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SIE > Deck 1 > Flashcards

Deck 1 Flashcards

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SIE Exam flashcards
1
Q

A registered representative buys and sells the same security for a customer three times during a single day. What is this considered?

A

Excessive Transactions

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2
Q

Name 2 corporate actions are designed to allow investors to buy shares of stock under specific, defined conditions

A

Rights Offering

Issuing Warrants

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3
Q

In an effort to safeguard customer information which regulation specifies securing desktop and laptop computers and encrypting email?

A

Regulation S-P

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4
Q

For the first trade in a newly opened margin account, there must be at least how much in equity?

A

$2000

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5
Q

RE: Margin account, IF transaction is greater than $4,000, deposit is ____%; between $2,000 and $4,000, deposit is $______; and if the transaction is less than $2,000, deposit ____% of the purchase price.

A

50%
$2000
100%

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6
Q

If person states not interested and never will be interested, what is required by the Telephone Consumer Protection Act of 1991?

A

No calls may be made to the prospect by anyone at the firm.

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7
Q

In this prohibited practice, the registered representatives buy shares for their own accounts and then tout the stock to customers in the hopes that the customers’ buying will drive the stock price higher. The reps then sell their personal positions for an illicit profit at the customers’ expense.

A

Pump and Dump

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8
Q

Required by USA Patriot Act: The Customer Identification Program (CIP) that must be in place at every broker-dealer firm is designed to ensure that all customers are who they say they are. Doing this prevents:

A

Money Laundering and funding of terrorist activities.

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9
Q

Interest on corporate bonds is paid how? The interest rate reported, however, is an annual rate. Thus a 7% bond would pay 7% of par ($1,000), or $70 how?

A

1) Twice per year or Semi Annually

2) As 2 semiannual checks for $35 each.

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10
Q

_______________ prohibit the use of margin.

A

Qualified Retirement Accounts or IRA’s

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11
Q

A suspicious activity report must be filed with FinCEN within ____ calendar days of the firm becoming aware of the suspicious activity. The suspected parties may not be informed that they are the subject of an ____________.

A

1) 30

2) SAR Suspicious Activity Report

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12
Q

Minutes of directors’ meetings (The Minute Book) is a ___________. Customer complaints must be kept on file for ________. The Compliance and Procedures Manual, which must frequently be updated, and the list of all offices where business is done are both ___________ year records.

A

1) lifetime record
2) 4 years
3) 3 year records

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13
Q

In order to eliminate a position, long or short, the investor always takes an _________action of the one that began (opened) the position. Therefore, we always close the position with a closing order.

A

Opposite

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14
Q

A broker-dealer’s BCP business continuity plan to be enacted in the event of a significant business disruption requires all of the following 3

A

Alternate physical location of employees if needed
Data backup and recovery (hardcopy and electronic)
Prompt customer access to funds and securities

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15
Q

When securities transactions occur, ownership changes hands between the 2 parties on the

A

settlement date

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16
Q

When an investment professional places an order for his own account or one that he controls ahead of other orders that are so large that they will likely move the market in an attempt to gain from the price movement ?

A

Front Running

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17
Q

-firms can increase their in-house margin requirements without advance notice
customers can lose more money than initially deposited
-customers are not entitled to an extension of time to meet a margin call

A

Risk disclosures found in the options disclosure document (ODD)

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18
Q

The regulation enacted by the SEC to protect the privacy of customer information is known as

A

Regulation S-P

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19
Q

Which of the following would NOT be considered ordinary income for tax purposes

A

Gains from sales of securities

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20
Q

In the event of late margin deposit, requests for extensions are made by the broker-dealer to the firm’s

A

designated examining authority (DEA)

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21
Q

When securities are held in street name (the name of the broker-dealer), the BD is the named or nominal owner, but the customer is still the ___________ retaining all rights of ownership.

A

beneficial owner

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22
Q

Investments in an IRA are limited to what 2 things?

