SIE Final Exam
A registered options principal (ROP) at your broker-dealer has just approved an options account for one of your new clients. How long does the client have to return the signed options agreement? A) 15 days B) 30 days C) Not later than the end of the month in which the account was approved D) 5 days
A) 15 days
A client has just purchased a ZZZ June 35 call @ 8 when the stock is trading at 41. What is the contact's premium? A) 6 points of intrinsic value and 2 points of time value. B) 8 points of time value C) 8 points of intrinsic value D) 2 points of intrinsic value and 6 points of time value.
A) 6 points of intrinsic value and 2 points of time value.
Which of the following securities would likely provide the greatest potential for capital appreciation? A) A common stock B) A U.S. Treasury STRIP C) A convertible bond D) A preferred stock
A) A common stock
Which of the following transactions represents the greatest potential risk to an investment banker? A) A firm commitment offering B) A spin-off C) A stock split D) A best efforts IPO
A) A firm commitment offering
A customer was charged a $35 commission on a recent stock trade. The firm acted in what capacity on this transaction? A) Agency B) Principal C) Selling Group Member D) Dealer
A) Agency
All of the following are considered money market instruments EXCEPT A) American depositary receipts (ADRs) B) negotiable jumbo certificates of deposit (CD) C) banker's acceptances (BAs) D) commercial paper
A) American depositary receipts (ADRs)
Which one of the following is NOT a tool used by the Federal Reserve Board (FRB) to impact the money supply? A) Changing the prime rate B) Open market operations of the FOMC C) Changing the discount rate D) Changing the reserve requirements
A) Changing the prime rate
The Investment Company Act of 1940 defined the term, "investment company." Which of the following is NOT included in that term? A) Hedge fund B) Unit investment trust C) Management company D) Face amount certificate company
A) Hedge fund
A registered representative offers a free lunch seminar for retired seniors at which ideas for sustaining a successful financial retirement are to be discussed. Before the seminar, a poll of the attendees indicates that only one of them has ever invested in individual stocks. Therefore, it would be appropriate for the presenter to discuss I. annuities II. hedging strategies using options III. mutual funds with an income objective IV. short selling as a way of profiting from market corrections A) I and III B) III and IV C) II and IV D) I and II
A) I and III
Which of the following would be likely to be a red flag leading to the generation of an exception report? I. activity in the account of a deceased person II. a street address matching a city or zip code provided III. a trade for 300 shares when the customer ordered 200 IV. receipt of a written complaint from a customer A) I and III B) II and IV C) II and III D) I and II
A) I and III
Features of the Roth IRA include I. there are no minimum required distributions after age 70½ with a Roth IRA II. higher contribution limits to a Roth IRA than to a traditional IRA III. 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 years and the participant is age 59 IV. the ability to contribute to both a Roth IRA and a traditional IRA A) I and IV B) II and III C) II and IV D) I and III
A) I and IV
GEMCO Oil and Gas, listed on the NYSE, wishing to sell up to $300 million of convertible debt as market conditions permit, files a shelf registration statement with the SEC. Which of the following statements are TRUE? I. For securities offered via a shelf registration, a supplemental prospectus must be filed with the SEC before each sale. II. The registration statement is effective upon completion of the cooling-off period. III. Shelf registration allows this issuer to sell portions of a registered shelf offering over a 2-year period without having to reregister the security. IV. Shelf registration allows this issuer to sell portions of a registered shelf offering over a 3-year period without having to reregister the security. A) I and IV B)II and III C) II and IV D) I and III
A) I and IV
Which 2 of the following statements regarding options are true? I. Investors who are bullish on a stock should buy calls II. Investors who are bullish on a stock should buy puts III. Investors who are bearish on a stock should buy calls IV. Investors who are bearish on a stock should buy puts A) I and IV B) II and IV C) I and III D) II and III
A) I and IV
Violations of the FINRA Conduct Rules would include I. engaging in a private securities transaction without compensation with an immediate family member without notification to the employing broker-dealer II. parking a license for a former registered principal III. a registered representative accepting a complimentary registration at a seminar presented by a mutual fund sponsor at an exclusive offshore island resort IV. a member firm waiting 30 days after termination to provide the terminated employee with a copy of the Form U-5 A) II and III B) I and II C) II and IV D) I and IV
A) 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 the following statements are correct? I. The adjusted cost basis of the shares is $30 II. The adjusted cost basis of the shares is $32 III. There is a short-term capital gain on 25 shares, long-term gain on the other 25 shares IV. There is a long-term capital gain on all of the shares sold A) II and IV B) I and IV C) I and III D) II and III
A) II and IV
Which of the following statements regarding a bond issued with a 6% coupon and now trading in the secondary market is TRUE? A) If interest rates rise, the coupon will remain at 6%. B) If interest rates fall, the bond's current yield will rise. C) If the bond falls in price, the current yield will fall also. D) If interest rates rise, the bond's price also rises in the secondary market.
A) If interest rates rise, the coupon will remain at 6%.
