SIE
An investor originally invested $2,000 into a mutual fund, and subsequently received $250 in dividends which were reinvested into the fund. The investor's cost basis would now be
$2,250
Reg T long positions minimum maintenance
25%
max political contribution
250
Coverdell contribution limit per year
2k
FDIC
Federal deposit insurance -insures up to 250k for each ownership category in each bank
how is accrued interest taxed and how does it effect cost basis
It is taxed as ordinary income and does not impact the cost basis of a bond.
Consider the following T bills: Maturity Bid Ask 8-2 6.36 6.20 8-16 6.42 6.26 The T bills maturing August 2nd (8-2) are being offered at par
less a discount to yield 6.20%
If a bond is trading above face value, its current yield will be ---- than its coupon yield
lower
federal reserve open market committee 's short term effect is to
make credit mor or less available
The greatest cost to an investor when investing in a fund is
management fees
what kind of risk is greatest in a variable life insurance policy
market risk
Systematic tisk
market tisk -non diversifyable
when an RR becomes subject to a statutory disqualification they
must optain regulatory approval before being permitted to work in the securities industry
he purpose of FINRA's rule 5130 on restrictions of the purchase and sale of Initial Equity Public Offerings (IPOs) is to ensure that
nderwriters make a bona fide public offering of all new issues
If a municipality appoints an underwriter to offer a new issue, the underwriting is
negotiated
The settlement date for the purchase or sale of an options contract is the
next business day
are employers required to make matching contributions to their 401(k)
no
is registration required for eurodollar bonds
no
is registration required for federal gov't securities
no
is registration required for municipal securities
no
treasury stoc
no voting rights or dividends stock that has been repurchased but he compay
ERISA Requirements
nondiscriminatory -at least 21 -one year of employment -vested
The RIA (Registered Investment Adviser) is most comparable to what other type of recognizable professional designation?
none
annual gift limit to an ugma or utma account
none
tax consequences during accumulation period of a variable annuity
none
529 contribution limit per year
none but gift tax is enacted on anything of 15K
conversion ratio
number of shares received upon conversion par/Conversion price
how are non qualified variable annuities taxed upon distribution
only on the growth of the invested dollars
third market
over-the-counter, negotiated-price trading of exchange-listed securities
For the purpose of FINRA rules regarding sharing in customer accounts, an immediate family member is a
parents, in laws, spouce, children or any relative to whose financial support the member or person associated with a member otherwise contributes directly or indirectly.
what is a vulnerable investor
person over 65 or a person over 18 that is physically or mentally impaired
If the YTM is higher than the YTC, the bond is trading at a
premium
term bond
principal is paid at maturity
The MSRB was created for what purposes?
propose and implement new rules for industry practitioners
A mutual fund's breakpoint schedule applies to .........
purchases within a single fund family.
how often must firms send account statements
quarterly
brokers call rate:
rate charged by banks on loans extended to broker-dealers
Federal funds rate:
rate that banks charge other banks for lending to them excess cash from their reserve balances on an overnight basis
DIscount rate
rate that the Federal Reserve charges banks for short term loans
CBOE purpose
regulate all matters related to trading standardized options and related options listed on that exchange
MSRB Purpose
regulates all matters related to the underwriting and trading of state and municipal securities. does not have enforcement powers.
An investor holds a callable bond that has been called by the issuer. This investor now faces
reinvestment risk
A UIT sells units to investors through...
representatives of broker dealers with which selling agreements have been established
a REIT is categorized as a(n)
trust it is not a type of investment company or direct participation program.
Under most circumstances a general securities firm is required to have a minimum of how many principals
two
a debenture is a(n)----
unsecured corporate bond
Current yield goes ----as bond prices decrease, and vice versa.
up
Roth IRA income contribution rules (limit)
up to 100% of compensation of active work that does not exceed MAGI income threshold
variable annuity return
varies with the performance of the investments
The process of a shareholder assigning voting rights to a third party is
voting by proxy
interpositioning
whe a second broker dealer is used in a way that denies the customer best execution
Secondary Offering
when a stockholder is selling a major portion of equity to the public
how often must regulatory elements ce
within 120 days of second anniversary of registration and every 3 years thereafter
Firms must report to FINRA any written customer complaints
within 15 days of the end of the quarter in which the complaint was submitted
Is registration required for ADR
yes
are capital gains for a municipal security taxable
yes
qualified institutional investor qualification
§ An institutional investor who invests at least 100MM on a discretionary basis
Depression definition
§ Six consecutive quarters of economic decline
Recession definition
§ Two consecutive quarters of economic decline
Finra (Code of Procedures (COP):
· Covers enforcement of FINRA rules and penalties for violation. COP decisions are appealable to the SEC.
FINRA (Uniform Practice Code (UPC)
· Covers technical aspects of trading and payment for securities transactions. Specifies delivery standards, dividend payment procedures, and interest payments
FINRA (conduct rules)
· Establish the relations between firms and their customers. This covers items such as fair dealing, compensation, communication, and sales practices.
Keynesian Theory
·-Active government involvement in the economy is vital -Demand for goods sets employment and price levels -Believed fiscal policy determined overall economic health
An "easy" monetary policy is one where the FRB
Buys securities to increase the money supply.
How can an investor participate in a Master Limited Partnership (MLP)?
