SIE Exam Questions & Answers. Verified 100% Correct. Exam Predictor!!

SIE Exam Questions & Answers. Verified 100% Correct. Exam Predictor!! Do common stock holders have to right to inspect all books of a company? - ✔✔-No, only certain items suchs as the income statement and balance sh ...

SIE Exam Questions & Answers. Verified 100% Correct. Exam Predictor!! Do common stock holders have to right to inspect all books of a company? - ✔✔-No, only certain items suchs as the income statement and balance sheet Order of asset distribution - ✔✔-Taxes Secured debt Unsecured debt Preferred stock holders Common stock holders What type of corporate security is considered the riskiest? - ✔✔-Common stock Of all securities, common stock has historically - ✔✔-Provided the best hedge against inflation, best capital appreciation potential Classifications of marginals securities - ✔✔-Registered securities, OTC securities, Regulation T - ✔✔-Regarding extension of credit to customers...requires that payment for purchases of securities be received by the 4th business day after the trade (T+4) On what IRS form are gains and losses from securities reported on? - ✔✔-1099b Who must approve stock splits - ✔✔-Common share holders must vote to approve a stock split. The split must also be approved by the board Warrants - ✔✔-Long-term option to buy stock. Typically issued with an IPO to make investors more interested. Gives IPO investors the right to buy more shares of the company at a set price for x number of years. Can be traded Premium = s-x Preemptive rights - ✔✔-Short-term Rights granted to existing shareholders that entitle shareholders to purchase newly issued shares of a corporation's stock, equal in percentage to shares already held, before the stock is offered to outside buyers. Rights can be sold and expire. Max maturity = 90 days If rights are exercised, proportion of ownership remains the same. Outstanding shares/new shares = # of rights to buy 1 share DERP - ✔✔-Declaration Ex-date Record date Payable date Serial bonds - ✔✔-Series of bonds with one issue date and varying/staggered maturities Balloon maturity - ✔✔-A type of maturity schedule for an issue of bonds that shows a relatively small number of bonds maturing serially (each year) and a large number maturing in a later year Current yiels - ✔✔-Annual coupon$/current mkt price$ YTM > coupon - ✔✔-Bond trades at discount YTM < coupon - ✔✔-Bond trades at a premium YTM = Coupon - ✔✔-Bond trades at par 1 Point (bonds) - ✔✔-$10 - corporate bonds Basis point - ✔✔-1/100 of 1% or .01% Duration - ✔✔-Measure of the sensitivity of a bond's market price to changes in interest rates. Ex. Duration of 5 = 5% price move for 1% interest rate move. Trust Indenture Act of 1939 - ✔✔-Federal law requiring all corporate bonds to be issued under an INDENTURE agreement approved by the SEC and providing for the appointment of a qualified trustee free of conflict of interest with the issuer. The Act provides that indentures contain protective clauses for bondholders. Regular way settlement for T-notes, bills, and TIPs - ✔✔-T+1 in secondary market T+3 in primary auction market Series EE savings bond - ✔✔-Non-marketable federal savings bonds. Denominations of $25-$10,000. Insured, cannot be used as collateral for a loan. Redeemable prior to maturity (after 1 year) Max maturity for commercial paper - ✔✔-270 days Series bonds - ✔✔-Different issue dates, same maturity date Serial bonds - ✔✔-One issue date, staggered maturity dates Interest costs go down over the life of the bonds Funded debt - ✔✔-Corporate debt that is due more than one year from the issue date. Includes corporate bonds, notes, and bank loans A bullish options investor would - ✔✔-Buy calls or sell puts A bearish options investor would - ✔✔-Buys puts or sell calls Securities act of 1933 - ✔✔-Investment company regulations Delivery of prospectus to new purchases is required Investment Company Act of 1940 - ✔✔-Primary objective: ensure that investors are provided with full and fair disclosure of all information needed to make an informed decision. Negotiated Bidding - ✔✔-Determines the managing underwriter for equity securities Competitive Bidding - ✔✔-Determines the managing underwriter for bonds Selling syndicate members - ✔✔-Other Brokerage Firms involved in the underwriting of a new issue - have financial liability - get underwriters compensation Selling Group - ✔✔-A large number of brokerage firms that join the originating investment banker(s); - have no financial liability - get selling concession Securities Act of 1933 - ✔✔-Regulates primary market and distribution of new issues of securities Securities Exchange Act of 1934 - ✔✔-Protects against unfair and inequitable practices in the Secondary Market Reg D - ✔✔-Private placements, new issues primarily offered to Accredited investors accredited investors under Reg D - ✔✔-Institutional investors VC firms Tax exempt organizations Directors, execs, partners of issuing firm net worth > $1,000,000 income > $200,000 ($300,000 joint) trust with assets > $5,000,000 Any entity made up of accredited investors 506 (b) - ✔✔-Traditional private placement, without general solicitation, to up to 35 non-accredited investors & unlimited accredited investors Restricted - ✔✔-Can't sell security for 6 months 506 (c) - ✔✔-private placement, with general solicitation, all purchasers must be