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A registered representative is permitted to contact a person whose name is on the national Do Not Call List:
A registered representative is permitted to contact a person whose name is on the national Do Not Call List:
On Wednesday, March 11, a customer purchases 1,000 shares of an OTC equity security in a cash account. The transaction will settle:
On Wednesday, March 11, a customer purchases 1,000 shares of an OTC equity security in a cash account. The transaction will settle:
A brokerage account for which a trusted person's name is required applies to which of the following?
A brokerage account for which a trusted person's name is required applies to which of the following?
The maximum civil penalty for insider trading violations is:
The maximum civil penalty for insider trading violations is:
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If a FINRA-registered person does not fulfill the continuing education requirements by the appropriate date:
If a FINRA-registered person does not fulfill the continuing education requirements by the appropriate date:
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The primary concern for investors who use a buy-and-hold strategy to maintain their portfolios is:
The primary concern for investors who use a buy-and-hold strategy to maintain their portfolios is:
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Although all of the following are reportable events on Form U4, which one results in statutory disqualification?
Although all of the following are reportable events on Form U4, which one results in statutory disqualification?
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A client has sold short XYZ stock. Which of the following actions may be taken to offset the risk of the short position?
A client has sold short XYZ stock. Which of the following actions may be taken to offset the risk of the short position?
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Which of the following activities is an unregistered employee of a brokerage firm allowed to perform?
Which of the following activities is an unregistered employee of a brokerage firm allowed to perform?
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A customer contacts her registered representative to buy an OTC stock. Rather than buying the shares directly from a market maker, the broker-dealer contacts another broker-dealer. This creates two levels of transaction fees and is referred to as:
A customer contacts her registered representative to buy an OTC stock. Rather than buying the shares directly from a market maker, the broker-dealer contacts another broker-dealer. This creates two levels of transaction fees and is referred to as:
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Which of the following choices has the LEAST amount of interest-rate risk?
Which of the following choices has the LEAST amount of interest-rate risk?
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The maximum political contribution from a municipal finance professional (MFP) to a candidate for whom she may not vote is:
The maximum political contribution from a municipal finance professional (MFP) to a candidate for whom she may not vote is:
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Which of the following organizations enforces municipal securities regulations for broker-dealers?
Which of the following organizations enforces municipal securities regulations for broker-dealers?
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When a bond is called, the bondholder receives the:
When a bond is called, the bondholder receives the:
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Which of the following statements is TRUE concerning electronic communication networks (ECNs)?
Which of the following statements is TRUE concerning electronic communication networks (ECNs)?
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The federal securities regulation that provides rules for the secondary market is:
The federal securities regulation that provides rules for the secondary market is:
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State securities laws are also referred to as:
State securities laws are also referred to as:
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An issuer includes warrants with a bond offering that it's conducting. This is done to:
An issuer includes warrants with a bond offering that it's conducting. This is done to:
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If an investor wants to build a bond portfolio that maintains a stable value, she should purchase bonds with:
If an investor wants to build a bond portfolio that maintains a stable value, she should purchase bonds with:
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Which of the following sources of revenue is NOT used to pay the debt service on general obligation bonds?
Which of the following sources of revenue is NOT used to pay the debt service on general obligation bonds?
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Which term is used for a member of a stock exchange that's responsible for providing liquidity by buying and selling throughout the trading day?
Which term is used for a member of a stock exchange that's responsible for providing liquidity by buying and selling throughout the trading day?
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Which of the following choices does NOT hold customer cash or securities?
Which of the following choices does NOT hold customer cash or securities?
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A type of bond in which the amount of interest paid to the investor may change is referred to as a:
A type of bond in which the amount of interest paid to the investor may change is referred to as a:
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Although most bonds are traded according to their maturity dates, which of the following investments are traded according to their average life?
Although most bonds are traded according to their maturity dates, which of the following investments are traded according to their average life?
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A financial services firm that charges customers based on a percentage of the assets under management is BEST defined as:
A financial services firm that charges customers based on a percentage of the assets under management is BEST defined as:
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Interest on U.S. Treasury securities is:
Interest on U.S. Treasury securities is:
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What type of bond would MOST likely be secured by an excise tax, cigarette tax, or gasoline tax?
What type of bond would MOST likely be secured by an excise tax, cigarette tax, or gasoline tax?
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A customer purchased a premium bond which gives the issuer the ability to redeem the entire issue prior to maturity. Which yield is MOST relevant?
