SIE exam
Which of these statements regarding options are true? Investors who are bullish on a stock should buy calls. Investors who are bullish on a stock should buy puts. Investors who are bearish on a stock should sell puts. Investors who are bearish on a stock should buy puts.
I and IV
Which of these may be found in the final prospectus that is not in the preliminary prospectus? Next year's sales Public offer price Release date Planned use of the proceeds
II and III
Which of these would not be included in a mutual fund's list of expenses? Shareholder records and service Investment adviser's fee Broker-dealer sales charges Underwriter's sales loads
III and IV
Which of the following contracts do not have intrinsic value if the strike price is 40 and the market price is 30?
Long call and short call
Which of the following has an obligation and is bearish on the stock?
Long put
All of the following are exempt issuers except
Modulux, Inc., a home manufacturer.
Which type of DPP would be most likely to enable the investor to claim a deduction for depletion?
Oil and gas income program
Which of these statements regarding a general partnership is correct?
Partners participate in the gains and losses of the business and are fully liable for the businesses actions.
Which of these is not considered an advantage of owning an exchange-traded fund?
Pass through of losses
Which of these would not affect the NAV per share of a mutual fund share?
Portfolio securities that had to be sold for a big capital loss
An investor is convinced that CDT stock will soon decline in value for a number of reasons. Which investment strategy will allow the investor to take advantage of the anticipated decline in share value with the smallest cash investment?
Purchase a put option
Which of these would cause a change in the net asset value of a mutual fund share?
The market value of the portfolio declines
Mikayla is a big fan of Seabird Coffee and is an enthusiastic investor. She currently owns 1,000 shares of the company stock and 10 call contracts on the stock as well. What is her maximum gain for this position?
Unlimited gain on the stock and the option position
Before an option trade may be entered for a customer, that customer's account must be approved for option trading by
a Registered Options Principal.
A risk that is specific to a particular issue or issuer is
a nonsystematic risk.
The Windmill Growth Fund has breakpoints at $10,000, $25,000, and $50,000. Your customer places an unsolicited purchase through you for $47,000. You place the trade as requested without question or comment. This action is
a rules violation.
Modulux, Inc., a NYSE listed manufacturing company, was founded by Clarence Mod. Clarence is now 82 years old and is looking to divest his significant interest in Modulux to capitalize the Mod Family Foundation, a charity. He has enlisted the help of Seacoast Securities, a regional investment banker based in Seattle, to run the sale. This is an example of
a secondary offering.
A state sponsored investment pool designed for municipalities with short-term cash investment needs is called
an LGIP.
A central, physical, marketplace where securities are traded through a designated market maker is
an exchange.
The Mod Family Foundation is a $500,000,000 charitable foundation headed by Clarence Mod. The foundation is seeking to purchase a large block of WeariTech, Inc., a Nasdaq listed company, for the foundation's portfolio. Seacoast Securities is assisting with this secondary market transaction. In this example, the Mod Family Foundation is
an institutional investor.
On a short put, when the premium equals the intrinsic value, the put is
at parity
Your customer, Ford, wrote 5 SPX (S&P 500 equity index) 2990 call options. Today, Tuesday, he received word that his options have been exercised. The SPX closed at 3000. He will have to deliver
cash tomorrow.
A strategy that blends various types of investment in an effort to reduce nonsystematic risk is called
diversification.
The risk that a stock will not appreciate in value due to poor cash flow is an example of
nonsystematic risk.
The breakeven on a short call is
strike + premium.
All of these are true for an Achieving a Better Life Experience account except that
the account must be opened before the beneficiary turns 26
A corporation seeking to raise funds in order to expand its manufacturing capacity would do so in
the capital market.
Great Plains Securities, an OTC market maker, holds inventory and provides liquidity for Modulux Homes, an NYSE listed company. This is an example of
the third market.
One characteristic of an open-end investment company that distinguishes it from a closed-end one is that
there is a continuous public offering.
The exercise of an equity option requires that stock must be delivered
two business days after the exercise.
An investor is short a January 30 call at 5. Maximum loss for the investor is
unlimited.
Risk that prevails despite diversification within an asset class is
unsystematic risk.
If a customer had a large cash position and was interested in purchasing stock at prices below where they are today, an option strategy would be to
write covered puts that are currently out of the money.
Darcy owns 5,000 shares of English Manor Properties. It is her belief that the company is unlikely to grow much over the next year. She is curious how she might generate some additional income from the position as English Manor pays a paltry dividend and she asks about covered calls. You tell her that
writing calls against her stock position is a conservative strategy for generating income
Skye purchased 100 shares of Moreno, Inc., for $20 a share. One year later, she sold the shares for $21 dollars. Over the year, Moreno paid a $0.25 quarterly dividend. What was Skye's gain or loss and how much investment income did she earn?
$1 gain and $1 in income
A new client of the member firm has just opened a margin account. After account approval, the client's initial trade is an order to purchase 100 shares of LMN common stock at $25. With Regulation T at 50%, in order to be in compliance with all regulations, the client would need to deposit
$2,000.
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?
$450,000
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?
$450,000—split evenly between the two people
Seabird Airlines common stock is listed on the NYSE. Appalachia Securities is an over-the-counter market maker and has a posted quote for Seabird of 55.25-55.50. If Appalachia wants to enter a new quote, the smallest incremental change is
0.01.
A trade of an equity option settles in ( ) days, while an exercise of an equity option must be completed in ( ) days.
1,2
Written complaints are kept for
10 years. B) three years. C) six years. D) none of these. answer d
Drew purchased 100 shares of Moreno, Inc., for $20 a share. One year later, he sold the shares for $21 dollars. Over the year, Moreno paid a $0.25 quarterly dividend. What is Drew's total return?
10.00%.
A 73-year old client in the 25% income tax bracket withdraws $20,000 from her traditional IRA. Based on her life expectancy, the withdrawal should have been $30,000. How much tax will she owe?
12,500
A broker-dealer has hired an individual for the position of a registered representative. The individual is struggling to pass the necessary qualification exam and has failed four times. After that fourth failure, the applicant faces a waiting period of
180 days.
