SIE Flashcards
In a 529 plan, can an individual be both the donor and the beneficiary?
Yes, if the person is of legal age.
What is the maximum loss for a buyer of a stock option?
The premium paid
How are IRA’s funded?
After tax deductions
A brokerage firm creates an in-house, non-cash incentive program. This is permitted if it’s tied to the RR’s sale of which of the following products?
All securities products that are sold by the RR
A corporation has a 7% cumulative preferred stock issue outstanding. The company paid a $5 dividend three years ago, $6 two years ago, and $7 last year. If the company wants to pay a common stock dividend in the current year, the cumulative preferred stockholders must first receive a dividend of: (How is it calculated)
$10 (Any dividend that’s not paid (in arrears) must be made up prior to a common dividend being paid. Adding up dividends missed cummulatively)
Which of the following activities is NOT performed by a transfer agent?
Handling lost, destroyed, or stolen certificates
Acting as proxy agent
Maintaining the issuer’s ownership register for each issuance of securities
Acting as the company’s paying agent for interest payments on bonds and for cash or stock dividends on equities
Maintaining the issuer’s ownership register for each issuance of securities
Industrial production is considered what type of economic indicator?
Coincident
A person pleaded guilty to a charge of counterfeiting and bribery five years ago. He has now been released from prison and is applying for an investment banking position with your firm. What is true regarding his eligibility for current employment in the securities industry?
He’s subject to statutory disqualification and is not currently eligible to be hired. Any person who has been convicted of a misdemeanor related to securities, or any felony during the last 10 years, is subject to statutory disqualification. A guilty plea is the equivalent of a conviction.
What is a restricted list?
List that must be told to employees by firm of securities that a bank’s employees are prohibited from buying or selling, either themselves or via any other person or third party
Why do no-load mutual funds have lower expense ratios than mutual funds with a sales load?
No-load funds cannot assess a 12b-1 fee that exceeds 25 basis points.
What is reinvesmtment risk?
Reinvestment risk is the result of not being able to reinvest funds at the same rate after a bond matures or is called.
What does a temporary hold on a customer’s account apply to on the account?
It applies to either the entire account or specific disbursements
The main difference between a registered exchange-traded REIT and a registered nontraded REIT is:
The amount of liquidity each of the securities has
A mutual fund charges a maximum front-end load of 5.50% for purchases of less than $100,000 and 3.50% for purchases of $100,000 but less than $250,000. An individual invests $75,000 in the fund and signs a letter of intent. Prior to the expiration date of the letter, the individual invests another $75,000. What is the total sales charge the individual should pay?
$5,250
How do you find the POP (Public offering price)
To find the POP, the net asset value is divided by the complement of the sales charge
The payout on a variable annuity is based on a:
Fixed number of annuity units with a fluctuating value per unit
A change in what requires the broker-dealer to send a notice to the customer?
A notice must be sent to a customer within 30 days if the account is updated due to a change in the name, address, or investment objectives of the customer.
May a brokerage firm place a temporary hold on a securities transaction?
Yes, for the account of a specified adult under Rule2165.
The payout on a variable annuity is based on a:
Fixed number of annuity units with a fluctuating value per unit
What are Moral obligation bonds
Moral obligation bonds are municipal revenue bonds that are payable by the state if revenues from the project do not satisfy debt service payments.
The U.S. Department of the Treasury is responsible for:
Collecting taxes
What type of communication must be approved by a principal?
A principal must approve retail communications prior to use.
What is a benefit of a 529 plan?
Change of beneficiaries allowed
The interest rate that fluctuates the most is the:
Federal funds rate
How do you find the current yield on a bond?
Annual interest divided by current price of bond
What is a primary offering?
In a primary offering (distribution), all of the proceeds of the offering are directed to the issuer of the securities.
What type of bond will provide safety of principal as well as capital appreciation?
A convertible bond
What is the regular trade settlement day for Secondary market trades in U.S. Government bonds, notes, and bills?