A customer purchased a premium bond which gives the issuer the ability to redeem the entire issue prior to maturity. Which yield is MOST relevant?
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An annuitant is receiving payments from a variable annuity and, at the time of his death, his beneficiary receives a lump-sum payment. The annuity payout option is:
An annuitant is receiving payments from a variable annuity and, at the time of his death, his beneficiary receives a lump-sum payment. The annuity payout option is:
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If a stock is sold before the ex-dividend date, but delivered after the record date, it must be accompanied by:
If a stock is sold before the ex-dividend date, but delivered after the record date, it must be accompanied by:
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A REIT will receive preferential tax treatment if it distributes at least what percentage of its income to shareholders?
A REIT will receive preferential tax treatment if it distributes at least what percentage of its income to shareholders?
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A fund which invests in companies that pay high dividends is:
A fund which invests in companies that pay high dividends is:
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If an options contract is exercised, which of the following statements is TRUE?
If an options contract is exercised, which of the following statements is TRUE?
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While saving for her retirement, a variable annuity owner investing $1,000 per month will buy a:
While saving for her retirement, a variable annuity owner investing $1,000 per month will buy a:
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All of the following statements are TRUE of 529 plans, EXCEPT:
All of the following statements are TRUE of 529 plans, EXCEPT:
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A hedge fund would NOT be a suitable investment for an investor seeking to:
A hedge fund would NOT be a suitable investment for an investor seeking to:
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If an investor expects a sharp increase in a stock's price, which of the following will be the most profitable?
If an investor expects a sharp increase in a stock's price, which of the following will be the most profitable?
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Two years ago, an investor bought mutual fund shares. Today, if the investor intends to purchase additional shares, she can obtain a reduced sales charge by using:
Two years ago, an investor bought mutual fund shares. Today, if the investor intends to purchase additional shares, she can obtain a reduced sales charge by using:
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Which of the following terms is NOT associated with a variable annuity?
Which of the following terms is NOT associated with a variable annuity?
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The Bond Buyer Index is based on which of the following securities?
The Bond Buyer Index is based on which of the following securities?
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Which of the following choices best describes the price that a mutual fund investor receives when she redeems her shares?
Which of the following choices best describes the price that a mutual fund investor receives when she redeems her shares?
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A hedge fund is:
A hedge fund is:
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All of the following are considered a qualified institutional buyer (QIB), EXCEPT:
All of the following are considered a qualified institutional buyer (QIB), EXCEPT:
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In an equity offering, what's the function of a syndicate desk?
In an equity offering, what's the function of a syndicate desk?
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An individual may roll over a lump-sum distribution from a corporate pension plan to an IRA without tax consequences if it is done within:
An individual may roll over a lump-sum distribution from a corporate pension plan to an IRA without tax consequences if it is done within:
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Which of the following statements is TRUE regarding contributions to a 401(k) plan?
Which of the following statements is TRUE regarding contributions to a 401(k) plan?
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An individual owns 100 shares of GHI stock. If GHI announces a 3-for-1 stock split, the individual:
An individual owns 100 shares of GHI stock. If GHI announces a 3-for-1 stock split, the individual:
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Which of the following items is NOT found on a sell order ticket?
Which of the following items is NOT found on a sell order ticket?
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Immediately prior to the effective date of an underwriting, an adverse event occurs that causes a sharp decline in the price of the stock. Which of the following clauses permits the underwriter to withdraw without a penalty?
Immediately prior to the effective date of an underwriting, an adverse event occurs that causes a sharp decline in the price of the stock. Which of the following clauses permits the underwriter to withdraw without a penalty?
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The most detailed financial information regarding a municipal securities issuer is found in the:
The most detailed financial information regarding a municipal securities issuer is found in the:
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A customer sells short 100 shares of XYZ at 34. The customer wishes to protect herself against a loss. Which of the following orders will prevent a loss on the short position?
A customer sells short 100 shares of XYZ at 34. The customer wishes to protect herself against a loss. Which of the following orders will prevent a loss on the short position?
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How many shares may an individual sell under Rule 144 if there are 3,500,000 shares outstanding and average weekly trading volumes are provided?
How many shares may an individual sell under Rule 144 if there are 3,500,000 shares outstanding and average weekly trading volumes are provided?
