784 SIE FINRA Exam Questions and Answers, 100% Accurate, Rated A+

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784 SIE FINRA Exam Questions and Answers The Federal regulatory body that governs the securities industry is: >>>The SEC A fully disclosed BD: >>>is an inducing firm clearing its transactions throu... gh a carrying firm An intermediary between the buy and sell sides of a transaction is known as >>>a clearing agent For the Depository Trust and Clearing Corporation (DTCC), all of the following are true EXCEPT: a. it is a member of the Federal Reserve System b. It acts as a retail bank servicing savings and checking accounts c. it serves for the purpose of providing custody of securities d. it is a worldwide clearing agent >>>b. it acts as a retail bank servicing savings and checking accounts Your BD acts as a prime broker for an institutional account. In this arrangement, your BD is likely to be providing which of the following services? >>>clearing and transaction settlement services for executing brokers An individual or institution willing to hold securities positions in its own proprietary account for the purpose of providing liquidity to the marketplace is >>>a market maker An entity such as a corporation wishing to offer securities for sale to the public for the purpose of raising capital is >>>an issuer A nonprofit organization requiring members to pay assessments into a general insurance fund used to meet customer claims in the event of a BD bankruptcy is >>>the Securities Investors Protection Corporation (SIPC) The FDIC provides insurance guaranteeing the safety of a depositor's accounts in FDIC member banks for each deposit up to: >>>$250,000 Determining monetary policy and taking actions to implement those policies is the responsibility of >>>the Federal Reserve Board (FRB) The Magnolia Steel Corporation needs to build a refinery plant. It is estimated to cost $750 million to complete. What market can be used to raise the money needed to build the new plant? >>>Secondary MarketWhen securities are sold to the investing public in what are known as issuer transactions, the transactions are being done in: >>>the primary market If an investment company bought stock directly from a bank, bypassing any intermediary or broker, this trade took place in >>>the fourth market Which of the following statements regarding the third market is TRUE? a. it refers to trading of unlisted stocks directly between institutional investors b. the services of a broker acting as an agent or intermediary are not used c. It is composed of listed securities traded OTC d. it is composed only of unlisted securities >>>c. It is composed of listed securities traded OTC An investor enters an order to purchase shares of XYZ stock. Another investor enters an order to sell XYZ stock. These two orders meet on the floor of a US Stock Exchange where they are executed. This transaction too place in: >>>the secondary market Assuming all other factors to remain constant, an increase in imports would most likely cause GDP to >>>decrease Which state of the business cycle is characterized by rising interest rates and higher wages? >>>Expansion An economic environment with little or no economic growth, but where inflation is present, is best described as >>>Stagflation It is generally agreed that the two primary policies impacting the U.S. economy are fiscal and monetary. Which of the following would be considered tools of fiscal policy? I. Government Spending II. Operations of the Federal Open Market Committee (FOMC) III. Changing the reserve requirements IV. Taxation >>>Government Spending and Taxation Which of the following is added to M2 to arrive at M3? >>>$100,000 and larger time deposits Which of the following actions of the Federal Reserve Board (FRB) would likely have the effect of causing interest rates to increase? I. The FOMC buying securities II. Raising the reserve requirements III. Raising the discount rate IV. Raising the prime rate >>>Raising the reserve requirements & Raising the discount rateEconomic data shows that the GDP has been declining steadily over the past two quarters. This would suggest >>>a recession All of the following would be considered a defensive industry security EXCEPT: A. Tobacco stock B. Food chain stock C. Steel company stock D. Utility company stock >>>steel company stock Which of the following would be a leading economic indicator? a. S&P 500 Index b. Industrial production c. Duration of unemployment d. GDP >>>S&P 500 Index When a government actively manipulates the economy through tax and spending policies, this is referred to as >>>Keynesian Economics A major distinction of secondary offering is >>>proceeds are not received by the issuer of the securities How many primary offerings can a corporation issue? >>>Unlimited A corporation can only have one initial public offering (IPO), but there is no limit on the number of subsequent public offerings (SPOs) or additional public offerings (APOs) issued. What federal law regulates the initial sale of securities to the public >>>The Securities Act of 1933 A tombstone advertisement includes all of the following information EXCEPT a. the offering price b. the name of the issuer c. the risks associated with the offering d. the number of shares to be sold >>>the risks associated with the offering Mark the following as true or false: A __ The final prospectus may be delivered via the internet before a sale B. __ A shelf registration is good for 5 yearsC. __ The access equals delivery rule is not applicable to the preliminary prospectus D. __ Additional public offerings (APOs) of listed securities do not require delivery of a prospectus E. __ Once the SEC approves a registration, the cooling-off period ends and an effective date is established >>>A: T B: F C: T D: T E: F The Uniform Securities Act (USA) is the template from which state securities laws are derived. Under the USA, a BD would have to register with the state under all of the following conditions EXCEPT: a. There was an office in the state b. Calls were directed to prospects in the state c. The BD made a market in municipal bonds issued by the state D. Calls were received from clients in the state >>>c. The BD made a market in municipal bonds issued by the state An issuer wishing to raise additional capital engages the services of an under-writer