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Securities Industry Essentials® (SIE®) - Sandbox > 1.1.4 Market Participants and their Roles > Flashcards

1.1.4 Market Participants and their Roles Flashcards

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1
Q

A client approaches a broker to purchase shares of a publicly-traded company. Who is the broker acting as in this transaction?

A. Market Maker
B. Transfer Agent
C. Agent
D. Trustee

A

C. Agent

**Explanation: **In this scenario, the broker is acting as an agent, representing the client in buying shares, facilitating the transaction on behalf of the client.

1.1.4 Market Participants and their Roles

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2
Q

An investment advisor suggests a list of stocks for her client to consider for investment. What role is the investment advisor playing?

A. Custodian
B. Agent
C. Fiduciary
D. Principal

A

C. Fiduciary

**Explanation: **The investment advisor is acting as a fiduciary, a role in which she is obligated to act in the best interest of her client.
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1.1.4 Market Participants and their Roles*

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3
Q

A company wishes to issue new shares to the public and hires a firm to manage the issuance and sale. What role does this firm play?

A. Underwriter
B. Transfer Agent
C. Registrar
D. Custodian

A

A. Underwriter

Explanation: The firm acts as an underwriter, managing the issuance and handling the initial sale of the new shares to the public.

1.1.4 Market Participants and their Roles

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4
Q

Who is responsible for maintaining shareholder records and handling issues like lost or stolen stock certificates?

A. Custodian
B. Transfer Agent
C. Registrar
D. Clearing Agency

A

B. Transfer Agent

Explanation: The transfer agent is responsible for maintaining shareholder records and dealing with administrative issues such as lost, stolen, or damaged stock certificates.

1.1.4 Market Participants and their Roles

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5
Q

If an investor wishes to sell shares and another wants to buy them, who facilitates the trade between these two?

A. Broker
B. Market Maker
C. Custodian
D. Clearing Agency

A

B. Market Maker

Explanation: Market makers facilitate trades by buying and selling securities from their own inventory, helping to maintain liquidity in the markets.
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1.1.4 Market Participants and their Roles*

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6
Q

In an initial public offering (IPO), which entity is responsible for setting the initial price of the stock?

A. The company going public
B. The exchange
C. The underwriter
D. The market maker

A

C. The underwriter

Explanation: The underwriter, typically an investment bank, is responsible for setting the initial price of the stock in an IPO, based on market demand and other factors.
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1.1.4 Market Participants and their Roles*

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7
Q

A retail investor uses an online platform to trade securities. What role does the online platform play?

A. Clearing Agency
B. Transfer Agent
C. Broker
D. Custodian

A

C. Broker

Explanation: The online platform acts as a broker, facilitating the buying and selling of securities for retail investors.

1.1.4 Market Participants and their Roles

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8
Q

Which entity ensures that the securities sold during an IPO are distributed fairly among all types of investors, including institutional and retail clients?

A. The exchange
B. The underwriter
C. The market maker
D. The custodian

A

B. The underwriter

Explanation: The underwriter is responsible for the fair allocation of shares during an IPO, ensuring that both institutional and retail investors have access to the offering.

1.1.4 Market Participants and their Roles

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9
Q

A mutual fund needs to safeguard its portfolio of assets. Which entity is most likely to provide this service?

A. Custodian
B). Broker
C. Clearing Agency
D. Market Maker

A

A. Custodian

**Explanation: **Custodians are financial institutions that hold and safeguard the securities and assets of other entities, such as mutual funds, to prevent loss or theft.

1.1.4 Market Participants and their Roles

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10
Q

A corporation is looking to update its number of outstanding shares with the NYSE. Which entity should they contact to handle this?

A. Transfer Agent
B. Registrar
C. Custodian
D. Clearing Agency

A

B. Registrar

**Explanation: **The registrar is responsible for maintaining the official list of shareholders and the number of outstanding shares, and thus would handle updates related to share counts with exchanges.