After terminating from a securities firm and leaving the industry, regulators retain jurisdiction for a former representative for a period of
2 years.
Your customer purchased 1,000 shares of SmallCo Stock at $10 a share. SmallCo pays no dividends. Exactly one year later, the customer sold the shares for $12 a share. They realized a
2,000 short-term capital gain
On March 3, the board of directors of Seabird Airlines declares a $0.20 a share dividend payable to holders of record, as of March 30. Seabird stock jumps on the news from $35 a share to $40 a share on the news. The current yield of Seabird stock is
2.00%.
Minimum maintenance requirements in a long margin account is
25%.
The TCPA requires that businesses that solicit by phone maintain a do-not-call registry that must be republished every
30 days.
A client and his spouse own shares in the KAPCO Fund as tenants in common. He has a 60% ownership interest in the account and the spouse has the balance. If the client dies, what happens to the shares in the account?
40% of the shares would belong to his spouse and the remaining balance would be distributed to his estate.
A client entering a sell limit order at 43 would accept which of these trades?
44
Individual retirement accounts allow a catch-up contribution of $1,000 to be made into the account for those who are
50 years old or over.
An investor has her registered representative enter a sell stop limit order at 50. Following the order entry, trades occur at 52, 50, 49, 51, and 53. The investor would receive
51
Your customer purchases 200 shares of Seabird Airlines (the ticker is SBRD) at $30 a share in a cash account. Under Regulation T, the Federal Reserve has set the initial margin requirement at 50%. How much does your customer need to deposit for this trade?
6,000
Cypress Care Nurseries, Inc., owns and operates a chain of nurseries and is headquartered in Cypress, California. The company is considering selling shares of the company to the public in California. In order to be exempt from registration with the SEC, under Rule 147 it would need to meet several criteria. Which of these is not a listed criterion under Rule 147?
80% of the issuer's customers must be located in the state of California
To fill a customer buy order, over-the-counter, your broker-dealer requests a quote from a market maker for 800 shares. The response is 15 bid, and ask 15.25. If the order is placed, the market maker must sell
800 shares at $15.25 per share.
The Big Shoe Sneaker Company is a small manufacturer of athletic shoes. It is selling $100 million of its stock. This will be its first public offering. It will use the money to enhance both marketing and production with a plan to grow the business and obtain a Nasdaq listing in two or three years. After the initial sale of the new shares, buyers of the stock in the over-the-counter market should expect to receive the final prospectus for how many days?
90
our customer has performed the following trades Bought 200 shares of ABC at $40 Bought 400 shares of ABC at 50 Sold 600 shares of ABC at 55 What is the result of these trades?
A $5,000 gain
Which of these is not correct? A) There is no annual contribution limit for a 529 plan. B) There are no earnings limits for those contributing to a 529 plan. C) Both a 529 College Savings Plan and an ESA may be used to pay for pre-college education expenses. D) A 529 plan's assets must be used by age 30, an ESA does not.
A 529 plan's assets must be used by age 30, an ESA does not.
A broker-dealer may extend credit under Regulation T for which of these transactions?
A closed-end investment company purchased on the NYSE
FINRA rule 2210 on communications with the public would apply for all of the following except
A voicemail left for a customer
An investor has a long position in ABC Chemical Corp. (ABCCC), with a substantial unrealized loss. Wishing to use that loss to offset realized gains, the investor sells the stock. In reinvesting the proceeds of the sale, the investor could avoid violating the wash-sale rule by purchasing
ABCCC put options.
Which broker-dealers or investment advisers are obligated to maintain a business continuity plan?
All federally covered broker-dealers and investment advisers
Which of these business structures would pass through the results of the business to the owners and protect the owners from the liabilities of the company?
An LLC
On a long call, when the premium is equal to the intrinsic value, which of the following is true? A) The contract has time value B) The contract is at parity C) None of these D) The contract is out of the money
B) The contract is at parity
Alan and Barbara Collins have three minor children; Dan, Ellen, and Frank. Which of the following UTMA accounts could be opened?
Barbara Collins as custodian for Ellen Collins
locate the shares to be borrowed.
Before executing a short sale the broker-dealer must first
Gerald is 78 years old. He approaches you to help him invest $150,000. He would like the money to generate some income to help pay for his new hobby, massive, multi-player, online role-playing games. He is rather risk adverse outside the digital world and wants the principal to remain largely intact when he leaves it to his heirs. Which of the following would you recommend?
Benji U.S. Treasury income fund
Seacoast Securities is underwriting the IPO of WearTech Technology. Which of these may purchase the IPO at the POP?
Bob, a customer of Seacoast Securities
Your customer, Ivan, owns a diversified portfolio of large cap stocks. He would like to find a way to hedge the market risk in his portfolio. Which of these actions might you recommend to accomplish his goal?
Buy S&P 500 index puts to hedge market risk.
Narcissus, Inc., a social media company, has shares selling at $52. Your customer likes the company but thinks it is currently a bit too high and would like to buy the stock if the price declines to $50 per share. Which of the following orders meets this customer's request?
Buy limit @ 50
Which of these is not a tool used by the Federal Reserve Board (FRB) to impact the money supply?
Changing the prime rate
Producers would generally report rising inventories during which period of the business cycle?
Contraction
Which of these places the phases of the business cycle in the correct order?
Contraction, trough, expansion, and peak
Where on a balance sheet would you find the estimated value of a retail company's inventory?
Current assets
Which of the following is not a measure of a company's short-term liquidity?
Debt ratio
On Tuesday, December 10 your customer Bought 5 OEX (S&P 100 Index) 230 March calls at four. On Tuesday, March 10 the calls are in-the-money and your customer issues exercise instructions. On what days did the trade and the exercise settle?
December 11 and March 11
Which of these would not make Nikki subject to a statutory disqualification?
Eight years ago, Nikki was charged with a misdemeanor involving securities fraud.
Inflation is most closely associated with which phase of the business cycle?
Expansion
The part of the federal government that acts as an independent central bank in order to manage monetary policy is the
Federal Reserve.
Which of these is not a division of the Treasury Department with some level of oversight for the securities industry?