who proposes limiting the sale to the 6 New England states. In doing so, it is most likely that the registration method to be used will be >>>Coordination Under the Securities Act of 1933, a corporation may qualify for an exemption from the registration statement and prospectus requirements under all of the following exclusionary provisions EXCEPT: a. Regulation A+ b. Regulation B c. Rule 147 d. The Investment Advisers Act >>>d. The Investment Advisers Act Miguel Reyes purchased $200,000 of ABC corporation common stock 5 years ago. At one point, the value of his investment doubled. However, as a result of a recent class action lawsuit, the company has been ordered to pay 50% more than the company's net worth, and ABC filed for bankruptcy. What is the maximum loss that Reyes can lose on his investment? >>>No more than his original investment of $200,000 Rights of common stockholders include all of the following EXCEPT:a. voting for the board of directors (BOD) b. transferring ownership of the stock at any time c. receiving audited semiannual reports d. preemptive rights >>>c. receiving audited semiannual reports Zoe Smith wants to invest $100,000 in ABC common stock. Which of the following would be appropriate objectives when placing the order? I. A long-term hedge against inflation II. The limited liability of ABC's common stock III. The stock may appreciate in value and pay a consistent cash dividend IV. The need for monthly dividend checks >>>A long term hedge against inflation The stock may appreciate in value and pay a consistent cash dividend Which two of the following preference items define preferred stock? I. Preferred dividends must be paid before paying common dividends II. Preferred dividends are guaranteed; common dividends are not III. Preferred stockholders are paid before common stockholders in the event of liquidation IV. Preferred stockholders voting rights exceed those of common stockholders >>>Preferred dividends must be paid before paying common dividends Preferred stockholders are paid before common stockholders in the event of liquidation Define Callable >>>Often redeemed by the issuer when interest rates fall Define Convertible >>>May be exchanged for shares of the corporation's common stock Define Cumulative >>>Is entitled to dividend in arrears Define Straight >>>No special privileges; dividends not paid are not recovered Define Participating >>>May receive a higher-than-stated dividend in profitable yearsDefine Adjustable Rate >>>Dividend is tied to industry benchmarks such as the yield of Treasury Bills Under Rule 144, how long must a restricted security be held before it can be sold? >>>6 months An investor is long 1 XYZ May 40 call and XYZ stock has a current market value of 44. Which of the following is TRUE? a. The May 40 call is at the money b. The May 40 call is in the money c. The May 40 call is out of the money d. The May 40 call has no intrinsic value >>>b. The May 40 call is in the money An investor is long 1 August XYZ 30 put and XYZ is has a current market value of 25. Which of the following is true? a. The August 30 put is in the money by 5 points b. The August 30 put is at the money c. The August 30 put is out of the money by 30 points d. The August 30 put has no intrinsic value >>>a. The August 30 put is in the money by 5 points An investor writes (sells) a July 25 ABC call. Which of the following is true? a. The investor has the right to purchase ABC stock at 25 b. The investor has the right to sell ABC stock at 25 c. The investor will be obligated to purchase ABC stock at 25 if the call is executed by the owner (buyer) d. The investor will be obligated to sell the ABC stock at 25 if the call is exercised by the owner (buyer) >>>d. The investor will be obligated to sell the ABC stock at 25 if the call is exercised by the owner (buyer) An investor writes a September 65 ABC put. Which of the following is TRUE? A. The investor will be obligated to sell ABC stock at 65 if the put is exercised by the owner (buyer) B. The investor will be obligated to purchase ABC stock at 65 if the put is exercised by the owner (buyer) C. The investor has the right to sell ABC stock at 65 D. The investor has the right to purchase ABC stock at 65 >>>B. The investor will be obligated to purchase ABC stock at 65 if the put is exercised by the owner (buyer)An investor is long 1 January 30 call at 2: Calculate the breakeven: >>>= 32 (For a call, BE = Strike Price (30) + Premium (2) 30 + 2 = 32 Breakeven Investor is long 1 January 30 call at 2. Calculate the Maximum Gain >>>= Unlimited The stock could theoretically go to infinity Investor is long 1 January 30 call at 2. Calculate the Maximum Loss >>>= $200 (the most an investor can lose when purchasing options is the premium paid) (2 points = $200) Maximum Loss Investor is long 1 January 15 put at 4. Calculate the Breakeven >>>= 11 For a put, BE = strike price - premium (15 - 4 = 11) Breakeven Investor is long 1 January 15 put at 4. Calculate the Maximum Gain >>>$1,100 [market attitude for a long put is bearish; the stock can fall to zero leaving the investor with a gain from the BE point (11) down to 0] Investor is long 1 January 15 put at 4. Calculate the Maximum Loss >>>$400 All of the following are true EXCEPT: a. breakeven (BE) is always the same number for both buyer and seller of an option contract b. the maximum loss for options buyers is the premium paid c. the maximum gain for options buyers is always unlimited d. BE is calculated using the same formula for both buyer and seller >>>c. the maximum gain for options buyers is always unlimited BE is calculated using the same formula for both buyer and seller. Therefore, BE is always the same number for both buyer and seller. the formula for calls is strike price plus premium and the formula for puts is strike price minus premium. The most any options buyer can lose (max loss, or ML) for a call or a put is the premium paid. However, max gain (MG), while unlimited for a call buyer (bullish), is limited for a putbuyer. Remember that the market attitude of a put buyer is bearish, and the farthest the stock could fall is zero. Therefore, the put buyer's MG is limited to amount from BE point to zero. Listed options transactions settle regular way a. on the third Friday of the expiration month b. on the next business day after trade date (t + 1) c. on