The main purpose of the Securities Exchange Act of 1934 is to regulate
[A] the sale of new issues, prospectuses, and disclosures
[B] the distribution and sale of investment companies
[C] the issuance of Treasury securities to the public
[D] broker/dealers
[D] -
The Securities Exchange Act of 1934 regulates the secondary market which is the exchanging of securities after they have been issued to the public. The 1934 Act also regulates stock exchanges, broker/dealers, and some SROs, including FINRA.
Which of the following is considered an affiliate, but bears no financial obligation when it comes to the primary offering of securities through a syndicate?
[A] The Managing Underwriter
[B] The Selling Syndicate Members
[C] The Selling Group Members
[D]
[C] -
The syndicate is comprised of the managing underwriter who puts together a selling syndicate. Selling syndicate members have a financial commitment to the offering. As a further means of distribution, selling group members are brought in. Selling gr
Common stockholders could take which of the following actions with regard to the corporation's business activities?
(i) Vote on a stock split
(ii) Inspect the minutes from the Board of Directors meetings
(iii) Attend the annual shareholders meeting
(iv) V
[A] -
Common stockholder would do I and III. II is not allowed since stockholders do not attend the meetings of the Board of Directors. IV is not done because common stockholders do not vote on the type or amount of dividends; that is done by the Board of
Which of the following activities by registered representatives conducted outside of their normal scope of activities at the member firm does NOT require written notice and approval from the member firm?
[A] A Yoga instructor
[B] A passive limited partner
[B] -
Passive income activities do not have to be reported to the employing member firm. All of the other activities involve active participation in an outside business activity which would require notice and approval from the member firm.
A customer wishes to sell a stock just after the stock pays a dividend with a record date of Friday, October 20th. Assuming a regular-way settlement, the earliest that the customer could sell the stock and still receive the dividend is
[A] Monday, October
[D] -
The ex-date on a dividend is one business day prior to the record date. In this case, the record date is listed as Friday, October 20th. This would mean that the ex-date for the security is Thursday, October 19th. The customer would have to sell on
The shares of a growth fund fluctuate in value based on the
[A] changing values of the securities in the portfolio.
[B] Dow Jones Industrial Average.
[C] market as a whole.
[D] current interest rates.
[A] -
The value of a growth fund will fluctuate daily based on the changing value of the securities held in the fund's portfolio.
A bond's par value represents the bond's
[A] market price and guaranteed payout on the bond.
[B] face value and the amount of principal that the issuer is expected to repay at maturity of the bond.
[C] value as a sum of all interest payments that will be
[B] -
A bond's par value represents the bond's face or principal value, normally $1,000. This is the amount that the issuer is expected to repay at maturity of the bond. It is also the amount from which the coupon payments are based. It is not the bond's
A customer buys $20,000 of securities in his cash account. On the settlement date, he tells the RR he cannot pay. He says to sell out the purchase. Which of the following is correct?
[A] If the proceeds of the sale exceed the cost, there is no penalty.
[B
[B] -
Because the transaction was liquidated the cash account would be frozen for 90 days
Under the FINRA rules, among the factors that should be considered when determining whether a broker-dealer has used "reasonable diligence" in finding the best market and execution for a customer's order are all of the following EXCEPT:
[A] The size and t
[B] -
The FINRA rule on Best Execution (Rule 2320) requires member firms " to use reasonable diligence in finding the best market and execution for customer orders." The rule lists five factors that should be considered in determining whether "reasonable
Which of the following activities by a RR would require registration as a Investment Adviser Representative?
[A] Advising a customer about various financial planning tools
[B] Advising a customer about tax and insurance matters
[C] Printing Certified Fina
[D] -
An Investment Adviser Representative (IAR) is a state registration category. The Uniform Securities Act, a model state securities statute, requires registration as an IAR if the agent of the IA firm makes recommendations about any securities.