Financial Industry Regulatory Authority
Sennacherib Partners, a broker-dealer partnership, maintains its records to meet or exceed regulatory requirements. Once a year, the partners gather for the annual partnership meeting. In order to meet the regulatory requirement, how long must Sennacherib maintain the minutes from the most recent partnership meeting?
For the life of the partnership
Josephine takes and passes the Securities Industry Essentials exam while employed as an intern at Seacoast Securities, Inc. She then returns to school full time to complete her undergraduate degree in Business Administration at the University of San Francisco. How many years does she have to affiliate with a member firm and complete a top-off exam before she would be required to retake the SIE?
Four years
Schmidt, a customer, has sent a written complaint to a firm principal. After a conversation with the customer, the principal was able to resolve the customer's concerns. How long must the complaint be held on file after the resolution?
Four years
The most commonly referenced indicator of economic activity is
GDP.
The economic indicator that reflects activity of U.S. entities without regard to where the activity takes place is
GNP.
Which of the following would likely be classified as a countercyclical industry?
Gold mining
Pete, a registered representative, is discussing his work as an investment banker with is family during his grandfather's birthday party. He was particularly excited about an upcoming IPO for Narcissus, a social media company. Several of his family members express an interest in purchasing the stock at the IPO. Which of Pete's family would be allowed to participate in the IPO of Narcissus Inc., stock?
His grandfather
Which of these would not be fully covered by SIPC insurance?
Holding $250,000 in index funds, $200,000 in Treasury bonds, and $50,000 in gold
FINRA is the primary regulator in the United States for broker-dealers registered representatives bankers the SEC
I and II
Regulation S-P defines consumers and customers correctly in which of these statements? A customer has an ongoing relationship with the company. A consumer performs a onetime transaction with the company. A consumer has an ongoing relationship with the company. A customer performs a onetime transaction with the company.
I and II
A customer of a broker-dealer sells 300 shares of stock at $50 per share and leaves the proceeds in the account. The proceeds are A free credit balance A debit balance available to the customer on demand available for withdrawal after 30 days
I and III
Brad is the brother of Chester. Chester is the CFO of Seabird Airlines. Over Sunday dinner, Chester mentions that Seabird is planning to raise its dividend payment significantly. He also tells Brad that the news will not be announced until this coming Tuesday, so keep it quiet. On Monday, Brad buys several hundred shares of Seabird and made a substantial profit. Brad is subject to which of these potential penalties? Up to 20 years in prison Up to 25 years in prison Penalties of up to three times the profit made A maximum penalty of $1 million
I and III
Harry's Burgers has announced a tender offer for 20 million shares of Jim's Junkfood Corner at $30 a share. If Harry's secures all the shares then they will control Jim's. The shareholders of Jim's, that submit their shares to the tender offer, will realize which of these? A capital loss occurs if their cost basis is greater than the tender price. There is no effect. A capital gain occurs if their cost basis is less than the tender offer. Investment income is received equal to the value increase of the new shares.
I and III
Kamron owns a diversified portfolio of stocks. The portfolio holds 58 different stocks that are diversified by market capitalization and sector as well as industry. When the stock market entered a significant downward correction Kamron's portfolio also dropped. This is an example of which of these? Market risk Business risk Systematic risk Unsystematic risk
I and III
Which of these customers are considered most susceptible to exploitation by others? Individuals age 65 and over Individuals age 62 and over Individuals with significant physical or mental impairment Individuals who are legally retired regardless of age
I and III
Which of these is not information requested on Form U4? Education Professional designations Marital status Current residence
I and III
Which of these would be considered a recommendation? You suggest that the client consider adding the Windmill Growth Fund to their portfolio. You explain to a customer how a sell stop limit order works. When speaking to a client you notice they are carrying a large cash balance. You suggest they move those funds into the firm's tax-free money market fund. You enter an order for a trade.
I and III
Your client, Bill Hearst, inherited several thousand shares of his grandfather's auto parts manufacturer, National Autoparts. He sells a portion of the position in order to raise some cash to buy a new boat. Which of these is true? This is a secondary market transaction. This is a primary market transaction. This is a long sale of the stock. This is a short sale of the stock (he never purchased it).
I and III
CDC Pharmaceutical stock is currently trading at $50 a share. The CDC Nov 45 PUT is trading at one. Based on this information, which of the following is true? Time value is $1. Intrinsic value is $1. The premium must be greater than $1. Intrinsic value is zero.
I and IV
First Amalgamated Bank of Buffalo, a large commercial bank, is a member of the Federal Reserve System. Should the bank need to increase its reserves, it could do which of these? Borrow from the FRB and pay the discount rate. Borrow from the FRB and pay the federal funds rate. Borrow from another member bank and pay the discount rate. Borrow from another member bank and pay the federal funds rate.
I and IV
Sam has decided to change careers and become a financial services professional. While reading about the Form U-4 she discovers which of these are true? Completion of Form U4 is not required for taking the SIE. Completion of Form U4 is required for taking the SIE. Form U4 is only required when taking a top-off exam. Form U4 must be updated promptly when required information changes.
I and IV
The Federal Reserve's dual mandate includes which of these? Maintaining maximum employment Enforcement of price controls Control the value of the dollar versus other currencies Price stability
I and IV
Which of these does M2 measure? M1 M3 Term repos and jumbo CDs Retail CDs and money markets
I and IV
Which of these features does the Roth IRA include? There are no minimum required distributions after age 72 with a Roth IRA. There are higher contribution limits to a Roth IRA than to a traditional IRA. Withdrawal of earnings in the Roth IRA may be made without any taxation as long as a Roth IRA has been open for a minimum of one year and the participant is age 59. There is the ability to contribute to both a Roth IRA and a traditional IRA.
I and IV
Your customer, Ellesha, places a sell stop at 50 on DEZ stock while it is trading at $53 per share. After the order is elected, Ellesha may sell her shares at which of the following prices? $48 $49 $50 $51
I, II, III, and IV
An investor receives a quote of 32-32.15 for XYZ common stock. Which of these is correct? Purchasing the stock will cost $32 per share. Purchasing the stock will cost $32.15 per share. The spread is $.15. The investor will receive $32.15 per share if selling.
