SIE study problems
Which of the following records must be kept by a broker-dealer firm for six years? Customer new account forms Advertising the firm has published Stock records Minute books
2 and 3
Regarding primary and secondary offerings, which of the following are true? An offering can only be either a primary or secondary. An offering can be a combination of primary and secondary. An initial public offering (IPO) is a secondary offering. An additional primary offerings (APO) is a primary offering.
2 and 4
Which of the following records must be kept for only three years? Customer statements Customer new account forms Customer confirmations Customer order tickets pick two
3 and 4
how many years do government bonds use?
30/365
nformation on the Form U4 is extensive and includes names (aliases) and addresses in addition to which of the following? A) 3 years of employment and 3 years of residency history B) 10 years of residency and 5 years of employment history C) 2 years employment and 3 years of residency history D) 5 years of residency and 10 years of employment history
5 years of residency and 10 years of employment
Which of the following is the lowest investment grade debt rating? A) Aa B) Ba C) Baa D) A
Baa or BBB is the lowest investment grade debt rating
Which of the following is a lagging economic indicator? A) Building permits B) Manufacturer's new orders C) Duration of unemployment D) The stock market as measured by the S&P 500
Duration of unemployment (i.e., how long unemployed people stay unemployed) is a lagging indicator. All of the others are leading indicators that tend to change direction before the economy changes direction.
An associated person of a Financial Industry Regulatory Authority (FINRA) member firm would not be considered a municipal finance professional (MFP) if involved solely in which of the following? A) Municipal securities communications with customers B) Municipal securities sales to customers C) Underwriting municipal securities for the firm D) Research involving municipal securities for the firm
Explanation Associated persons whose activities are limited solely to sales or have only clerical or ministerial functions are not MFPs. All the other activities would be associated with an MFP.
The bureau of the Treasury Department that combats money laundering and international and domestic terrorist financing is called A) the ATF. B) the SAR. C) the Comptroller of the Currency. D) FinCEN.
Explanation The SAR is the suspicious activity report. The Comptroller of the Currency deals with banking regulations. The ATF is the Bureau of Alcohol, Tobacco, Firearms and Explosives. FinCEN is the Financial Crimes Enforcement Network, which deals with money laundering.
For the primary market, which of the following is true? A) All U.S. exchanges are primary markets where securities are offered at a public offering price. B) Issuer transactions occur in the primary market, and securities are offered at a public offering price. C) Issuer transactions occur in the primary market, and price is determined by supply and demand. D) All U.S. exchanges are primary markets where price is determined by supply and demand.
Explanation The primary market, regulated by the 1933 Securities Act, is where securities are offered by issuers (issuer transactions) at an offering price. The sales proceeds of these transactions go to the issuer.
A RR who wants to place a tombstone advertisement in the paper would need written approval from who?
FINRA A principal at the firm?\ Each state security admin
which IRA is deductible and which one is not
Roth IRA is NOT deductible Traditional IRA is Deductible
who might a correspondent firm have a relationship with?
Self clearing firm
Selling long is equivalent to which of the following?
Selling to close
For restricted stock (unregistered) held by a nonaffiliated, which of the following applies? A) Six-month holding period, with sales allowed freely thereafter B) Six-month holding period, with volume limits thereafter C) No holding period, but volume limits always apply D) No holding period or any volume restrictions
Six-month holding period, with sales allowed freely thereafter For restricted stock (unregistered) held by a nonaffiliated, a six-month holding period before any sales can be made applies. After the holding period, sales can be made freely.
what is the trade day for an option
T +1
what is regular way settlement
T+2 which is 2 business days after trade date.
A 40-year-old individual is not covered by a retirement plan at work. What is the maximum contribution this individual can make to a traditional IRA this year?
The current maximum allowed by the IRS, which will all be deductible.