A

cash and securities

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23
Q

In order to open a position with a short sale, the shares to be sold must be borrowed or located to be borrowed first. If not it is a ___________ and is prohibited.

A

Naked Short Sale

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24
Q

Salary or bonuses are ______ income; interest and dividends are ________ income.

A

earned

investment

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25
Q

Money laundering consists of moving illegally obtained funds into the financial system_________, concealing its origins by the use of multiple transactions_______, and then commingling it with legitimate funds in legitimate enterprises __________.

A

Placement
Layering
Integration

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26
Q

Customer ledgers, from which account statements are prepared, must be kept on file or in appropriate electronic form for ______ years. Minute books and Form BD and its amendments are kept for _________ of the firm. Confirmations and order tickets are kept for _____ years.

A

6
lifetime
3

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27
Q

Declaration, record, and payment dates are determined by the________, but FINRA, or the exchange, determines the ____________ date.

A

BOD board of directors

ex dividend date

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28
Q

An investor notices that a bond purchased several years ago at 95 is now priced at 90. The investor sells the bond for 90, then immediately repurchases it for 90. This action is known as

A

wash sale

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29
Q

Upon the purchase of a security, the investors may receive ___________ or _________, which are forms of income.

A

dividends

interest

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30
Q

Person may sell the security for a different price than was paid for it, which represents a ________ or ______.

A

capital gain

loss

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31
Q

As long as there are no restrictions against trading on margin in the ___________, corporate accounts may trade on margin.

A

corporate charter

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32
Q

If there are commissions from work done when the person was registered that have not yet been paid, they may be paid, provided that a _________ was signed by both parties specifying precisely what is due.

A

written contract

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33
Q

Records of wire transfers of $_____ or more must kept, regardless of their destination.

A

$3,000

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34
Q

A member firm holding stock in street name may vote the shares as it sees fit if the customer does not return the signed proxy statement by the ____ day before the shareholders’ meeting, and if the matters to be voted on are of ____ importance. If the matters are of major importance (such as a change in the direction of the business or a merger or acquisition), the shares are simply not voted.

A

10th

minor

35
Q

If an asset is sold within ________ of its purchase, the gain is considered to be short-term and taxed at the same rate as the taxpayer’s ordinary income. Therefore, for ________ capital gains, the tax rates are the same as the taxpayer’s ordinary income. However, if the asset is held for more than one year, the gain is considered to be a ________ and is taxed a more favorable rate.

A

1 year
short term
long term

36
Q

Accounts can be registered in the name of one or more persons, as well as legal entities such as corporations or partnerships. ___________ determines the ownership of the account and who will have control of the investments in the account.

A

Account Registration

37
Q

Certificate books on the stock issued by the firm must be kept as long as the firm is active. The general ledger and customer ledgers need only be kept for _____ years, and forms U-4 and U-5 regarding the firm’s associated persons need only be kept for ____ years.

A

6

3

38
Q

The customer agrees to pledge the securities to be purchased on margin to the broker-dealer so that the broker-dealer can then pledge them to a bank as collateral for the margin loan.

A

Hypothecation

39
Q

Scheduled, common events such as dividend declarations, issuance of rights and warrants, and forward and reverse stock splits are accompanied by standardized adjustment of the

A

Stocks Cost Base

40
Q

___________ are accounts for which firms provide a group of services, such as asset allocation, portfolio management, executions, and administration, for a single fee. Can be a cash or margin account and like any other be approved for option trading.

A

Wrap Accounts

41
Q

________ involve selling shares not yet owned. This is permitted. When _________, investors are borrowing the shares to be sold, which must be replaced later by buying them. Investors who ________ are bearish, hoping the shares go down in value so that they can be purchased later at a lower price than they were initially sold for.

A

Short sales
Selling Short
Sell short

42
Q

Income from debt securities is known as _______. Income from common stock is known as ________. Sale of a security for a price different from that originally paid is known as a capital gain or loss.