By buying MLP shares on an exchange
The best bid currently available to buy ABC stock is $36.45 per share. If the spread is 2 cents per share, what is the best ask price, as shown on the limit order book?
$36.47
how to calcualte sales charge
(POP - NAV)/ POP
T- Bill (maturity and interest)
- 1 month -3month -6 month -9 month -1 year no semiannual interest, instead trade at a discount to par
Tax deferral plans
-401k -pension -traditional IRA
Rule 144A
-An exemption to rule 144 offered under the Securities Act of 1933. Only available to large, Qualified Institutional Buyers (QIB) -allows QIBs to purchase and resell restricted securities with no volume limit or holding period
Largest SROs (self regulated organizations)
-FINRA -CBOE (Chicago board options exchange) -MSRB (municipal securities rulemaking Board)
Trading Restrictions under Rule 144 for Insiders (time and amount)
-In a 90 day period, the security may not trade at a volume exceeding the greater of: - 1% of the total outstanding shares or -The average of the weekly trading volume of the prior 4 weeks on all exchanges.
DIrect Participation Program (DPP)
-Investment companies that raise funds to invest in real estate, oil and gas, equipment leasing, and related business ventures.
Factors that make a bond sensitive to interest rate risk
-Low coupon -long maturity
IPO Restricted Persons
-Member firms -Employees of member firms -Underwriters and their fiduciaries -Portfolio managers -any person owning 10% of more of a member firm -Immediate (nuclear) family members of member firm employees
Tenants in Common (TIC)
-Provides that a deceased tenants fractional interest in the account is retained by the tenant's estate and is not passed to the surviving tenant
post tax plans
-Roth IRA -529 -ABLE -Coverdell
restricted securities
-Securities acquired through some means other than a registered public offering (i.e. a private placement)
control securities
-Securities owned by directors, officers or persons who own more than 10% voting stock
Private Placement offer
-Sold directly to institutional investors and accredited investors -Exempt for Securities Act of 1933 regulation
MF share class A
-The sales charge is paid at the time the investor buy shares. The charge is subtracted from the amount invested.
MF share class C
-These funds have a standardized, annual fee schedule that never dissipates. -Fee structure is ideal for investors with a short investment horizon.
Best Efforts underwriting
-Underwriter acts as agent, not the principle -Underwriter is not obligated to purchase the shares.
QIB
-a qualified Institutional Investors who trade 100MM or more on a discretionary basis.
SIPC coverage (if BD fails)
-cash and margin accounts are covered no more than 500k -accounts for 1 customer are combined for coverage -only the equity in a margin account Is covered, not the market value -commodities and futures are not covered
securities exchange act of 1934
-created the SEC -governs trading markets for existing securities ®istration requirements for BDs, their employees and exchanges
SROs under sec regulation must
-enforce federal securities law -supervise securities practice within an assigned jurisdiction
GO bond
-general obligation bond -non-revenue producing projects. Bond cash flow are produced by the taxation power of the jurisdiction.
securities act of 1933
-governs primary markets -requires issues to register their securities when selling to the public
An investor purchases a 6% bond for 115. Rank the yield computations for this bond from highest to lowest. I. Current yield II. Nominal yield III.Yield to call IV. Yield to maturity
-nominal yield (i.e. coupon) II -current yield, I -yield to maturity, IV -yield to call.III
UTMA/UGMA
-one minor -one custodian -custodian acts as fiduciary, and manager
shelf offering
-pre-emptively register securities without actually issuing them until a later date -Once filed, the registration is good for 2 years,
Pre registration period
-quiet period -underwriter prepares registration statement
trust account
-settler contributes -trustee holds legal title -multiple beneficiaries recieve
Penny stock
-unlisted security -trading less than 5$
FIrm Commitment underwriting
-·The underwriter contracts to buy the shares directly from the issuer at a set price. -Underwriter is acting as a principle
A corporate bond that is currently trading at 95 pays a semi-annual coupon of $25. What is the current yield?
0.0526 50/$950 = 5.26%.
Martin opens his first Roth IRA on March 31, 2014, at age 56. What is the first date on which he can take a qualified distribution that is tax-free?
1-Jan-19 2 criteria. 1) Five years after the first contribution (which is deemed to occur on Jan 1 of that year) and 2) after the account holder's 59½ birthday.
An individual may be subject to statutory disqualification if he or she has committed a felony within the past.... years
10
When a firm learns of a statutory disqualifying event, it must update a registered representative's U-4 within
10 days
standard denomination of a bankers acceptance is in what amount
100k
traditional ira tax free withdrall limits for first time homebuyer under the age of 59.5
10k
rule 144
144 regulates the sale of control and restricted securities
Unless eligible for an exception, municipal trades must be reported to the Real-time Transaction Reporting System (RTRS) within
15 minutes of execution.
ABLE contribution limit per year
15k
MFP rule G-37 has a penalty for political contributions of
2 year ban from negotiated underwrtitings
t-notes (maturity,interest and quote)
2-10 years pay semiannual 1/32nd quote
Under federal anti-money laundering regulations, a Suspicious Activity Report (SAR) must be filed within how many days of the discovery of suspicious activity?
