SIE Exam Cards

All of the following are true regarding the term market EXCEPT
A) it is where buyers and sellers come together for the purpose of trading assets
B) it can be a physical place or an electronic venue
C) it is unique to the U.S. securities industry
D) it inc

C) it is unique to the U.S. securities industry
The term market is used to describe any physical place or electronic venue where buyers and sellers can come together for the purpose of trading assets. Markets can be found in nearly every nation in the wor

For a new issue that qualifies for listing on an exchange, a prospectus must be provided to all purchasers for how many days after the effective date?
A) 90
B) 25
C) 60
D) 40

B) 25
For new issues that qualify for listing on an exchange or Nasdaq, the prospectus delivery requirement period in the aftermarket (after the effective date) is 25 days. For nonlisted and non-Nasdaq securities the period is 40 days. If the new issue wi

Which of the following points to a general decline in prices occurring during severe recessions and the unemployment rate is rising.
A) Deflation
B) Contraction
C) Stagflation
D) Stagnation

A) Deflation
Deflation is a general decline in prices. Deflation usually occurs during severe recessions when unemployment is on the rise.

A method of registering securities at the state level that is reserved only for federal covered securities is known as
A) coordination
B) qualification
C) federal covered application
D) notice filing

D) notice filing
The method known as notice filing exempted federal covered securities from state jurisdiction but still established a method by which the states could collect fees when issuers of those securities wished to have them sold in the state.

Under the Uniform Securities Act, states have which of the following 2 ways to register securities to be sold?
I. Preparation
II. Integration
III. Coordination
IV. Qualification

III & IV
Securities to be sold within a state require registration at the state level. States have 2 ways to register (or blue sky) securities: coordination and qualification.

A tombstone advertisement placed before the effective date
A) can only be placed by the issuing company
B) can always be deemed to be an offer to sell the securities
C) can be placed by the issuer directly or by the underwriters
D) can only be placed by t

C) can be placed by the issuer directly or by the underwriters
Tombstone advertisements can be placed by either the issuer or the underwriters and are the only ads that can be placed before the registration's effective date. They are not an offer or solic

Which of the following prospectus delivery requirements for negotiable securities sold in the secondary markets is NOT accurate?
A) For an additional issue if the security is non-Nasdaq there is no delivery requirement.
B) For an IPO if listed on an excha

A) For an additional issue if the security is non-Nasdaq there is no delivery requirement.
For an additional issue, if the security is non-Nasdaq the delivery requirement is 40 days.

A firm that functions for the purpose of receiving and delivering payments and securities on behalf of both buyer and seller in a securities transaction is
A) a depository
B) a broker-dealer
C) a transfer agent
D) a clearing agent

D) a clearing agent
A clearing agent is an intermediary between the buy and sell sides of a transaction that receives and delivers payments and securities on behalf of both parties. While some broker-dealers are self-clearing (act as their own clearing ag

A deficit in the U.S. balance of payments can occur if
I. interest rates in foreign countries are higher than U.S. domestic rates
II. interest rates in foreign countries are lower than U.S. domestic rates
III. U.S. consumers are purchasing (importing) for

I & III
Anything that sends money out of our domestic economy leads to a deficit (more money flowing out than coming in). When interest rates abroad are higher, money flows out of the United States to those foreign locations. When U.S. consumers are purch

The largest component of the U.S. balance of payments is
A) exports
B) imports
C) the balance of trade
D) foreign currency

C) the balance of trade
U.S. imports and exports are the components used to calculate the balance of trade. The balance of trade is the measure of those 2 components against each other�the net being either more money coming into or going out of the U.S. e

According to the U.S. Commerce Department, the economy is in a recession when a decline in real output of goods and services lasts
A) 18 months or more
B) 9 months or more
C) 6 months or more
D) beyond 12 months

C) 6 months or more
The U.S. Commerce Department defines a recession as a decline in real output of goods and services for 6 months or more.

Broker-dealers that transact securities business with customers or other broker-dealers must apply and be approved for registration with
A) SEC
B) CBOE
C) MSRB
D) FINRA

A) SEC
The Securities and Exchange Commission (SEC) is the securities industry's primary regulatory body. Broker-dealers that transact securities business with customers or with other broker-dealers must apply and be approved for registration with the SEC

Several months of slow economic growth and rising unemployment have characterized the economy. Market analysts would describe this as a period of
A) deflation
B) inflation
C) stagnation
D) stagflation

C) stagnation
Stagnation is defined as prolonged periods of slow or little economic growth accompanied by high unemployment.

During the 20-day cooling-off period,
I. solicitations of sales can be made
II. solicitations of sales may not be made
III. deficiency letters, if issued, are sent to the issuer
IV. deficiency letters, if issued, are sent to the underwriters

II & III
No solicitations of sales are permitted during the cooling-off period. If a deficiency letter is issued by the SEC halting the review of the registration, it is sent to the issuer who is responsible for correcting the deficiency.

Correspondent firms would be likely to have relationships with which of the following types of broker-dealers?
A) Market maker
B) Fully disclosed
C) Self-clearing
D) Introducing

C) Self-clearing
A self-clearing (or carrying) firm holds funds and securities of the fully disclosed or introducing firm's customers and performs related functions, such as sending confirmations and statements for them. Those firms for whom the carrying

A provision for filing securities at the state level used solely for securities that are considered to be federal covered securities is known as
A) coordination
B) notice filing
C) registration
D) qualification

B) notice filing
When securities are deemed to be federally covered, the states have no jurisdiction over the registration requirements. However, the National Securities Markets Improvement Act did provide that states could require the filing of a notice

According to economists which of the following is the correct characterization of the money supply?
A) M2 equals M1 plus M3.
B) M1 includes all of M2 and M3.
C) M3 includes all of M1 and M2.
D) M1 plus M2 equals M3.

C) M3 includes all of M1 and M2.
M3 includes all of M1 and M2, plus time deposits of more than $100,000 and repurchase agreements with terms longer than one day. In this light, M3 is that measure of the money supply that is the most inclusive.

Deflation occurs during
A) a recession, coinciding with economic peaks
B) a depression, coinciding with an economic trough in the business cycle
C) a depression, coinciding with economic expansion in the business cycle
D) a recession, coinciding with an e

D) a recession, coinciding with an economic contraction
Deflationary periods in the economy are most associated with severe recessions. Recessions occur during periods of economic contraction in the business cycle.

A method of registering securities at the state level that is reserved only for federal covered securities is known as
A) coordination
B) qualification
C) federal covered application
D) notice filing

D) notice filing
The method known as notice filing exempted federal covered securities from state jurisdiction but still established a method by which the states could collect fees when issuers of those securities wished to have them sold in the state.

A tombstone advertisement placed before the effective date
A) can only be placed by the issuing company
B) can always be deemed to be an offer to sell the securities
C) can be placed by the issuer directly or by the underwriters
D) can only be placed by t

C) can be placed by the issuer directly or by the underwriters
Tombstone advertisements can be placed by either the issuer or the underwriters and are the only ads that can be placed before the registration's effective date. They are not an offer or solic

A corporation sells shares to the investing public in order to raise capital. This is known as
A) a secondary market transaction
B) a primary, or investor-to-investor, transaction
C) an exchange market execution
D) an issuer transaction

D) an issuer transaction
The primary market is where securities are sold to the investing public by the issuer wishing to raise capital. These are known as primary market or issuer transactions.