Secondary market trades in U.S. Government bonds, notes, and bills settle one business day after the trade date.(T+1)
The federal securities regulation that requires disclosure by issuers offering securities to the public is:
The Securities Act of 1933
When does a breakpoint sale occur?
A breakpoint sale occurs when an RR solicits or recommends a purchase just below a breakpoint level.
A broker-dealer is underwriting an initial public offering (IPO) for a company that will be exchange-listed. How long must The broker-dealer continue to deliver prospectuses:
For 25 days after the deal has closed
What type of account May a brokerage firm place a temporary hold on the transfer of securities?
Account of a senior investor.
When do Treasury notes pay interest?
Semiannually, and the investor receives the principal (par value) repayment at maturity with the interest
What is true regarding the Uniform Trust Minor Act?
Securities must be held in the name of the brokerage firm
Tax is charged on minor
What is the difference between Class A shares and Class B shares?
Class A shares have a front-end sales charge, while Class B shares have a contingent deferred sales charge
What is a Form 10k
A Form 10-K is an annual filing that provides details of a company’s financial information. Forms 10-K are often sent to broker-dealers and forward them to their customers.
What happens if an employee gets tickets for an event but does not attend an event? What limitations?
A gift. $100 limit.
Broker-dealers must provide a privacy notice to every consumer when?
When an account is opened
A broker-dealer’s customer is attempting to raise money for a new business venture. The customer’s registered representative (RR) agrees to assist by referring other clients and, in return, the RR will receive free services from the new business venture. This arrangement is
(Selling away) Acceptable if the firm was provided prior written notice and it maintains records of all transactions on the firm’s books
How do you find the SALES CHARGE of a net-asset-value of $11.72 and an offering price of $12.67?
Offering price - NAV = Difference
Difference ÷ Offering price = Sales Charge
The sales charge for the fund is calculated by dividing the difference between the offering price and the NAV ($12.67 - $11.72 = $0.95) by the offering price ($0.95 divided by $12.67 equals 7 1/2 %).
Under what circumstances is the 10% penalty tax is waived for IRA withdrawals prior to age 59 1/2.
Used to pay qualified higher-education expenses
Used to pay acquisition costs for a first-time homebuyer, which can include the account owner, the owner’s spouse, and any child, grandchild, or ancestor of the owner or spouse. However, this does not include the purchase of a vacation home.
How do you find the breakeven point for a put?
stock’s purchase price - put premium= Breakeven
What is a characteristic of direct participation programs (DPPs)?
Steady returns and non-correlated investments
Who can a registered person of a broker-dealer borrow funds from a customer without approval of her firm
Immediate family members.
The customer is a financial institution that’s regularly involved in the business of extending credit or providing loans.
What is a limit order
A limit order is to sell, which can only be executed at a specified price or higher.
What is the beta?
Beta measures a security’s volatility in relation to the market.
The time at which an employee is eligible to receive at least some of the retirement benefits that have been contributed to the plan by the employer is referred to as
Vested
What is dollar cost averaging?
Dollar-cost averaging involves investing the same amount of money, in the same securities, over a long period.
A 529 plan may be offered by who?
Directly or by an adviser
Who is prohibited against IPO purchases by restricted persons?
Member firms and any employee of the member firm.
An immediate family member of an employee
Portfolio managers as well as anyone whom they materially support.
If a bond is currently selling for less than par value, then what is higher? The Current yield or Nominal yield?
The current yield is higher than the nominal yield
Prior to the maturity of a variable-rate demand obligation, an investor has the right to receive the:
Par value plus accrued interest
How are stock index options exercised?
Settled by cash instead of the delivery of securities.
ERISA stipulates that employers with qualified plans are not permitted to exclude employees who fall into what three stipulations?
age 21 or older,
have worked full-time (1,000 hours minimum) during the year,
be employed for at least one year
What is sector rotation?
Sector rotation is the switching from one industry (sector) into another as the economy changes.
How is the growth and distribution handled in a 529 A Able plan?
tax-deferred growth
tax-free distrubtions
How are 529 Able plans funded
ABLE accounts are funded with after-tax contributions.
