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Securities Industry Essentials (SIE)
Assessment
โ Which of the following statements is true regarding the concept of an annuity contract? a) Payouts of an investment in a nonqualified annuity are all income tax- free b) The kind of annuity selected partly determines the payment amounts to the annuitant c) In the case of life annuity contracts, the age and sex of the annuitant do not affect the payment amounts d) The amounts of the periodic payments to the annuitant are determined by the performance of the insurance company's investment returns. Answer: b) The kind of annuity selected partly determines the payment amounts to the annuitant โ Which of the following Form U4 reportable events results in a statutory disqualification? a) A personal bankruptcy filing b) A written customer complaint alleging misappropriation of assets c) A felony theft charge
d) A felony conviction for a driving under the influence (DUI) charge. Answer: d) A felony conviction for a driving under the influence (DUI) charge โ Under SEC Regulation S-P (Consumer Privacy), which of the following information must a firm include in its customer privacy and opt-out notices? a) The addresses of the firm's website b) The fee and opt out from the privacy program c) The deadline by which to out from the privacy program d) The policies to protect the security of nonpublic information. Answer: d) The policies to protect the security of nonpublic information โ Under normal circumstances, a customer's letter of intent on a mutual fund purchase is valid for what maximum period of time? a) 3 months b) 6 months c) 13 months d) 24 months. Answer: c) 13 months โ No-load mutual funds may have lower expense than load mutual funds for which of the following reasons?
d) Preferred stock. Answer: b) Rights โ In the event of a stock split, which of the following parties is required to maintain a record of the shareholders eligible to receive the additional shares? a) DTC b) Issuer c) Custodian d) Transfer agent. Answer: d) Transfer agent โ Under FINRA rules, which of the following activities by a registered representative requires written notification to her firm? a) Volunteering as a youth soccer league coach b) Gambling resulting in winnings in excess of $10, c) Driving part time for a transportation network company on weekends d) Selling nonproprietary investment company securities products through her firm. Answer: c) Driving part time for a transportation network company on weekends โ Which of the following responses describes an advantage of index funds? a) The protection of principal during bearish markets
b) High turnover to take advantage of market opportunities c) Higher management fees due to active management of fund d) Lower management fees due to passive management of the fund. Answer: d) Lower management fees due to passive management of the fund โ Upon expiration, all in-the-money S&P 100 index call options are settled by the delivery of which of the following? a) Cash b) S&P 100 Index stocks c) S&P exchange-traded fund (ETF) d) The same number of S&P 100 Index put options. Answer: a) Cash โ 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 13 months ago. If the employee wants to support the campaign further without impacting the municipal securities business of the firm, he is permitted to make an additional contribution of up to what amount? a) $ b) $ c) $ d) $250. Answer: a) $
a) Political b) Exchange c) Repayment d) Interest rate. Answer: b) Exchange โ The primary purpose of a syndicate desk in the context of an equity offering is to: a) Determine the list of selling shareholders b) Build an order book and allocate the stock c) Solicit interest from investors in the stock offering d) Chaperone one company management during the road show. Answer: b) Build an order book and allocate the stock โ The last transaction in XYZ 5.50s 2030 was at 102. This bond is selling at: a) Par b) Premium c) Discount d) Asset Value. Answer: b) Premium โ A customer buys 1 ABC Jan 35 put for a premium of $3 and simultaneously buys 100 shares of ABC stock for $35 per share. The
customer will break even when the stock is selling at what price per share at expiration? a) $ b) $ c) $ d) $38. Answer: d) $ โ Regular way settlement on Treasury bonds is: a) Same day b) Next business day c) Second business day (skip day) d) Fifth business day. Answer: b) Next business day โ At issue, which of the following debt securities mature in one year or less? a) FNMA bonds b) GNMA bonds c) Treasury notes d) Money market instruments. Answer: d) Money market instruments
d) The Investment Company Act of 1940. Answer: b) The Bank Secrecy Act โ Which of the following investments are generally traded according to their average life rather than their stated maturity dates? a) Corporate bonds b) Government bonds c) Asset-backed securities d) Fixed-rate capital securities. Answer: c) Asset-backed securities โ 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: a) 50 shares at $25 per share b) 50 shares at $100 per share c) 200 shares at $25 per share d) 200 shares at $100 per share. Answer: b) 50 shares at $100 per share โ In a period of low inflation and economic recession, the Federal Reserve is expected to take which of the following actions? a) Decrease taxes
b) Raise the federal funds rate c) Buy bonds in the open market d) Require banks to increase reserves. Answer: c) Buy bonds in the open market โ Company ABC announces a 20% stock dividend for its 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? a) 800 shares at $62. b) 1,000 shares at $41. c) 1,200 shares at $41. d) 1,200 shares at $50.00. Answer: c) 1,200 shares at $41. โ When a broker-dealer charges a commission on a securities transaction, it has acted as: a) An agent b) A principal c) An underwriter d) A market maker. Answer: a) An agent โ A registered representative (RR) wants to participate in a private securities transaction. Which of the following actions must the RR take?
