NURSING MISC784 SIE FINRA Exam Questions and Answers 100%Correct Verified Latest Update 20, Exams of Nursing

Download NURSING MISC784 SIE FINRA Exam Questions and Answers 100%Correct Verified Latest Update 20 and more Exams Nursing in PDF only on Docsity! DO NOT COPY NURSING MISC784 SIE FINRA Exam Questions and Answers 100%Correct Verified Latest Update 2023-2024 1) The Federal regulatory body that governs the securities industry is: >>>The SEC 2) A fully disclosed BD: >>>is an inducing firm clearing its transactions through a carrying firm 3) An intermediary between the buy and sell sides of a transaction is known as >>>a clearing agent 4) For the Depository Trust and Clearing Corporation (DTCC), all of the following are true EXCEPT: it is a member of the Federal Reserve System It acts as a retail bank servicing savings and checking accounts c. it serves for the purpose of providing custody of securities d. it is a worldwide clearing agent >>>b. it acts as a retail bank servicing savings and checking accounts 5) Your BD acts as a prime broker for an institutional account. In this arrangement, your BD is likely to be providing which of the following services? >>>clearing and transaction settlement services for executing brokers 6) An individual or institution willing to hold securities positions in its own proprietary account for the purpose of providing liquidity to the marketplace is >>>a market maker 7) An entity such as a corporation wishing to offer securities for sale to the public for the purpose of raising capital is >>>an issuer P a g e 1 | 238 8) A nonprofit organization requiring members to pay assessments into a general insurance fund used to meet customer claims in the event of a BD bankruptcy is >>>the Securities Investors Protection Corporation (SIPC) 9) The FDIC provides insurance guaranteeing the safety of a depositor's accounts in FDIC member banks for each deposit up to: >>>$250,000 10) Determining monetary policy and taking actions to implement those policies is the responsibility of >>>the Federal Reserve Board (FRB) 11) The Magnolia Steel Corporation needs to build a refinery plant. It is estimated to cost 12) $750 million to complete. What market can be used to raise the money needed to build the new plant? >>>Secondary Market P a g e 2 | 238 29) Economic data shows that the GDP has been declining steadily over the past two quarters. This would suggest >>>a recession 30) All of the following would be considered a defensive industry security EXCEPT: A. T o b a c c o s t o c k B . F o o d c h a i P a g e 5 | 238 n s t o c k B. Steel company stock C. Utility company stock >>>steel company stock 31) Which of the following would be a leading economic indicator? 32) S&P 500 Index 33) Industrial production 34) Duration of unemployment d. GDP >>>S&P 500 Index 35) When a government actively manipulates the economy through tax and spending policies, this is referred to as >>>Keynesian Economics 36) A major distinction of secondary offering is >>>proceeds are not received by the issuer of the securities 37) How many primary offerings can a corporation issue? >>>Unlimited 38) A corporation can only have one initial public offering (IPO), but there is no limit on the number of subsequent public offerings (SPOs) or additional public offerings (APOs) issued. P a g e 6 | 238 39) What federal law regulates the initial sale of securities to the public >>>The Securities Act of 1933 40) A tombstone advertisement includes all of the following information EXCEPT 41) the offering price 42) the name of the issuer 43) the risks associated with the offering 44) the number of shares to be sold >>>the risks associated with the offering 45) Mark the following as true or false: 46) A The final prospectus may be delivered via the internet before a sale 47) A shelf registration is good for 5 years P a g e 7 | 238 What is the maximum loss that Reyes can lose on his investment? >>>No more than his original investment of $200,000 61) Rights of common stockholders include all of the following EXCEPT: P a g e 10 | 238 62) voting for the board of directors (BOD) 63) transferring ownership of the stock at any time 64) receiving audited semiannual reports 65) preemptive rights >>>c. receiving audited semiannual reports 66) Zoe Smith wants to invest $100,000 in ABC common stock. Which of the following would be appropriate objectives when placing the order? a. A long-term hedge against inflation b. The limited liability of ABC's common stock c. The stock may appreciate in value and pay a consistent cash dividend d. The need for monthly dividend checks >>>A long term hedge against inflation 67) The stock may appreciate in value and pay a consistent cash dividend 68) Which two of the following preference items define preferred stock? 69) Preferred dividends must be paid before paying common dividends 70) Preferred dividends are guaranteed; common dividends are not 71) Preferred stockholders are paid before common stockholders in the event of liquidation P a g e 11 | 238 72) Preferred stockholders voting rights exceed those of common stockholders 73) >>>Preferred dividends must be paid before paying common dividends 74) Preferred stockholders are paid before common stockholders in the event of liquidation 75) Define Callable >>>Often redeemed by the issuer when interest rates fall 76) Define Convertible >>>May be exchanged for shares of the corporation's common stock 77) Define Cumulative >>>Is entitled to dividend in arrears 78) Define Straight >>>No special privileges; dividends not paid are not recovered 79) Define Participating >>>May receive a higher-than-stated dividend in profitable years P a g e 12 | 238 90) An investor is long 1 January 30 call at 2: Calculate the breakeven: >>>= 32 (For a call, BE = Strike Price (30) + Premium (2) 91) 30 + 2 = 32 92) Breakeven 93) Investor is long 1 January 30 call at 2. Calculate the Maximum Gain >>>= Unlimited 94) The stock could theoretically go to infinity 95) Investor is long 1 January 30 call at 2. Calculate the Maximum Loss >>>= $200 (the most an investor can lose when purchasing options is the premium paid) 96) (2 points = $200) 97) Maximum Loss 98) Investor is long 1 January 15 put at 4. Calculate the Breakeven >>>= 11 For a put, BE = strike price - premium 99) (15 - 4 = 11) 100) Breakeven 101) Investor is long 1 January 15 put at 4. Calculate