Whats one basis point equal?
One basis point is equal to .001%, or 1/100th of 1%.
What is the rate that is charged between member banks?
fed funds rate.
What is the age contribution limit for a Coverdell and when must they use/trade it by?
Contributions can be made until age 18 and must be used by age 30.
What’s required on Form U5?
The reason for termination
Who must a B-D give a copy of a RR’s U5 form?
The Registered representatives who the U5 belong to
Where can shares of a REIT be traded at?
REITs may be traded either on an exchange or over-the-counter (OTC)
What is required of a corproration who wishes to open a cash brokerage account?
A corporate resolution
When an ETF is purchased, what is the transaction cost paid by the client?
A commission
What is a prime rate?
The prime rate is the rate that commercial banks charge their best corporate clients.
How long are complaints held for and what is required of them after they are filed?
4 years and A memo must be prepared describing any action taken in response to the complaint.
When executing customer orders, best execution rules require the broker-dealer must
Use reasonable diligence to obtain the best price possible
A Regulation D (Private Placement) offering may be sold to a maximum of how many nonaccredited investors?
35 nonaccredited investors
How soon must a broker-dealer verify each customer’s identity according to the Customer Identification Program (CIP)?
Within a reasonable period
What can the Federal Reserve do during a recession?
Federal Reserve can try to increase economic activity by buying bonds (remove bonds from the market and insert cash reserves)
What is arbitrage?
Simultaneously buying and selling a security on different exchanges in order to take advantage of a price difference
What is the immediate impact if an issuer’s convertible bonds are converted into stock?
Increase to the number of outstanding shares.
A disciplinary action concerning a registered representative (RR) is reported by the firm through what?
Form U4
What is the job of a transfer agent?
Transfer agents are responsible for transfering (issuing) securities and also transfering (paying) bond interest and/or dividends
manages and keeps track of registered shareholders
What is the job of a custodian?
Custodians provide for safekeeping of securities,
Who is Regular T set by?
Regulation T is set by the FRB and requires payment from a customer in two business days following regular-way settlement.
What is NOT a benefit of investing in a real estate investment trust
Passive losses. Unlike DPPs, real estate investment trusts (REITs) do not generate passive losses.
What type of maturity bonds have the most amount of interest-rate risk?
The one with the longest maturity and lowest coupon.
Which measure of economic activity is calculated by summing the value of goods and services that have been produced minus the value of the goods and services needed to produce them?
GDP
During periods of deflation, the FRB will likely and why?
The FRB will attempt to move into a period of easy money. Easing money (making it available) may be accomplished by purchasing securities in the open market.
What is Stabilization?
Stabilization is used to prevent the price of a new issue (e.g., IPO) from falling. It is buying shares back in the secondary market, to keep the price from falling. Broker-dealers are only allowed to stabilize at or below the public offering price
What is a best-efforts underwriting?
A type of offering in which whatever is not sold is returned to the issuing corporation.
What is a private securities transaction?
Private security transaction; person executing a transaction outside of the scope of his firm’s business.
What is the rule if you are engaged in a private security transaction and not paid?
Youre required to provide written notice to his firm.
What is the rule if you are compensated for a private security transaction?
You must receive his firm’s written approval and the transactions must be recorded on the firm’s books and records.
When must a Broker-Dealer provide a privacy notice?
When the account is opened and before any non public info is given out
What is the minimum denomination for negotiable CD?
The minimum denomination for negotiable CDs is $100,000.
What is the purchase price of a NO-LOAD fund determined by?
The net asset value as computed at the end of the business day
What is found on Brockercheck?
active registration employment history specific disclosures concerning customer disputes, disciplinary events, criminal matters financial matters.
When do equity options and mutual funds settle?
Next trade day (T+1)
Which investment company does NOT charge a management fee?
A unit investment trust. A portfolio is fixed and there is no investment adviser since unit investment trusts are supervised, not managed.
When does an arbitration involve a mix of individuals who represent the public and financial industry?
disputes that involve public customers
How do you find the NEW PRICE of a stock after a split?