Where can demand deposits, checking accounts, paper currency and coins be found in the money supply?
A) M2 only
B) M1 only
C) M1 and M3 only
D) M1, M2 and M3

D) M1, M2 and M3
Demand deposits, checking accounts, paper currency, and coins are a part of M1 in the money supply. However, consider that M2 contains all of M1, and M3 contains all of M2 and M1; therefore, one should recognize that these components are

A broker-dealer that accepts the risk of holding a particular security in its account to facilitate trading and provide liquidity in that security is BEST described as a(n)
A) holding company
B) direct participation program
C) market maker
D) clearing cor

C) market maker
Market makers can be individuals or broker-dealers with a line of business to stand ready to buy or sell securities (make markets) with the view of being profitable by buying low and selling high or selling high and buying low (short selli

A customer has a significant amount of money in bank deposit accounts: $225,000 in a savings account titled in the customer's name; $240,000 in a checking account titled jointly with a spouse; and $100,000 in an account where the customer is custodian for

D) the entire $565,000
The FDIC provides deposit insurance guaranteeing the safety of a depositor's accounts in member banks up to $250,000 for each deposit ownership category in each insured bank. Each account listed (savings, checking, and custodial) is

Under the Securities Exchange Act of 1934, registration is required for
I. broker-dealers
II. initial public offerings (IPOs)
III. securities
IV. securities exchanges

I & IV
Under the Securities Exchange Act of 1934, broker-dealers and exchanges are required to register with the SEC. Registration of securities and IPOs is a requirement of the Securities Act of 1933, sometimes called the Paper or New Issues Act.

Which of the following statements with regard to the issuance of securities is TRUE?
A) The Securities Act of 1933 provides criminal penalties for fraud
B) Once a registration statement has been filed with the SEC it should be expected that the securities

A) The Securities Act of 1933 provides criminal penalties for fraud
The Securities Act of 1933 (also known as the Paper Act, Full Disclosure Act, New Issues Act, Truth in Securities Act, and Prospectus Act) ensures that the investing public is fully infor

The Securities Act of 1933 requires that all of the following be offered by a prospectus EXCEPT:
A) Treasury bonds.
B) Unit investment trusts.
C) Variable annuities.
D) Mutual fund shares.

A) Treasury bonds
Treasury securities are exempt from registration requirements, and therefore do not require a prospectus.

An underwriter is placing a tombstone advertisement for a company's new issue. A prospective investor might expect to see all of the following information on the advertisement EXCEPT
A) the names of the underwriting members
B) the number of shares to be s

C) the names of the company's officers
Information on a tombstone, those advertisements allowed to be placed prior to the effective date, is limited to; name of issuer, type of security, number of shares to be sold, public offering price or expected range

For nonexempt securities being offered to the public for the first time by a corporate issuer, which of the following would be applicable?
A) Securities Act of 1934 regulating securities that must be offered by prospectus
B) Securities Act of 1933 regulat

C) Securities Act of 1933 regulating issues that must be offered by prospectus
Nonexempt securities are those that must be registered with the SEC under the Securities Act of 1933. The Securities Act of 1933 mandates that offerings of these securities mus

If large money center commercial banks begin to lower their prime rates, which of the following is most likely to occur?
A) Smaller banks will need to offset the lower prime rate by increasing the broker call loan rate.
B) Smaller banks will lower lending

B) Smaller banks will lower lending rates for creditworthy corporate customers as well.
When large money center commercial bank lower the prime rate, the rate charged to their most creditworthy corporate customers, smaller banks will generally follow in o

Certain investors are deemed "accredited" when they have a net worth of
A) $1 million not including net equity in the primary residence
B) $200,000
C) $1 million
D) $.5 million not including net equity in the primary residence

A) $1 million not including net equity in the primary residence
An accredited investor is defined as a natural person who has a net worth of $1 million or more, not including net equity in a primary residence; or has had an annual income of $200,000 or mo

A stock's market value is directly determined by which of the following?
A) Vote of the stockholders
B) Company's financial condition
C) Supply and demand
D) Board of directors

C) Supply and demand
The market value of stock is directly determined by supply and demand and only indirectly by the remaining choices, such as a company's financial condition.

Match the following statement to the BEST expression: Government should allow market forces to determine prices of all goods and that the federal government should reduce government spending as well as taxes.
A) Supply-side Economic Theory
B) Keynesian Th

A) Supply-side Economic Theory
Supply-side economics holds that governments should allow market forces to determine prices of all goods. Supply-side adherents judge that the federal government should decrease government spending and taxes. In this way, se

The Securities Act of 1933 protects investors who buy new issues by doing all of the following EXCEPT
A) regulating the underwriting and distribution of primary and secondary issues
B) providing criminal penalties for fraud in the issuance of new securiti

C) requiring the licensing of persons affiliated with broker-dealers
Licensing of individuals associated with broker-dealers is mandated under the Securities Exchange Act of 1934. The Securities Act of 1933 protects investors who buy new issues regulating

Broker-dealers who transact securities business with other BDs or customers must be registered with
A) FINRA
B) SEC
C) OCC
D) FRB

B) SEC
Any entity such as a broker-dealer intending to do business with other BDs or customers involving securities must be registered with the Securities and Exchange Commission (SEC).

Which of the following must be a member of the Securities Investor Protection Corporation (SIPC)?
A) A firm that deals only with mutual funds
B) A firm that deals only in industrial development revenue bonds
C) A firm that deals only in U.S. government bi

D) A firm that deals only in OTC and exchange listed stocks
The Securities Investor Protection Act, which established SIPC, was passed in 1970 to protect persons with brokerage accounts from loss due to failure of their broker-dealer. Firms with such acco

The access equals delivery rule applies to
A) the final prospectus delivery requirements during the cooling-off period
B) the preliminary prospectus delivery requirements during the cooling-off period
C) all prospectuses delivered before the registration

D) the final prospectus and aftermarket delivery obligations
The access equals delivery rule applies to the final prospectus and aftermarket prospectus delivery obligations. It does not apply to preliminary prospectuses. No prospectus can be delivered bef

Which of the following is TRUE regarding the primary market?
I. Issuer transactions occur in the primary market.
II. Price is determined by supply and demand.
III. It is regulated by the Securities Act of 1933.
IV. The NYSE is an example of a primary mark

I & III
The primary market is where securities are sold to the investing public through issuer transactions. It is regulated by the Securities Act of 1933. The NYSE is an example of a secondary market where price is determined by supply and demand.