An issuer files a registration statement with the SEC for the sale of new securities on May 1. While reviewing the registration statement, the SEC determines that it has not been filed properly and issues a deficiency letter on May 5. The issuer submits a corrected registration statement on May 8. Which of the following is TRUE regarding the 20-day cooling-off period? A) It is halted on the day the deficiency letter is issued and resumes where it left off on the day the corrected registration is received. B) It continues and is not impacted by the issuance of the deficiency letter by the SE C) It is halted and does not resume until 20 days following the corrected registration is received. D) It is halted on the day the deficiency letter is issued and must begin anew from that same date once the corrected registration is received.
A) It is halted on the day the deficiency letter is issued and resumes where it left off on the day the corrected registration is received.
Rank the following government-issued securities from shortest to longest maturity. A) Treasury bills, notes, bonds B) Treasury bonds, notes, bills C) Treasury bills, bonds, notes D) Treasury notes, bills, bonds
A) Treasury bills, notes, bonds
Which of the following instruments is not backed by the full faith and credit of the U.S. government? A) Treasury receipts B) Treasury STRIPS C) Treasury bonds D) Treasury bills
A) Treasury receipts
Which of the following is the most appropriate action for a registered representative to take after receiving a written complaint letter from a client? A) Turn the letter over to the representative's supervisor. B) Place a telephone call to the client to resolve the issue. C) Commence a thorough investigation and provide a report of the results to the representative's employer. D) Forward the complaint to FINRA and maintain a copy in the representative's records.
A) Turn the letter over to the representative's supervisor.
Encouraging a customer to purchase mutual fund shares in an amount just under the next dollar volume bracket (which entitles the customer to a reduction in sales charges) or remaining silent on the matter is called A) a breakpoint sale B) a front-end load C) selling short D) market manipulation
A) a breakpoint sale
It would be appropriate to refer to any of the following as an issuer transaction EXCEPT A) a repo B) an APO C) an IPO D) an SPO
A) a repo
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) a spinoff B) a tender offer C) a buyback D) an acquisition
A) a spinoff
There are rules regarding customer statements. All of the following statements reflect those rules EXCEPT A) activity limited to stock splits or stock dividends only do not require monthly statements be sent B) customer statements must be sent no less frequently than quarterly C) customers must be alerted to report any inaccuracies or discrepancies promptly D) customer statements containing penny stocks must be sent monthly, even if no activity occurred in the account
A) activity limited to stock splits or stock dividends only do not require monthly statements be sent
A corporation deposits marketable securities it owns into a trust in order to secure a loan. The loan for this type of arrangement would be facilitated by the corporation issuing A) collateral trust bonds B) equipment trust certificates C) guaranteed bonds D) mortgage bonds
A) collateral trust bonds
The business cycle is best characterized as A) expansion, peak, contraction, trough B) expansion, prosperity, depression C) depression, recovery, prosperity, peak D) inflation, deflation, depression
A) expansion, peak, contraction, trough
A requirement placed by the SEC upon applicants for registration as registered representatives of a broker-dealer that is designed to lessen the possibility that an individual's criminal past might not have been discovered by the employing firm is A) filing of a fingerprint card with the U.S. Attorney General B) filing of a fingerprint card with the SEC C) obtaining a credit report from at least 2 recognized credit reporting agencies D) a personal interview at the nearest FINRA district office
A) filing of a fingerprint card with the U.S. Attorney General
Included in the term, equity security, would be A) participating preferred B) equipment trust certificates C) debentures D) collateral trust certificates
A) participating preferred
An affiliate of a corporation has purchased shares of restricted securities (fully paid for) in a private placement. Under Rule 144 the affiliate can A) sell shares after a 6-month holding period but is subject to volume restrictions B) sell shares immediately with no restrictions C) sell shares immediately but is subject to volume restrictions D) not divest of the shares until the affiliation with the issuer ceases
A) sell shares after a 6-month holding period but is subject to volume restrictions
A corporation seeking to raise funds in order to expand its manufacturing capacity would do so in A) the capital market B) the currency market C) the secondary market D) the funding market
A) the capital market
A corporate bond has a stated yield set at the time of issuance. This stated yield is also known as A) the nominal yield B) the yield to maturity C) the current yield D) the yield to call
A) the nominal yield
Regarding a tombstone advertisement, all of the following are accurate statements EXCEPT A) they are required by and filed with the SEC in order to announce a new issue to the investing public B) all such advertisements must contain an advisory stating that the ad is neither an offer to sell nor a solicitation of an offer C) they are limited to the information that may be contained in them D) it is the only type of advertisement permitted between the time the registration statement is filed with the SEC and the effective date
A) they are required by and filed with the SEC in order to announce a new issue to the investing public
An investment banker primarily engages in which of the following activities? A)Helping issuers to raise capital through securities issuances B)Assisting wealthy individuals manage their investment portfolios C)Helping banks find appropriate investments for excess reserves D)Offering high net worth investors private banking services
A)Helping issuers to raise capital through securities issuances
Which of the following types of broker-dealer would most likely have correspondent firms? A)Self-clearing B)Market maker C)Fully disclosed D)Introducing
A)Self-clearing
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? A)The names of the investment bankers underwriting the issue B)The total number of shares being offered C)The expected price range of the offering D)The name of the issuer
A)The names of the investment bankers underwriting the issue
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)a prime account B)a self-clearing account C) a clearing account D) a fully disclosed account
A)a prime account
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 will she owe the IRS? A) $7,500 B) $12,500 C) $10,000 D) $5,000
B) $12,500
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 A) $2,500 B) $2,000 C) $1,000 D) $1,250
B) $2,000
A broker-dealer has hired an individual for the position of registered representative. The individual is struggling to pass the necessary qualification exam and has failed 4 times. After that fourth failure, the applicant faces a waiting period of A) 90 days B) 180 days C) 60 days D) 30 days
B) 180 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? A) His interest would automatically be transferred to the spouse B) 40% of the shares would belong to his spouse and the remaining balance would be distributed to his estate C) 50% of the shares would belong to his spouse and the remaining half would be distributed to his estate D) Ownership of the shares would be determined by probate court
B) 40% of the shares would belong to his spouse and the remaining balance would be distributed to his estate
Your firm has a number of clients who like to speculate with penny stocks; therefore, it is important to be familiar with the definitions and rules applicable to them. Which of the following statements is FALSE? A) Before an initial penny stock transaction, a new customer must receive a copy of a risk disclosure statement and sign and date an acknowledgement of its receipt. B) A penny stock includes both listed and unlisted securities trading at less than $5 per share. C) Established or existing customers are exempt from the suitability statement requirements but not the risk disclosure requirements. D) Customers holding penny stock positions must receive a monthly account statement regardless of activity in the account.
