Insider Trading and Securities Regulations, Exams of Business Fundamentals

Download Insider Trading and Securities Regulations and more Exams Business Fundamentals in PDF only on Docsity! FINRA SIE Practice Exam 140 Questions with Verified Answers What is true about treasury stock? - CORRECT ANSWER It is issued stock that has been subsequentially reacquired by the corporation Under the securities act of 1933 Registration is required for - CORRECT ANSWER American depository receipts (ADRs) Under normal circumstances, a customer's letter of intent on a mutual fund purchase is valid for what maximum period of time? - CORRECT ANSWER 13 months A firm is a participant in a public offering to sell a substantial amount of securities to its customers, The firm agrees to repurchase the shares at no less than the original sales price. Such agreements are - CORRECT ANSWER Prohibited as fraudulent and manipulative In what situation is an employee of a public company permitted to trade upon information without violating insider trading laws? - CORRECT ANSWER An independent securities analyst explains to the employee why the earnings for the company next quarter could be marketably poor than expected Roth 401(k) and Roth Individual Retirement Account (IRA) plans share what feature? - CORRECT ANSWER Qualified distributions are excluded from federal income tax What is the greatest risk in a variable life insurance policy? - CORRECT ANSWER Market risk Stability in the value of a debt portfolio is greatest when - CORRECT ANSWER Maturities of the debt securities are short All of the following risks apply to both foreign and domesic debt instruments - CORRECT ANSWER - Political risk - Repayment risk - Interest rate risk What is true regarding the concept of an annuity contract - CORRECT ANSWER The kind of annuity selected party determines the payment amounts to the annutant What is the essential difference between a primary distribution and a secondary distribution? - CORRECT ANSWER A primary distribution involves a sale of newly issued shares by the issuer, while a secondary distribution involves a sale of already issued and outstanding shares A member of a stock exchange responsible for providing liquidity in a security by being willing to buy and sell at times is known as - CORRECT ANSWER A market maker An associated person who is not a registered representative is permitted to engage and what type of activity? - CORRECT ANSWER Provide account opening forms to a new customer What represents the effect of a stock split? - CORRECT ANSWER The price per share of common stock decreases. What product is adversely impacted if the issuer's credit rating is downgraded - CORRECT ANSWER Exchange traded notes What type of security provides investors with a stated maturity date? A floating interest rate and an option to put the security back to a financial intermediary on a daily or weekly basis? - CORRECT ANSWER Variable rate demand note A broker-dealer is permitted to accept payment for a new issue from a new customer when the - CORRECT ANSWER Registration is effective A transaction in which a writer covers a position by purchasing an option is called - CORRECT ANSWER A closing purchase countercurrency the customer will receive? - CORRECT ANSWER The spot exchange rate Under industry regulations, An initial purchase of $3000 Of common stock and a margin account requires a cash deposit of - CORRECT ANSWER $2,000 Upon expiration all in the money S&P 100 Index call options are settled by the delivery of - CORRECT ANSWER Cash A married couple who earned income that exceeded $300,000 In each of the prior two years and reasonable expects, the same for the current year is - CORRECT ANSWER An accredited investor A decline in the gross domestic product must last for at least how many quarters to be considered a recession - CORRECT ANSWER 2 quarters The computation of dollar prices and accrued interest on municipal bonds is normally on what calendar basis - CORRECT ANSWER 30/360 In the over-the-counter market the. Term spread refers to the difference between - CORRECT ANSWER Bid and asked prices What Form U4 Reportable event results in statutory disqualification - CORRECT ANSWER A felony conviction for a driving under the influence charge The redemption value of an open end investment company shares is based on - CORRECT ANSWER NAV Computed, after the order is received. What product is most exposed to inflationary risk - CORRECT ANSWER Treasury bonds. What is an example of communication with the public that is considered misleading - CORRECT ANSWER Literature providing 10-year Performance information to Support predictions of future performance What is required when a firm receives cash and excess of $10,000 From one customer and one business day - CORRECT ANSWER File a currency transaction report In a period of low inflation and economic recession, the federal reserve is expected to take what action - CORRECT ANSWER Buy bonds in the open market In the event of a stock split, who Is required to maintain a record of these shareholders eligible to receive additional shares - CORRECT ANSWER Transfer agent What action is required of a broker dealer's anti money laundering program - CORRECT ANSWER Designating an AML Compliance officer Blue sky laws are regulated by what entity - CORRECT ANSWER State securities regulators. Under FINRA rules, Non cache compensation connected with the cell of variable contracts includes all of the following items except: - gifts - meals - lodging - commissions - CORRECT ANSWER commissions What is true about all US Government agency issues - CORRECT ANSWER They are exempt from registration under the securities act of 1933 A savings account at a bank is guaranteed by which entity - CORRECT ANSWER FDIC A registered representative who wants to place a mutual fund. Advertisement must obtain written approval from - CORRECT ANSWER A registered principle of the RR's firm What action violates FINRA Rules regarding selling away? - CORRECT ANSWER Engaging in private securities transactions without written prior consent of the employing BD Which investments are generally traded according to their average life, rather than their stated maturity dates - CORRECT ANSWER Asset-backed securities No load, mutual funds may have lower expense ratios than load mutual funds. For what reason? - CORRECT ANSWER No load funds are not permitted to charge a 12b-1 Fee greater than 25 basis points UTMA