RR is TRUE regarding dividends?
An investor who owns an American Depositary Receipt can expect to receive dividends from their investment when declared and paid."
Which of the following accurately describes a secondary offering or secondary distribution?
An offering in the secondary market of securities owned by one or more major owners wishing to sell large volumes of their shares.
529 Education Savings Plan accounts have all of the following features EXCEPT:
Annual contributions to the account can total no more than $2,000.
One of your clients is a sophisticated 40 year old investor and has recently changed jobs. The client is considering rolling over his $100,000 401(k) plan with his former employer to an IRA. He invests conservatively in his personal brokerage account which is now worth $150,000. but he wants to speculate in his IRA account investments because he feels that he can take risks since he won't need the money until retirement. What is the best advice a BOM should give a RR about this customer?
Assets in an IRA should be taken into consideration with an overview of the customer's total investment portfolio and risk profile
A customer with a variety of investment products in his account elects to put a Transfer on Death (TOD) agreement in place with relation to his account. Which of the following is TRUE?
Assets will automatically be passed to beneficiaries per instructions in the TOD agreement and will avoid being tied up in legalities associated with regulations on assets of a deceased person.
A walk-in customer comes in who is a recent immigrant from another country. This customer has informed you that she does not have a social security number (SSN). Which of the following is CORRECT? Under the USA Patriot Act, the customer: (A) can open an account without providing a SSN, as long as she provides her name and a residential address. (B) can open an account without providing a SSN, but would be required to provide a Tax Identification Number (TIN) of some kind. (C) cannot open an account without providing her employment status, anticipated earnings this year, and her overall net worth. (D) cannot open an account because she is not a citizen of the United States at this time.
B
A RR in California has a client in Colorado. To make trades for the Colorado client, the RR MUST:
Be registered in Colorado
Which of the following is TRUE regarding Traditional IRAs?
Beginning date for first required minimum distributions (RMDs) is April 1st of the year following the calendar year in which the owner reaches 70 1/2
Which of the following statements is generally accurate regarding securities issued by agencies of the U.S. Government?
Both the principal and interest payments are considered to be safe.
SEC Rule 144A permits the resale of non registered securities to all of the following EXCEPT:
individuals
All of the following securities may be purchased on margin in a customer's margin account EXCEPT?
Call options on equities
An Open-end Mortgage Bond issued by a corporation is one in which the property used to secure the bonds:
Can be used to secure additional bonds and all bonds rank equally.
Which of the following is TRUE of an open-end investment company?
Capital gains must be distributed to shareholders on an annual basis.
Under the JOBS Act, an issuer that is an emerging growth company or a broker-dealer representing the issuer may engage in the following communications before a registration statement is filed with the SEC EXCEPT
Contact potential investors that are Retail Investors to ascertain investor interest
Under the SEC's "Pay-to-Play" rules, which of the following contributions by a covered associate is permitted to an elected official's campaign in which the covered associate may NOT vote?
Contributions of $150 or less per election, per covered associate.
A wife owns a small business and has net income of $100,000 for the year. Her husband was hired by her as an accountant for her business and was paid $30,000. Which of the following is true concerning the amount that can be contributed to an IRA by the wife and/or husband?
Each or either can deposit $6,000 into their own IRA.
All of the following statements are true about a registered person who is called to active duty in the military except:
Earned but unpaid commissions cannot be paid while the registered person remains on active duty
The ratio at which one country's currency can be converted into another country's currency is known as the:
Exchange rate
When a client opens an options account at a firm, regulations dictate that the firm must receive an account agreement signed by the customer in what time frame?
Following approval of the account, the firm must receive the signed account agreement within 15 days.
How often must a member firm have to send a customer a statement showing the cash and securities positions in the account if there is no activity in the account?
Quarterly
An investor expects the market value of ABC to remain neutral over the next few months. He is long ABC. How could this investor utilize the expectation that ABC will remain neutral?
He could sell a call.
An unregistered individual may perform all of the following functions EXCEPT:
Hold a semi-annual meeting with a registered representative's client and update the investment objectives of the account.
Which of the following is FALSE regarding a variable annuity?
Holders are protected against losses to their initial investment.
Which of the following statements about REPOs (Repurchase Agreements) is FALSE?
REPOs are often thought of as risk-free investments.
An organization that owns and operates income producing property like shopping centers and apartment buildings and distributes most of its taxable income to its shareholders would be a:
Real Estate Investment Trust
The filing of a SAR (Suspicious Activity Report) may be required for which TWO of the following?
III. The deposit of a cashier's check once every other week for $9,000 IV. Wire transfers into and out of an account at frequent intervals
Which of the following may NOT be purchased on margin?
IPOS
All of the following are true regarding IRA contributions EXCEPT:
If an extension for a tax return is obtained, the IRA contribution may be delayed until the date the tax return is filed.
One of your friends works for a company that has established a profit-sharing plan that is company-sponsored. Which of the following statements on this type of plan is FALSE?
In this type of plan, deductions allowed to employers from one year can be carried to the following year.
When an investor buys either a corporate or municipal bond, how frequently is interest paid?
Interest is paid on a semi-annual basis.
Which of the following statements regarding "inflation" and "interest rates" would be true?
Interest rates will increase in periods of inflation.
When an investor in the U.S. owns an ADR (American Depositary Receipt), what does that mean?
It means that the investor holds a certificate representing ownership of a foreign company which is held by a custodian who is a third party to the ownership.
Mr. Smith, your client, has maintained about 80% of his portfolio in fixed income securities. Interest rates are expected to decline over the next 12 month period. Mr. Smith calls you because he is concerned about this prediction and his portfolio. Which of the following recommendations would be appropriate for you to give to Mr. Smith?