c) An institutional investor d) A qualified institutional buyer (QIB). Answer: b) An accredited investor โ Which of the following statements is true about treasury stock? a) It has voting rights b) It receives dividends c) It is issued stock that has subsequently reacquired by the corporation d) It is authorized stock that has not been issues and is held in the corporation's treasury. Answer: c) It is issued stock that has subsequently reacquired by the corporation โ Which of the following actions is required of a broker-dealer's anti- money laundering (AML) program? a) Designating an AML compliance officer b) Filing of the firm's AML program with FINRA c) Conducting background checks of all employees d) Identifying to regulators the employees responsible for Currency Transaction Reports (CTRs). Answer: a) Designating an AML compliance officer โ Under FINRA rules, noncash compensation connected with the sale of variable contracts includes all of the following items EXCEPT:
a) Gifts b) Meals c) Lodging d) Commissions. Answer: d) Commissions โ Under Federal Reserve Regulation T, a 90-day restriction is imposed when a customer opens and closes which of the following positions? a) The same stock on the same day in a margin account b) The same stock in different accounts on the same day c) The same stock in different accounts in the same household d) The same stock in a cash account without paying for the stock in full. Answer: d) The same stock in a cash account without paying for the stock in full โ 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. How often must the firm send her an account statement? a) Monthly b) Quarterly c) Semiannually d) Annually. Answer: b) Quarterly
โ Which of the following represents the effect of a stock split? a) The price per share of common stock increases b) The price per share of common stock decreases c) Each stockholder's proportionate ownership decreases d) Each stockholder's proportionate ownership increases. Answer: b) The price per share of common stock decreases โ A member of a stock exchange responsible for providing liquidity in a security by being willing to buy and sell it at all times is known as: a) Broker b) Underwriter c) Market Maker d) Transfer Agent. Answer: c) Market Maker โ A savings account at a bank is guaranteed by which of the following entities? a) FDIC b) SIPC c) Federal Reserve d) Department of the Treasury. Answer: a) FDIC
โ No-load mutual funds may have lower expense ratios than load mutual funds for which of the following reasons? a) No-load funds do not charge 12b-1 fees b) No-load funds are not permitted to charge 12b-1 fee greater than 25 basis points c) Sales charges for load mutual funds increase their annual expense ratios d) Fund management fees for no-load funds are always lower than load funds. Answer: b) No-load funds are not permitted to charge 12b-1 fee greater than 25 basis points โ At the time of issuance, which of the following securities normally has the longest period to expiration? a) Rights b) Options c) Warrants d) Repurchase agreements. Answer: c) Warrants โ Which of the following actions is required when a firm receives cash in excess of $10,000 from one customer in one business day? a) File a Currency Transaction Report (CTR) b) File a Suspicious Activity Report (SAR) with the SEC
b) 2 quarters c) 3 quarters d) 4 quarters. Answer: b) 2 quarters โ Blue-sky laws are regulated by which of the following entities? a) SEC b) MSRB c) FINRA d) State securities regulators. Answer: d) State securities regulators โ 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 financial intermediary on a daily or weekly basis? a) Equity put option b) Perpetual preferred stock c) Variable rate demand note d) Tax-deferred variable annuity. Answer: c) Variable rate demand note โ Which of the following communications with the public is considered misleading? a) Historical illustrations based on a factual performance
b) Product comparisons that illustrate material differences c) A research report that includes a buy recommendation for a specific security d) Literature providing 10-year performance information to support predictions of future performance. Answer: d) Literature providing 10- year performance information to support predictions of future performance โ 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: a) Positions vacant on the board b) Directors present at the meeting c) Shares owned by the stockholder d) Proxies available for voting by the board. Answer: c) Shares owned by the stockholder โ Which of the following considerations should a registered representative explain to a customer when recommending a 529 college savings plan? a) The potential deductibility of contributions from state taxes b) The potential deductibility of contributions from federal taxes c) The income eligibility restrictions to contribute to the account