B) A penny stock includes both listed and unlisted securities trading at less than $5 per share.
Alan and Barbara Collins have three minor children; Dan, Ellen, and Frank. Which of the following UTMA accounts could be opened? A) Alan Collins as custodian for Dan and Frank Collins B) Barbara Collins as custodian for Ellen Collins C) Alan and Barbara Collins as custodians for Ellen Collins D) Frank Collins as custodian for Dan Collins
B) Barbara Collins as custodian for Ellen Collins
Which of the following statements regarding open-end and closed-end funds is TRUE? A) Both are priced using the same method. B) Both pay dividends when declared. C) Both issue equity and debt securities. D) Both issue full and fractional shares.
B) Both pay dividends when declared.
A strategy that blends various types of investment in an effort to reduce nonsystematic risk is called A) Conservation B) Diversification C) Capital preservation D) Dollar cost averaging
B) Diversification
Regarding the dividend disbursement process, there are 4 dates of consequence. There are 3 that are determined by the issuing corporation's board of directors. Which is the one determined by FINRA or the exchange that the security trades on? A) Record date B) Ex-dividend date C) Declaration date D) Payable date
B) Ex-dividend date
Which of the following is NOT a characterization of the Securities Act of 1933? A) Prospectus Act B) Exchange Act C) Truth in Securities Act D) Paper Act
B) Exchange Act
An individual is defined by the SEC as an accredited investor if the individual has a net worth of A) $10 million or more, or has had an annual income of $100,000 or more in each of the 5 most recent years B) Greater than $1 million, or has had an annual income of greater than $200,000 in each of the 2 most recent years C) $3 million or more, or has had an annual income of $200,000 or more in each of the 5 most recent years D) $5 million or more, or has had an annual income of $500,000 or more in each of the 2 most recent years
B) Greater than $1 million, or has had an annual income of greater than $200,000 in each of the 2 most recent years
An investor can take advantage of intraday price changes due to normal market forces when investing in I. closed-end funds II. exchange-traded funds III. hedge funds IV. open-end funds A) III and IV B) I and II C) II and III D) I and IV
B) I and II
Application for FINRA membership by a firm carries the applying firm's specific agreement to I. comply with federal securities laws II. pay dues, assessments, and other charges in the manner and amounts fixed by the association III. pass the appropriate qualification exam(s) IV. attend a FINRA annual conference no less frequently than once every 3 years A) II and IV B) I and II C) I and III D) II and III
B) I and II
Which of the following option contracts is in the money if ABC stock is currently trading at $45 per share? A) Mar 40 put B) Jan 55 put C) Jan 50 call D) Feb 45 call
B) Jan 55 put
Which of the following statements regarding a 529 plans is correct? A) The beneficiary must be below age 18 B) One person can be both beneficiary and owner C) Contributions are limited to $2,000 annually D) The assets in the plan belong to the beneficiary
B) One person can be both beneficiary and owner
Which of the following common stock characteristics would NOT be considered a benefit for common stock shareholders? A) Liability to the extent of one's entire investment in the case of corporate failure B) Priority of claims against a company should it dissolve or be forced to liquidate assets C) The opportunity to collect income from the distribution of corporate profits D)Limited access to the corporations books and records
B) Priority of claims against a company should it dissolve or be forced to liquidate assets
A final prospectus must include certain information. Which of the following is NOT required to be included? A) A statement by the SEC that the offering is neither approved or disapproved B) The underwriting contract and a list of all underwriters named in the contract C) A history of the business including any risks to purchasers that might be unique to that business or industry D) The intended use of the proceeds for such corporate actions including expansion, mergers, or acquisitions
B) The underwriting contract and a list of all underwriters named in the contract
Which of the following statements regarding Treasury bills is correct? A) They are issued with initial maturities of 3, 12, 24, and 50 weeks B) Treasury bills are the only Treasury security issued without a stated interest rate C) They have the highest interest rate risk of all Treasury securities D) They are usually issued at a slight premium to par value
B) Treasury bills are the only Treasury security issued without a stated interest rate
Standardization of transaction settlements, good delivery of securities, ex-dividend dates and trade confirmations is addressed in the A) Code of arbitration procedures B) Uniform Practice Code (UPC) C) Conduct rules D) Code of Procedure (COP)
B) Uniform Practice Code (UPC)
A customer of your broker-dealer has invested in a variable annuity. She makes several comments about them, but 1 of them is inaccurate and needs to be corrected. Which is it? A) VAs guarantee an income stream for life. B) VAs are not securities. C) VAs are actually insurance company products. D) Premiums are invested in a diversified portfolio with an investment objective that the purchaser gets to choose.