the Maximum Gain >>>$1,100 [market attitude for a long put is bearish; the stock can fall to zero leaving the investor with a gain from the BE point (11) down to 0] 102) Investor is long 1 January 15 put at 4. Calculate the Maximum Loss >>>$400 P a g e 15 | 238 103) All of the following are true EXCEPT: a. breakeven (BE) is always the same number for both buyer and seller of an option contract b. the maximum loss for options buyers is the premium paid c. the maximum gain for options buyers is always unlimited d. BE is calculated using the same formula for both buyer and seller >>>c. the maximum gain for options buyers is always unlimited 104) BE is calculated using the same formula for both buyer and seller. Therefore, BE is always the same number for both buyer and seller. the formula for calls is strike price plus premium and the formula for puts is strike price minus premium. The most any options buyer can lose (max loss, or ML) for a call or a put is the premium paid. 105) However, max gain (MG), while unlimited for a call buyer (bullish), is limited for a put P a g e 16 | 238 106) buyer. Remember that the market attitude of a put buyer is bearish, and the farthest the stock could fall is zero. Therefore, the put buyer's MG is limited to amount from BE point to zero. 107) Listed options transactions settle regular way 108) on the third Friday of the expiration month 109) on the next business day after trade date (t + 1) 110) on the third business day after trade date (t + 3) 111) when the option finally expires >>>b. on the next business day after trade date (T + 1) 112) Regarding assignment of exercises notices, which of the following are TRUE? a. The Options Clearing Corporation (OCC) assigns short BD's randomly b. The OCC assigns short BD's using the first in, first out (FIFO) accounting method c. Short BD's can assign their short customers randomly only d. Short BD's can assign their short customers randomly, using the FIFO accounting method or by any other fair method. >>>The OCC assigns short BDs randomly 113) Short BDs can assign their short customers randomly. using the FIFO accounting method or by any other fair method P a g e 17 | 238 130) An investment established by states to provide other government entities such as cities or counties a place to invest funds short term is: >>>Local government investment pools (LGIPs) 131) Regarding annuity products offered by insurance companies, which of the following is TRUE? a. Variable annuities are securities; fixed annuities are not b. Fixed annuities are securities; variable annuities are not c. Neither variable nor fixed annuities are securities d. Both variable and fixed annuities are securities >>>Variable annuities are securities; fixed annuities are not 132) Premiums paid into variable annuities are invested in the separate account, which is a portfolio of investments intended to keep pace with inflation. Investing the premiums this P a g e 20 | 238 133) way, the returns in the separate account are not guaranteed, and therefore a loss of principal is possible for the investor. Because the investor is assuming the risk, variable annuities are considered securities. Fixed annuities, however, guarantee a fixed rate of return; therefore, the risk is shouldered by the insurance company instead of the investor. 134) A private, unregulated investment company organized in such a way so as to invest and achieve high returns utilizing debt leverage and derivative products such as options and margin is best described as: >>>a hedge fund 135) An investor has placed money in a debt-like instrument issued by a financial institution and linked to the performance of the S&P 500 Index. From the investment which has a stated maturity date but makes no interest payments, the investor anticipates receiving a cash payment minus any applicable management fees when the instrument matures. This describes which of the following investments? >>>Exchange-traded note (ETN) 136) One of the advantages of a security being traded on a listed stock exchange is the ready availability of buyers and sellers. This has the tendency to reduce or even eliminate: >>>liquidity risk 137) Before making an investment, it is wise to evaluate the potential risk involved. It is safe to assume that A. The greater the risk, the greater the potential reward B. The greater the risk, the lower the potential reward >>>the greater the risk, the lower the potential reward 138) Twenty years ago, an investor purchased an AAA rated corporate bond P a g e 21 | 238 with a coupon rate of 6%. The bond is about to mature and when searching for a new bond, it seems that the rates being paid on 20-year AAA bonds is about 4%. This would be an example of >>>reinvestment risk 139) the risk that occurs when an investor is unable to reinvest the proceeds from the redemption of a security at the same rate previously earned. 140) When the interest rate paid on a debt security is less than the current inflation rate, the investor suffers from which of the following risks? >>>Purchasing power risk 141) also known as inflation risk, is the risk faced by investors in almost all debt securities. it is most prevalent in a time of rising inflation where the interest payments on the security are below the rate of inflation. This will have the effect of reducing the purchasing power of the interest payments received. 142) A company operating in State A has just been notified that the state legislature has passed a new law on permitted emissions, and several of the company's plants in that P a g e 22 | 238 160) loss is limited to the amount of the investment 161) the investor is bearish >>>c. loss limited to the amount of the investment 162) Which of the following is a taxable event for an investor when it occurs? a. stock dividend distribution b. cash dividend distribution c. forward split 163) d. reverse split >>>b. cash dividend distribution 164) there is no economic benefit for investors when a stock splits or when a stock dividend occurs. In each of these cases, the investor's cost basis in the investment is adjusted based on the resulting stock the investor owns after the split or additional stock received from a stock dividend. Only cash dividends are taxable (in the year they are distributed). 