An associated person is unable to work for any business other than his member firm without having the employing broker-dealer's
knowledge of the activity
A representative of a dealer who solicits municipal securities business from an official of an issuer contributes $275 to the official's city council re-election campaign during the general election. Under what circumstance would the contribution invoke a
The dealer seeks to engage in a negotiated underwriting with the issuer.
Which of the following entities establishes the rules, regulations, and membership eligibility standards to be registered with the SEC?
The National Adjudicatory Council (NAC)
Which of the following would be considered earned income?
Bonus received from employment
An investor owning 400 shares of CDS stock receives notice that the stock will be split. When the split is complete, the customer owns 600 shares of stock. The split must have been
a forward, uneven split
- Because the split resulted in the investor owning more shares, it was a forward split. Because the ratio of shares owned before and after the split was 2:3 (400:600 in this case), the split was an uneven split.
All of the following are possible actions of an investor who has received stock rights EXCEPT
hold the rights for a possible long-term capital gain
-A long-term capital gain would require a holding period of more than 1 year. Rights expire 4 to 6 weeks after issue, so this would not be possible.
If a broker-dealer holds the stock of an investor in street name, which of the following must be forwarded to the investor promptly upon receipt?
I.Articles about the company found in financial industry literature
II.Proxy statements relating to upcoming
II and IV
Which of the following orders need NOT be immediately filled in their entirety?
I.Immediate or cancel (IOC)
II.Fill or kill (FOK)
III.Market at open
IV.All or none (AON)
I and IV
-Immediate or cancel (IOK) orders allow partial execution, with the unexecuted portion of the order being canceled. All or none (AON) orders may be executed piecemeal, until the end of the day (for day orders) or until they can be filled in their
Which of the following corporate actions are designed to allow investors to buy shares of stock under specific, defined conditions?
I and IIII.A rights offering
II.A forward split
III.Issuing warrants
IV.A stock dividend
I and III
All of the following are true regarding market indexes EXCEPT
they track single stocks rather than hypothetical portfolios
Distinguishing between a sell stop order and a sell stop limit order, which of the following are TRUE?
I.The sell stop limit order becomes a sell limit once triggered.
II.The sell stop order becomes a sell limit order once triggered.
III.The sell stop lim
I and IV
A stock trade took place on Tuesday, July 2. When would regular way settlement normally take place?
Friday, July 5
-b/c July 4th is a not a business day(national holiday), it wont be until Friday
Your customer opens a position at 45 and then closes it later at 47. This represents
a 2-point gain or loss
-Because we do not know if the opening transaction was a buy or a sell from what we are told, this could be either a 2-point gain or loss. If the opening transaction was a buy, this represents a gain (bought at 45, sold at 47). But
An investor with no existing positions in MMS stock sells 100 shares. This is?
a short bearish position
- With no other existing positions, this sale transaction would have to be opening a position. Sell to open a position = short = bearish.
How an account is registered determines
ownership and control of the investments in the account
As long as it is not restricted in any documentation, margin trading is permissible in which of the following accounts?
I.Corporate
II.IRA
III.Partnership
IV.Fiduciary
I and III
All of the following are exempt from the Federal Reserve Board (FRB) Regulation T margin requirements EXCEPT
corporate stocks
-Certain securities are exempt from the FRB's Regulation T initial margin requirements. Those exempted would include U.S. Treasury issues, government agency issues, and municipal securities. Corporate securities are not exempt; for corpor
Which of the following must be signed by a customer wanting to open a margin account?
Credit and hypothecation agreements
A customer of a broker-dealer purchases 100 shares of XYZ stock at $50 per share on Monday. Later that week, a confirmation arrives electronically indicating that the total cost of the transaction was $5,000. The client is puzzled that there is no additio
the broker-dealer acted as a principal in the trade
-Broker-dealers must always indicate their capacity on the confirmation. If the client had looked, there would have been a statement something to the effect of "we acted as principals in this trade". Whe
A new customer opens a margin account and, upon account approval, does an initial transaction purchasing 100 shares of MJS common stock at $25. How much will the customer need to deposit?
$2,000
- For the first trade in a newly opened margin account, there must be at least $2,000 in equity. The rule is as follows: transaction greater than $4,000, deposit 50%; between $2,000 and $4,000, deposit $2,000; and if the transaction is less than $2
Margin calls can be met with deposits of
cash or fully paid for marginable securities
The category of correspondence, one of the three identified as being communications with the public, is defined as
any written or electronic communication that is distributed or made available to 25 or fewer retail investors within any 30 calendar-day period
In which of the following accounts would the use of margin always be prohibited?