the third business day after trade date (t + 3) d. when the option finally expires >>>b. on the next business day after trade date (T + 1) Regarding assignment of exercises notices, which of the following are TRUE? I. The Options Clearing Corporation (OCC) assigns short BD's randomly II. The OCC assigns short BD's using the first in, first out (FIFO) accounting method III. Short BD's can assign their short customers randomly only IV. Short BD's can assign their short customers randomly, using the FIFO accounting method or by any other fair method. >>>The OCC assigns short BDs randomly Short BDs can assign their short customers randomly. using the FIFO accounting method or by any other fair method A customer of a BD is opening a new options account. The customer must return the options agreement >>>Signed and not later than 15 days after the account approval An investor purchases 100 shares of XYZ stock at 67 and writes 1 covered call for a premium of $2.25 each. What is the investor's breakeven point? >>>$64.75 BE: 67 - 2.25 = 64.75 All of the following could be found in the money market EXCEPT: a. T-bonds maturing in 12 months b. T-bills c. Commercial paper d. Equities such as common and preferred shares >>>d. Equities such as common and preferred sharesThe most common type of direct participation program (DPP) in the securities industry is: >>>a limited partnership (LP) All of the following are benefits for the limited partners in a direct participation program (DPP) EXCEPT: a. Passive losses b. Flow-through of income c. Unlimited liability D. An investment managed by the general partner (GP) >>>c. unlimited liability A pooled investment which is organized as a trust in which investors buy shares or certificates of beneficial interest, either on stock exchanges or in the over-the-counter market, is >>>a real estate investment trust (REIT) An open-end management company may charge what amount annually and still advertise itself as a no-load fund? >>>.25% All of the following are true for exchange-traded funds (ETFs) EXCEPT A. ETFs can be bought or sold throughout the trading day B. ETFs are not marginal securities C. ETF share prices are subject to market forces like supply and demand D. ETF transactions are commissionable trades >>>B. ETFs are not marginal securities An investment established by states to provide other government entities such as cities or counties a place to invest funds short term is: >>>Local government investment pools (LGIPs) Regarding annuity products offered by insurance companies, which of the following is TRUE? a. Variable annuities are securities; fixed annuities are not b. Fixed annuities are securities; variable annuities are not c. Neither variable nor fixed annuities are securities d. Both variable and fixed annuities are securities >>>Variable annuities are securities; fixed annuities are not Premiums paid into variable annuities are invested in the separate account, which is a portfolio of investments intended to keep pace with inflation. Investing the premiums thisway, the returns in the separate account are not guaranteed, and therefore a loss of principal is possible for the investor. Because the investor is assuming the risk, variable annuities are considered securities. Fixed annuities, however, guarantee a fixed rate of return; therefore, the risk is shouldered by the insurance company instead of the investor. A private, unregulated investment company organized in such a way so as to invest and achieve high returns utilizing debt leverage and derivative products such as options and margin is best described as: >>>a hedge fund An investor has placed money in a debt-like instrument issued by a financial institution and linked to the performance of the S&P 500 Index. From the investment which has a stated maturity date but makes no interest payments, the investor anticipates receiving a cash payment minus any applicable management fees when the instrument matures. This describes which of the following investments? >>>Exchange-traded note (ETN) One of the advantages of a security being traded on a listed stock exchange is the ready availability of buyers and sellers. This has the tendency to reduce or even eliminate: >>>liquidity risk Before making an investment, it is wise to evaluate the potential risk involved. It is safe to assume that I. The greater the risk, the greater the potential reward II. The greater the risk, the lower the potential reward >>>the greater the risk, the lower the potential reward Twenty years ago, an investor purchased an AAA rated corporate bond with a coupon rate of 6%. The bond is about to mature and when searching for a new bond, it seems that the rates being paid on 20-year AAA bonds is about 4%. This would be an example of >>>reinvestment risk the risk that occurs when an investor is unable to reinvest the proceeds from the redemption of a security at the same rate previously earned. When the interest rate paid on a debt security is less than the current inflation rate, the investor suffers from which of the following risks? >>>Purchasing power risk also known as inflation risk, is the risk faced by investors in almost all debt securities. it is most prevalent in a time of rising inflation where the interest payments on the security are below the rate of inflation. This will have the effect of reducing the purchasing power of the interest payments received. A company operating in State A has just been notified that the state legislature has passed a new law on permitted emissions, and several of the company's plants in thatstate do not comply. As a result, operations at those facilities must cease. This is an example of >>>Legislative risk results from a change in the law. Also referred to as political risk. Which of the following are risks that are most likely to be faced by investors in domestic debt securities? I. Liquidity risk II. Currency risk III. Political risk IV. Inflation risk >>>Liquidity risk & Inflation risk because debt securities are rarely listed on an exchange, they tend to have greater liquidity risk than equity securities. one of the least avoidable risks encountered by investors in debt securities is inflation or purchasing power risk. With domestic issues, there is no currency risk, and although possible, political risk is less of a factor than the others. ABC stock is currently