When converting accumulation units to annuity units when annuitizing a variable annuity contract, all of the following would be considered EXCEPT the
[A] annuitant's age
[B] annuitant's gender
[C] assumed interest rate
[D] beneficiary's choice of payout o
[D] -
The choice of payout options is made by the annuitant, not the beneficiary. The annuitant's age and gender are important in calculating the number of years in the annuitant's life expectancy. The assumed interest rate is important in estimating the
A person who has a Series 6 license would be allowed to say which of the following to a potential client?
[A] "Now that I am registered with FINRA, I can sell mutual funds in your state."
[B] "The S6 registration allows me to sell only securities that hav
[C] -
The S6 registration satisfies FINRA requirements; the individual now has to register as an agent in each state. The SEC does not approve any security. Lastly, the S6 registration does not approve an individual to sell options.
Which of the following BEST describes a call feature?
[A] This is a feature of a bond that allows the bond to be converted to common stock at the option of the issuer.
[B] A feature that allows the issuer of a bond to redeem the bond ahead of the final ma
[B] -
A call feature allows the issuer of a bond to redeem or call in the bond ahead of the bond's final maturity date. If bonds are called, there is typically a premium that is added to the face or par value of the bond to compensate for payout ahead of
S & P 100 index options when exercised are settled by the use of which of the following?
[A] Cash
[B] stocks from the S & P 500 index
[C] Treasury Securities
[D] ETF shares on the index
[A] -
When any index option is traded or exercised settlement is made by the delivery of cash.
Information pertaining to the suitability of various investments and investment strategies is required by an RR at what point in time?
[A] Before beginning a telemarketing campaign
[B] Within 10 calendar days of the account opening
[C] After providing the
[D] -
Much of the information required for determining suitability must be included in the New Account Report form that must be signed by the registered representative. "A" cannot be true because the RR has not yet talked with the prospects. "B" is wrong
You are analyzing your company in order to ensure that the retirement plans of its employees best benefit both the employees and the company. You notice that two of your executives are currently 57 and 60. Of the following choices, which best fulfills you
[C] -
The defined benefit plan would best suit both the company and the two executives that are likely to retire in the upcoming years. Older, long-service employees will have already accumulated the highest monthly pension benefits under a defined benefi
When considering penalty free withdrawals from a Traditional IRA prior to age 59 � , all of the following could qualify EXCEPT:
[A] Death
[B] Disability
[C] College education costs
[D] Building a vacation home
[D] -
Distributions from a Traditional IRA may begin at age 59 1/2 . Funds withdrawn before age 59 � will be subject to a 10% penalty except for death, disability, some medical expenses, first time (not vacation) home purchases, and higher education costs
Open-end investment companies do not list on national exchanges because they
[A] qualify for listing on the OTC market only
[B] are continuously being offered as new issues by the fund
[C] require 100% shareholder approval
[D] are wholly owned and traded
[B] -
Mutual funds or open-end investment companies offer redeemable shares only. The do not offer shares that are publicly traded. Therefore, the fund is always issuing new shares to the public and redeeming shares that are sold back to the fund and woul
A quote for a security trading in the secondary market typically contains all of the following, EXCEPT:
[A] A bid price
[B] An ask price
[C] The size of the market
[D] Average daily trading volume
[D] -
A quote for a security typically contains the bid price, the ask price, and the size of the market (the number of shares available for sale and for purchase). Average daily trading volume would not be found on a quote.
A registered representative offers to share in all of the gains and losses in a customer's account in order to give her confidence in his recommendations. Under the FINRA rules, the RR
[A] is forbidden from such sharing under all circumstances
[B] is perm
[D] -
Under FINRA Rule 2330 (f), the RR would need the prior written approval of his firm and the firm would need the prior written approval of the customer.
A regular-way settlement on US Government Treasury Bonds purchased in the secondary market is
[A] same day as trade day.
[B] trade day plus one business day.
[C] trade day plus two business days.
[D] trade day plus three business days.
