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SIE Exam flashcards
1
Q

common feature of both qualified and non-qualified annuities is

A

tax-deferred growth.

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2
Q

If an investor expects a sharp rise in a stock’s price, exercising rights is (more or less) profitable than buying puts,
selling calls, or selling puts.

A

If an investor expects a sharp rise in a stock’s price, exercising rights is more profitable than buying puts,
selling calls, or selling puts.

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3
Q

Warrants and rights are issued by Who

What about call options?

A

the corporation, but call options are not.

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4
Q

If an investor is concerned about a significant market decline to occur shortly, to protect her assets

A

she should

move to cash and cash equivalents.

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5
Q

If an investor buys 2 STC July 40 calls at 5, the breakeven point is 45. The breakeven is per

A

contract and not

influenced by the number of contracts purchased or sold.

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6
Q

If a bond is called at 103.75, the holder will receive

A

$1,037.50 plus accrued interest.

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7
Q

Qualified withdrawals from 529 plans, Roth IRAs, and Roth 401(k) plans are

A

tax-exempt.

− However,traditional IRA sallow for tax-deferred growth; while UGMA/.

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8
Q

disclosure document for a public offering is a

A

prospectus.

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9
Q

The disclosure document for a municipal offering is

A

an official statement.

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10
Q

The disclosure document for a private placement is

A

an offering memorandum.

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11
Q

On Form U4, an applicant must disclose bankruptcy and felonies which have occurred

A

within the last 10 years,

but NOT all misdemeanors (only those involving the securities industry).

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12
Q

A customer account statement must indicate that the customer should promptly notify

A

her broker-dealer if a

discrepancy is noticed.

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13
Q

When an investor rolls $800,000 from a 401(k) plan to an IRA and is concerned that the market will fall dramatically, this is considered what of of risk

A

systematic risk.

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14
Q

If a mother wants to make a gift to her son, but doesn’t want him using the funds to pay living expenses, she should establish

A

a trust account.

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15
Q

An unregistered person cannot make

A

securities recommendations.

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16
Q

C Corporation is NOT a

A

pass-through entity (i.e., it’s taxable).

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17
Q

If a country runs a trade surplus

What would happen to currency

A

(i.e., the value of its exports exceeds the cost of its imports), its currency will
appreciate.

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18
Q

A large appliance manufacturer is an example of

A

a cyclical company.

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19
Q

Arbitrage

A

Buying a stock on one exchange and simultaneously selling it on another exchange is referred to a

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20
Q

The reason for the creation of the DTC was to provide

A

a book-entry system to handle the increase in volume of securities transactions.

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21
Q

The quoted price of a non-listed stock can be found on

A

OTCBB or OTC Pink Marketplace

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22
Q

Broker-dealers that receive a commission are acting in

A

agency capacity

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23
Q

A firm that charges a markup on a stock transaction is acting in a

A

dealer/ principal capacity

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24
Q

A broker-dealer sells a security to an investor at the

A

ask price

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25
Q

A broker-dealer buys a security from an investor at the

A

bid price

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26
Q

A market maker is a member of a stock exchange (or a broker-dealer) that’s responsible for

A

providing liquidity by consistently buying and selling securities at its quoted prices

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27
Q

The reason that the Investment Company Act of 1940 requires mutual funds to have a significant percentage of its directors be disinterested is to

A

protect shareholders against management impropriety

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28
Q

The purpose of information barriers is to

A

limit the spread of non-public information within a broker-dealer

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29
Q

In arbitration proceedings involving customers, the arbitration panel can consist of

A

both industry and non-industry arbitrators

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30
Q

industry arbitration proceedings will utilize

A

industry arbitrators only

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31
Q

For coverage purposes, the SIPC considers CDs and money-market mutual funds as

A

securities

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32
Q

For SIPC coverage purposes, a client with $250,000 in stocks and $50,000 in cash is

A

fully covered

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33
Q

client with $200,000 in stocks, $50,000 in cash, $100,000 in a CD, and $50,000 in futures is

A

is NOT fully covered since the SIPC doesn’t cover commodity futures contracts.

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34
Q

Characteristics of rights include (4)

A

that they are provided to existing shareholders,
they allow for the purchase of shares at a predetermined price, and
they are transferable;
however, they do NOT receive dividends

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35
Q

that they are provided to existing shareholders, they allow for the purchase of shares at a predetermined price, and they are transferable; however, they do NOT receive dividends

A

to the sale of registered securities being sold by non-affiliates.