Which of the following sell transactions is not subject to the holding period restriction specified in SEC Rule 144? A) Unregistered stock acquired by a corporate affiliate in a stock option program B) Stock acquired in the OTC market by a corporate affiliate C) Unregistered stock acquired by a nonaffiliate under an investment letter D) Stock acquired by a corporate affiliate in a private placement
The holding period rule applies only to unregistered stock, which may or may not be control stock. Unregistered stock results from either private placements or the exercise of a corporate stock option. Because this question asked which securities were not subject to the Rule 144 holding period, only stock acquired in the OTC market by a corporate affiliate is the correct answer. However, the affiliated person is subject to volume restrictions.
Once a dividend is initially declared by the board of directors (BODs), any future dividend payments A) carry no guarantee of payment in any amount. B) are not guaranteed to be paid, but if they are paid, they must be at least equal to the initial declaration. C) are guaranteed to be paid in at least the same amount as the initial declaration. D) are guaranteed to be paid, but no amount is stipulated.
carry no guarantee of payment in any amount. While the potential to share in the company's profits by receiving dividends is considered one of the benefits of equity ownership, one of the risks is the possibility of dividend income decreasing or ceasing entirely. Dividends are not guaranteed in any way.
how do index call option settle
cash
Which of the following sets of FINRA rules focuses on disputes in the industry and with customers who have filed a predispute agreement? A) Conduct Rules B) Uniform Practice Code C) Code of Arbitration D) Code of Procedures
code of arbitration The Code of Arbitration covers disputes over money between representatives, member firms, banks, and customers.
The mission of the Financial Crimes Enforcement Network is to A) investigate and prosecute fraud. B) safeguard the financial system from illicit use. C) enforce anti-money laundering laws. D) analyze foreign trade.
safe guard the financial industry from illicit use The mission of the Financial Crimes Enforcement Network (FinCEN) is to safeguard the financial system from illicit use; to combat money laundering; and to promote national security through the collection, analysis, and dissemination of financial intelligence. Most financial services companies are required to report suspicious or unusual activity to FinCEN. Suspicious activity reports and cash transaction reports go to FinCEN.
Your client, Mary Quinn, wants to place an order to sell a stock in her portfolio when the current price is 45, but she is only willing to sell if she can sell for at least 47. Which order should she place?
sell limit order
Under Regulation T, when must a corporate stock transaction be paid for in full in a cash account?
settlement plus two days
An account that is titled "customer name d/b/a business name" would be which of the following? A) Corporate account B) Sole proprietor account C) Partnership account D) Limited liability corporation
sole proprietor account The abbreviation "d/b/a" stands for "doing business as" and is used for a sole proprietor account when the business is using a fictitious business name.
An order that when triggered becomes a market order is called a
stop order
Calculate Intrinsic Value
strike - mkt price
The ex-date for a dividend from a mutual fund is set by whom?
the BOD
The broker loan rate charged by banks is also known as A) federal funds rate. B) prime rate. C) discount rate. D) the call loan rate.
the call loan rate
Regulation S-P requires that financial institutions provide information to customers and consumers concerning
the categories of nonpublic personal information that a broker-dealer, fund, or registered investment adviser may collect and disclose. 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 ex day for exchange listed stocks is set by whom?
the exchange
Which of the following are true of nonqualified plans but not true of qualified plans?
the plan may discriminate
Which of the following should be stated to the customer when he is being recommended a 529 savings plan?
the potential deductibility of contributions from state taxes
The ask price represents
the price the BD is willing to sell for
After the owner of a variable annuity elects to annuitize, they begin to receive lifetime income payments. The calculation that determines the amount of those payments includes several factors. Which of the following is not one of those factors? A) The amount of assets in the variable annuity B) The projected rate of inflation C) The age of the annuitant D) The assumed interest rate
the projected rate of inflation Inflation is not one of the factors in calculating the payout. An acronym to assist in remembering the criteria is SAAPI: sex, age, amount, payout choice, and interest rate.
under regulation T, a 90-day restriction is imposed when a customer opens and closes which of the following?
the same stock in a cash account without paying for the stock in full
A customer called you and asked you to place a buy order for 200 shares of ABC common stock. Which of the following is true regarding this transaction? A) This is not a recommendation. B) This is a solicited trade. C) This is a discretionary trade. D) This is a recommendation.
this is not a recomendation
Exempt from the penny stock rules are A) both solicited and unsolicited transactions. B) all transactions. C) unsolicited transactions. D) solicited transactions.
unsolicited transactions Unsolicited transactions (those not recommended by the broker-dealer or registered representative) are exempt from the penny stock rules. Solicited transactions are nonexempt and the rules therefore apply.