trading at $63. Julia Miller would like to purchase ABC stock, but not at $63. If the price of ABC stock were to fall to $58 or less, then Miller wants to buy the stock. Which type of order should Miller place considering her objective. >>>Buy Limit The current quote for DEF stock is 49.50 big - ask 49.75. If an investor wanted to buy or sell DEF stock, we can conclude which of the following? I. The best price anyone in the secondary market is willing to sell at is 49.50 II. The best price anyone in the secondary market is willing to sell at is 49.75 III. The best price anyone in the secondary market is willing to buy at is 49.50 IV. The best price anyone in the secondary market is willing to buy is at 49.75 >>>The best price anyone in the secondary market is willing to sell is at 49.75 The best price anyone in the secondary market is willing to buy is at 49.50 When an investor is long a stock: >>>the investor is bullish All of the following is true about an investor who sells a stock short EXCEPT: a. the investor will close his position by purchasing the stock b. the price of the stock must go down in order to profitc. loss is limited to the amount of the investment d. the investor is bearish >>>c. loss limited to the amount of the investment Which of the following is a taxable event for an investor when it occurs? a. stock dividend distribution b. cash dividend distribution c. forward split d. reverse split >>>b. cash dividend distribution there is no economic benefit for investors when a stock splits or when a stock dividend occurs. In each of these cases, the investor's cost basis in the investment is adjusted based on the resulting stock the investor owns after the split or additional stock received from a stock dividend. Only cash dividends are taxable (in the year they are distributed). A stock is purchased on June 10th of this year and sold on January 10th of next year for a profit of $200. How will the $200 be taxed? >>>As a short-term capital gain, taxed at the ordinary income tax rate (holding period is less than one year, therefore, the gain is short term and is taxed at same rate as taxpayer's other ordinary income.) A customer has returned a signed proxy statement for stock held in street name by a member firm. He did not indicate how he wanted to vote for any issues listed on his ballot. What action, if any, is required of the member firm? >>>The firm must vote in accordance with the recommendations made by the issuer of the stock Which of the following securities will settle regular way, T + 1? a. Corporate bond b. Revenue bond C. Treasury bond D. GNMA >>>C. Treasury bond regular way settlement for federal government securities (T-bills, notes, and bonds) and options is T+1 An individual opens an account with your firm. She tells you that upon her death, she wants any assets in the account to be divided equally among her 3 children. She also wants the ability to change the allovation in the event that conditions change and one of the children is in greater need than the others, but she does not want to incur any significant legal expense. You would suggest that the account be opened A. as a joint account with the right of survivorshipB. as a joint account with tenants in common C. as an individual transfer on death (TOD) account D. under a discretionary power >>>C. as an individual transfer on death (TOD) account If 3 individuals have a tenants in common (TIC) account with your firm and one individual dies, then >>>the 2 survivors continue as co-tenants with the decedent's estate A wealthy individual has established a trust and wishes to establish an account with your BD that permits the trust to engage in margin transactions. Which of the following statements regarding margin trading in trust accounts is TRUE? a. it is not permitted b. it is permitted if the trustee observes the prudent investor rule c. it is permitted with the written approval of the beneficiary of the trust d. it is permitted if provided for in the trust's documentation >>>d. it is permitted if provided for in the trust's documentation (margin trading is not a common practice, however, margin trading in a trust account is permitted if it is specifically provided for in the trust agreement) A client of a brokerage firm opened an UTMA account for her granddaughter 5 years ago, naming the child's father as the custodian. Through appreciation as well as additional contributions, the account value has grown to $50,000 and generates interest and dividend income in excess of $3,000. Who bears the liability for the taxes on his income? a. the donor b. the custodian c. the granddaughter d. no one, because there are no taxes on an UTMA account until the beneficiary takes possession of the account. >>>c. the granddaughter the tax liability is that of the beneficiary of the account, the minor. In reality, the parents are responsible for making sure their child files the proper tax return; the legal obligation is that of the minor. All of the following would be legal investments in an IRA EXCEPT: a. annuities issued by the ABC Life Insurance Companyb. whole life insurance issued by the ABC Life Insurance Company c. mutual funds d. gold coins made by the U.S. Treasury >>>b. whole life insurance issued by the ABC Life Insurance Company (any form of life insurance is a prohibited investment in an IRA, however, another insurance company product, an annuity, is permitted) Which of the following is NOT true for trade confirmations? a. Commissions are added to the sales proceeds to arrive at the amount the seller is to receive b. Commissions are not shown when a markup or markdown is charged c. The firms acting capacity as agent or principal is shown d. They are received by both parties at or before the settlement date >>>a. Commissions are added to the sales proceeds to arrive at the amount the seller is to receive One of the concerns of a registered representative (RR) is complying with the antimoney laundering (AML) rules promulgated under the Bank Secrecy Act. There are several stages to money laundering, and it is generally agreed that the one where money laundering is most easily detected is: >>>Placement the first stage of laundering is when funds or assets are moved into the laundering system. This stage is recognized as the time when illegal funds are the most susceptible to detection. How