II and III
An investor receives a quote of 48.70—48.75 for XYZ common stock. Which of these is true? Purchasing the stock will cost $48.70 per share. Purchasing the stock will cost $48.75 per share. The spread is $.05. The investor will receive $48.75 per share if selling.
II and III
In regards to fiscal policy, which of these statements is correct? Fiscal policy is considered the most efficient means to solve short-term economic problems. Fiscal policy is not considered the most efficient means to solve short-term economic problems. Fiscal policy refers to governmental budget decisions enacted by the U.S. President and Congress. Fiscal policy refers to governmental budget decisions enacted by the U.S. President and the cabinet.
II and III
Which of these is correct regarding the ex-date for a common stock? It is set by the board of directors. It is set by FINRA or the exchange. It is the first date an investor can purchase a security and not be entitled to the dividend. It is the date the seller reimburses the buyer for the amount of the dividend paid.
II and III
You should expect which of these to occur when the dollar strengthens against other currencies? Imports will become more expensive Imports will become less expensive Inflation will go down Inflation will rise
II and III
An investor purchased 100 shares of MJS on June 19, 2015 at a price of $40 per share. On June 1, 2016, MJS declared a 25% stock dividend. On July 1, 2016, the investor sold 50 shares of the MJS at $50 per share. Which of these statements is correct? The adjusted cost basis of the shares is $30. The adjusted cost basis of the shares is $32. There is a short-term capital gain on 25 shares and long-term gain on the other 25 shares. There is a long-term capital gain on all of the shares sold.
II and IV
Five years ago, Tom, a resident of State A, was convicted of driving under the influence (DUI). At the time, the conviction was considered a misdemeanor. Last year, State A's legislature made DUIs a felony. Which of these is true for Tom when filing his Form U4 for registration with a member firm? Tom must indicate that he has been convicted of a felony. Tom would not have to list the conviction. Tom would be subject to statutory disqualification. Tom would not be subject to statutory disqualification.
II and IV
It would be reasonable to expect an increase in exports from the United States if which of these occurred? The dollar strengthened against the euro The yen strengthened against the dollar The Swiss franc weakened against the dollar The dollar weakened against the British pound
II and IV
Many investors like to put a transfer on death (TOD) designation on their brokerage accounts. Which of these are benefits of doing so? The TOD designation avoids estate taxes. The TOD designation avoids probate. The account holder is relieved of decision making in the account. There is flexibility to change beneficiaries as conditions dictate.
II and IV
Under the IRC Subchapter M, if the WWF Fund only distributes 85% of its net investment income to its shareholders, then which of these is true? The fund must pay taxes on the undistributed 15% of net investment income. The fund must pay taxes on 100% of the net investment income. The shareholder pays no tax if the income is reinvested. The shareholder must pay taxes if the income is received in cash or reinvested
II and IV
Which of these trading strategies are employed by hedge funds but are generally prohibited to mutual funds? The act of limiting investments to a narrow group of securities The use of borrowed money to purchase portfolio securities The act of taking long positions in speculative stocks The act of taking short positions in NYSE listed stocks
II and IV
CDC Pharmaceutical stock is currently trading at $50 a share. The CDC Nov 55 put is trading at $7. Which of the following is true? The time value is $2. The intrinsic value is $5. The time value is $5. The intrinsic value is $2.
III and IV
Four of the best-known indices and averages are listed as follows. How do they rank from most to fewest issues in the index? Dow Jones Industrial Average NYSE Composite Index Standard & Poor's 500 Wilshire 5000
IV, II, III, I
n which circumstances may a FINRA member firm conduct securities business with a nonmember broker-dealer?
If the nonmember broker-dealer is a foreign firm and properly registered in their home jurisdiction
Patrick the intern, who has passed the SIE but is not yet registered, is sitting at the front desk greeting customers and answering the phone. During the course of an hour, he interacts with several customers and prospective customers. Which of these activities might be a rules violation for Patrick?
Providing current quote information on a stock in response to a customer's request.
Buzz the broker has a radio show where he discusses penny stocks. In a recent show, Buzz told his audience that he just bought into stock in the Dipper Diaper company at $0.05 a share. He continues to talk about the strength and great growth potential of the company for several days. The stock rises to $3.00 a share and Buzz sells his position. He continues to talk up Dipper Diapers for another week then drops it from his daily discussion. What activity does this exemplify
Pump and dump
The Federal Reserve is concerned that the economy is slowing. With this in mind, which of these actions would the Federal Reserve most likely engage in?
Pursue an easy-money policy to lower interest rates
Of the standard Federal Reserve tools, which of these is considered the most powerful and used infrequently?
Reserve rate
The market for Dizzy Rides Inc., is at $52 per share. Your customer would like to sell his shares for $55, and believes the stock will climb to that level in the next two to three weeks. What order should he place?
Sell limit 55 GTC
The Office of Foreign Asset Control maintains a list of people and organizations with whom U.S. citizens and companies are not allowed to do business. This list is called the
Specially Designated Nationals List.
Which of these is considered a standard corporate action where adjustments made to cost basis, for outstanding shares, are standardized?
Stock split
Shortly after the branch opens, a customer, Martin, deposits $4,000 in cash into a business account. About midday, his spouse Cindy deposits another $4,000 in cash into the same account. Just before closing, Martin returns and makes another identical $4,000 deposit as he did that morning. What is this action called and which report should be filed?
Structuring, and both a CTR and a SAR should be filed
Your clients, spouses Jared and Joaquim, are both 33 years old. They are concerned about saving money for a down payment on a home. Currently they have $120,000 set aside for that purpose. They plan to start a family in about a year and would like to buy the home in six months. The amount they have saved is more than 20% of the value of the homes in the area they want to move. They look to you for a place to save the money until they need it. Which of the following is the most suitable recommendation for the couple?
The Benji Money Market fund
A margin account allows a customer to borrow a portion of the funds needed to complete a trade. Currently, the required minimum is 50%. Which regulator sets the requirement?
The FRB
What government organization maintains the Specially Designated Nationals List?
The OFAC
A registered representative placing trades in a customer account must have discretionary authority if they choose which of the following aspects of the trade?