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36
Q

A risk that’s unique to ADRs as opposed to domestic stocks

A

political risk

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37
Q

Bonds with short-term maturities minimize

A

interest rate risk

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38
Q

Stability in the value of a debt portfolio is the greatest when

A

the debt securities have short maturities

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39
Q

If interest rates fall, a money-market fund will experience

A

stable value, but a decrease in yield

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40
Q

Call protection is most valuable for a bondholder if bond prices are

A

rising (due to interest rates falling

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41
Q

Regarding the tax treatment of a municipal bond mutual fund

A

tax-free income and taxable capital gains

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42
Q

An increase in property values is favorable to the credit rating of aAn increase in property values is favorable to the credit rating of a

A

municipal issuer

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43
Q

primary source that backs an industrial development bond (IDB).

A

corporation

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44
Q

The payment on an IDB is guaranteed by the signatures of

A

of the issuing authority and the corporation

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45
Q

The redemption value of open-end investment company shares is based

A

on the NAV that’s computed after the redemption order is received.

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46
Q

In a 529 plan, a person can be both

A

the donor and beneficiary as long as she’s 18 or older

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47
Q

When recommending a 529 plan to a customer, a registered representative should consider

A

potential deductibility of contributions from state taxes.

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48
Q

If an investor is interested in income, what dpp is unsuitable

A

raw land investment is unsuitable.

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49
Q

Two risks that are specific to ETNs

A

credit risk and market risk

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50
Q

The potential outcomes for covered call writing

A

limited gain and a limited loss.

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51
Q

what is the suitable hedge for a long stock position

A

buying a put

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52
Q

what is a suitable hedge for a short stock

position

A

buying calls

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53
Q

Selling calls against a long stock position is a conservative strategy for

A

generating income

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54
Q

The best source of information regarding a new municipal bond offering is the official statement which is
created by the issuer and can be found

A

in the Electronic Municipal Market Access (EMMA) system

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55
Q

During the cooling off period, a registered representative can provide potential investors with a

A

preliminary prospectus (red herring).

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56
Q

Under Rule 144A, restricted securities are permitted to sell to

A

qualified institutional buyers (QIBs).

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57
Q

Short sales must be executed in a

A

margin account

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58
Q

If an investor buys ABC stock and sells short XYZ stock, the purchase may be executed

A

in a cash account (or a margin account), but the short sale must be executed in a margin account.

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59
Q

In a new margin account, if a client’s initial transaction is to sell short 100 shares of ABC at $18, she must
deposit

A

$2,000.

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60
Q

If the initial transaction in a customer’s margin account is a short sale of 1,000 shares of ABC stock at $90, the
customer must deposit

A

$45,000.

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61
Q

In a new margin account, if a client’s initial transaction is to buy 100 shares of XYZ at $30, he must deposit

A

$2,000 (for purchases, the initial equity requirement is the lesser of $2,000 or 100% of the purchase).

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62
Q

If a customer wants to buy or sell securities immediately, she should enter

A

a market order.

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63
Q

In the secondary market, the spread represents

A

the difference between a stock’s bid and ask prices.

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64
Q

o An investor owns 375 shares at $17 per share. If the stock splits 5:3, the investor will then own

A

625 shares

375 x 5/3) at $10.20 per share ($17 x 3/5

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65
Q

A tender offer is made with a 100,000 share minimum and a 1 million share maximum; however, only 80,000
shares were tendered. how many shares will been tendered

A

In this case, none of the shares that were tendered by the investors will be purchased.

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66
Q

If an investor sells shares of preferred stock, delivery must be made

A

by T + 2.

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67
Q

In a joint account, good delivery of a stock certificate is made if the stock power is signed by

A

both of the owners.

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68
Q

A proxy may be used by a

A

customer to vote for members of the board of directors

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69
Q

A customer owns 1,000 shares of XYZ at $2.00 per share. If XYZ executes a 1:20 stock split, his position is now

A

50 shares at $40 per share (1,000 x 1/20 and $2.00 x 20/1).

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70
Q

If a company executes a stock split, who is responsible for maintaining a record of the
shareholders who are eligible to receive the additional shares.