Leave his portfolio the way it is now Of the choices offered the best choice would be to leave his portfolio in fixed income securities. If interest rates decline the value of his bonds will go up and his overall portfolio value will increase. He also would be able to continue to receive the income from the coupons on the bonds he currently owns.
What type of order would an investor enter if they wanted to buy 1 ABC May 50 Call when the premium for the option declined from its current value?
Limit order to buy
When determining position limits an investor that is short XYZ calls would be affected by which of the following?
Long XYZ puts
Which of the following is NOT commonly associated with UITs (Unit Investment Trusts)?
Management company structure
Which of the following is true of cumulative voting?
Minority shareholders have a better chance of electing a director of their choice.
A customer buys U.S. Government Bonds Friday, March 6. Regular Way settlement is?
Monday, March 9
Of the following assets, which are most likely to be included in the investment portfolio of a real estate investment trusts:
New apartment houses and shopping centers
When an investor regularly trades in and out of five or six different stocks daily and does not maintain any positions over night would be a:
Pattern day trader
When discussing rights offerings, which of the following statements is ACCURATE?
Rights offerings allow existing shareholders to maintain their proportionate share of ownership when new shares are being issued.
Harvey had his registration revoked last year. If he wants to re-join the securities industry as a licensed person, who can approve it?
SEC
When disciplinary action is taken against a broker-dealer, final authority is in the hands of the
SEC - Securities Exchange Commission
A broker-dealer firm has become insolvent. SIPC liquidation procedures have begun. Jill and Jack are married and each of them have individual accounts along with a joint account with each other at the firm. The following are their account balances: Jill's individual account has $275,000 in fully-paid securities Jack's individual account has $265,000 in fully-paid securities Jill and Jack's joint account has $475,000 in fully-paid securities What would SIPC cover in relation to these accounts?
SIPC coverage would pay $275,000 for Jill's account, $265,000 for Jack's account, and $475,000 for the joint account.
Form letters, telemarketing scripts, and seminar texts are examples of:
Sales literature
FINRA, the Financial Industry Regulatory Authority, is responsible for all of the following, EXCEPT
Setting the amount of commissions, mark-up/mark-downs, and other transaction costs on securities-related transactions
One of your clients has large holdings of a few blue-chip corporations. The investor wishes to hold onto the stock for multiple reasons, but she is uncertain about price fluctuations in the short-term future. How can she use options to provide the MOST downside protection?
She can purchase put options on the securities in her portfolio.
Susan Smith has a large portfolio of blue chip common stocks and is expecting the market value of her stocks to remain about the same or decline modestly in price and would like to improve the rate of return on her portfolio. Which of the following option positions would be best for her?
Short Calls
A member firm is associated with Mr. Smith, an independent contractor of the member firm. Mr. Smith sells mutual funds from his home office. All of the following are true regarding this association EXCEPT:
Since Mr. Smith is an independent contractor, he will not be supervised by the firm.
Which is TRUE of the spreads in OTC stock quotations?
Stocks with a narrow spread are more active than stocks with the wider spread.
Mr. Smith advises his registered representative to sell 300 shares of his ABC common stock whenever the price is right. Later that day ABC starts to move up and the RR enters a market order to sell the stock. Which of the following statements is true?
The RR handled the order appropriately since the only decisions required were related to time and price.
What happens when an RR FAILS to complete the regulatory element of continuing education?
The RR must immediately stop performing all activities which require the RR to be registered.
One of your clients placed a trade in their cash account without the funds to pay for the securities. No additional funds were added to the account and no extension was obtained for additional time to deposit funds. The firm liquidates the purchased position. In order to comply with Reg T guidelines, the customer's account must be frozen for what amount of time?
The account must be frozen for 90 days.
All of the following are true of a corporate bond with a call feature EXCEPT:
The bond will be sold for a higher price because of the call feature.
If a corporation wants to open a margin account at a broker-dealer, which of the following documents is NOT required?
The corporation's affidavit of domicile
One of your clients owns an individual account and does not want any outside influence over the account. The client would like to ensure that probate is avoided in the event that they unexpectedly pass away and has named an immediate family member as the beneficiary of their account. This customer's needs will be best met by which of the following?
The customer should set up a Transfer on Death agreement for securities in the account.
One of your clients purchases a callable corporate bond. The bond is callable at 106.55. What will the customer receive if the corporation calls the bonds and the customer tenders them back to the corporation?
The customer will receive $1,065.50 for the bond and accrued interest up to the call date will be added to that figure.
All of the following could be applied to fixed UITs EXCEPT:
The fact that they are managed
In the sale of a mutual fund, which of the following documents is the primary and most important sales document?
The fund's prospectus
Changes to the investment objectives of a mutual fund must be approved by the
The fund's shareholders
The following are all characteristics of variable annuities EXCEPT:
The investment portfolio is insured against loss.
An RR is explaining a Section 529 Education Savings Plan to clients who are the parents of a college bound child. They are interested in making provisions for the college costs. The RR should disclose all of the following characteristics of a 529 Plan EXCEPT:
The maximum contribution limit can be set at more than $300,000 .depending on the state and the contribution is exempt from federal gift taxes.
Who receives an annuity contract's surrender value?
The owner of the contract receives the surrender value.
Which of the following statements pertaining to fiduciary accounts is FALSE?
The profits of such an account may be shared with the fiduciary in charge of managing the account.
An investor wants to exchange shares of one fund with shares of another fund that is within the same family of funds. Which of the following is NOT an important consideration when making such an exchange?
The sales load of the new fund
When does settlement take place on cash transactions?
The second business day after trade date
Which of the following factors is the LEAST important in analyzing the investment quality of a mortgage bond?