1.1.4 Market Participants and their Roles

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11
Q

During a high-volume trading day, an investor wants to quickly buy 100 shares of XYZ Corp. Which market participant can facilitate this immediate transaction?

A Broker
B. Market Maker
C. Transfer Agent
D. Custodian

A

B. Market Maker

Explanation: Market makers facilitate quick transactions by keeping an inventory of shares to buy or sell instantly, providing liquidity to the market.

1.1.4 Market Participants and their Roles

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12
Q

Who acts as an intermediary to ensure that the securities and cash are transferred between the buyer and seller after a trade is executed?

A. Broker
B. Underwriter
C. Clearing Agency
D. Registrar

A

C. Clearing Agency

Explanation: Clearing agencies act as intermediaries to ensure that securities and cash are properly transferred between the buyer and seller after a trade.

1.1.4 Market Participants and their Roles

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13
Q

A high net-worth individual is interested in purchasing a large block of shares without affecting the market price. Which entity is best suited to facilitate this trade?

A. Market Maker
B. Broker
C. Underwriter
D. Clearing Agenc

A

A. Market Maker

Explanation: Market makers can facilitate large block trades, often through over-the-counter transactions, to minimize market impact.
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1.1.4 Market Participants and their Roles*

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14
Q

An investor loses their stock certificate. Who should they contact to issue a replacement?

A. Broker
B. Custodian
C. Transfer Agent
D. Clearing Agency

A

C. Transfer Agent

Explanation: Transfer agents handle issues related to stock certificates, including replacements for lost or stolen certificates.

1.1.4 Market Participants and their Roles

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15
Q

A company needs to verify the legitimacy of shareholders claiming dividends. Which entity verifies shareholder identities and entitlements?

A. Custodian
B. Registrar
C. Transfer Agent
D. Broker

A

B. Registrar

Explanation: Registrars ensure that only legitimate shareholders are recorded and thus are responsible for verifying identities and entitlements for things like dividends.
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1.1.4 Market Participants and their Roles*

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16
Q

Which entity is responsible for providing detailed reports on the holdings of a mutual fund?

A. Market Maker
B. Custodian
C. Broker
D. Transfer Agent

A

B. Custodian

Explanation: Custodians, who hold the assets of a mutual fund, are often responsible for reporting on the fund’s holdings and other detailed financial information.
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1.1.4 Market Participants and their Roles*

17
Q

A retail investor wants to understand the tax implications of their stock investments. Whom should they consult?

A. Broker
B. Investment Advisor
C. Registrar
D. Custodian

A

B. Investment Advisor

**Explanation: **Investment advisors provide comprehensive financial advice, including tax implications of investments.

1.1.4 Market Participants and their Roles

18
Q

A company wants to change its stock ticker symbol. Which market participant should they coordinate with?

A. Clearing Agency
B. Transfer Agent
C. Exchange
D. Underwriter

A

C. Exchange

Explanation: Exchanges manage the listing details, including ticker symbols for companies, so any changes would need to be coordinated with them.

1.1.4 Market Participants and their Roles

19
Q

After executing a trade, which entity ensures that the shares are formally transferred to the buyer’s name?

A. Broker
B. Clearing Agency
C. Transfer Agent
D. Custodian

A

C. Transfer Agent

**Explanation: **Transfer agents manage the formal transfer of share ownership and ensure that shares are registered in the buyer’s name.

1.1.4 Market Participants and their Roles

20
Q

An institutional investor seeks to make significant changes to a company’s management through a proxy vote. Who helps facilitate this process?

A. Market Maker
B. Broker
C. Registrar
D. Transfer Agent

A

D. Transfer Agent

Explanation: Transfer agents manage communications and logistics related to shareholder voting, including proxy voting, making them key in facilitating such processes

1.1.4 Market Participants and their Roles

Securities Industry Essentials® (SIE®) - Sandbox (34 decks)

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