Which of the following is correct concerning an uncovered call writer? A) The premium is the maximum loss and the gain potential is unlimited. B) Both gains and losses are unlimited since the position is uncovered. C) The premium is the maximum gain and the loss potential is unlimited. D) Both gains and losses are limited to the premium received from the sale of the option.
The premium is the maximum gain and the loss potential is unlimited. Uncovered call writers have a maximum profit potential of the premium received if the option expires worthless. The loss potential is unlimited since the writer does not have the stock required to make delivery and would be forced to buy the shares in the open market.
Which of the following regarding open-end (mutual fund) and a closed-end management investment company is true?
The price of open-end company shares is set by supply and demand, but not the price of closed-end shares.
Class B mutual fund shares are also known as A) deferred-load shares. B) contingent-deferred shares. C) back-end load shares. D) partially loaded shares.
back end load shares
Which of the following securities is most often used to fund international trade?
bankers acceptance BAs are widely used in international trade for payments that are due for a future shipment and delivery of goods. For example, a Brazilian shoe manufacturer would receive a BA from a U.S. retailer for a guaranteed future payment when the shoes arrive in the United States. The manufacturer may ship its product knowing that the BA is guaranteed by a commercial bank. BAs are negotiable and freely traded in the money markets at a discount.
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 sell long
All of the following may be purchased on margin except A) municipal securities. B) call and put contracts. C) Nasdaq listed stocks. D) exchange-listed securities.
call and put contracts Option contracts—calls and puts—are among those securities products that cannot serve as collateral for a margin loan and, therefore, may not be purchased on margin. In the case of options, their unpredictable intrinsic value, diminishing time value, and limited life make them inappropriate for securing any kind of loan.
Of the following, reinvestment risk is most closely associated with A) call risk. B) inflation risk. C) capital risk. D) market risk.
call risk
when bond prices rise, interst rates do what?
are falling
how many days of the year do corporate and municiple bonds use?
artificial days 30/360
advantages of using ADR's
ADR issuers provide financial reports in English. ADRs pay dividends in U.S. dollars. ADRs make it significantly easier to invest in a foreign security
Which of the following is considered a systematic risk? A) Regulatory risk B) Financial risk C) Purchasing power risk D) Default risk
purchasing power risk
Seacoast Securities, a member firm, filled a customer's sell order for BigTech Computers common stock and did not charge a commission. The firm most likely acted in what capacity?
Dealer
Why would a foreign corporation want to see American depositary receipts issued for its common stock?
ADRs make investing easier for U.S. investors and make accessing U.S. capital markets easier for the foreign corporation. The company must still operate under the laws of the nation in which it is located.
What is the penalty, if any, for overcontribution to an IRA?
6%
How much of a tender must be offered to have it be executed?
80%
A company has just conducted a stock offering, by prospectus, through an investment banker. The proceeds of the offering are used to purchase a portfolio of securities. The stock, now in the hands of the public, is freely traded in the secondary market, and the portfolio is managed to generate maximum profit according to a specific investment objective. The company must be a nonfixed UIT. B) a fixed UIT. C) a closed-end company. D) a mutual fund.
