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The Securities & Exchange Commission (SEC) was created by Congress in
Question 1 Explanation:
The Act of ’34 created the SEC.
The term ‘disclaimer’ is most often associated with
The fact that no agent can guarantee a customer against loss
The fact that unregistered securities are more risky than registered ones
The fact that the government cannot guarantee the accuracy of the information in a prospectus
None of the above
Question 2 Explanation:
The SEC reviews the information in a registration statement, it does not approve or disapprove of the information, nor does it guarantee the accuracy of the information disclosures. Therefore no sales agent can say to a prospect that these are ‘government approved’ securities.
SIPC, the securities investor protection corporation is:
An insurance entity which protects investors investments again market losses up to $500,000
An insurance entity which protects investors who are sold worthless securities
A Congressional guarantee against losses in the securities markets
None of the above
Question 3 Explanation:
SIPC was set up to protect customer ACCOUNTS in the event of a broker-dealer bankruptcy, not protect investments against loss. Be careful of the wording in this question. Cash & securities in customer accounts are ‘insured’ up to $500,000 in the event the B/D goes bankrupt and the cash and securities can’t be located and properly returned to the customer.
In most cases, Federal Securities Laws:
Supersede State securities laws
Are subordinate to State securities laws
Are given the same weight as State securities laws
None of the above
Question 4 Explanation:
Federal securities laws typically supersede State laws.
Which of the following are not considered money market securities?
Question 5 Explanation:
Since the ‘money market’ includes short term debt instruments only, and since ADRs represent ownership (equity) in foreign stocks, ADRs are not debt.
When a corporation goes public, it is issuing:
Any of the above
Question 6 Explanation:
Going public means sharing equity ownership (common stock) with public investors, for the first time (Initial public offering, IPO).
The term ‘issuer’ most often refers to:
A corporation seeking to raise additional capital for expansion or modernization purposes
A business which prints up securities certificates such as bonds and stocks
A business which has satisfied the listing requirements of one or more approved stock exchanges
A business, a municipality, or a federal governmental entity which is seeking to raise capital from the sale of securities.
Question 7 Explanation:
Whether one considers answers A, B, or C partially accurate, the last answer, D is the most complete therefore best answer.
Every publicly-traded corporation is required to have a transfer agent and a registrar. The primary distinction between the two is:
They are not different --- they perform the same function
The registrar keeps the record of all stock and bond holders
The transfer agent transmits the payment for securities from the purchaser to the seller in all secondary market trades.
The transfer agent ensures that dividend payments go out to all registered owners of record on the payable date.
Question 8 Explanation:
This is one of the functions of a Transfer Agent. Registrars make sure that a company does not issue more shares than authorized in the Charter.
One of the more attractive features of common stock is that:
One cannot lose more than one's investment
The stockholders have the right to vote on quarterly dividends
The stockholders have the right to choose Officers
Any of the above
Question 9 Explanation:
You cannot lose more than you’ve put at risk. A common stockholder cannot be held liable for any debts of the corporation, therefore they have limited liability.
When the market price of a company’s common stock has reached triple digits ($100 or above), the Board of Directors may elect to declare which of the below to make the shares more affordable?
Reverse stock split
A stock split
A stock dividend
Any of the above
Question 10 Explanation:
Splitting a stock provides each shareholder with more shares and the CMV (current market value) of the stock will decline proportionately. Because of the reduced price in the market, it becomes more ‘affordable.’
When a corporate Board announces a 10% stock dividend, shareholders know they will be receiving:
both of the above
neither of the above
Question 11 Explanation:
Stock dividends are not Cash dividends – they are dividends in the form of additional shares.
Boards of Directors in the publicly-traded sphere are elected by corporate stockholders, using which of the following methods?
any of the above are possible voting procedures
Question 12 Explanation:
All three are correct – in fact, Regular and Statutory are the same.
Call option contracts are considered to have intrinsic value:
when CMV exceeds exercise price
when exercise price exceeds CMV
when CMV is equal to exercise price
when the option holder has exercised the option
Question 13 Explanation:
Call option contracts go ‘in the money’ (intrinsic value) when the current market value of the underlying security exceeds the exercise price (strike price) of the option. If a call option's exercise price is $20, and the underlying stock is trading at $25, the intrinsic value of the call option is $5.
Reinvestment risk is least present in:
2% 10 year Treasury Note
3% 10 year AA rated Municipal G.O.
4% 10 year AAA rated Corporate debenture
Zero coupon Treasury Bond
Question 14 Explanation:
Since with a Zero coupon instrument there is no annual income to ‘reinvest,’ Zeroes have no reinvestment risk.
All of the below are typical features of an ETF except:
they are marginable
they often are sector-driven portfolios
they are traded each day based upon 4:00 pm NAV
none of the above are exceptions
Question 15 Explanation:
Exchange traded funds trade on exchanges at market prices determined by supply and demand – the same as regular corporate stocks.
Accumulation units are most often associated with:
Question 16 Explanation:
Variable annuities sell ‘accumulation units’ to purchasers, whose price each day is based upon the 4 pm net asset value of the separate account.
One of the most frequently issued money market instruments is commercial paper. Typically, this investment has a maximum maturity:
of one year
of 90 days
of 270 days
of 180 days
Question 17 Explanation:
The maximum maturity is 9 months or 270 days.
The Securities Industry Essentials examination gives a candidate
the right to take one or more of the top-off representative exams
the right to trade securities
the right to engage in phone solicitation of sales prospects
all of the above
Question 18 Explanation:
This SIE exam enables the candidate to take one of several different FINRA registered reps exam.
Certain securities are marginable under Regulation T of the Securities & Exchange Act of 1934 except:
all of the above are marginal under Reg. T
Question 19 Explanation:
Regulation T does not permit margin under normal circumstances on Option contracts.
When an investor is bearish on the broad stock market
buying puts on the S&P 500 index is an appropriate strategy
buying calls on the S&P 500 index is an appropriate strategy
buying mutual funds is an appropriate strategy
not investing in the market is an appropriate strategy
Question 20 Explanation:
Buying broad-based Index Put options will provide a hedge against the decline in the broad market.
A customer wishes to liquidate 100 shares of ABC common at the market. If the current inside market is 904.78 – 905.57, the client’s transaction will occur disregarding commissions and other charges at
at the last transaction price prior to entering this order
at a price agreed to between the firm and the customer
Question 21 Explanation:
The best (inside) bid is the price at which a client’s liquidation (sell) order will be executed.
A market maker is obligated
to maintain subject quotes during trading hours
to maintain and honor firm quotes during trading hours
to buy no less than one round lot from a customer at its ask price
to sell no less than one round lot to a customer inside the spread
Question 22 Explanation:
Market making firms post firm quotes during the trading day at which they are obligating themselves to do business with other firms as well as retail customers.
The spread between bid and offer
typically gets wider as the volume increases
typically gets narrower as the volume increases
is entirely up to the firm which is making a market in the stock
is generally fixed for the trading day
Question 23 Explanation:
With more active trading in a stock (high volume), the spread between the bid and ask prices usually narrows.
The so-called 5% policy pertains to
mark ups on retail OTC transactions excepting new issues
commissions on NYSE trades exclusively
mark ups, mark downs and commissions on retail secondary market trades in municipal bonds
none of the above
Question 24 Explanation:
The FINRA markup markdown and commission policy does not apply to new issues as well as municipal bonds --- MSRB has its own such policy.
The principal difference between a selling syndicate and a selling group would be:
Eastern versus Western liability
all of the above
Question 25 Explanation:
Syndicate implies a firm commitment; group implies best efforts.
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