SIE study set

An investor opens an account with BNZ Government Securities, a broker-dealer limiting its transactions exclusively to securities issued by the U.S. government. The account holds $250,000 of Treasury bonds, $250,000 of Treasury notes, and $50,000 in cash. If BNZ's broker-dealer business should fail, the investor would receive Securities Investor Protection Corporation (SIPC) protection in the amount of

$0.

Certain investors are deemed accredited when they have a net worth of

$1 million, not including net equity in the primary residence.

The minimum initial requirement when purchasing 100 shares at $15 in a new account would be

$1,500.

If par value of the bond is $1,000, what is the value of 1 bond point?

$10

Two years ago Joshua Ryan bought 100 XYZ at $60 per share. While he held the stock it paid dividends of $1 the first year and $1.50 the second year. Joshua sold the shares at $40 per share after a 2 for 1 stock split. How much gain or loss did he incur per share for tax purposes?

$10 gain

Two years ago Joshua Ryan bought 100 shares of XYZ at $60 per share. While he held the stock, it paid dividends of $1 the first year and $1.50 the second year. Joshua sold the shares at $40 per share after a 2:1 stock split. How much gain or loss did he incur per share for tax purposes?

$10 gain

To arrive at M3, one would add to M2 which of the following?

$100,000 and larger time deposits and repurchase agreements

The de minims exemption for MSRB rule G-37 would allow municipal financial professionals to make a contribution to a municipal candidate under certain conditions up to what dollar limit per election?

$250

An investor has a cash account with $300,000 in securities and $40,000 in cash. The investor also has a restricted long margin account containing securities with a market value of $220,000 and equity of $60,000. What is the extent of this investor's Securities Investor Protection Corporation (SIPC) coverage?

$400,000

If a married couple have a joint account with a market value of $1 million and a debit balance of $600,000, all of which is in securities, how much coverage would this account have?

$400,000

Which of the following would require the filing of a SAR? Any transaction alone or in aggregate involving at least

$5,000 and appears to serve no business or legal purpose.

A 72-year-old customer has a $30,000 required minimum distribution (RMD) calculated to be taken from an IRA. If the customer is in the 20% income tax bracket and only withdraws $25,000 from the account, how much in taxes and penalties will be owed?

$8,500

ABC has the following recorded on its balance sheet: Current Assets$50,000Fixed Assets$100,000Notes payable$40,000Accounts Payable$25,000 ABC's net worth is

$85,000.

If after a registered representative terminates the firm learns of something that should have been reported to the Central Registration Depository, how long does the firm have to make an amendment if that information would cause statutory disqualification?

10 days

Your client bought 100 ABC at $50 per share and later received a 10% stock dividend. What is her new cost basis per share how many shares does he now have?

110 share at $45.45

According to the U.S. Commerce Department, the economy is in a depression when a decline in real output of goods and services lasts

18 months or more (6 quarters).

A registered representative was guilty of an undetected minor rule violation during the last year of employment at a broker-dealer firm. The representative has now decided to leave the industry. For how long might the representative still be subject to fines or other sanctions by Financial Industry Regulatory Authority (FINRA) if the violation is belatedly detected?

2 years

When a registered person leaves the securities business, Financial Industry Regulatory Authority (FINRA) retains jurisdiction over that person for how long?

2 years

For a new issue that qualifies for listing on an exchange, a prospectus must be provided to all purchasers for how many days after the effective date?

25 days

To ensure that the information obtained from each new customer is accurate, firms must furnish to each customer a copy of the account record within how many days of opening the account?

30

Firms must file a suspicious activity report (SAR) within how many days of becoming aware of a suspicious transaction?

30 days and are prohibited from notifying the customer involved that a report has been filed.

An investor owns 200 shares of MNO common stock. The company's management has proposed a 2:1 stock split. If the price of the stock at the time of the split is $50, what would the investor's adjusted position be?

400 shares at $25

Your Client Dana McCann just purchased a 20-year City of Salt Lake School district bond for $800. If the bond has a stated rate of 4%, the current yield (CY) is

5%.

Your client, Dana McCann, just purchased a 20-year City of Salt Lake School District bond for $800. The bond has a stated rate of 4%. The current yield is

5%.

A customer purchased 1 MNO Jan 50 call at 2. What is the breakeven point for both the purchaser and the seller?

52

How long can a good 'til canceled order remain in force without being reconfirmed by the customer?

6 months

According to the U.S. Commerce Department, the economy is in a recession when a decline in real output of goods and services lasts

6 months or more.

Which type of account fee structure is typically better for the moderate to active trader?

A fee-based account

Which of the following is true regarding accounts trading on margin?

A fiduciary account may only trade on margin if it is specifically permitted in the trust or custodial agreement.

Which of the following must be a member of the Securities Investor Protection Corporation (SIPC)?

A firm that deals only in over-the-counter (OTC) and exchange-listed stocks

Your client, Chue Xiong, is a very wealthy, sophisticated investor and has many years of experience investing in aggressive strategies. He is looking for very high rates of return on a very large investment and is willing to have the money tied up for a few years. Which of the following would be suitable for him?

A hedge fund

A balloon maturity for an issuer's debt securities is most accurately described as

A later final maturity within a serial issue of bonds that contains a disproportionately large percentage of the principal amount of the original issue.

Which of the following need not be included in the annual reports a mutual fund provides to its shareholders?

A list of the most poorly performing portfolio securities

Your client Nate McCann has been investing for several years and is comfortable with moderate risk as long as he can get in and out of the investment easily. His portfolio is currently mostly in stock and he would like to diversify into some other asset classes and thinks real estate would help with that. Which of the following would be most suitable for you to recommend for him?

A listed real estate investment trust (REIT)

Your client, Dana McRae, has no investment experience. She just retired and won't be in a high tax bracket. She also is concerned about volatility of her investments. She is more concerned about preserving her principal than getting a high rate of return. Which of the follow would you recommend?

A money market mutual fund investing in short-term corporate debt

A penny stock is best described as

An unlisted stock valued at less than $5 a share

Which of the following expressions describes the current yield of a bond?

Annual interest (coupon) payment divided by current market price

Which of the following securities can never be purchased on margin?

Any mutual funds

Contributions to an IRA can be made up to which of the following dates?

April 15 of the year following the year the contribution is for

Treasury bills

Are issued at a discount without a stated interest rate.

Transactions where the penny stock rules are applicable would be those that

Are solicited.

The following records must be maintained by a broker-dealer: partnership records, articles of incorporation, records of the board of directors (BOD), and Form BD and amendments to the form. How long must they be maintained by the firm?

As long as the firm is in business

An investor has been putting aside funds for retirement in a nonqualified variable annuity for over five years. She is now age 66 and takes a lump-sum distribution. How are the earnings taxed?

As ordinary income

At expiration, for those who trade call options, which of the following is true?

Call buyers want the contract to be in the money.

An investor would expect which type of preferred stock to pay the highest stated dividend rate?

Callable

Which of the following preferred stocks allows the issuer to pay the shareholders par and cease dividend payments following a stated period?

Callable

All else being equal, which of the following preferred would pay the highest dividend?

Callable preferred

Which of the following would be unlawful regarding use of a mutual fund prospectus?

Calling an investor's attention to a section that may be interesting

Your broker-dealer executes trades for other broker-dealers and after execution settles those transactions for them. Your firm would be classified as which of the following?

Carrying firm

Which of the following sets of FINRA rules focuses on disputes in the industry and with customers who have filed a predispute agreement?

Code of Arbitration

Accusations of Financial Industry Regulatory Authority (FINRA) Conduct Rule violations will heard and handled under the

Code of Procedure.

Which of the following sets of FINRA rules focuses on how member violations will be handled?

Code of Procedures

Which type of securities are most susceptible to business risk?

Common stock

Which of the following sets of FINRA rules focuses on fair dealing with the public?

Conduct Rules

Reports of rising inventories generally occur during which period of the business cycle?

Contraction

Which of the following is not a function of the Office of Foreign Assets Control (OFAC)?

Control the assets of U.S. broker-dealers in foreign countries

Which of the following features of preferred stock allows the holder to reduce the risk of inflation?

Convertible

Which of the following a classifications of communications with the public?

Correspondence

Which of the following is a classification of communications with the public?

Correspondence

If a bond is trading at a discount, which of the following rates is correctly ranked from low to high?

Coupon rate, current yield, yield to maturity, yield to call

SIPC coverage is best described by which of the following?

Covers up to $500,000 in cash and securities but no more than $250,000 in cash

Which of the following must be signed by a customer wanting to open a margin account?

Credit and hypothecation agreements

ABC Corporation raised capital through an offering of equity securities. Which component of the balance sheet has changed as a result?

Current assets

What is the formula for calculating working capital?

Current assets - current liabilities

Of the statements listed, which best characterizes the potential impact of factors occurring outside our domestic economy and markets?

Factors outside the United States can have immediate and prolonged impact on our securities and trade markets and thus our domestic economy.

As interest rates rise, prices of preferred stock will

Fall

Which of the following organizations was created to protect investors financially from a bank failure?

Federal Deposit Insurance Corporation (FDIC)

Which of the following organizations engaging in open-market operations acts as agent for the U.S. Treasury Department?

Federal Reserve Board (FRB)

Each self-regulatory organization (SRO) functions under the Securities and Exchange Commission's (SEC's) oversight and is accountable to the commission for enforcing federal securities laws. While the Municipal Securities Rule Board (MSRB) regulates all matters related to the underwriting and trading of state and municipal securities, it does not have enforcement powers of its rules. Which of the following does the MSRB rely on for enforcement of these rules?

Financial Industry Regulatory Authority (FINRA)

Which of the following is a self-regulatory organization (SRO)?

Financial Industry Regulatory Authority (FINRA)

Which of the following organizations looks to promote self-discipline among members and investigate and resolve grievances between the public and members and between members?

Financial Industry Regulatory Authority (FINRA)

Which regulatory body oversees trading in the over-the-counter (OTC) market?