[B] -
Regular-way settlement of US Government Securities in the secondary market is trade date plus one business day. From auction in the primary market, US Government Securities settle trade date plus three business days. Regular way settlement of most c
The Fed would use which of the following tactics to attempt to LOWER inflation?
(i) The discount rate would be increased.
(ii) The requirements on margin accounts would be lowered.
(iii) Open operations would take place where the Fed sells government secu
[B] -
In order to LOWER inflation, the Fed would attempt to take money out of the system and they would increase rates. If the Fed sells government securities, the member banks are forced to buy these securities. This removes money from the system making
Which of the following regulations govern distributions of new issues?
[A] Securities Act of 1933
[B] Securities Act of 1934
[C] Maloney Act of 1938
[D] Trust Indenture Act of 1939
[A] -
The Securities Act of 1933 regulates the issuance of new equity securities. Some examples of equity securities are preferred stock and common stock.
A mutual fund's net asset value has increased from $22.00 to $23.50 over the last few months. The cause for the increase would be due to
[A] an appreciation in the value of the portfolio
[B] the fund manager deciding to increase the number of shares it is
[A] -
The increase in the net asset value would be directly related to an increase in the value of the underlying securities held in the fund's portfolio.
What are the purposes of the Securities Exchange Act of 1934?
(i) Created the SEC
(ii) Provided for the regulation of credit
(iii) Provided for the regulation of exchanges
(iv) Provided for the regulation of new issues
[A] II, III and IV
[B] I and IV
[C]
[C] -
All choices are true except IV. IV is incorrect because it is the Securities Act of 1933, which regulates new issues.
Mrs. Smith set up a Uniform Gifts to Minors Account for her daughter and the custodial account has done very well this past year. The profits and earnings on this account would be reportable on which person's tax return?
[A] Mrs. Smith's
[B] Mrs. Smith's
[B] -
In a UGMA/UTMA account the child's social security number is used and the profits and earnings on the account will be filed on the tax return of the minor. These profits and returns are NOT filed on the donor's or custodian's return.
A client of yours wants to put additional funds into his retirement account. He has an annual income of $400,000 and two children to support. He is considered a qualified plan participant. The best form of retirement account for this individual is:
[A] A
[D] -
In this situation, since the individual wishes to put additional funds away for retirement, the best answer of those given would be the Traditional IRA.
A - Coverdell - For educational expenses.
B - Roth IRA - Income of $400,000 exceeds the maximum
Which of the following is TRUE of an investor who is long 1 ABC July 50 Call Option decides to exercise the call?
[A] The exercise requires the investor to buy an additional ABC July 50 Call Option in their account.
[B] The investor will buy 100 shares of
[B] -
When an investor buys a call option on common stock, they purchase the ability to buy 100 shares of the underlying stock at the exercise or strike price specified in the contract. So when the investor decides to exercise, this means that the investo
The value of accumulation units in a variable annuity contract is directly related to the value of which of the following?
[A] The Consumer Price Index
[B] The Dow Jones Industrial Average
[C] The securities in the general account of the insurance company
[D] -
In a variable annuity, accumulation units are used during the pay-in period to determine the contract holders interest in a separate account of the insurance company issuing the variable annuity contract. The separate account consists of a portfolio
All of the following statements on the secondary market of Brokered CDs are INCORRECT EXCEPT:
[A] An interest penalty is added to the par value of the Brokered CD when it is returned to the investor.
[B] On settlement date, accrued interest is added to th
[B] -
When Brokered CDs are sold in the secondary market, they trade at the market value of the brokered CD plus accrued interest. This is paid to the seller by the buyer on settlement date.
A mutual fund's purchase price is determined by the
[A] net asset value at the previous day's close
[B] net asset value calculated at the close after the order is received
[C] price that reflects the current supply-demand for the security
[D] intraday net
[B] -
Forward pricing is always required when purchasing an open-end mutual fund, which means you will pay the next calculated price (less any sales load discount) after your order is entered. "C" is how a closed-end fund generally trades.
Corporation X announces an offering of subscription rights. Which of the following statements is NOT true?
