SIE Unit 9
Darrell has an individual account at Seacoast Securities, Inc., an SIPC firm that holds $300,000 in cash; $100,000 in various stock; and $100,000 in the Seacoast Money Market Fund. If Seacoast Securities fails how much coverage does Darrell have? A) $350,000 B) $250,000 C) $100,000 D) $450,000
D, SIPC covers securities and cash at a broker-dealer up to a maximum of $500,000, but no more than $250,000 in cash. A money market fund is a type of security. Darrell is covered for $200,000 in securities and $250,000 in cash for a total of $450,000.
According to the Uniform Securities Act, who is charged with enforcing state securities laws and regulations? A) The SEC B) NASAA C) FINRA D) The administrator
D, The administrator handles state securities laws. NASAA is an association of state administrators. The SEC and FINRA are both national level organizations.
The Securities Investors Protection Corporation protects investors from the financial failure of A) broker-dealers. B) banks. C) the third market. D) the stock market.
B, The SIPC protects investors in the event of a collapse of their broker-dealer firm.
Which of these is not a division of the Treasury Department with some level of oversight for the securities industry? A) Financial Industry Regulatory Authority B) IRS C) Office of the Comptroller of the Currency D) Financial Crimes Enforcement Network
A, The Financial Industry Regulatory Authority (FINRA) is not a government agency, so it is not part of the Treasury Department. FINRA is a nongovernmental organization that has received significant delegated authority from the SEC.
The SEC has regulatory authority over all of these entities except A) municipalities. B) exchanges. C) Securities Information Providers (SIPs). D) FINRA.
A, Though the SEC does oversee the MSRB, neither the SEC nor the MSRB regulates municipalities in the U.S. The SEC does oversee FINRA and the exchanges.
Cooper and Belle, spouses, have a checking account at Gloria City National Bank. The balance is $450,000. What is their protection from FDIC if Gloria City Bank fails? A) There is no protection as FDIC only covers savings accounts B) $450,000—split evenly between the two people C) $250,000—the total maximum coverage per account D) $450,000—$250,000 for Cooper and $200,000 for Belle
B, FDIC coverage is per person, per account, split evenly. A joint account with two owners would be covered up to $500,000.
The part of the federal government that acts as an independent central bank in order to manage monetary policy is the A) Treasury Department. B) Federal Reserve. C) Department of the Interior. D) Comptroller of the Currency.
B, This is a description of the duties of the Federal Reserve.
Which of these would not be fully covered by SIPC insurance? A) Holding $250,000 in cash and $250,000 in the Windmill Commodity ETF B) Holding $400,000 in junk bonds and $100,000 in cash C) Holding $250,000 in index funds, $200,000 in Treasury bonds, and $50,000 in gold D) Holding $300,000 in a money market and $200,000 in mutual funds
C, Gold is not a security and is not covered by SIPC. Money markets, ETFs, mutual funds, and junk bonds are all types of securities.
Keegan and Drew, spouses, have a checking account at Gloria City National Bank. The balance is $450,000. What is their protection from SIPC if Gloria City fails? A) $250,000—the total maximum coverage per account B) $450,000—split evenly between the two people C) There is no coverage for Keegan and Drew D) $450,000—$250,000 for Keegan and $200,000 for Drew
C, SIPC covers broker-dealers, not banks.
Dewey Cheatham, a registered representative for Great Plains Securities, was found by the SEC to have committed fraud by stealing from the accounts of several elderly customers of the firm. The SEC has also found that Great Plains was negligent in its supervision of Dewey. The SEC might take all of these actions against Great Plains Securities except A) censure. B) fine. C) suspend. D) arrest.
D, A broker-dealer is a business. You can not really arrest a business. You can censure, suspend, or fine a business. Note that the SEC cannot arrest a natural person either (like Dewey Cheatham), but they can contact the Justice Department.
Deanfield and Chatham Investments, LLC has recently registered as a broker-dealer with the SEC and been accepted as a FINRA member firm. They update their website to prominently display this fact at the top of their site and include large images of both organizations' logos. This is A) allowed so long as it is accurate. B) allowed with proper disclaimers. C) not allowed because it violates principals of marketing. D) not allowed because it is a misrepresentation.
D, This is a misrepresentation. Even if only stating a fact, the prominence suggests some greater affiliation or approval. Deanfield and Chatham is about to get a rather terse letter from these regulators, or worse.
The Hoffman Equipment company of Anaheim, California is preparing to sell share to the public in an IPO. They plan to sell exclusively to residents of the state of California and use the proceeds to build a new showroom in Long Beach, California. This offer would need to be registered with A) the SEC. B) MSRB. C) no one, this is an exempt transaction. D) the administrator of the state.
D, This offer would be exempt from registration with the SEC as it meets the criteria under the Intrastate Offer Rule, but would still need to be registered with the state. MSRB makes rules for municipal securities.
FinCEN is a bureau of what department within the federal government? A) Justice B) Defense C) Interior D) Treasury
D, Though it is an intelligence-gathering organization that watches for suspected criminal activity, FinCEN is part of the Treasury Department.
The Securities Exchange Commission was authorized by A) the Securities Exchange Act of 1933. B) the Securities Act of 1933. C) the Securities Act of 1934. D) the Securities Exchange Act of 1934.
D, Though the Securities Act of 1933 required registration for new securities with the SEC, the SEC was not authorized until passage of the Securities Exchange Act of 1934.