Financial Industry Regulatory Authority (FINRA)

While the Municipal Securities Rule Board (MSRB) writes the rules and regulations regarding underwriting and trading for municipal securities, it does not enforce those rules. Who does?

Financial Industry Regulatory Authority (FINRA)

If an arbitration agreement has not been signed, under which two of the following circumstances would a dispute between a Financial Industry Regulatory Authority (FINRA) member firm and a retail customer go to arbitration? I. The dispute cannot otherwise be resolved to the satisfaction of both parties. II. The customer requests that the dispute go to arbitration. III. The amount under dispute is less than $50,000. IV. The FINRA director of arbitration so rules.

I and II

Which of the following records must be kept for six years? I. Customer statements II. Customer new account forms III. Customer confirmations IV. Customer order tickets

I and II

Common stockholders of a publicly traded corporation have which of the following rights and privileges? I. Residual claim to assets at dissolution II. Right to a vote for stock dividends to be paid III. Right to receive an audited financial report on an annual basis IV. Claim against dividends in default

I and III

In general, the first industry form that a new applicant for registration sees is the Form U-4. This lengthy form requests information about the applicant's I. name including any aliases. II. residency history back through the previous two years. III. 10-year employment history. IV. convictions, but not arrests, dealing with any securities related violations.

I and III

Mr. Davis bought 100 QRS at $60 per share. The company declared a 3:2 split. What is Mr. Davis' new cost basis and how many shares does he have now? I. cost basis of $40 per share II. cost basis of $90 per share III. a total of 150 shares VI. a total of 67 shares

I and III

The bid price represents I. the price the broker-dealer is willing to pay when buying a security. II. the price the customer will pay when buying a security. III. the price a customer will receive when selling a security. IV. the price the broker-dealer is will receive when buying.

I and III

The bid price represents I. the price the broker-dealer is willing to pay when buying a security. II. the price the customer will pay when buying a security. III. the price a customer will receive when selling a security. IV. the price the broker-dealer will receive when buying a security.

I and III

A mutual fund has breakpoints at $25,000, $50,000, $100,000, and $250,000. Which of the following transactions might be considered a breakpoint sale? I. The client purchases $48,000 worth of shares II. The client redeems $24,000 worth of shares III. The client purchases $252,000 worth of shares IV. The client purchases $96,000 worth of shares

I and IV

As they apply to knowing your customer and making recommendations which of the following are true statements? I. The term investment strategy applies to recommendations to buy and sell only. II. The term investment strategy applies to recommendations to buy, hold and sell. III. Only financial considerations such as income and net worth should be considered when making recommendations. IV. Nonfinancial considerations such as marital status and age should be considered as well as financial considerations when making recommendations.

II and IV

Which of the following records must be kept for only three years? I. Customer statements II. Customer new account forms III. Customer confirmations IV. Customer order tickets

III and IV

Nate McCann is closing on a house tomorrow and wants to sell some securities to meet closing cost. He wants to know how soon he could get the money and what he needs to do. You could tell him which of these?

If he does the trade today for cash settlement he could settle today.

Which of the following items are required to be kept more than three years? I. U-4 forms II. U-5 forms III. Customer order tickets IV. Customer confirmations

I only

Which of the following items may be required to be kept more than three years? I. U-4 forms II. U-5 forms III. Customer order tickets IV. Customer Confirmations

I only

An investor has opened an individual brokerage account for use in a small business and has given a business partner a power of attorney (POA) over the account. Which of the following persons may have access to the account for trading purposes? I. The attorney who administers to the business's legal needs II. The investor's partner who was given the POA III. The investor who opened the account IV. A secretary at the business, but only in an emergency

II and III

Which of the following would cause a mutual fund's net asset value (NAV) per share to fall? I. The fund purchases securities for the portfolio. II. The fund pays a dividend to shareholders. III. The market value of the portfolio declines. IV. A large number of shares are redeemed.

II and III

Which of the following best describes the trade execution of American depository receipts (ADRs)?

Trades are executed domestically in U.S. dollars.

Financial Industry Regulatory Authority (FINRA) normally requires that member firms provide at least how many names as emergency contacts as a part of their business continuity plan (BCP)?

Two

A strong U.S. dollar leads to more

U.S. imports and a balance of payments deficit.

Which of the following sets of FINRA rules focuses on broker-dealers doing business with other broker-dealers?

Uniform Practice Code

Regarding purchases on margin, which of the following is true?

Warrants can be purchased on margin, but rights cannot.

A customer has multiple accounts at a bank that also owns accounts at a broker-dealer. All of the following accounts would be covered by FDIC insurance up to the specified limits except

a checking account in a money market mutual fund.

All FINRA firms must have business continuity plans. Those plans must include all of the following except

a designated principal and member of senior management to conduct a quarterly review and update of the plan.

All of the following people working for a registered broker-dealer would be required to be fingerprinted except

a driver assigned to high-net-worth clients.

Underwriters acting as principals and committing to purchase any unsold shares for the syndicate account would best be described as being engaged in

a firm commitment.

An investor owning 400 shares of stock receives notice that the stock will be split. When the split is complete, the customer owns 1,200 shares of stock. The split must have been

a forward, even split.

SKRAM Corporation is appealing directly to the shareholders of IDNIC Corporation to acquire shares of IDNIC stock. This appeal is best described as

a hostile takeover with IDNIC the target company.

All of the following actions would cause the NAV per share of the mutual fund to increase except

a large number of investors making deposits in the fund.

Borrowing money to buy securities is prohibited in all of the following accounts except

a margin account.

A broker-dealer that accepts the risk of holding a particular security in its account to facilitate trading and provide liquidity in that security is best described as

a market maker.

Having been told that a firm incorporates proprietary trading in its business model buying and selling securities into and out of its own inventory you would know that it is

a market maker.

Broker-dealers must comply with Securities and Exchange Commission (SEC) rules and regulations when conducting business. A broker-dealer that does not comply may be subject to all of the following except

a prison sentence for principals of the firm ranging from two to five years.

A toy company is experiencing sudden strong demand for a game. Purchasing this company's stock may prove profitable in the short run. This company's stock might best be termed as

a special situation.

An investor receives an unsolicited email about a startup company trading for pennies. The email notes that a patent for a new technology is forthcoming and investors need to get in now. The next day the investor sees lots of information on the same stock in an internet chat room. The hype seems to be similar to what was received in the email blast. Being cautious, the investor senses that this could be

an effort to spread market rumors in an attempt to manipulate the stock.

If the portfolio of a variable annuity separate account is directly and actively managed by the insurance company, the separate account must be registered as

an open-end management investment company.

A fiduciary would be best described as

any person legally appointed and authorized to represent another person, act on that person's behalf, and make whatever decisions are necessary to the prudent management of the account.

Hedge funds

are not regulated under the Investment Company Act and no Securities and Exchange Commission (SEC) registration is required.

Each of the following are likely to be found on a trade confirmation except

bond credit rating.

An investor sells (writes) put options on MAS stock. This investor is

bullish on MAS the stock.

A customer who is bullish on ABC would most likely

buy ABC long.

An investor holding a 4.5% callable bond has it called away by the issuer when interest rates fall to 3.5%. This is an example of

call risk, which can lead to reinvestment risk.

Of the following, reinvestment risk is most closely associated with

call risk.

All of the following are exempt from the do not call provisions of the Telephone Consumer Protection Act except

calls made to make the customer aware of new products that are available to the customer.

A clearing corporation agent or depository for securities transactions

can be a commercial bank.

The risk when investing, where one has the potential to lose all or part of the investment due to circumstances that are unrelated to the issuer's financial strength or well-being, is known as

capital risk.

Once a dividend is initially declared by the board of directors (BODs), any future dividend payments

carry no guarantee of payment in any amount.

The best characterization of how economists view the money supply is

cash, loans, different forms of credit, and other liquid instruments.

Your customer is a limited partner in a real estate partnership. This partner has the right to do all of the following except

choose which properties the partnership should buy or sell.

Examples of investments in assets that would be considered illiquid would be all of the following except

common stock.

To keep up with recent developments in the industry regarding regulatory changes and other requirements imposed by Financial Industry Regulatory Authority (FINRA), as well as needs identified by the broker-dealer firm, registered persons must fulfill the firm's

continuing education (CE) requirement.

All of the following are acceptable choices to function as a depository and intermediary for transactions between buyers and sellers of securities except

credit unions.

Industries that tend to be highly sensitive to inflation, deflation and the ups and downs of business trends would best be described as

cyclical.

Registered representatives who have not completed their regulatory element training in the prescribed time frame will have their registrations

deactivated by Financial Industry Regulatory Authority (FINRA) until the requirements of the program are met.

List the dates associated with dividend payment in their proper order.

declaration date, ex-dividend date, record date, pay date

The U.S. balance of payments deficit would decrease in all of the following scenarios except

decrease in purchases of U.S. securities by foreign investors.

U.S. consumers are increasing their imports of foreign-made goods. On this data alone, one might expect gross domestic product (GDP) to

decrease.

Those industries that are least affected by normal business cycles are

defensive industries.

The allowable deduction for equipment used in an oil and gas direct participation program is taken as

depreciation over the life of the program.

When discussing investing with your client all of the following would be considered recommendations except

discussing the pros and cons of traditional IRAs and Roth IRAs.

When discussing investing with your client, all of the following would be considered recommendations except

discussing the pros and cons of traditional IRAs and Roth IRAs.

Earned income would include all the following except

dividends earned on mutual funds.

Downturns in the business cycle or economic contractions are characterized by all of the following except

falling inventories.

Suspicious activity reports (SARs) are

filed to the Financial Crimes Enforcement Network (FinCEN) as required by the USA PATRIOT Act.

A company that is extensively overleveraged using debt financing whenever available would be exposing its investors to

financial risk.

Records relating to a Currency Transaction Report (CTR) must be retained for

five years.

A term indicating that a security is tradable and all of the requirements of the contract to sell the security have been met and the security is ready to be transferred is

good delivery.

During periods of economic decline and contraction, one would expect

gross domestic product (GDP) to decrease.

The country's annual economic output of all of the goods and services produced within the nation, is known as

gross domestic product.