long must a BD hold the record of a complaint? >>>4 years Account statements provided to customers would reflect I. year-to-date activity in the account II. long positions, short positions, or both III. whether the account was discretionary or non-discretionary IV. debt or credit balances >>>long positions, short positions, or both debt or credit balancesCustomer account statements are required to be sent quarterly unless the account contains a. bonds b. NYSE-listed stocks c. options d. penny stocks >>>d. penny stocks the minimum frequency for sending customer statements is once per quarter. If there is any activity in the account, then a statement must be sent the following month in which that activity took place. However, if the account contains any securities meeting the SEC's definition of penny stock, statements must be sent monthly. When a client makes a trade, industry rules require that a confirmation be delivered no later than completion of the trade. Included on that confirmation would be all of the following information EXCEPT a. the number of bonds in the transaction b. the number of shares of stock in the transaction c. the CUSIP number d. the capacity in which the BD executing the trade acted >>>a. the number of bonds in the transaction (when securities transaction involves bonds, the par value is indicated, not the number of bonds) Many years ago, a client purchased 100 shares of ABC common stock. Due to stock splits, the customer's account now holds 500 shares of ABC. If the customer had the BD send out certificates for 200 of those shares in the mail, then >>>a non-trade confirmation would have to be generated not every confirmation is trade related. When there is non-trade-related or third-party activity in a client's account, that activity will require a confirmation. The following statements regarding electronic delivery of customer confirmations and statements are true EXCEPT a. the firm must have procedures in place to show that the information sent has been delivered as intended b. once customers agreed to electronic delivery, they can no longer receive paper copiesc. customers must provide written consent to electronic delivery d. the firm must have procedures in place to show that the confidentiality and security of personal information are protected >>>b. once customers agreed to electronic delivery, they can no longer receive paper copies customers are always permitted to ask for paper copies of their account activity, even when they have a signed agreement to have confirmations and statements delivered electronically. Define Marking the Close >>>Falsely reporting trades that never occurred or entering orders to influence the closing price of a stock Define Matched Orders >>>Transactions designed to give the illusion of increased activity or volume in a stock Define Front Running >>>Placing orders to buy or sell stock ahead of orders that could move the market Define Capping >>>Entering orders designed to keep a stock from rising Define Pump and Dump >>>Perpetrating rumors to push up the price of stock owned so as to profit later when selling Define Pegging >>>Any activity intended to keep a stock price stable An investor sells put options and, just before their expiration, buys the underlying stock. The intent is to keep the price from falling below the strike price of the options. Such an action is called >>>supporting An investor sells ABC stock at a loss to offset a capital gain. However, the following week, the investor buys call options on ABC stock. This activity can be defined as >>>a wash sale Regarding a member firm's continuing payment of commissions to a retired registered representative, each of the following statements are true EXCEPT: a. an agreement to pay continuing commissions to retired RRs must be in writing b. commissions may be paid to a representative's beneficiary or estate after death c. a member firm may pay continuing commissions to its retired RRs that are derived from accounts held for continuing customers, regardless of whether customer funds or securities are added to the accounts during retirementd. a retired RR may receive commissions derived from new customers to the book >>>c. a member firm may pay continuing commissions to its retired RRs that are derived from accounts held for continuing customers, regardless of whether customer funds or securities are added to the accounts during retirement A joint trading account can be created and profits and losses shared between which of the following parties? a. BD (firm) and retail customer, but only if sharing is in proportion to the investment b. BD (firm) and institutional client, but only if sharing is in proportion to the investment c. RR and neighbor with principal approval, and only the customer has contributed to the account d. RR and mother-in-law, and only the mother-in-law has contributed to the account >>>d. RR and mother-in-law, and only the mother-in-law has contributed to the account firms cannot have joint accounts with customers. Representatives may have joint accounts with customers only if the arrangement has been approved by the principal and account proceeds are shared in proportion to each party's contribution. Exceptions to the proportion rule are made when sharing in a joint account with immediate family members (including in-laws). FINRA membership eligibility standards are determined by >>>The National Adjudicatory Council (NAC) An individual applying for registration as an associated person will be rejected if he a. submitted an application for registration which omitted mention of a minor traffic violation that occurred two years ago b. failed to include the ZIP code on his home address c. is under a court injunction regarding a domestic issue d. is under an order of a foreign financial regulator denying, suspending, or revoking his registration or barring him from association with a BD >>>d. is under an order of a foreign regulator denying, suspending, or revoking his registration or barring him from association with a BD As a means of protecting the integrity of the industry and protection of the investing public, associated persons of FINRA member firms must submit fingerprint records to: >>>The U.S. Attorney GeneralIf a registered representative (RR) has been barred from the securities industry while working for the ABC broker-dealer (BD), which of the following is TRUE? a. the RR must refrain from engaging with the public on any securities-related activity for one year b. the RR may apply for and obtain a principal's registration, but may not engage any direct sales of securities until the bar has expired c. the RR can be an adviser to a BD but may not be registered with a BD d. the RR may not associate with any BD >>>d. the RR may not associate with any BD The receptionist at a BD opens all incoming mail and forwards to various departments and people of the firm. Which of the following statements is true? I. the receptionist must be fingerprinted II. the receptionist need not be fingerprinted III. the receptionist must be registered with FINRA IV. the receptionist need not be registered with FINRA >>>the receptionist must be fingerprinted the receptionist need not be registered with FINRA Which of the following is CORRECT regarding the continuing education regulatory element requirements? a. training must be completed within 120 days of the person's second registration anniversary and every 5 years thereafter b. training must be completed within 120 days of the person's first registration anniversary and then annually thereafter c. training must be completed within 120 days of the person's second registration anniversary and every 3 years thereafter d. training must be completed annually >>>c. training must be completed within 120 days of the person's second registration anniversary and every 3 years thereafter The continuing education firm element requires member firms to prepare in-house training for all registered persons: >>>annuallyFINRA describes 4 sets of rules and codes in its manual. Which of the following is NOT one of them? a. Code of Arbitration Procedure b. Uniform Practice Code c. Code of Procedure d. Code of Business >>>d. Code of Business 4 sets include: Conduct Rules Code of Procedure Uniform Practice Code Code of Arbitration FINRA's Conduct Rules dealing with outside business activity (OBA) of an associated person of a member firm require: >>>written notification to the employer You overhear a discussion about a registered representative (RR) being disciplined because of SELLING AWAY. Which of FINRA's Conduct Rules was violated? >>>Private securities transaction the Conduct Rules define a private securities transaction as any sale outside an associated person's regular business and her employing member. Private securities transactions are also known as selling away. A BD may give other firms' employees gratuities without violating the rules, provided the compensation's total value does not exceed >>>$100 under the current rules, the cash gift that may be made without raising concern is $100 per person per year. One way distributors of mutual funds attempt to encourage BDs and their RRs to include their funds in recommendations to clients is to provide educational seminars. FINRA's Conduct Rules permit this activity as long as the sponsor does not: >>>offer reimbursement for the travel expenses of the attendee's spouse although expenses for representatives of a BD may be reimbursed, expenses of a spouse or other guest may not. The seminar must be held in an appropriate location, and the company's office would certainly qualify. Regulators are concerned about the use of political influence to obtain business. This is particularly important with municipal securities because elected officials frequently arethe people who select the underwriters for their community's financing. As a result, the MSRB issued Rule G=37 which, among other things, >>>prohibits municipal firms from engaging in negotiated underwriting with an issuer for two years after a contribution is made to an official of that issuer by a municipal securities dealer Political contributions are permitted, but if made to an official of an issuer by the member firm in any amount, or by an MFP in excess of the de minimis limit ($250), the firm is not permitted to engage in negotiated underwritings with that issuer for a period of two years. The two-year ban would also apply to the firm if an MFP of the firm makes any contribution to a municipal official for whom the MFP cannot legally vote. A customer complaint against one of the firm's registered representatives (RRs) involves allegations of misappropriation of funds or securities. The member firm must >>>notify FINRA within 30 calendar days Brokers placing orders for their own account ahead of notably large customer orders that are known to be entering the market in an attempt to gain from the price movement that is likely to occur is an example of what prohibited activity? >>>Front running When the money supply in the economy decreases, >>>interest rates go up, hence borrowing and spending for consumers is more difficult Which of the following retirement plans does not require minimum distributions once the participant has reached age 70 1/2? >>>Roth IRA Which of the following oil and gas direct participation programs might be considered the riskiest? a. exploratory b. combined exploratory and income c. raw land d. income >>>a. exploratory exploratory programs are those that look for resources near existing producing wells in the hopes of finding more deposits. They are riskiest of the oil and gas programs. A call feature attached to a bond allows >>>an issuer to call in a bond before maturity at times that will benefit the insurer an investor is long a January 30 call at 2. Maximum gain for this position is: >>>unlimited for a long-call option, the max gain potential is unlimited Automatic exercise will occur at expiration for any equity option contract that is in the money by at least: >>>0.01An investor is long a January 30 call at 2. Breakeven is: >>>32 Premium (2) + Strike Price (30) 2 + 30 = 32 An amended Form U-5 must be filed and a copy sent to the former employee within how many days of discovery of the inaccuracy? >>>30 days Limited partnership programs are categorized as direct participation programs. The term direct participation refers to the >>>flow-through of profits and losses of the partnership to the individual limited partners As long as it is not restricted in any documentation, margin trading is permissible in which of the following accounts? I. Corporate II. IRA III. Partnership IV. Fiduciary >>>Corporate & Partnership Regarding primary offerings, which