B) VAs are not securities.
All of the following would decrease the U.S. balance of payments deficit EXCEPT A) a decrease in dividend payments by U.S. companies to foreign investors B) a decrease in purchases of U.S. securities by foreign investors C) a decrease in imports of foreign goods into the United States D) an increase in exports of domestic goods from the United States
B) a decrease in purchases of U.S. securities by foreign investors
Some securities are sold without a physical certificate. In those instances, evidence of ownership is kept on record at a central agency. One example of those securities would be A) all equity securities issued by corporations B) all government securities issued by the U.S. Treasury C) all securities held in fiduciary accounts D) all debt securities issued by corporations
B) all government securities issued by the U.S. Treasury
A small company, in order to raise capital for expansion, wants to sell shares of stock to investors. The company has never offered ownership outside the founding partners to new investors before. This offering is known as A) a secondary offering B) an initial public offering (IPO) C) an additional public offering (APO) D) a subsequent public offering (SPO)
B) an initial public offering (IPO)
Each of the following might be considered misleading or statements omitting necessary information EXCEPT A) an advertisement claiming that a BD's customers consistently do much better than any other BD's customers in terms of profitability B) an options chart for calls showing unlimited gain potential and the possibility of losing all of one's investment C) a claim that a degree in medicine qualifies a RR to make recommendations on all stocks having to do with pharmaceuticals or medical procedure patents D) an advertisement promising the greatest commission potential of any BD in the securities industry for first year representatives
B) an options chart for calls showing unlimited gain potential and the possibility of losing all of one's investment
One of your new clients explains that she prefers investments paying income with a fixed rate of return, but also allows for the possibility of realizing greater gain potential. She would likely favor investments in A) common shares B) convertible preferred shares C) corporate bonds D) adjustable rate preferred shares
B) convertible preferred shares
Issuers are not required by the Securities Exchange Commission (SEC) to give notice of corporate actions to shareholders for such actions as A) dividends on the issuer's common stock B) interest on the issuer's bonds C) a reverse split D) issuance of warrants
B) interest on the issuer's bonds
A registered representative handling a fiduciary account must be aware of the fact that A) margin account trading is permitted once the regular margin account forms have been received from the fiduciary B) investment decisions must be made in accordance with the prudent investor rule C) a fiduciary may share in an account's profits or may charge a reasonable fee for services, but not both D) account performance will be enhanced by the addition of speculative positions
B) investment decisions must be made in accordance with the prudent investor rule
A suspicious activity report would probably be triggered if the broker-dealer suspects that a transaction involves funds derived from illegal activity and A) involves at least $10,000 in funds or other assets B) involves at least $5,000 in funds or other assets C) involves more than $10,000 in funds or other assets D) involves more than $5,000 in funds or other assets
B) involves at least $5,000 in funds or other assets
A client of a member broker-dealer has just found a new job requiring relocation with a salary paying 50% more than the old job. The client should A) complete a new account application within 30 days B) notify the broker-dealer of the change within 30 days C) review goals and objectives and submit them within 36 months D) open an account with a broker-dealer in the new location
B) notify the broker-dealer of the change within 30 days
All of the following statements regarding penny stocks are true EXCEPT A) if an account holds penny stocks, broker/dealers must provide a monthly account statement to the customer B) penny stock rules apply to both solicited and unsolicited transactions C) the SEC rules require that prospects, before their initial transaction in a penny stock, be given a copy of a risk disclosure document D) established customers of the firm need not sign a suitability statement
B) penny stock rules apply to both solicited and unsolicited transactions
It is generally agreed that the most volatile interest rate in the U.S. economy is A) the discount rate B) the fed funds rate C) the call money rate D) the prime rate
B) the fed funds rate
A registration statement disclosing material information about a new issue must be filed with the Securities Exchange Commission. The accuracy and adequacy of the registration statement is the responsibility of A) the underwriters B) the issuer C) the exchanges where the shares will trade D) the Securities Exchange Commission (SEC)
B) the issuer
ABC Corporation has filed a registration statement with the SEC for the sale of 1 million shares of common stock. This will be the first public offering for ABC. Twelve days into the cooling-off period, ABC receives a deficiency letter from the SEC requesting further information. Five days later, ABC submits the required corrections. Assuming no other problems, this issue should become effective in A)20 days B)8 days C)3 days D)15 days
B)8 days