The measure of a nation's economic output is

gross domestic product.

A measure of a nation's citizen's economic activity is

gross national product.

Should a registered representative enter into a private securities transaction that would entail earning compensation, the employing member will

have the opportunity to approve or disapprove of the associated person's participation

A company very concerned about liquidity would want

high current ratio.

Stagnation in the economy can be associated with

high unemployment.

Which of the following are characteristics of an economic downturn?

higher consumer debt

When a bond is purchased at a discount the current yield will be

higher than the coupon rate.

Margaret, a registered representative with Saguaro Securities, should gather all of the following information about her new customer to meet KYC rules except

if the customer graduated from college.

An associated person of a Financial Industry Regulatory Authority (FINRA) member firm has been found guilty of forging a customer's signature on a document relating to a securities transaction. Under the Code of Procedure, FINRA could impose any of the following sanctions except

imprisonment for a specified period.

With CDT stock at 42, a September 40 call trading at 3 is

in the money by 2 points.

An accredited investor is one who meets

income or net worth criteria with substantial investment experience.

The federal government could use which of the following to stimulate the economy?

increase government spending

When the Federal Open Market Committee (FOMC) directs that Treasury securities be purchased in the open market, this

increases the supply of money.

An expansion in the business cycle would be characterized by

increasing consumer demand for goods and services, increasing industrial production, and rising stock markets and property values.

A preliminary prospectus is used to solicit

indications of interest before the effective date.

The prime rate is set by

individual banks.

The effect of continually rising retail prices on the investment returns of one's portfolio is best described as

inflation risk.

Rising employment due to an increase in demand for goods and services would be associated with periods of

inflation.

Under the Telephone Consumer Protection Act of 1991 (TCPA), administered by the Federal Communications Commission (FCC), a telephone solicitation is defined as a telephone call

initiated for the purpose of encouraging the purchase of, or investment in property, goods, or services.

The Securities and Exchange Commission (SEC) requires that notice of corporate actions be given for all of the following except

interest payments on the issuer's debt instruments.

Holding a callable bond with call protection is least impactful for the investor when

interest rates are rising.

When the supply for money exceeds the demand,

interest rates fall, making consumer borrowing easier.

When the money supply in the economy increases,

interest rates go down, hence borrowing and spending for consumers is easier.

All of the following are true of negotiable commercial paper except

it is typically issued by banks

All of the following are true regarding the term market except

it is unique to the U.S. securities industry.

All of the following are true of a revocable living trust except

its primary purpose is to avoid estate taxes for the grantor.

An August 15 call is written at 4. The call expires without being exercised by the owner. The writer of the call

keeps the $400 received when the call was written.

All the following are exempt from the Securities Act of 1933 except

limited partnership.

The risk that an investor might not be able to sell an investment quickly and at a fair market price is known as

liquidity or marketability risk.

When a bond is purchased at a premium, the current yield will be

lower than the coupon rate.

To prevent inflation by tightening the availability of credit, the Federal Reserve Board (FRB) would do any of the following except

lower the prime rate.

Which of the following is true regarding the primary market?

Issuer transactions occur in the primary market.

Which of the following best describes the size of a quote?

It tells the number of shares the broker-dealer is willing to buy or sell at that price.

A customer enters several orders in complex securities without concern on the returns or losses. This suspicious activity is most likely the result of which stage of money laundering?

Layering

Passive investments do not fall under the definition of an outside business activity (OBA). Which of the following investments would be considered a passive investment?

Limited partnership unit

All of the following could be characterized as benefits to owning common stock except

Low dissolution priority

A bank is likely to do which of the following when the Federal Reserve Board (FRB) eases the money supply?

Lower its prime rate

Currency held by the public, including checking accounts and time deposits less than $100,000, and money market mutual funds would best be described by economists as

M2.

Which of the following cannot enforce their own rules?

MSRB

Which of the following types of investments is least likely to be a major investment strategy for hedge funds?

Money market instruments

Which if the following may not be purchased on margin but can be used as collateral for a margin loan after being held for 30 days?

Mutual funds

A 65-year-old investor is looking to earn additional income in her securities portfolio without much risk. Which of the following would likely be the least acceptable trading strategy for this investor?

Naked call writing

Which of the following is a leading indicator?

New orders for consumer goods

A municipal securities dealer has just made a contribution to the mayor's reelection campaign. How long must the firm wait before it can enter competitive bids on proposed bond issues by the city?

No waiting period

Which of the following are not requirements for corporate actions?

Notify the customer prior to the payment of the semiannual interest payment.

An investor has a long position in OMQ stock. After selling the stock at a loss, the investor could purchase which of the following and not violate the wash sale rule?

OMQ put options

A corporation is issuing a bond with an interest rate below that which is commonly being offered for this type of bond. To improve the bond's marketability without reducing the capital to be obtained, which of the following actions might the corporation take?

Offer a warrant on the stock with each bond

Deductions for depletion would most likely apply to which of the following direct participation programs (DPP)?

Oil and gas income program

A married couple have two children, both still minors. Which of the following UTMA accounts could be opened?

Parent as custodian for one of the children

Money laundering activities are most easily caught during which phase?

Placement

Which of the following is the first stage in the money laundering process?

Placement

An investor chooses to have a portfolio made up of domestically listed U.S. securities only. In so doing, this investor is primarily avoiding which of the following two risks?

Political and currency

Just as markets can be influenced by many factors, so can the market price of a single company's stock. While all of the following could impact a company's stock price to some extent, which would be the least likely to have a direct and immediate impact?

Political elections

Which of the following interest rates do large U.S. money center commercial banks charge their most creditworthy corporate borrowers for unsecured loans?

Prime rate

Which of the following best describes the calculation for gains or losses for tax purposes?

Proceeds minus cost basis

The potential that inflation will devalue the fixed dividend income payments received by preferred shareholders is known as

Purchasing power risk.

In an effort to safeguard customer information which regulation specifies securing desktop and laptop computers and encrypting email?

Regulation S-P

Securities acquired through some means other than a registered public offering are known as

Restricted

For municipal debt issues, which of the following is true?

Revenue bonds are self-supporting, while general obligation (GO) bonds are backed by the municipality's good faith and credit.

Which of the following is a benchmark for small cap stocks?

Russell 2000® Index

Which of the following regarding income is true?

Salary or bonuses are earned income; interest and dividends are investment income.

All of the following are part of Financial Industry Regulatory Authority (FINRA)'s manual regarding employee conduct and reportable events except

Sales Practice Code.

All of the following are self-regulatory organizations (SROs) except

Securities and Exchange Commission (SEC).

Which of the following transactions, if any, must be done in a margin account?

Sell 100 ABC to open

Which of the following transactions if any, cannot be done in a cash account?

Sell 100 ABC to open.

Angela Quinn owns 100 shares of LMN with a cost basis of $60. LMN has a 2:1 split and she sells 100 shares the next year for $40 per share. Quinn has which of the following tax consequences?

She has a $10 gain per share on the 100 shares sold.

Which position has the greatest potential risk if the price of the underlying stock goes up?

Short call

How long do blotters, general ledgers, and stock records need to be maintained?

Six years

How long do the following records need to be maintained? Blotters General ledgers Stock records

Six years

For restricted stock (unregistered) held by a nonaffiliated, which of the following applies?

Six-month holding period, with sales allowed freely thereafter

If large money center commercial banks begin to lower their prime rates, which of the following is most likely to occur?

Smaller banks will lower lending rates for creditworthy corporate customers as well.

Financial Industry Regulatory Authority (FINRA) is concerned about potential conflicts of interest in providing incentives or rewards for selling a sponsor's product. Which of the following situations regarding a product sponsors product training or education for outside RRs would FINRA disallow?

Spouses are included in the invitation with travel expenses paid for.

When the economy shows high unemployment and is failing to expand as measured by a lack of consumer demand and business activity, but prices for goods and services are still rising, this could be described as what?

Stagflation

Match the following statement to the best expression: Government should allow market forces to determine prices of all goods and that the federal government should reduce government spending as well as taxes.

Supply-side Economic Theory

Which of the following securities is exempt from the Regulation T margin requirements but still subject to an initial margin requirement as determined by the broker-dealer?

T-notes

Which of the following would you expect to have the lowest expense ratio?

The ABC Corporate Bond Fund

Money available to lend to corporations and consumers is impacted most in the United States by the policies of which of the following?

The Federal Open Market Committee (FOMC)

Regarding the issuance of new securities to the public, which of the following is true?

The Securities Act of 1933 provides criminal penalties for fraud.

A corporation has a shareholders' meeting coming up wherein several controversial proposals will be made. A number of persons will be actively soliciting proxies, and the corporation plans to send out up-to-date material on the proposals to shareholders to permit them to make informed decisions. Which of the following must review this material before it is sent out?

The Securities and Exchange Commission (SEC)

What is the name for the legal framework of state laws for broker-dealers, registered representatives, investment advisors and investment advisor representatives?

The Uniform Securities Act

Which of the following are true of both qualified plans and nonqualified plans?

The accounts grow tax deferred.

Which of the following is considered a benefit for broker-dealers offering margin accounts to their customers?

The additional income generated from the payment of margin interest

When shareholders owning participating preferred shares receive the additional participating amount, this was determined by

The board of directors (BOD).

Which of the following statements regarding $1,000 par value 6.5% bond trading offered at 110 is true?

The bond's current yield equals $65 ÷ $1,100 or 5.9%.

A customer of a Financial Industry Regulatory Authority (FINRA) member firm buys securities on margin. The customer is expected to pay a rate of interest on the margin loan based on which of the following?

The broker call loan rate

Which of the following is a nonfinancial investment consideration?

The customer's place of employment and status

A representative of a dealer who solicits municipal securities business from an official of an issuer contributes $275 to the official's city council reelection campaign during the general election. Under what circumstance would the contribution invoke a ban on the dealer's municipal securities business with that issuer?

The dealer seeks to engage in a negotiated underwriting with the issuer.

In which of the following circumstances would a firm be denied Financial Industry Regulatory Authority (FINRA) membership?

