SIE (Mastery Test)
Which of the following mutual fund share classes has no back-end load, lower operating expenses, and low or no 12b-1 fees? A) Class A B) Class B C) Class C upon conversion to Class B D) Class C
A) Class A
Variable annuities include which of the following attributes? A) Guaranteed death benefit B) Tax-free growth C) Intra-day Liquidity D) Unlimited pre-tax contributions
A) Guaranteed death benefit
Which of the following is correct concerning an uncovered call writer? A) The premium is the maximum gain and the loss potential is unlimited. B) Both gains and losses are unlimited since the position is uncovered. C) The premium is the maximum loss and the gain potential is unlimited. D) Both gains and losses are limited to the premium received from the sale of the option.
A) The premium is the maximum gain and the loss potential is unlimited.
Regarding stock rights and stock warrants, which of the following is TRUE? A) Warrants are sometimes bundled with other securities. B) Warrants have a short-term subscription length (expiry). C) Rights cannot be sold in the open market, only exercised once received. D) Rights are exercised to purchase shares at a premium, above the security's price when issued.
A) Warrants are sometimes bundled with other securities.
If the Midlands Pencil Corporation has issued several different debt securities, an investor would expect the lowest income stream from A) ordinary debentures B) speculative bonds C) subordinated debentures D) convertible debentures
A) convertible debentures. Although convertible debentures have many positive features for the investor, the major negative is that, in exchange for those benefits, the investor accepts a lower rate of interest.
A broker-dealer designated as a carrying firm would be expected to do all of the following EXCEPT A) maintain a lower net capital than noncarrying BDs B) perform back-office functions such as sending trade confirmations to customers C) take custody of customer funds and securities D) clear transactions for customer accounts
A) maintain a lower net capital than noncarrying BDs * maintain a HIGHER net capital than noncarrying BDs TRUE - perform back-office functions such as sending trade confirmations to customers - take custody of customer funds and securities - clear transactions for customer accounts
Which of the following may not be disclosed to a potential buyer while a security is in registration? A) There will be a road show in NYC in May B) A brokerage report showing the security is properly valued C) The issue is expected to be priced early June D) The issue is being offered through ABC Investment Bank
B) A brokerage report showing the security is properly valued
Which of the following persons would be allowed to purchase shares of an initial public offering (IPO)? A) An attorney acting on behalf of the managing underwriter B) The grandparent of a member broker-dealer employee C) Someone owning 15% of a member broker-dealer D) The father of a member broker-dealer employee
B) The grandparent of a member broker-dealer employee Aunts, uncles, grandparents are NOT considered immediate family
If a 40-year-old customer earns $65,000 a year and his 38-year-old spouse earns $40,000 a year, how much may they contribute to IRAs? A) Only the higher wage earner may contribute to an IRA. B) They may each contribute 100% of earned income or the maximum annual allowable dollar limit, whichever is less, to an IRA. C) They may not contribute because their combined income is too high. D) They may contribute up to the maximum annual allowable dollar limit, split evenly between both accounts.
B) They may each contribute 100% of earned income or the maximum annual allowable dollar limit, whichever is less, to an IRA. No matter how much income individuals or couples receive, they may contribute to their IRAs if they have earned income. Each is entitled to contribute 100% of earned income up to the maximum allowed. However, if either or both of them are covered under a qualified plan, limits may exist on the deductibility of the contributions.