The action to be taken, the asset to be traded, or the amount of the trade
According to the Uniform Securities Act, who is charged with enforcing state securities laws and regulations?
The administrator
Who must grant permission for a representative to have discretionary trading authority on an account?
The customer and a principal of the broker-dealer
Your customer places an order to buy 500 shares of Narcissus, Inc., (the ticker is NCS) at $50 per share fill-or-kill (FOK). When the order is entered, there are 450 shares available at $50 per share. What happens to the order?
The order will be canceled and nothing is done.
A client phones his registered representative in September and informs the representative that he will be studying abroad in Europe for the remainder of the year. The client wants the firm to hold his mail. What action should the representative take?
The representative must instruct the client that the request must be made in writing.
Louise Ripley is a customer of Seacoast Securities, Inc., a FINRA member firm. While she was away on a long trip, several limit and stop orders were executed. She believes that these orders were not executed properly and cost a significant loss. She has requested that Seacoast make financial amends. Seacoast maintains that it performed correctly and as instructed by Louise. An arbitration panel found Seacoast at fault in one instance and awarded Louise $2,000. Seacoast maintains they did nothing incorrectly. How long does the firm have to file an appeal?
There is no appeal in an arbitration hearing
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?
There is no coverage for Keegan and Drew
BigTel Inc., has been the only provider of telephone service for over a century. The courts have declared BigTel is an unlawful monopoly and orders the company to break into smaller, competing companies. Owners of BigTel stock will retain their shares of BigTel (now smaller) and receive shares of three new companies: East-Tel, Cent-Tel, and West-Tel. Which of these is a tax consequence that could occur for this break up of BigTel and the receipt of the new shares?
There is no taxable consequence
FinCEN is a bureau of what department within the federal government?
Treasury
Which of these is the most appropriate action for a registered representative to take after receiving a written complaint letter from a client?
Turn the letter over to the representative's supervisor.
Dwight was appointed a principal for Seacoast Securities in June of 1996. He continued in the position until 2012, when he left to start his own firm. How long did Seacoast need to maintain the record of his principal designation?
Until 2018
Your customer has purchased 1 February 35 call at 2 on Tuesday, December 4. This transaction will settle on
Wednesday, December 5.
Ron buys 522 shares of Narcissus Inc., common stock in a cash account on Monday, March 19. He deposits cash in the account sufficient to cover the trade on March 20. How soon would he be able to withdraw those shares?
Wednesday, March 21
Last year Brownstone Properties, LP distributed $200 per unit to investors and reported a $500 business loss per unit on the K-1. For tax purposes the investors received
a $500 per unit passive loss.
Your customer is quite nervous about the stock market but expresses his belief that equities are still the place to save for retirement over the long term. He places a trade for 500 shares of an equity index fund. Overall your customer is likely
a bull.
Your customer buys 300 shares of Steel Tools common stock on Tuesday and will be an owner of record as of the close of business that same Tuesday. This must be
a cash settlement trade.
All of the following would decrease the U.S. balance of payments deficit except
a decrease in purchases of U.S. securities by foreign investors.
Andrea recently began working for the Seabird Coffee Company as a barista. She tells you that her company has two retirement plans she can participate in. In one plan, she contributes a portion of her salary into an account where she can choose from a set of investments. The contributions reduce her taxable income. The money grows and when she retires, or leaves the company, she can take the balance. In the other program, she does not contribute to the plan; the company pays into the plan and invests the money. When she retires, and if she qualifies, she will receive a retirement income for life from the plan based on her working income. You explain that Seabird Coffee has
a defined contribution and a defined benefit plan.
A broker-dealer that concentrated its business efforts on proprietary trading would most likely be functioning as
a market maker.
Another term for a defined benefit plan is
a pension plan
RJN common stock is currently listed on the New York Stock Exchange. Poor operating results over the past several years have led to a sharp decline in RJN's stock price, putting the company at risk for failing to meet the minimum price requirements to remain listed on the NYSE. The corporate action most likely to be taken to preserve the listing would be
a reverse split.
A company's board of directors has voted to divest of all shares of a subsidiary to create a new company. This is a type of corporate action best characterized as
a spinoff.
The inverse relationship between interest rates and bond prices helps in understanding that interest rate fluctuations are
a systematic risk for bonds.
There are rules regarding customer statements. All of the following statements reflect those rules except
activity limited to only stock splits or stock dividends do not require monthly statements be sent.
Regulation S-P requires that financial institutions provide information to customers and consumers concerning
all of these a consumer's right to opt out of the disclosure of nonpublic personal information to nonaffiliated third parties. their policies on the protection of nonpublic personal information. the categories of nonpublic personal information that a broker-dealer, fund, or registered investment adviser may collect and disclose.
Modulux, Inc., a NYSE listed manufacturer, is offering 5,000,000 shares to the public, which will raise capital to build a new plant. The new technology and design should allow Modulux to increase market share significantly in the modular home business. This offer is
an APO.
Your customer, Amelia, is excited about an investment she recently purchased from another firm. At maturity, in five years, she will receive her principal back plus an interest payment based upon the returns of five well-known technology companies. It pays no interest during the five years. She has likely invested in
an ETF.
One difference between an UTMA account and an UGMA account is
an UTMA account has a wider set of allowed investments
The Bank Secrecy Act requires that all financial services firm must appoint
an anti-money laundering officer.
A REIT that owns and operates an office building in the Dallas Metroplex is an example of
an equity REIT.
If a fund sponsor allows an investor to move funds from one fund to another within its fund family, this is called
an exchange privilege
Modulux, Inc., a NYSE listed manufacturing company, was founded by Clarence Mod. Clarence is now 82 years old and is looking to divest his significant interest in Modulux to capitalize the Mod Family Foundation, a charity. He has enlisted the help of Seacoast Securities, a FINRA member broker-dealer based in Seattle, to run the sale. Seacoast Securities is acting as
an investment banker.
Rep. Pete receives a call from his client, Neil, to place a trade. He wants to buy 200 shares of the Starshine Entertainment Company. Pete asks Neil a few questions about the trade before placing it. This is
an unsolicited trade
Communicating the information in a firm's BCP to customers occurs at all of the following times except
annually.