The firm has been expelled or suspended by the foreign equivalent of an self-regulatory organization (SRO).

In a limited partnership, which of the following best describes who is responsible for tax consequences of the business?

The investors

Under whose social security number is the custodial account established?

The minor's

Which of the following best describes how a market order to buy would fill if placed when the market price of the stock was at 40?

The next available price

Which of the following best describes how a market order to sell would fill if placed when the price of the stock is a 40?

The next available price

Which of the following best describes how a buy stop @ 39 would fill?

The next available price after the market price rises to 39

Which of the following best describes how a buy stop at 39 would fill?

The next available price after the market price rises to 39

John Bourne places a buy limit order at 42 when the market price of the stock is at 45. Which of the following best describes how the order would fill?

The order can only be filled at a price of 42 or lower.

A GTC order is left unexecuted at the end of the trading day on the last business day of April. Which of the following is true?

The order will be automatically canceled.

Which of the following are true of nonqualified plans but not true of qualified plans?

The plan may discriminate

The MSRB has jurisdiction for making rules in all of the following cases except

municipalities selling their own securities.

the MSRB has jurisdiction for making rules in all of the following cases except

municipalities selling their own securities.

Those persons employed by a Financial Industry Regulatory Authority (FINRA)-registered broker-dealer to do nothing other than provide training for its associated persons

must be registered as a principal.

A corporation increases capitalization by selling shares of stock which can either come from a new issue or previously authorized but unissued shares. Total stock outstanding must

never exceed the number of shares authorized.

All investors and investments are different. Recognizing this, it is true that

no investment should be deemed suitable for every investor.

A member firm believes that financial exploitation of a senior customer is being attempted. While not required to, but allowed to, they put a temporary hold on disbursements of cash and securities from the account. The temporary hold should be

no longer than 15 business days unless a state regulator or agency of jurisdiction extends it longer.

The coupon on a bond can be described as its

nominal yield.

Risks that are unique to a specific industry, business type, or investment type are known as

nonsystematic risks.

While an associated person may work for an entity other than the member firm, the employing member firm's permission is

not required.

The anti-money laundering compliance officer should do all of the following except

notify customers immediately when a SAR is being filed.

An AML compliance officer should do all of the following except

notify customers immediately when an SAR is being filed.

Section 529 plans are considered municipal fund securities. They must therefore be sold by

offering circular.

When securities are bought and sold, ownership changes hands between the buyer and the seller

on the settlement date of the transaction.

A stock currently has a market value of $75 per share. If a put option on the stock has an exercise price of $60, the put option is

out of the money.

A mutual fund has been in existence for 25 years. The prospectus must disclose the fund's performance

over the last 1, 5, and 10 years.

How an account is registered determines

ownership and control of the investments in the account.

All of the following would be advantages of a limited partner in a DPP except

participate in the management of the business.

A shareholder owns preferred shares that allow for the possibility of receiving more than the stated dividend. This type of preferred share would be known as

participating.

Noncash compensation exceeding the $100 annual limit to another member firm's employee is

permitted if occasional.

All the following are lagging indicators except

personal income.

All the following are leading indicators except

personal income.

Those who look to hide money from government agencies and law enforcement to avoid the payment of taxes or to fund criminal enterprises often look to launder money in the following order:

placement, layering, integration.

Industry rules regarding political contributions intended to preserve investor confidence and market integrity apply to contributions made to

political parties, candidates for office, and elected officials.

Financial Industry Regulatory Authority (FINRA) rules regarding outside business activity (OBA) require that

prior written notice to the employing firm be provided.

Regarding registered representatives working from their residence, commonly known as their home office, all of the following would be true except

prospects would not be allowed to visit and be on the premises at this location.

Associated persons who wish to enter into a private securities transaction for which they will receive no compensation must

provide prior written notice to their employer.

An investor has just received stock rights in the mail allowing the purchase of 250 shares of a stock offering at a discount. With these rights, the investor may take any of the following actions except

purchase 125 shares at double the discount

An investor owns a bond purchased several years ago yielding 3%, which at the time was considered a fair return. However, these fixed 3% interest payments have not kept up with the inflation rate. This situation presents the investor with

purchasing power risk.

Obtaining the financial status of the customer, and whether or not they meet income and net worth criteria, could be required for all of the following except

real estate investment trusts (REITs).

A REIT can avoid being taxed as a corporation would by

receiving 75% or more of its income from real estate and distributing 90% or more of its net investment income to its shareholders.

A registered securities broker-dealer that does not comply with Financial Industry Regulatory Authority (FINRA) and Securities and Exchange Commission (SEC) rules and regulations is subject to each of the following sanctions except

reductions in Securities Investor Protection Corporation (SIPC) coverage.

The Securities Act of 1933 protects investors who buy new issues by doing all of the following except

requiring the licensing of persons affiliated with broker-dealers.

All of the following are benefits of using a prime broker except

research.

If it finds that the registration statement needs revision, expansion, or to have corrections made, the Securities and Exchange Commission (SEC) may suspend the review of the new issue and issue a deficiency letter. Once the issuer submits a corrected registration statement, the 20-day cooling-off period

resumes where it had left off.

Jackson Raleigh, a registered representative in Memphis, TN, has a client who is a pension fund manager for the Tiger Pension Fund. Raleigh creates several flyers of informational literature about the funds available in the Tiger Pension Fund and emails them to the fund manager so that the fund manager can prints copies of the flyers and make them available to the participants in the pension fund. FINRA would classify these flyers as

retail communications.

To contract the overall economy, the Federal Reserve Board (FRB), acting as agent for the U.S. Treasury department, will

sell securities via open-market operations, pushing interest rates up.

Under the Uniform Transfers to Minors Act (UTMA) a custodian has control over the account and can do each of the following except

sell short and write uncovered call options.

The owner of a listed put equity option has the right to

sell the stock at the strike price.

The requirement for a supplemental prospectus to be filed before each sale is applicable to

shelf registration sales.

The rate at which banks lend to broker-dealers for the purpose of lending money for margin loans is typically

slightly above (a percentage point or so) other short-term lending rates.

Tighter credit will

slow economic expansion, preventing inflation.

A registered representative suggests a trade to a customer which the customer agrees is suitable given their investment objectives. The order is entered. This transaction is

solicited and the order ticket must be marked solicited.

Several months of slow economic growth and rising unemployment have characterized the economy. Market analysts would describe this as a period of

stagnation.

A customer who tries to disguise deposits of more than $10,000 in currency by making multiple smaller deposits in currency is guilty of

structuring.

For tax purposes, investment income is

taxed at either ordinary income tax or capital gains tax rates.

What does the mortality guarantee of a variable annuity insure?

that payments will continue for the life of the annuitant

Regulation T, the initial margin requirement, is set by

the Federal Reserve Board (FRB).

All of the following self-regulatory organizations (SROs) function under the Securities and Exchange Commission's (SEC's) oversight except

the Federal Savings and Loan Insurance Corporation (FSLIC).

Broker-dealers who transact securities business with other broker-dealers or customers must be registered with

the Securities and Exchange Commission (SEC).

When an investor receives a final prospectus, the expectation should be that one of the following would not be found. Which is it?

the Securities and Exchange Commission's (SEC's) verification of accuracy

A market in which exchange-listed securities are traded in the over-the-counter (OTC) market would best be described as

the Third Market.

Regarding the registration statement filed with the Securities and Exchange Commission (SEC) when new securities are to be issued, all of the following are true except

the accuracy and adequacy of the registration documents is the responsibility of the underwriters.

When making unsolicited cold calls to prospects, a registered representative must disclose all of the following to the individual called except

the address of any securities issuer mentioned during the call.

The flow of money between the United States and other countries is known as

the balance of payments.

The largest component of the U.S. balance of payments is

the balance of trade.

A registered representative has a customer buying securities, but rather than paying in full, the customer wants to borrow some of the money needed for the purchase from the broker-dealer. It is explained to the customer that in order to borrow the money, there will be interest payable based on

the broker call loan rate.

A customer of a broker-dealer purchases 100 shares of XYZ stock at $50 per share on Monday. Later that week, a confirmation arrives electronically indicating that the total cost of the transaction was $5,000. The client is puzzled that there is no additional charge for commission. The most likely reason for that is

the broker-dealer acted as a principal in the trade.

With a discretionary account

the customer may still enter orders

An investor purchases a T-bill for $9,925 that will mature at $10,000. The difference between the $9,925 paid and the $10,000 that will be received is

the discount to par and will be considered interest received at maturity.

When the Securities and Exchange Commission (SEC) clears securities for sale to the investing public, this is

the effective date.

A customer has a significant amount of money in bank deposit accounts: $225,000 in a savings account titled in the customer's name; $240,000 in a checking account titled jointly with a spouse; and $100,000 in an account where the customer is custodian for a grandchild. Should that bank fail, the Federal Deposit Insurance Corporation (FDIC) insurance would cover

the entire $565,000.

A barometer of short-term interest rates and one that is therefore considered the most volatile interest rate in the U.S. economy is

the federal funds rate.

The interest rate negotiated for an uncollateralized overnight loan between two money center banks is known as

the federal funds rate.

Upon application for registration as a registered representative to ensure that any criminal past might be discovered by the employing firm, the Securities and Exchange Commission (SEC) requires

the filing of a fingerprint card with the U.S. Attorney General.

All of the following are provisions of FINRA's rules for holding mail for customers except

the firm must hold the customer's mail for up to three months if it receives notice in writing that it is for security reasons.

A customer writes (sells) a call. This customer will realize the maximum gain if

the option contract expires without being exercised.

Hypothecation is

the pledging of customer securities as collateral for margin loans.

The ask price represents

the price the broker-dealer is willing to sell for.

Failure to complete the regulatory element continuing education (CE) requirement within the allotted time period will result in

the registration being deactivated until the requirements are met.

Anyone making call cold calls for the firm must disclose all of the following information except

the rep's address or phone number.

An investor holds a November 35 call that was purchased on March 3. The investor, if wanting to exercise the contract, would need to do so no later than

the third Friday of November.