30 calendar days
A firm must report to FINRA a change in the person named as its Anti-Money Laundering Officer within
30 days of the change
t-bond (maturity, interest and quote)
30 year semiannual interest 1/32nd
Reg t short positions minimum maintenance
30%
Muni bond calander year (accrued interet)
360
corporate bond calander year (accrued interest)
360
Government bond calander year
365
afte passing sie how long does one have to take a top off exam
4 years
What is the name of a participant-directed ERISA plan sponsored by a state or local government entity?
457(b)
market sell order is executed at the quote at a time when the bid-ask is $48.35-$48.37. The transaction price is
48.35
Reg T Purchase deposit (and finra acc minimum)
50% and 2k in account
What is the penalty for failure to take a Required Minimum Distribution (RMD) from a Traditional IRA?
50% of the under-withdrawal amount
The maximum annual contribution of earned income to an IRA is
6K
When a redemption of mutual fund shares is requested, the fund must redeem shares within
7 calendar days
The maximum annual contribution of earned income to an IRA for a person over 50 is
7K
cold calling time limits
8am-9pm in customer time zone
All of the following information is required when submitting a Form U-4 for a registered representative EXCEPT A) Tax returns for the past 3 years B) Employment history for the past 10 years C) Social Security Number D) Residential history for the past 5 years
A
An insurance company's separate account is not directly managed by its investment managers. This separate account is A) Registered as a unit investment trust under the Investment Company Act of 1940 B) Is not registered under the Investment Company Act of 1940 C) Registered as a closed-end investment company under the Investment Company Act of 1940 D) Registered as an open-end investment company under the Investment Company Act of 1940
A
Which of the following are least likely to be found within an insurance company's general account? A) Common stock B) Corporate bonds C) Cash D) Treasury bonds
A
Which of the following statements is not accurate with respect to a warrant? A)There is no secondary market available for these securities. B)They usually have longer timeframes than a right, another type of equity security. C)They will have value if the share price appreciates above the exercise price. D)They are typically issued in connection with other securitie
A
in order for a firm to begin business as a broker-dealer, it must have satisfied all of the following requirements EXCEPT A) Received approval from the SEC B) Become a member of an SRO C) Filed Form BD D) Become a member of SIPC
A
Which of the following is a type of risk not commonly associated with ADRs? A) Call risk B) Political risk C) Currency risk D) Inflation risk
A ADRs do not carry call risk, as they are equity securities and as such the issuer does not have the right to redeem the shares from the investor.
Which type of open order is not adjusted for a cash dividend? A) Buy Stop B) Sell Stop-limit C) Buy Limit order D) Sell stop
A Orders above the market are not adjusted for corporate events. Only orders below the market, such as buy limit, sell stop and sell stop limits, are adjusted.
Who is the issuer of a banker's acceptance?
A borrower with a bank deposit account
STOP order
A market order activated once a security has passed a pre-specified limit.
Fourth Market
A market where large block trades of both listed and unlisted securities trade
The Bank Secrecy Act requires MSRB member firms to develop and implement a (an)
Anti-money laundering compliance program
An investor is concerned that he may receive his payment of invested principal at a time when interest rates are low. Which of the following is LEAST suitable for the investor?
A municipal bond with a call feature This investor is concerned with reinvestment risk, a risk associated with callable bonds. Issuers call bonds when interest rates have fallen.
According to Rule 144, which of the following persons is NOT a control person?
A non-affiliate who has obtained non-public information about the issuer of the stock
A mutual fund's investment manager is paid
A percentage of the assets held by the fund
An official statement is not yet available for a new issue of municipal securities. In this situation
A preliminary official statement can be used if available, but a final official statement must be furnished as soon as possible
In a tender offer, the price that the acquiring party is offering to pay to existing investors is
A premium to current market value
Which type of business is the most likely the target of a private equity firm?
A private company that is underperforming
An individual who has made an initial payment for a deferred variable annuity contract owns
Accumulation units
Primary offerings after the IPO are referred to as
Additional Public Offerings or Subsequent Public Offerings
Andrew is taking a new job with a company that offers a defined contribution plan. He is age 22. When can he expect to become eligible to participate in the plan, under ERISA's general eligibility standard?
After one year of work service
Execution at quote
An execution at the quote means a buy order is executed at the national best offer and a sell order is executed at the national best bid.
An investor in a mutual fund owns
An undivided interest in the shares of the securities held by the mutual fund
All of the following options are typically available to investors at the termination of a UIT EXCEPT A) Rollover into a new series of the same trust B) Receive a return of the principal that was invested C) Receive an in-kind distribution D) Receive proceeds in cash
B
Why are U.S. Treasury Securities used for conducting Open Market Operations?
Because the market for these securities is the broadest and most active in the U.S. financial markets
All of the following statements are true of a callable convertible preferred issue EXCEPT that A) the convertible is issued with a lower stated dividend rate than a nonconvertible preferred B) the stockholder must surrender the preferred when called or lose the right to par value C) dividend payments stop after the preferred is called D) the convertible preferred can increase in price because of the underlying security
B
An issuer will send proxy statements directly to the beneficial owner of the securities when they are held in all of the following forms EXCEPT A)DWAC B)Street name C)DRS D)Registered physical certificates
B
With regard to the price of closed-end fund shares held by investors which of the following statements is TRUE? A)Shares are sold at a discount when the securities in the fund have increased in value relative to their NAV B) Shares may be sold at a discount or premium to their NAV C) Shares are sold at the price calculated at the close of business on that day D) The price is set by formula each business day
B
In an underwriting of corporate securities, syndicate members participate in the distribution of the securities (what agreement, and with or without financial responsibility)
Based on the terms of the Agreement Among the Underwriters and With financial responsibility for unsold securities
Bid- ask (if i want to sell)
Bid what the market maker is willing to pay
A client owns a portfolio of blue chip stocks that is to fund his retirement in 10 years. Although confident that the market will continue to advance, he is concerned that a market correction of more than 10% could wipe out significant value. Which of the following strategies might benefit this investor?
