SIE EXAM (MISSED QUESTIONS) Flashcards
Which of the following is not part of a mutual fund’s expense ratio?
Sales load. Sales charges (loads) are not part of the expense ratio
What is apart of mutual fund’s expense ratio?
*Managers fees
*Transfer agent’s cost
* 12b-1 Fees
Growth in a variable annuity is which of the following?
Growth in a variable annuity is tax deferred.
No tax is due until the growth is withdrawn.
Once withdrawn, the growth is taxed as investment income.
Broker-dealer acted as a principal in the trade.
Broker-dealers must always indicate their capacity on the confirmation.
If the client had looked, there would have been a statement something to the effect of “we acted as principals in this trade.”
When the firm does that, there is no commission; there is a markup (in the case of a buy) or a markdown (in the case of a sell).
In this instance, the actual price of the stock would have been lower than $50 per share and the broker-dealer marked it up to $50. (e.g., price of $49.50 with a 0.50 markup = $50).
Acting as an agent
When the firm is acting as an agent however, commissions are always disclosed.
A FINRA maintenance call will occur in a long account if the equity drops below
In a long account, equity must be maintained at 25% or $2,000, whichever is greater.
Redeem shares
Face amount certificates
unit investment trusts
open end funds
Closed end funds
Do NOT redeem their shares
Margin Maintenance requirements are set by
FINRA.
Maintenance requirements are set by the governing SRO. FINRA is the best answer of this set. FRB sets the initial margin requirement along with the SRO minimum. The FRB does not set maintenance requirements.
European style
Contracts may only be exercised on the last day the contract trades before expiration
American style
May be exercised by the owners at any time. American style is much more common.
Coverdell & 529 Plans
Contributions into a Coverdell Education Savings Account (ESA) are phased out at high income levels for a donor, whereas the income level of a donor has no impact on contributions made into a Section 529 plan.
The features of Section 529 plans, including their contribution limits and fees, vary widely from state to state. Section 529 plans have no age limits as to participation; they are open to both children and adults who plan to attend college or graduate school. For college savings plans, there is no state residency requirement for owners or beneficiaries of Section 529 plans.
A customer purchased 200 shares of ABC common stock for a total of $5,000. After one year, they sell the position for $5,400. ABC paid $0.50 per share in dividends over the year. What is the total return?
The formula for calculating total return is (income + gains or – losses) / cost basis. For this question ($100 + $400) / 5000 = 500 / 5000 = 0.10 (10%).
Which of the following is true of closed end funds but not of open end funds?
Open end funds can issue an unlimited number of shares. Closed end funds have a fixed number of shares.
Which of the debt issued listed here would produce tax-free interest at all levels?
Issues from a territory of the United States (like Puerto Rico) produce interest that is tax free at the federal, state, and local level.
Municipal bond
Interest is tax free at the federal level and tax free at the state level if the bondholder is a resident of the same state as the issuer
Treasury issues
Taxed at the federal level.
Deficiency letter
When a deficiency letter is issued by the SEC to an issuer, the 20-day cooling-off period is halted.
It resumes where it left off when the corrected registration statement is filed. In other words, the days that the cooling-off period are suspended do not count toward the 20 days.
U4 forms must be kept for how long after the associate leaves the firm?
3 years after the associate leaves the firm.
Occasionally our economy experiences an unusual combination of rising prices and high unemployment. Economists have given this unusual pairing what name?
Stagflation is the term economists use to describe the combination of inflation (a rise in prices) and stagnation (high unemployment). While unusual, this generally occurs when the economy is not growing and there is a lack of consumer demand and business activity, and yet prices for goods are still rising.
How long must customer complaints be kept on file by the broker-dealer?
The rule requires customer complaints to be kept on file for 4 years.
The primary purpose of American depositary receipts (ADRs) is to facilitate the trading of…
ADRs facilitate the trading of foreign stocks in U.S. markets.
Warrants!
A warrant grants its owner the right to purchase securities from the issuer at a specified price, normally higher than the current market price at the time the warrants are issued and at some time in the future.
A warrant is usually a long-term instrument, normally five years or more until expiration.