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A customer enters a sell stop-limit order for 100 shares at 18.50. The last round-lot sale that took place before the order was entered was 18.88. Round-lot sales that took place after the order was entered were at 18.60, 18.25, 18.38, 18.50, and 18.63. The execution price is:
A customer enters a sell stop-limit order for 100 shares at 18.50. The last round-lot sale that took place before the order was entered was 18.88. Round-lot sales that took place after the order was entered were at 18.60, 18.25, 18.38, 18.50, and 18.63. The execution price is:
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Who keeps track of the shareholders of a mutual fund?
Who keeps track of the shareholders of a mutual fund?
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Which of the following choices would NOT be subject to the holding period restriction under Rule 144?
Which of the following choices would NOT be subject to the holding period restriction under Rule 144?
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The investments that tend to perform the WORST during periods of inflation are:
The investments that tend to perform the WORST during periods of inflation are:
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If a customer exceeds SIPC limits:
If a customer exceeds SIPC limits:
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When discussing the purchase of a variable annuity with a client, the RR is not required to disclose:
When discussing the purchase of a variable annuity with a client, the RR is not required to disclose:
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Jamie inherited 500 shares of an investment company. What kind of investment company does she own if it makes no provision for future purchases or redemptions?
Jamie inherited 500 shares of an investment company. What kind of investment company does she own if it makes no provision for future purchases or redemptions?
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Which of the following is TRUE if a mutual fund investor chooses to implement a systematic withdrawal plan from the fund?
Which of the following is TRUE if a mutual fund investor chooses to implement a systematic withdrawal plan from the fund?
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A husband and wife have combined earnings of greater than $300,000 in each of the last two years. The couple is considered:
A husband and wife have combined earnings of greater than $300,000 in each of the last two years. The couple is considered:
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All of the following persons are permitted to be named as a trusted contact person for a senior investor, EXCEPT:
All of the following persons are permitted to be named as a trusted contact person for a senior investor, EXCEPT:
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Which of the following risks does not apply to both foreign and domestic debt instruments?
Which of the following risks does not apply to both foreign and domestic debt instruments?
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A Treasury bond is quoted 105.04 - 105.24. The purchase price that a customer would expect to pay would be:
A Treasury bond is quoted 105.04 - 105.24. The purchase price that a customer would expect to pay would be:
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An equity inverse exchange-traded fund (ETF) is most similar to:
An equity inverse exchange-traded fund (ETF) is most similar to:
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When a broker-dealer sells a security to a client and charges a commission on the transaction, it is acting as the client's:
When a broker-dealer sells a security to a client and charges a commission on the transaction, it is acting as the client's:
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A corporation will be paying a cash dividend to its shareholders. On what date will the market price of the stock be reduced?
A corporation will be paying a cash dividend to its shareholders. On what date will the market price of the stock be reduced?
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Which types of investments have historically shown a great deal of sensitivity to regulatory risk?
Which types of investments have historically shown a great deal of sensitivity to regulatory risk?
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A firm is the managing underwriter of a follow-on offering of a security that's listed on the NYSE. The aftermarket prospectus delivery rule:
A firm is the managing underwriter of a follow-on offering of a security that's listed on the NYSE. The aftermarket prospectus delivery rule:
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An investor shifted the allocation of corporate bonds in his portfolio to American Depository Receipts (ADRs). As a result, he will be more exposed to:
An investor shifted the allocation of corporate bonds in his portfolio to American Depository Receipts (ADRs). As a result, he will be more exposed to:
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Which bonds are considered the most liquid?
Which bonds are considered the most liquid?
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Which of the following securities trades in fractional units of 1/32 of a point?
Which of the following securities trades in fractional units of 1/32 of a point?
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A brokerage firm purchases 600 shares of stock from a customer and places the securities into its inventory. In this case, the firm likely acted as a(n):
A brokerage firm purchases 600 shares of stock from a customer and places the securities into its inventory. In this case, the firm likely acted as a(n):
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A previously registered person was convicted of a felony 14 years ago. If he's now seeking employment as a registered representative, he should be informed that:
A previously registered person was convicted of a felony 14 years ago. If he's now seeking employment as a registered representative, he should be informed that:
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Which of the following securities would be subject to federal securities registration requirements?
Which of the following securities would be subject to federal securities registration requirements?
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All of the following statements concerning hedge funds are TRUE, EXCEPT the funds:
All of the following statements concerning hedge funds are TRUE, EXCEPT the funds:
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All of the following characteristics would be associated with a growth company, EXCEPT that it has a:
All of the following characteristics would be associated with a growth company, EXCEPT that it has a:
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What's a general obligation (GO) bond?