Buy index puts
An investor buys a December 45 call for 6 when the current market price of the stock is 46. Which of the following statements is true? A) The contract has no intrinsic value B) The contract has intrinsic value of $1 C) The contract has intrinsic value of $100 D) The contract has time value of $100
C
Hal buys a $50,000 certificate of deposit (CD) from his bank. Which one of the following features is the CD not likely to have? A) Fixed maturity B) FDIC insurance C) Can be resold D) Interest payable through maturity
C
Which of the following best characterizes the role of the SEC with respect to an offering of securities by an issuer? A) They endorse the offering for public sale. B) They advise the issuer on the best time to conduct a public sale. C) They clear the offering for public sale. D) They approve the offering for public sale.
C
Puts or calls of the same issuer share the same
Class
From a capital perspective, an ETF is structured most like what other investment (and why)
Closed end company Each of these investments has a fixed capitalization. After its initial IPO, there are not additional shares issued.
Which type of investment company product issues a single class of shares only and trades on the market at a discount or premium to its NAV?
Closed-end company
Manufacturing sales is what kind of economic indicator?
Coinciding Coincident indicators provide a snapshot of the economy's current level of health.
In which type of underwriting is a securities issuer most likely to get the best price with the least risk?
Competitive bid, firm commitment If issuers want the best price for shares with the least risk of unsold shares, they should elect a competitive bidding process with a firm commitment by the underwriter. Issuers may choose a negotiated process if underwriter-selection criteria other than price (comfort, relationship) are important. Firm commitment means the underwriter buys shares from the issuer, regardless whether these shares can be resold to the public.
What type of communications with the public is made available to 25 or fewer retail investors in any 30 calendar-day period?
Correspondence
Coverdell ESA's age rules
Coverdell ESA's can be opened for any student who is under the age of 18, and the assets must be used / withdrawn by the time the individual reaches the age of 30.
Securities Investor Protection Corporation (SIPC)
Created under the Securities Investor Protection Act of 1970, this agency oversees the liquidation of insolvent brokerage firms and provides insurance on investors' trading accounts. -all BDs must be SIPC members except for firms that deal exclusively in (munis, government securities, and redeemable investment company securities)
All of the following statements are true regarding private REITS EXCEPT A)They do not trade in the public markets B)They are exempt from many disclosure requirements under the Securities Act of 1933 C)they lack liquidity D)They are sold to public, accredited and institutional investors
D
All of the following statements regarding penalties for insider trading and securities fraud are true EXCEPT A) Both the tipper and tippee can be liable and subject to penalty under the Act B) A bounty is payable to persons who inform the SEC of insider trading activities C) Violators may be subject to civil penalties equal to three times the profits made or losses avoided D) Violators may be imprisoned for no more than 5 years if proven guilty
D
All of the following statements regarding the margin account disclosure statement are true EXCEPT A)The margin account disclosure must inform the customer that the firm can force the sale of assets without the customer's approval to meet a margin call B)Delivery of the margin account disclosure statement is required at or prior to the opening of the account C)Margin account disclosure delivery can take place physically in hard copy form or electronically D)A follow-up margin disclosure must be delivered to all margin customers at least once every 3 years in writing or electronically
D
Money market funds offer all of the following EXCEPT A)Higher interest than interest bearing bank accounts B)High degree of safety and liquidity C)Net asset value per share that historically has not fallen below $1.00. D) Insured by the FDIC
D
Under FINRA's Standards of Commercial Honor and Principles of Trade all of the following may be considered by a firm when charging a commission in an agency transaction, except: A)market conditions with respect to such security at the time of the transaction B)the expense of executing the order C)the value of any service rendered by reason of the firm's experience D)the fact that the firm is entitled to a profit
D
The notification and disclosure provisions that apply when an employee of a broker-dealer opens an account with another firm are waived for accounts limited to transactions in all of the following EXCEPT A)UITs B)Variable life policies C)Mutual funds D)ETFs
D Accounts that involve transactions in ETFs are subject to the FINRA disclosure and notification requirements when opened by employees of other firms.
MF no-load shares
Directly marketed shares with no sales fee
The function of the sponsor of the fund is
Distributing shares of the fund
Distributions from a CMO are made
Distributions from a CMO are made on monthly basis and are taxed at the federal, state, and local level. Their monthly distributions make them appropriate for investors who are seeking income on a monthly basis.
Transfer Agent
Entity responsible for ensuring that securities are issued in the owner's correct name. § Cancelling old, and issuing new securities § Maintaining records of ownership § Handling issues related to lost, stolen, or destroyed certificates.
