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SIE Exam Prep > Underwriting Trading, Customer's Accounts, and Prohibited Activities > Flashcards

Underwriting Trading, Customer's Accounts, and Prohibited Activities Flashcards

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1
Q

What type of account would need to be opened for a customer who makes deposits from trading purposes?

A. Margin Account

B. Option Account

C. Cash Account

D. Day Trading Account

A

C

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2
Q

If a company does a reverse stock split for 30,000 outstanding shares trading at $10 per share, what is the market value of the shares at the time of the split?

A. $60,000

B. $600,000

C. $300,000

D. $150,000

A

C

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3
Q

What are the hours in which employees of a FINRA member firm are prohibited from calling residences?

A. Before 7 am and after 11 pm

B. Before 8 am and after 9 pm

C. Before 6 am and after 10 pm

D. Before 9 am and after 8 pm

A

B

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4
Q

Reports from a firm’s research department must be made independent of any influence from which of the following departments?

A. Bond trading desk

B. Investment banking department

C. Compliance department

D. Board of directors

A

B

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5
Q

Which of the following is a way to increase information security?

A. Using password-protected laptops

B. Encrypting the company website

C. Sharing software programs among employees

D. Allowing employees to take files home with them

A

A

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6
Q

When are taxes incurred on a traditional IRA?

A. Never

B. When the initial investment occurs.

C. When the money is withdrawn

D. Annually when the beneficiary pays income tax.

A

C

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7
Q

Which of the following is true concerning disclosure and review of public communications?

A. Records must be kept in an SEC approved format.

B. Certain public communications must be filed at least 15 business days before their publication.

C. Public communications does not have to be approved by a supervisory member of the firm.

D. Records must include the date and content of the communication.

A

D

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8
Q

At the end of the second quarter, if a company has a stock price of $10 and pays a dividend of $0.50 every quarter, what is the annualized dividend yield?

A. 5%

B. 0.5%

C. 10%

D. 20%

A

D

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9
Q

Which of the following terms describe a trade that is only executed when the price surpasses a certain point?

A. Day order

B. Stop order

C. Market order

D. Good ‘Til Cancel (GTC) order

A

B

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10
Q

Which of the following is an advantage of a Roth IRA when compared to other types of IRAs?

A. Contributions to the plan are tax-deductible.

B. Required minimum distribution (RMSs) are not required at the age of 70 1/2 when the original owner is alive.

C. Funds are taxed as ordinary income when withdrawn in retirement.

D. There is no provision for catch-up contributions.

A

B

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11
Q

Which of the following is an example of a return of capital?

A. When a stock goes from $100 to $150

B, The amortization of a bond

C. When a stock pays a dividend of 10%

D. When a bond makes a coupon payment

A

B

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12
Q

Which of the following entities would most likely be involved with reverse churning?

A. Investment bankers

B. Research analysts

C. Commissioned-based brokers

D. Fee-based brokers

A

D

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13
Q

Which of the following requires financial institutions to submit five types of reports intended to detect money laundering activities?

A. Suspicious Activity Reports (SARs)

B. The Office of Foreign Asset Control (OFAC)

C. Currency Transaction Reports (CTRs)

D. The Bank Secrecy Act (BSA)

A

D - Also called the Currency and Foreign Transactions Reporting Act

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14
Q

Which of these individuals is considered to have a control relationship with Company X?

A. A wife of the CEO of Company X

B. The chairman of the board of Company X.

C. A low-level HR recruiter working at Company X for more than five years

D. A recall investor owning 1% of Company X’s common stock.

A

B

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15
Q

Which of the following would be an example of a preventive measure included in a Business Continuity and Disaster Recovery (BC/DR) Plan?

A. Having one server where all customers access their accounts.

B. Backing up data once a quarter.

C. Having home phone numbers as the primary contact number for employees

D. Having computer and customer files backed up to a location offsite.

A

D

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16
Q

Which of the following is a non-profit retirement plan?

A. 529

B. 457(b)

C. 401(k)

D. 403(b)

A

D

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17
Q

What do the horizontal and vertical axes of the capital asset pricing model (CAPM) represent?