The trustee bank holding the title to the collateral
The Trust Indenture Act of 1939 regulates corporate debt issues and requires the designation of a trustee. What duty does this trustee have?
The trustee is charged with acting on behalf of bondholders and ensuring that the rights of these bondholders are not infringed upon.
Gross Domestic Product (GDP) differs from the Gross National Product (GNP) in that the GDP measures:
The value of goods and services produced within the boundaries of the United States.
What is the obligation of a put writer upon exercise of the put?
The writer must purchase the underlying security at the strike price.
An investor, whose investment objective is speculation, would MOSTLY be concerned with which of the following?
Their exposure to capital risk
Repurchase Agreements are characterized by all of the following EXCEPT:
Their fixed maturities make them unsuitable for use by corporations
Which of the following statements regarding warrants is not true?
They are an obligation which must be issued by the corporation.
Some broker-dealers allow their registered representatives to be "independent contractors" of the firm. When handling the sale of equity securities and mutual funds all of the following about independent contractors are correct EXCEPT:
They are not required to adhere to the member firm's supervisory requirements
Good-till cancelled orders have all of the following characteristics EXCEPT:
They are permitted for common stock only
A client has held a long position in BCD Common for several years and has seen a sizeable increase in price since initially buying the stock. The client fears that BCD is headed for a slight downturn in price and wishes to protect the profits that he holds from the previous increase. Which option strategy provides the MAXIMUM protection for this client?
This client would be best suited by buying puts on BCD.
A Registered Representative thoroughly reads a preliminary prospectus and then writes a brief review of the prospectus which he wants to send to clients he believes are suitable.
This may not be done under any circumstances. Preliminary Prospectus must be sent w/o any attachments or anything with it
A day trader of blue chip common stocks would be most concerned with which of the following risks?
Timing Risk
Regulation T Settlement for corporate securities such as common stocks, preferred stocks, and bonds is:
Trade date plus 4 business days
Which of the following U.S. Government securities are classified as money market instruments?
Treasury Bills
In order to free up time for the registered representatives, a member firm has several non-registered persons telemarket prospective clients with a script. The script states the following: "Good morning, my name is _____ and I'm calling you from Make Money Securities. Our firm expects market increases in ABC Fund, which is offered for sale by our registered representatives. May I connect you with one of our representatives or send you further information?" Which of the following is CORRECT about this situation?
Under no circumstances may an unregistered person perform such activities.
Which of the following provides a long-term opportunity to purchase a certain number of common shares at a specific price?
Warrants
When could one expect changes in the net asset value of a mutual fund?
When there are changes in the value of securities within the fund's portfolio
Mr. Jones has a conservative investing approach. He has a large portfolio of blue chip common stocks and wants to use options to receive additional income from the portfolio. Which of the following would be the MOST suitable recommendation for Mr. Jones?
Write Call options on the portfolio of securities
As BOM, one of your RRs comes to you with a letter to a client about a 529 education savings plan account. The client's child is expected to graduate from high school in the near future. What else should the RR disclose in relation to this plan?
Your RR needs to state that withdrawals from 529 plans are tax-free when used for qualified education costs.
One of your clients holds a preferred stock on ABC and ABC has not paid dividends for the past two quarters. ABC requires that unpaid dividends on preferred stock be paid prior to paying any dividends to common stockholders. What kind of preferred stock does your client hold?
Your client has a cumulative feature on their preferred stock.
A 23 year old customer wants to invest to provide for his qualified higher education expenses. Which of the following is his best alternative? (A) A Section 529 pre-paid tuition plan (B) A Section 529 Education Savings Plan (C) Series EE and Series I savings bonds (D) A Coverdell Education Savings Account
[A]
A client has a long position in a security that is currently trading at $50 per share. He instructs his RR to sell his shares if the market price goes to $45 or lower per share today. The RR should: (A) Enter the order ticket, indicating the date and time the order was entered. (B) Enter the order ticket, without indicating the date and time. (C) Wait to enter the order ticket until the stock goes to $45 per share. (D) Refuse the order because it's a conditional order
[A]
ABC Corporation has little or no track record of sales and earnings and wants to raise capital by issuing debt securities. The corporation would most likely issue securities that would be called: (A) Debentures (B) Preferred Stock (C) Junk Bonds (D) Subordinated Bonds
[A]
All of the following are likely violations of FINRA rules EXCEPT: (A) Selling a customer's blue chip stocks and buying high yield bonds (B) Short-term trading in mutual funds (C) Recommending penny stocks to customers whose investment objective is current income (D) Handling a large number of accounts on a discretionary basis
[A]
All of the following represent self-regulatory organizations except (A) SEC - Securities and Exchange Commission (B) FINRA - Financial Industry Regulatory Authority (C) MSRB - Municipal Securities Rulemaking Board (D) NYSE - New York Stock Exchange
[A]
An investor has a long-term investment objective. Of the following, which is the best reason that a variable annuity may meet the investor's objective? (A) Avoiding tax penalties set forth by State insurance regulators requires a holding period on such investments of no less than two years. (B) Annuities must exist for a minimum of 5 years in order for death benefits to be activated. (C) The individual's investment will be negatively affected to a significant degree by surrender charges. (D) Avoiding tax penalties at the federal level requires a holding period of 10 or more years.