accredited investors Rule 144 - ✔✔-A regulation that provides for the sale of restricted stock and control stock. Filing with the SEC is required prior to selling restricted and control stock. The number of shares that may be sold is limited Rule 144-A - ✔✔-allows sale of restricted (unregistered) securities to QIBs during 6 month restricted period Qualified Institutional Buyer (QIB) - ✔✔-include insurance companies, banks, trust funds...not individuals Rule 145 - ✔✔-requires the registration of transactions sales offers are made as part of a merger, consolidation, or stock reclassification. does not apply to stock splits or changes in par value Rule 147 - ✔✔-Intrastate offerings: sales can only be made to full time residents of the state for 6 months from the time of the last issue Blue sky laws - ✔✔-State laws that regulate the offering and sale of securities for the protection of the public. RRs must be registered in the individual state and with FINRA Tender offer - ✔✔-offer made directly to shareholders to buy all of their shares. price is typically higher than the market price Record keeping requirements - ✔✔-Can be in electronic form OR hard copy with firm OR with external service (must notify SEC) Records kept for 3 years: - ✔✔-*in readily accessible location for first 2 years Employment applications with B/D Fingerprints of all persons associated with B/D or firm Customer confirmations Copies of orders Names & addresses of beneficial owners of all accounts Records kept for 4 years: - ✔✔-*in readily accessible location for first 2 years Customer complaints - *maintained at Office of Supervisory Jurisdiction (OSJ) aka firms main office Records kept for 5 years: - ✔✔-Monetary instruments sales records (available upon request) Records kept for 6 years: - ✔✔-Blotters of Original Entry Customer and General Ledgers *Customer Account Information Securities Reports Records kept for life: - ✔✔-Article of incorporation/partnership, supporting entity documents 3 stages of money laundering - ✔✔-Placement stage Layering stage Integration Stage transaction amt requiring CTR - ✔✔-cash transactions over $10,000 by one person in a single day Fund transfer amount requiring reporting - ✔✔-transfers over $3,000 must collect and retain certain information about sender and receiver Customer identification window for new account - ✔✔-5 business days SAR amount & time frame - ✔✔-Suspicious transactions over $5,000 in one day must be reported via a SAR within 30 days Covered Member (associate) - ✔✔-any member that solicits a government entity for investment advisory services associate = anyone associated with such a firm Prohibition time frame for engaging with a government entity after a donation exceptions - ✔✔-2 years, plus 2 year look back for new covered associates exceptions: Contribution of $350 or less per election where associate can vote. $150 or less when can't vote. or new associate made contribution 6 months prior to becoming covered associate. Warrant - ✔✔-*long-term* option to buy stock at a specified price from the company they are transferable, usually issued with debentures, dividends are not paid Debentures - ✔✔-unsecured bonds Rights - ✔✔-*short-term* privilege granted by a corporation to existing common shareholders gives the opportunity to subscribe to a proportionate number of newly issued shares at a lower price than what is offered to the public generally have a max maturity of 90 days cumulative (preferred stock) - ✔✔-all dividends must be current on preferred stock before dividends are paid to common shareholders participating (preferred stock) - ✔✔-Stock that allows the preferred stockholder to participate in the profits of the corporation along with the common stockholders. get a minimum dividend guaranteed, but have the option to participate in common dividends. Callable (preferred stock) - ✔✔-can be called by the issuer at a set premium over par, after a specified date. Equity REITs - ✔✔-take equity positions in real estate. Receive income from rents received and cap. gains when property is sold Mortgage REITs - ✔✔-Lend money to building developers and pass the interest income on to shareholders. They are generally *highly leveraged* REIT pay out percentage and asset allocation - ✔✔-IRS rules require REITs to pay out at least 90% of income and have at least 75% of its assets in real estate related activities. Direct Participation Program (DPP) - ✔✔-type of alternative investment (not liquid) A business venture structured to pass through income and tax losses to investors. Commonly structured as a limited partnership or general partnership (Sponsor) GP - manage the entity and have unlimited liability LP - limit their liability to the amount of their investment Note: adjusted cost basis Option position limits - ✔✔-The OCC limits the number of contracts that can be purchased on the same stock, on the same side of the market Option exercise limits - ✔✔-The OCC limits the number of listed option contracts that may be exercised with in any consecutive 5 business day period Option cycles - ✔✔-1 4 7 10 2 5 8 11 3 6 9 12 Shorting against the box - ✔✔-If you are long a stock, and you short it (while owning your long position). Creates a neutral position Options Contract Adjustments - ✔✔-adjusted for stock splits, reverse stock splits, stock dividends and rights offerings Not adjusted for cash dividend