A. Horizontal: assets; Vertical: rates

B. Horizontal: equities; Vertical: bonds

C. Horizontal: risks; Vertical: expected return

D. Horizontal: volatility; Vertical: willingness

A

C

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18
Q

What does the acronym RAP stand for?

A. Reverse Away Payment

B. Recapture Account Pension

C. Receive Against Payment

D. Remit Against Payor

A

C

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19
Q

How much money is an employee allowed to contribute to their 401(k) on a pre-tax basis if they are under 50 years of age?

A. $5,500

B, $15,000

C. $20,500

D. $10,000

A

C - This is the amount for 2022. Per google the amount has increased to $23,000 for 2024

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20
Q

A customer is considered a corporate insider if they own more than what percentage of the voting shares of a company?

A. 1.50%

B. 10%

C. 5%

D. 8%

A

B

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21
Q

John and Sarah are a married couple and contact a broker in order to open an account that gives them authority over it and allows for continued control if the other spouse dies. What type of account should the broker recommend?

A. Joint Tenants in Common (JTIC) Account

B. Marital Account

C. Transfer on Death (TOD) Account

D. Joint Tenants with Rights of Survivorship (JRWROS) Account

A

D

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22
Q

Which of the following would be expected to earn a risk-free rate?

A. Short-term treasury bonds.

B. Equities

C. Options

D. Commodities

A

A

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23
Q

The S&P 500 return for a time period was 7%. Maggie, a fund manager, has a benchmark in the S&P 500 that returned 9%.
What was the Alpha generated?

A. 2%

B. -2%

C. 14%

D. 9%

A

A - The Alpha is the excess return that fund managers generate against index benchmark. The Alpha is the return of the fund manager less the return of the selected index: 9% - 7% = 2%

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24
Q

Which form of market manipulation involves a trader using dishonest or misleading methods to artificially boost the market price of an asset they own, and then selling the asset at a much higher value than the price as which they bought it?

A. Pump and dump

B. Freeriding

C. Front running

D. Market rumors

A

A

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25
Q

A corporate stockbroker purchases stock in a tech company after an employee at the company privately relays information to him regarding an upcoming product that is expected to prove highly lucrative, information that is not publicly available. What form of market manipulation did the broker engage in?

A. Excessive trading

B. Marking the open

C. Insider trading

D. The broker did not manipulate the market.

A

C

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26
Q

When the market or an asset is identified as “bearish”, what are investors most likely to do?

A. Sell their investment and assets.

B. Temporarily freeze their trading activity.

C. Invest more and buy more assets.

D. Diversify their investment portfolio.

A

A

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27
Q

Which statement about account types is correct?

A. A cash account is an account with which a customer pays for all transactions in full.

B. A margin account is an account with which a customer does not pay for a transaction in full but borrows up to 90% of the transaction amount from the member firm.

C. A cash account may have a short sale made in it.

D. A margin account must have payments made promptly, no later than T+1.

A

A

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28
Q

Which statement about corporate actions is correct?

A. An exchange offer is when the offer maker trades shares in one security for trades in another.

B. A rights offer is not approved by a Biard of Directors.

C. An acquisition may be approved by a Board of Directors to combine two companies.

D. A merger may be approved by a Board of Directors to purchase another company.

A

A

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29
Q

Which of the following is true regarding discretionary and nondiscretionary accounts?

A. An investor with a nondiscretionary account must authorize a discretionary order in writing.

B. The investor must open a discretionary account for the representative to make discretionary trades.

C. A discretionary order in a discretionary account must be approved within two days after the trade.

D. A discretionary order in a discretionary account must be approved within a month of the trade.

A

A

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30
Q

Which statement about settlement that may vary from regular-way settlement is correct?

A. If the seller cannot provide ownership in the regular-way time frame, the trade is always reversed.

B. The purchaser or seller may not settle on the trade date.

C. The purchaser or seller may agree to settle during other than regular-way before the trades completes.

D. The purchaser or seller may agree to settle during other than regular-way after the trades completes.

A

C - Special settlement

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31
Q

Which order type is certain to be fulfilled?