Required minimum distributions (RMDs) for IRAs must begin by

the year after the participant turns 72.

An investor asks for a copy of mutual funds Statement of Additional Information (SAI). The request must be satisfied within

three business days, free of charge.

Discretion given to a registered representative to make transactions applies to all of the following except

timing and price only.

All of the following are rights of limited partners in a DPP except

to make day-to-day business decisions.

Isaac James has some call options in his account that he would like to exercise. He wants to know when the resulting purchase of the stock would settle. You would tell him

trade date plus 2 business days.

Your client, Alice Tate, lives in Irvine, California, and wishes to purchase some bonds that would be both state- and federal-tax free for her. You recommend some school district bonds from Costa Mesa. She then asks when she would need to pay for the bonds. You should tell her

trade date plus 2 business days.

Josie Reese, one of your clients with an option account, calls asking you to remind her when she would settle if she bought a call today. You would tell her

trade date plus one business day.

Regular way settlement for common stock is

trade date plus two business days.

Exchange-traded funds (ETFs) offer several attractive advantages over mutual funds. All of the following would be advantages that ETFs typically have over mutual funds except

trading costs for active traders.

A customer called his registered representative to place a trade to buy 100 shares of ABC. The customer wants to put a limit on the order, but is unsure what would be an appropriate price. At the suggestion of the registered representative, the customer enters the order with a limit of $30. This trade was

unsolicited.

The primary use for a revocable living trust is to

use as a substitute for a will.

The business cycle includes all of the following classifications except

waves.

The Specifically Designated Nationals (SDN) list must be checked

when opening a new account for an individual or other entity.

Your customer has purchased $10,000 in U. S. Treasury bonds. These securities

will have evidence of ownership recorded in book-entry form.

A new customer opens a margin account and, upon account approval, does an initial transaction purchasing 100 shares of MJS common stock at $25. How much will the customer need to deposit?

$2,000

LMN Corporation has a $60 par, 4% preferred stock currently trading at $45 per share. Its annual dividend is

$2.40.

An investor purchased 100 shares of Acme Shoelace stock for $20 per share. Four years later, the investor sold the stock for $28 per share. This investor would report these transactions, on a per share basis, as

$20 cost base, $8 capital gain.

Unless otherwise specified, the size of a firm quote is

100 shares.

An order is entered by a customer to sell at 30 stop limit. Once the order is entered, the stock trades in the following sequence: 32, 29, 31, and 33. The order would be executed and the investor would receive a price of

31.

An investor short a January 30 call at 4 has a maximum gain potential of

4 points or $400.

Your customer is long 1 October 55 put at 4. The customer's breakeven point is

51.

Your client Dana McCarthy has no investment experience. She just retired and won't be in a high tax bracket. She also is concerned about volatility of her investments. She is more concerned about preserving her principal than getting a high rate of return. Which of the follow would you recommend?

A money market mutual fund investing in short-term corporate debt

ABC and MNO both have the same market price and shares outstanding for their common stock. If ABC's price-to-earnings ratio is higher, that would indicate

ABC's net income is less than MNO's.

Some issuers issue securities in electronic form, some securities have been issued in physical form. Which of the following statements are true in relation to electronic or physical form?

All U.S. Government Securities are issued in book-entry form.

Treasury bills pay

All interest at maturity.

Which of the following is used to calculate a company's net worth?

Assets − liabilities

The Federal Deposit Insurance Corporation (FDIC) protects which of the following?

Bank depositors

Which of the following would be the interest rate charged for overnight, uncollateralized loans negotiated between two money center banks?

Federal funds rate

The bureau of the Treasury Department that combats money laundering, and international and domestic terrorist financing is called

FinCEN.

Prepayment risk is associated with which type of securities?

GNMA

Which of the following are associated with manipulative, deceptive, or fraudulent devices? I. Breakpoint sale II. Good til canceled III. Fill-or-kill (FOK) IV. Churning

I and IV

Under the Securities Act of 1933, which of the following is a nonexempt security?

Shares issued by a U.S. government bond fund

All of the following would be considered current assets except

a warehouse.

An investor owns one NMS June 40 call trading at 5. If the underlying value of NMS stock is 45, the contract is trading

at parity.

Intangible drilling costs (IDCs) associated with oil and gas DPPs can generally

be deducted completely in the first year of the program.

Put buyers are

bearish.

Under the Securities Exchange Act of 1934, registration is required for

broker-dealers.

To expand the overall economy, the Federal Reserve Board (FRB), acting as agent for the U.S. Treasury department, will

buy securities via open-market operations, pushing interest rates down.

Some bonds have a feature that prohibits them from being called by the issuer before a certain date. This is known as

call protection.

All the following are coincident indicators except

changes in durable goods inventories.

All of the following accounts are for unincorporated businesses except

corporate accounts.

When the Federal Open Market Committee (FOMC) directs that Treasury securities be sold in the open market, this

decreases the money supply.

All of the following are stages of money laundering except

initiation.

The Federal Reserve Bank is raising interest rates, this will

push bond prices lower in the open market.

Economists call mild, short-term contractions

recessions.

The law that provides the legal framework for state registration of securities is

the Uniform Securities Act.

Correspondence must be maintained by a member firm for

three years.

A market maker

trades in a proprietary account to facilitate trading of a security and provide liquidity.

A U-5 form should be filed with the Central Registration Depository within how many days after termination of a registered representative?

30 days

A broker-dealer firm managing an initial public offering (IPO) wishes to give a gift to an associated person of one of the selling group members. Which of the following would be an unacceptable gift under the rules?

A $125 designer edition fountain pen and desk holder

Which of the following investments would not require heightened suitability requirements before recommending them to your clients?

A Utilities Mutual Fund

Which of the following would be a secondary market transaction?

A broker-dealer arranges for a customer's order to be executed on the NYSE

Which of the following transactions would take place in the secondary market?

A broker-dealer selling securities out of its inventory to the public

Which of the following best describes buy back and tender offer?

A buy back is when a company buys back its own stock in the market place and a tender offer is when a company offers to purchase a certain number of its shares at a certain price.

A broker-dealer that accepts funds and securities from customers and its correspondent member firms would most likely be which of the following?

A carrying firm

Your client, Janice Thomas, is an active trader and wants to invest in a managed equity portfolio that he can trade intraday. Which of the following should you recommend?

A closed end fund

A registered person has left the securities industry and now holds a manufacturing job. Under what circumstances may this formerly registered person continue to receive commissions from work done at the person's old firm?

A contract must have been signed by the registered person and the firm specifying what commissions are still to be paid.

Which of the following scenarios would not violate general standards regarding member firm communications?

A recruitment advertisement promises substantial training to be delivered to incoming employees.

A bond that is structured so that the principal of the whole issue matures at once is

A term bond.

Earned income includes which of the following?

A year-end bonus

Restricted shares, those that are unregistered, meaning that they were not attained in a public offering, may be sold by a nonaffiliate

After holding them for six months and freely thereafter.

Some issuers issue securities in electronic form, while some securities have been issued in physical form. Which of the following statements are true in relation to electronic or physical form?

All U.S. government securities are issued in book entry form

If a broker-dealer suspects that a transaction involves funds derived from illegal activity, a suspicious activity report (SAR) would be triggered at what threshold?

At least $5,000 in funds or other assets

Which of the following would be considered earned income?

Bonus received from employment

Mr. Smith purchases 2% of MES Corporation's common stock. Four years later Mrs. Smith purchases 9% for her own account. Which of the following is true?

Both Mr. and Mrs. Smith are considered control persons.

For investors engaging in the trading of option contracts, which of the following is true?

Buyers pay the premium for the right to exercise the contract.

When interest rates are falling, which bonds are most likely to expose holders to call risk?

Callable bonds with higher coupons

Which of the following securities is the underlying asset used to create an American depository receipt (ADR)?

Common shares

Which of the following points to a general decline in prices occurring during severe recessions and the unemployment rate is rising.

Deflation

A prospectus displays which of the following?

Description of how the proceeds will be used

Which of the following would be associated with loans made to member banks of the Federal Reserve?

Discount rate

Which of the following would be recommendations?

Discussing the advantages of day trading with an existing client to generate more business for you and your firm

Underwriters who are assisting an issuer in bringing securities to the investing public can do which of the following between the time the registration was filed with the Securities and Exchange Commission (SEC) and the effective date?

Distribute a preliminary prospectus to the investing public.

What is a big advantage Roth IRAs have over traditional IRAs?

Distributions are normally tax free

Which of the following would lead to a standardized cost-base adjustment for stockholders?

Dividend

Which segment of the business cycle would one expect to find rising interest rates and higher wages?

Expansion

All of the following are true of prohibited activities except

Financial Industry Regulatory Authority (FINRA) has published a list of all the prohibited activities.

The rules to prevent pay to play regarding contributions made to political parties, candidates, and elected officials by firms involved in the underwriting or sales of municipal securities are enforced by

Financial Industry Regulatory Authority (FINRA).

For preferred shares, the annual dividend payment is

Fixed and stated as a percentage of par value

Because common stock can be sold or given away, it is considered to be

Freely transferable

A customer buys a 4% Treasury bond, maturing in 10 years, at a price of $96.08. The yield to maturity (YTM) is

Greater than nominal yield.

A free lunch seminar is advertised among senior citizens who may be looking to improve the results of their investment portfolio. Which of the following activities by the registered hosts of the seminar would be deemed a potential violation? I. Use of a designation such as Chartered Senior Advisor, a largely unknown designation II. The representative is introduced as someone approved by Financial Industry Regulatory Authority (FINRA) to answer questions from senior investors III. Use of degrees and registration licenses IV. Promoting technology stocks

I and II

A customer leaves the sale proceeds from a recent transaction in the account. This amount would be considered I. a free credit balance. II. a margin debit balance. III. available to the customer at any time. IV. a loan to the broker-dealer, who will pay interest to the customer.