[A]
Assuming all of the following products are available, which provides the customer with the BEST opportunity to invest in a foreign stock? (A) An American Depositary Receipt (ADR) (B) An international fund that includes the stock (C) A global fund that includes the stock (D) A domestic corporation that is within the same sector
[A]
Mutual fund minimum purchase requirements must be disclosed in: (A) the prospectus (B) a letter of intent (C) the annual report (D) the official statement
[A]
Of the following types of orders, which would be used to obtain a specific price of execution or better: buy limit buy stop sell limit sell stop (A) I, III (B) I, IV (C) II, III (D) II, IV
[A]
Of the following, which will give you the real interest rate? (A) The inflation rate subtracted from the nominal rate (B) The discount rate of the Fed subtracted from the prime rate (C) The prime rate subtracted from the nominal rate (D) The tax rate of an investor subtracted from the total rate of return
[A]
Open-end investment companies (mutual funds) are very liquid because (A) the funds are always ready to tender and redeem shares (B) they list on multiple exchanges (C) they are backed by the U.S. government (D) active dealer markets exist for most mutual fund issues
[A]
The term "spread" in the OTC market refers to the difference between the (A) bid and ask prices of a security. (B) Treasury bill yield and the yield on corporate bonds. (C) market maker's inventory in the security from the opening to the close of the trading day. (D) market price of the security and the price at which a firm would offer the security.
[A]
Under Regulation D Private Placement Rules the restricted securities that are issued may be sold to a maximum of (A) 35 accredited investors (B) 35 non-accredited investors (C) unlimited number of sophisticated investors (D) unlimited number of accredited and non-accredited investors
[A]
When would a call option be considered "in-the-money"? (A) When the underlying security's market price is greater than the strike price of the option. (B) When the underlying security's market price is equal to the sum of the strike price and the premium. (C) When the underlying security's market price is below the strike price of the option. (D) When the underlying security's market price is equal to the strike price less the premium.
[A]
Which of the following investment company transactions would be subject to the prospectus delivery requirements? (i) Face Amount Certificates (ii) Mutual Fund Shares (iii) Variable Annuities (iv) Contractual Plan Certificates (A) III only (B) II and IV (C) I, II and IV (D) I, II, III, and IV
[A]
A registered representative has his insurance license suspended for fraudulent activity. The registered representative works for a FINRA member firm. The member firm: (A) does not have to report this fact to FINRA. (B) must promptly report this to FINRA. (C) must report this to FINRA provided the amount of money involved in the incident is in excess of $15,000. (D) none of the above are true.
[B]
A round lot unit of trading in common stock is (A) 10 shares (B) 100 shares (C) 500 shares (D) 1000 shares
[B]
All of the following are types of corporate bonds EXCEPT: (A) Mortgage bonds (B) Revenue bonds (C) Debentures (D) Zero coupon bonds
[B]
All of the following securities can be purchased on margin except? (A) Municipal Bonds (B) Traditional Put and Call Options (C) Listed Common Stock (D) Corporate Bonds
[B]
An investor who buys a call: (A) has the right to sell 100 shares of the underlying stock. (B) has the right to buy 100 shares of the underlying stock. (C) has the obligation to sell 100 shares of the underlying stock. (D) has the obligation to buy 100 shares of the underlying stock.
[B]
How often must a member firm have to send a customer a statement showing the cash and securities positions in the account if there is no activity in the account? (A) Monthly (B) Quarterly (C) Semiannually (D) Annually
[B]
If an individual invests in a tax-preferenced retirement product such as a 401(k) Plan or a Traditional IRA and this person withdraws funds from the plan prior to reaching 59 1/2, the IRS tax penalty is (A) the investor's ordinary income tax rate. (B) 10% in addition to the investor's ordinary income tax rate. (C) 20% in addition to the investor's ordinary income tax rate. (D) 40% in addition to the investor's ordinary income tax rate.
[B]
In a normal market, when there is a change in interest rates how do the yield to maturity and the current yield of a bond react? (A) They move in the same direction. (B) They move in opposite directions. (C) They are unaffected by bond price movements. (D) There is no relationship to each other.
[B]
Mr. Smith comes into your office and wants to open a margin account for his son who is 7 years old. As Mr. Smith's RR you must advise him that (A) you can open the account without restriction provided the son has a social security number (B) you cannot open the account because margin accounts are never allowed for minors (C) you can open the account as a custodian margin account and invest only as a prudent investor would invest (D) you cannot open the account because Mr. Smith would not be allowed to be the custodian
[B]
Normally a stock will begin trading ex-dividend on the: (A) Second business day prior to the record date. (B) Business day prior to the record date. (C) Second business day prior to the payable date. (D) Record date.
[B]
Stock prices over the long-term have tended to be which of the following? (A) A lagging indicator (B) An indication of future economic trends (C) A very poor indicator of futures moves in the economy (D) In a major downward trend
[B]
The non-profit, self-regulatory organization whose members include almost all of the firms in the securities industry is (A) SEC - Securities Exchange Commission (B) FINRA - Financial Industry Regulatory Association (C) MSRB - Municipal Securities Rulemaking Board (D) CBOE - Chicago Board Options Exchange
[B]
When an investor's SIPC claim exceeds SIPC limits, which of the following takes place? (A) Extended coverage of the investor's account may be granted by the designated SIPC trustee. (B) Claims exceeding the SIPC limits are combined with the total claims for the firm in default and reduced according to the investor's total percentage of claimed losses. (C) If claims exceed SIPC limits, SIPC member firms are assessed for the difference. (D) In the event that there is an unsatisfied portion of an investor's claim that exceeds SIPC limits, that investor becomes a general creditor of the troubled firm for that amount.