The Securities Exchange Act of 1934 allows for the creation of self-regulatory organizations (SROs) to write and in some instances enforce compliance by its member firms and persons associated with its member firms. Which of the following is NOT an SRO registered with the Securities Exchange Commission (SEC)? A) Municipal Securities Rulemaking Board (MSRB) B)Depository Trust Company (DTC) C)Financial Industry Regulatory Authority (FINRA) D)Chicago Board Options Exchange (CBOE)
B)The DTC
Most economists would agree that rising employment would be found during periods of A)stagflation B)inflation C)stagnation D)deflation
B)inflation
A corporate bond ($1,000 PAR) purchased several years ago at $825 matures. At maturity, the bond holder will receive principal in what amount? A) An amount to be calculated based on the current yield at the time of maturity B) $175 representing the difference between the purchase price and PAR C) $1,000 face value D) $825 representing return of the purchase price
C) $1,000 face value
In 2011, RST Corp. had both common stock and $100 par value 4% and noncumulative preferred stock outstanding. The preferred, like the common stock, paid dividends on a quarterly basis. Because of financial difficulties, the company stopped paying dividends after 2011. After resolving its problems in 2015, the company resumed dividend payments in 2016. Before paying the first quarterly common stock dividend that year, the company would have to pay a quarterly dividend to the preferred stockholders of A) $20.00 B) $4.00 C) $1.00 D) $17.00
C) $1.00
An investor shorts 2 DEF January 55 puts at a premium of 2 each when the market price of DEF is 56.25. What is the investor's maximum potential loss? A) Unlimited B) $5,300 C) $10,600 D) $5,425
C) $10,600
Your customer is long 1 DFG July 35 call at 2. You explain to the customer that in order to breakeven, DFG stock must be trading at A) 35 B) 0 C) 37 D) 33
C) 37
A broker-dealer may extend credit under Reg. T for which of the following transactions? A) A mutual fund purchase B) A variable annuity purchase C) A Closed-end investment company purchased on the NYSE D) The purchase of an IPO that went public 25 days ago
C) A Closed-end investment company purchased on the NYSE
Investing in securities entails a large number of potential risks. Diversifying one's portfolio could have the effect of reducing which of the following risks? A) Market risk B) Interest rate risk C) Business risk D) Inflation risk
C) Business risk
Under Rule 144, which of the following sales are subject to volume limitations on the number of shares sold? I. Control person selling registered stock held for 1 year II. Control person selling restricted stock held for 2 years III. Non-affiliate selling registered stock held for 1 month IV. Non-affiliate selling restricted stock held for more than 6 months A) II and III B) I and IV C) I and II D) III and IV
C) 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. This would be considered I. a free credit balance II. a debit balance III. available to the customer on demand IV. funds that must be reinvested within 30 days A) I and IV B) II and IV C) I and III D) II and III
C) I and III
Two reasons why a municipality would probably have an easier time issuing revenue bonds instead of general obligation bonds is that I. revenue bonds do not require voter approval II. revenue bonds generally have a higher rating than GO bonds from the same issuer III. revenue bonds are not constrained by a statutory debt limit IV. revenue bonds are supported by ad valorem taxes A) II and III B) I and IV C) I and III D) II and IV
C) I and III
The SEC has established rules regarding delivery of a prospectus when a secondary market transaction occurs after the effective date. Which of the following statements comply with those rules for initial (IPO) and additional (APO) public offerings? I. An IPO of a stock to be listed on the NYSE requires delivery for a period of 25 days. II. An IPO of a stock that will not be listed nor quoted over Nasdaq requires delivery for a period of 40 days. III. An APO of a stock listed on the NYSE requires delivery for a period of 25 days. IV. An APO of a stock that will not be listed nor quoted over Nasdaq requires delivery for a period of 40 days. A)III and IV B)I and II C)I and IV D)II and III
C) I and IV
The Securities Exchange Act of 1934 required the registration of I. broker-dealers II. initial public offerings (IPOs) III. margin accounts IV. stock exchanges A) II and III B) III and IV C) I and IV D) I and II
C) I and IV
It would be reasonable to expect an increase in exports from the United States if I. the dollar strengthened against the euro II. the yen strengthened against the dollar III. the Swiss franc weakened against the dollar IV. the dollar weakened against the British pound A) I and IV B) II and III C) II and IV D) I and III
C) II and IV
Many investors like to put a "transfer on death" (TOD) designation on their brokerage accounts. Among the benefits of doing so are I. the TOD designation avoids estate taxes II. the TOD designation avoids probate III. the account holder is relieved of decision making in the account IV. flexibility to change beneficiaries as conditions dictate A) I and IV B) I and III C) II and IV D) II and III
C) II and IV
For a fully disclosed firm, which of the following is TRUE? A) It can clear transactions (accept cash and securities for delivery) for its customers. B) It can hold funds and securities for a customer. C) It can execute both buy and sell orders for a customer. D) It can accept checks from customers made out to fully disclosed form or the clearing firm.
C) It can execute both buy and sell orders for a customer.