of the following is TRUE? a. there is no limit to the number of primary offerings a corporation can issue b. after its IPO, a corporation can have only one more primary offering - its subsequent primary offering (SPO) c. a corporation can have only one primary offering - the IPO d. a corporation can have two primary offerings - the IPO and an additional public offering (APO) >>>a. there is no limit to the number of primary offerings a corporation can issue A diversified fund charging 0.4% of net assets per year as a 12b-1 fee may NOT make which of the following statements? a. the fund will pay its investment adviser a specified percentage of funds under management b. the fund will have a calculated fully disclosed expense ratio c. the fund will have a diversified portfolio with a stated investment objectived. the fund is a no-load fund >>>d. the fund is a no-load fund A customer has a short-term investment time horizon and a fairly certain need for funds she wishes to invest. Which of the following might meet those 2 investment objectives? a. common stock b. corporate bonds c. money market instruments d. government bonds >>>c. money market instruments Tax credits for partners in a real estate program can come primarily from >>>government-assisted housing and historic rehabilitation properties An officer of a financial firm has been identified what might represent suspicious behavior on the part of a customer, involving more than $5,000. When must the firm file a suspicious activity report (SAR)? >>>Within 30 calendar days Each of the following makes regular interest payments EXCEPT a. treasury STRIPS b. corporate bonds c. treasury bonds d. treasury notes >>>Treasury STRIPS Treasury STRIPS have the coupons removed and therefore do not make regular interest payments. A market maker provides a firm quote to another broker/dealer then refuses to buy or sell at the price quoted. This is a violation where the market maker is said to be >>>backing away Rule 144 imposes volume limitations on the number of shares that can be sold by I. control persons selling registered stock held for 1 year II. control persons selling restricted stock held for 2 years III. non-affiliates selling registered stock held for 1 month IV. non-affiliates selling restricted stock held for more than 6 months >>>Control persons selling registered stock held for 1 year & Control persons selling restricted stock held for 2 years An investor establishes the following position: Long 1 XYZ September 40 call at 2. Utilizing this position, the maximum potential gain for the investor is: >>>unlimitedLong calls are bullish positions A corporate stock is purchased on Friday, April 2, regular way. When will the trade settle? >>>Tuesday, April 6 Regular way settlement is the trade date (Fri, April 2) plus two business days (T+2); therefore, the trade will settle on Tuesday, April 6 Someone responsible only for training associated persons at a FINRA member firm >>>must be registered as a principal of the firm A company is already public with several major stockholders. Sale proceeds for shares being sold to the investing public will go to some of the existing stockholders who want to divest of their shares. This is: I. a secondary offering II. a primary offering III. an additional public offering IV. an initial primary offering >>>a secondary offering & an additional public offering Mary Alice McVey, a RR with a FINRA member broker-dealer, has recently remodeled her home and now has an area with a private entrance that she would like to use instead of commuting each day to her office 20 miles away. Under FINRA rules: >>>this would be permitted with FINRA's approval The repayment or maturity date of a banker's acceptance is normally which of the following? >>>As short as 1 day or as long as 270 days a banker's acceptance is a money market instrument used to finance international and domestic trade. A banker's acceptance is a check drawn on a bank by an importer or exporter of goods and represents the bank's conditional promise to pay the face amount of the note at maturity (normally less than three months). An investor purchased and then sold a security 8 months later for a gain. This gain: >>>is considered to be a short-term gain, and it will be taxed at the same rate as the taxpayer's other ordinary income Which of the following would be the interest rate charged for overnight, uncollateralized loans negotiated between two money center banks?a. Prime rate b. Repo rate c. Discount rate d. Federal funds rate >>>d. Federal funds rate federal funds rate is the interest rate charged by one institution lending federal funds to another. Which of the following would constitute improper use of a customer's securities or funds? I. Agreeing to a stock purchase the representative thinks is beyond the client's means II. Selling a bond at the client's insistence during a period of high interest rates III. Lending securities for a short sale when the client has agreed to it on the phone IV. Borrowing a client's funds without permission, though it will be repaid the same day >>>Lending securities for a short sale when the client has agreed to it on the phone & Borrowing a client's funds without permission, though it will be repaid the same day All of the following are nonsystematic risks EXCEPT a. call risk b. purchasing power risk c. business risk d. capital risk >>>b. purchasing power risk it is a systematic risk All of the following unregistered persons may under certain circumstances receive commissions from a FINRA member firm EXCEPT: a. a retired broker who still has commissions coming from preretirement trades b. a suspended broker who recommends the broker's firm for a transaction c. the spouse of a retired broker who is still owed commissions d. a foreign nonmember firm ineligible for FINRA membership >>>b. a suspended broker who recommends the broker's firm for a transaction A select pair or group of companies organized to underwrite corporate or municipal securities is BEST known as a(n) >>>syndicateA stock trade took place on Tuesday, July 2. When would regular way settlement normally take place? a. Tuesday July 2 b. Wednesday July 3 c. Monday July 8 d. Friday July 5 >>>d. Friday, July 5 Regular way settlement for a trade is T + 2 (Trade date + 2 business days) (Also, July 4th is a National Holiday so it can't be transacted then) Which of the following would be considered earned income? a. dividends received from a stock dividend b. interest received from a bond investment c. the premium kept from an unexercised short put d. bonus received from employment >>>d. bonus received from employment Listed options expire on: >>>the 3rd Friday of the expiration month A 72-year old customer has a $30,000 RMD calculated to be taken from an IR if the customer is in the 20% income tax bracket and only withdraws $25,000 from the account, how much tax will be owed? >>>$7,500 Failure to meet RMD results in 50% penalty tax on the shortfall. Taking only 25k when 30k should have been taken leaves 5k exposed to 50% penalty tax. $5,000 x 50% = 2,500. 