Trading Settlement, And Corporate Actions Quiz Flashcards
Internal procedures which limit and control the passing of sensitive potentially non public information between the departments of a corporation or firm to aid in protecting investors against violations of insider trading laws are known as
Chinese walls
The liquidity of an investment is best described as
Whether the investment can be sold as quickly and profitably as expected should the investor wish to sell
Which of the following statements is correct in regard to broker/dealer?
A principal is a dealer and sells securities from its own inventory
An agent is broker and trades securities for a customer. As an agent a firm does not own the security
Securities firms may act in the capacity of both a principal and an agent and are referred to as broker/dealers
When a market maker does not honor a published quote that could be considered a market manipulation practice of
Backing away
ABC Corporation shares are currently trading at $50 per share. ABC is about to perform a two for one stock split. After the split an investor who currently owns 100 shares of ABC stock would own
200 shares at $25
Which of the following statements regarding limit orders is true?
A limit may never be executed
Sell ABC short 20 stop 20.50. The ticker tape shows: 19, 20, 21, 20.50, 20.25. At what price was the trade executed?
21
When a customer sells a security in the secondary market he or she will receive the
Bid price
James owns 300 shares of LYPA stock which is currently trading at $60 per share. The company announces a 1:3 reverse split. What will James own after the split?
100 shares at $180 per share
Which of the following is the risk that an issuer may not be able to meet interest or principal payments on fixed income securities?
Business/ credit risk
Liability to contemporaneous traders for inside trading means
Insider traders may be liable to traders with no insider information who traded at the same time and lost money.
An investor owned stock in the corporation where he was an officer. Two day md before it was made public that the company would file or for a financial restructure he hold his truck $50000. After the news became public the stock would have been worth $10,000. What is the maximum civil penalty that can be imposed on this investor to the insider Traded act of 1988 AcT
$120,000
A customer instructs his broker /dealer to purchase 200 shares of Dunham Corporation m. Two days after date the customer decided that he no longer wants the shares. Which statement is correct
The customer has entered into a legally binding contract
All of the following investments are subject to currency exchange risk
US treasury Bonds
What is the lowest price at which the dealer will sell a stock to the investor?
Ask
Which of the following products might be offered by a cyclical company?
Bulldozers
Which of the following represents the order in which market orders are filed?
Priority precedence and parity
Companies are required to notify FINRA of corporate actions such as dividends stock soloist or rights offering and rights offerings within what time period?
10 days prior to the record date
What type of risk is involved where an investor may sustain a loss of a security must be sold quickly?
Liquidity risk
The Act that requires financial institutions to develop implement and monitor procedures that prevent its agents and associates from misusing non public information is the
Securities and Exchange Act of 1934
One of your clients bought 100 shares of TBS at 20. The stock has now risen to 55, and the client would like to protect her profit. Which of the following orders should be entered?
Sell stop at 54.88
An investor could achieve diversification in his portfolio by holding
Stocks and or bonds of companies in different industries
Stocks and or bonds of companies in different geographic regions
A variety of investment instruments
Sustained inflation over time will erode the value of a dollar. This is known as
Purchasing power risk
The options position limit on XYZ stock is 200,000 contracts. Bob (a high roller) is short 150,000 XYZ Dec 50 puts. Which of the following trades would put Bob in a violation of position limits?
Buy 60,000 XYZ Mar 60 calls
James owns 300 shares of LYPA stock which is currently trading at $60 per share. The company announces a 1:3 reverse split. What will James own after the split?
100 shares at $180 per share
When a customer buys a security in the secondary market he or she will pay the
Ask price
The type of risk that includes influences such as competing pressures market share and competence of management and is usually managed with a long term focus is called
Business risk
Government securities regular settlement is
Next day
Which of the following describes a tender offer?
Shareholders selling into the tender must deceived the shares not long
Maximum civil and criminal penalties for an individual for insider trading violations are
$5,000,000 and or 20 Years imprisonment
A corporation pays a stock dividend to
Conserve cash
The ABC European Bond Fund invests in the debt of European corporations and other companies doing business in Europe. Investors in this fund are subject to all of the following risks
Currency exchange risk
Interest rate risk
Inflation risk
A specialist receives an order to buy XYZ 200 shares 20 stop 19. This means that
The order is triggered at or above 20 and filled at 19 or lower
If an investor cannot specifically identify redeemed shares IRS assumes that reporting will be in the basis of
First in first out
Which of the following best describes cash settlement?
The customer pays for the securities on trade date
The options limit on ABC stock is 75,000 contracts in the same side of the market. Which of the following positions would violate the position limit?
Long 50,000 ABC June 60 calls Long 25,000 ABC Sept 55 calls and Short 10,000 ABC June 50 puts
ABC corporation announces that it will be acquiring XYZ corporation XYZ shareholders will receive one share of ABC stock for every two shares of XYZ they own. This corporate action is an
Acquisition
A customer placed a market order. This means
No price is set and the order is to be filled at the best available market price
Of the following examples which would be exempt from liability under insider trading laws?
There are no exceptions from liability under inside trading laws
Which of the following is true concerning physical safety of mutual fund holdings?
Physical safety of funds assets is the responsibility of the custodian
The shareholder needs to maintain share certificates since funds use book entry accounting
If certificates are held they must be surrendered in good order before shares can be redeemed
Which of the following factors will most likely create reinvestment risk?
Falling interest rates
The insider trading act of 1988 has set guidelines for imposing penalties including civil actions in a federal court. The maximum penalty a court can impose for insider trading violation is
An amount up to 3 times the profit gained of loss avoided
Sam was having difficulty selling his investments due to a lack of demand in the secondary market. What does that say about his investments?
The have a high liquidity risk
The cyclical and constantly fluctuating nature of interest rates has the most direct impact on
Market values of fixed income securities
If the prime interest rate increases bond prices will generally
Decrease
Why does a diversified portfolio tend to carry a lower degree of investor risk?
Not all market segments or investment types in a diversified portfolio will move in tandem with one another.
ABC Corp a newly formed corporation is developing a machine to harness wind power to create energy. Because ABC currently has no earnings and is still in the growth phase, it is unable to pay cash dividends to its investors. However ABC is very optimistic about its new product and wants to provide some sort of dividend to its current shareholders. ABC board of directors declares a 20% stock dividend to its current shareholders. An investor who currently owns 1,000 shares valued at $50 per share would own what after the stock dividend?
1,200 shares at $41.67
The type of investment risk that impacts buying power and results in a devaluation of assets is called
Inflation risk
Which of the following statements describe a market manipulation practice of painting the tape?
Buying and selling a Security among traders to create a high level of activity to influence the price of a stock
The highest price a dealer is willing to pay for a security is known as the
Bid price
Which TWO of the following positions are bullish?
Long Calls
Short Puts
Government securities regular settlement is
Next day
A technician or chartist would most likely enter a sell stop order
At or below the support level for the stock
Which of the following is synonymous with market risk?
Systematic risk