[A] New common stock can be purchased by a rights holder below the offering price.
[B] New common stock can be purchased by a rights holder before t
[D] -
A rights offering is a privilege that is granted to existing shareholders when they own the common stock of the company. It allows them to maintain proportionate ownership of the underlying company by purchasing more shares before a new issues is of
When considering a possible investment in a Roth IRA, which of the following would NOT be an advantage?
[A] Until the funds are withdrawn during retirement, all contributions and earnings are tax-deferred.
[B] Contributions to the account can continue to
[A] -
All choices are advantages except for "A" because contributions to a Roth IRA are made with AFTER-TAX dollars. Earnings grow tax-deferred and if withdrawals are qualified, they will be tax-free.
A customer holds a corporate bond with a coupon rate of 5.75%. This bond will pay how much interest on an annual basis?
[A] $5.75
[B] $57.50
[C] $575.00
[D] Annual coupon payments will depend on the market price at which the bond was purchased
[B] -
A standard corporate bond will have a par value of $1,000. Coupon rates are based on par value (NOT market price), so a rate of 5.75% on a $1,000 would be $57.50 in annual interest related to the coupon rate ($1,000 par x 0.0575 (5.75%) = $57.50. Th
When is payment typically due on the regular-way purchase of a round lot of T-Notes?
[A] Payment is typically due on the 4th business day.
[B] Payment is typically due on the 3rd business day.
[C] Payment is typically due on the following business day.
[D
[C] -
Regular-way settlement for Treasury Securities is the business day following the trade date.
Which of the following BEST describes a market maker who acts in a "dealer" or "principal" capacity?
[A] A designated market maker working trades of buyers and sellers, typically on the floor of an exchange.
[B] A broker/dealer firm that trades into and o
[B] -
Broker/dealers who trade into and out of their own account are working in a principal or dealer capacity. Market makers are often broker/dealers who are working in that dealer or principal capacity in the OTC market. The listed market is where a des
A registered representative at your firm has a client who is on the board of directors of QRS Corporation. The client calls in and in passing, mentions that QRS will not come close to meeting their earnings projections for the coming period. The release o
[C] -
Whenever an RR is given insider information, the RR should NOT act on the information and should immediately contact the firm's legal department and/or compliance department for further instruction. Each of the other actions would be an example of o
The intent of ERISA (Employee Retirement Income Security Act) is to protect the funds within an employee retirement fund from which of the following?
[A] ERISA is designed to protect retirement funds from poor management by investment advisory firms and i
[C] -
ERISA was designed and put in place to protect the retirement funds of employees from poor management by employers. It places limitations and establishes guidelines associated with how funds can be invested and used within the retirement plan.
If a broker-dealer fails the trustee appointed by SIPC will
[A] secure temporary financing for the broker-dealer with the Federal Reserve.
[B] freeze the assets of the broker-dealer and recover damages in bankruptcy court.
[C] liquidate the assets of the
[C] -
The SIPC trustee will liquidate the assets and notify customers on the procedures to file a claim. The other three choices are not responsibilities of the SIPC trustee.
Which two of the following statements would be correct regarding Regular Way settlement on common stock and Reg T settlements?
(i) Reg T settlement is trade date plus 2 business days
(ii) Reg T settlement is trade date plus 4 business days
(iii) Regular W
[B] -
Regular Way settlement on common stock is trade date plus 2 business days. Regulation T settlement on common stock is trade date plus 4 business days.
Which of the following are required in order to open an options account?
(i) The RR must inquire about the investment objectives of the customer.
(ii) The RR must gather and keep record of customer financial background information.
(iii) The RR must provi
[D] -
All choices are correct regarding the opening of an options account for a customer.
An investment that consists of a managed portfolio of property established to earn profits for its shareholders would be best described by which of the following?
[A] This description best applies to CMOs (Collateralized Mortgage Obligations).
[B] This de
[C] -
Real Estate Investment Trusts (REIT's) consist of a managed portfolio of real property which is intended to earn profits for the REIT's shareholders. A Direct Participation Program would have limited partners and would not have shareholders.