2,500 + 5,000 = 7,500 required minimum distribution (RMD). If distributions do not begin by April 1 of the year after the individual turns age 70 1/2, a 50% insufficient distribution penalty applies. It is applicable to the amount that should have been withdrawn on the basis of IRS life expectancy tables. The coupon rate on a debt security represents >>>the interest rate the issuer has agreed to pay the investor An associated person of a FINRA member firm would not be considered a municipal finance professional (MFP) if involved solely in which of the following? a. municipal securities sales to customers b. underwriting municipal securities for the firm c. research involving municipal securities for the firm d. municipal securities communications with customers >>>c. research involving municipal securities for the firmDuring the cooling-off period, underwriters may NOT >>>distribute sales literature or advertising material Which of the following choices would BEST describe a "follow-on" offering? a. the common stock that is issued attached to a 'rights' offering b. an issue of shares by a public company that is already listed on an exchange c. an offering to the employees of the issuing company d. an IPO that has additional shares added by the issuer on the effective date >>>b. an issue of shares by a public company that is already listed on an exchange Which of the following would be defined as a penny stock? I. Nasdaq listed stock trading at $4 per share II. Bulletin Board stock trading at $4 per share III. Exchange Listed stock trading at $4 per share IV. OTC Pink stock trading at $4 per share >>>Bulletin Board & OTC Pink A penny-stock is a NON-NASDAQ stock trading under $5 per share. Which of the following choices would BEST describe a "follow-on" offering? a. The common stock that is issued attached to a "rights" offering b. An issue of shares by a public company that is already listed on an exchange c. An offering to the employees of the issuing company d. An IPO that has additional shares added by the issuer on the effective date >>>b. An issue of shares by a public company that is already listed on an exchange An investor needs to decide whether or not they would like to maintain their percentage of ownership in a company that has decided to increase the number of outstanding shares. Which of the following is the best description of what is taking place? >>>Rights will be distributed to existing stockholders with an exercise price lower than the current market value A broker-dealer is confronted with margin deposit due but not yet received. The BD can choose to take no action, neither selling out the securities nor requesting an extension, if the amount due is: >>>Less than $1,000Which of the following is TRUE when opening an out-of-state Section 529 plan? a. The student may not use it in the donor's state of residence b. Earnings do not accumulate tax deferred c. Withdrawals may not be free of federal taxation d. Withdrawals may not be free of state taxation >>>d. Withdrawals may not be free of state taxation Mutual funds that market directly to the public, using no underwriter and charging no sales charge, are called: >>>no-load funds The FDIC protects which of the following? >>>Bank depositors Which of the following would NOT be considered violations? I. As soon as a customer opens a margin account and signs the loan consent agreement, the BD lends all of the securities in the customer's account to other customers for the purpose of selling short. II. A BD temporarily lends a customer's securities to another customer with no loan consent on file III. A registered representative transfers funds from Mr. Smith's account to the account of his spouse, Mrs. Smith, in order to meet a margin call she has received. The intent is to move funds back to Mr. Smith once Mrs. Smith makes her required margin call deposit IV. Mr. Smith makes a deposit into his spouse's account for the purpose of meeting a margin call >>>As soon as a customer opens a margin account and signs the loan consent agreement, the BD lends all of the securities in the customer's account to other customers for the purpose of selling short & Mr. Smith makes a deposit into his spouse's account for the purpose of meeting a margin call If the dollar price of a municipal bond is 101 and the basis is 6.10, the nominal yield is: >>>greater than 6.10 For bonds trading at a premium (101), the nominal yield (or coupon) is higher than the basis (YTM).Which of the following would be unlawful regarding use of a mutual fund prospectus? a. Failing to highlight a small section the customer has specifically asked about b. Sending a prospectus to someone who has shown no interest in the fund c. Calling an investor's attention to a section that may be interesting d. Leaving a typographical error in the text unmarked >>>c. Calling an investor's attention to a section that may be interesting a prospectus may not be marked, highlighted, or altered in any way, nor may steps be taken to call an investor's attention to some passage or section that might be of special interest. On October 8, an investor discovers that a security purchase that took place on August 5 of the same year was prompted by fraudulent information provided by the brokerdealer on the day of the purchase. How long does the investor have to bring action? >>>Until October 7 of the following year The statute of limitations on fraudulent practices, under the Securities Exchange Act of 1934, is 3 years from the event itself, or one year from its discovery, whichever comes sooner [Show More]

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