Two options contracts would be in the same series when they have common
Expiration months and strike prices
who enforces MSRB rules within securities firms
FINRA
Broker dealer definition
Firms that stand ready to buy and sell securities in the hopes of making a profit
When large sums of money are transferred through sophisticated financial transaction to separate the funds from their illegal source, this is an example of
Layering
When a registered rep's association with a FINRA member firm is terminated, the firm must file (form and time frame)
Form U-5 with FINRA within 30 days
Money laundering (placement)
Funds or assets are moved into the laundering system
Ginnie mae vs Fannie Mae and Freddie mac
Ginnie mae is backed by US
to qualify as an "accredited investor" under the SEC's Regulation D, a single person would need to have income of
Has a net worth over 1MM at least $200,000 in each of the two most recent years
IPO selling group
Helps sell shares no financial commitment to deal
im is a single person covered by a retirement plan at work. He is told by his accountant that only part of his Traditional IRA contribution is deductible this year. Why is this true?
His income level falls in a particular range
All of the following are means of backing general obligation bonds EXCEPT Hotel occupancy taxes B) Ad valorem taxes C) Sales taxes D) Acts of state legislature
Hotel occupancy taxes
An exchange-traded note is a combination of which two of the following? I. a bond II. a pool of commodities III. a derivative IV. a pool of real estate
I and III
When designing its continuing education program, a firm must require that all covered persons complete I. Firm Element training annually II. Regulatory Element training annually III. Regulatory Element through a computer based module, and Firm Element through the method the broker-dealer has determined most appropriate
I and III
Which two of the following statements are TRUE regarding bond UITs? I. They issue a set number of units and their offerings are then closed II. They issue as many units as necessary to complete their IPO III. They are redeemable IV. They are exchange traded
I and III
A customer purchased a 5% U.S. government bond yielding 6%. A year before the bond matures, new U.S. government bonds are being issued at 4%, and the customer sells the 5% bond. The customer probably I. bought it at a discount II. bought it at a premium III. sold it at a discount IV. sold it at a premium
I and IV
A registered rep intends to begin working for a start-up company during off hours. Although not receiving compensation currently, she expects an equity position in the firm and eventual payment for her work. According to FINRA rules, this representativ e I. Must provide written notice to her employer II. Is not required to provide notice to her employer III.Must receive permission from her employer before accepting the position IV. Is not required to receive permission from her employer before accepting the position
I and IV
An increase in corporate inventories is I. A leading indicator II. A lagging indicator III.A sign of economic growth IV. A sign of economic decline
I and IV
Which TWO of the following are TRUE of a broker-dealer's obligation to provide notice to customers of its Customer Identification Program? I. Notice must be given when the account is opened. II. Notice must be given at account opening and annually thereafter. III. Individual copies of the notice must be delivered to the customer. IV. The notice must be provided by any means that ensures the customer will be able to view it.
I and IV
Under the Securities Exchange Act of 1934, the SEC does which of the following? I. Regulates securities exchanges. II. Requires the registration of brokers and dealers. III. Prohibits inequitable and unfair trade practices. IV. Regulates over-the-counter markets.
I, II, III and IV
Which of the following are acceptable options for delivery of Firm Element education? I. Computer-based training modules prepared by outside vendors II. Face-to-face training delivered by the firm's compliance department to all registered representatives III. Pre-recorded web conferences presented by high level product experts within the firm
I, II, and III
A dealer purchases municipal securities for its inventory from another dealer. This transaction is I. an agency trade II. a principal trade III. compensated with a mark up IV. compensated with a commission
II and III
The tax advantages a limited partnership offers I. Should be the primary reason an investor chooses a limited partnership as an investment choice II. Should be of use to the investor if the partnership investment is recommended III. Are most useful in sheltering other passive income IV. Are most useful in sheltering ordinary income
II and III
Which two of the following documents would be considered an advertisement under MSRB rules? I. a dealer offering sheet II. an abstract of an official statement III. a form letter IV. an interoffice memo
II and III
Which two of the following statements describe closed-end funds? I. They are a continuous primary offering II. There is a fixed number of shares III. Shares are liquidated through exchange trading IV. Shares are redeemed by the fund
II and III
An investor that holds units in a UIT needs to liquidate the units. These units will be I. Sold to another investor on an exchange II. Sold to the issuing trust III. Worth at least the price at which they were issued IV. Valued at the end of the business day of the transaction based on the assets held in the trust
II and IV
Under the terms of a selected dealer agreement, participant firms I. act as principal II. act as agent III. may distribute registered securities only IV. may distribute either registered or unregistered securities
II and IV
When a customer purchases a new municipal bond, the interest included in the accrued interest calculation I. begins on the trade date II. begins on the dated date III. includes the settlement date IV. does not include the settlement date
II and IV
Which of the following are "fiduciaries" covered under FINRA Rule 2060's restrictions on using information about the ownership of an issuer's securities to solicit transactions ? I. Broker-dealers II. Transfer agent III. Registered Representative IV. Trustee
II and IV
hich TWO of the following statements are TRUE of FINRA requirements for the designation of contact persons for a broker-dealer's business continuity plan? I. Firms must designate a single emergency contact person. II. Firms must designate a minimum of two emergency contacts. III. Updates of the emergency contacts must be made through WebCRD. IV. Updates of the emergency contacts must be made within 30 days.
II and IV
For purposes of calculating the Required Minimum Distribution (RMD) from a Traditional IRA, which life expectancy factors are used?
IRS tables
Money Laundering (Integration)
Illicit funds are integrated with legitimate funds
When must proxy materials be filed with the SEC?