165) A stock is purchased on June 10th of this year and sold on January 10th of next year for a profit of $200. How will the $200 be taxed? >>>As a short-term capital gain, taxed at the ordinary income tax rate 166) (holding period is less than one year, therefore, the gain is short term and is taxed at same rate as taxpayer's other ordinary income.) 167) A customer has returned a signed proxy statement for stock held in street name by a member firm. He did not indicate how he wanted to vote P a g e 25 | 238 for any issues listed on his ballot. What action, if any, is required of the member firm? >>>The firm must vote in accordance with the recommendations made by the issuer of the stock 168) Which of the following securities will settle regular way, T + 1? a. Cor por ate bo nd b. Re ve nu e bo nd C. Tre as ury bo nd 169) D. GNMA >>>C. Treasury bond 170) regular way settlement for federal government securities (T-bills, notes, and bonds) and options is T+1 171) An individual opens an account with your firm. She tells you that upon her death, she wants any assets in the account to be divided equally among her 3 children. She also wants the ability to change the allovation in the event that conditions change and one of the children is in greater need than the others, P a g e 26 | 238 but she does not want to incur any significant legal expense. You would suggest that the account be opened 172) as a joint account with the right of survivorship P a g e 27 | 238 187) whole life insurance issued by the ABC Life Insurance Company 188) mutual funds 189) gold coins made by the U.S. Treasury >>>b. whole life insurance issued by the ABC Life Insurance Company 190) (any form of life insurance is a prohibited investment in an IRA, however, another insurance company product, an annuity, is permitted) 191) Which of the following is NOT true for trade confirmations? 192) Commissions are added to the sales proceeds to arrive at the amount the seller is to receive 193) Commissions are not shown when a markup or markdown is charged 194) The firms acting capacity as agent or principal is shown 195) They are received by both parties at or before the settlement date >>>a. Commissions are added to the sales proceeds to arrive at the amount the seller is to receive 196) One of the concerns of a registered representative (RR) is complying with the anti- money laundering (AML) rules promulgated under the Bank Secrecy Act. There are several stages to money laundering, and it is generally agreed that the one where money laundering is most easily detected is: >>>Placement 197) the first stage of laundering is when funds or assets are moved into the laundering system. This stage is recognized as the time when illegal P a g e 30 | 238 funds are the most susceptible to detection. 198) How long must a BD hold the record of a complaint? >>>4 years 199) Account statements provided to customers would reflect a. year-to-date activity in the account b. long positions, short positions, or both c. whether the account was discretionary or non-discretionary d. debt or credit balances >>>long positions, short positions, or both 200) debt or credit balances P a g e 31 | 238 201) Customer account statements are required to be sent quarterly unless the account contains 202) bonds 203) NYSE- listed stocks c. options 204) d. penny stocks >>>d. penny stocks 205) the minimum frequency for sending customer statements is once per quarter. If there is any activity in the account, then a statement must be sent the following month in which that activity took place. However, if the account contains any securities meeting the SEC's definition of penny stock, statements must be sent monthly. 206) When a client makes a trade, industry rules require that a confirmation be delivered no later than completion of the trade. Included on that confirmation would be all of the following information EXCEPT 207) the number of bonds in the transaction 208) the number of shares of stock in the transaction 209) the CUSIP number 210) the capacity in which the BD executing the trade acted >>>a. the number of bonds in the transaction 211) (when securities transaction involves bonds, the par value is indicated, not the number of bonds) 212) Many years ago, a client purchased 100 shares of ABC common stock. P a g e 32 | 238 activity can be defined as >>>a wash sale 228) Regarding a member firm's continuing payment of commissions to a retired registered representative, each of the following statements are true EXCEPT: 229) an agreement to pay continuing commissions to retired RRs must be in writing 230) commissions may be paid to a representative's beneficiary or estate after death 231) a member firm may pay continuing commissions to its retired RRs that are derived from accounts held for continuing customers, regardless of whether customer funds or securities are added to the accounts during retirement P a g e 35 | 238 232) a retired RR may receive commissions derived from new customers to the book 233) >>>c. a member firm may pay continuing commissions to its retired RRs that are derived from accounts held for continuing customers, regardless of whether customer funds or securities are added to the accounts during retirement 234) A joint trading account can be created and profits and losses shared between which of the following parties? 235) BD (firm) and retail customer, but only if sharing is in proportion to the investment 236) BD (firm) and institutional client, but only if sharing is in proportion to the investment 237) RR and neighbor with principal approval, and only the customer has contributed to the account 238) RR and mother-in-law, and only the mother-in-law has contributed to the account 239) >>>d. RR and mother-in-law, and only the mother-in-law has contributed to the account 240) firms cannot have joint accounts with customers. Representatives may have joint accounts with customers only if the arrangement has been approved by the principal and account proceeds are shared in proportion to each party's contribution. Exceptions to the proportion rule are made when sharing in a joint account with immediate family members (including in- laws). 