Which of the following statements about call features found on securities such as preferred stock or bonds is CORRECT?
[A] Call features should not be a consideration as they do not impact the security's return.
[B] Call features are required on all long-
[C] -
Call features allow the issuing company to "call in" their securities prior to their specified maturity date. These features are beneficial to issuers because they allow the issuer to call securities if lower costs of borrowing (lower rates of inter
Which of the following is a characteristic of a variable annuity?
[A] Investment risk is assumed by the annuitant.
[B] Annuity payments are fixed.
[C] The investment account portfolio consists primarily of debt securities.
[D] Interest payments are guaran
[A] -
In a variable annuity, the amount of the benefit payments made out of the annuity varies with the investment performance of the separate account. The separate account is mainly invested in equity securities, with no return guaranteed. The hope is th
Minor declines over at least two consecutive quarters in which of the options below would be considered a recession?
[A] DJIA - Dow Jones Industrial Average
[B] NASDAQ 100
[C] Gross Domestic Product
[D] Cost of Living Index
[C] -
Recession is measured by changes in the GDP - Gross Domestic Product. Generally a recession is signified by declines in GDP over the course of at least two consecutive quarters.
The terms "bid" and "ask" are used to indicate
[A] last sale information
[B] initial public offering price
[C] quotations on securities in the secondary market
[D] the range within which securities are trading for that day
[C] -
Quotations will typically contain the bid price and ask price for a security trading in the secondary market. Last sale information applies to the price at which the last trade took place. During an initial public offering, there is a fixed offering
A 90-day frozen period where restrictions are placed on trading activity would apply to an individual account when the
[A] owner receives a margin call on a long margin account and meets the call.
[B] margin account has entered "restriction" where equity
[C] -
One key aspect of a cash account is that all securities must be paid for in full, regardless of if the securities were sold prior to the settlement of the purchase. In a scenario where the owner of a cash account fails to pay for securities in full
Mutual funds must send financial reports to their shareholders at least
[A] with each trade confirmation which contains a link to the reports
[B] Upon request by the customer
[C] Semi-annually
[D] Annually
[C] -
Sections 13(a) and 15(d) of the Securities Exchange Act of 1934 require funds to send financial reports to shareholders at least semi-annually (once every six months).
FINRA rules on discretionary accounts require which of the following?
[A] A record of the customer agreeing to arbitrate all disputes between the customer and the member firm
[B] An attestation that the customer will abide by FINRA rules
[C] A record indi
[C] -
A signed and dated written discretionary authorization must be submitted by the customer before the RR can execute any discretionary trades.
When is it permissible for a non-registered individual to receive commissions?
[A] Only if the individual's supervising principal approves of the payment
[B] Commissions paid to the non-registered person must represent no more than 10% of the total commis
[D] -
Continuing commissions may be paid to a non-registered individual if provided for in the written employment agreement of the RR.
On Tuesday, February 11th, one of your clients calls in and is curious about a stock that they purchased the previous business day of Monday, February 10th. The stock was purchased regular way and the client wants to know when the transaction will settle.
[B] -
Regular way settlement is T+2. If the trade date was Monday, February 10th, then the settlement date will be Wednesday, February 12th. If the stock were settled "Reg T", then the T+4 deadline of Friday, February 14th would be used. "Cash" settlement
Preferred stock has which of the following characteristics?
(i) One can typically expect a dividend at a specific rate.
(ii) Voting rights typically do not accompany preferred stock.