I and III

Exports from the United States would likely increase if

I and III

Jim Davis bought 100 shares of QRS at $60 per share and then the company declared a 3:2 split. What is Davis' new cost basis and how many shares does he have now? I. Cost basis is $40 per share II. Cost basis is $90 per share III. He now has 150 shares VI. He now has 67 shares

I and III

Regarding limited partnerships, which of the following are true? I. A general partner can be held personally liable for business losses and debts. II. A limited partner can be held personally liable for business losses and debts. III. A general partner business decisions are legally binding on the partnership. IV. A limited partner business decisions are legally binding on the partnership.

I and III

Which of the following are required if a registered representative is to share in profits and losses with a customer? I. The trades must be done in a joint account. II. The customer must be a family member of the representative. III. The principal must give permission in writing for the arrangement. IV. The broker-dealer firm must also be a tenant in the account.

I and III

Which of the following corporate actions are designed to allow investors to buy shares of stock under specific, defined conditions? I. A rights offering II. A forward split III. Issuing warrants IV. A stock dividend

I and III

Distinguishing between a sell stop order and a sell stop limit order, which of the following are true? I. The sell stop limit order becomes a sell limit once triggered. II. The sell stop order becomes a sell limit order once triggered. III. The sell stop limit order becomes an order to sell at the market triggered. IV. The sell stop order becomes an order to sell at the market triggered.

I and IV

For Treasury bills, which of the following are true? I. T-bills are issued at a discount to par. II. T-bills have maturities of 1-10 years III. Most T-bill issues are callable and convertible. IV. T-bills are a direct obligation of the U.S. government.

I and IV

Which of the following are considered tools used to implement fiscal policies? I. Government spending II. Operations of the Federal Open Market Committee (FOMC) III.Changing the reserve requirements IV. Taxation

I and IV

An investor makes several statements regarding what they know about exchange-traded funds (ETFs). All of them are correct except

I can't buy them on margin because they represent an entire basket of stocks like mutual funds do.

In the following situation, who would be guilty of insider trading? A company leaks some insider information to some key employees, but not the public. One of those employees tells his registered representative, and the registered representative tell another customer who trades on the information before it becomes public. I. The person at the company who leaked the information II. The employee who told the registered representative III. The registered representative IV. The customer who traded on the information

I, II, III, IV

A buy stop order at 39 could fill at which of the following prices? I. 38 II. 39 III. 40 IV. 41

I, II, III, and IV

If your client, Marvin Blackwell, places a sell stop order at 38 when ABC is trading at 40, at which of the following prices could the order be filled? I. 38 II. 39 III. 40 IV. 41

I, II, III, and IV

Which of the following are characteristics of a revocable living trust? I. It is established before the grantor dies II. The grantor can change beneficiaries III. The grantor can add or remove items from the trust IV. The grantor is subject to tax on income that remains in the trust

I, II, III, and IV

In what order would claimants receive payment in the event of a corporate bankruptcy? I. Holders of secured debt II. Holders of subordinated debt instruments III. General creditors IV. Preferred stockholders

I, III, II, IV

In what order do the following economic phases typically occur? I. Recovery II. Trough III. Decline IV. Prosperity

I, IV, III, II

A private securities transaction I. is nonexempt and must be register under the Act of 1933. II. is exempt from registration under the Act of 1933. III. can be sold to individual accredited investors. IV. can be sold to institutional investors only.

II and III

Certain actions taken by the Federal Reserve Board (FRB) would likely have the effect of causing interest rates to increase. Which would these be? I. The Federal Open Market Committee (FOMC) buying securities II. Raising the reserve requirements III. Raising the discount rate IV. Raising the prime rate

II and III

During the 20-day cooling-off period, I. solicitations of sales can be made. II. solicitations of sales may not be made. III. deficiency letters, if issued, are sent to the issuer. IV. deficiency letters, if issued, are sent to the underwriters.

II and III

Fiscal policy I. is the most efficient means for solving short-term economic issues. II. is not considered the most efficient means to solve short-term economic issues. III. is reflected in the budget decisions enacted by our president and Congress. IV. is reflected in the money supply decisions enacted by the Federal Reserve Board (FRB).

II and III

The trade would need to be placed in a discretionary account if the registered representative chooses which of the following? I. The time of execution of the trade II. Which security to buy III. How much of the security to buy IV. At what price to execute the trade

II and III

WRJ stock is quoted as 21 bid, 21.15 offer. Which of the following is true? I. A purchase can be made at $21 per share if buying at the market. II. A purchase can be made at $21.15 per share if buying at the market. III. The spread is $0.15. IV. A sale can be made at $21.15 per share if selling at the market.

II and III

Which of the following are true of qualified plans but not true of nonqualified plans? Contributions are not tax deductible. Contributions are tax deductible. Plan needs IRS approval. Plan does not need IRS approval.

II and III

A surplus in the U.S. balance of payments can occur if I. interest rates in foreign countries are higher than U.S. domestic rates. II. interest rates in foreign countries are lower than U.S. domestic rates. III. U.S. consumers are purchasing (importing) foreign goods. IV. foreign consumers are purchasing (importing) U.S. goods.

II and IV

An investor purchased 100 shares of LMN in 2013 at a price of $40 per share. Soon after, the LMN declared a 25% stock dividend. Three years after the shares were purchased, they were sold at $50. Which of the following statements are correct? I.The adjusted cost basis of the shares is $30. II. The adjusted cost basis of the shares is $32. III. There is a short-term capital gain on all the shares sold. IV. There is a long-term capital gain on all the shares sold.

II and IV

At a shareholders' meeting, a mutual fund investor might be called upon to vote on any of the following except I. changes in membership in the board of directors (BOD). II. whether to sell a certain company's stock out of the portfolio. III. approval of the investment adviser's contract. IV. changing to a new landscaper for the fund's headquarters.

II and IV

During the cooling-off period, underwriters of new securities may I. accept orders to purchase shares. II. not accept orders to purchase shares. III. not accept indications of interest regarding potential purchases of shares. IV. accept indications of interest regarding potential purchases of shares.

II and IV

Regarding primary and secondary offerings, which of the following are true? I. An offering can only be either a primary or secondary. II. An offering can be a combination of primary and secondary. III. An initial public offering (IPO) is a secondary offering. IV. An additional primary offerings (APO) is a primary offering.

II and IV

Which of the following accounts can only be opened in a cash account? I. Individual transfer on death (TOD) account II. Individual account III. Individual retirement account (IRA) IV. Individual custodial account

III and IV

When a limited partnership is liquidated (dissolved), the priority of payments to settle accounts are made from first to last in which order? I. General partners II. Limited partners III. General creditors IV. Secured creditors

IV, III, II, I

An officer of a public company buys 1,000 shares of the company's registered stock in the open market. Regarding the sale of these shares, the officer may sell

Immediately, subject to Rule 144 volume limitations.

For primary and secondary markets, which of the following is true?

In the primary market, securities are sold to the public and the issuer receives the sale proceeds.

Which of the following are characteristics of the expansion phase of the business cycle?

Increase industrial production

What is one of the advantages for the investor who invests in mutual funds that include foreign securities in the fund's portfolio?

Increased diversification

Which of the following accounts would allow the assets of a single father's account to go directly to his daughter while avoiding probate but not a let her have access while he is alive?

Individual with TOD

What is the final stage of money laundering?

Integration

Possible benefits of owning common stock do not include which of the following?

Interest income

A broker-dealer's business model allows for only the purchase and sale of securities for retail customer accounts. It does not execute, settle, or clear its customer's transactions, nor does it tend to any back-office functions such as sending trade confirmations or forwarding proxies. This broker-dealer would best be described as what type of firm?

Introducing/fully disclosed

A registered representative is appointed the fiduciary for a trust account. Which of the following is true?

Investment decisions must be made in accordance with the prudent investor rule.

Which of the following is true for mutual funds and those who invest in them?

Investors must be provided with specific information when purchasing mutual funds.

Which of the following best describes a prospectus?

It is a full and fair disclosure of all material information and facts regarding the issuance of securities.

Regarding the Regulation T requirement, which of the following is true?

It is currently 50% but can be changed at any time by the Federal Reserve Board (FRB).

Under Financial Industry Regulatory Authority (FINRA)'s Code of Procedure, which of the following is not a sanction that could be imposed against a firm or registered person?

Jail sentence for an associated person of the firm

John and Tara Bourne have two children, Henry and Avery, who they want to set up custodial accounts for. Which of the registrations of the accounts are allowed?

John Bourne custodian for Henry Bourne

Craig and Judy have just married. It is a second marriage for both of them and they both have kids from a prior marriage. Craig would like his portion of their account to go to his kids when he dies and Judy would like her portion to go to her kids when she dies. As new partners in marriage, while they are both alive they would both like to have full access to the account. What type of account(s) should they set up?

Joint tenants in common (TIC)

What is the economic theory that says the government can and should effect individual spending by adjusting taxes and government spending?

Keynesian

Match the following statement to the best term: Government intervention in the economy is a significant force in creating prosperity by engaging in activities that affect aggregate demand.

Keynesian Theory

What is the greatest disadvantage of limited partnerships?

Lack of liquidity

Which of the following risks is the risk that congress could change the laws and negatively impact a particular company or industry?

Legislative risk

Someone who purchases shares of a corporation's common stock has

Limited liability and voting rights

Which of the following has the most liquidity risk?

Limited partnerships

Large time deposits of more than $100,000 are considered to be found in what part of the money supply?

M3

According to economists which of the following is the correct characterization of the money supply?

M3 includes all of M1 and M2.

Subject to market liquidity, which of the following orders is most likely to be executed immediately?

Market order

Which of the following is true regarding a member firm operating under Financial Industry Regulatory Authority (FINRA) membership or the membership of another self-regulatory organization (SRO)?

Member firms can offer all types of investment products, such as stocks, bonds, mutual funds, options, and others or limit the products they offer to only a few.

Which of the following can encourage economic growth because gradually increasing prices tend to stimulate business investment?

Mild inflation

Different degrees of inflation can impact the economy differently. Which of the following best reflects this?

Mild inflation can encourage growth and stimulate the economy.

Match the following statement to the best expression: A well-controlled, moderately increasing money supply leads to price stability and a healthy economy.