241) FINRA membership eligibility standards are determined by P a g e 36 | 238 >>>The National Adjudicatory Council 242) (NAC) 243) An individual applying for registration as an associated person will be rejected if he 244) submitted an application for registration which omitted mention of a minor traffic violation that occurred two years ago 245) failed to include the ZIP code on his home address 246) is under a court injunction regarding a domestic issue 247) is under an order of a foreign financial regulator denying, suspending, or revoking his registration or barring him from association with a BD >>>d. is under an order of a foreign regulator denying, suspending, or revoking his registration or barring him from association with a BD 248) As a means of protecting the integrity of the industry and protection of the investing public, associated persons of FINRA member firms must submit fingerprint records to: 249) >>>The U.S. Attorney General P a g e 37 | 238 263) FINRA describes 4 sets of rules and codes in its manual. Which of the following is NOT one of them? 264) Code of Arbitration Procedure 265) Uniform Practice Code 266) Code of Procedure 267) Code of Business >>>d. Code of Business 268) 4 sets include: 269) Condu ct Rules Code of Procedure 270) Uniform Practice Code Code of Arbitration 271) FINRA's Conduct Rules dealing with outside business activity (OBA) of an associated person of a member firm require: >>>written notification to the employer 272) You overhear a discussion about a registered representative (RR) being disciplined because of SELLING AWAY. Which of FINRA's Conduct Rules was violated? 273) >>>Private securities transaction 274) the Conduct Rules define a private securities transaction as any sale P a g e 40 | 238 outside an associated person's regular business and her employing member. Private securities transactions are also known as selling away. 275) A BD may give other firms' employees gratuities without violating the rules, provided the compensation's total value does not exceed >>>$100 276) under the current rules, the cash gift that may be made without raising concern is $100 per person per year. 277) One way distributors of mutual funds attempt to encourage BDs and their RRs to include their funds in recommendations to clients is to provide educational seminars. FINRA's Conduct Rules permit this activity as long as the sponsor does not: >>>offer reimbursement for the travel expenses of the attendee's spouse 278) although expenses for representatives of a BD may be reimbursed, expenses of a spouse or other guest may not. The seminar must be held in an appropriate location, and the company's office would certainly qualify. 279) Regulators are concerned about the use of political influence to obtain business. This is particularly important with municipal securities because elected officials frequently are P a g e 41 | 238 280) the people who select the underwriters for their community's financing. As a result, the MSRB issued Rule G=37 which, among other things, >>>prohibits municipal firms from engaging in negotiated underwriting with an issuer for two years after a contribution is made to an official of that issuer by a municipal securities dealer 281) Political contributions are permitted, but if made to an official of an issuer by the member firm in any amount, or by an MFP in excess of the de minimis limit ($250), the firm is not permitted to engage in negotiated underwritings with that issuer for a period of two years. The two-year ban would also apply to the firm if an MFP of the firm makes any contribution to a municipal official for whom the MFP cannot legally vote. 282) A customer complaint against one of the firm's registered representatives (RRs) involves allegations of misappropriation of funds or securities. The member firm must 283) >>>notify FINRA within 30 calendar days 284) Brokers placing orders for their own account ahead of notably large customer orders that are known to be entering the market in an attempt to gain from the price movement that is likely to occur is an example of what prohibited activity? >>>Front running 285) When the money supply in the economy decreases, >>>interest rates go up, hence borrowing and spending for consumers is more difficult 286) Which of the following retirement plans does not require minimum distributions once the participant has reached age 70 1/2? >>>Roth IRA 287) Which of the following oil and gas direct participation programs might be considered the riskiest? P a g e 42 | 238 308) after its IPO, a corporation can have only one more primary offering - its subsequent primary offering (SPO) 309) a corporation can have only one primary offering - the IPO 310) a corporation can have two primary offerings - the IPO and an additional public offering (APO) >>>a. there is no limit to the number of primary offerings a corporation can issue 311) A diversified fund charging 0.4% of net assets per year as a 12b-1 fee may NOT make which of the following statements? 312) the fund will pay its investment adviser a specified percentage of funds under management 313) the fund will have a calculated fully disclosed expense ratio 314) the fund will have a diversified portfolio with a stated investment objective P a g e 45 | 238 315) the fund is a no-load fund >>>d. the fund is a no-load fund 316) A customer has a short-term investment time horizon and a fairly certain need for funds she wishes to invest. Which of the following might meet those 2 investment objectives? a. co mm on sto ck b. cor por ate bon ds b. money market instruments c. government bonds >>>c. money market instruments 317) Tax credits for partners in a real estate program can come primarily from 318) >>>government-assisted housing and historic rehabilitation properties 319) An officer of a financial firm has been identified what might represent suspicious behavior on the part of a customer, involving more than $5,000. When must the firm file a suspicious activity report (SAR)? >>>Within 30 calendar days 320) Each of the following makes regular interest payments EXCEPT a. trea sury STRI P a g e 46 | 238 PS b. corp orat e bon ds c. trea sury bon ds 321) d. treasury notes >>>Treasury STRIPS 322) Treasury STRIPS have the coupons removed and therefore do not make regular interest payments. 