In advance of the shareholder solicitation
rule 147
Instate business qualifications (only must meet one of the following) o 80% of revenue in a state o 80% of assets in a state o 80% of net proceeds used in a state o Majority of employees are based in a state - Can raise unlimited capital - As often as they want - Can sell to in state residents o Those residents can sell across state lines after holding shares for 6 months
Repurchase agreement
Institutions raise cash (funding) by temporarily selling certain securities with the promise to buy them back
When a UIT reaches the termination date specified at its creation, the trust
Is dissolved and no longer active
Cleo wants to make sure she gets a good price when she sells her 400 shares of Time Warner stock. If she enters a stop order to sell the shares at $11, what is the worst price she can get? and why
It isn't known The stop order will convert into a market order when any shares of Time Warner sell at $11. However, there is no guarantee of the next-sale price.
Which of the following is TRUE of the yield of a bond that is trading at a price that is $80 more than its face value?
Its coupon yield will be higher than its current yield
Joe is a registered rep currently employed by Windy City Broker-Dealer, a Chicago based firm. Joe recently graduated from college and is working to pay down his student loan debt. In order to get his finances in order in a timely fashion, his parents, who also happen to be clients of the broker-dealer, agree to lend him $50,000. Which of the following is true regarding this action?
Joe can borrow money from his parents provided that the firm has written supervisory procedures addressing the scenario.
client and his business partner open an account together that allows them to share profits and losses in the account based on a 30/70 split, and will pass to their heirs at death. This account is a
Joint Tenants in Common (JTIC)
------ allows an investor to receive a sales charge discount on a current purchase by combining it with future purchases within the next 13 months
Letter of intent
What types of contributions may employers make to a 401(k)?
Matching or profit-sharing
A customer makes a stock purchase and two months later the company goes bankrupt and the stock becomes worthless. The registered rep (reimbursement forms)
May not offer to reimburse this customer, as no guarantees may be made against financial loss.
Roth IRA contribution age cap
NONE
The role of the specialist (Designated Market Maker) is most closely associated with what market
NYSE
When must a confirmation of purchase of equity securities be sent to the customer?
No later than the date of settlement
Which date relating to dividends generally occurs last?
Payable
Which of the following would have the smallest impact on the share price of an OTC listed REIT? A) Lack of liquidity B) Market conditions C) Occupancy rates D) Pending mortgage applications
Pending mortgage applications
A registered representative would like to open a brokerage account at a different firm, where his friend recently accepted a position. This is
Permitted, with prior written consent from the employer
seriel bond
Portion of Principle paid off at intervals over a period of time
balloon bond
Portion of principle paid off prior to maturity, but the majority is paid off at maturity.
Equity includes (balance sheet)
Preferred Stock, Common Stock, Additional paid-in Capital, Treasury Stock, Retained earnings.
If an investor is holding callable preferred stock, she should be
Prepared to sell her shares back to the company
Conversion price
Price paid per share upon conversion
Which of the following receive the least amount of their revenue from property taxes?
State governments
The correct order of these interest rates, from high to low is: Discount rate, Broker's call rate, Prime rate, Federal funds rate
Prime rate, Broker's call rate, Discount rate, Federal funds rate
Pursuant to Regulation S-P, a broker-dealer must provide a privacy notice to a customer
Prior to engaging in any securities business with that customer.
A broker-dealer is excluded from registration as an investment adviser if both of two tests are met. One test is receipt of no special compensation for advisory services. What is the other test?
Providing advisory services that are solely incidental to the main business
To establish a short position in one XYZ two-year 90 LEAP puts at $13, an investor will (pay/recieve how much)
Receive $1,300
Fed selling securities effect on money supply and rates
Reduces money supply and raises rates
Retiring an outstanding bond issue at maturity by using money from the sale of a new offering is known as
Refunding
-------is/are most likely backed by fees, tolls or concessions?
Revenue bonds
key difference between a Traditional IRA and a Roth IRA?
Roth IRAs are not available to everyone with earned income, but Traditional IRAs are.
act that created SIPC
Securities Investor Protection Act of 1970
The option strategy presenting the greatest potential risk to an investor is a
Short call
Under the intrastate offering rule, when may a resident purchaser of the securities resell them to a nonresiden
Six months after the last sale made by the issuer
--- receives the least amount of their revenue from property taxes?
State governments
In interest-bearing corporate bonds, accrued interest that is due the seller must be included in settlement. According to industry rules, the accrued interest must be calculated up to what date?
T + 1 For interest-bearing fixed income securities, interest is accrues up to (but not including) the settlement date, which is the second business day following the trade date (T+2). Put differently, accrued interest includes the trade date and T+1, but not on T+2 (settlement). On T+2, the interest accrues to the buyer of the bond.
Treasury debt settlement time
T+1
Unlike most other packaged investment products, hedge funds are exempt from
The Investment Company Act of 1940
best source of financial information about an issuer for potential investors?
The Official Statement
The regulation that requires the appointment of an independent fiduciary to act on behalf of bondholders and periodic filing of financial information by corporate issuers is
The Trust Indenture Act of 1939
working capital
The amount of available capital a company has to work with · Increased by higher profits, sale of securities, and sale of non-current assets. · Decreased by declared dividends, paying off long-term debt, and net losses
In order to receive a cash dividend payment based on regular way settlement process, an investor must purchase stock no later than
The business day before the ex-dividend date
In which of the following situations would it be appropriate for a registered representative to lend money to a client without receiving permission from the firm?