A

interest

dividends

43
Q

The definition of ___________ does not include non-security investments such as commodities or fixed annuities

A

investment strategy

44
Q

The representative’s _______________ may not be considered part of the representative’s contribution, only what proportion of the investment funds the representative has contributed

A

knowledge and expertise

45
Q

Margin calls can be met using either ______ (100% of the call) or fully paid for marginable ___________ (twice the amount of the call because securities are only marginable to 50% of their value).

A

cash

securities

46
Q

providing customers with a risk disclosure document
signing the credit agreement
signing the hypothecation agreement
(signing a loan consent is optional)

A

Opening a Margin Account

47
Q

If a shareholder decides not to abide by the decision to assign a _______ to a particular person, the decision can easily be abrogated. The shareholder may still abstain, may vote the shares personally or by mail or online, or may reassign the _______ to another.

A

proxy

48
Q

A security with a termination, maturity, or expiration date that is 1 year or less from the date of issue is said to be short term. _________ offerings have a lifetime of 4 to 6 weeks, which makes them short term. If the end date is more than a year from the issue date, the security is long term. _______ have expiration dates typically 2 to 5 years from the date of issue, which makes them long term.

A

Rights

Warrants

49
Q

When a company offers to buy outstanding securities for cash or for cash plus other securities from its stockholders or bondholders this is known as a _____________. In contrast, a __________, sometimes referred to as a repurchase, is when a company buys its own outstanding securities in the open market rather than appealing directly to its investors.

A

tender-offer

buyback

50
Q

Under joint tenants with _____________ each brother’s interest in the account would go to the surviving brother.

A

right of survivorship

51
Q

Annuities, variable or fixed, are in most cases acceptable investments appropriate for IRAs. What are not?

A

life insurance, fine art, margin account

52
Q

________ is excessive trading for a particular customer’s circumstances or exceeding what would normally be considered suitable.

A

churning

53
Q

_______________paid by customers is considered a source of income for broker-dealers and pledging the customer’s securities as collateral for the loan is simply a necessary part of offering margin to customers.

A

margin interest

54
Q

A closing transaction can be either a buy or a sell, depending on what the opening (initial) transaction was. The closing transaction will always be the __________ of the opening one—buy to open, sell to close or sell to open, buy to close.

A

opposite

55
Q

Customers may open a ______ account, _____ account, or any other account so long as the firm supports that type of an account and an authorized principal approves it.

A

cash

margin

56
Q

The Regulation T initial margin requirement is currently ____%. While it has been so for many decades, it can be changed by the ________________ anytime it deems appropriate to do so.

A

50%

FRB Federal reserve board

57
Q

A split that reduces the number of shares, is a ________ split. IF the investor now owns 400 shares when previously they had 500 shares, which would be expressed as a 4:5 split. Since neither number in the ratio is 1, it is an __________ split.

A

reverse

uneven

58
Q

Any entity wishing to solicit proxies to vote a stockholder’s shares must register with the _____________.

A

SEC securities exchange commission

59
Q

Updated account information must be sent to the customer within ______ for confirmation upon the opening of the account, and at least once every ___________ thereafter, and in the event of the customer notifying the firm of changes in any information shown or listed on the account form.

A

within 30 days

once per 36 months thereafter

60
Q

A signed _____________ agreement permits the pledging of customer securities as collateral for margin loans.

A

hypothecation

61
Q

Any solicitation made must occur between ____________ in the recipient’s time zone (not the callers). Firms must maintain a ___________, 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.

A

8:00 - 9:00

do not call list

62
Q

A transaction initiated by an agent or registered representative is known as a _________ transaction. __________ transactions are those initiated by the customer. Order tickets should always be marked.

A

solicited

unsolicited

63
Q

_________ are a way of increasing a company’s share price. The number of shares outstanding decreases, but the price per share increases.

A

Reverse Splits

64
Q

Purchasing securities in a _____________ is permitted, but the funds to pay for the purchase in full must be available in the account before the order can be entered.