A closed-end company, or closed-end management investment company, is much like any other company, just that its source of profit is investments, rather than selling a product or service. Shares of closed-end companies are traded in the secondary markets, while the other choices listed here offer only redeemable securities.
stock or bond power
A document that substitutes for the owners signatures on the back of a stock or bond certificate is called a
A debt-based unit investment trust (UIT) will feature which of the following? A) A fixed portfolio of bonds B) A passively managed portfolio of bonds C) An actively managed portfolio of bonds D) A fixed portfolio of corporate bond mutual funds
A fixed portfolio of bonds UITs are not managed; once the portfolios are composed, they do not change. There is no manager, not even a passive one. Mutual funds are managed and do not have a fixed portfolio, therefore a portfolio of funds is not fixed.
Which of the following statements would describe the Fourth Market? A) These transactions take place through electronic communications networks (ECNs) which are open during normal trading hours and act solely as principals B) The after-hours market C) A market for institutional investors in which large blocks of stock, both listed and unlisted, trade in transactions unassisted by broker-dealers D) These transactions take place through electronic communications networks (ECNs). ECNs are open 24 hours a day and act solely as principals
A market for institutional investors in which large blocks of stock, both listed and unlisted, trade in transactions unassisted by broker-dealers The Fourth Market is a market for institutional investors in which blocks of stock trade through ECNs that are open 24 hours a day acting as agents.
how many stock rights does an existing share holder get in a stock right offering?
A rights offering allows stockholders to purchase common stock below the current market price. The rights are valued separately from the stock and trade in the secondary market during the subscription period, which is typically 30 to 45 days. Existing shareholders receive one right per share owned. The number of rights required to purchase one share of the new issue depends on the number of outstanding shares and the number of new shares offered.
While preferred shares tend to be less volatile than common shares, one type of preferred is noted as being even more stable in price than the others. This would be
Adjustable rate Because the dividend payment adjusts to current interest rates, the price of the stock remains relatively stable. In other words, it is the return that fluctuates rather than the price.
Which of the following regarding open-end (mutual fund) and a closed-end management investment company is true? A) An open-end company may sell fractional shares, but a closed-end company may not. B) Only the closed-end company may issue additional shares without changing its charter. C) A closed-end company sets its own dividend ex-date, but an open-end company's ex-date is set by its self-regulatory organization (SRO). D) The price of open-end company shares is set by supply and demand, but not the price of closed-end shares.
An open-end company may sell fractional shares, but a closed-end company may not. Open-end shares are redeemable and may be purchased in specific dollar amounts. This results in fractional shares being sold. Closed-end shares trade on the open market, and are therefore traded in round lots of full shares only. The other choices reverse the characteristics of open-end and closed-end companies.
How are ADRs taxed?
Any trading profits (capital gains) from the ADR would only be taxable in the United States. Because the position was maintained for more than one year, long-term capital gains rules would apply.
Contributions to an IRA can be made up to which of the following dates?
April 15th of the following year the contribution is for
All of the following may be purchased on margin except A) exchange-listed securities. B) Nasdaq listed stocks. C) municipal securities. D) call and put contracts.
Call and Put contracts
the call provision of a bond stipulates
Call date and call price
Which of the following best fits the description of a growth stock? A) Preferred shares in companies that back stated dividends with investments in pharmaceutical companies B) Common shares in companies that retain earnings and pays little or no dividends C) Common or preferred shares in companies, which experience growth in unusual, nonrecurring profitable circumstances D) Common shares in companies that pay a high dividend on rapid growth experience
Common shares in companies that retain earnings and pays little or no dividends Most every industry passes through phases; introduction, growth, maturity, and decline. An industry is in its growth phase if it is growing faster than the economy as a whole due to e.g. technological changes, new products, or changing consumer tastes. Because growth companies retain nearly all of their earnings to finance business expansion, growth stocks pay little or no dividends.
The statement "These securities have not been approved or disapproved nor have any representations been made about the accuracy or the adequacy of the information" is A) mandated by the Financial Industry Regulatory Authority (FINRA) to be placed in both the preliminary and final prospectus. B) is the disclaimer placed by the underwriters in a tombstone advertisement. C) placed by the issuer in the preliminary prospectus. D) mandated to be in the final prospectus by the Securities and Exchange Commission (SEC).