(iii) Historically, preferred stock exhibits more appreciation potential
[A] -
Preferred stock typically comes with a specific or fixed dividend rate. Preferred also does not come with voting privileges, though it is possible. Common has more potential for appreciation, since the market price of preferred is normally more tied
A corporation has a pre-emptive rights clause which requires that rights be offered to existing shareholders prior to the issuance of new shares. This corporation decides to issue new securities and a rights offering takes place. Once existing shareholder
[B] -
A pre-emptive rights clause requires a corporation with outstanding publically traded shares to offer new shares to existing shareholders prior to offering them to the public. When existing shareholders receive rights, they can exercise the rights a
Zero coupon bonds are frequently used to:
[A] amortize the cost of the bond
[B] provide a steady stream of dividend income
[C] provide a steady stream of interest income
[D] accumulate capital to fund a particular investment goal
[D] -
Zero coupon bonds do not make semi-annual interest payments, but instead are sold at a deep discount from their face value by the issuer. They are generally purchased by investors that do not need the semi-annual income and want to accumulate capita
Which of the following would be considered "sales literature" under FINRA rules?
(i) Brochures made available at the branch office reception area
(ii) A research report sent to customers regarding investing in certain industries
(iii) Reprints of material
[D] -
All three choices are included in FINRA's definition of sales literature.
Once a registration statement has been filed with the SEC and it becomes effective, which of the following statements by an issuer would be ACCEPTABLE?
[A] "The issue has now been approved by the SEC."
[B] "The SEC has verified the accuracy of statements
[D] -
The SEC does not approve or disapprove of any issue and does not pass on the accuracy or adequacy of statements filed with them. They review the issue in an attempt to determine that full and fair disclosure has been made but take responsibility for
The primary function of SIPC (Securities Investor Protection Corporation) is to protect investors
[A] from identity theft and fraudulent transactions in their accounts
[B] in the event that their broker/dealer fails, providing compensation for losses on c
[B] -
SIPC protects customers against the default or insolvency of their broker/dealer. SIPC compensates investors for cash and securities held in their accounts up to certain limitations.
When a call option is exercised the
[A] buyer of the call will deliver 100 shares of the underlying stock at the market price.
[B] seller of the call will deliver 100 shares of the underlying stock at the strike price.
[C] buyer of the call will deliver 1
[B] -
When a call option is exercised, the seller of the call is obligated to deliver 100 shares of the underlying stock at the strike price. The buyer of the call will pay the seller the strike price for the 100 shares and the buyer is not required to de
An Over-The-Counter (OTC) security is
[A] any security that is available for purchase without a recommendation from an agent or investment adviser representative.
[B] a security that is traded on the floor of an exchange, typically available from a design
[C] -
OTC securities are securities that trade off of the floor of an exchange. Transactions normally take place with market makers, often broker/dealer firms, who act in a dealer or principal capacity, trading into and out of their own inventory of secur
An investor who trades a closed-end fund would receive which of the following prices?
[A] The current market price
[B] The price is based on the closing market price of the day
[C] The current NAV of the shares
[D] The value of the NAV from the previous t
[A] -
Closed-end funds trade on an exchange like common stock; therefore, the investor would buy or sell his shares for the current market price of the shares.
Retail Communications identified as advertising and/or sales literature must be approved by which of the following before it can be distributed?
[A] One of the firm's sales supervisors
[B] A registered representative with at least 3 years of sales experie
[D] -
Retail Communications identified as either advertising and/or sales literature must be reviewed and approved by a registered principal of the firm PRIOR to use.
A customer at the firm purchases a corporate bond that is both callable and convertible. The customer wants to know when the transaction will settle. Assuming the trade settles under normal circumstances, what should the customer be told?
[A] The trade wi
[B] -
If the trade is to settle under normal circumstances, this would be a "regular way" settlement. Regular way settlement is two business days following trade date, or T+2.
A signed "options agreement" must be obtained from a new options customer:
[A] Before the first options order
[B] Within 15 days after the account has been approved for options transactions
[C] No later than the settlement date of the first options trade
[B] -
A signed options agreement must be received by the firm within 15 days from the time the account has been approved for options transactions.