What's a general obligation (GO) bond?
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Study Notes
Mutual Fund Shareholders
- The transfer agent is responsible for tracking shareholders of a mutual fund.
Rule 144 Holding Period
- Control stock from open-market purchases is exempt from the six-month holding period required for restricted stock.
Investment Performance During Inflation
- Bonds are the investments that typically perform the worst in inflationary periods.
SIPC Limit Exceedance
- If SIPC limits are exceeded, the customer is considered a general creditor and does not have a claim to excess amounts.
Variable Annuity Disclosure
- Probation fees are not required to be disclosed when discussing variable annuities, unlike surrender, mortality, and administrative fees.
Inherited Shares of Investment Company
- A closed-end fund does not allow for future purchases or redemptions once shares are inherited.
Systematic Withdrawal Plan
- Withdrawals from a mutual fund under a systematic withdrawal plan lead to a reduction of capital since shares must be redeemed.
Accredited Investor Definition
- Couples earning over $300,000 annually for two consecutive years qualify as accredited investors.
Trusted Contact for Senior Investors
- Only natural persons (not law firms) can be trusted contacts for senior investors.
Debt Instrument Risks
- Exchange rate risk applies only to foreign debt instruments; domestic debt is not subject to this risk.
Treasury Bond Pricing
- Treasury bonds are quoted in 32nds; a quote of 105.24 equates to a purchase price of $1,057.50.
Equity Inverse ETFs
- Equity inverse ETFs are similar to selling stock short, designed to perform inversely to an index.
Broker-Dealer Transactions
- When a broker-dealer acts as an agent, they charge a commission rather than taking on risk.
Tender Offers
- A company will not buy shares if the tendered amount does not meet the minimum requirement.
Government-Sponsored Enterprise Securities
- Not all government-sponsored enterprise securities are guaranteed by the government.
Investment Risk Exposure
- Investing in ADRs increases exposure to political risk.
Information Barriers
- There must be information barriers between investment banking and trading departments in brokerage firms.
Regulatory Risk Sensitivity
- Limited partnerships are highly sensitive to regulatory risks compared to other investment vehicles.
529 Prepaid Tuition Plans
- The main drawback of 529 Prepaid Tuition Plans is financial loss if the beneficiary does not attend a public college in that state.
Selling Away Definition
- Selling away involves transacting securities privately without the consent of the broker-dealer.
Entertainment Expenses with Clients
- Under FINRA rules, the giving of a ticket valued at $85 to a client is permissible, while giving both is not.
Aftermarket Prospectus Delivery Rule
- A firm does not need to deliver an aftermarket prospectus when it manages a follow-on offering.
Variable Annuity Tax Consequences
- In the event of the holder's death during the accumulation period, the excess proceeds are taxed as ordinary income.
Employment After Felony Conviction
- A person convicted of a felony can become a registered representative after ten years, provided they have served their sentence.
Stock Ex-Dividend Date
- The ex-date is when a stock's price is reduced by the dividend amount.
Municipal Bond Offering Responsibility
- The issuer is responsible for creating the official statement for a municipal bond offering.
Short-Term Trading Vehicles
- Leveraged ETFs are considered short-term trading vehicles due to their volatility.
Market Maker Quotes
- A market maker with a quote of 50.00 - 50.05 indicates a willingness to buy at $50.00 and sell at $50.05.
Asset Allocation Funds
- Asset allocation funds adjust investment percentages across assets based on market conditions.
Deflation Impact
- Persistent deflation generally leads to lower interest rates.
Securities Registration Requirements
- Mutual fund shares are subject to both state and federal securities registration requirements.
Hedge Fund Registration
- Hedge funds do not have to register under the Investment Company Act of 1940 when offered to U.S. residents.
Characteristics of Growth Companies
- A growth company typically has a high price/earnings ratio but not a high dividend payout ratio.
General Obligation Bonds
- GO bonds are backed by taxes imposed by local municipalities.
Liquidity of Treasury Bonds
- Treasury bonds are regarded as the most liquid due to high trading volumes.
Fractional Trading Units
- Treasury bonds trade in fractional units of 1/32 of a point.
Brokerage Firm's Role
- A firm that purchases stocks for its inventory acts as a dealer.
Aggressive Growth Investments
- Common stock is best suited for investors seeking aggressive growth potential.