Which of the following direct participation programs (DPPs) is most likely to be associated with intangible costs and depletion allowances? A) Equipment leasing program B) Real estate existing property program C) Oil and gas income program D) Real estate raw land program
C) Oil and gas income program
Which type of DPP would be most likely to enable the investor to claim a deduction for depletion? A) Oil and gas exploratory program B) Equipment leasing C) Oil and gas income program D) Real estate limited partnership
C) Oil and gas income program
Occasionally our economy experiences an unusual combination of rising prices and high unemployment. Economists have given this unusual pairing what name? A) Stagnation B) Deflation C) Stagflation D) Inflation
C) Stagflation
Which of the following is considered a standard corporate action where adjustments made to cost basis for outstanding shares are standardized? A) Takeover B) Merger C) Stock split D) Buyback
C) Stock split
A company is engaging in a securities offering that is a combination of a primary and secondary offering. Which of the following is TRUE? A) This combination is known as an APO where existing shareholders receive all of the proceeds of the sale. B) This combination is known as an IPO where the issuer receives all of the proceeds from the sale. C) This combination is known as a split offering where the issuer receives some of the proceeds and existing shareholders receive some of the proceeds from the sale. D) This combination is known as a split offering where the issuer receives all of the proceeds from the sale.
C) This combination is known as a split offering where the issuer receives some of the proceeds and existing shareholders receive some of the proceeds from the sale.
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) a depository B) a transfer agent C) a clearing agency D) a broker-dealer
C) a clearing agency
For initial public offerings (IPOs) of common stock, all of the following would be considered restricted persons EXCEPT A) a member firm B) fiduciaries acting on behalf of the underwriters C) a person owning at least 5% of the member firm D) employees of the member firm
C) a person owning at least 5% of the member firm
Secondary market transactions are ones in which A) an issuer is selling securities to a public investor B) an investor is having shares redeemed by an investment company C) an investor is selling securities to another investor D) an issuer is selling securities to institutional investors
C) an investor is selling securities to another investor
Regarding a public offering and a private placement, all of the following are true EXCEPT A) both may utilize the services of investment bankers to facilitate the sale of securities B) both are methods of offering securities for sale to investors C) both are subject to the registration requirements found in the Securities Act of 1933 D) both allow securities to be sold to individual and institutional investors
C) both are subject to the registration requirements found in the Securities Act of 1933
Financial markets encompass A) stocks and bonds only B) currencies only C) equity, debt, currency, and derivative products D) derivative products such as options only
C) equity, debt, currency, and derivative products
A municipal finance professional (MFP) would have duties A) limited to giving financial advice regarding new issue municipal bonds B) limited to sales of municipal bonds and other securities C) including underwriting, sales and trading of municipal bonds D) including issuing and underwriting municipal bonds
C) including underwriting, sales and trading of municipal bonds
In most cases, the majority of private placements are sold to A) investment bankers B) individuals who meet the definition of accredited investor C) institutional investors D) general public investors
C) institutional investors
A shelf registration A)is good for 3 years and requires a prospectus to be filed only once B)is good for 4 years and requires a prospectus to be filed only once C) is good for 2 years and requires a supplemental prospectus be filed before each sale D) is good for 4 years and requires a supplemental prospectus be filed before each sale
C) is good for 2 years and requires a supplemental prospectus be filed before each sale
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 A) must only register as a registered representative B) would only have to register as a registered representative if she dealt with customers C) must register as a principal D) need not be registered as this job is strictly administrative
C) must register as a principal
An applicant completing a Form U-4 would NOT be required to list A) legal name and any aliases used B) employment history for the past 10 years C) residential history for the past 10 years D) date of birth
C) residential history for the past 10 years
During the cooling-off period, underwriters may A) take orders from institutional investors only B) distribute sales literature to interested existing clients C) take non-binding indications of interest from public investors D) make offers to sell the securities if an order is entered
C) take non-binding indications of interest from public investors
The portfolio manager of a pension plan is well known as a fan of the local NFL football team. The branch manager of a FINRA member firm who has been trying to secure a portion of the plan's investment account owns a luxury box at the stadium. FINRA's Conduct Rules would permit A) the branch manager to offer tickets to the portfolio manager only if the value did not exceed $100 B) transferring the ownership of the rights to the luxury box to the portfolio manager if at least 30% of the portfolio is transferred to the branch manager's firm C) the branch manager to invite the portfolio manager to accompany him to a game of his choice D) the branch manager to offer the portfolio manager 2 of the seats in the box for the entire season
C) the branch manager to invite the portfolio manager to accompany him to a game of his choice
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 A) only the broker-dealer could rescind the proxy and permit the investor to vote at the meeting B) the voting proxy would stand because it would have already been counted C) the voting proxy would be revoked and only the vote at the meeting would count D) only those with reservations would be able to attend the meeting so the proxy vote would stand
C) the voting proxy would be revoked and only the vote at the meeting would count
The Options Clearing Corporation (OCC) assigns exercise notices to broker/dealers with short positions A) using any method that is considered fair and reasonable B) on a FIFO basis C) using a random selection method D) on a LIFO basis
C) using a random selection method
Producers would generally report rising inventories during which period of the business cycle? A)Expansion B)Peak C)Contraction D)Recovery
C)Contraction
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 I. borrow from the FRB and pay the discount rate II. borrow from the FRB and pay the federal funds rate III. borrow from another member bank and pay the discount rate IV. borrow from another member bank and pay the federal funds rate A) II and IV B)II and III C)I and IV D)I and III
C)I and IV
A broker-dealer that concentrated its business efforts on proprietary trading would most likely be functioning as A)an underwriter B)an investment banker C)a market maker D)an investment adviser
C)a market maker
A basis point is valued at: A) 1/1000th of 1 percent B) 1% of market value C) 1% of face value or $10 D) 1/100th of 1 percent
D) 1/100th of 1 percent
A client entering a sell limit order at 43 would accept which of the following trades? A) 42.90 B) 42.50 C) 42 D) 44
D) 44
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 A) 49 B) 50 C) 53 D) 51
D) 51
Which of the following funds would most likely fall the most in a rising interest rate environment? A) A money market fund B) A T-bill fund C) A T-note fund D) A T-bond fund
D) A T-bond fund
Which of the following statements regarding put and call features on debt securities is NOT correct? A) Put features benefit the bond holder. B) Call features benefit the issuer. C) A puttable bond is likely to be put back when interest rates are rising. D) A callable bond is likely to be called when interest rates are rising.