One of your customers holds a position in DEF common. The customer calls and informs you that they want to sell 250 shares of DEF at $30. The current bid on DEF is $22, so you, the RR, enter a GTC order to sell 250 shares at $30. After sitting on the GTC
[C] -
In this situation, the registered rep should cancel the GTC order that is outstanding still at $30 per share and enter a market order which will achieve the best current price for the customer. Entering another GTC order, or adjusting a previous ord
The public offering price of a bond is $1,000 and the bond has a coupon of 5%. If interest rates remain unchanged, what could you expect regarding the price of the bond?
[A] The bond would remain at par value.
[B] The bond would trade at a premium.
[C] Th
[A] -
Bonds that trade for $1,000 are said to trade at "par." Bonds that trade for a price above $1,000 are said to trade at a premium. Bonds that trade below $1,000 are said to trade at a discount. Depreciation refers to an accounting practice for physic
One of your clients comes in for a consultation and is excited that his wife just recently gave birth to their first child. His wife is adamant that they send the child to private school and they hope to see the child go to college. The investor asks for
[A] -
A Coverdell Education Savings Account can be set up with little initial cost and proceeds of the account can be used for expenses related to education at ANY level. The maximum contribution per year is $2,000, and these plans offer flexibility in te
U.S. Treasury securities regular way settlement is:
[A] same day as trade date
[B] the next business day after trade date
[C] five business days after trade date
[D] seven business days after trade date
[B] -
U.S. Government securities transactions settle the next business day after trade date.
Which of the following are regulated by the Securities Exchange Act of 1934?
(i) Insider trading
(ii) The extension of credit for the purchase of securities
(iii) Required disclosures on publicly traded securities
(iv) The Secondary Market for securities
[D] -
The Securities Exchange Act of 1934 provides for regulation of all choices offered.
A client is currently filling out the paperwork for a new margin account with your firm. The client calls you and asks you about the purpose of the Loan Consent Agreement. What is the MOST appropriate description of this document?
[A] The agreement provid
[C] -
A Loan Consent Agreement provides the firm with the authority to lend the customer's margined securities to other firms and customers for purposes such as short selling. The other options include discretionary authority, new account forms related to
A customer's only account at a broker-dealer is an established margin account. The customer wishes to participate in the distribution of a new issue of common stock coming to market in the next few days. Which of the following is true regarding this situa
[C] -
This investor would be allowed to purchase the new issue shares in his margin account but since it is a new issue, the purchase is not permitted using margin borrowing and the customer will be required to pay for the purchase in full.
Economic analysts have found that over the past six months, there has been an overall decline in the following: - GDP (Gross Domestic Product) - Equity Prices - Employment Statistics - Business Activity Which of the following terms is most often used to d
[A] -
The term that best fits the scenario described would be a recession. A recession is defined as a six-month consecutive decline in stock prices, business activity, employment, and GDP. Though the recession may affect inflation/deflation, periods of h
All of the following are requirements for a cash account for the purchase of listed options EXCEPT:
[A] A new account report form.
[B] An option account agreement.
[C] A hypothecation agreement.
[D] The authorization of a Registered Option Principal.
[C] -
An hypothecation agreement is required in a margin account, not a cash account. The other documents are required, as well as, the authorization of a Registered Option Principal.
An RR who is also involved in outside business activities which have been approved by their firm is sued for fraud with regard to the outside business activity. Which of the following actions should be taken by the branch manager of the RR's firm?
[A] No
[B] -
This must be immediately reported since the incident may involve improper business conduct and practices.
Of the following, which is a possible cause of the yield curve becoming inverted?
[A] Due to favorable trends in interest rates, corporations are taking advantage by borrowing on a long-term basis.