Which of the following is considered to be the order of the stages in a business cycle?
A) Contraction, trough, peak, expansion
B) Expansion, peak, contraction, trough
C) Peak, expansion, contraction, trough
D) Trough, contraction, expansion, peak

B) Expansion, peak, contraction, trough
The correct order for the stages of a business cycle is expansion followed by a peak, then a contraction that ends in a trough. The cycle then repeats. Note that because this order represents a cycle, the correct an

An investor is viewing a company's prospectus on the Securities Exchange Commission's website. Which of the following is TRUE?
A) This satisfies the access equals delivery rule for a preliminary prospectus.
B) Access equals delivery can only mean physical

D) This satisfies the access equals delivery rule for a final prospectus.
A prospectus will be deemed to precede or accompany a security for sale if the final prospectus has been filed with the SEC and can be viewed on the SEC website. The access equals d

To arrive at M3, one would add to M2 which of the following?
A) Gold and silver bars held on reserve at the FR
B) $100,000 and larger time deposits and repurchase agreements
C) Savings and checking accounts
D) All currency in circulation, including coins

B) $100,000 and larger time deposits and repurchase agreements
Included in M3 but not found in M2 are time deposits of more than $100,000 and repurchase agreements with terms longer than one day.

Which of the following choices would BEST describe a "follow-on" offering?
A) 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
C) An offering to the

B) An issue of shares by a public company that is already listed on an exchange
A follow-on public offer (FPO) is an issue of shares by a public company (registered and reporting to the SEC) that is currently listed on an exchange and has previously gone

A weak U.S. dollar leads to more
A) U.S. exports and a balance of payments surplus
B) U.S. imports and a balance of payments deficit
C) U.S. imports and a balance of payments surplus
D) U.S. exports and a balance of payments deficit

A) U.S. exports and a balance of payments surplus
When the dollar is weak relative to other currencies, it makes U.S. goods more affordable for foreign consumers to buy, so U.S. exports increase. As more goods flow out of the U.S., more money flows in�sur

An unsecured promissory note issued by a bank that can be traded in the secondary market is known as
A) mortgage bond
B) prime paper
C) a negotiable CD
D) commercial paper

C) a negotiable CD
Corporations issue unsecured promissory notes known as commercial or prime paper. When a bank issues an unsecured promissory note, it is known as a negotiable certificate of deposit (CD).

All of the following securities are backed by the full faith and credit of the U.S. government EXCEPT
A) Treasury STRIPS
B) Treasury notes
C) Treasury bonds
D) Treasury receipts

D) Treasury receipts
Treasury receipts are issued by broker-dealers, and they are backed by the good faith and credit of those that issue them. Treasury STRIPS are the U.S. Treasury Department's version of these, and therefore they are backed in full by t

An investor owns a bond with a 3.5% nominal yield making semiannual interest payments. On each interest payable date, the investor can expect to receive how much?
A) $35
B) $17.50
C) $175
D) $350

B) $17.50
A bond with a nominal yield of 3.5% pays $35 in interest annually (3.5% � $1,000 par value). Given the bond makes semiannual interest payments, each of those payments would be in the amount of $17.50.

A certificate stating a borrower's obligation to pay back a specific amount of money on a specific date to an investor is
A) a bond or stock power
B) a stock certificate
C) an ownership certification
D) a bond

D) a bond
A bond is best described as a certificate stating a borrower's obligation to pay back a specific amount of money on a specific date to an investor. A bond certificate also states the borrower's obligation to pay the investor a specific rate of i

Banker's acceptances are
A) short-term time drafts issued by banks to corporations
B) intermediate-term debt instruments issued by banks to corporations
C) intermediate-term debt instruments issued by the federal government to banks
D) short-term time dra

A) short-term time drafts issued by banks to corporations
Used by corporations to finance international (foreign) trade, BAs are issued by banks to corporations. They are considered money market instruments because of their short-term maturities, generall

All of the following are nonsystematic risks EXCEPT
A) capital risk
B) business risk
C) call risk
D) purchasing power risk

D) purchasing power risk
Purchasing power or inflation risk is a systematic risk. Capital risk, business risk, and call risk, among others, are nonsystematic risks, those that portfolio diversification can help to reduce.

While preferred shares tend to be less volatile than common shares, one type of preferred is noted as being even more stable in price than the others. This would be
A) callable
B) convertible
C) adjustable rate
D) participating

C) adjustable rate
Because the dividend payment adjusts to current interest rates, the price of the stock remains relatively stable. In other words, it is the return that fluctuates rather than the price.

Class B mutual fund shares are also known as
A) deferred-load shares
B) partially loaded shares
C) contingent-deferred shares
D) back-end load shares

D) back-end load shares
Class B mutual fund shares are bought with no sales charge at the time of purchase. The sales charge is paid instead at the time of redemption, or at the "back end." Hence, they are known as back-end load shares. For this type of s

For registered shares held by an affiliate (known as control stock), which of the following applies?
A) 6-month holding period, with volume limits thereafter
B) No holding period or any volume restrictions
C) 6-month holding period, with sales allowed fre

D) No holding period, but volume limits always apply
Control stock would be registered shares held by an affiliate. There is no holding period, but there will always be volume limits for as long as the individual is an affiliate.

Which of the following would you expect to have the lowest expense ratio?
A) The MNO Small Cap Growth Fund
B) The ABC Corporate Bond Fund
C) The XYZ Aggressive Growth Fund
D) The QRS Stock Income Fund

B) The ABC Corporate Bond Fund
Bond mutual funds typically have lower expense ratios than stock funds, which tend to be riskier and require more sophisticated investment strategies. The ABC Bond fund is the only bond mutual fund listed. Growth funds invol

For investors, instability within an emerging economy is generally recognized as
A) regulatory risk
B) business risk
C) political risk
D) currency risk

C) political risk
While political risk can be interrelated with legislative risk, most attribute this risk specifically to the potential instability in the political underpinnings of a country or economy. This risk is often associated with emerging econom

Section 529 plans are considered municipal fund securities. They must therefore be sold by
A) security memo
B) investment letter
C) prospectus
D) offering circular

D) offering circular
Municipal bonds are sold by offering circular, a document similar to a prospectus used in the sale of municipal securities. Because Section 529 plans are state sponsored, they must be sold by offering circular.

Which of the following regarding open-end (mutual fund) and a closed-end management investment company is TRUE?
A) A closed-end company sets its own dividend ex-date, but an open-end company's ex-date is set by its SRO.
B) Only the closed-end company may

D An open-end company may sell fractional shares, but a closed-end company may not.
Open-end shares are redeemable and may be purchased in specific dollar amounts. This results in fractional shares being sold. Closed-end shares trade on the open market, a

A bank trustee holds the titles to assets a corporation has purchased and utilizes in its day-to-day business. The corporation issues debt securities backed by these assets. These securities are
A) collateral trust bonds
B) debentures
C) equipment trust c

C) equipment trust certificates
Debt securities issued by corporations backed by the assets the corporation owns and uses in its daily business are known as equipment trust certificates.

When a broker-dealer pledges customer securities to a bank as collateral for a margin loan, the pledge is known as
A) loan consent
B) hypothecation
C) credit agreement
D) rehypothecation

D) rehypothecation
By signing the margin agreement, a customer hypothecates (pledges) the securities to the BD who then rehypothecates (pledges) them to the bank as collateral for the margin loan.

If an associated person is disciplined for violating SEC rules and regulations, and is ultimately suspended by the SEC, the member firm where the person is affiliated must report the suspension to
A) the Board of Governors
B) the exchanges where the firm

B) the exchanges where the firm is a member
An associated person may be disciplined for violating SEC rules and regulations. If a member firm suspends an associated person, the firm must report the suspension to the exchanges where the firm is a member.