A. Market

B. Buy stop

C. Limit

D. Sell stop-limit

A

A

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32
Q

Which order type is appropriate for liquid securities?

A. Sell-stop (loss)

B, Market

C. Limit

D. Sell stop-limit

A

B

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33
Q

Which statement is correct?

A. Long positions, also called covered positions, are conservative.

B. Long positions, also called naked positions, are conservative.

C. Short positions, also called covered positions, are conservative.

D. Short positions, also called naked positions. are conservative.

A

A = Long (covered) positions are conservative as the customer buys the security prior to selling it, making the maximum loss equal to the amount paid.

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34
Q

Which definition of the asking price is correct?

A. It is the amount the buyer asks the broker-dealer to obtain for a stock.

B. It is the amount the buyer’s broker-dealer asks the clearing broker to accept for the stock.

C. It is the amount the market maker requires in order to sell the stock to the buyer.

D. It is the amount the seller’s broker-dealer negotiates for the stock.

A

C

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35
Q

An investor has made a long purchase. How would this investor most likely react if the market price declined afterward?

A. The investor would make a short sale.

B. The investor would wait for the market price of the security to rise above the purchase price.

C. The investor would gift the security to an investment club for educational purposes.

D. The investor would file a complaint with FINRA against the broker-dealer who helped with the long purchase.

A

B

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36
Q

Which statement about order record notations is correct?

A. Solicited orders, but not discretionary orders in nondiscretionary accounts, must be indicated as such.

B. Solicited orders and discretionary orders in nondiscretionary accounts are not indicated as such.

C. Solicited orders and discretionary orders in nondiscretionary accounts must be indicated as such.

D. Discretionary orders in nondiscretionary accounts, but not solicited orders, must be indicated as such.

A

C

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37
Q

Which statement about the 1934 Act Section 15 - Rules Relating to Over-the-Counter Markets is correct?

A. The broker-dealer reads the risk disclosure document aloud to the customer, maintaining it afterward.

B. The customer must learn the bid and ask prices and the quantity of penny stock shares for each price.

C. The broker-dealer must know a penny stock order is possible and receive written approval for a trade.

D. The customer must be informed of the percentage of the transaction the firm and broker will receive.

A

C

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38
Q

Which statement about the intention of securities regulation is correct?

A. No investor will be able to sue the investor’s broker-dealer.

B. Investors will have enough information to make informed decisions regarding purchases and sales.

C. No investor will make more than a fair profit on any paid of buy/sell transactions.

D. Investors will realize enough profit to cover the commissions involved in a given buy/sell interaction.

A

B

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39
Q

Which statement about dividends is correct?

A. A Board of Directors chooses when the stock will begin trade without a right to a declared dividend.

B. The ex-dividend date is typically first business or trading day after the date of ownership.

C. The price of the stock will typically increase by the amount of the dividend on the ex-date.

D. A Board of Directors may declare a dividend in cash or with stock.

A

D

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40
Q

Under FINRA Rule 2251 - Forwarding of Proxy and Other Issuer-Related Materials, which event would require the broker to send proxy materials?

A. The issuer provides payment in advance for the cost of the forwarding process.

B. The issuer identifies stockholders who own at least a round lot (100 shares).

C. The issuer does not object to the distribution of proxy materials.

D. The issuer provides enough copies of proxy materials.

A

D

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41
Q

Which statement about total return is correct?

A. It is a dollar value equaling the proceeds when sold or mature, less the cost of the investment.

B. It is a dollar value that equals the proceeds when disposed of by sale or maturity.

C. It is a percentage wherein the numerator is the net change, and the denominator is the purchase cost.

D. It is a percentage wherein the numerator is cash received and the denominator is the purchase cost.

A

C

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42
Q

Which definition of the spread is correct?

A. It is the profit realized by the investor.

B. It is the amount the ask prices changes during a period of time.

C. It is the amount by which the market maker may be persuaded to change the price.

D. It is the difference between the ask and the bid price provided by a market maker at a given point in time.

A

D

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43
Q

Which definition of short sale is correct?