[B]
Which of the following describes Regular-way settlement for common stock transactions? (A) T+1 (B) T+2 (C) T+3 (D) T+4
[B]
Which of the following is NOT a feature of growth funds? (A) Pays monthly dividends (B) Riskier than money market investments (C) Portfolio comprised of mostly small cap common stocks (D) Fund's objective is capital appreciation
[B]
Which two of the following describes the difference between a listed and unlisted security? Listed securities are primarily traded on the floor of a stock exchange. Unlisted securities are primarily traded on the floor of a stock exchange. Listed securities are traded only by market-makers who buy and sell for and from their own inventory. Unlisted securities are traded by market-makers who buy and sell for and from their own inventory. (A) I and III (B) I and IV (C) II and III (D) II and IV
[B]
A client recently purchased a sizeable number of mutual fund shares and knows that the Net Asset Value will change daily. The customer asks the RR how the NAV number is computed. Which of the following best describes the computation to arrive at NAV per share?
[B] -NAV = net assets / total outstanding stock
Which of the following is generally NOT TRUE in relation to Corporate Commercial Paper?
[B] Commercial paper is normally issued in callable form Commercial paper represents unsecured, short-term debt of a corporation. Generally it is sold in book-entry form at a discount and redeemed at face value on a specified date. Commercial paper is NOT normally issued as callable.
Eurodollars are BEST described with which of the following statements?
[B] Eurodollars represent currency of the U.S. that is currently being held in foreign (non-U.S.) banks.
Which regulator determines which securities can be purchased on margin when the securities are non-exempt securities trading on the OTC market?
[B] FRB - Federal Reserve Board
Which of the following are true about the purchase of variable annuities?
[B] The monthly payout varies. When purchasing variable annuities the monthly pay out after annuitization varies and the monthly premium during the accumulation period is fixed.
A customer buys $20,000 of securities in his cash account. On the settlement date, he tells the RR he cannot pay. He says to sell out the purchase. Which of the following is correct? A] If the proceeds of the sale exceed the cost, there is no penalty. [B] Under Regulation T, the account must be frozen for 90 days. [C] This is a violation of the 1934 Act anti-fraud rules. [D] The SEC considers the account undesirable and the account must be closed.
[B] Under Regulation T, the account must be frozen for 90 days.
If an investor spreads his mutual fund investments over several different fund families, his/her registered representative should disclose to the investor that the investor will probably forfeit which of the following privileges?
[B] sales charge breakpoint
All of the following are defensive except:
[B] tool and die manufacturer
A client at the firm has a birthday of January 1st. The client has a Traditional IRA and he is concerned about required minimum distributions (RMDs) and the penalties associated with not taking RMDs. The client turns 70 this year. Which of the following is TRUE in this scenario? (A) If the client still works in a part-time capacity at any employer, then RMDs are waived and no penalty would apply. (B) Given that the client turns 70 this year, RMDs are required beginning on April 1st of the same year. (C) Given that the client turns 70 this year, RMDs are not required until April 1st of the following year, because the client will not be 70 1/2 until after April 1st of this year. (D) If the client wishes to avoid RMDs, the client can simply roll this Traditional IRA over into another Traditional IRA.
[C]
A municipal general obligation bond has which of the following characteristics? (A) Revenues generated by the users of the project pay all expenses related to the bonds. (B) They trade on listed exchanges. (C) GO bonds are backed by the full faith and credit of the municipality issuing the bonds. (D) GO bonds can be exempt from federal taxation only.
[C]
All of the following are factors in the calculation of the money supply's M1 component EXCEPT: (A) The amount of funds in demand deposit accounts (B) The funds in people's checking accounts (C) The amount of funds in certificates of deposit (D) The amount of currency that is in circulation
[C]
An investor buys 100 shares of ABC common stock at 25. If the investor later buys a put on ABC, he/she has: (A) Created a ratio position (B) Limited his/her future gain on ABC (C) Hedged against a price decline (D) Established a covered put position
[C]
An investor buys one ABC Sept 50 put @ 3. To close this position, the investor would have to: (A) Buy one ABC Sept 50 put (B) Buy one ABC Sept 50 call (C) Sell one ABC Sept 50 put (D) Sell one ABC Sept 50 call
[C]
An investor interested in tax free interest income should invest in which of the following? (A) A certificate of deposit (B) A money market fund (C) A municipal bond fund (D) A corporate bond fund
[C]
An investor is considered "covered" in which of the following scenarios involving option contracts? The investor: (A) sells 1 ABC Call on common stock and owns 100 shares of ABC non-convertible preferred stock. (B) buys 100 shares of ABC common stock and buys 1 ABC Put. (C) buys 100 shares of ABC common stock and sells 1 ABC Call. (D) sells 1 ABC Put and buys 100 shares of ABC common stock.
[C]
An investor is looking over several retirement plans for pros and cons. The investor wishes to invest funds that they are not required to withdraw at any given time, since they intend to continue working well into their 70's. Which of the following would be inappropriate for this investor? (A) A Roth IRA (B) A Traditional IRA (C) A defined-benefit plan (D) A deferred compensation plan that is not qualified
[C]
An investor would have the greatest amount of risk with which of the following option positions? (A) The investor writes an uncovered put. (B) The investor buys a long put. (C) The investor writes an uncovered call. (D) The investor buys a long call.
[C]
Corporate bonds are normally issued in denominations of (A) $100.00 (B) $500.00 (C) $1,000.00 (D) $5,000.00
[C]
New customers wanting to trade options must receive an Options Disclosure Document (A) only once the approval of the account takes place. (B) before the first options transaction settles in the new account. (C) at or before the approval of the options account. (D) at the time that the customer asks about options trading.
[C]
Of the following types of orders, which would generally be used to protect an existing position or profit? buy limit sell stop buy stop sell limit (A) I, III (B) I, IV (C) II, III (D) II, IV
[C]
Regulation T requires that an option purchased in a margin account be paid for (A) by the trade date. (B) by the first business day following trade date. (C) by the fourth business day following trade date. (D) by the seventh business day following trade date.