All of the following are part of FINRA's manual regarding employee conduct and reportable events EXCEPT
A) Uniform Practice Code
B) Sales Practice Code
C) Conduct Rules
D) Code of Arbitration Procedure

B) Sales Practice Code
FINRA publishes the Conduct Rules, the Uniform Practice Code, the Code of Procedure, and the Code of Arbitration Procedure to regulate employee conduct and reportable events. There is no Sales Practice Code.

Failure to complete the regulatory element continuing education requirement within the allotted time period will result in
A) the registration being deactivated until the requirements are met
B) an automatic bar from the industry for 3 years
C) suspension

C) suspension of the individual until all CE requirements are met
Failure to complete the regulatory element within the allowable time frame will lead to FINRA's deactivating that person's registration until the CE regulatory element is met.

A broker-dealer may allow a registered representative to work from home - that is, to have a "home office." If this is the case, the registered representative must
A) use the office only to perform clerical functions
B) not specify the office as a place o

D) expect the office to be treated like any branch office
If a registered representative works from home, the office must be subject to site review and visits to the premises by principals of the firm and FINRA examiners, may be specified in advertising o

Which of the following entities establishes the rules, regulations, and membership eligibility standards to be registered with the SEC?
A) Municipal Securities Regulatory Board (MSRB)
B) Federal Reserve Board (FRB)
C) The National Adjudicatory Council (NA

C) The National Adjudicatory Council (NAC)
The National Adjudicatory Council (NAC) establishes the rules, regulations, and membership eligibility standards for registration with the SEC.

Those persons employed by a FINRA-registered broker-dealer to do nothing other than provide training for its associated persons
A) need not be registered
B) must be registered as a representative
C) are exempt from the firm element of the firm's continuin

D) must be registered as a principal
Those who manage any part of a member's securities activities must be registered as a principal with FINRA, including those involved solely in training associated persons.

Upon application for registration as a registered representative to ensure that any criminal past might be discovered by the employing firm, the Securities and Exchange Commission (SEC) requires
A) obtaining a credit report from an established credit repo

C) the filing of a fingerprint card with the U.S. Attorney General
A fingerprint card is required to be filed with the U.S. Attorney General to ensure that any criminal past that might result in statutory disqualification from association with a member fi

The minimum number of principals that a member firm of FINRA may have is
A) 3
B) 2
C) 4
D) 1

D) 1
If the member firm is a sole proprietorship, only 1 principal is required; otherwise, the firm must employ at least 2 registered principals.

The Advisers Act of 1940 specifically deters gaining political favor via contributions made to candidates, officials, or political parties. As such, if a political contribution is made to any of these entities then under the Act, the firm may NOT provide

A) 2 years
Rules within the Investment Advisers Act of 1940 are designed to deter what is commonly called the practice of "pay to play" or "play for pay." In other words, gaining political favor via contributions made to political parties, elected officia

Registered representatives who have not completed their regulatory element training in the prescribed time frame will have their registrations
A) permanently revoked and subject to criminal charges
B) suspended and subject to a fine of not more than $500

C) deactivated by FINRA until the requirements of the program are met
If a person fails to complete the regulatory element within the prescribed time period, FINRA will deactivate that person's registration until the requirements of the program have been

Which of the following violates the FINRA Conduct Rules?
A) A firm filing Form U-5 20 days after an employee's termination
B) Allowing a former RR to keep a securities license with your firm, even though no business is expected to transpire
C) An RR parti

B) Allowing a former RR to keep a securities license with your firm, even though no business is expected to transpire
Allowing a former RR to keep a securities license with a firm even though no business is expected to transpire is known as "parking" a li

During a discussion with a customer about a potential investment opportunity involving securities, standing alone, all of the following would likely be permissible EXCEPT
A) the RR points out, correctly, that the maximum possible loss on this particular i

B) the RR points out only that a tech firm has a brilliant product idea and the CEO has advanced degrees in science
The CEO may have advanced degrees, and the product idea may be brilliant, but the registered representative has failed to mention that thes

If a broker-dealer firm wishes to become a FINRA member firm, it must make its application
A) to the FINRA district office where the applying firm has its home office
B) to a member firm to act as the applying firm's sponsor
C) to FINRA's National Adjudic

A) to the FINRA district office where the applying firm has its home office
An application to become a FINRA member firm must be made to the FINRA district office in the district where the applying firm has its home office.

The rules to prevent "pay to play" regarding contributions made to political parties, candidates, and elected officials by firms involved in the underwriting or sales of municipal securities are enforced by
A) SEC
B) MSRB
C) FRB
D) FINRA

D) FINRA
Having no authority to enforce the rules it enacts, the MSRB relies on FINRA to enforce its municipal securities rules. This would include the enforcement of the "pay to play" or "play for pay" rules regarding political contributions.

In the event that a customer complaint is received it is essential that the appropriate personnel are notified immediately. Which of the following need not be notified or only notified regarding specific scenarios?
A) The account's registered representati

B) The Financial Industry Regulatory Authority
Whenever a customer complaint is received, it is essential that the proper personnel are notified. Persons who should be notified may include the account's representative, the account's principal, the branch

When is the electronic filing of all information on customer complaints by broker-dealers with FINRA due?
A) Within 15 days of the end of each calendar quarter
B) Within 15 days of the end of each calendar year
C) Semiannually, in June and December
D) Wit

A) Within 15 days of the end of each calendar quarter
Broker-dealer firms must electronically report information on all customer complaints to FINRA within 15 days of the end of each calendar quarter. Both these filings and the complaints must be retained

Associated persons who wish to enter into a private securities transaction for which they will receive no compensation must
A) take steps to have the transaction supervised at the firm where it will occur
B) open a new account to accommodate the transacti

C) provide prior written notice to their employer
Associated persons who wish to enter into a private securities transaction must provide prior written notice to their employer. Approval is only required when compensation will be paid. All supervision for

All associated persons must be fingerprinted if they handle
A) new account forms
B) cash and securities
C) cold-call lists
D) direct mail programs

B) cash and securities
Any associated person put in a position that would have them handle cash or securities would be required to be fingerprinted.

An institution or a person responsible for making all investment, management, and distribution decisions in an account maintained in the best interests of another who has been legally appointed to provide these services is BEST described as a(n)
A) Market

B) Trustee
A trustee is legally appointed to manage as a fiduciary assets in a trust.

Each of the following provides for an exemption from the registration requirement of the Securities Act of 1933 EXCEPT
A) Rule 147
B) Access equals delivery rule
C) Regulation D
D) Regulation A

B) Access equals delivery rule
Securities offerings may qualify for exemption from the registration statement and prospectus requirements of the Securities Act of 1933 under Regulation A+, Regulation D, Rule 147 and Regulation S.