A member firm broker-dealer is found to be in violation of an SEC federal regulation and could be subject to all of the following EXCEPT A) revocation of the firm's registration B) jail sentences for directors and officers C) monetary fines D) limits on activities the firm may participate in
B) jail sentences for directors and officers
Which of the following may be considered suspicious? A) Transactions that alone, or in the aggregate, involve at least $2,000 B) A client expressing undue concern about substantial commissions being charged to the account C) A customer unconcerned about losses D) Moving large sums of money between accounts with the same last names
C) A customer unconcerned about losses D) Moving large sums of money between accounts with the same last names
Which of the following sell transactions is NOT subject to the holding period restriction specified in SEC Rule 144? A) Unregistered stock acquired by a corporate affiliate in a stock option program B) Stock acquired by a corporate affiliate in a private placement C) Stock acquired on the NYSE by a corporate affiliate D) Unregistered stock acquired by a nonaffiliate under an investment letter
C) Stock acquired on the NYSE by a corporate affiliate Unregistered stock, if held by a non-affiliate, must still subject to the holding period
Under the Investment Company Act of 1940, an investment company may take all of the following forms EXCEPT A) an open-end investment company B) a closed-end investment company C) a limited partnership with partners as passive investors D) a unit investment trust
C) a limited partnership with partners as passive investors
Your broker-dealer is a fully disclosed firm. This means that it A) accepts customer funds to be held at the BD B) holds customer securities at the BD C) introduces its business to a clearing agent D) acts as its own back office, performing all functions such as sending out customer statements
C) introduces its business to a clearing agent
All of the following are benefits of a traditional IRA EXCEPT A) contributions may be tax deductible B) funds may be withdrawn without penalty for certain exemptions C) no penalty is charged for failing to withdraw funds after age 70½ D) earnings accumulate on a tax-deferred basis
C) no penalty is charged for failing to withdraw funds after age 70½ MUST withdraw funds after 70 1/2 RMDs TRUE A) contributions may be tax deductible B) funds may be withdrawn without penalty for certain exemptions D) earnings accumulate on a tax-deferred basis
When a security position is liquidated for a gain, cost basis A) is taxed as a capital gain B) is taxed as ordinary income C) represents a return of capital invested D) represents the difference between capital invested and sales proceeds
C) represents a return of capital invested
After a FINRA audit, if the Department of Enforcement issues a formal complaint against a member firm for alleged violations of federal securities law, the matter will be dealt with under: A) the Code of Arbitration. B) the Conduct Rules. C) the Code of Procedure. D) the Uniform Practice Code.
C: the Code of Procedure. Trade practice complaints, including alleged violations of federal securities laws, are handled under the Code of Procedure.
Which of the following offering types would be used for a deal that will be sold exclusively to residents of one state? A) A Reg A offering B) A Reg. S offering C) A Rule 144 offering D) A Rule 147 offering
D) A Rule 147 offering
If the U.S economy was to enter a deflationary period which of the following would likely occur? A) Employment would rise B) Gold prices would increase C) Interest rates would increase D) Fixed income payments become more valuable
D) Fixed income payments become more valuable
Your customer is aware that a corporate action has taken place where the adjustment to the number of shares owned and the stock price will not be standardized, but instead unique to fit the circumstances and terms of the corporate action. Of those listed, which is most likely to be such an action? A) Stock dividend payment B) Forward stock split C) Uneven reverse split D) Merger or acquisition
D) Merger or acquisition
All of the following are U.S. government agency debt securities EXCEPT A) Government National Mortgage Association securities B) Farm Credit Administration securities C) Federal National Mortgage Association securities D) Treasury notes
D) Treasury notes GNMA, Freddie & Fannie, Farm Credit Admin
Which of the following federal securities acts provides the legal framework for the registration of securities at the state level? A) 1933 Securities Act B) 1934 Securities Exchange Act C) National Securities Markets Improvements Act D) Uniform Securities Act
D) Uniform Securities Act
The gross domestic product (GDP) for a country is best defined as A) all of the goods and services sold domestically B) all of the goods and services exported to other countries for consumption C) the difference between goods produced and services produced D) all of the goods and services produced within the nation
D) all of the goods and services PRODUCED within the nation
Numbers measuring the output of goods and services have been declining for just under 2 years. The economy would be characterized as A) being just under the recessionary measurement threshold B) expanding C) being in an economic trough within the business cycle D) being in a depression
D) being in a depression a trough is the end of of of declining period
An investor holds a 5% bond, callable in 6 years, and maturing in 8 years. The bond's current yield (CY) measures its annual coupon payment relative to A) its value when callable B) its value at maturity C) par value D) its market price
D) its market price CY measures a bond's annual coupon relative to it's market price Coupon / CMV = CY
A registered representative is permitted to work from a home residence conducting normal business activities. Regarding the arrangement, all of the following statements are true EXCEPT A) the location would be subject to a premise visit by and review by a principal of the firm B) approval of the member firm's self-regulatory organization (SRO) is required C) taking customer orders for the purchase and sale of securities would be permitted at this location D) the address and telephone number of this location may not be advertised
D) the address and telephone number of this location may not be advertised *** address & telephone number maybe advertised TRUE A) the location would be subject to a premise visit by and review by a principal of the firm B) approval of the member firm's self-regulatory organization (SRO) is required C) taking customer orders for the purchase and sale of securities would be permitted at this location
Which of the following groupings might indicate the economy is contracting? A) Inventories are at record lows, stock prices are at record highs, and bankruptcies are falling. B) Bond prices are falling, stock prices are rising, and GDP is rising. C) Bond defaults are rising, inventories are rising, and GDP is falling. D) Consumer borrowing is low, property values are high, and stock prices are falling.