323) A market maker provides a firm quote to another broker/dealer then refuses to buy or sell at the price quoted. This is a violation where the market maker is said to be 324) >>>backing away 325) Rule 144 imposes volume limitations on the number of shares that can be sold by 326) control persons selling registered stock held for 1 year 327) control persons selling restricted stock held for 2 years 328) non-affiliates selling registered stock held for 1 month 329) non-affiliates selling restricted stock held for more than 6 months >>>Control persons selling registered stock held for 1 year P a g e 47 | 238 approval 345) The repayment or maturity date of a banker's acceptance is normally which of the following? >>>As short as 1 day or as long as 270 days 346) a banker's acceptance is a money market instrument used to finance international and domestic trade. A banker's acceptance is a check drawn on a bank by an importer or exporter of goods and represents the bank's conditional promise to pay the face amount of the note at maturity (normally less than three months). 347) An investor purchased and then sold a security 8 months later for a gain. This gain: 348) >>>is considered to be a short-term gain, and it will be taxed at the same rate as the taxpayer's other ordinary income 349) Which of the following would be the interest rate charged for overnight, uncollateralized loans negotiated between two money center banks? P a g e 50 | 238 a. P ri m e r a t e b . R e p o r a t e b. Discount rate c. Federal funds rate >>>d. Federal funds rate 350) federal funds rate is the interest rate charged by one institution lending federal funds to another. 351) Which of the following would constitute improper use of a customer's securities or funds? 352) Agreeing to a stock purchase the representative thinks is beyond the client's means 353) Selling a bond at the client's insistence during a period of high interest rates P a g e 51 | 238 354) Lending securities for a short sale when the client has agreed to it on the phone 355) Borrowing a client's funds without permission, though it will be repaid the same day 356) >>>Lending securities for a short sale when the client has agreed to it on the phone & 357) Borrowing a client's funds without permission, though it will be repaid the same day 358) All of the following are nonsystematic risks EXCEPT 359) call risk 360) purchasing power risk c. business risk 361) d. capital risk >>>b. purchasing power risk 362) it is a systematic risk 363) All of the following unregistered persons may under certain circumstances receive commissions from a FINRA member firm EXCEPT: 364) a retired broker who still has commissions coming from preretirement trades 365) a suspended broker who recommends the broker's firm for a transaction 366) the spouse of a retired broker who is still owed commissions 367) a foreign nonmember firm ineligible for FINRA membership >>>b. a suspended broker who recommends the broker's firm for a P a g e 52 | 238 378) $5,000 x 50% = 2,500. 2,500 + 5,000 = 7,500 379) required minimum distribution (RMD). If distributions do not begin by April 1 of the year after the individual turns age 70 1/2, a 50% insufficient distribution penalty applies. It is applicable to the amount that should have been withdrawn on the basis of IRS life expectancy tables. 380) The coupon rate on a debt security represents >>>the interest rate the issuer has agreed to pay the investor 381) An associated person of a FINRA member firm would not be considered a municipal finance professional (MFP) if involved solely in which of the following? 382) municipal securities sales to customers 383) underwriting municipal securities for the firm 384) research involving municipal securities for the firm 385) municipal securities communications with customers >>>c. research involving municipal securities for the firm P a g e 55 | 238 386) During the cooling-off period, underwriters may NOT >>>distribute sales literature or advertising material 387) Which of the following choices would BEST describe a "follow-on" offering? 388) the common stock that is issued attached to a 'rights' offering 389) an issue of shares by a public company that is already listed on an exchange 390) an offering to the employees of the issuing company 391) an IPO that has additional shares added by the issuer on the effective date >>>b. an issue of shares by a public company that is already listed on an exchange 392) Which of the following would be defined as a penny stock? a. Nasdaq listed stock trading at $4 per share II. Bulletin Board stock trading at $4 per share 393) Exchange Listed stock trading at $4 per share 394) OTC Pink stock trading at $4 per share >>>Bulletin Board & 395) OTC Pink 396) A penny-stock is a NON-NASDAQ stock trading under $5 per share. 397) Which of the following choices would BEST describe a "follow-on" offering? P a g e 56 | 238 398) The common stock that is issued attached to a "rights" offering 399) An issue of shares by a public company that is already listed on an exchange 400) An offering to the employees of the issuing company 401) An IPO that has additional shares added by the issuer on the effective date >>>b. An issue of shares by a public company that is already listed on an exchange 402) An investor needs to decide whether or not they would like to maintain their percentage of ownership in a company that has decided to increase the number of outstanding shares. Which of the following is the best description of what is taking place? >>>Rights will be distributed to existing stockholders with an exercise price lower than the current market value 403) A broker-dealer is confronted with margin deposit due but not yet received. The BD can choose to take no action, neither selling out the securities nor requesting an extension, if the amount due is: >>>Less than $1,000 P a g e 57 | 238 417) Which of the following would be unlawful regarding use of a mutual fund prospectus? 418) Failing to highlight a small section the customer has specifically asked about 419) Sending a prospectus to someone who has shown no interest in the fund 420) Calling an investor's attention to a section that may be interesting 421) Leaving a typographical error in the text unmarked >>>c. Calling an investor's attention to a section that may be interesting 422) a prospectus may not be marked, highlighted, or altered in any way, nor may steps be taken to call an investor's attention to some passage or section that might be of special interest. 423) On October 8, an investor discovers that a security purchase that took place on August 5 of the same year was prompted by fraudulent information provided by the broker- dealer on the day of the purchase. How long does the investor have to bring action? 