A fully disclosed broker-dealer
A) is also known as a full-service clearing agent able to process and clear transactions
B) is one that introduces its business to a carrying firm to clear transactions
C) is like a clearing agent in that it can take custod

B) is one that introduces its business to a carrying firm to clear transactions
A fully disclosed broker-dealer is also known as an introducing BD because it introduces its business to a carrying firm that can clear and process transactions for it. Unable

Which of the following statements would describe the Fourth Market?
A) A market for institutional investors in which large blocks of stock, both listed and unlisted, trade in transactions unassisted by broker-dealers.
B) These transactions take place thro

A) A market for institutional investors in which large blocks of stock, both listed and unlisted, trade in transactions unassisted by broker-dealers.
The Fourth Market is a market for institutional investors in which blocks of stock trade through electron

All of the following are benefits of using a prime broker EXCEPT
A) cost savings
B) consolidation of records
C) multiple executing brokers
D) research

D) research
An institutional investor may select one firm (the prime broker) to provide custody and financing of securities while other firms, called executing brokers, handle all trades placed by the customer. It is not unusual for large companies to use

Which of the following regarding monetary or fiscal policy is TRUE?
A) Fiscal policies are the actions taken by the president and Congress to regulate the amount of money consumers will be able to borrow.
B) Fiscal policies are governmental budget decisio

C) Monetary policy is what the FRB engages in when it attempts to influence the money supply.
Monetary policy is what the FRB engages in when it attempts to influence the money supply. Fiscal policy refers to governmental budget decisions enacted by the p

A broker-dealer has a line of business restricted solely to the purchase and sale of securities with trade executions being handled by another member firm. Which of the following would best describe this type of firm?
A) Prime/Executing
B) Market making
C

C) Introducing/fully disclosed
A fully disclosed "introducing" broker-dealer is what the word implies�it introduces its customers to a clearing firm. Clearing firms (often referred to as carrying firms) hold their customer's funds and securities as well a

State registration is not required if the transaction is exempt. An example of an exempt transaction would be
A) one that is solicited
B) one involving municipal bonds
C) one involving U.S. government bonds
D) one that is unsolicited

D) one that is unsolicited
Purchases and sales that are unsolicited (unsolicited transactions) are exempt under the blue-sky (state securities) laws. Municipal bonds and U.S. government bonds are examples of exempt securities, not transactions.

Regarding the registration statement filed with the SEC when new securities are to be issued, all of the following are true EXCEPT
A) underwriters may assist the issuer in preparing and filing the registration statement
B) the names and addresses of compa

C) the accuracy and adequacy of the registration documents is the responsibility of the underwriters
The Responsibility is on the Issuers not the underwriters

Regarding primary offerings, which of the following is TRUE?
A) A corporation can have two primary offerings�the initial public offering (IPO) and an additional public offering (APO).
B) After its initial public offering (IPO), a corporation can have only

D) There is no limit to the number of primary offerings a corporation can issue.
While a corporation can have only one initial public offering (IPO), there is no limit to the number of subsequent public offerings (SPOs) or additional public offerings (APO

Which of the following companies was created by an act of Congress and provides securities investors limited financial coverage in the event that the investor's servicing broker-dealer fails financially?
A) SIC
B) FDIC
C) SIPC
D) OFAC

C) SIPC
The Securities Investor Protection Corporation (SIPC) was created by Congress to meet customer claims in the event of a broker-dealer bankruptcy.

An official statement is a disclosure document that would be used in connection with an offering of which of the following securities?
A) Municipal bonds
B) Common of preferred stock offered privately
C) U.S. Treasury notes
D) Limited partnership interest

A) Municipal bonds
An official statement (OS) serves as a disclosure document and contains any material information an investor might need about a municipal bond issue. Municipal bonds are exempt from registration under the Securities Act of 1933.

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(n)
A) primary offering
B)

A) primary offering
A primary offering is one in which the proceeds raised go to the issuing corporation, municipality, or government. The corporation in this case looks to increase its liquid capital by offering bonds. Primary offerings of bonds may be m

To the benefit of the bondholder, a puttable bond is likely to be put back to the issuer
A) when interest rates are volatile, moving both up and down over short periods of time
B) when interest rates rise
C) when interest rates fall
D) when interest rates

B) when interest rates rise
Bonds with put features are most likely to be put back to the issuer when interest rates rise. For example, if a bondholder has a bond paying 4% and interest rates have risen to 6%, why settle for a 4% return when prevailing ma

All of the following would be associated with hedge funds EXCEPT
A) highly leveraged portfolios (borrowing to purchase securities)
B) the use of short positions (selling securities the portfolio does not own)
C) commodity speculation
D) investing in gover

D) investing in government debt securities
Hedge fund managers often employ highly speculative strategies and products associated with substantial risk. These might include using leverage (borrowing to purchase securities), selling securities short, (sell

Limited partnership programs are categorized as direct participation programs. The term direct participation refers to the
A) ability for each partner to have her vote flow through to the general partner
B) ability of any partner, limited or general, to p

C) flow-through of profits and losses of the partnership to the individual limited partners
Understanding the flow-through concept is critical with DPPs. Only DPPs allow flow-through of losses.

Which of the following describes the position in a call option on a stock with a strike price of 20, a premium of 7, and a current market of 26?
A) Out of the money
B) At parity
C) In the money
D) At the money

C) In the money
In this case, the strike price is less than the current market value, so a call option would be in the money by the difference between the strike price and the market price (6 points, in this case). "At the money" means the strike price an

Direct participation programs (DPPs) are set up
A) as tax-free investments with no potential write-offs
B) to be taxed directly, much like corporations are taxed
C) to pass on taxable income only to the investors, but not losses
D) having the owners of th

D) having the owners of the business liable for any taxes due
DPPs are not taxed directly as a corporation would be. Instead, the income or losses from the business are passed directly through to the owners of the partnership. These are the investors who

A customer buys a callable 5% coupon bond at par that will mature in 10 years. Which of the following statements is TRUE?
A) Nominal yield is higher than either YTM or YT
B) YTC is the same as YTM.
C) YTC is higher than YTM.
D) YTC is lower than YTM.

B) YTC is the same as YTM.
This bond was purchased at par. If a bond is trading at par, the nominal yield (coupon rate) = current yield = yield to maturity = yield to call. YTC is higher than YTM if the bond is trading at a discount to par. YTC is lower t

Which of the following would be included in a mutual fund's list of expenses?
I. Shareholder records and service
II. Investment advisor's fee
III. Broker-dealer sales charges
IV. Underwriter's sales loads

I & II
Costs to maintain shareholder records, costs to provide services to shareholders, and the investment adviser's fees are all expenses to the fund. The costs paid in the form of sales charges (loads) to an underwriter or broker-dealers selling mutual

Advantages enjoyed by the limited partners in a partnership might be all of the following EXCEPT
A) being in a fiduciary position with responsibilities to others
B) having income and expenses flow directly through to them
C) having liability limited to th

A) being in a fiduciary position with responsibilities to others
The fiduciary responsibility is borne by the GPs, not the LPs. The flow-through of income and expenses, limited liability, and having an investment managed by the GPs are all considered adva

For Treasury receipts and STRIPS, which of the following is TRUE?
A) Treasury receipts are backed in full by the U.S. government. Treasury STRIPS are not.
B) Neither Treasury receipts or STRIPS are backed in full by the U.S. government.
C) Both Treasury r

D) Treasury STRIPS are backed in full by the U.S. government. Treasury receipts are not.
Brokerage firms can create and issue a type of bond known as a Treasury receipt from U.S. Treasury notes and bonds. Issued by financial institutions, they are not bac

Which of the following is NOT a type of real estate direct participation program?
A) Raw land
B) Income
C) New construction
D) Existing properties

B) Income
Direct participation real estate programs come in 3 types: raw land, new construction, and existing properties. Income is a type of oil and gas program.