A

the transfer agent

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71
Q

In a margin account, the hypothecation agreement permits

A

a broker-dealer to pledge a customer’s securities as collateral for a loan and must be signed by the customer.

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72
Q

The $2,000 maximum non-deductible contribution to a Coverdell Education Savings Accounts (ESA) is

A

gradually phased out as income rises (if married, filing jointly, no contribution is allowed if income exceeds
$220,000).

73
Q

IRAs are retirement accounts that allow individuals to contribute

A

the lesser of 100% of earned income or

$6,000 per year.

74
Q

If a 55-year-old has $55,000 of pension income and $1,500 of earned income, she can contribute a maximum of

A

1,500 to an IRA

75
Q

Numbered accounts are acceptable if the firm has a

A

signed statement on file from the customer which

“attests” to ownership of the account.

76
Q

For numbered accounts, the firm must know

A

the identity of the beneficial owner.

77
Q

Along with name, accounts can be identified

A

by number or symbol.

78
Q

If a customer is invested in a 401(k) plan, she must begin withdrawing funds by

A

April 1 of the first year after
the year in which she turns age 70 ½.
− In other words, if her birthday is June 1, 2018, she turns 70 ½ by the end of the year; therefore, she must
start withdrawing funds by April 1, 2019.

79
Q

A fee-based account is generally more suitable for

A

individuals who trade their portfolios actively (i.e., a

portfolio that’s rebalanced rather than one that’s buy-and-hold)

80
Q

A Coverdell ESA must be established for a person who is

A

under the age of 18 and the funds must be used by

her 30th birthday.

81
Q

According to Regulation SP, the privacy statement is NOT required to include

A

the names of the third parties

with which information is shared (instead, it includes the categories of third parties).

82
Q

Regulation SP requires broker-dealers to send a privacy notice at the time an account is opened and annually
thereafter.

A

an account is opened and annually

thereafter.

83
Q

The most suitable investment for a customer seeking aggressive growth is

A

stock, not bonds

84
Q

Customers who buy technology stocks accept what type of risk

A

significant capital risk.

85
Q

Telemarketing (cold) calls can only be made _____

unless what

A

between 8:00 a.m. and 9:00 p.m. of the person being called,

unless the client has an established business relationship with the firm.

86
Q

Firms that conduct telemarketing must create and maintain their own

A

Do Not Call Lists. The list is not created by the firms’ registered representatives.

87
Q

Customer account records must be maintained for

A

six years after the account is closed.

88
Q

A broker-dealer can hold a customer’s mail if

A

it receives a written request from the customer

89
Q

FINRA’s suitability rules state that member firms and RRs must have a

A

reasonable basis for believing that a

transaction is suitable based on information they’ve obtained from the customers.

90
Q

An important aspect of a broker-dealer’s anti-money laundering (AML) policy is

A

appointing an AML compliance officer.

91
Q

If a broker-dealer receives cash exceeding $10,000 from one customer in one business day, it must file a

A

CTR.

92
Q

To safeguard the financial system from the abuses of financial crime, including terrorist financing and money
laundering, FinCEN enforces

A

the Bank Secrecy Act (BSA).

93
Q

If RR’s father-in-law establishes a trust account at a financial institution and makes the RR the trustee, this
must be

A

reported to the RR’s broker-dealer since the RR has a beneficial interest in the account.

94
Q

An RR is prohibited from agreeing to buy back mutual fund shares from a customer if

A

they don’t perform in

accordance with a benchmark

95
Q

buying equity IPOs is restricted for

A

FINRA member firms, member firm employees, and the immediate family members of the employees who are
materially supported by, or share a household with, the employee are restricted from buying equity IPOs. For
purposes of the rule, immediate family includes in-laws, but not grandparents.

96
Q

Registered representatives can only borrow from or lend with who — without permission of their firms.

A

Registered representatives can only borrow from or lend to clients that are immediate family members and
financial institutions that are in the business of providing funds, without permission of their firms.

97
Q

Registered representatives can only borrow from or lend with who — with permission of their firms.

A

However, if
the borrowing/lending is with persons registered at the same firm or persons with whom they have a preexisting personal/business relationship, their firms’ permission is required.

98
Q

The Exploitation of Specified Adults Rule is designed to prevent

A

the abuse of any persons who are over the age
of 65 and any persons who are over the age of 18 who has a mental or physical impairment that renders the
person unable to protect his own interest.