Commonly known as the Securities and Exchange Commission's disclaimer, the SEC mandates that it be found in the final prospectus.
Which of the following are true of traditional IRAs but not of Roth IRAs? Contributions may be deductible Contributions are always deductible There is a 50% penalty for failing to take the required minimum distribution (RMD) There are income limits for making contributions
Contributions may be deductible There is a 50% penalty for failing to take the required minimum distribution (RMD)
Which of the following features of preferred stock allows the holder to reduce the risk of inflation?
Convertible stock Fixed-dollar investments, such as bonds and preferred stock, are subject to inflation risk, which is the risk that the fixed interest or dividend payments will be worth less over time in terms of purchasing power. The ability to convert to common stock, which tends to keep pace with inflation, offsets this risk.
In a split offering, A) shares are sold by existing shareholders only. B) all shares are issued to the public from existing shareholders. C) shares are issued to existing shareholders only. D) shares are issued from the corporation and sold by existing shareholders.
In a split offering, shares are sold to the public. These shares come from both the corporation (issuer) and existing shareholders. These offers are also called combination offers.
Which of the following characteristics are associated with face-amount certificates (FAC)? A) Variable returns B) Set death benefit C) No specific maturity date D) In return for a future payment, the investor agrees to pay the issuer a set amount of money
In return for a future payment, the investor agrees to pay the issuer a set amount of money
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 A) premium. B) intrinsic value. C) strike price. D) time value.
Intrinsic value and time value are components of the premium. The strike price is needed to compute the intrinsic value.
Margin Maintenance requirements are set by A) the SEC. B) the FBI. C) the FRB. D) FINRA.
Maintenance requirements are set by the governing SRO. FINRA is the best answer of this set. FRB sets the initial margin requirement along with the SRO minimum. The FRB does not set maintenance requirements.
Which of the following characteristics are typical of an exchange-traded product (ETP)? A) An ETP is an ineligible investment for retail customers, and may not be purchased on margin. B) An ETP is marginable but may not be sold short. C) The value of an ETP is derived from other investment instruments, and it trades on a national securities exchange. D) The value of an ETP is derived by formula disclosed in the prospectus and it trades on an exchange only after normal trading hours.
The value of an ETP is derived from other investment instruments, and it trades on a national securities exchange. ETPs are priced so that the value of the product is derived from other investment instruments, such as a commodity, a currency, a share price or an interest rate. ETPs are benchmarked to stocks, commodities or indices. They are marginable and may be sold short.
What are the associated pentaltys and their percentages for an IRA?
There is a 10% penalty is for early withdrawal. There is a 50% penalty is for failure to make the minimum required distribution for the year. Contribution of more than the maximum amount in a year carries a 6% penalty.
How many times can a transfer happen between custodians?
Trustee-to-trustee transfers (between custodians) are permitted as often as an investor wishes. There is no mandatory tax withholding or penalty for this type of transfer.
Isaac James has some call options in his account that he would like to exercise. He wants to know when the resulting purchase of the stock would settle. You would tell him A) trade date plus 2 business days. B) trade date plus 1 business day. C) trade date. D) trade date plus 3 business days.
When purchasing or selling an option, the settlement is the next business day. When an option is exercised the resulting stock transaction is 2 business days following exercise.
when are municipal bonds labeled as tax-free at all levels?
When they are issued and purchased in the same state/
The growth potential in the price of preferred shares is generally considered to be
While the growth potential of both common and preferred shares can be tied to a company's financial well-being, preferred share growth is generally less than that of the common shares. The trade-off is that the preferred shares have preference with dividends received, enjoy a fixed rate of return via those dividends, and have a priority claim over common shareholders in the event of bankruptcy and the dissolution of assets.