An investor has purchased Class A mutual fund shares. The NAV (net asset value) per share of the fund is the price the investor
A) knows will be the cost per share when the order is entered
B) will receive upon redemption of the shares
C) will use as the

B) will receive upon redemption of the shares
The NAV per share of a mutual fund is calculated by dividing the net assets of the fund by the number of shares outstanding. When purchasing Class A shares, NAV plus a sales charge is paid. When redeeming the

Which of the following are the most likely to make monthly or quarterly payments for the life the investor?
I. Fixed annuity
II. UIT
III. Mutual fund
IV. Variable annuity

I & IV
Both a fixed and variable annuity is an insurance contract designed to provide retirement income. The term annuity refers to a stream of payments guaranteed for a certain period including the life of the annuitant. In the case of a variable annuity

Limited partnerships
A) can either exist in perpetuity or be designated to end on a specific date
B) must exist in perpetuity
C) must end on a predetermined date or can be dissolved earlier by vote
D) must end on a predetermined vote with no exceptions

C) must end on a predetermined date or can be dissolved earlier by vote
Unlike with a corporate charter, which has corporate entities existing in perpetuity, limited partnerships are scheduled to end on a predetermined date. The exception to ending on tha

An investor has asked a mutual fund company for a copy of its Statement of Additional Information (SAI). How long does the fund have to comply with the request?
A) 3 business days from the date of the request
B) By end of week in which the request was rec

A) 3 business days from the date of the request
If an investor asks for a copy of a mutual fund's SAI, the copy must go into the mail no later than the end of the 3rd business day from the date of the request. It must also be supplied free of charge.

Under the Investment Company Act of 1940, which of the following is NOT considered and investment company?
A)Face-amount certificate company
B) Unit investment trust
C) Hedge fund
D) Management company

C) Hedge fund
Investment companies include face-amount certificates, unit investment trusts, and management companies (both open- and closed-end). Hedge funds are organized as private investment companies, which are excluded under the definition of invest

For tax purposes, investment income is
A) always taxed at the capital gains tax rate
B) never taxable at ordinary income tax rates
C) taxed at either ordinary income tax or capital gains tax rates
D) always taxed at an investor's ordinary income tax rate

C) taxed at either ordinary income tax or capital gains tax rates
Investment income is that which is earned from one's investments. Sometimes called portfolio income, it would include dividends, interest, and capital gains derived from the sale of securit

Which of the following may receive a commission from a FINRA member firm?
A) A retired representative, provided there are no adverse judgements against the RR
B) A domestic nonmember firm that agrees to abide by FINRA rules
C) A foreign nonmember firm tha

C) A foreign nonmember firm that agrees to abide by FINRA rules
Domestically, nonmember firms, suspended firms, and retired representatives are not licensed or registered and may not receive commissions. The exception is a foreign nonmember firm that agre

What happens to the contents of a custodial account in the event of the death of the beneficial owner (the minor child)?
I. The account's contents are returned to the donor(s).
II. The custodian's fiduciary responsibility ceases.
III. The account passes t

II & III
The custodian's fiduciary responsibility is for the benefit of the minor and ceases upon the minor's death. The account passes to the minor's estate for distribution to the minor's heirs.

Which of the following statements about rights and warrants is TRUE?
A) Rights and warrants are both long term.
B) Rights are short term; warrants are long term.
C) Rights are long term; warrants are short term.
D) Rights and warrants are both short term.

B) Rights are short term; warrants are long term.
A security with a termination, maturity, or expiration date that is 1 year or less from the date of issuB) Until October 7 of the following year
e is said to be short term. Rights offerings have a lifetime

A customer has given permission for securities in an investment account to be used for the purpose of other customers who want to borrow them in order to sell those securities short. This would have entailed the customer signing
A) a loan consent form
B)

A) a loan consent form
Allowing one's securities to be loaned to others who want to borrow them for the purpose of selling them short would entail signing a loan consent form. This is optional and need not be signed to open a margin account or any other.

Which of the following are required if a registered representative is to share in profits and losses with a customer?
I. The trades must be done in a joint account.
II. The customer must be a family member of the representative.
III. The principal must gi

I & III
A registered representative may share in profits and losses with a customer if the customer gives consent and the principal gives permission in writing. The trades must be done in a joint account, and the representative must share in both profits

Regarding purchases on margin, which of the following is TRUE?
A) Warrants and rights can both be purchased on margin.
B) Warrants can be purchased on margin, but rights cannot.
C) Neither rights nor warrants can be purchased on margin.
D) Rights can be p

B) Warrants can be purchased on margin, but rights cannot.
Warrants are marginable securities, but rights are not.

In an effort to safeguard customer information which regulation specifies securing desktop and laptop computers and encrypting email?
A) Regulation S-P
B) The Securities Exchange Act
C) Regulation A
D) Regulation T

A) Regulation S-P
Safeguard requirements such as securing desktop and laptop computers and encrypting email to protect customer information is an obligation of financial institutions under Regulation S-P.

A customer wanting to open a margin account is told that the securities will be held in street name. This means that the securities will be registered in
A) the name of the broker-dealer
B) the name of the bank supplying the loan
C) the names of the custo

A) the name of the broker-dealer
Securities held in street name are registered in the name of the BD, who is the named or nominal owner. The customer remains as the beneficial owner.

What are the 2 basic types of return on an investment?
A) Short term and long term
B) Capital gains and income
C) Dividends and interest
D) Interest and principal

B) Capital gains and income
Upon the purchase of a security, the investors may receive dividends or interest, which are forms of income, or they may sell the security for a different price than was paid for it, which represents a capital gain or loss.

Under regulation S-P nonpublic personal information would not include a customers
A) account balance
B) home address
C) any information collected through an internet cookie
D) social security number

B) home address
The SEC, in Regulation S-P notes examples of nonpublic personal information to include a customer's Social Security number, account balances, transaction history, and any information collected through an internet cookie. A home address wou

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?
A)

B) Until October 7 of the following year
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.

A 72-year-old customer has a $30,000 required minimum distribution (RMD) calculated to be taken from an IRIf the customer is in the 20% income tax bracket and only withdraws $25,000 from the account, how much tax will be owed?
A) $7,500
B) $12,500
C) $10,

A) $7,500
Failure to meet the required minimum distribution (RMD) results in a 50% penalty tax on the shortfall. In this case, taking only $25,000 when $30,000 should have been taken leaves $5,000 exposed to the 50% penalty tax. $5,000 � 50% equals $2,500

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 & 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 en

Which of the following are not 3-year or 6-year records?
I. Compliance and Procedures Manual
II. List of home, regional, and branch offices
III. Minutes of directors' meetings
IV. Customer complaints

III & IV
Minutes of directors' meetings (The Minute Book) is a lifetime record. Customer complaints must be kept on file for 4 years, not 3 or 6. The Compliance and Procedures Manual, which must frequently be updated, and the list of all offices where bus

The regulatory element of training requires that all registered persons complete a computer-based training session how frequently?
A) Within 120 days of the person's third registration anniversary and then every 2 years thereafter
B) Within 90 days of the

C) Within 120 days of the person's second registration anniversary and then every 3 years thereafter
The regulatory element of training requires that all registered persons complete a computer-based training session within 120 days of the person's second

A mutual fund company may offer noncash compensation to associates of broker-dealer firms in the form of attendance at a meeting or convention, provided that
A) attendance is conditional upon agreement to a predetermined sales target
B) a record of compen

B) a record of compensation and meeting details is kept by the attendee member's firm
The firms whose associates attend the meeting must keep records of all noncash compensation and details of what went on at the meeting. Noncash compensation of this type

A registered representative was guilty of an undetected minor rule violation during the last year of employment at a broker-dealer firm. The representative has now decided to leave the industry. For how long might the representative still be subject to fi

D) 2 years
FINRA retains jurisdiction over a registered person for 2 years after the person leaves the industry.

