FINRA - Practice Exam Flashcards
All SIE topics
The redemption value of an open-end investment company’s shares is based on the:
A) previous offering price.
B) previous closing net asset value (NAV).
C) NAV computed after the order is received.
D) offering price computed after the order is received.
C
Which of the following investment risks is the greatest risk in a variable life insurance policy?
A) Credit risk
B) Market risk
C) Inflation risk
D) Interest rate risk
B
A company announces a tender offer to its shareholders with the intent to buy a maximum of 1 million shares of its outstanding stock at $10 per share and sets no minimum number of shares to be purchased. An investor wants to participate in this offer and tenders his 1 ,000 share position. At the close of the offer period, only 900,000 shares have been tendered. How many, if any, of the investor’s shares will the company purchase?
A) 0
B) 100
C) 900
D) 1,000
D
Roth 401 (k) and Roth individual retirement account (IRA) plans share which of the following features?
A) Contributions are made pretax.
B) Neither account has maximum contribution limits.
C) Neither account is subject to early distribution penalties.
D) Qualified distributions are excluded from federal income tax.
D
FinCEN accomplishes its mission to safeguard the financial system from the abuses of financial crime, including terrorist financing and money laundering, by enforcing:
A) SEC regulations.
B) the Bank Secrecy Act.
C) the Securities Act of 1933.
D) the Investment Company Act of 1940.
B
All of the following risks apply to both foreign and domestic debt instruments except:
A) political.
B) exchange.
C) repayment.
D) interest rate.
B
Stability in the value of a debt portfolio is greatest when:
A ) interest rates are rising.
B) interest rates are falling.
C) maturities of the debt securities are long.
D) maturities of the debt securities are short.
D
Which of the following products is adversely impacted if the issuer’s credit rating is downgraded?
A) Mutual funds
B) Unit investment trusts (UlTs)
C) Exchange-traded funds (ETFs)
D) Exchange-traded notes (ETNs)
D
In a period of low inflation and economic recession, the Federal Reserve is expected to take which of the following actions?
A) Decrease taxes
B) Raise the federal funds rate
C) Buy bonds in the open market
D) Require banks to increase reserves
B
A customer is an officer of a company that is involved in some significant changes. All of the following items are examples of corporate affairs that could be considered insider information if the customer shares them with his registered representative except:
A) pending transactions.
B) declared stock dividends.
C) top management changes.
D) imminent financial liquidity problems.
B
Which of the following comparisons best describes the essential difference between a primary distribution and a secondary distribution?
A) A primary distribution can only be made for equity issues while a secondary distribution can be made for both equity and debt issues.
B) A primary distribution can only be made for issues that exceed a specified dollar amount while a secondary distribution can be made for issues of all sizes.
C) A primary distribution must be made at a fixed public offering price (POP) while a secondary distribution must be made at the current market price.
D) A primary distribution involves a sale of newly issued shares by the issuer while a secondary distribution involves the sale of already issued and outstanding shares.
D
An investor owns 100 shares ofXYZ common stock at the current market price of $50 per share. If XYZ conducts a I-for- 2 reverse stock split, the investor’s post-split stock position will be:
A) 50 shares at $25 per share.
B) 50 shares at $100 per share.
C) 200 shares at $25 per share.
D) 200 shares at $100 per share.
B
Which of the following outcomes are possible for the writer of a covered call option?
A) Profit limited and loss limited
B) Profit limited and loss unlimited
C) Profit unlimited and loss limited
D) Profit unlimited and loss unlimited
A
Under a system of statutory voting, a common stockholder has as many votes for each vacancy on the board of directors as the number of:
A) positions vacant on the board.
B) directors present at the meeting.
C) shares owned by the stockholder.
D) proxies available for voting by the board.
C
A broker-dealer is permitted to accept payment for a new issue from a new customer when the:
A) registration is effective.
B) red herring is delivered.
C) preliminary prospectus is amended.
D) transaction takes place during the cooling-off period.
A
Which of the following actions violates FINRA rules regarding selling away?