99
Q

If the niece of an elderly client is involved in making suspicious withdrawals/disbursements of cash from her
uncle’s account, the best course of action is to

A

halt/suspend the withdrawals (assuming the owner has not provided a trusted contact person).

100
Q

An individual who is employed by a broker-dealer is required to be fingerprinted if

A

he processes trades in the
back office, is a clerical person who has access to books and records, or handles client funds in the back office,
but not if he simply provides capital to the firm.

101
Q

If a registered representative has been terminated, she can still receive trailing commissions as long as

A

she entered into a contract while she was appropriately registered.

102
Q

A registered person is required to attend a compliance meeting on an ____ basis.

A

annual

103
Q

If an RR receives a felony conviction for driving under the influence (DUI), it’s grounds for

A

statutory disqualification

104
Q

Within 60 days, a registered representative must report on Form U4 that she satisfied

A

a tax lien.

105
Q

If a person’s association with a member firm was terminated more than 24 months ago, the person must

A

requalify through examination to re-enter the securities industry.

106
Q

A link to BrokerCheck must be _______ of a firm’s website so that it’s available to the public.

A

on the first page

107
Q

FINRA members and associated persons are not allowed to give gifts that exceed

A

$100 per year to employees

of other member firms.

108
Q

To be exempt from the Gift Limit Rule, a promotional gift with a firm’s logo

A

must be valued at less than $100.

109
Q

A gift of a golf bag or putter with the firm’s logo is likely to be valued in excess of $100

A

and therefore

prohibited.

110
Q

Business and entertainment expenses do not violate the gift limit rule as long as the person

A

giving the gift also

attends the event/function

111
Q

A registered person is not permitted to receive non-cash compensation (sales contest)

A

directly from the

distributor of a securities product (mutual funds).

112
Q

A Municipal Finance Professional (MFP) can contribute $250 per candidate, per election, provided the MFP is

A

able to vote for the candidate.

113
Q

Due to an RR’s inability to make mortgage payments on a second property, she decides to sell the property
short and use the proceeds to cover the mortgage. This is referred to

A

as a “compromise with creditors” and

FINRA must be notified.

114
Q

Based on sales that are executed by registered representatives, if the sponsor of a mutual fund is offering a
trip, this is considered a

A

form of non-cash compensation.

115
Q

In relation to the sale of variable products, non-cash compensation includes

A

meals, lodging, and gifts, but NOT

commissions.

116
Q

Under FINRA’s non-cash compensation rules, an all-expenses paid trip that’s covered by a mutual fund wholesaler is .

A

prohibited

117
Q

If an MPF makes a $500 contribution (in excess of $250) to her neighbor who is running for local office, the MPF’s
firm is prohibited from

A

engaging in negotiated underwriting business with the municipality for two years.

118
Q

Selling away is

A

a prohibited practice which involves an RR engaging in private securities transactions without
the prior written consent of her broker-dealer

119
Q

Keynesian

A

The economic policy that utilizes taxation and government spending programs to influence the economy is
considered .

120
Q

During an economic slow-down, the FRB will

A

lower interest rates to stimulate economic activity

121
Q

The FRB determines whether unlisted equity securities are .

A

marginable

122
Q

In periods of high inflation, stocks typically perform ____ than bonds

A

better than bonds.

123
Q

what type of indicator is industrial production

A

Coincident economic indicators

124
Q

If inflation increases by 5% and the distribution that’s received by an investor increases by 5%, the investor’s
purchasing power

A

remains the same.

125
Q

If a country imports more than it exports, its GDP will .

A

decrease

126
Q

If a country exports more than it imports, its GDP will .

A

increase

127
Q

One likely reason for the FRB to pursue an easy money policy is an

A

increase in unemployment.

128
Q

A Ginnie Mae security is impacted by all of the following risks

A

prepayment risk, reinvestment risk, and

fluctuations in the principal value of underlying mortgages

129
Q

If an investor wants a hedge against inflation,

A

common stock is an appropriate investment.

130
Q

If an investor wants to preserve capital, an appropriate investment is

A

short-term U.S. government bonds.

131
Q

To create a downside risk hedge, an investor who owns 100 shares of ABC at $40 buys 1 ABC July 40 put at 3. To
breakeven, the investor needs ABC stock to be trading at

A

$43 ($40 cost of the stock plus the $3 premium paid).