ORIGINAL security price before the split ÷ the split ratio.
A person who invests in a variable annuity would be MOST concerned with the performance of the insurance company’s
Separate account
When does a cash trade settle?
On the trade date
What is market risk?
Market risk represents the potential losses due to market fluctuations in the prices of securities.
When are Broker-dealers required to send balance sheets to customers
Every 6 months. Semianually.
What are the three types of investment companies?
(1) face-amount certificate companies
(2) unit investment trusts
(3) management companies (i.e., open-end and closed-end funds).
What is a Pink Marketplace?
The Pink Marketplace lists market makers and their bid and asked quotations for over-the-counter stocks (i.e., OTC equities). These OTC equities are not listed on either the NYSE or Nasdaq.
What is a warrant?
A stock warrant represents the right to purchase a company’s stock at a specific price and at a specific date. Issued directly by corporation to investor.
What is the MSRB’s Investor Education Rule?
Firms must notify a customer about the availability of educational material on an annual basis.
disclose that the regulated entity is registered with the MSRB and the SEC
the MSRB’s website address
availability of a brochure
During periods of easy money when interest rates are declining, yield curves tend to:
Yields on shorter maturities will be less than yields on longer maturities. Yield curves tend to slope upward from the shorter to the longer maturities.
If a person who’s associated with a FINRA member firm has been indicted for any felony or any misdemeanor that involves the purchase or sale of a security, fraud, extortion, forgery, or counterfeiting what happens?
The event must be reported to FINRA and they MAY REMAIN at the firm with no statutory disqualifation because they have not been convicted.
What is capital risk?
Risk of losing all or part of your capital on an investment
What is opportunity risk?
Risk that the investment that’s chosen will yield less than the yield of another investment that’s not chosen.
If the economy is experiencing rising inflation, this will generally lead the increase in interest rates to cause bonds to?
This increase in rates will cause outstanding bond prices to decrease.
What qualified withdrawal expenses are not subject to federal taxes?
Higher education expenses
What does the SIPC provide coverage for?
$500,000 per separate customer, with a maximum coverage of $250,000 of cash. SIPC doesn’t provide protection for futures positions.
What is the difference between 529A and 529?
529A accounts are not required to be used for qualified education expenses.
What happens to an investors security after a stock dividend?
An investor will own more shares of the company and their value per share will fall.
What is the math to find new shares after a stock DIVIDEND?
ORIGINAL SHARES x % of stock dividend = NEW SHARE TOTAL
What is the math to find new price per share after a stock dividend?
TOTAL INVESTMENT ÷ NEW SHARES = Share price
What is an aggressive growth fund?
Investment fund that seeks to return the highest capital gains. These funds hold stocks of small companies with potential for rapid growth. No dividends.
The ability to reduce sales charges on mutual fund shares that are purchased through a front-end load is available to?
An individual who signs a letter of intent
What is a NO-load fund?
A fund that does not charge any type of sales load.
Who can issue Revenue bonds?
states political subdivisions (e.g., counties and townships) interstate authorities intrastate authorities.
What is a call provision?
A call provision on a bond offering allows the issuer to redeem its outstanding bonds before they reach maturity.
What is the benefit of a call provision?
Benefit to the issuer is that it will no longer be required to make periodic interest payments once the bond issue has been called.
What is a spinoff?
The separation of a division or subsidiary from its parent to create a new corporate entity is considered a spinoff.
What is Regulation D?
Regulation D sets the regulations for raising capital through private placements.
What is Rule 147/147A?
Rule 147/147A establish the requirements for intrastate offerings.
What is Rule 145?
Rule 145 establishes the registration requirements for the reclassification of securities.
The call premium of a bond refers to?
The call premium of a bond refers to the amount the issuer must pay in excess of par value to exercise the call privilege.
What is TRUE concerning member firms’ suitability requirements for institutional investors?
The suitability requirements are less stringent than those of retail accounts.