Individual retirement accounts
If a margin deposit is late, an extension request made by the broker-dealer
is not required but can be made, and may or may not be granted
Suspicious activity reports (SARs) are
filed to the Financial Crimes Enforcement Network (FinCEN) as required by the USA PATRIOT Act
Which of the following records must be kept by a broker-dealer firm for 6 years?
I.Customer new account forms
II.Advertising the firm has published
III.Stock records
IV.Minute books
I and III
- New account forms filled out when the customer account was opened and stock records showing all the securities held by the firm and where they are held must be kept for 6 years. Minute books showing the minutes of directors' meetings are lifet
Which of the following are available to participants in a 401(k) plan that are not available to IRA holders?
I.Tax deferral on the earnings
II.Hardship withdrawals
III.The catch-up provision for those who are age 50 and older
IV.Loans against the vested b
II and IV
The income level of a donor
may affect contributions into a Coverdell ES
A customer receives a Regulation T margin call for $3,200. To meet the deposit requirement, which of the following can be deposited?
Fully paid for marginable securities totaling $6,400 in market value
-When meeting a Regulation T margin call with cash, 100% of the call must be deposited�in this case, $3,200. If using fully paid for marginable securities to meet the call, a deposit tot
Which of the following records must be kept by a broker-dealer firm for 3 years?
Trial balances
The regulation enacted by the SEC to protect the privacy of customer information is known as
Regulation S-P
A 40-year-old individual is not covered by a retirement plan at work. What is the maximum contribution this individual can make to an IRA this year?
The current maximum allowed by the IRS, which will all be deductible if the individual does not exceed the income limit.
Which of the following securities are most likely deemed marginable by either the Federal Reserve Board (FRB) or regulatory bodies such as FINRA and the New York Stock Exchange?
Treasury bonds
A customer of a securities firm has concluded that selling short would be an effective trading technique to reach his investment goals. Assuming the firm's principal agrees to permit the customer to effect short sales, what type of account would be most s
Margin account
Of the following, which would NOT be considered institutional communications with the public?
An internal memo promoting a new product that will be offered to your firm's institutional customers only
Financial institutions such as broker-dealers must report when there is an event, transaction, or series of events or transactions that appear to be questionable to
FinCEN
Once a customer account has been opened at a broker-dealer, rules require that updating information on the account record occur no less frequently than once every
36 months
Which of the following is TRUE regarding accounts trading on margin?
A fiduciary account may only trade on margin if it is specifically permitted in the trust or custodial agreement.
An investor makes several statements regarding what they know about exchange-traded funds. All of them are correct EXCEPT
I can't buy them on margin because they represent an entire basket of stocks like mutual funds do
In an LP, which of the following is TRUE?
The partnership entity is not responsible for paying taxes on gains.
When interest rates in the open market move up or down, a bond's coupon rate will
be unaffected by the open-market interest rates
-Though the price of a bond will react to market forces, such as supply and demand, and be interest-rate sensitive (inverse), the coupon is always the same: A fixed percentage of par value established by the
Which of the following positions would give an investor an unlimited loss potential?
I.Short 1 IBS Jul 50 put
II.Short 100 shares of IBS stock
III.Short 1 IBS Jul 50 uncovered call
IV.Short 1 IBS Jul 50 covered call
II and III
- A short stock position gives an investor unlimited risk potential if the stock should rise because the investor must eventually buy back the stock at the higher price. Because stock can rise an unlimited amount, there is unlimited risk. The s
A hedge fund portfolio has been characterized as being highly leveraged. This means that
there is substantial borrowing or purchasing on margin
Which of the following securities would most likely have the lowest expense ratio?
Exchange-traded fund
Which of the following statements regarding Treasury receipts are TRUE?
I.Interest is paid annually.
II.Interest is paid at maturity
III.They are sold at a discount.
IV.They are sold at par.
II and III
Which of the following statements best describes financial risk?
The risk that an issuer will be unable to meet interest and principal payments on debt obligations
To the benefit of the issuer, a callable bond is likely to be called
when interest rates fall
- Bonds with call features are most likely to be called by an issuer when interest rates fall. For example, if an issuer has an outstanding bond paying 6% and interest rates have fallen to 4%, why pay out 6% when prevailing market
All investors and investments are different. Recognizing this, it is TRUE that
no investment should be deemed suitable for every investor
A March 30 call purchased at 3 has expired without being exercised. The owner of the call
loses the $300 premium paid
A change to tax rates on dividends would be an example of
legislative risk