Monetarist Theory

Select the two distinctive types of policies that impact the U.S. economy.

Monetary and fiscal

Which of the following regarding monetary or fiscal policy is true?

Monetary policy is what the Federal Reserve Board (FRB) engages in when it attempts to influence the money supply.

Which of the following regulatory authorities relies exclusively upon other examining authorities to enforce its rules?

Municipal Securities Rule Board (MSRB)

Which of the following regulatory bodies regulates but has no enforcement powers?

Municipal Securities Rule Board (MSRB)

An associated person of a Financial Industry Regulatory Authority (FINRA) member firm would not be considered a municipal finance professional (MFP) if involved solely in which of the following?

Municipal securities sales to customers

Which of the following pairs are not covered by the Federal Deposit Insurance Corporation (FDIC) at any level?

Mutual funds and annuities

All of the following are exempt from Regulation T except

NYSE-listed securities.

For registered shares held by an affiliate (known as control stock), which of the following applies?

No holding period, but volume limits always apply

Registered broker-dealers must have fingerprint records for most of their employees and for which of the following?

Partners

The federal government could use which of the following to slow the economy?

Raise taxes

Broker-dealers and registered representatives may be subject to each of the following administrative and regulatory bodies except

Securities Investor Protection Corporation (SIPC).

Financial Industry Regulatory Authority (FINRA) staff must submit new rules and await approval from which of the following regulatory bodies prior to becoming effective?

Securities and Exchange Commission (SEC)

The locate requirement is an element of which of the following transactions?

Sell to open

Which of the following transactions has the most risk?

Selling short

Which of the following has an obligation and is bearish on the stock?

Short call

Which of the following is not a prohibited activity?

Short selling

Which of the following refers to prolonged periods of slow or little economic growth, usually accompanied by high unemployment?

Stagnation

Which of the following is a benchmark for large cap stocks?

Standard and Poor's 500 Index

Which of the following prospectus must be provided no later than confirmation of the sale?

Statutory prospectus

Which of the following records must be kept for the life of a broker-dealer firm?

Stock certificate books

A stock's market value is directly determined by which of the following?

Supply and demand

Which of the following entities is chiefly responsible to conduct U.S. monetary policy and maintain the stability of the financial system?

The Federal Reserve Board (FRB)

Which of the following entities considers appeals of decisions made in department of enforcement (DOE) actions?

The National Adjudicatory Council (NAC)

Which of the following publishes and maintains a list of known terrorists and drug traffickers and those controlled by them or acting on their behalf?

The Office of Foreign Assets Control (OFAC)

Which of the following acts deals with money laundering?

The PATRIOT Act

Which of the following acts created the SEC?

The Securities Exchange Act of 1934

Which of the following would be required for a good-til-canceled order to remain in force for more than six months?

The customer would need to reconfirm the order

What is the spread on a stock quote?

The difference between the bid price and the ask price or offer

Which benchmark interest rate indicates the direction of the Federal Reserve Board's monetary policy?

The discount rate

Which of the following is the rate of interest charged by the Federal Reserve Bank (FRB) for short-term loans to its member banks?

The discount rate

When a new associated person is hired at a broker-dealer firm, which of the following is responsible for seeing that Form U-4 is completed and filed?

The employing broker-dealer firm

The Conduct Rules permit specific types of lending arrangements between registered representatives and their firms and customers. Which arrangement below would not be permitted?

The firm lends the customer's securities without a consent agreement.

An investor has a friend who mentions that an officer of the firm he works for reported to the CEO, in a confidential meeting, that a product had great test results. If this information were public, it would have a positive effect on the corporation's stock price. If the investor now makes a large purchase of the corporation's stock, who beside the investor might be liable under the Insider Trading and Securities Fraud Enforcement Act of 1988?

The investor's friend

A shareholders' meeting for ABC Corporation will take place in eight days. A customer whose stock is being held in street name has not returned the proxy statements. Which of the following is true?

The member firm may vote the shares as it wishes on minor matters.

Which of the following statements best describes financial risk?

The risk that an issuer will be unable to meet interest and principal payments on debt obligations

Regarding primary offerings, which of the following is true?

There is no limit to the number of primary offerings a corporation can issue.

Once a corporate liquidation proceeding in court is underway, common shareholders know that

They are not guaranteed to be paid back any amount.

Which of the following statements best describes the term churning?

Trading in a customer's account considered excessive, and for which no discernible investment purpose is detected.

The Securities Act of 1933 requires that all of the following be offered by a prospectus except

Treasury bonds.

FINRA firms must employee at least how many principals?

Two

A weak U.S. dollar leads to more

U.S. exports and a balance of payments surplus.

Which of the following statements is true of income bonds?

Unlike other bonds, they don't pay income unless declared by the board of directors.

Which of the following is a true statement with regard to either U.S. securities laws or the description of international economic factors?

When the U.S. dollar is strong, foreign currency buys fewer U.S. goods.

Holders of subordinated debt instruments know that in the case of a corporate liquidation, they

Will be paid back last of all debtholders.

An investor purchased an MJS Corporation 6% 20-year bond at issue for $950. Two years later, the investor sold the bond for $925. This investor experienced

a $25 capital loss.

Your customer opens a position at 45 and then closes it later at 47. This represents

a 2-point gain or loss.

A broker-dealer that executes trades and settles transactions for another broker-dealer is called

a carrying firm.

A customer has given permission for securities in an investment account to be used for the purpose of other customers who want to borrow them in order to sell those securities short. This would have entailed the customer signing

a loan consent form.

The Securities Act of 1933 requires that

a new issue, unless specifically exempted from the Act, be registered with the Securities and Exchange Commission (SEC) before public sale.

A new registered representative receives a memo discussing the distribution of a red herring. The registered representative knows that the memo is referencing

a preliminary prospectus.

An institutional investor selects a single Financial Industry Regulatory Authority (FINRA)/NYSE member firm to provide for financing and custody of securities while orders to buy or sell are placed with executing brokers. This is an example of

a prime brokerage account.

Deflation occurs during

a recession, coinciding with an economic contraction.

Recent reports indicate that the gross domestic product (GDP) has been declining steadily over the past two quarters. This would suggest

a recession.

An individual who purchases securities for a personal account is called

a retail investor.

An investor with no existing positions in MMS stock sells 100 shares. This is

a short bearish position.

An institution or a person responsible for making all investment, management, and distribution decisions in an account maintained in the best interests of another who has been legally appointed to provide these services is best described as

a trustee.

An investor notices that a bond purchased several years ago at 95 is now priced at 90. The investor sells the bond for 90, then immediately repurchases it for 90. This action is known as

a wash sale.

The transfer agent for a corporation is responsible for each of the following except

acting as an intermediary between the buy and sell sides of a transaction.

Regarding the potential financial exploitation of seniors, impacted accounts would be those for individuals

age 65 and older, or age 18 and older who the member reasonably believes has a mental or physical impairment that renders the individual unable to protect her own interests.

The U.S. gross domestic product is best described as

all goods and services produced within the nation.

In a leasing partnership program, loans are taken to purchase equipment that is then leased to companies in return for the lease payments. This process

allows for the loan interest and equipment depreciation to be taken as deductions that will shelter the income from the lease payments received.

Anyone who, as part of their business, gives investment advice for compensation must register as

an investment adviser under the Investment Advisers Act of 1940.

A corporation sells shares to the investing public in order to raise capital. This is known as

an issuer transaction.

The SEC can do all of the following except

approve broker-dealers to participate in the securities business.

When the Federal Reserve Board (FRB) wants to expand (loosen) the money supply, it will

buy Treasury securities from banks in the open market.

Recommendations regarding investment strategies under the know your customer (KYC) rule would not apply to recommendations to

buy or sell commodities.

A registered representative with discretionary authority has been doing two or three trades per week in her customer's discretionary account. The volume of transactions is not in keeping with the historic activity in the account and the trades don't all align very well with the account objectives. A principal noted that other than generating commissions, the trades seem to have little profit potential. This is likely a red flag for

churning.

In accordance with the terms of the Telephone Consumer Protection Act of 1991 (TCPA), all of the following statements are true except

cold calls may be made between 8:00 am and 9:00 pm in the time zone from which the representative is making the call.

The Uniform Practice Code (UPC) establishes uniform trade practices pertaining to all of the following except

communications with the public.

A person may not act as a registered representative or principal unless Financial Industry Regulatory Authority (FINRA)'s eligibility standards regarding training, experience, and competence are met. In all of the following instances, a person may be statutorily disqualified from FINRA membership except

conviction of a DUI resulting in a fine and probation.

An offering is defined as the sale of a security. Regarding offerings, all of the following are true except

corporate securities can only be offered in public securities offerings.

Caleb Wilson receives an email from his client, Shelby Bogdin, requesting the year-to-date performance on several of her mutual funds. Wilson immediately looks up the performance and emails her a response. This type of communication would be classified as under FINRA rules as

correspondence.

Economists refer to longer, more severe contractions in the economy as

depressions.

The Federal Reserve Board (FRB) does all of the following except

enact fiscal policy.

An investor who has a short position in 500 shares of JKH common stock would eliminate that position by

entering a closing purchase order for 500 shares of JKH.

An investor purchases a bond offered at par. The bond has a coupon rate

equal to its current yield.

Financial Industry Regulatory Authority (FINRA)'s Conduct Rules are designed to promote

fair and ethical trade practices when dealing with the public.

All of these are functions of the Office of Foreign Assets Control (OFAC) except

fine financial service companies that do not comply with the regulations.

Laws increasing or decreasing taxation would be best associated with

fiscal policy enacted by the president and Congress.

If the U.S. dollar is weak against foreign currency,

foreign currency buys more U.S. goods; therefore, U.S. exports will increase.

The business cycle is generally viewed as having how many stages?

four

Regarding the taxation of gains on securities, all of the following are true except

gains on securities for a position held at least 12 months are not taxable.

After the filing of a registration for a new issue with the Securities and Exchange Commission (SEC), and still in the registration's cooling-off period, broker-dealers may

give a red herring to prospective investors.