What must a RR do if they are managing a TRUST FOR A FEE? (Outside Business Activity)
Must provide written notice to a principal at her firm.
What will protect assets if there’s an impending large market decline?
Move investments into cash and equivalents.
How long can a broker-dealer hold a customer’s mail without instructions concerning a valid reason?
For a period not exceeding three consecutive months
What is a stop order?
An order that becomes a market order when it sells at or below (or at or above) a particular price
What must a RR do if they have a BENEFICIAL INTEREST in ANOTHER ACCOUNT at ANOTHER FIRM?
The RR must provide written notification to her employing broker-dealer.
What is freeriding?
If a customer of a cash account does not deposit the full purchase price later than the second business day following settlement and tries to profit to make up for the unpaid balance.
What is the punishment for freeriding?
90-day restricted or frozen period, during which they must pay for all of their transactions in advance.
What is a sector fund?
A fund that invests in the securities of a specific industry or geographic location and typically does not have income as a primary objective.
What is a 403(b) plan?
A retirement plan OFFERED BY NON-PROFIT or PUBLIC SCHOOL that are mutual funds, as well as variable and fixed annuities.
What’s required if a registered representative intends to sell LIMITED PARTNERSHIP INTEREST OUTSIDE of her employment with a broker-dealer? A
Receive written consent from her employer
How does a seller get additional time to settle?
A seller’s option may be requested and implemented if the buyer agrees. Must be paid before trade execution.
What is the seniority of a bankrupt liquidation process?
Secured creditors (i.e., mortgage bondholders)
unsecured creditors (debenture holders)
preferred stockholders,
common stockholders
What is a syndicator?
A syndicator (underwriter) is the person that distributes interests in a direct participation program (DPP).
What are the rules regarding in-house, non-cash incentive program?
Must be based on the total amount of sales executed by the RR.
What is statutory disqualification?
Statutory disqualification is the suspension of a person’s registration.
What are preemptive rights?
Preemptive rights are issued by corporations and offer existing shareholders the ability to purchase additional shares at a fixed price.
What are investment advisers?
Investment advisers charge fees for providing advice to their clients.
What happens When an investor reinvests her dividends and/or interest distributions from a mutual fund?
she’s required to pay taxes in the year of the distribution and add it to the total cost basis
What happens if you violate the contribution limit MRSB Rule G37?
You’re firm is banned from obtaining negotiated business from that issuer for the next two years.
What security can not be invested on margin?
Initial public offerings (IPOs) cannot be purchased on margin.
Volume and holding-period restrictions do NOT apply to the resale of private placements to who?
qualified institutional buyer
If a temporary hold has been placed on a customer’s account who must the firm notify and how soon?
the account owner and the trusted contact person by no later than two business days after the hold has been placed.
What is the narrowest index fund?
The Dow Jones Industrial Average contains only 30 stocks.
What is the typical maturity for an ETN?
10 to 30 years
If an investor writes (sells) a covered call, what are the potential profit and loss outcomes?
Limited profit and limited loss
What will a corporation do to raise its share prices if they believe they are undervalued?
Buying back some of the shares
What is the Bond Buyer Index?
The Bond Buyer is a financial publication that specializes in the municipal bonds.
What are rights of accumulation?
ROA’s grant holders of mutual fund shares the potential for reduced loads (commissions) when purchasing more fund shares.
What may a customer contribute EACH YEAR to a 529 college savings plan without incurring any taxes?
An amount equal to the annual gift tax exclusion (16K)
How much can a SINGLULAR contributor make in a SINGLE, LUMP-SUM gift to a 529 plan?
the five-year cumulative limit ($80,000)
What type of security is exempt from registration?
Government agency securities
What price is used in gifts when choosing the value price?
the higher value between the purchase price and the current value would be used.
What is an inverse exchange-traded funds?
An inverse ETF is designed to deliver the opposite of the performance of an index or other benchmark.
When do treasury BONDS pay interest? What is received by an investor at maturity?
Semiannually, and the investor receives the principal (par value) repayment at maturity with the interest
What form are treasury securities issued in?