424) >>>Until October 7 of the following year 425) The statute of limitations on fraudulent practices, under the Securities Exchange Act of 1934, is 3 years from the event itself, or one year from its discovery, whichever comes sooner 426) SKRAM corporation is appealing directly to the shareholders of IDNIC corporation to acquire shares of IDNIC stock. This appeal is best described as >>>a hostile takeover with IDNIC the target company 427) Which of the following may NOT be purchased on margin but can be P a g e 60 | 238 used as collateral for a margin loan after being held for 30 days? >>>Mutual funds 428) Neither mutual funds nor new issues can be purchased on margin. However, both may be used as collateral for a margin loan after being eld for 30 days. Options are not marginal securities, but equities, bonds, and warrants are. 429) For revenue bonds issued by a state or municipality, which of the following is TRUE? 430) Interest and principal payment is guaranteed 431) Interest and principal payment is backed by the full faith and credit of the issuer 432) Interest will be paid only if the enterprise owned and operated by the state or municipality has sufficient earnings to cover the interest payments or the debt service revenue P a g e 61 | 238 433) The bonds carry an unqualified promise to pay interest and principal backed by the power of the issuer to levy taxes >>>c. Interest will be paid only if the enterprise owned and operated by the state or municipality has sufficient earnings to cover the interest payments or the debt service reserve. 434) Treasury bills pay >>>all interest at maturity 435) Yield to call (YTC) calculations reflect the early redemption date and: a. acceleration of the discount gain if the bond was originally purchased at a premium b. acceleration of the discount gain if the bond was originally purchased at a discount c. accelerated premium loss if the bond was originally purchased at a premium d. accelerated premium loss if the bond was originally purchased at a discount 436) >>>Accelerated of the discount gain if the bond was originally purchased at a discount 437) & 438) Accelerated premium loss if the bond was originally purchased at a discount 439) List the order of payment from first to last in the event of a corporate liquidation: >>>1. Taxes and wages P a g e 62 | 238 o l d e r 450) d. long party >>>b. writer 451) Common shareholders have the right to >>>limited access to a company's books and records 452) Put buyers are >>>bearish 453) Mr. Smith enters a trade in a stock at the same time as Mr. Jones, who has inside information regarding that company, Mr. Smith is considered >>>a contemporaneous trader 454) Examples of investments in assets that would be considered illiquid would be all of the following EXCEPT: 455) real estate 456) common stock 457) classic automobiles 458) works of art >>>b. common stock 459) A convertible feature for a corporate bond allows >>>a bondholder to convert a debt instrument into securities that give the investor ownership rights 460) If large money center commercial banks begin to lower their prime rates, which of the following is most likely to occur? 461) smaller banks will follow by lowering the discount rate P a g e 65 | 238 462) smaller banks will need to increase their lending rates for creditworthy corporate customers 463) smaller banks will need to offset the lower prime rate by increasing the broker call loan rate P a g e 66 | 238 464) smaller banks >>>d. smaller banks will lower lending rates for creditworthy corporate customers as well. 465) Which of the following orders need NOT be immediately filled in their entirety? a. Immediate or cancel (IOC) b. Fill of kill (FOK) c. Market at open d. All or none (AON) >>>Immediate or Cancel & 466) All or none 467) Which of the following regarding income is TRUE? 468) salary or bonuses are portfolio income; interest and dividends are investment income 469) salary or bonuses are earned income; interest and dividends are investment income 470) salary, bonuses, interest, and dividends are all investment income 471) salary, bonuses, interest, and dividends are all portfolio income >>>b. salary or bonuses are earned income; interest and dividends are investment income 472) A broker-dealer has engaged in a reverse repurchase (repo) P a g e 67 | 238 another corporation that it owns. These debt securities are known as: >>>collateral trust bonds 489) As they apply to knowing your customer and making recommendations which of the following statements are TRUE statements? >>>The term investment strategy applies to recommendations to buy, hold and sell 490) & 491) Non-financial considerations such as marital status and age should be considered as well as financial considerations when making recommendations 492) Ownership of a security indicates that one is: >>>long the position and bullish 493) BDs who reserve the right to disclose nonpublic private information about their customers to unaffiliated parties must: >>>provide notice to customers at the time of the account opening and provide reasonable means for customers to opt out of such disclosures. P a g e 70 | 238 494) An example of securities that are established by states to provide other government entities such as cities, towns, school districts or state agencies with a short-term investment vehicle to invest funds include: >>>Local Government Investment Pools 495) Identify 2 trading strategies that a hedge fund could employ in its portfolio but a mutual fund cannot >>>1. Trading on margin to purchase portfolio securities 496) Selling short stocks 497) If a margin deposit is late, an extension request made by the BD >>>is not required but can be made, and may or may not be granted 498) A customer buys a 4% Treasury bond, maturing in 10 years, at a price of 96.08. The yield to maturity is >>>greater than nominal yield 499) A bond whose price is below par (priced at a discount) has a higher YTM than current yield 500) An investor has been putting aside funds for retirement in a non- qualified variable annuity for over five years. She is now age 66 and takes a lump-sum distribution. How are the earnings taxed? >>>as ordinary income 501) The regulatory element of training requires that all registered persons complete a computer-based training session