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SIE updated > SIE 16-20 > Flashcards

SIE 16-20 Flashcards

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SIE Exam flashcards
1
Q

In the SEC Act of 1934 which prohibits manipulative and deceptive practices, which rule includes specific anti-Manipulation provisions

A

Rule 10b-5

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2
Q

What prohibited trading practices spreads false of misleading information to influence the price of the stock

A

Market rumors

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3
Q

What prohibited trading practices is when RRs execute trades for a proprietary (self) accounts ahead of a customer’s block order i.e. stock or trading derivatives prior to executing a large movement

A

Front-running

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4
Q

What prohibited trading practices affecting trades near open or close in an attempt to influence the stock’s open or close up or down

A

Marking the close / open

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5
Q

What prohibited trading practices is when a RR does exercise trading for the purpose of generating additional fees and commissions

A

churning

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6
Q

What prohibited trading practices refers to inserting another BD between a customer and the best market. Prohibited if detrimental to customer but acceptable if adventurous

A

Interpositioning

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7
Q

What prohibited trading practices involves trading ahead of customer orders for own account that would have satisfied the customers order. exception if there are information barriers and executed by a different department at same firm

A

Trading ahead of customer orders

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8
Q

Rule that prevents manipulation by persons with an interest in the outcome of an offering and prohibits activities that could influence an offered security’s market

A

Regulation M

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9
Q

What rules are covered in regulation M

A
  1. Limits bids and purchases by distribution participants (underwriters and selling group members) 2. Prevents related parties from buying stock in secondary market during time around the new issue (restricted period) 3. Allows for passive market making and permits distribution participants to execute unsolicited trades to maintain marketability. 4. permits stabilization of new issue to protect its price from falling substantially
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10
Q

A market maker that publishes a quote is obligated to buy to sell at its stated bid or offer and up to the size quoted

A

Backing away

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11
Q

What regulations regulated payment from customers to broker dealer

A

Regulation T

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12
Q

Who regulates regulation T

A

The fed reserve board

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13
Q

When payment must be obtained for purchases that are made either in cash or margin accounts

A

Two business dates of settlement (S+2) total of 4 days

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14
Q

Violation when an investor buys a stock then sells that stock to pay for purchase

A

Free riding

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15
Q

Actions prohibited under anti-intimidation / coordination interpretation

A

coordinating price quotes, threating, harassing, or intimidating other market makers, retaliating or discouraging the competitive activities of another market maker

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16
Q

Best execution trading rules

A

a BD must use reasonable diligence to obtain best execution for their customers.

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17
Q

MSRB time of trade disclosures

A

Dealers are required to provide customers with all material information that is know or reasonably available at or prior to time of trade

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18
Q

Insider trading penalties

A

Civil - the sec may demand triple amount the damages and release of any profit and criminals - justice department an individual may be subject to a max fine of 5 million and or up to 20 years in permission

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19
Q

Bounties for insider trading

A

Eligible whistleblowers are entitled to an award of 10-30% of monetary sanctions collected

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20
Q

The new issue rule

A

FINRA prohibits member firms (any BD), immediate family of member firms that share a household, purchase is made through family members RR, or use 25% of the income of the restricted person, from selling equity IPOs to any account in which restricted persons have a beneficial interest

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21
Q

preconditions for IPO sales

A

Verification that the account is eligible to purchase the IPO in written or electronic communication. Re-verification of eligibility every 12 months

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22
Q

General exemptions for new issue rule

A

An account that includes a restricted person provided their combined ownership does not exceed 10%, issuer-directed sales that allow restricted person to purchase if the associated person’s immediate family is an employee or director of the issuer, PMs purchasing for a MF, a BD purchasing for its own account after making a bona fide public offering (i.e. in a firm commitment)

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23
Q

What exemptions are there for borrowing from and lending to clients

A
  1. without notification to firm - if client is immediate family member or if it is a financial institution regularly engaged in the business of providing loans (i.e. the RR wants to borrowing form a bank)
  2. with notification to firm - the customer and RR are both registered with the same firm, a personal relationship exists, a business relationship exists outside the brokerage firm
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24
Q

Who are the adults who the financial exploitation rules are for

A
  1. persons 65 or older and any person 18 or older who are believed to have mental or physical impairment. if firm notices any of these signs such as dementia, the firm needs to place a temporary hold on disbursement of funds and should make a reasonable effort to get a trusted contact person
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25
Q

Compensation rules and forgery

A

Payments are prohibited to unregistered individuals or firms, which includes referrals. A retired rep may continue to receive commissions on existing accounts if a bona fide contract is created

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26
Q

Roles for electronic storage for BDs books and records

A
  1. prior to using electronic storage the BD must notify the SRO 2. If the electronic is other than CDs the BD must give the SRO 90 days noticed. It must include temper evident features to track and changes
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27
Q

If a temporary hold has been placed on an account, it will expire:

A

15 business days

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28
Q

Individuals who are responsible for managing specific areas of a member firm

A

Principals

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29
Q

Written supervisory procedures

A

1 brokers must establishe, maintain, and enforce written supervisory procedures, include responsibilities, date they became a supervisory, periodic review and approval of customer accounts, verifying the character, qualification, and experience of all registered persons on a continuing basis

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30
Q

Keeps information on registered reps, such as U4 and fingerprint card

A

Central Registration Depository (CRD)

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31
Q

what would subject a RR to a statutory disqualification

A
  1. conviction within the last 10 years of any felony or securities related misdemeanor ( need to disclose longer than 10)2. Denial or revocation of registration by SEC or CFTC 3. Expulsion or suspension from membership with any SRO 4. Omitting a material fact on the application or report to an SRO 5. Maintaining a business relationship with a banned person
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32
Q

State registration (blue sky laws) if required the RR is tested on what

A

The uniform Securities Act - a model law that is created by North American Securities Admin Associate NASAA. Includes Series 63, Series 65, and Series 66

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33
Q

CPE requirements

A
  1. Regulatory Element - applies to al RRs due on second anniversary and every 3 years after. Must be completed within 120 days of notice. Military are exempt from the 2 years inactive status limitation and CPEs are on hold 2. Firm Element - on going training as directed by your firm (needs to be evaluated annually)
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34
Q

Arbitration is a means to handle disputes. What disclosures are required with Arbitration

A
  1. Right to sue or jury trial is waved 2. Discriminations or harassment are excluded and whistleblower statue 3. Arbitration awards are generally final and binding 5. arbitration panels may consist of either industry or public arbitrators
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35
Q

Form that is filled when registration is terminated and filed within 30 days and a copy is sent to RR

A

Form U5

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36
Q

requalification (retaking exams) is required if registration is terminated for more than how many years

A

2

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37
Q

what form is used to report disciplinary actions against representatives and firms and includes arbitration awards

A

U6

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38
Q

what system allows investors to check the background and disciplinary history of their existing or prospective firm

A

BrokerCheck

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39
Q

Rule requires firms to provide customers with the following annually - FINRA’s broker check hotline, FINRAs website, and a statement that an investors can sue brokercheck

A

FINRA Investor Education rule

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40
Q

Process by which customer information or customer complaints is removed from a RR’s central record

A

Expungement

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41
Q

Annually MSRB member firms must disclose the following to customers

A
  1. MSRB’s website address 2. That they are registered with the MSRB and SEC 3. a statement regarding the availability of the investor Boucher
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42
Q

Customer complaints must be in written form

A

true

43
Q

Office of supervisors jurisdiction (OSJ) maintain waht

A

customer complaint files including copies and a report to indicate actions taken

44
Q

how long must complaints be maintained

A

4 years with quarterly reports made to FINRA

45
Q

FINRA requires customer complaints and other incidents involving RRs by when

A

No later 30 days from discovery

46
Q

Reporting rquirements

A

subject to customer complain for allegations of theft, violating securities laws, being named as a defendant by a regulator violation relating to securities, withholding commissions or fines in excess of 2.5k or being a defendant or respondent in an award or settlement of more than 15k

47
Q

Requirements for outside business activites

A
  1. excludes volunteer or charity work 2. must provide written notices to employee if being compensation and must update the Form U4 and information is disclosed through Broker check
48
Q

Securities transactions that are executed by an associated person outside her association with a member firm, including public and private offerings. If compensated and RR must obtain employer’s written permission and firm must record the transaction on its books. If not compensated - RR must provide employing firm with written notice and firms acknowledgement (written) of receipt

A

Private Securities Transactions

49
Q

Violation of the private Securities Transaction rules

A

Selling away

50
Q

Gift limit for RRs, whole sales, mutual fund distributions

A

$100 per person per year. gifts can be exceeded for events involving family relationships (weddings). normal business expenses do not violate rule, such as meals, sporting events, entertainment business expense (must be attended by giver) also excludes training and in-house incentives (cannot be 1 particular fund)

51
Q

MSRB G-37

A

Political Contribution Rule “no pay to play rule” by municipal financial professional to politicians. Limits on contributions, if you can vote for the candidate can contribute $250 per candidate per election. If MFP cannot vote - no contribution can be made. 2 year ban on your firm doing negotiated underwriting business with issuer.

52
Q

Records of gifts of any value must be maintained by member firms

A

true

53
Q

Measurement of the output of goods and services produced within the US boarders regardless of origin of producer

A

GDP

54
Q

measurement in change of prices of goods purchased by a typical consumer, key measurement of inflation

A

consumer price index CPI

55
Q

Leads to a rise in prices of goods and services, usually accompanies higher interest rates

A

inflations

56
Q

General decline in prices, interest rates tend to go down

A

deflation

57
Q

reduction in the rate of inflation

A

disinflation

58
Q

phases of the business cycle

A
  1. expansion 2. peak 3. contraction / recession 4. trough
59
Q

recession is how many quarters in a row

A

2 quarters

60
Q

When the economy is in peak and inflation might occur what will the Fed do?