A. It is a sale of a security that is borrowed but not owned.

B. It is a sale that is settled on the trade date.

C. It is a sale of stock with fewer than 100 shares (a round lot).

D. It is a sale on behalf of a minor in a UGMA or UTMA account.

A

A

44
Q

Which statement about requirements of the Investment Company Act of 1940 is true?

A. A mutual fund may not trade securities.

B. A company controlled by a mutual fund may not trade securities.

C. A portfolio affiliate of a mutual fund may not trade securities.

D. A mutual fund may not purchase securities from, or sell securities to, another mutual fund if it is likely that the purchase or sale will harm the fund.

A

D

45
Q

Which order is to be completed at the best available price, as soon as is reasonably practical, and expires at the end of the current trading day if NOT completed?

A. Market order

B. Stop order

C. Limit order

D. Good-til-canceled (GTC) order

A

A

46
Q

Which statement about cost basis is true?

A. From the point of view of the IRS, the oldest shares purchased may need to be designated as the shares sold.

B. Case received is usually included in the calculation of the cost basis.

C. One the purchase price is included, not the cost of acquisition.

D. If stock dividends have been declared, this does not affect the calculation or cost basis per share.

A

A

47
Q

Which of the following is a defining characteristic of a Roth IRA?

A. Contributions to it are tax-deductible.

B. Withdrawals from it are tax free.

C. It allows catch-up contributions at age 50 and up.

D. Mandatory minimum distributions (RMDs) at age 70 1/2.

A

B

48
Q

Under Section 21A of the SEC Rules and Regulations, what is the statute of limitations for insider trading cases?

A. One year

B. Three years

C. Four years

D. Five years

A

D

49
Q

As per FINRA rule 2231, which pertains to customer account statements, how often must regularly active customers be sent account statements at a minimum?

A. At least once per year

B. At least once per quarter

C. At least once per month

D. At least once per week.

A

B

50
Q

Which equation is an expression of a basis point, which may be used to refer to the yield of an investment, especially a debt security?

A. 0.1% = one basis point

B. 0.01% = one basis point

C. 0.001% = one basis point

D. 1% = one basis point

A

B

51
Q

Which broker-dealer is acting in the trade capacity as principal?

A. A broker-dealer who fulfills an unsolicited order.

B. A broker-dealer who fulfills a solicited order.

C. A broker-dealer who fulfills a good-til-cancel order.

D. A broker-dealer who sells a security to a buyer.

A

D

52
Q

Which list of characteristics could apply to one order?

A. Day, market, GTC, and solicited.

B. Market, GTC, non-discretionary, and unsolicited.

C. Market, GTC, sell stop (loss), and unsolicited.

D. Buy-stop, market, non-discretionary, and unsolicited.

A

B

53
Q

What is stated on a bond issue?

A. Current yield

B. Nominal yield

C. Yield to maturity (YTM)

D. Yield to call (YTC)

A

B

54
Q

Which definition of the bid price is correct?

A. It is the amount the seller asks the broker-dealer to obtain for a stock.

B. It is the amount the seller’s broker-dealer asks the clearing broker to obtain for the stock.

C. It is the amount the market maker askes in order to sell the stock to the buyer.

D. It is the amount the buyer pays for the stock.

A

D

55
Q

What is one of the main reasons that mutual funds provide investors with a selection of share classes?

A. So investors can select the lowest up-front sales load.

B. So investors can select a sales charge, including 12b-1 fees, appropriate to their investment horizon.

C. So investors will purchase more shares in that mutual fund family.

D. So investors will obtain a higher return in their first 12 months after purchase.

A

B

56
Q

Which of the following is NOT a distinguishing characteristic of a discretionary order because it is chosen by the representative and NOT by the investor?

A. Price

B. Asset

C. Amount

D. Action

A

A

57
Q

In which corporate action is the shareholder provided with more new shares in exchange for fewer old shares?

A. Buyback

B. Stock split

C. Reverse stock split

D. Tender offer

A

B

58
Q

What is NOT included in the penny stock risk disclosure document?