During periods of stock market declines, investors may favor bonds because they offer safety of principal and periodic interest payments Rising inventories Decline in GDP Drop in personal income, industrial production, and retail sales. Contractions are recessions & depressions. Deflation (decline in prices), rising unemployment
Regarding delivery for listed option contracts when exercised, which of the following is TRUE? A) Currency and index options are cash settled in U.S. dollars. B) Equity and index options are settled in U.S. dollars. C) Equity options are cash settled in U.S. dollars. D) Currency and equity options are settled in the underlying security.
Foreign currency & index options are cash settled
The federal act that requires registration with the SEC as a face-amount certificate company, unit investment trust company, or management company is A) the Securities Act of 1933 B) the Investment Company Act of 1940 C) the Trust Indenture Act of 1939 D) the Securities Exchange Act of 1934
Investment Company Act of 1940
Local government investment pools (LGIPs) are established by A) states to provide municipalities a place to invest funds short term B) local municipalities to allow states a place to invest funds short term C) states to provide municipalities a place to invest funds long term D) the federal government to provide municipalities a place to invest funds long term
STATES provide municipalities a place to invest funds SHORT term
Which of the following statements describing Section 529 plans is TRUE? A) They can only be opened for children under age 18. B) The fees associated with them are similar from state to state. C) The maximum contribution varies from state to state. D) Most state college savings plans require either the owner or the beneficiary of the plan to be a state resident.
Under federal law, contributions made into Section 529 plans are considered gifts and are not deductible at the federal level. Furthermore, earnings generated each year are tax deferred and, on withdrawal, are tax free at the federal level-if used for college-related expenses. Not subject to income limitations. high contribution limits. Contributions are NOT tax deductible tax-free withdrawal at the federal level for qualified education expenses.
The Achieving a Better Life Experience (ABLE) Act of 2014 enabled the establishment of ABLE accounts for certain individuals. All of the following regarding ABLE accounts are true EXCEPT A) contributions can be made by any person, including the account beneficiary B) eligibility is limited to those where the onset of a significant disability occurred before the age of 26 C) contributions to ABLE accounts are tax deductible D) income earned in an ABLE account is not taxed
contributions to ABLE accounts are NOT tax deductible TRUE income earned in an ABLE account is not taxed
In general, a corporation assumes the least risk when it obtains funds from the sale of A) secured bonds B) zero coupons C) preferred stock D) debentures
preferred stock - equity does not have to be paid back Unlike the other choices, the sale of preferred stock does not entail the assumption of debt and is therefore the least risky. It is always riskier to borrow than it is to raise equity because equity does not have to be paid back.
A customer owns 1,000 shares of stock subject to a 2:3 reverse stock split. The position will now consist of A) fewer shares worth more per share, but the same net position value B) more shares worth less per share, but the same net position value C) more shares worth more per share with an increased net position value D) fewer shares worth less per share with a decreased net position value
reverse stock split: Shares decrease, price per share increases A) fewer shares worth more per share, but the same net position value