[C]
The Self-Regulatory organizations would establish regulations for all of the following EXCEPT: (A) the handling of transaction procedures for standardization (B) overseeing sale practices (C) establishing minimum commission rates (D) setting rule enforcement procedures and practices
[C]
The Trust Indenture Act of 1939 covers and requires the registration of which of the following? (A) Common stock equity securities (B) Preferred stock equity securities (C) Debentures issued by a corporation (D) Bonds issued by the U.S. Treasury Department
[C]
The investment portfolio of a Variable Annuity is called which of the following? (A) The General Account (B) The Margin Account (C) The Separate Account (D) The Cash Account
[C]
The most senior claim against assets of a corporation in the event of a corporate liquidation would be which of the following? (A) Preferred stock (B) Common stock (C) Mortgage bonds (D) Subordinated debentures
[C]
When an investor buys either stocks or mutual funds, regular-way settlement of the trade is: (A) same day as the trade date (B) the next business day after trade date (C) trade date plus 2 business days (D) trade date plus 4 business days
[C]
Which of the following describes statutory disqualification of a registered person under SEC rules? (A) An investor invests enough to qualify for the sales load discount required by a mutual fund. (B) The suspension of a registered person from registration with a FINRA member due to SEC rule violations. (C) The failure to determine adequate suitability information from a customer as required by securities law. (D) Violations of a broker-dealer firm's policies by a registered person.
[C]
Which of the following is FALSE with regards to repurchase agreements? (A) The Federal Reserve Board's open market operations often utilize repurchase agreements. (B) Repurchase agreements are money market transactions which are sometimes called "repos." (C) Rates on such agreements are set quarterly and published by the Federal Reserve Board. (D) A specified time and yield are designated at which the seller will repurchase the securities.
[C]
Which of the following is NOT a characteristic of common stock? (A) Common stock represents an equity ownership of the company. (B) Common stocks are riskier than Treasury securities. (C) Dividends paid on common stock are typically a fixed percentage of the value at the time of issuance. (D) Bondholders and preferred stockholders have priority claims over common stockholders in the event of the company's liquidation.
[C]
Which of the following persons is generally permitted to participate in initial public offerings? (A) The husband of a registered representative at a member firm (B) The sister of an operations professional at a member firm (C) The cousin of a supervisor at a member firm (D) An analyst at a member firm
[C]
Which of the following statements regarding REIT's is incorrect? (A) If publicly sold, they must be registered with the SEC. (B) A minimum of 75% of the gross assets must be in Real Estate related activities. (C) They are recognized as limited partnerships. (D) Must distribute at least 90% of earnings to shareholders.
[C]
A pharmaceutical company plans to release a new drug next month. Prior to the release, one of your clients buys 1,000 shares. Two weeks prior to the release, the FDA publicly announces a delay in the approval of the drug. Your customer's shares drop approximately 20% in value. Which of the following types of risk is BEST represented by this scenario?
[C] This is an example of legislative or regulatory risk. In this situation, the risk most represented would be legislative risk. Legislative risk or regulatory risk is risk which is related to changes in laws or regulations, as well as examples such as this, a delay by the FDA. The company has no control over the FDA, and thus the reduction in price of the company's stock is directly attributed to the risk assumed due to regulations and the delay by the FDA.
Regular Way Settlement for corporate securities such as common stocks, preferred stocks, and bonds is:
[C] Trade date plus two business days
A new client opens up a margin account at the firm. The client wishes to perform a short sale as their first transaction. They wish to sell short 1,000 shares of MNO corporation, which is currently trading at $2.25 per share. How much must this client deposit assuming no other deposits have been made at this time?
[C]The minimum deposit required for low priced stock (0 - $5) is $2.50 per share or 100% of market value whichever is greater. In this case, the $2.50 per share is greater. Therefore 1,000 shares of MNO x $2.50 per share = $2,500.
A 60 year old man works part time and earns $3,000. per year. He wants to contribute to his traditional IRA. His maximum annual contribution will be: (A) $3,000. (B) $4,000 (C) $5,500. (D) $6,500.
[D]
A Coverdell Education Savings Account may be preferred to a Sec. 529 College Savings Account under all of the following circumstances EXCEPT: (A) The student beneficiary will use the money to pay for high school expenses. (B) The grantor's modified adjusted gross income is below a certain threshold amount (C) The grantor is in a low tax bracket (D) The grantor wants to contribute $15,000. to the account
[D]
A RR of a retail member firm is attempting to cultivate a key employee of a large institutional investor client. The RR invites the employee to join him for dinner at an excellent restaurant and front row center tickets at a professional hockey game. After the game, they talk business over drinks. The total expense for the evening was $1,000. Which of the following statements about this expense is TRUE? (A) It is permitted because it is an ordinary and necessary business expense (B) It is permitted under all circumstances (C) It is prohibited under all circumstances (D) It is prohibited because it exceeds $100.
[D]
A bond that pays interest and principal in U.S. dollars held in banks outside the United States and which is initially offered for sale in a foreign country is called a : (A) Foreign exchange bond. (B) Junk bond. (C) Foreign dollar bond. (D) Eurodollar bond.
[D]
A client of yours has been interested in buying ABC. The client calls and asks you to enter an order to buy 200 shares of ABC whenever you think the price is right. Which two of the following would be correct with regard to this request? Explain to the customer that you will watch ABC and execute the order sometime in the next few days whenever the price is right. Explain to the customer that you will watch ABC and execute the order today if the price is right, but that you would talk to them tomorrow if the order is not executed today. Complete a buy order ticket and indicate that it has time and price discretion for that day only. Put ABC on your "watch" list and complete a buy order ticket only if the price is right and order will be entered for execution. (A) I and III (B) I and IV (C) II and III (D) II and IV
[D]
A person who performs which of the following functions must be registered as a Financial and Operations Principal (FINOP)? (A) Accepts clients' investment orders (B) Reviews and approves research reports (C) Prepares customer account statements and confirmations (D) Prepares firm financial statements and net capital computations
[D]
A prospective client requests a numbered account. The registered representative should explain: (A) That trading in such an account may only be done on a cash basis. (B) That numbered accounts are forbidden under industry regulations. (C) That the number used must be the social security number. (D) That a statement signed by the client acknowledging ownership of the account must be filed with the firm.