Treasury securities are only issued in book entry form.
What does the FDIC not cover?
insurance, or fixed and variable annuities.
If a customer wants to open an account to trade options, when must the account must be approved:
Prior to the time the initial order is accepted
What is the order of a stock dividend pay out?
Preferred shares receive dividends before the common stock dividends can be paid.
How are Treasury BILLS quoted?
Treasury bills are quoted on a discount yield basis.
The higher yield represents the lower price and is the bid.
The lower yield represents the higher price and is the ask.
What are Coverdell Education Savings Account permitted for?
Elementary and/or higher education expenses.
Where do the majority of REIT securities trade and how?
The vast majority of REITs trade on the NYSE with prices that are determined by the forces of supply and demand.
What is the EX DATE?
The ex-date is the first date on which a stock trades without its dividend included in the price.
What happens when an investment’s distribution increases by the same amount as inflation?
It stays the same.
Who do Discretionary accounts require WRITTEN authorization from?
The customer.
What is the Depository Trust Corporation (DTC)?
A subsidiary of the (DTCC) and its primary function is to hold securities in book-entry form.
What do writers (sellers) of call options have the obligation to do?
sell 100 shares of stock at the strike price if exercised against.
When must a security be sold under Rule 144?
Over a 90-day period
What must happen In order for the sale of stock from a joint account to be considered good delivery?
The stock power OR stock certificate must be signed by all of the owners
If an investor expects a sharp increase in a stock’s price, what order transaction will be the most profitable?
Exercise rights
What are leading economic indicators?
Indicators that are intended to forecast future economic activity.
Building permits
Consumer expectations
Stock prices
What is a newly called to duty RR Continuing Education (CE) status?
CE requirements are deferred until his active duty ends.
What are Municipal securities exempt from?
registration under the Securities Act of 1933.
What will Increasing unemployment lead to?
The Federal Reserve buying bonds in the marketplace to increase money supply.
When is a firm required to notify FINRA After a registered person resigns or is terminated from a member firm? What form?
30 days on Form U5
Whats the best hedge against inflation?
Common stocks
Who must each member firm’s AML program be approved in writing by?
a member of senior management.
How long do you have to join another firm until an unemployed RR registration is void?
Two years
What is acting in principal?
When a Broker Dealer charge the client a markup or markdown.
What is acting in agency?
The broker-dealer will normally charge the client a commission.
What strike price are warrants issued with?
Warrants are issued with a strike price that’s higher than the current market price of the stock (premium)
When are treasury BILLS interest paid?
At maturity
What are Summary prospectuses used for?
Mutual funds use summary prospectuses and are used to summarize the full or statutory prospectus.
What 3 things must an RR make REASONABLE EFFORT to obtain?
Taxpayer ID
Occupation Name and Address
Whether customer is associated with another firm
What are closed end funds?
Exchange securities that are purchased with commissions or sold less a commission.
How do you calculate the price of an OPEN-end fund share?
Their NAV plus any applicable sales charges.
What is Total return?
The total return calculation takes into account all of the cash flow received from dividends and/or interest, plus any appreciation or depreciation in the value of the investment.
What is Form Q?
Form 10-Q is an earnings report for each of the first three quarters sent quarterly.
What is the proxy form?
the form that contains voting information.
What’s the maximum contribution that can be made to a 529 plan without being subject to gift taxes?
$160,000 from a married couple if no additional contributions are made for the next five years.
Who does a customer contact to transfer VARIABLE annuity account of a SEPERATE ACCOUNT?
The insurance company that sponsors her account
What do the expense ratio for an investment company depend on?
fees that are charged against the net assets of the fund. (Management fees)
What is the maximum duration for a letter of intent?
13 months
How many days may a letter of intent be backdated?
90 days
What is a special assessment?
A special assessment is a charge against property that receives a benefit from the improvement.
How old must you be for an additional $1,000 can be contributed in an IRA?
50
What are the maximum IRA contribution limits?
$6,000 or 100% of earned income, whichever is less.