D) A callable bond is likely to be called when interest rates are rising.
Which of the following positions/actions would cover a client who has shorted a call? A) Buying a call that expires sooner B) A short stock position C) Buying a put with a higher strike price D) A long stock position
D) A long stock position
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 A) ABCCC warrants B) ABCCC call options C) ABCCC convertible bonds D) ABCCC put options
D) ABCCC put options
Which of the following securities would be least likely to be issued by a corporation? A) Preferred stock B) Debentures C) Common stock D) Call and put options
D) Call and put options
A registered representative of a FINRA member firm has been accused of violating the Conduct Rules. Treatment of this case will be handled under the FINRA A) Code of Arbitration Procedure B) Uniform Securities Act C) Uniform Practice Code D) Code of Procedure
D) Code of Procedure
Which of the following records must be kept by a broker-dealer for a minimum of 4 years? A) Blotters B) Partnership articles if the broker-dealer is organized as a partnership C) Customer confirmations D) Customer complaint letters
D) Customer complaint letters
If a registered person fails to complete the regulatory element within the prescribed period, A) the member firm must suspend the person until the requirements of the program are met B) the person must not be present on the firm's premises until the requirements of the program are met C) FINRA will normally grant a 30-day extension of time D) FINRA will deactivate that person's registration until the requirements of the program are met
D) FINRA will deactivate that person's registration until the requirements of the program are met
An investor considering the differences between purchasing open-end investment company shares or ETFs with a similar objective should understand that I. each time an investor purchases and sells ETFs, there is a commission II. the operating expense ratio for an ETF is generally very high because they usually track indexes such as the S&P 500 III. it is possible that an investor liquidating ETF holdings will receive less than the NAV per share IV. the margin requirements to purchase an ETF are higher than that for an open-end investment company A) I and IV B) II and III C) II and IV D) I and III
D) I and III
An investor receives a quote of 32—32.15 for XYZ common stock. This means that I. purchasing the stock will cost $32 per share II. purchasing the stock will cost $32.15 per share III. the spread is $.15 IV. the investor will receive $32.15 per share if selling A) III and IV B) I and III C) I and IV D) II and III
D) II and III
Examples of systematic risk would include I. business risk II. inflation risk III. market risk IV. regulatory risk A) I and II B) III and IV C) I and IV D) II and III
D) II and III
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 DUI a felony. When filing a Form U-4 for registration with a member firm, I. Tom must indicate that he has been convicted of a felony II. Tom would not have to list the conviction III. Tom would be subject to statutory disqualification IV. Tom would not be subject to statutory disqualification A) II and III B) I and III C) I and IV D) II and IV
D) II and IV
Which of the following trading strategies are employed by hedge funds that are generally prohibited to mutual funds? I. Limiting their investments to a narrow group of securities II. Using borrowed money to purchase portfolio securities III. Taking long positions in speculative stocks IV. Taking short positions in NYSE listed stocks A) I and III B) II and III C) I and IV D) II and IV
D) II and IV
BBB Corporation is liquidating under a Chapter 7 bankruptcy. What is the order of payout? A) Senior bond holders, preferred shareholders, common shareholders , general creditors B) General creditors, senior bond holders , preferred shareholders , common shareholders C) Common shareholders, preferred shareholders, general creditors, senior bond holders D) Senior bond holders, general creditors, preferred stock holders, common shareholders
D) Senior bond holders, general creditors, preferred stock holders, common shareholders
A client phones his registered representative in September and informs the rep that he will studying abroad in Europe for the balance of the year. The client wants the firm to hold his mail. What action should the rep take? A) The rep should temporarily change the client's address to a secure P.O. box to prevent the theft of his mail. B) The rep should send duplicates to Paris since under SEC customer protection rules, mail cannot be held. C) The rep should have all mail forwarded directly to the branch to protect against identity theft. D) The rep must instruct the client that the request must be made in writing.
D) The rep must instruct the client that the request must be made in writing.