[D]
All of the following are examples of a regular stock split EXCEPT: (A) 3:2 (B) 5:4 (C) 8:7 (D) 2:3
[D]
An order ticket for a transaction must include which of the following? The time of execution on the order The executing market maker's name and information Whether the order was at the request of the customer or was discretionary Whether the customer's account has excess equity (A) I and II (B) III and IV (C) II and III (D) I and III
[D]
Computation of NAV of an open-end investment company takes place how often? (A) On an annual basis as part of the issuance of annual statements (B) Only when the number of shares in the fund changes (C) On a quarterly basis using the average bid price over the past quarter (D) On a daily basis at a time specified by the fund
[D]
Eurodollar Bonds have which of the following features? They are based upon the Euro, and all payments related to these bonds are made in Euros. They are based upon the U.S. Dollar, and all payments related to these bonds are made in U.S. Dollars. They are registered here in the U.S. and must abide by all U.S. regulations on securities. Issuers of Eurodollar Bonds can be foreign companies/corporations and/or domestic companies/corporations. (A) I and III (B) I and IV (C) II and III (D) II and IV
[D]
If a person is found guilty of possessing unauthorized materials while taking a qualification examination, they are subject to: (A) Retesting at a later date (B) A 90 day suspension (C) A 180 day suspension (D) Permanently being barred from association with a broker/dealer
[D]
In a margin account, "equity" is defined as: (A) the common stock in the account (B) the debt investment in the account (C) securities listed on a national exchange (D) the net financial ownership in the account
[D]
In which of the following scenarios would a joint account be permitted? I. Two individuals that are not related by blood or law II. A small child and a parent III. All of the members of a general partnership (A) I & II only (B) I & III only (C) II & III only (D) I, II, & III
[D]
The aggregate amount of securities which may be offered by an issuer during a specified period under Regulation A cannot exceed (A) $1,000,000 (B) $2,000,000 (C) $3,000,000 (D) $5,000,000
[D]
The criteria for determining whether an OTC security may be purchased on margin is established by: (A) The SEC (B) FINRA (C) The Federal Reserve Board (D) State securities commissioners
[D]
The nominal yield of a bond: (A) is found by dividing the annual interest payout by the bond's current market price. (B) is found by factoring in the bond's purchase price, coupon rate, time to maturity, and redemption value. (C) is found by multiplying the bond's current market value by the bond's coupon rate. (D) is found by multiplying the bond's coupon rate by the bond's par value and is the same as the coupon rate printed on the bond.
[D]
When a customer opens a new cash account, the New Account Report form must be signed by: The customer The registered representative A principal of the firm (A) I only (B) I and II only (C) III only (D) I, II, and III
[D]
When a customer opens an account at a firm, which of the following statements is NOT accurate in terms of signatures? (A) All "tenants" must sign account documentation when a "tenants in common" account is opened. (B) All "tenants" must sign account documentation when a "joint tenants with rights of survivorship" account is opened. (C) When dealing with community property accounts such as investment clubs, all participants must sign account documentation. (D) When dealing with limited partnership accounts, each limited partner who is a party to the account must sign account documentation.
[D]
When reviewing the prospectus and registration statements of an issuer the SEC (A) passes on the merits of the particular security covered by the registration statement. (B) guarantees the adequacy of the disclosures made in a prospectus. (C) guarantees the accuracy of the disclosures made in a prospectus. (D) does not approve securities registered with it and offered for sale.
[D]
Which of the following best describes the agreement between the customer and the broker/dealer related to the securities purchased on Margin in a Margin account? (A) The New Account Report Form (B) The Consent Form (C) The Hypothecation Agreement (D) The Credit Agreement
[D]
Which of the following is an ACCURATE statement regarding GTC (good 'till cancelled) orders? (A) These orders automatically come with DNR (do not reduce) instructions. (B) A principal or branch office manager (BOM) must approve these orders. (C) These orders do not lose position in relation to the specialist's book if they are entered properly and renewed properly. (D) Automatic cancellation takes place on these orders, normally after 6 months of being open.
[D]
Which of the following is typically considered a unit of trading when dealing in common stock? (A) Lots with a value of $10,000 or more (B) Lots with a value of $100 or less (C) Lots of 10,000 shares (D) Lots of 100 shares
[D]
Which of the following terms describes the over-the-counter market? (A) Auction market (B) Fourth market (C) Firm market (D) Negotiated market
[D]
Which of the following would NOT qualify as an investment company under the Investment Company Act of 1940? (A) A closed-end investment fund (B) A face amount certificate company (C) A unit investment trust (D) A limited partnership
[D]
Which of the following would cause an increase in the net asset value per share of a fund? (A) Payments made by purchasers of the fund (B) Reinvestment of dividends and capital gains distributions by shareholders of the fund (C) Capital gains distributions (D) Appreciation in the value of securities held in the fund
[D]
A limited partner in a non-leveraged, non-assessable limited partnership assumes all of the following risks EXCEPT:
[D] losses in the excess of the limited partner's investment
A customer enters an order to Buy 100 shares of ABC @49 stop. This order will be activated by which of the following?
a trade executed at $49 or higher
Assume that interest rates have remained stable while stock prices have been declining. An investor is most concerned about the loss of principal when investing and asks his registered representative whether a balanced fund or a growth fund would provide better preservation of capital. The RR should tell the customer that the
balanced fund is better because the debt securities and preferred stocks in the portfolio will provide downside protection in this scenario.