Regulatory Enforcement for Municipal Securities
- FINRA enforces regulations related to municipal securities for broker-dealers.
Bond Call Price
- Upon a bond call, the bondholder receives the call price along with any accrued interest.
Electronic Communication Networks (ECNs)
- ECNs allow investors to trade anonymously, catering to various types of investors.
Federal Securities Regulation
- The Securities Exchange Act of 1934 sets rules for secondary market activities.
State Securities Laws
- State securities laws are commonly referred to as the Blue Sky laws.
Purpose of Issuing Warrants with Bonds
- Issuing warrants with bonds is intended to enhance the bonds' appeal and value.### Bonds and Interest Rates
- Lowering the coupon rate on bonds can significantly reduce the issuer’s interest cost.
- Short-term bonds are less affected by interest rate changes, making them a safer option for stability in portfolios.
General Obligation Bonds
- Revenue sources for debt service include income taxes, property taxes, and licensing fees.
- Tolls collected at municipal tunnels are not used to pay general obligation bond debt.
Market Mechanics
- Market makers provide liquidity on stock exchanges by standing ready to buy and sell at any time.
- The Depository Trust Company does not hold customer cash or securities.
Bond Types
- Variable rate bonds have interest payments that can change over time.
- Asset-backed securities are traded based on their average life rather than maturity.
Financial Services
- Investment advisers charge fees based on assets under management (AUM) rather than commissions.
- The interest from U.S. Treasury securities is taxed federally but exempt from state taxes.
Special Tax Bonds and Annuities
- Special tax bonds are typically secured by revenue from specific taxes like excise or cigarettes.
- The current yield is most relevant for premium bonds that can be redeemed before maturity.
Account Management and Securities
- 529 plans allow tax-free withdrawals for educational expenses but have specific contribution limits set by states.
- The rights of accumulation offer reduced sales charges for purchasing additional mutual fund shares.
Hedge Funds and Qualified Buyers
- Hedge funds are private investment funds designed for affluent and sophisticated investors, not suitable for those needing immediate access to funds.
- Qualified institutional buyers are defined by specific asset thresholds, with certain exceptions.
Trading Mechanics
- Market-out clauses allow underwriters to withdraw from agreements due to adverse events.
- The execution price for sell stop-limit orders is determined by the price at which the order becomes active.
Insider Trading and Education Compliance
- Maximum civil penalties for insider trading violations can be three times the amount gained or lost avoided.
- FINRA-registered individuals who do not meet continuing education requirements may remain employed but cannot serve in a registered capacity.
Investment Strategies
- A buy-and-hold strategy focuses on proper asset allocation to manage risks effectively.
Stock Splits and Market Orders
- In a stock split, the total value of the investment remains unchanged despite an increase in the number of shares.
- Specific protocols must be followed for orders such as due bills when stock ownership changes.
Compliance in Brokerage Accounts
- Special protocols exist for brokerage accounts opened for senior investors, requiring the designation of a trusted person.### DUI Conviction and Disqualification
- Conviction of a felony charge for driving under the influence (DUI) leads to disqualification only if the conviction is for a felony.
Risk Mitigation for Short Selling
- To offset risk from a short position in XYZ stock, purchasing calls is advisable. This allows the investor to buy the stock if its value increases.
Unregistered Employee Responsibilities
- Unregistered employees can send prospective clients account opening forms.
- They are prohibited from accepting orders or discussing investment objectives, as well as explaining financial products.
Interpositioning in Brokerage Transactions
- Interpositioning refers to the practice where a broker-dealer uses another broker-dealer to execute a customer's order, resulting in additional transaction fees.
- This practice is generally prohibited unless it secures a better price for the customer.
Interest-Rate Risk Analysis
- A BB-rated corporate debenture maturing in two years carries the least interest-rate risk due to its short maturity.
- Interest-rate risk increases with the bond’s maturity; hence, longer-term bonds face greater risk.
Political Contributions by Municipal Finance Professionals
- Municipal finance professionals (MFPs) are not allowed to make any political contributions to candidates for whom they cannot vote.
- Any contribution could result in a two-year ban on municipal securities business with the candidate’s issuer.
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Prepare for the Securities Industry Essentials (SIE) Exam with these flashcards covering critical topics. Each card includes questions related to mutual funds, rules, and stock ownership, ideal for efficient study. Test your knowledge and boost your confidence for the exam.