[B] Since short-term rates are low, there is an increased
[D] -
An increase in demand for short-term borrowing will lead to increased rates in the short-term debt market (e.g., it will cost more to borrow short-term if everyone wishes to borrow short-term). This will lead to an inversion of the yield curve as sh
When a division or subsidiary of a corporation becomes an independent company as part of a divestiture, it's called a(n):
[A] recapitalization
[B] spin-off
[C] acquisition
[D] leverage buyout
[B] -
A spin-off is a form of corporation divestiture in which a subsidiary or division becomes an independent company. Recapitalization is an alteration of a corporation's capital structure, such as an exchange of bonds for stock. A leveraged buyout is a
All of the following are considered to be benefits of investing in a municipal bond unit investment trust EXCEPT:
[A] diversification
[B] tax free interest income
[C] redeemable units
[D] active investment management
[D] -
A municipal bond unit investment trust is not managed. It is supervised. As bonds in the portfolio mature, the proceeds are paid out to investors. They are not reinvested. Therefore, no buy-sell-hold decisions are needed to be made by an investment
When discounting a draft between a US company and a foreign exporter to expedite foreign trade, they would be discounting which of the following?
[A] A Treasury Bill
[B] A Banker's Acceptance
[C] A Certificate of Deposit
[D] A Letter of Credit
[B} -
A Banker's Acceptance would be used to finance foreign trade and would be discounted in order for the exporter to receive immediate payment.
In which of the following scenarios would it be UNACCEPTABLE for a FINRA member firm to hold a customer's mail?
[A] The customer is leaving the United States on business and the trip will be shorter than 3 months.
[B] The customer provides a written reque
[C] -
Firms may not hold customer's mail indefinitely. The customer must tell the member firm how long the mail must be held. All of the other situations are acceptable concerning holding customer mail.
Which two of the following options strategies would be considered "bullish"?
(i) Selling uncovered put options
(ii) Selling uncovered call options
(iii) Buying put options
(iv) Buying call options
[A] I and III
[B] I and IV
[C] II and III
[D] III and IV
[B] -
Long calls and short puts are both "bullish" positions - covered or uncovered.
An investor at the firm insists on buying a stock in order to receive the dividend, despite being advised against this by their registered representative. The stock's record date is Monday, October 23rd. Assuming a regular-way settlement, the latest that
[B] -
In order to receive the dividend, the investor would have to buy the stock prior to the ex-date in order to receive the dividend. The ex-date in this scenario is Friday, October 20th, which is one business day prior to the record date. Therefore, th
When an RR is opening an account for a new mutual fund customer which of the following is NOT necessary?
[A] Estate value and overall net worth
[B] Social security number
[C] Whether the customer is employed by another FINRA member firm
[D] The name and a
[A] -
As an RR, you would obtain the customer's basic information but would not need to know the customer's estate value to open the account. Each of the other items is required.
An individual owner of a brokerage account may
[A] be 17 years old.
[B] designate another individual to perform actions in the account on his behalf.
[C] not open a joint account also at the same member firm.
[D] assume that upon his death, ownership of t
[B] -
An individual may designate another person to act on his behalf by signing a power of attorney or a limited trading authorization (discretionary power). The owner of the account may not be a minor (i.e. under 18). For a minor to be the owner, the ac
An investor is nearing retirement. Historically, the investor has purchased shares of equity funds, including growth funds, with the objective of capital appreciation in their retirement portfolio. Now, the investor is seeking to transition that objective
[C] -
Some families of funds offer conversion/exchange/switching privileges. These allow buyers of funds to reduce or eliminate sales loads when objective changes. In this question, the investor avoids additional sales loads because the family of funds of
ABC Company declared a fifty cent ($0.50) per share dividend on August 15th to shareholders of record Friday, September 15th. On which two of the following days can an ABC Company stockholder sell his shares and still receive his fifty cent ($0.50) per sh
[B] -
Usually dividend questions are asked from a buyer's point of view, - buy before ex-date to receive the dividend - but this question says the investor already owns the stock and wants to keep the dividend; when should they SELL. In this case the inve
If an investor buys a call option contract on the S&P 500 Index, what will the investor receive when exercising the call?
[A] 100 shares of the S&P 500 ETF at the strike price listed on the contract
[B] The market price of the index at the close of tradin
[C] -
Buyers of index options receive cash that is equal to the difference between the market price at the close of trading for the index and the exercise price on the contract. Index options settle in cash, not in ETF or actual common shares. Index optio