Who must provide written approval before a registered representative (RR) can place a mutual fund advertisement which will be widely disseminated?
The RR’s registered principal
How is the growth in the value of a variable annuity taxed?
grows tax-deferred and automatically reinvested.
How do you reduce market risk?
investing in different asset classes
Who has control over STOCK DIVIDENDS?
The board of directors
When must you complete the Regulatory Element?
two-year registration anniversary and then every three years thereafter.
What is a compromise of credit?
When the proceeds of a short sale of property is used to settle the payment of a mortgage at less than its full amount,
What happens if an RR compromises credit?
FINRA must be notified by the filing of an updated Form U4.
What is a stock power?
assignment that’s used to transfer delivery of a security from a seller to a buyer.
What is the tax consequence of a REIT?
(90% distribution on taxable income)
What is systematic risk?
caused by events that will affect all securities. (Market risk, War, inflation, interest rates changing)
Who sets the EX-DIVIDEND date?
SROs, based on settlement rules for the stock.
What are market timers?
Active investors who trade frequently based up economic trends, technical factors, and corporate information.
What is a value stock?
A value stock relates to a company that investors feel is undervalued in relation to its fundamentals.
What is the cost basis for a tax-qualified annuity?
0
If A bond is selling at a premium what does that mean?
Interest rates have decreased since the bond was issued
What is an Industrial Development Bond (IDB)?
An IDB is issued by a municipality, but secured by a lease agreement with a corporation.
How do you find the BREAKEVEN point for PUT?
PREMIUM - EXCERCISE PRICE
What is high-quality commercial paper?
Unsecured, short-term debt commonly issued by companies to finance their payrolls, payables, inventories, and other short-term expenditures.
How are CLOSED-END funds priced?
Once at the end of the trading day, basing the price on the NAV of the portfolio with supply and demand forces.
What is the declaration date?
The declaration date is the date on which the board of directors of a company announces the next dividend payment.
What is an Auction Rate Security?
A type of variable-rate investment that is generally either a bond with a long-term maturity or preferred shares of stock.
Short term issue because the interest rates reset approximately every month.
What is a variable-rate demand obligations (VRDOs)?
Another long-term security that’s marketed as a short-term investment
What are two long-term securities that’s marketed as a short-term investment?
Auction Rate Security
Variable Rate Demand Obligation
What kind of investments make no provision for future purchases or redemptions from the issuing fund?
A closed-end fund
What is a Form U6?
Form U6 is used to report disciplinary actions against RR’s and firms as well as final arbitration awards against individuals or firms.
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.
What do investors redeem their open end investment (mutual funds) at?
The net asset value of the shares as computed AFTER the order is received
What is a bonds yield if it is held to maturity?
The same as the coupon rate
If a bonds price is below par, is the yield high or low?
The yield is high.
Who derives the MOST benefit from a put provision attached to a bond offering?
Bondholders
If an equity option is exercised, when does the stock transaction settle?
T + 2
What does the 5% markup policy apply to?
secondary market trades which includes proceeds transactions
What is a Face-amount certificate company?
An investment company that is purchased in installments and that matures at a fixed-dollar amount.
What is the value called you get if you surrender your Face-amount certificate company early?
A surrender value.
How are distributions taxed from a qualified plan?
the entire amount is taxable as ordinary income.
The Federal Reserve has been buying bonds in the marketplace. This is in response to what type of event in the economy?
Increasing unemployment to add more money into the economy for people to get hired.
What is Employee Retirement Income Security Act of 1974 (ERISA)?
ERISA gave the government jurisdiction over PRIVATE PENSION PLANS and protects employees from improper investments by their employers.
What must happen if A registered person has been indicted for investment fraud, which was unrelated to his employment at the member firm?
The registered person is permitted to remain employed at the member firm, but the event must be reported to FINRA.
When can broker-dealers make unsolicited telephone calls?
Between 8:00 a.m. and 9:00 p.m
What is a Systematic withdrawal plan?
A plan that provides an investor with regular payments.