Warrants are usually offered in connection with other securities, such as debt instruments (bonds) or preferred stock, to make those securities more attractive.
Callable preferred stock is advantageous to the issuing company because it allows the company to
Replace a higher, fixed-rate issue with a lower issue after the call date. By issuing a callable preferred stock, a corporation can call in a high dividend payment issue and replace it with a lower one when interest rates have fallen. This feature allows the company to take advantage of reduced interest rates by calling in high-rate preferred issues and replacing them with lower ones.
Information on a tombstone
Those advertisements allowed to be placed prior to the effective date, is limited to;
-name of issuer
-type of security
-number of shares to be sold
-public offering price or expected range
-names of the underwriters or group.
Regulation T, the initial margin requirement, is set by
FRB. Regulation T, the initial margin requirement currently at 50%, is set by the Federal Reserve Board (FRB).
A municipal finance professional (MFP) is
As per the Municipal Securities Rulemaking Board (MSRB), a municipal finance professional (MFP) is an associated person of a member firm who is primarily engaged in municipal securities representative activities, including underwriting, sales and trading, or any other activity that involves communications with the public regarding municipals
CLOSED END
DO NOT REDEEM
NAV
Treasury Stock
Issued shared- outstanding shares
Corporations (dividends)
If they receive dividends then they can exclude 50% of that income from taxation.
Rule 144
If the stock is bought in the open market, there is no holding period required.
Rule 144 allows the selling of 1% of the outstanding shares every three months or the average weekly trading volume of the last four weeks, whichever is greater.
Investor who relies heavily on fixed interest payments from long-term (25-30 years) bond should be most concerned with….
Inflation risk (purchasing power risk) is the effect of rising prices over a long period while an investor is collecting fixed interest payments.
Statutory Prospectus
**Must be provided no later than confirmation of the sale.
Mutual Funds
Mutual fund shares may be purchased in either full or fractional shares.
Upon termination a form U5 must be filed withing how many days?
30 days
Keynesian Theory
Believes that the government can use its resources to stimulate or discourage economic activity through the use of tax and spending policies.
Monetarist theory
Is employed by a central bank (The Federal Reserve in the US) and uses interest rates to stimulate or discourage economic activity.
Supply side theory
Focuses on the use of tax and regulatory policies to stimulate the economy.
The holder of an-in the money option contract gives a do not exercise instruction (notice) to your broker-dealers.
This notice is used to avoid automatic exercise at expiration.
Broker-dealers who transact securities business with other broker-dealers or customers must be registered with..
SEC
Day Order
If a day order does not execute, is is cancelled as of the end of the day.
MONEY LAUNDERING
1) PLACEMENT
2) LAYERING
3) INTEGRATION
OFAC
ORGANIZATION MAINTAINS THE SPECIALLY DESIGNATED NATIONALS LIST!
RIGHTS OFFERING
-Allows stockholders to purchase common stock below the current market price.
-The rights are valued separately from the stock and trade in the secondary market during the subscription period (30 to 45 days).
-Existing shareholders receive one right per share owned.
- The number of rights required to purchase one share of the new issue depends on the number of outstanding shares and the number of new shares offered.
Calculation for gains or losses for tax purposes.
Proceeds - cost basis = capital gains
The dividends are not part of the calculation for capital gains.
MFP- Municipal Finance Professional
Cooling off period
It lasts 20 CALEDNAR DAYS
All CORPORATIONS issue…
-Common stock, of which there can be only one class.
-BUT not all CORPORATIONS issue preferred stock.
-Corporations that choose to issue preferred shares can issue more than one class.
MUTUAL EXPENSE RATIO
MUTUAL EXPENSE RATIO
Includes: Transfer agent’s cost, Board of Directors Cost, Legal fees, Manager’s Fee, 12b-1 fees
DOES NOT INCLUDE: sales charge or loads
FIXED PORTFOLIO (UIT)
UIT’s do not generally assess management fees bc there is no need to hire an investment adviser monitor and trade positions within the portfolio.
Deflation
Stagnation
Stagflation
UIT