A

frozen account

65
Q

If an investor has received ___________, he can allow them to expire, sell them for a short term capital gain or loss, or exercise them to buy a new stock at a discount.

A

stock rights

66
Q

If a security is sold for less than the original purchase price, the difference is called a __________. This would apply to both equity and debt securities.

A

capital loss

67
Q

Investors who choose to sell short eligible securities must satisfy Federal Reserve Board (FRB) margin requirements to do so. The margin requirement is a deposit of ________ of the sale proceeds in the customer’s margin account.

A

50%

68
Q
  • have no minimum required distributions at any age

- can be contributed to in the same year as a traditional IRA

A

Roth IRA’s

69
Q

Your customer opens a position at 45 and then closes it later at 47. This represents?
Because we do not know if the opening transaction was a buy or a sell from what we are told.

A

a 2 point gain or loss

70
Q

Unnecessary transactions entered into for the purpose of generating commissions with no regard for profitability constitute __________. It can result from both excessive number and excessive size of transactions.

A

churning

71
Q

The _____________ permit several types of lending arrangements. Among them; an immediate family relationship exists between the representative and the customer, the customer is in the business of lending money, the customer and the representatives are both registered persons with the same firm, the customer and the representative have a personal relationship or a business relationship outside the broker-customer relationship. Lending securities for use in short sales can only be done with a signed consent agreement from the customer.

A

conduct rules

72
Q

Any piece promoting securities services and / or products intended to be received by more than 25 retail customers within any 30 calendar-day period must be pre-approved by?

A

A principal before use.

73
Q

All GTC (good till cancelled) orders if unexecuted will be automatically canceled on the last business day of _______and the last business day of ________. If the customer wishes to have the order continue working beyond that date, it must be reentered after the automatic cancellation.

A

April

October

74
Q

Indexes such as the DJIA or the S&P 500 are hypothetical portfolios, not single stocks. While there’s no single standard or benchmark, an index can be used as a performance standard one can monitor and therefore judge the performance of a portfolio or investment against. When we refer to the stock market’s performance in general, we are most likely referring to the performance of an index or average that tracks stocks or bonds. These benchmarks can serve as an indicator of the overall direction of the market as a whole, or the direction of individual market sectors.

A

TRUE

75
Q

RE: College Education in an IRA account. Max annual contribution is:______. Contributions __________ tax deductible and must cease when beneficiary reaches age of ______. Any unused balance must be rolled over or distributed by the time the beneficiary reaches age 30. Can be rolled over to sibling once in a 12 mo period.

A

$2000
are not tax deductible
18

76
Q

____________(also known as preemptive rights or subscription rights) give current shareholders the ability to preemptively purchase enough shares to maintain their proportionate ownership of the corporation. This prevents their dividend and voting power from being diluted. The shares outstanding in this case will go from 1,000,000 to 1,250,000. This investor must thus go from owning 100 shares out of 1,000,000 to 125 shares out of 1,250,000. This would require that the investor be able to purchase an additional 25 shares.

A

Stock Rights

77
Q

____________ are marginable securities, but __________ are not.

A

Warrants

Rights

78
Q

If a shareholder does not wish to attend an annual stockholders’ meeting, but still wishes to vote, the shareholder may confer a limited power of attorney on another party to vote the shares. This power is known as

A

Proxy

79
Q

If a customer wishes to open a cash account in his name only and allow a third party to make trading decisions, but not withdraw cash and securities, he must instruct his broker-dealer to open a

A

cash account with limited power of attorney

80
Q

With a discretionary account the customer may still

A

enter orders

81
Q

What dollar limit is placed on damages if a suit is filed based on allegations of manipulative practices?

A

No dollar limit

82
Q

When making unsolicited cold calls to prospects, a registered representative must disclose all of the following to the individual called?

A

the name of the member broker-dealer firm
the caller’s name
the address at which the caller may be contacted

83
Q

procedures to show that delivery took place as intended
assurance of confidentiality of the documents and personal information
procedures to deliver the information in paper form upon request

A

electronic delivery of documents

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