A

Tighten money policy. if economy is contracting, fed might follow easy monetary policy by bringing down interest rate and injecting money into the economy

61
Q

Economic indicators that move before the business cycle, initial claims for unemployment, interest rate spreads, the S&{ index, manufactures new orders, permits

A

Leading

62
Q

Economic indicators that move with business cycle, employees on non-agricultural payroll, personal income, index of industrial prodcutions

A

Coincident

63
Q

Economic indicators that move after business cycles - duration of unemployment, average prime rate charged by bank, change n CPI for services

A

Lagging

64
Q

interest rate charged by commercial banks to their best corp clients

A

Prime rate

65
Q

interest rate that is set by the fed when member banks borrow

A

Discount rate

66
Q

rate charged for an overnight loan of reserves between banks (rate that banks charge eachother)

A

Federal Funds Rate

67
Q

the rate charged by commercial banks to brokerage firms with securities as collateral

A

call money rate

68
Q

stocks that move with the business cycle, includes constructions, transportation, machine tool companies, auto

A

Cyclical

69
Q

stocks that are resistant to recession, examples, tobacco, utility, food, alcohol

A

Defensive

70
Q

stocks that grow faster than industry average - pay low to no dividends, riskier

A

growth

71
Q

stocks that trade at low prices relative to the companies fundamentals,

A

value

72
Q

market capitalization of stocks

A
  1. nano-cap below 50m
  2. micro cap 50m-300m
  3. small cap 300m-2b
  4. mid cap 2-10
  5. large cap - more than 10 bil
73
Q

who implements fiscal policy?

A

Presidency and congress

74
Q

Keynesian policy

A

Cut taxes and expenditures, believes in fiscal policy with government intervention

75
Q

Monetarist policy

A

Use Monetary policy (controlled by fed)

76
Q

Tools of the red

A
  1. Discount rate 2. Reg T for margin 3. reserve requirements for banks 4. federal open market committee (buy or sell treasury securities through primary government dealders)
77
Q

to stimulate / easy the economy what will the fed do

A

Buy securities and lower interest rates

78
Q

rising interest rates in the US will normally accompany the strengthening of what

A

the US dollar

79
Q

system of recording all of a country’s economic transactions with the rest of the worth over a specific period

A

Balance of Trade

80
Q

as interest rates rise, the economy will normally be in which phase (

A

expansion (CPI rises - inflation rises - interest rates rise)

81
Q

As inflation increases, bond prices will?

A

Decrease ( interest increase resulting in Bonds decrease)

82
Q

Risk inherent in all securities due to market fluctuation

A

Market Risk

83
Q

Risk that the value of a fixed income investment will decline to a rise in interest rate

A

Interest Rate Risk

84
Q

Risk that the purchasing value of the dollar will fall

A

Inflation risk

85
Q

Risk that a significant event will cause a substantial decline in the market

A

Event Risk

86
Q

Measures the volatility of an asset relative to the entire market.

A

Beta

87
Q

A stock’s beta is compared to the beta of what?

A

S&P 500 which is always 1, if s stock’s beta is more than 1 - its expected to outperform the market when market is up and is more volatile

88
Q

risks that are unique to s specific security and can be managed through diversification

A

unsystematic risk

89
Q

risk that a company may perform poorly causing a decline in the value of the stock

A

Business risk

90
Q

Risk that new regulations may have a negative impact on an investments value

A

Regulatory risk

91
Q

Risk that political event outside US could impact domestic markets

A

political risk

92
Q

risk from lack of marketability (like DPPs and hedge funds) risk that an investment cannot be bought or sold quickly

A

liquidity risk

93
Q

risk that an investor will lose the invested capital (lower for bonds)

A

Capital risk

94
Q

Risk that a bond may not repay its obligation (treasurys do not have this)

A

Credit risk

95
Q

Risk that when converting an investment that is made in a foreign currency might decline when converted into US dollars

A

Currency risk

96
Q

Risk that new laws may have a negative impact on an investments value

A

Legislative risk

97
Q

Risk of passing on the opportunity of making a higher return on another investment

A

Opportunity risk

98
Q

Risk that interest rates will fall and semi-annual coupons will be reinvested at a lower rate. zero coupon bonds eliminate this

A

Reinvestment rate

99
Q

risk that mortgages will be paid off early due to lower interest rates resulting in reinvestment in lower yielding investments

A

prepayment risk

100
Q

Passive (strategic) asset allocation

A
  1. Buy and hold - maximizes transaction costs and tax consequences 2. Indexing - maintaining investments in companies that are part of a major stock 3. Systematic Rebalancing - buying and selling assets periodically to keep portfolio closer to its strategic allocation
101
Q

Tactical (active) asset allocation

A

assumes market is inefficient, involves altering the asset mix in anticipation of changing economic conditions / events

102
Q

Involved making the same periodic investment regardless of share price over a fixed period of time

A

Dollar cost averaging

103
Q

Products used to hedge risk

A
  1. Equity options to protect individual stocks 2. Index options can protect an entire portfolio 3. Currency option can protect against exchange rate risk

SIE updated (6 decks)

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