The Uniform Practice Code (UPC) establishes uniform trade practices pertaining to all of the following EXCEPT
A) good-delivery procedures
B) communications with the public
C) don't know (DK) procedures
D) settlement and ex-dates

B) communications with the public
The Uniform Practice Code (UPC) established uniform trade practices and other guidelines for broker-dealers to follow when they do business with other member firms, including transaction settlement, good delivery, ex-date

A municipal finance professional (MFP) is
A) employed by a municipality (not elected) to oversee the issuance of municipal bonds
B) an elected official of a municipality having some decision-making authority regarding who will underwrite the municipality'

D) an employee of a FINRA member engaged in municipal security representative activities such as underwriting and trading
As per the Municipal Securities Rulemaking Board (MSRB), a municipal finance professional (MFP) is an associated person of a member f

An investor makes several statements regarding what they know about exchange-traded funds. All of them are correct EXCEPT
A) I'll be able to buy or sell them throughout the trading day like stocks trading on an exchange
B) I won't have to pay any sales ch

D) I can't buy them on margin because they represent an entire basket of stocks like mutual funds do
Though mutual funds cannot be purchased on margin, ETFs can be. They can be traded throughout the trading day with purchases and sales commissionable tran

The rate on an adjustable preferred stock would most likely be indexed to
A) the Dow Jones Industrial Average (DJIA)
B) the Treasury bill (T-bill) rate
C) the Producer Price Index (PPI)
D) the Consumer Price Index (CPI)

B) the Treasury bill (T-bill) rate
The dividend on an adjustable-rate preferred stock is tied to a particular benchmark interest rate, and the Treasury bill rate is a common benchmark. The CPI, the PPI, and the DJIA are not interest rates.

A company that is extensively overleveraged using debt financing whenever available would be exposing its investors to
A) call risk
B) liquidity risk
C) business risk
D) financial risk

D) financial risk
Debt financing or utilizing debt leverage too much can lead to the inability to meet principal and interest payments on a company's debt obligations. This is the definition of financial risk.

Which of the following are fixed at the time a bond is issued?
A) Nominal yield
B) Yield to maturity
C) Yield to call
D) Current yield

A) Nominal yield
Coupon, nominal, or stated yield is set at the time of issue and is a fixed percentage of the bond's par value.

The performance of listed options contracts is guaranteed by which of the following?
A) OCC
B) SEC
C) U.S. Treasury
D) FRB

A) OCC
The Options Clearing Corporation (OCC) guarantees the performance of listed option contracts.

A customer is interested in an exchange-traded fund (ETF). With regard to how they can be traded, you would want the customer to be aware that
A) the NAV calculated at the end of the day, plus a sales charge establishes the real-time quote for trading
B)

C) real-time quotes are available for ETFs, which can be purchased throughout the trading day
ETFs can be traded (purchased and sold) throughout the trading day. Changing price quotes are available in real time as investors buy and sell. Although ETFs hav

Which of the following is TRUE for debt instruments issued by the U.S. Treasury?
A) All pay semiannual interest payments.
B) All have interest stated as a percentage of par value.
C) All are issued in book-entry form.
D) All are priced as a percentage of

C) All are issued in book-entry form.
U.S. Treasury-issued debt instruments are all issued in book-entry form. Only T-notes and bonds are priced as a percentage of par, have interest stated as a percentage of par, and pay semiannual interest payments. T-b

By virtue of a stocks listing for trading on a U.S. stock exchange, which of the following risks is reduced or even recognized as eliminated?
A) Equity risk
B) Liquidity risk
C) Price risk
D) Market risk

B) Liquidity risk
One of the advantages of a security being traded on a U.S. listed stock exchange is the ready availability of buyers and sellers. This means the investment can be considered a liquid one�easy to divest of at a fair price, if and when one

Which of the following corporate bonds is backed by the securities of other corporations or those of a subsidiary?
A) Equipment trust certificate
B) Mortgage bond
C) Debenture
D) Collateral trust bond

D) Collateral trust bond
Collateral trust bonds are backed by a portfolio of other securities; mortgage bonds are backed by real estate. Equipment trust certificates are backed by equipment. Debentures are backed only by the company's promise to pay (good

For which of the following investors would Class C shares be most suitable?
A) An investor who intends to leave the money in the fund for many years
B) An investor who intends to redeem the shares within a short time
C) An investor interested in high-risk

B) An investor who intends to redeem the shares within a short time
Because Class C shares have no sales charge levied at the time of purchase but rather levy a withdrawal from the customer's account every quarter, they would be most suitable for an inves

Intraday price changes due to normal market forces would be found with
I. closed-end fund shares
II. exchange-traded fund shares
III. hedge fund shares
IV. open-end (mutual) fund shares

I & II
Both closed-end funds and ETFs trade in the open market and are priced by supply and demand. Open-end (mutual) funds use forward pricing and generally price only once per day (usually at the end of the trading day). Most hedge funds are organized a

A commonality of all self-regulatory organizations (SROs) is that they all require their members and associated persons to
A) transact business with public customers
B) be incorporated in the United States
C) register with them
D) transact business with o

C) register with them
All SROs, such as FINRA, require member firms and associated persons to be registered with them. Some firms may transact business with other members, or the public, or both. There is no requirement that a member firm be organized as

In an underwriting where fixing a minimum dollar amount to be sold in order to move forward with the entire offering is most commonly referred to as
A) mini-max
B) firm commitment
C) all-or-none
D) de minimis

A) mini-max
A mini-max offering is a best efforts underwriting setting a floor or minimum, which is the least amount the issuer needs to raise in order to move forward with the underwriting, and a ceiling or maximum on the dollar amount of securities the

Which of the following are the 2 basic types of Section 529 plans, which are products used for funding higher education?
I. Savings plans
II. Education savings accounts
III. Secondary school funding plans
IV. Prepaid tuition plans

I & IV
The savings plan allows the investor to accumulate money for use later in funding someone's education. The prepaid tuition plan allows the purchaser to pay the tuition for a particular K-12 or higher education institution at current rates, either i

For revenue bonds issued by a state or municipality, which of the following is TRUE?
A) Interest and principal payment is backed by the full faith and credit of the issuer.
B) Interest will be paid only if the enterprise owned and operated by the state or

B) 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.
Revenue bonds are not backed by the full faith and credit of the municipali

A corporation needs to build a new manufacturing facility costing several hundred million dollars. In which of the following markets could this new capital be raised?
A) Secondary market
B) Municipal bond market
C) Capital market
D) Government bond market

C) Capital market
Capital markets are a source of financing for corporations, municipalities, and governments. Capital can be raised by issuing equities or debt and offering the securities to investors in an initial public offering (IPO) or an additional

Federal funds represent
A) the amount by which a bank exceeds its required
deposits to be held on reserve at the FRB
B) the amount by which a bank falls short of its required deposits to be held on reserve at the FRB
C) the amount of a bank's deposits req

A) the amount by which a bank exceeds its required deposits to be held on reserve at the FRB
The Federal Reserve Bank (FRB) mandates how much money its member banks must keep on reserve at the FRAny deposits in excess of the required amount are known as f

MJS Corporation has called in its 6% preferred shares. Owners of these shares should expect that
A) dividend payments will continue until the owner chooses to turn in the shares
B) dividend payments will cease on the call date
C) the shares will continue

B) dividend payments will cease on the call date
When a corporation calls in preferred shares, the shares stop trading and dividend payments cease on the call date.