Accounts are opened under the tax ID of the - CORRECT ANSWER minor What is an advantage of index funds? - CORRECT ANSWER Lower management fees due to passive management of the fund Under a system of statutory voting, A common stockholder has as many votes for each vacancy on the board of directors as the number of - CORRECT ANSWER Shares owned by the stockholder In which of the follow situations is an employee of a public company permitted to trade upon information without violating insider trading laws - CORRECT ANSWER An independent securities analyst explains for the company next quarter could be markedly poorer than expected Under rule 144A, an issuer of a restricted stock is permitted to sell to which of the following investors - CORRECT ANSWER Qualified Institutional Buyers (QIBs) A registered representative (RR) wants to participate in a private securities transaction. Which of the following actions must the RR take - CORRECT ANSWER Send written notice to his supervisor outlining the activity and compensation structure Direct Participation Programs (DPP) provide: - CORRECT ANSWER exposure to non-correlated assets with steady returns Broker-dealer ABC seeks to underwrite a municipal securities offering by a local town in which the mayor is currently seeking re-election. A municipal finance professional who resides in the town and works for ABC contributed $200 to the mayor's re-election campaign further without impacting the municipal securities business of the firm, he is permitted to make an additional contribution of up to what amount. - CORRECT ANSWER $50 In a period of low inflation and economic recession, the Federal Reserve is expected to take which of the following actions - CORRECT ANSWER Buy bonds in the open market A firm is a participant is a public offering. To sell a substantial amount of the securities to its customers, the firms agrees to repurchase the shares at no less than the original sales price. Such agreements are: - CORRECT ANSWER prohibited as fraudulent and manipulative Company ABC announces a 20% stock dividend for it common shareholders. If a customer holds 1,000 shares at $50.00, what is the new price and number of shares following the payment of the stock dividend - CORRECT ANSWER 1,200 shares at $41.67 FinCEN accomplishes its mission to safeguard the financial system from the abuses of financial crime, including terrorist financing and money laundering, by enforcing: - CORRECT ANSWER The Bank Secrecy Act Call protection is most valuable to a bond owner when bond prices are generally: - CORRECT ANSWER Rising Which of the following actions is requires when a firm receives cash in excess of $10,000 from one customer in one business day - CORRECT ANSWER File a Currency Transaction Report (CTR) Which of the following consideration should a registered representative explain to a customer when recommending a 529 college savings plan - CORRECT ANSWER The potential destructibility of contributions from state taxes Which of the following security types provides investors with a stated maturity date, a floating interest rate, and an option to put the security back to a financial intermediary on a daily or weekly basis - CORRECT ANSWER Variable rate demand note A married couple who earned income that exceeded $300,000 in each of the prior two years and reasonably expects the same for the current year is: - CORRECT ANSWER an accredited investor A company announces a tender offer to its shareholders with the intent to buy a maximum of 1 million shares of its outstanding stock at $10 per share and sets no minimum number of shares to be purchased. An investor wants to participate in this offer and tenders his 1,000 share position. At the close of the offer period, only 900,000 shares have been tendered. How many, if any, of the investors shares will the company purchase - CORRECT ANSWER 1,000 To offer its shareholders a privilege to obtain its shares at a fixed price, which of the following products does a corporation issue - CORRECT ANSWER Rights All of the following risks apply to both foreign and domestic debt instruments except: - CORRECT ANSWER exchange The computation of Dollar prices and accrued interests on municipal bonds is normally on what calendar basis - CORRECT ANSWER 30/360 Which of the following statements is true about all U.S. government agency issues - CORRECT ANSWER They are exempt from registration under the Securities Act of 1933 At the time of issuance, which of the following securities normally has the longest period to expiration - CORRECT ANSWER Warrants If a market maker posts a quote of 10.00-10.10 [25x10], which of the following actions is the market maker willing to take? - CORRECT ANSWER Buy 2,500 shares at $10.00 and sell 1,000 shares at $10.10 No-load mutual funds may have lower expense ratios than load mutual funds for which of the following reasons - CORRECT ANSWER No-lead funds are not permitted to charge a 12b-1 fee greater than 25 basis points Stability in the value of a debt portfolio is greatest when: - CORRECT ANSWER maturities of the debt securities are short The primary purpose of a syndicate desk in the context of an equity offering - CORRECT ANSWER build an order book and allocated the stock Which of the following products is adversely impacted if the issuer's credit rating is downgraded - CORRECT ANSWER Exchange-traded notes (ETNs) The call provision of a bond stipulates which of the following factors - CORRECT ANSWER Call date and call price An investor owns 100 shares of XYZ common stock at the current market price of $50 per share. If XYZ conducts a 1-for-2 reverse stock split, the investor's post- split stock position will be: - CORRECT ANSWER 50 shares at $100 per share Which of the following outcomes are possible for the writer of a covered call option - CORRECT ANSWER Profit limited and loss limited At issue, which of the following debt securities mature in one year or less - CORRECT ANSWER Money market instruments Regular way settlement on Treasury bonds is: - CORRECT ANSWER next business day Under a system of statutory voting, a common stockholder has as many votes for each vacancy on the board of directors as the number of: - CORRECT ANSWER Share owned by the stockholder Under SEC Regulation S-P(Consumer Privacy), which of the following information must a firm include in its customer privacy and opt-out notices - CORRECT ANSWER The policies to protect the security of nonpublic information