how frequently? >>>Within 120 days of hte person's second registration anniversary and then every 3 years thereafter 502) Bonds can typically be issued with >>>term, serial, or balloon maturities P a g e 71 | 238 503) The growth potential in the price of preferred shares is generally considered to be 504) >>>less than that of the issuer's common shares 505) An individual would most likely be statutorily disqualified from working the in the securities industry for which of the following reasons? a. Willful failure to disclose personal bankruptcy or unsatisfied liens b. Willful failure to disclose motor vehicle fines in excess of $1,000 c. Conviction for a DUI resulting in personal injury - a felony d. Conviction for felonious assault >>>a. Willful failure to disclose personal bankruptcy or unsatisfied liens 506) A call option reaches its expiration date and goes unexercised. This means >>>the buyer loses the premium paid P a g e 72 | 238 526) long-term gains are taxed at more favorable long-term rates 527) capital gains are associated with the sale of securities and other real assets 528) short-term gains are taxed at less favorable ordinary income tax rates >>>a. gains on securities for a position held at least 12 months are not taxable 529) Treasury receipts are backed by >>>the issuing broker-dealer 530) What is the "spread" on a stock quote? >>>The difference between the bid price and the ask price or offer 531) A company is looking to raise additional capital to fund an expansion plan. The company's senior management chooses to issue additional bonds to the general public. The best expression to explain this type of offering would be a: >>>primary offering 532) The corporation in this case looks to increase its liquid capital by offering bonds. 533) An officer of a financial firm has identified what might represent suspicious behavior on the part of a customer, involving more than $5,000. When must the firm file a suspicious activity report (SAR)? >>>Within 30 calendar days 534) Which of the following statements would describe the Fourth Market? >>>A market for institutional investors in which large blocks of stock, both listed and unlisted, trade in transactions unassisted by broker-dealers 535) Your broker-dealer, rather than clear its own securities transactions, P a g e 75 | 238 chooses to introduce its business to another firm that will clear, processes and handle all back- office operations for it. The firm receiving the business is known as >>>a carrying firm 536) a firm that chooses to 'introduce' its customers' business to another firm to clear and process transactions, as well as handle all back-office tasks such as sending trade confirmations and taking custody of customer funds and securities, is known as an introducing firm. The firm receiving the business is known as the "carrying" or "clearing" firm 537) An investor has some stock held in street name and has just received proxy statements forwarded by the broker-dealer for an upcoming shareholders' meeting. If the investor wishes the shares to be voted as recommended by the issuer's management, which of the following must the investor do? >>>Sign and return the proxy statements by the 10th day before the meeting 538) Which of the following are methods of registering securities within a state? 539) >>>Registration by coordination & 540) Registration by qualification P a g e 76 | 238 541) An issuer that is already a publicly traded company wants to register new securities without selling any of the shares until later when it anticipates it will be retooling all of its existing manufacturing plants. Which of the following applies? 542) this can be accomplished by utilizing a new IPO, which is necessary for registration of all new shares 543) this cannot be done because newly registered securities must be made available for sale immediately 544) this can be accomplished by utilizing a shelf registration specifically designed to register shares presently to be sold later 545) this can be accomplished by utilizing an additional issue offering, which is specifically for publicly traded companies wanting to register new shares to be issued later >>>c. this can be accomplished by utilizing a shelf registration specifically designed to register shares presently to be sold later. 546) Which of the following are TRUE of municipal revenue bonds? a. They are secured by a specific pledge of property b. They are a type of general obligation bond c. They are not subject to statutory debt limits d. They are backed by a facilities ability to generate revenue >>>They are not subject to statutory debt limits P a g e 77 | 238 563) An investor owning 500 shares of MES stock received notice that the stock had undergone a 2:1 forward split when the stock's market price was $10 per share. The investor now owns >>>1,000 shares worth $5 per share 564) All of the following are true for 529 plans EXCEPT: 565) plan donors must be related to the student benefactor 566) contributions to the plan are considered gifts for tax purposes 567) withdrawals would be tax free at the federal level if used for qualified education expenses 568) any adult can open a 529 plan for a student >>>a. plan donors must be related to the student benefactor 569) What happens to the contents of a custodial account in the event of the death of the beneficial owner (the minor child)? >>>The custodian's fiduciary responsibility ceases P a g e 80 | 238 570) & 571) The account passes to the minor's estate 572) FINRA is concerned about potential conflicts of interest in providing incentives or rewards for selling a sponsor's product. Which of the following situations regarding a product sponsors product training or education for outside RRs would FINRA disallow? 573) Spouses are included in the invitation with travel expenses paid for 574) a member firm's permission for its RRs to attend is required 575) Separate outings are planned in conjunction with the training at the expense of the attendees if they wish to participate 576) A training location is chosen based on its being convenient for attendees to get to and its proximity to the main office >>>a. Spouses are included in the invitation with travel expenses paid for 577) Which of the following corporate actions are designed to allow investors to buy shares of stock under specific, defined conditions? a. A righ ts offer ing II. A forw ard P a g e 81 | 238 split III. Issui ng warr ants 578) IV. A stock dividend >>>A rights offering & 579) Issuing warrants 580) Which of the following describes the results of a 1 for 2 reverse stock split? >>>Half as many shares at twice the original prie 581) If a stock price has become too low, a corporation may carry out a reverse stock split. 