What funds do payments come from first in a mutual fund systematic withdrawal plan?
Payments will first come from dividends and capital gains that are generated from the fund.
What happens if the dividends and capital gains are not sufficient for payments from a MUTUAL FUND SYSTEMATIC WITHDRAWAL PLAN?
Reduction of capital and shares will be redeemed.
What is the conversion ratio of a convertible BOND?
Bond’s par value ($1000) ÷ conversion price
A bond is selling at a premium. This indicates that?
Interest rates have decreased since the bond was issued
What is a BUYER of a PUT options?
They have the right to sell 100 shares of stock.
What are the three pass-through entities?
S Corporations
LLCs
REITs
The SEC rules regarding the record retention generally require that records be kept in an easily accessible location for the?
First two years
When are member firms required to report statistical and summary information regarding customer complaints?
On a quarterly basis
Who are member firms required to report statistical and summary information regarding customer complaints to?
SRO
Which bonds are considered the most liquid?
Treasury bonds
A method of voting that gives smaller, less substantial stockholders a greater degree of voting power over the larger, more substantial stockholders is called?
Cumulative voting
What is a Bankers’ acceptances?
A BA is used to facilitate foreign trade. It is a time draft that has been guaranteed (collateralized) by a bank.
When implementing its anti-money laundering (AML) rules, what is a broker-dealer required to do?
Create an AML program
Designate an AML compliance office
If an issuer intends to sell restricted stock under the provisions of Rule 144A, who can make purchases?
Qualified institutional buyers (QIBs)
What is the requirement of maintaining a record of wire transfers in excess of $3,000 used for?
financial institution’s AML program (BSA Law)
Reinvested dividends and capital gains distributions from the investments within an IRA are allowed to do what?
accumulate on a tax-deferred basis
What is a shelf registration?
Shelf registration allows the issuer to file a registration statement with the SEC and then, over a three-year period, sell the securities when the issuer considers the time appropriate.
Why can CLOSE-End fund shares be invested with margin?
Closed-end fund shares are listed on an exchange
What strategy is the portfolio manager of a mutual fund employing when call options are being sold on stock that’s held in the portfolio?
A neutral conservative strategy that’s is a means of generating income when prices are stable.
What will happen to a purchasers bond if a revenue bond (from a municipality) goes bankrupt?
The bonds go into default.
What is a Currency Transaction Report (CTR)?
CTRs are filed on FinCEN Form 104 when a customer deposits a total amount of more than $10,000 in cash on any one day.
(63620)
What type of investment could subject to a capital call?
DPPs
What do Writers of PUT options have?
They have the OBLIGATION to buy 100 shares of stock.
What is INDEXING?
Making adjustments to the investments in a portfolio based on changes that are made to an market index or average
What is ASSET ALLOCATING?
Asset allocation is balancing the contents of a portfolio based on the risk tolerance and investment objectives of a client.
What happens if a customer makes an account designated by number?
Open the account if the customer signs a written statement acknowledging the account is the customer’s
What is the spread?
Difference between the bid and asked price of a stock at the current market
The primary purpose of the North American Securities Administrators Association is to what?
Create rules, laws, and exam requirements for states
For how long must prospectuses continue to be delivered on an IPO of a company that will NOT be listed?
For 90 days in the aftermarket
What happens to the YIELD if a BOND’S price is HIGHER THAN PAR?
Yield is low
What kind of account can options and sale of covered calls be purchased in?
Cash AND Margin account?
What is the corporate and municipal bond calendar?
30 days in every month and 360 days in the year.
What is the treasury (Fed Gov) calendar based on?
Use the actual calendar days in every month and a 365 days in the year.
What is structuring?
depositing funds in amounts just below the reporting levels.
What is a balanced fund?
A balanced fund invests its portfolio among a variety of investment classes, such as equities, bonds, and “cash” (money-market investments).
What is a short call?
Obligation for the investor to sell shares at strike price if exercised against.
State or Blue-Sky Laws may require a registered person to do what?
File an application, pass an exam, and pay a fee
