Additional Info Flashcards
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True or false: Under federal securities laws, every partner, officer, director, and most employees of a broker-dealer are required to be fingerprinted in order to complete a criminal background check. An exception applies if the person does not sell or have access to securities or funds and doesn’t have access to the firm’s books and records?
True
Under MSRB rules, firms that transact business in municipal securities are required to notify customers of the availability of a investor brochure how frequently?
Annually
True or false: All customer complaints must be forwarded to FINRA?
False, only some. The original complaint should be forwarded to the appropriate supervisor or principal. In some circumstances, it may be the compliance department. The complaint may be reviewed by the registered representative, but its the supervisor’s responsibility to review and initial it. Only certain events trigger the need to send a complaint to FINRA.
A customer wants to establish a joint account at a brokerage firm with an individual who is employed by the same firm. Is this permitted?
A customer and an employee of a member firm may establish a joint account with prior approval of both the customer and the firm. Sharing in the profits and losses of the account must be proportionate to the financial contributions of each person.
What is the maximum civil penalty for insider trading violations?
Three times the amount gained or loss avoided
True or false: Utilities is a cyclical industry?
False
True or false: If taken from a Roth IRA prior to age 59 1/2, these following withdrawals will result in a 10% tax penalty:
* Withdrawal for a first-time homebuyer for less than $10,000
* Withdrawal that’s made within five years of the first contribution
* The payment of an IRS tax levy
* Equal withdrawals over the individual’s life
False, on withdraals made within five years of the first contribution will be subject to the 10% penalty.
True or false: Liquidity is a benefit of investing in REITs?
True since many REITs trade on an exchange.
True or false: Passive losses is a benefit of investing in REITs?
False, unlike DPPs, real estate investment trusts (REITs) do not generate passive losses.
True or false: A fee based account is suitable for investors who frequently trade?
True
True or false: Long-term munis tend to have less price volatility than short-term corporate bonds?
False
How often are broker-dealers required to send clients balance sheets?
Every six months
True or false: If YTM < Coupon, a bond is trading at a discount?
False, premium
What would a person who invests in fixed annuities be most concerned with the performance of the insurance company?
The general account
A customer requests that a broker-dealer sell stock that she owns and, at the same time, use the proceeds of the sale to purchase a different stock. Can the broker charge a markup?
This is a proceeds transaction. When the broker-dealer determines the markup it will charge, industry rules state that the firm may charge a markup or commission on both transactions, but should compute the markup based solely on the amount of money involved in the sale to the customer. The regulatory focus is to be certain that the total amount received for executing a proceeds transaction does not violate the 5% Markup Policy.
If an equity option is exercised, when does the stock transaction settle?
T+2
True or false: TIPS are subject to state and federal tax?
False, they are subject to federal tax but not state tax.
True or false: Delivery in the sale of shares must be made in 100-share certificates, multiples of 100, or any combination that adds up to 100 shares?
True
An investment company that is purchased in installments and that matures at a fixed-dollar amount is called a:
Face-amount certificate company
True or false: The 5% Markup Policy applies when a member firm acts as a dealer/principal with a customer?
True
Who has the responsibility to investigate the accuracy of the information in a prospectus for a DPP?
The managing underwriter.
The SEC reviews only the information in a prospectus. It never attests to its accuracy.
True or false: A clearing corporation is responsible for automated book-entry changes in the ownership of securities?
False
True or false: A registered person wants to set up an investment program for a charity and will not be receiving compensation for his service. He must notify his broker dealer?
True
An index option has been exercised. What is the writer of the option required to do to satisfy his obligation?
Deposit cash equal to the difference in the strike price and the value of the index.
A registered person wants to borrow funds from a neighbor who is also a customer of his firm. Does he need to receive approval for his firm?
Yes
If the loan is based on provisions 1 or 2 (borrowing from family members OR from a financial institution whose business is loaning money), firm notification or firm approval is not required. However, if the conditions indicated in provisions 3, 4, or 5 apply (e.g., borrowing from a neighbor), the firm must approve the lending activity prior to the execution of the loan.
An individual purchased 100 shares of stock at $35 per share. The stock is now trading at $44 per share and the issuer decides to split the stock 2-for-1. After the split, the individual’s cost basis per share will be:
35 * 0.5 = 17.5
What is stabilization used for?
To prevent the price of a newly issued stock from falling
What type of security is SPDR?
ETF
What is a pass-through entity?
A business that avoids double taxation.
Breakpoint sale
The sale of investment company shares in dollar amounts just below the point at which the sales charge is reduced on quantity transactions
True or false: The S&P 500 is the broadest index?
False, The Wilshire Index represents the dollar value of all the stocks and is considered the broadest of all indexes and averages. T
If an investor sells 10 ABC June 40 calls at a premium of $4 each, his maximum profit is:
$4 * 100 shares * 10 options = $4,000
What is the minimum denomination for negotiable certificates of deposit?
$100,000
The payment date for securities purchased in a cash or margin account as stated by Regulation T is:
two business days after the settlement date
True or false: DPPs proide investors exposure to non-correlated assets?
True
Under rule 144A, who can an issuer of restricted stock sell to?
QIBs
Who must a RR who wants to create a mutual fund advertisement get approval from?
The supervising principal
Which investment risk is the greatest risk to a variable annuity?
Market risk