To meet a Regulation T margin call, a customer would have how long?
A) Trade date plus 2 additional business days
B) Trade date plus 5 additional calendar days
C) Settlement date plus 2 additional calendar days
D) Settlement plus 2 additional business day

D) Settlement plus 2 additional business days
The rule requires that the call be met within 2 business days of the settlement date, referred to as S + 2. If regular way settlement was T + 2, adding 2 additional business days to the trade date would be T +

The general partner of a limited partnership has responsibility for all the following EXCEPT
A) providing all of the partnership capital
B) paying partnership's debts
C) managing the day-to-day operations
D) organizing the business

A) providing all of the partnership capital
The general partner organizes and manages the partnership and assumes unlimited liability, responsible for paying all partnership debts. While some capital may also be provided by the GPs, it is the limited part

Which of the following are considered intangible drilling costs for an oil and gas DPP?
A) Fuel and interest expenses
B) Wages and insurance
C) Equipment and fuel
D) Wages and equipment

B) Wages and insurance
Intangible drilling costs (IDCs) are costs for those items that would have no salvage value at the end of the program. These might include wages, supplies (not equipment that can be depreciated), fuel, and insurance.

Promissory notes are a form of
A) jumbo CDs issued by banks
B) Treasury notes issued by the U.S. government
C) Treasury bills issued by the U.S. government
D) commercial paper issued by corporations

D) commercial paper issued by corporations
Corporations issue short-term, unsecured commercial paper, known as promissory notes. The proceeds from these notes are generally used to fund such items as pending accounts receivable and seasonal inventory glut

All of the following are considered control persons (owning control stock) EXCEPT
A) an officer of the corporation owning less than 1% the outstanding shares
B) an unaffiliated shareholder owning 8% of the outstanding shares
C) a director on the BOD ownin

B) an unaffiliated shareholder owning 8% of the outstanding shares
By virtue of their positions, directors and officers are considered control persons and any stock they own, no matter how little, is considered control stock. To be considered a control pe

The tax rate on qualified dividends depends on which of the following?
I. The current IRS tax code
II. The financial status of the issuer
III. The tax bracket of the shareholder
IV. The price per share of the stock

I & III
Qualified dividends are taxed at a rate lower than the rate applied to the investor's tax bracket. That rate thus depends on current provisions of the IRS tax code and the investor's ordinary income tax bracket.

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
A) quarter
B) other year
C) year
D) 36 months

D) 36 months
Account updating must occur at least every 36 months thereafter.

An investor would expect which type of preferred stock to pay the highest stated dividend rate?
A) Cumulative
B) Callable
C) Convertible
D) Straight

B) Callable
With callable preferred stock, to compensate for the possibility that the shares may be called, the issuer pays a higher dividend than with straight preferred. Cumulative and convertible preferred have positive characteristics that would justi

A company is going public for the first time. Because it is already incorporated and has two key stockholders, the proceeds of the shares sold will go to those stockholders. This is
I. a secondary offering
II. a primary offering
III. an additional public

I & IV
Anytime proceeds are going to the selling shareholders rather than the issuer, it is a secondary offering. In this example, the shares are being offered to the investing public for the first time, which makes the offering an IPO (initial public off

Your customer has purchased $10,000 in U. S. Treasury bonds. These securities
A) cannot be delivered in physical certificates because they exceed the amount for paper certificate delivery
B) are required to be delivered in the form of physical paper certi

C) will have evidence of ownership recorded in book entry form
All U.S. government securities no matter what the denomination or amount are delivered, transferred, and have ownership recorded in book-entry form.

FINRA regulates all matters related to investment banking, including
A) trading in commodities markets
B) trading in the OTC market
C) trading in the futures markets
D) trading in fixed annuities

B) trading in the OTC market
FINRA regulates all matters related to investment banking (securities underwriting), trading in the OTC market, trading in NYSE-listed securities, and the conduct of FINRA member firms and associated persons.

Which of the following statements is TRUE regarding Exchange-traded notes?
A) ETNs track performance to U.S. Treasury notes
B) ETNs are senior, unsecured debt securities issued by a bank or financial institution.
C) ETNs are junior, unsecured debt securit

B) ETNs are senior, unsecured debt securities issued by a bank or financial institution.
Exchange-traded notes (ETNs) are senior, unsecured debt securities issued by a bank or financial institution. They are backed only by the good faith and credit of the

Secured corporate debt includes
A) preferred shareholder stock
B) debt owed to the federal government
C) mortgage debt
D) debt owed to suppliers

C) mortgage debt
Examples of secured corporate debt includes outstanding bonds and mortgage paper. Debt owed to suppliers would be unsecured. Government debt owed is taxes, and preferred and common stock is equity.

Your customer is long 1 October 55 put at 4. The customer's maximum loss potential is
A) 51 points ($5,100)
B) 4 points ($400)
C) 59 points ($5,900)
D) 40 points ($4,000)

B) 4 points ($400)
For long option contracts (puts or calls), the maximum loss is always the premium initially paid�in this case, 4 points ($400). This happens if the price of the underlying is at or above the put strike price at the option's expiration�i

All of the following must be on the cover page or beginning of the summary prospectus of a mutual fund EXCEPT
A) the share class or classes offered by the fund
B) the fund share class or classes ticker symbols
C) the website where a full prospectus may be

D) the name of the investment advisor
The summary prospectus, as the name implies, contains the important information about a mutual fund in summary form. The cover page must contain a standardized listing of certain information, including the fund's name

In a leasing partnership program, loans are taken to purchase equipment that is then leased to companies in return for the lease payments. This process
A) allows for the loan interest and equipment depreciation to be taken as deductions that will shelter

A) allows for the loan interest and equipment depreciation to be taken as deductions that will shelter the income from the lease payments received
When a leasing program purchases equipment that it will lease to companies in return for the lease payments,

Which of the following publishes and maintains a list of known terrorists and drug traffickers and those controlled by them or acting on their behalf?
A) The Financial Industry Regulatory Authority (FINRA)
B) The Financial Crimes Enforcement Network (FinC

C) The Office of Foreign Assets Control (OFAC)
Such a list is maintained by OFAC and is available to broker-dealers and other companies in the financial industry. It must be consulted when a firm takes on a new customer and on other occasions. The FOMC ca