132
Q

Long Call

A

Unlimited profit; limited loss

133
Q

Long Put

A

Limited profit; limited loss

134
Q

Short Call (Uncovered)

A

Limited profit; unlimited loss

135
Q

Short Put (Uncovered)

A

Limited profit; limited loss

136
Q

Covered Call

A

Limited profit; limited loss

137
Q

purpose synidate desk

A

build order book and allocate the stock

138
Q

cost basis of inherited mutual fund is

A

NAV of shares when owner dies

139
Q

variable rate demand note

A

long term with short term rates

140
Q

remedption value of open end fund =

A

NAV computed after order is recieved

141
Q

DPPs provides exporsure to

A

uncorrelated assets with steady returns

142
Q

initial purchases of 3,000 of common in margin account requires

A

a cash deposit of 2,000

143
Q

shared feature for Trad IRA and Roth IRA

A

qualifid distrbution are exculded from federal income tax

144
Q

asset back securities

A

traded according to their average life rather than stated maturity date

145
Q

unregistered person can provided

A

account opening forms to new owner

146
Q

CTRs must be filed

A

15 days

147
Q

number of unemployement ads

A

leading indicator

148
Q

restricted stock must be sold within

A

90 days

149
Q

BD’s anti-money laundering compliance program must be

A

approved in writing by member of senior mgmt

150
Q

REITs are handled like

A

stock

151
Q

unsigned certifcates are

A

sent separately from stock powers

152
Q

otc bb is a

A

quotation system

153
Q

bond getting closer to maturity what happen to price

A

price increases

154
Q

reits and mutual fund both are

A

actively managment

155
Q

tell FINRA about U5 in

A

30 days

156
Q

government agency bonds are

A

exempty

157
Q

anti-money laundtry compliance progrom should disclose

A

the person overseeing to finra

158
Q

CTR needed for

A

when opens an account with 11k

159
Q

structuring

A

occurs when a client attempts to circumvent anti-money laundering reporting by depositing funds in amounts just below the reporting levels

160
Q

tax purposes income distributed by reit will be taxable

A

to shareholders and not the REITS

161
Q

alll complaints must be sumbitted to FINRA with in the most

A

recent quarter – 15th of the following quarter

162
Q

most volatile preferred stock

A

convertible perferred stock

163
Q

short term trading vechile

A

leverage etfs

164
Q

bond interest payment

A

semi-annually

165
Q

investment in coverdell ed are

A

determined by investors

166
Q

if variable holder dies during accumulation period, proceed of excess of cost are

A

taxable as ordinary income to the beneficary

167
Q

if customer purchases securities but fails to pay for them

A

the brokerage firm will sell out the securities and freeze the account

168
Q

official statment of muni is made by

A

issuer

169
Q

temp hold last

A

for 15 days and can be extended for 10 more days

170
Q

REITS benefits are

A

diversified, liquidity, and stable DIVs

171
Q

premptive rights have

A

dividends

172
Q

preferrerd stock have not

A

dividends

173
Q

In a sponsored ADR,

A

the company pays a depository bank to issue shares in the U.S. Many of the largest ADRs are sponsored.

174
Q

In an unsponsored ADR,

A

the company does not pay for the cost associated with trading in the U.S.

175
Q

legal opinion,

A

which is written by a bond counsel, attests to the validity and tax status of a municipal bond offering

176
Q

fund that would probably have the most price volatility is

A

International equity fund

177
Q

Under FINRA’s Investor Education and Protection Rule, a firm is required to provide customers with the following information once per year:

A

The FINRA BrokerCheck® hotline number
The FINRA website address
A statement regarding the availability of an investor brochure that includes information describing BrokerCheck®

178
Q

According to Regulation T,

A

any purchases that are made in either cash or margin accounts must be paid for promptly. If they are not paid for within two business days of the regular-way settlement date, the broker-dealer may cancel the transaction by selling out the securities. After selling out the customer’s securities, the broker-dealer is required to freeze the account for 90 days. For the 90-day period, all purchases must be paid for in advance; however, once the 90 days have elapsed, the customer is considered to have reestablished credit and may once again be extended normal credit terms.

179
Q

According to current regulations, if a client redeems his mutual fund shares, the fund company must send the payment within:

A

7 days

SIE (9 decks)

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