The client is a financial institution engaged in the business of lending money.
An institutional account may be able to qualify for an exemption from
The customer-specific aspect of the suitability rule
FINRA (Code of Arbitration (COA)
The dispute resolution arm of FINRA. Handles non-monetary disputes. COA decisions are final and binding
An associated person has a mutual fund account with another broker-dealer. According to industry rules, which of the following statements is true?
The mutual fund is not required to notify the employing firm or offer duplicate confirmations in this situation.
Money laundering (layering )
The origins of the cash are concealed
MF share class B
The sales fee is paid when the investor sells the shares. -sales fee drops over time incintivizig investor to hold shares
A municipal finance professional at JoeBrokerDealer made a contribution of $250 to a candidate in a local election. A month later the MFP joined a new municipal securities firm, JaneBrokerDealer. With regard to the campaign of this candidate, if the MFP makes another $250 contribution to the same election
The underwriting ban will be triggered for JaneBrokerDealer
A customer has a Roth IRA, and he wants to delay taking money out as long as possible. If he lives to be 100, at what age must he begin taking minimum distributions?
There is no such requirement
Which of the following statements is true of Treasury Notes? A) They cannot be traded in the secondary market B) They have a minimum purchase amount of $100 C) They are the shortest maturity of U.S. government securities D) They are issued at a discount and mature to face value
They have a minimum purchase amount of $100
over-the-counter trading of exchange-listed securities takes place in which market
Third
An investor would like to achieve monthly income from a mutual fund investment that has the highest level of principal protection available. A suitable recommendation is a
U.S. Government Bond fund
In which of the following investments is the investor most likely to hold an interest in the same securities for the life of the investment?
UIT
post effective period
Underwriter sells shares
A customer that invests in a unit investment trust owns
Units in a fixed portfolio of securities
What term specifies an ERISA plan participant's right to receive benefits from the plan, without a risk of forfeiture, such as the participant's dismissal from work?
Vesting
FINRA has revoked the registration of a registered representative due to a violation of SEC regulations. In this case the representative may
When FINRA has canceled the registration of a representative, the firm may not allow the representative to act in any capacity and may not pay compensation earned after the revocation.
An order ticket, or memorandum, must be completed
When a customer's order is received
In which case will an open buy limit order not be adjusted by the amount of a cash dividend paid to shareholders of record?
When the order is marked Do Not Reduce "DNR" Also, orders are not adjusted for dividends of less than one cent.
When securities are purchased by investors in a Regulation D private placement, what determines the required holding period, before they can be sold?
Whether or not the issuer reports financial information to the SEC
he registrar is best characterized as the entity
Who maintains records of ownership of securities
A bond issued by a well-known and highly rated municipal issue (compared to 10 year t bond)
Will trade at a relatively low spread relative to the U.S. Treasury 10 year bond
A registered rep has violated an SEC rule, resulting in termination of employment. This individual is now the subject of a statutory disqualification and
is ineligible for registration
Claire is a stay-at-home mother who is married to Ken. They file a joint tax return. She has no income of her own. Can she have a Traditional IRA?
Yes, if her husband works and has compensation
Bond is trading flat
a bond that trades with no accrued interest (zero coupon bonds)
exchange offer
a company exchanges new securities for old ones. the old and new securities MUST have the same issuer
Joint Tenants with Rights of Survivorship (JTWROS)
a deceased tenant's interest in the account passes to the surviving tenant
reverse repurchase agreement
a lender borrows a security and agrees to return it for a higher price.
who grants approval for advertising by a RR
a registered principal of the RRs firm
Broker definition
act as intermediary (Broker)
how to calculate NAV
adding the total value of the fund's investments, subtracting the fund's fees and expenses, and dividing this figure by the number of shares of the fund that investors currently own.
For the purpose of FINRA rules involving borrowing and lending money to customers, an immediate family member is a(n) I. grandparent II. Aunt or uncle III. Cousin
all
1035 exchanges
allows annuity investor to make a tax free transfer of one annuity contract for another
current yeild calculation
annual interest/current price
how often must firm elements training be completed
annually
who is able to set up a 529 plan and contribute to it
any adult
how are qualified variable annuities taxed upon distribution
as ordinary income
bid- ask (if i want to buy)
ask what market maker is willing to accept
In a firm commitment offering, the underwriter
assumes the risk of selling the entire allotment of securities.
to qualify as an "accredited investor" under the SEC's Regulation D, a married couple would need to have income of
at least $300,000 in each of the two most recent years
Restricted Securities (time to hold until sale)
at least 6 months
when must an options disclosure document be provided to a customer
at or prior tot he time the account is approved for options trading
in a best-efforts offering, an underwriter
attempts to sell the newly issued securities to the public, but makes no guarantees, and takes on no financial risk.