582) The sales charge for Class A shares may NOT exceed: >>>8.5% of the total investment 583) The decision to pay a dividend rests with >>>the BOD but it is not guaranteed 584) Which of the following would be unacceptable reasons for an officer of a member firm to make a contribution to the election campaign of a political candidate? 585) the candidate is a member of the officer's political party 586) the candidate has promised to steer business to the officer's firm P a g e 82 | 238 604) debentures 605) preferred stock 606) option contracts >>>d. option contracts 607) Priority at dissolution for preferred shareholders means that they are paid: >>>After all creditors 608) & 609) Before common sareholders 610) Regarding a corporate bankruptcy and the liquidation priority, which of the following is accurate? >>>Debt securities claims are satisfied before equity securities claims 611) All of the following SROs function under the SEC's oversight EXCEPT: a. C B O E b . F S L I C c . M P a g e 85 | 238 S R B 612) d. FINRA >>>b. FSLIC 613) Selling shares not yet borrowed or located to be borrowed is: >>>known as naked short sale and is prohibited 614) All of the following are issuer transactions where the proceeds of the offering go to the issuing company EXCEPT: 615) IPO 616) REP O c . S P O 617) d. APO >>>b. REPO 618) All of the following are terms that can be used to describe an option contracts strike price relative to the price of the underlying stock EXCEPT: a. i n t h e P a g e 86 | 238 m o n e y b . a t t h e m o n e y b. out of the money c. above the money >>>d. above the money 619) Which of the following would constitute improper use of a customer's securities or funds? 620) agreeing to a stock purchase the representative thinks is beyond the client's means 621) selling a bond at the client's insistence during a period of high interest rates 622) lending securities for a short sale when the client has agreed to it on the phone P a g e 87 | 238 b . t r e a s u r y b i l l s b. treasury bonds c. blue chip industrials >>>c. treasury bonds P a g e 90 | 238 640) A customer has a cash balance in her account together with long positions in several securities. She has made no securities transactions in the account during the past 18 months. >>>Quarterly 641) Under FINRA rules, which of the following activities by a registered representative requires written notification to her firm? 642) Volunteering as a youth soccer league coach 643) Gambling resulting in winnings in excess of $10,000 644) Driving part time for a transportation network company on the weekends 645) Selling nonproprietary investment company securities products through her firm 646) >>>c. Driving part time for a transportation network company on the weekends 647) Under the Securities Act of 1933, registration is required for which of the following securities? 648) Eurodollar bonds 649) Municipal securities 650) American Depositary Receipts (ADRs) 651) Securities issued by the federal government >>>d. American Depositary Receipts (ADRs) 652) Which of the following statements is true about treasury stock? 653) it has voting rights 654) it receives dividends P a g e 91 | 238 655) it is issued stock that has been subsequently reacquired by the corporation 656) it is authorized stock that has not been issued and is held in the corporations treasury 657) >>>c. it is issued stock that has been subsequently reacquired by the corporation 658) Which of the following Form U4 reportable events results in a statutory disqualification? 659) a personal bankruptcy filing 660) a written customer complaint alleging misappropriation of assets 661) a felony theft charge 662) a felony conviction for a DUI charge >>>d. a felony conviction for a DUI charge P a g e 92 | 238 t s b . o p t i o n s b. warrants c. repurchase agreements >>>c. warrants 676) Under SEC Regulation S-P (Consumer Privacy), which of the following information must a firm include in its customer privacy and opt-out notices? >>>The policies to protect the security of nonpublic information 677) Which of the following actions is required when a firm receives cash in excess of 678) $10,000 from one customer in one business day? >>>File a Currency Transaction Report (CTR) 679) 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: >>>50 shares at $100 per share P a g e 95 | 238 680) 100 shares at $50 each before the reverse split 681) Which of the following communications with the public is considered misleading? 682) historical illustration based on factual performance 683) product comparisons that illustrate material differences 684) a research report that includes a buy recommendation for a specific security 685) literature providing 10-year performance information to support predictions of future performance >>>d. literature providing 10-year performance information to support predictions of future performance 686) Which of the following considerations should a RR explain to a customer when recommending a 529 college savings plan? >>>the potential deductibility of contributions from state taxes 687) A BD is permitted to accept payment for a new issue from a new customer when the: 688) >>>registration is effective 689) The call provision of a bond stipulates which of the following factors? >>>call date and call price 690) A firm is participating in a public offering. To sell a substantial amount of the securities to its customers, the firm agrees to repurchase the shares at no less than the original sales price. Such agreements are: P a g e 96 | 238 >>>prohibited as fraudulent and manipulative 691) Blue-sky laws are regulated by which of the following entities? >>>State securities regulators 692) All of the following risks apply to both foreign and domestic debt instruments EXCEPT: a. p o l i t i c a l b . e x c h a n g e b. repayment c. interest rate >>>b. exchange 693) Under industry regulations, an initial purchase of $3,000 of common stock in a margin account requires a cash deposit of: P a g e 97 | 238