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
arrest.
Class B mutual fund shares are also called
back-end load shares.
Assets = liabilities + net worth is the
basic balance sheet equation.
An investor is long a call option. Over time, the underlying security rises in value above the strike price of the call. It is likely that the call would
be exercised.
The Telephone Consumer Protection Act of 1991 exempts all of these entities except
booking services for commercial enterprises.
In order to calculate the earnings per share you would need information from
both the balance sheet and the income statement
The Securities Investors Protection Corporation protects investors from the financial failure of
broker-dealers.
Five years ago Thompson, an investor, ran across a board game that he enjoyed and believed the game would become very popular. He purchased 1,000 shares of the corporation that publishes the game. Unfortunately, the game was too complex for most casual game players and sales never amounted to much. Over the five years, the stock of the publisher has remained steady, but has not increased in value. This is an example of
business risk.
Two months ago your customer sold short 200 shares of Seabird Airlines at $15 a share. Today, the stock is trading at $10 a share. In order to close out the position your customer would
buy 200 shares of Seabird.
Snowflake Resorts, Inc., has announced their intention to repurchase 5 million of the companies outstand shares from the secondary markets. This is called a
buy back
Your customer purchased 300 shares of XYZ stocks six months ago and sold the shares last week. The actions your customer took in relation to XYZ were to
buy long and sell long.
M1 is a measure of the value of
cash and funds held in DDAs.
A business entity that performs the function of receiving and delivering payments and securities on behalf of both parties to a securities transaction is called a
clearing agency.
The monthly unemployment figure is considered a
coincident indicator.
When opening a new account with margin, all of the following documents are required except
consent to loan agreement
People who enter trades at or near the same time, in the same security as a person who has inside information, are known as
contemporaneous traders.
An exchange has some degree of regulatory authority over all of the following except
dealers in the third market.
Secondary markets exist to do all of these except
decrease liquidity in the national markets.
A security that is a contractual obligation between two parties and whose value is based on the specifics of the contract in relation to a different security is a
derivative.
All of these are leading economic indicators except
duration of unemployment.
Seabird Coffee Company has just reported an unexpected increase in EBITDA this past quarter. This means they experience an increase in
earnings before interest, taxes, depreciation, and amortization.
Narcissus, Inc., a social media company, has shares selling at $50. Your customer is bearish. He would like to sell the stock short, but not until it retreats at least 10% from its current price. In order to catch the drop he could
enter a sell short at stop 45.
Sam Malloy owns a small business and has built a substantial estate both with his business success and his early career as a pro athlete. He wants to set up his estate in a way that he will control the assets until he passes away or becomes incapacitated. Once that time comes, he wants control to transfer easily and he wants to avoid probate. Sam should
establish a revocable living trust.
Sam Malloy owns a small business and has built a substantial estate both with his business success and his early career as a pro athlete. He would like to begin to move assets out of his estate in a way that will allow him to benefit from the assets, but also allows for an easy transfer to his heirs when he dies. He needs to lower the size of his estate before he passes and hates the idea of a public hearing that is part of probate. Sam should
establish an irrevocable living trust.
The authorities delegated to FINRA by the SEC include all of these except
establishing initial margin requirements.
An account that charges a set fee on a monthly or quarterly basis, which covers all trading activity, is called a
fee-based account.
The SEC implemented which of these requirements to lessen the possibility that a broker-dealer applicant may not disclose their criminal past during registration to potential employers?
filing of a fingerprint card with the U.S. Attorney General.
Irksome Inc., makes components and peripherals for smart phones. Their line of bright florescent sparkly earbuds has taken off in Asia and is starting to gain popularity in the Americas and Europe, even in countries experiencing harder economic times. Irksome is an example of a
growth company.
An industry whose products stay in high demand, and whose companies grow, without regard to the business cycle are called
growth industries.
All of these are true regarding no-load shares except they
have sales charges associated with sales and redemptions.
The ABC Chemical Corporation wishes to advertise its upcoming offering of common stock in a tombstone advertisement that they, the issuer, will place. When placing the tombstone advertisement, which of the following would be least likely to appear?
he names of the investment bankers underwriting the issue
A signature endorsement on a stock certificate would not be required for good delivery if the shares were
held in street name.
Shares held in electronic form at a clearing house under a broker-dealers account are
held in street name.
When a customer chooses to annuitize a variable annuity, all of these are factors the insurance company will use in calculating the initial payout amount except
historic inflation rate.
An economic event where consumers experience an extreme increase in the cost of goods in a short period is
hyperinflation.
When consumer prices are increasing at a steady but reasonable rate this is considered a healthy level of
inflation.
The use of information that is material to a company's prospects, and is not yet public, in order to make a profit or avoid a loss on a security is
insider trading.
The final phase of money laundering, when the money moves into the legal economy, is called
integration.
Issuers are not required by the Securities Exchange Commission (SEC) to give notice of corporate actions to shareholders for actions such as
interest on the issuer's bonds.
A Suspicious Activity Report would be triggered if the broker-dealer suspects a transaction involves funds derived from illegal activity and
involves at least $5,000 in funds or other assets.
An institutional customer, such as a hedge fund, utilizes the services of a broker-dealer who provides custody of securities, as well as other back-office functions, while allowing the customer to establish relationships with other broker-dealers for the purpose of executing orders. This account would be known as a
prime account.
The Hoffman Equipment company of Anaheim, California is preparing to sell shares 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
the administrator of the state.
For institutional communication the rule allows for either preapproval or review. However, if the firm allows the communication to go out before approval by a principal then
the associate must have training on these communications.
Seacoast Securities, a FINRA member firm and a large corporation, needs to secure funds to cover customers' margin purchases. Seacoast reaches an agreement to borrow from a large money-center bank for a loan that the bank can terminate with 24 hours' notice. The rate that the bank charges Seacoast for this loans is called
the broker call loan rate.
Seacoast Securities is a syndicate member for the initial public offering of WeariTech, Inc., WeariTech is a hot new issue in the wearable technology space. The S-1 registration statement has been filed but the effective date has not yet been released. This is
the cooling-off period.