A. An explanation of market risk for penny stock in both primary offering (IPOs) and secondary markets.

B. A guarantee that the broker-dealer will indemnify the customer’s realized losses from market decline.

C. An explanation of the bid and ask prices, the spread, and how a dealer buys or sells security.

D. A toll-free telephone number for inquiries about regulatory violations.

A

B

59
Q

What does an investor expect will happen after they complete a long purchase?

A. The investor expects the exchange to halt trading for 15 minutes.

B. The investor expects the exchange to halt trading for the remainder of the day.

C. The investor expects the market value of the security to rise.

D. The investor expects a stock split in the security.

A

C

60
Q

Under FINRA 4512 - Customer Account Information, which data is NOT required to be kept by the broker-dealer firm?

A. Contact information

B. Whether of legal age.

C. For a corporation, an alternative contact

D. Signature of the supervisor approving the establishment of the account

A

C

61
Q

Which statement about a long sale is correct?

A. It is a sale of a security that is owned.

B. It is a sale of a security with a quantity greater than 100 shares (around lot).

C. It is a sale of securities that take longer than the usual settlement time of T+2.

D. It is a sale of securities held by a group of persons, such as an investment club.

A

A

62
Q

An investor chooses to make a long sale of a security that they had previously made a long purchase of at a lower price. What is likely to happen?

A. The counterparty buyer makes a short sale at the same time.

B. The investor’s broker-dealer in the gain or the loss, through retroactive commissions adjustments.

C. The quantity of shares sold is greater than the quantity of shares purchased.

D. The investor realizes a profit, less commission.

A

D

63
Q

Which statement about the manner of delivery of notices regarding corporate actions is correct?

A. An exchange does not provide notices for shares traded on its exchange.

B. Notices regarding corporate actions are provided prior to approval by the Board of Directors.

C. The NYSE provides notices for shares traded in OTC markets to meet appropriate deadlines.

D. FINRA communicates the notices of shares traded in OTC markets to meet appropriate deadlines.

A

D

64
Q

Which statement about conditional orders is correct?

A. A buy limit order is typically set at a price above the current market.

B. A sell limit order is typically set at a price below the current market.

C. A buy stop order is typically set at a price 10% above the current market.

D. A sell stop limit order is typically set at a price above the current market.

A

D

65
Q

As per FINRA Rule 3240, which pertains to borrowing from or lending to customers, how long after the termination of a borrowing or lending agreement must members retain written pre-approval records of the agreement.

A. Two years

B. Four years

C. One year

D. Three years

A

D

66
Q

Presuming they are all done by a registered municipal securities representative, which action is in violation of MSRB Rule G-25, which pertains to improper use of assets?

A. Guaranteeing customers against loss on an account they introduced.

B. Withholding knowledge of the risks associated with an investment they are selling.

C. Front-running an asset to a customer.

D. Providing late or otherwise untimely trade confirmations to clients.

A

A

67
Q

What is the purpose of SEC Regulation M?

A. Regulating the trading of municipal bonds.

B. Overseeing corporate mergers and acquisitions.

C. Preventing manipulative securities market practices.

D. Monitoring foreign investments in American markets.

A

C

68
Q

Suppose aliens have invaded Earth and are only interested in obtaining information about different types of brokerage accounts. Which of the following account types would NOT be found in their database?

A. Joint tenants with rights of survivorship (JTWROS)

B. Community property brokerage account

C. Simplified Employee Pension IRA (SEP IRA)

D. Interstellar Investment Account.

A

D

69
Q

Which type of trade allocation is documented under Regulation SHO?

A. Principal trades

B, Agency trades

C. Short sales

D. Arbitrage

A

C

70
Q

Imagine that a customer is a pattern day trader. Which of the following account types can this customer use?

A. Cash account

B. Margin account

C. Retirement account

D. Advisory account

A

B

71
Q

Which of the following is the term for an announcement made when a seller wants to entertain bids on securities?

A. Bid wanted

B. Offer wanted

C. Spread strategy

D. Straddle

A

A

72
Q

According to FINRA Rule 4320, how many days can a failure to deliver a position in a non-threshold security be outstanding before the participant is required to close the position?

A. 7 days

B. 15 days

C. 30 days

D. 35 days

A

D

73
Q

Which of the following account types is best suited for a customer working with a financial advisor but still wanting to retain all rights to authorize purchases?