Which of the following issues only common stock? A) Mutual funds B) Closed-end funds C) Municipalities D) Corporations
a mutual funds
An unsecured promissory note issued by a bank that can be traded in the secondary market is known as a negotiable CD. B) commercial paper. C) mortgage bond. D) prime paper.
a negotiable CD
In accordance with the terms of the Telephone Consumer Protection Act of 1991 (TCPA), all of the following statements are true except A) the firm must maintain a do-not-call list documenting all those who have asked to be placed on it. B) calls made on behalf of tax-exempt nonprofit organizations are exempt from the act. C) calls made to parties with whom the caller has an established business relationship are exempt from the act. D) cold calls may be made between 8:00 am and 9:00 pm in the time zone from which the representative is making the call.
cold calls may be made between 8:00 am and 9:00 pm in the time zone from which the representative is making the call. Any solicitation made must occur between 8:00 am and 9:00 pm in the recipient's time zone (not the callers). Firms must maintain a do-not-call list, and the act exempts calls made on behalf of tax-exempt nonprofit organizations and calls made to parties with whom the caller has an established business relationship.
insider trading penalties
criminal 5 mil and 20 years of jail time firms 25 mil or 3x damages
what is true for a roth IRA?
distributions are not required after reaching 72. anyone with earned income under a certain limit may contribute. contributions are not deductible.
what do direct correlation programs provide?
exposure to non correlated assets
Which regulator sets maintenance requirements for margin accounts? A) the FRB. B) the OCC. C) the SEC. D) FINRA. Explanation
finra
How long must record of a customer complaint be retained? A) Six years after resolution B) Four years after receipt C) Indefinitely D) Four years after resolution
four years after resolution Any record of written complaints must be kept for four years after resolution.
Roth IRAs have no minimum required distributions at any age. have higher contribution limits than those allowed for a traditional IRA. allow the withdrawal of earnings tax free as long as the account has been opened for two years. can be contributed to in the same year as a traditional IRA.
have no minimum required distributions at any age. can be contributed to in the same year as a traditional IRA.
Stagnation in the economy can be associated with A) prolonged periods of healthy economic growth. B) high unemployment. C) robust production. D) plentiful employment opportunities.
high unemmployment
what is another name for a disclosed firm?
introducing broker
FAC
is a contract between an investor and an issuer in which the issuer guarantees payment of a stated (face-amount) sum to the investor at some set date in the future. In return for this future payment, the investor agrees to pay the issuer a set amount of money, either as a lump sum or in periodic installments.
who trades in an OTC market ?
market makers in a decentralized market
A stop order, once triggered, becomes A) a limit or more order. B) a market order. C) a stop limit order. D) a limit or better order.
market order
whats the greatest risk in a variavle life insurance policy
market risk
On February 29 of last year, when the stock was trading at $72, Seabird Airlines declared a 15% stock dividend, payable on April 15. On the close of trading, on the pay date, the stock was trading at $75. What would a customer who owned the stock all of last year report for tax purposes? A) $3 loss B) $14 gain C) $11 investment income D) Nothing
nothing there are no tax implications for a stock dividend
A supply-side approach to fiscal policy will use all of these tools except A) decreasing government regulatory costs. B) providing tax credits to small business. C) personal income tax rebates. D) decreasing tax rates on business entities.
personal income tax rebates. Supply-side fiscal policy seeks to create a better environment for business to thrive. The end goal is a growing economy that creates jobs. Sometimes called trickle-down economics, the emphasis is on the business side much more than the consumer side. LO 9.e
what represents an effective stock split
price per common stock decreases
To qualify as an exempt transaction under Tier 2 of Regulation A, an issuer may offer a maximum of which of the following? A) Up to $75 million in securities in a 12-month period B) Up to $20 million in securities in a 12-month period C) Up to $22.5 million in securities in a 12-month period D) Up to $15 million in securities in a 12-month period
up to 75 million in securities in a 12 month period Securities offerings up to $75 million in a 12-month period are allowed in Tier 2. Of the $75 million, no more than $22.5 million can be sold on behalf of existing selling shareholders (similar to a combination offering). These offerings are subject to SEC review only and no review at the state level. Tier 2 offerings are still subject to rigorous disclosure requirements to the SEC, including audited financial statements and annual, semiannual, and current reports.