To facilitate a public offering where securities are offered and sold to the investing public, issuers will utilize the services of all of the following EXCEPT A) broker-dealers B) investment bankers C) underwriters D) U.S. stock exchanges
D) U.S. stock exchanges
An investor has purchase a bond where the issuer will repay part of the bond's principal before the final maturity date, and then pay off the major portion of the debt principal at final maturity. This is A) a serial maturity schedule B) a term maturity schedule C) a series maturity schedule D) a balloon maturity schedule
D) a balloon maturity schedule
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 most likely corporate action to be taken to preserve the listing would be A) reducing staff B) increasing earnings C) a stock dividend D) a reverse split
D) a reverse split
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) a discretionary account B) a commission-based account C) a margin account D) a wrap account
D) a wrap account
Under rules found in the Investment Advisers Act of 1940, if a political contribution to certain elected officials or candidates is made, A) an adviser must suspend providing advisory services to any government they represent until it is determined if the election campaign was successful or not B) an adviser may not provide advisory services to any government they represent for a fee for 3 years C) an adviser may not provide advisory services to any government they represent for a fee until the next election D) an adviser may not provide advisory services to any government they represent for a fee for 2 years
D) an adviser may not provide advisory services to any government they represent for a fee for 2 years
An investor has purchased a senior, unsecured debt security that trades on an exchange and is issued by a financial institution. It is backed only by that institution's good faith and credit. The security tracks the performance of a particular market index, but does not represent ownership in a pool of securities the way share ownership in a mutual fund does. This security that pays no interest and has a stated maturity date is known as A) a real estate investment trust B) an exchange-traded fund C) a call option or put option contract D) an exchange-traded note
D) an exchange-traded note
Both exempt and nonexempt securities have full disclosure documents available to the investing public so that an informed investment decision can be made. The document associated with exempt securities would be A) a prospectus or offering circular B) a prospectus or disclosure document C) an official statement or registration statement D) an official statement or offering circular
D) an official statement or offering circular
Persons who enter trades at or near the same time in the same security as a person who has inside information are known as A) tippees B) informers C) tippers D) contemporaneous traders
D) contemporaneous traders
If the U.S. balance of payments is currently running at a surplus, all of the following are likely to be occurring EXCEPT A) exports are currently exceeding imports B) the value of the U.S. dollar is currently down against other currencies C) the balance of trade shows a credit D) more dollars are flowing out of the United States than into the United States
D) more dollars are flowing out of the United States than into the United States
Underwriters have been taking indications of interest for shares of an upcoming new issue. Indications of interest are A) binding on the underwriters only to make available the shares once the effective date is reached B) binding on all parties C) binding only on the parties who tendered the indications to purchase the shares once the effective date is reached D) non-binding on all parties
D) non-binding on all parties
After working for several years as a retail sales manager, Marsha decided to seek employment at a FINRA member firm. Marsha was successful on her first attempt on the qualification exam and during her first 3 years as a registered representative, opened a number of accounts. During a market correction, her commission income fell and she decided to devote her time on weekends to a part time retail sales position. Under FINRA rules regarding outside business activity (OBA), Marsha must A) receive approval from the FINRA district office B) provide prior written notice to and receive written permission from the employing member C) choose her occupation; she cannot do both of these simultaneously D) provide prior written notice to the employing member firm
D) provide prior written notice to the employing member firm
The Federal Reserve Board (FRB) can have an impact on the money supply utilizing all of the following EXCEPT A) buying and selling government securities in the open market B) raising or lowering the discount rate C) raising or lowering the reserve requirement D) raising or lowering the prime rate
D) raising or lowering the prime rate
All of the following are debt security maturity schedules EXCEPT A) balloon B) serial C) term D) series
D) series
When a registered person terminates from a FINRA member firm, filing form U-5 is the responsibility of A) the depository trust company B) FINRA C) the registered person D) the member firm
D) the member firm
The investment return of a variable annuity comes from A) the assumed rate stated in the policy documents B) the insurance company's general account C) computing the excess of the premiums received over the mortality experience D) the performance of the selected sub-accounts within the separate account
D) the performance of the selected sub-accounts within the separate account
All of the following are key differences between general obligation (GO) bonds and revenue bonds EXCEPT A) the requirement for voter approval B) the source of interest and principal payments C) being subject to statutory debt limits D) the type of issuer borrowing the funds
D) the type of issuer borrowing the funds
One characteristic of an open-end investment company that distinguishes it from a closed-end one is that A) there are a wide variety of objectives available for investors to select from B) it may avoid taxation by distributing all of its net investment income to shareholders C) it may be either diversified or non-diversified D) there is a continuous public offering
D) there is a continuous public offering
The enforcement of MSRB rules upon broker-dealers is performed by A)OCC B)MSRB C)NYSE D)FINRA
D)FINRA
With regards to fiscal policy, it would be CORRECT to state that I. fiscal policy is considered the most efficient means to solve short-term economic problems II. fiscal policy is not considered the most efficient means to solve short-term economic problems III. fiscal policy refers to governmental budget decisions enacted by our president and Congress IV. fiscal policy refers to governmental budget decisions enacted by our president and the cabinet A)I and III B)I and IV C)II and IV D)II and III
D)II and III
The Federal Reserve is concerned that the economy is slowing. Which of the following actions would the Fed most likely engage in? A)Double the reserve requirements for member banks B)Raise the margin requirements under Reg. T C)Engage in open market sales of T-Bills D)Pursue an easy money policy to lower interest rates
D)Pursue an easy money policy to lower interest rates