A. Fee-Based Account

B. Discretionary Account

C. Advisory Account

D. Margin Account

A

B

74
Q

Which of the following is the term for an investor profiting from the decline in a security’s value through short selling without owning the stock?

A. Hedge

B. Speculation

C. Arbitrage

D. Straddle

A

B

75
Q

A customer wants to open an account to save for their child’s education. Which of the following account types would be suitable?

A. 529 College Savings Account

B. Fee-Based Account

C. Discretionary Account

D. Joint Tenant with Rights of Survivorship Account

A

A

76
Q

Which of the following is the primary difference between a Cash Account and a Margin Account?

A. Margin accounts are tax-advantages, while cash accounts are not.

B. Margin accounts allows borrowing funds from the broker, while cash account do not.

C. Cash accounts require a financial advisor, while margin accounts do not.

D. Cash accounts are used for day trading, while margin account are not.

A

B

77
Q

What type of order allows an investor to have more control and is not executed if the market price does not fall within a specified limit range?

A. Market order

B. Limit order

C. Stop order

D. Good-til-canceled (GTC) order

A

B

78
Q

Which of the following account types is specifically designed for customers who want to work with a financial advisor but still want to authorize purchases themselves?

A. Fee-Based Account

B. Advisory Account

C. Discretionary Account

D. Education Account

A

B

79
Q

Which of the following statements is true regarding record keeping requirements for investment advisors?

A. Records must be maintained for at least five years.

B. Records can be discarded after one year.

C. All records must be kept in hard copy format.

D. Investment advisors do not have to maintain records.

A

A

80
Q

What type of quote is used to trade that an investor wants executed on a best-efforts basis, without a limit?

A. Firm quote

B. Nominal quote

C. Subject quote

D. Not-held quote

A

D

81
Q

In options trading, which of the following is the term for simultaneously buying a put and a call of the same underlying stock with the same strike price and expiration date?

A. Spread strategy

B. Straddle

C. Discretionary authority

D. Nondiscretionary authority

A

B

82
Q

Which of the following is the difference between the bid and ask price called?

A. Spread

B. Order type

C. Bid wanted

D. Offer wanted

A

A

83
Q

What type of order is executed at the current market price?

A. Market order

B. Limit order

C. Stop order

D. Day order

A

A

84
Q

Which department is responsible for ensuring that a firm’s financial statements are accurate and in compliance with applicable regulations?

A. Internal audit department

B. Investment banking department

C. Compliance department

D. Research department

A

A

85
Q

In a DVP settlement procedure, when is the buyer’s payment for securities due?

A. At the time of delivery

B. At the time of receipt

C. Two days after the purchase

D. Five days after the purchase

A

A

86
Q

In the context of financial transactions, what is the primary function of Clearing Brokers?

A. Analyzing market trends to provide investment advice to clients

B. Enabling smooth transaction settlements through accurate execution of investor trades

C. Acting as intermediaries in the stock market by executing trades on behalf of clients

D. Managing portfolios of securities on behalf of institutional investors

A

B

87
Q

What is the mandatory step that a customer must complete before initiating trading activities in their account?

A. The customer must demonstrate a high-risk tolerance.

B. The customer must officially sign an account agreement.

C. The customer’s identity and relevant information must be verified and documented.

D. The customer must receive approval to execute options trades on a specific exchange.

A

C

88
Q

An investor observes a substantial discrepancy in the price of a company’s convertible bonds and the stock it can be converted into. To capitalize on this, the investor chooses to purchase the convertible bonds and concurrently sells the stock. What is this financial strategy called?

A. Risk Mitigation

B. Market Speculation

C. Financial Arbitrage

D. Portfolio Diversification

A

C

89
Q

In the context of securities trading, which of the following entities is NOT legally permitted to engage in trading activities, assuming that no associated individuals would gain a financial advantage from the trade?

A. The mutual fund itself

B. A subsidiary company under the control of a mutual fund

C. An independent brokerage firm

D. An affiliated entity involved in the portfolio management of the mutual fund

A

A

90
Q

In accordance with BOE Rule 9.11, which detail is required to be included in a customer’s options trade confirmation?