An investor is short 1 XYZ January 60 put at 2. This investor

has received $200 for writing the put contract.

The firm element of a broker-dealer's continuing education (CE) requirement must be undergone by all registered persons who

have direct contact with the public.

To meet the requirements of the know your customer rule, a registered representative would be required to gather information on all of the following except

if the customer graduated from college.

Should a member firm or an associated person be found in violation of Financial Industry Regulatory Authority (FINRA)'s Conduct Rules, a number of sanctions may be imposed. However, under the Code of Procedure, FINRA may not

impose a prison sentence on the violator.

When investors buy and sell securities to and from one another, these transactions occur

in the secondary market.

Deflationary periods are characterized by all of the following except

increased consumer demand.

All of the following are restricted persons except

individual owning 5% or more of a member firm.

Private placements are primarily sold to

institutional investors.

The holder of an in-the-money option contract gives a do not exercise instruction (notice) to your broker-dealer. This notice

is used to avoid automatic exercise at expiration.

An analyst is trying to determine upcoming economic activity to better determine her recommended investment strategy. She would be most interested in

leading indicators.

For investors, changes made to the tax code by the IRS are known as a form of

legislative risk

A luxury tax that consumers must pay that is levied on nonessential items of a certain value or more is an example of

legislative risk.

Assets offered and traded in the securities markets can include all of the following except

life insurance.

Each of the following may be traded on an exchange except

life insurance.

A customer wishes to sell short 1,000 shares of ABC. Prior to executing the order, the registered representative must

locate shares that can be lent to effect the sale.

A broker-dealer firm opening a corporate account must establish all of the following except

location of any account records the corporation will keep when received.

The four basic options transactions are

long calls, short calls, long puts, short puts.

All of the following terms and phrases are associated with the sell side of the contract except

lose the premium if the contract expires.

A March 25 put purchased at 1.5 has expired without being exercised. The owner of the put

loses the $150 premium paid.

A March 30 call purchased at 3 has expired without being exercised. The owner of the call

loses the $300 premium paid.

Which of the following is not a category of communications with the public designated by Financial Industry Regulatory Authority (FINRA)?

market letters

A company an individual has invested in by purchasing 1,000 shares of common stock has unfortunately gone bankrupt. This investor

may lose all that was invested but is not liable for any corporate debts that cannot be satisfied during the dissolution process.

Carrying firms may not

mix customer funds and securities with their own.

There are two distinctive types of policies implemented to shape and mold the U.S. economy. They are

monetary and fiscal.

The process of creating the appearance that money coming from illegal activities came from legal activities is called

money laundering.

The process of making money that appears to have come from legal activities when it in fact it came from illegal activities is called

money laundering.

All of the following are true regarding customer account statements except

monthly statements need not be sent if the only account activity is the receipt of interest or dividends.

A surplus in the balance of payments is best described by

more money flowing into the United States than out.

All of the following are valid terms describing stock splits except

odd split.

Under the USA PATRIOT Act, financial firms must create and maintain records of wire transfers only

of $3,000 or more.

Mutual fund shares are required to be priced at least

once per business day

State registration is not required if the transaction is exempt. An example of an exempt transaction would be

one that is unsolicited.

Distributions from IRAs are taxed at

ordinary income tax rates on the full amount of the distribution.

Real estate investment trusts (REITs)

pay dividends and pass gains through to investors but not losses.

Companies in defensive industries would be the manufactures of

pharmaceuticals.

For investors, instability within an emerging economy is generally recognized as

political risk.

All the following are cyclical industries except

precious metals.

The Federal Reserve Board (FRB) might impact the money supply by using all of the following except

prime rate.

Several registered representatives have agreed to purchase a certain security for their own accounts, then tout the security to their best customers. They hope that a number of large orders will be entered, driving up the price of the security, which they can then sell from their own accounts for a capital gain. This illegal practice is a form of

pump and dump.

To contract or slow economic growth U.S. fiscal policy should be to

raise taxes and cut government spending for programs and development.

For real estate program partners, tax credits will

reduce tax liability dollar for dollar.

Benefits of mutual funds include all of the following except

reinvested dividends are not taxed until withdrawal.

Lilly Bogdin, a registered representative in the Norristown, PA, branch, creates a flyer for an upcoming seminar that she emails to all of her 150 clients. FINRA would classify this type of communications with the public as

retail communications.

All of the following are investment income except

running a business.

Secondary market transactions would include all of the following except

sale of $10 million of corporate bond by a broker-dealer acting as an underwriter.

All of the following would be secondary market transactions except

securities sold to the public by the issuer.

Carrying firms, those that carry customer accounts, must

segregate customer funds and securities from the firms' funds and securities.

A customer is given a quote for ABC as: 17.00 - 17.25 6 × 12. This quote indicates the customer can

sell 600 shares for $17 per share.

Blaine Smith has owned XYZ stock for several years and believes it is time to take his profit and invest that money in another stock. He should

sell XYZ to close.

Blaine has owned XYZ stock for several years and believes it is time to take his profit and invest that money in another stock. He should

sell XYZ to close.

Economic growth has slowed to a halt with little consumer demand, but prices for goods and services are still rising. This is known as economic

stagflation.

Increasing cost of goods and services and high unemployment are characteristics of

stagflation.

All of the following are taxable to the investor except

stock dividends.

The measure of the inflation rate is

the Consumer Price Index.

Implementing monetary policy, and thereby undertaking the responsibility to maintain the stability of the U.S. financial system, is

the Federal Open Market Committee (FOMC).

Broker-dealers that transact securities business with customers or other broker-dealers must apply and be approved for registration with

the Securities and Exchange Commission (SEC).

The spread a dealer makes is best described as

the ask minus the bid.

The broker loan rate charged by banks is also known as

the call loan rate.

While a branch office manager can initially approve an options account for trading, it must ultimately be approved by

the firm's registered options principal (ROP).

A hedge fund portfolio has been characterized as being highly leveraged. This means that

there is substantial borrowing or purchasing on margin

Your client Mr. Jenson calls and wants to purchase T-bills and wants to know when payment is due. You should inform him

trade date plus one business day.

Your client, Jacob Riley, wants to purchase Treasury bonds and asks when he would need to pay for the bonds. You would inform him that regular way settlement for U.S. Government Bond is

trade date plus one business day.

Financial Industry Regulatory Authority (FINRA) regulates all matters related to investment banking, including

trading in the over-the-counter (OTC) market.

Municipal Securities Rule Board (MSRB) and Financial Industry Regulatory Authority (FINRA) rules specifically deter gaining political favor via contributions made to candidates, officials, or political parties. As such, if a political contribution is made to any of these entities then under the act, the firm may not provide advisory services to any government these individuals or parties represent for how long?

two years

The maximum loss on a short call is

unlimited.

For purposes of the rules against exploitation of seniors, seniors are defined as

65 and older.

The sales charge for Class A shares may not exceed

8.5% of the total investment.

Of the following, which would not be considered institutional communications with the public?

An internal memo promoting a new product that will be offered to your firm's institutional customers only

Your client, Mrs. Stephens, has been bearish on LMN stock and sold it short several months ago. She now believes the company is in a good position for a turn around and wants to change her strategy on LMN. What should she do to implement her new strategy?

Buy to close her existing position and open a new long position in the stock

Your client, Randall Stephens, has been bearish on LMN stock and sold it short several months ago. He now believes the company is in a good position for a turnaround and wants to change his strategy on LMN. What should he do to implement his new strategy?

Buy to close his existing position and open a new long position in the stock

An investor believes the price of an exchange-listed stock will likely fall in the near term. Which of the following option strategies would best support this belief?

Buying puts

ABC Corporation's earnings remained steady while its shares outstanding increased by 5%. How does this impact ABC's earnings per share (EPS)?

EPS has decreased

All of the following would be considered advantages of exchange-traded funds (ETFs) as opposed to mutual funds except

ETFs are commissionable.

When speaking to a customer about exchange-traded funds (ETFs), a registered representative could make which of the following correct statements?

ETFs have different potential tax consequences than mutual funds.

A prospectus must be delivered to customers following a transaction in all of the following except

ETFs.

Regarding different types of risk, which of the following is true?

Enactment of, or changes in laws, represent potential legislative risk.

Which of the following is considered to be the order of the stages in a business cycle?

Expansion, peak, contraction, trough

Which of the following is the largest self-regulating organization (SRO)?

FINRA

Written customer complaints must be kept for how many years?

Four years

Which of the following might be considered a red flag in a customer's account activities?

Funds and securities are moved from one account to another for no apparent reason.

A customer's account has been frozen. Which of the following is true if the customer wants to purchase more securities?

Funds to pay in full must be available in the account before the buy order is entered.

Which of the following is true regarding a registered person who wishes to move her registration from one broker-dealer to another?

In no circumstances can a registration be transferred from one firm to another.

You have a client, Hank Brown, who does much of his business overseas, and his assistant who is his sister, Allie Brown, often drops off checks at the branch for deposit in his individual account. Today Allie stopped by the office and said Hank forgot to sign some papers before he left and will be gone for three weeks. Because these are time-critical documents, Hank told her to have you sign them for him. Which of the following is true?

This would not be permitted. Hank will have to sign them when he gets back.

An investor is long MJS stock. For this investor, which of the following is true?

The risk is that the stock falls in price.

Who is responsible for meeting the desired returns on a defined benefit plan?

The sponsor

Which of the following characteristics are typical of an exchange-traded product (ETP)?

The value of an ETP is derived from other investment instruments, and it trades on a national securities exchange.

For hedge funds organized as private investment partnerships, which of the following is true?

They can limit the number of investors and require large or minimum initial investments.

An investor is viewing a company's prospectus on the Securities Exchange Commission's (SEC's) website. Which of the following is true?

This satisfies the access equals delivery rule for a final prospectus.

Three brothers open a joint account instructing you that if they die, they want the cash and securities in the account to go to the remaining parties to the account. The account should be opened

with rights of survivorship.

All of the following would be acceptable methods for opting out of the customer allowing the broker-dealer to share his nonpublic personal information except

write a letter.