All of these dates are set by the board of directors of a corporation except
the ex-dividend date.
It is generally agreed upon that the most volatile interest rate in the U.S. economy is
the federal funds rate.
Electronic market centers designed primarily for institutional investors describes
the fourth market.
When a registered person terminates from a FINRA member firm, filing Form U-5 is the responsibility of
the member firm.
The investment return of a variable annuity comes from
the performance of the selected subaccounts within a separate account.
The strike price is
the price that will be paid for the shares if the option is exercised.
The first step in the process of adding options trading to a customer account is
the representative determines, based on reasonable grounds, the customer can understand and afford the risks of the recommendations the representative provides.
A cash settlement trade settles
the same day as the trade.
A bearish sentiment means that a person believes
the security will decline in value.
The TCPA only restricts solicitations that are delivered via
the telephone lines.
Sparkly florescent earbuds made in the U.S. by Irksome, Inc., are suddenly popular in Asia. People from Canton to Calcutta are buying them in huge numbers. This is most likely to cause
the trade deficit to decrease, or surplus to increase.
An investor owns 300 shares of a Silicon Valley high tech firm whose shares are quoted on the Nasdaq Stock Market. A month prior to the company's annual meeting, the broker-dealer holding the stock in street name forwarded the voting proxy to the client. As it happens, the investor had to be at a business meeting in San Francisco that ended the day before the annual meeting. If the investor took advantage of the proximity to attend the meeting
the voting proxy would be revoked and only the vote at the meeting would count.
All of the following are elements of a customer's suitability except
their alma mater.
FOCUS reports, U-4 forms, and order tickets are examples of records that must be kept for
three years.
Tony was fired for cause from Great Plains Investments. A U-5 Form was promptly filed stating that the cause was rude treatment of coworkers creating a hostile work environment. Great Plains will keep the U-5 record for a minimum of
three years.
Fee-based accounts are appropriate for investors that
trade actively.
All of the following are records that are kept for the life of the firm except
trade blotters.
Fiscal policy seeks to encourage or discourage economic activity through the
use of government spending and taxation.
The Options Clearing Corporation (OCC) assigns exercise notices to broker-dealers with short positions
using a random selection method.
On Form U-5 all of the reasons for termination listed here require an additional explanation except
voluntary
All of the following are classifications of communication under Rule 2210 except
wholesale.
A customer has an account with a broker-dealer who provides a group of services, such as asset allocation, portfolio management, trade executions, and administration, for a single fee. This is known as a
wrap account.
Your client, Ann Porter, likes fast cars and has been saving for a high-end Italian sports car. She recently saw a report that said the dollar was likely to drop in the near future. She is concerned that this might affect her plans to buy her dream car next year. You tell her
yes, it will likely cost her more to buy the car if the dollar drops.
A customer believes the price of MJS stock will rise but is not currently in a position to purchase the stock outright. How could the customer use options to profit from a rise in the stock's price? Buy calls Write calls Buy puts Write puts
1 and 4
An investor shorts 2 DEF January 55 puts, at a premium of two each, when the market price of DEF is 56.25. What is the investor's maximum potential loss?
10,600
Your customer, Leo, recently purchased one put contract on Napa Valley Spirits, Inc., stock. The strike price is $50.00 and the premium was $4.50. He later executed the contract. How much did he pay for the contract?
450.00
Your customer is long 1 October 55 put at 4. The customer's breakeven point is
51
Yusef would like to save money for his 10-year-old daughter's college tuition costs. She has her heart set on a small liberal arts school with a growing reputation in the arts. His biggest concern is the potential increase in cost over the next several years. The program best suited to hedge against the increasing cost of college tuition at the school is a
529 prepaid tuition program.
A letter of intent may be backdated to include a prior purchase up to
90 days.
A mutual fund's public offering price is $10.50. An investor who wishes to invest $1,000.00 in the fund is able to purchase
95.238 shares.
Under the Investment Company Act of 1940 all of these are examples of management companies except
A Windmill Income UIT.
Which of the following positions or actions would cover a client who has shorted a call?
A long stock position
Which of these broker-dealers would most likely have correspondent firms?
A self-clearing firm
ACE, an open-end investment company, operates under the conduit, or pipeline, tax theory. Last year, it distributed 91% of all net investment income as a dividend to shareholders. Therefore, which of the following statements is true?
ACE paid taxes on 9% of its net investment income last year.
All of these are part of the expense ratio of a mutual fund except
CDSC.
Which of the following securities would be least likely to be issued by a corporation?
Call and put options
Regarding options positions, which of the following statements is true?
Call buyers have the right to purchase the underlying, and put writers may be obligated to purchase underlying
Which of these would be unlawful regarding the use of a mutual fund prospectus?
Calling an investor's attention to a section that may be interesting
The preliminary prospectus for the IPO of the Big Shoes Sneaker Company indicates that the number of shares sold may be increased as much as 15% if market demand is sufficient. This is called a
Green Shoe option
Under the Investment Company Act of 1940, which of the following is not considered an investment company?
Hedge fund
An investor can take advantage of intraday price changes due to normal market forces when investing in which of these? Closed-end funds Exchange-traded funds Hedge funds Open-end funds
I and II
GEMCO Oil and Gas, a non-NMS stock, wishing to sell up to $100 million of convertible debt as market conditions permit, files a shelf registration statement with the SEC. Which of these statements are true? For securities offered via a shelf registration, a supplemental prospectus must be filed with the SEC before each sale. The registration statement is effective upon completion of the cooling-off period. Shelf registration allows the issuer to sell portions of a registered shelf offering over a 2-year period without having to reregister the security. Shelf registration allows the issuer to sell portions of a registered shelf offering over a 4-year period without having to reregister the security.
I and III
A document that substitutes for the owners signatures on the back of a stock or bond certificate is called a
stock or bond power.
An order that when triggered becomes a market order is called a
stop order.
The breakeven point on a long call is
strike + premium.
All of these are potential risks of private, nontraded, REITS except
tax treatment.
The most common way of measuring purchasing power risk is
the CPI.
Margin Maintenance requirements are set by
the FRB.