A. The specific option’s symbol

B. The customer’s investment objectives

C. The option’s exercise price

D. The broker’s commission fee

A

C

91
Q

In which type of brokerage account must a customer deposit cash within two days of purchasing a security?

A. Margin Account

B. Traditional IRA

C. Cash Account

D. Rosh IRA

A

C

92
Q

In the securities market, what does a narrower bid-ask spread signify?

A. Higher liquidity and increased transaction costs.

B. Lower liquidity and increased transaction costs

C. Higher liquidity and decreased transaction costs

D. Lower liquidity and decreased transaction costs

A

C

93
Q

An investor is interested in purchasing a stock, but only if the price is at or below a specified level. Which type of order should they utilize?

A. Market order

B, Limit order

C. Stop-loss order

D. Stop-limit order

A

B

94
Q

Which type of account allows a broker to lend money to a customer, using the customer’s cash and securities as collateral?

A. Cash Account

B. Margin Account

C. Roth IRA

D. SIMPLE IRA

A

B

95
Q

Which type of account enables clients to collaborate with a financial advisor while still retaining the authority to approve investment decisions?

A. Brokerage Account

B. Discretionary Account

C. Managed Account

D. Non-Discretionary Account

A

D

96
Q

What is the primary function of the book-entry system in the securities industry?

A. To physically document every change in security ownership

B. To electronically monitor and record the current ownership of a security

C. To maintain a sequential log of all transactions involving a particular security

D. To guarantee that security transactions comply with the TX System settlement regulations.

A

B

97
Q

According to the Securities Act Rule 144, which of the following conditions must be met for an individual to sell restricted or controlled securities?

A. The holding period for the securities must be at least six months.

B. The individual must file a Form 144 with the SEC,

C. The sale must be reported to the public.

D. The individual must meet the minimum volume requirement.

A

A

98
Q

According to the Bank Secrecy Act, which financial transaction necessitates the filing of a report?

A. A customer depositing $9,500 in cash into their account.

B. A customer withdrawing $10,500 in cash from their account.

C. A customer transferring $5,000 between their savings and checking accounts,

D. A customer purchasing a cashier’s check worth $5,000.

A

B

99
Q

Which of these tax-advantaged brokerage accounts can be either a cash or a margin account?

A. Roth IRA

B. SIMPLE IRA

C. SEP IRA

D. Individual Retirement Account (IRA)

A

D

100
Q

In an options trading strategy, which approach should an investor utilize to potentially profit from both upward and downward movements of a stock’s price?

A. Iron condor

B. Vertical spread

C. Straddle

D. Covered call

A

C

101
Q

Which of the following investment strategies enables an investor to automatically reinvest dividends to purchase additional shares of stock, frequently at a reduced price?

A. Dividend Reinvestment Plan (DRIP)

B. Dollar-Cost Averaging Strategy

C. Systematic Investment Strategy

D. Automatic Investment Strategy

A

A

102
Q

Which of the following is an example of material nonpublic information?

A. A company’s quarterly earnings report that was publicly released an hour ago.

B. A widely circulated press release announcing a merger between two public companies.

C. A company’s CEO sharing future product plans during a publicly accessible conference.

D. Undisclosed information regarding a pending lawsuit that could impact its stock price.

A

D

103
Q

In the context of bond investments, what term best represents the periodic income received by bondholders?

A. Dividends

B. Coupon payments

C. Capital gains

D. Simple interest

A

B

104
Q

What is the primary role of FINRA concerning brokerage firms and their registered representatives??

A. Advising individual investors on investment decisions.

B. Supervision and regulating the operations of brokerage firms and their registered representatives.

C. Delivering financial education to employees of brokerage firms

A

B

105
Q

In the context of safeguarding customer information within the financial industry, which legislation grants the SEC the authority to set appropriate standards for financial institutions?

A. Securities Act of 1933

B. Investment Company Act of 1940

C. Investment Advisers Act of 1940

D. Gramm Leach Bliley Act

A

D

SIE Exam Prep (4 decks)

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