A) Recommending to a customer the services of another broker- dealer (BD)
B) Sharing commissions with another registered representative in the same BD
C) Advising customers to buy mutual funds at amounts just below a discount level
D) Engaging in private securities transactions without written prior consent of the employing BD
D
Which of the following actions is required of a broker-dealer’s anti-money laundering (AML) program?
A) Designating an AML compliance officer
B) Filing of the firm’s AML program with FINRA
C) Conducting background checks of all employees
D) Identifying to regulators the employees responsible for Currency Transaction Reports (CTRs)
A
Which of the following responses describes an advantage of index funds?
A) The protection of principal during bearish markets
B) High turnover to take advantage of market opportunities
C) Higher management fees due to active management of the fund
D) Lower management fees due to passive management of the fund
D
In the event of a stock split, which of the following parties is required to maintain a record of the shareholders eligible to receive the additional shares?
A) DTC
B) Issuer
C) Custodian
D) Transfer agent
D
Call protection is most valuable to a bond owner when bond prices are generally:
A) rising.
B) falling.
C) stable.
D) fluctuating.
A
When a broker-dealer charges a commission on a securities transaction, it has acted as:
A) an agent.
B) a principal.
C) an underwriter.
D) a market maker.
A
Under industry regulations, an initial purchase of $3,000 of common stock in a margin account requires a cash deposit of:
A) $750.
B) $1,500.
C) $2,000.
D) $3,000.
C
Under SEC Regulation S-P (Consumer Privacy), which of the following information must a firm include in its customer privacy and opt-out notices?
A) The address of the firm’s website
B) The fee to opt out from the privacy program
C) The deadline by which to opt out from the privacy program
D) The policies to protect the security of nonpublic information
D
A firm is a participant in a public offering. To sell a substantial amount of the securities to its customers, the firm agrees to repurchase the shares at no less than the original sales price. Such agreements are:
A) prohibited as fraudulent and manipulative.
B) permissible if the securities are deposited into escrow.
C) prohibited unless the firm immediately sets aside funds for the repurchase.
D) permissible if the customers retain the right to sell the securities into the open market.
A
A decline in the gross domestic product (GDP) must last for at least how many quarters to be considered a recession?
A) 1 quarter
B) 2 quarters
C) 3 quarters
D) 4 quarters
B
Which of the following actions is required when a firm receives cash in excess of $10,000 from one customer in one business day?
A) File a Currency Transaction Report (CTR)
B) File a Suspicious Activity Report (SAR) with the SEC
C) Issue a cash transfer receipt to the customer
D) Place a five-day hold on the customer’s account for the funds received
A
Broker-dealer ABC seeks to underwrite a municipal securities offering by a local town in which the mayor is currently seeking re-election. A municipal finance professional who resides in the town and works for ABC contributed $200 to the mayor’s re-election campaign 13 months ago. If the employee wants to support the campaign further without impacting the municipal securities business of the firm, he is permitted to make an additional contribution of up to what
A) $50
B) $100
C) $150
D) $250
A
In which of the following situations is an employee of a public company permitted to trade upon information without violating insider trading laws?
A) An independent securities analyst explains to the employee why the earnings for the company next quarter could be markedly poorer than expected.
B) The employee’s neighbor works for the government and informs him that the government will award a major contract to the company next month.
C) The employee’s spouse works in the corporate headquarters and shares with him a conversation overheard at work regarding possible acquisition targets.
D) A coworker informs the employee of a conversation he had with the administrative assistant to the company’s general counsel regarding key developments in an ongoing class action lawsuit.
A
When selling a fixed amount of a base currency to purchase a counter currency, which of the following factors is primarily used to determine how much of the counter currency the customer will receive?
A) The spot exchange rate
B) The counter currency’s inflation rate
C) The trade balance between the two countries
D) The credit rating of the counter currency’s government
A
Which of the following security types provides investors with a stated maturity date, a floating interest rate, and an option to put the security back to a financial intermediary on a daily or weekly basis?
A) Equity put option
B) Perpetual preferred stock
C) Variable rate demand note
D) Tax-deferred variable annuity
C