Prime rate:
is the interest rate that commercial banks charge their most credit-worthy customers
An investor interested in a general obligation bond versus a revenue bond
is willing to accept a lower yield in return for taking less risk
Eurodollar bond
bond traded or issued outside of the US but is denominated in USD
margin account loans are typically assessed based on what
broker call rate
the primary purpose of a syndicate desk is to
build an order book and allocate the stock
penalty free withdrawals from a traditional IRA pre 59.5 for college tuition
bust be used for qualified expences
When must traditional ira distributions begin
by age 72
how are official statements used
by syndicates in the marketing of the issue
why is comingling prohibited
it places the customers securities at risk if the BD defaults on a loan
What will an investor own after exercising a warrant at its strike price?
common stock
a municipal issuer invites bids from potential underwriters and gives the deal to the firm offering the lowest interest cost to the issuer this is a
competitive bid
529 plan (tax and non relatives)
contributions are tax deductible non relatives may establish plans for a beneficiary
A statutory disqualification may be imposed if, within the past ten years, an individual has been
convicted of a securities misdemeanor
20 days after registration of a security
cooling off period
A bond indenture requires an issuer to maintain adequate financial ratios and reserve funds to pay bond interest. Such provisions, designed to protect bond holders, are called
covenants.
the US patriot act
covers anti-money laundering policies and procedures that must be followed by financial firms
securities investor protection act of 1970
covers the protection threshold for customers in the event of BD bankruptcy
Insider Trading and Securities Fraud Enforcement Act of 1988
defines penalties for the misuse of materials NPI by both firms and individuals
who signs the Customer New Account form
designated principal
Selling away
engaging in private securities transactions without written prior consent of the employing BD
Account Custodians and Trustees definition
entity responsible for making all investment, management, and distribution decisions in an account. All decisions are made on a fiduciary basis.
-American Depository Receipt (ADR)
equity security designed to simplify foreign investing for Americans
a secondary offering is---
existing investors are selling some or all of their shares in to the open marketplace.
Every year a mutual fund will examine its operating expenses as a function of the average dollar value of its assets under management. This item is published as the mutual funds'
expense ratio
dealer definition
facilitate trade form own balance sheet
what is the most volitile interest rate
federal funds rate rates banks charge other banks for overnight loans
Interest received from a Treasury Bond is taxed at the
federal level but not the state or local level.
Revenue Bonds
finance any municipal facility that generates sufficient income to self-fund the issuance
IPO syndicate
firms committed to underwrite shares will buy own unseld shares
The function of the transfer agent of the fund is
for customer redemptions and other services
Ad valorem taxes are most likely used to support issues of
general obligation bonds issued by a city.
investment advisor act of 1940
governs the regulation of firms that earn fees from providing investment advise
investment company act of 1940
governs the regulation of packaged products such as MF, closed-end funds, and unit investment trusts
If a bond is trading below face value, current yield will be the ------of the two.
greater
fixed annuity returns are...
guaranteed at a fixed rate
A bond is trading at a premium. Therefore, the nominal yield will be _______ than the YTM
higher
at issuance, warrants are issued at what price relative to the underlying security
higher than the current market value
What determines whether Pablo can make a Roth IRA contribution this year?
his income oth IRA contributions are available only to taxpayers who work, earn compensation, and have income below a certain dollar amount.
A client has just started her traditional IRA. when will she will be vested
immediately
when is a standby offer used
in a rights offering
Pre-refunding or advance refunding occur if the issuers sells the new bonds...
in advance of the first available call date, typically to lock in a lower interest rate.
fed Buying securities effect on money supply and rates
increases money supply and lowers rates
fixed annuity premiums are invested into
insurance company general account
variable annuity premiums are invested into
insurance company seperate account
The practice of returning illegal funds to their original source through the legitimate banking system i
integration
private activity bond taxation
interest is fully taxable
A dealer buying debt securities from a customer with an agreement to sell the same securities back to the same customer at a later date is taking part in
reverse repurchase agreement
a non-deductable ira referes to a
roth ira
The function of the Custodian of the fund is
safekeeping
cooling off period
sec reviews registration statement underwriter markets the new securities but cannot sell
The agreement that specifies rules for the group of financial institutions who assist an underwriter in the sale of a new securities issue but do not have responsibility for any unsold securities is a(n)
selected dealer agreement
selling of Open end company (MF)
shares are redeemed to the fund by the holder and are priced at NAV
Tax Anticipation Notes (TANs)
short term municipal instruments that are issued in anticipation of an upcoming tax collection. example- Schools are supported by property taxes, so TANs can be used to provide interim financing until the tax revenue is available.
nonsystematic risk
specific business risk -diversifyable
Coupon yield ----over the life of a bond while current yield
stays consistent changes
rising interest rates effect on usd
strengthens
Listed options have standardized ........strike prices and expiration dates
strike prices and expiration dates
Cash dividends paid on common shares held for fewer than 60 days are
taxable as ordinary income
Who actively manages the business of a limited partnership?
the General Partner
what is the cost basis of an inherited mutual fund
the NAV of the shares when the owner dies
under reg S-P what is something the firm must include in the customer privacy and optout notices
the polices to protect the security of non public information
rising rates effect on mortgage prepayments
they will decine When interest rates rise, fewer homeowners will be inclined to prepay their mortgages, thus causing refinancing activity to slow down.
Who wants strong exchange rate (stong USD)
those with revenues in USD
selling of Closed end company
traded on secondary market
A bond is selling at a price of 81 with all coupons since July of 2011 attached. This bond is said to be
trading flat with unpaid coupons attached
The function of the investment advisor of the fund is
trading of the fund's portfolio
a deductible ira refers to a
traditional ira