The term "spread" in the OTC market refers to the difference between the
bid and ask prices of a security.
Rule 415 allows shelf registration. This permits one registration statement to cover all securities to be issued during the next:
c. Three years Shelf registration allows the issuer to file a registration statement with the SEC and then, over a three-year period, sell the securities when the issuer considers the time appropriate.
Upon the expiration of S&P index options, all options that are "in the money" will be settled by the delivery of:
cash
Prior to offering shares to the public, an investment company must
complete and file the appropriate SEC registration documentation.
Each of the following would be expected to increase during an expansionary period in a business cycle EXCEPT for
corporate losses
The buyer of a put option expects that the price of the underlying security will:
decrease significantly in value
A registered representative (RR) is also a reserve in the armed forces. He is called to active duty and deploys. This RR's registration status is
deemed to be inactive and the RR will not have to re-qualify upon returning from active duty and will also be permitted to receive commissions related to existing customers while on active duty.
A common stockholder has all of the following rights except:
demand dissolution of the company's assets
Self-regulatory organizations (SROs) are required by federal securities laws to do all of the following EXCEPT:
determine fair market prices
If a customer requests a registered representative to exercise discretion in his account, all of the following must be obtained EXCEPT
essential facts about the customer.
An exchange privilege in a mutual fund means the investor can
exchange shares of one mutual fund for those of another.
One of your clients refers a friend. After talking with the referred friend, she opens an account with you, deposits $20,000, and states that she wants you choose some stocks that will have good growth potential whenever you feel it is the right time to buy. The next step you should take would be to:
get written discretionary authorization from her prior to executing any transactions.
Reg T governs the extension of credit for all of the following EXCEPT
government securities.
A variable annuity contract is similar to a life insurance policy because it may contain all of the following EXCEPT
guaranteed cash values
A registered person who fails to complete the Regulatory Element of the industry's Continuing Education Program will
have his registration suspended until the program is completed.
When a customer opens a margin account at a broker-dealer, they are required to sign certain documents. Which of the following best describes the agreement between the customer and the broker-dealer related to the terms and conditions of financing involved in purchasing on margin?
hypothecation agreement
An investor, Mrs. Smith, is seeking a mutual fund offering a high yield. Which of the following is the best choice for Mrs. Smith?
income fund
A bond which carries a credit rating of BB or lower is referred to as a(an):
junk bond
When a bond is trading at a discount, the current yield on the bond is:
less than its yield to maturity
When telemarketing, a registered representative must provide the called party with the
name of the RR's broker-dealer firm.
One of your friends is excited to inform you that they have decided to open up an IRA account. They are doing so in late April and starting the account with a deposit of $1,750. Consideration for this deposit to the IRA account MUST be for
only the current year
When an investor buys a call option, regardless of whether it is an Equity or Stock Index option, the maximum risk or loss potential to the investor is the
premium that was paid for the contract
In preparation for a Secondary distribution a member firm decides to make purchases on the floor which would cause the price of the stock to rise so that the secondary distribution could be made at a higher price. Such activity is
prohibited as market manipulation is not allowed
Which of the following statements is FALSE when discussing the Federal Funds Rate?
prohibited as market manipulation is not allowed
Mortgage Real Estate Investment Trusts generally invest in which of the following?
properties handled by developer or builders
Customers of member firms are required to receive statements of their accounts at a MINIMUM of
quarterly
Which of the following types of bonds secures its income from fees charged to users?
revenue bond
An investor who is "bullish" should invest in all of the following EXCEPT:
sell naked calls
Under the SEC's Pay-to-Play Rules, a "Covered Member" is BEST described as a person or firm that
solicits a government entity in relation to investment advisory services.
An over-the-counter stock trader is given a quote of "14-15 workout." This quote is:
subject to confirmation.
The appreciation of the value of a variable annuity during the accumulation period is
tax deferred until annuitization.
Mr. & Mrs. Jones have a joint account. Mr. Jones enters an order to sell 300 XYZ which is held in their joint account, and requests that the check be made payable to him. As the registered representative you should
tell Mr. Jones that the check must be issued in joint name.
All of the following are components of the calculation to find compound accreted value (CAV) on zero-coupon bonds EXCEPT?
the bond's current market yield
A client is evaluating purchasing corporate bonds versus purchasing municipal bonds. In their evaluation, the client wishes to evaluate the equivalent yield required by a corporate to compensate for the tax benefits of the municipal bonds. Which of the following is the formula used to determine tax-equivalent yield?
the client should divide the tax-exempt yield of the muni by (100% - their tax rate).
A market maker is quoting ABCD common stock, a NASDAQ security. The spread in this security is best described as the difference between
the dealer's quoted bid and ask price
The "spread" in an over-the-counter trade is
the difference between the current bid and ask prices.
A mutual fund breakpoint occurs when
the sales load is reduced because a specified dollar amount has been invested
American Depositary Receipts are used to facilitate
the trading of foreign stocks domestically.
Which of the following investments allow a maximum contribution limit of 100% of earned income, not to exceed $6,000 (2020), assuming the investor is less than 50 years of age?
traditional ira
Preferred stock has which of the following traits?
typically pay out monthly dividends
An RR must explain sales charges to prospective mutual fund clients so that they
understand breakpoint discounts and maximum charges related to buying mutual fund shares
Common stockholders have all of the following rights EXCEPT:
vote for the senior management of the company