The federal agency charged with the collection and analysis of financial transactions in order to detect illegal activity is
the Financial Crimes Enforcement Network (FinCEN).
All of these enforce MSRB rules except
the MSRB Enforcement Department.
Investigations and hearings into alleged violations of FINRA's Code of Procedure are performed by
the National Adjudicatory Council.
Bob's Discount Brokerage has applied for FINRA membership and was denied. Bob wants to appeal this decision. The first appeal goes to
the SEC.
The Securities Exchange Commission was authorized by
the Securities Exchange Act of 1934.
All of the following terms and phrases are associated with the sell side of the contract except
pays the premium.
supply-side approach to fiscal policy will use all of these tools except
personal income tax rebates.
The three stage of money laundering include
placement, layering, and integration.
During the cooling-off period the disclosure document that may be delivered to interested parties is called the
preliminary prospectus.
The price that the buyer of a contract pays, or the writer receives, on a per share basis for an option contract is called the
premium
An investor buys 1 DWQ May 70 call at 2, giving the investor the right to buy 100 shares of DWQ at $70 per share. All the specifications of the transaction are set or standardized by the Options Clearing Corporation (OCC) except
premium of 2.
An extended period of little or no growth in GDP, wages, and prices is a period of
stagnation.
The principles of demand-side theory were laid out in the 1936 book, The General Theory of Employment, Interest, and Money written by who?
John Keynes
Demand-side economics call on the federal government to do which of the following to encourage economic activity?
Lower personal income tax rates
Which of the following is an example of a company in a defensive industry?
Major Mills Grain Company, a grain and cereal producer
Which of the following is a financial consideration?
Monthly interest costs of consumer debt loans.
Which of the following is not part of the secondary markets?
Mutual fund market
On August 20 of last year, when the stock was trading at $42 dollars, Seabird Airlines declared a 15% stock dividend, payable on September 15. On the close of trading, on the pay date, the stock was trading at $40. What would a customer who owned the stock all of last year report for tax purposes?
Nothing
The economy appears to be moving into a strong expansion. Which of the following companies will likely benefit the most from this expansion?
Old Bess Steel, Inc.
Which of these statements regarding a 529 plan is correct?
One person can be both the beneficiary and owner
An economic indicator that tends to change direction following a change in the direction of GDP is a
lagging indicator.
New Haven Farms is a producer of specialty foods. They recently received a notice that the Wetlands Maintenance and Drainages Act (The WMD Act) passed indicates that a significant portion of their current land used in food production falls under the act's protection and may no longer be used for agriculture. This is an example of
legislative risk.
All of these are risks associated with limited partnerships except
limited liability risk
Under the dual mandate, the Federal Reserve is most concerned with achieving
maximum employment and controlling inflation.
The Federal Reserve pursues its dual mandate through
monetary policy.
One characteristic of large criminal enterprises is that they often generate significant sums of cash. The process of obscuring the source of this cash so that it can be used for legitimate purposes is
money laundering.
MSRB rules apply to all of the following except
municipalities.
The SEC has regulatory authority over all of these entities except
municipalities.
All of these are true regarding correspondence except correspondence
must be filed with FINRA within 10 business days.
When responding to regulatory requests for documents a broker-dealer
must comply with the request promptly.
A FINRA member broker-dealer has a new hire with the sole responsibility of training associated persons. She will not have any dealings with the firm's customers. In order to hold this position, the new hire
must register as a principal.
Rihanna resigns from her position as a Series 7 registered representative with Princeton Securities, a FINRA member firm, where she has worked for five years. After completing an accelerated graduate studies program, and receiving a Ph.D. in 30 months, she wishes to return to her prior position as a registered representative. In order to do so she
must retake the Series 7 exam but not the SIE exam.
The Telephone Consumer Protection Act mandates that unsolicited sales calls must occur
no earlier than 8:00 am and no later than 9:00 pm recipient's time. C)
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
not allowed because it is a misrepresentation
Systematic risk is
not reduced by diversification within an asset class.
An institutional customer has requested that you provide an article that they can use in their quarterly retail client newsletter. Rule 2210 states that you must
obtain preapproval from a principal and file a copy with FINRA.
A mutual fund has been in existence for 15 years. The prospectus must disclose the fund's performance
over the last 1, 5, and 10 years.
Good delivery of a stock certificate requires all of the following except
proper signatures of a firm principal on the certificate.
GDP turned negative in the first quarter of the year, and was negative again in the second quarter. It is now August and numbers have not improved. The economy is experiencing
recession.
The nation has passed through very trying economic times. Many have lost jobs and are tapping into savings to maintain their lifestyles. The economy is not weakening and shows a few signs of growth, but the damage from the downturn is very visible. The nation is likely entering a period of
recovery.
All of these are steps that firms take to protect the interests of their senior customers except
refuse to open an account for senior citizens.
Marsha, Jane, Cynthia, Craig, Jim, and Robert are owners of an account JTWROS. If Craig, Jim, and Robert pass away then their interest in the account
remains in the account and is now the property of the surviving tenants
An applicant completing Form U4 would not be required to list their
residential history for the past 10 years.
All of these are rules set down by an exchange except
revoking a corporate charter
The primary risk associated with ETNs is
risk of default.
Both the individual and institutional investor are able to easily buy and sell securities to meet their objectives through
secondary markets.
The Uniform Securities Act (USA) provides a legal framework for the registration of
securities at the state level.
Pedro dislikes Seabird Coffee and thinks the company's stock is overvalued. He is currently short 1,000 shares of the company. He is concerned with the potentially unlimited risk he is exposed to and would like to use options to hedge that risk. His best option position would be
sell 10 Seabird Coffee calls.
All of these would be seen as reasons to investigate activity in a customer account except
setting up and RMD in January for a customer that is only 72 years old.
A customer is long 400 shares of BuyStuff Inc., a big-box retailer. He borrows 400 shares to sell while maintaining his long position. This sale is called
short against the box.
Stock ledgers, a record of stocks owned by the firm, are maintained for at least
six years.
The nation is experiencing a rapid increase in the cost of living, but wages are not keeping pace with the increase in cost. The nation is experiencing
stagflation.
