SIE Exam

Fourth Market

Refers to direct institution-to-institution trading and doesn’t involve public exchanges

Clearing, settlement, and information services

What services does the Depository Trust and Clearing Corporation (DTCC) provide to its members

Municipal Advisor

Type of advisor that provides advice either to a state, county, or city

It is the end-of-day process of matching trades executed by a BD to determine what is owed

What does it mean to clear a trade?

The Research Department

What department of a broker-dealer writes reports about markets and securities for investors?

on one of the four OTC Markets Group tiers: OTCQX, OTCQB, OTCID Basic, and Pink limited markets

Where may quotes for non-Nasdaq (OTC) stocks be found?

Investment Banking

Which department of a broker-dealer handles the underwriting and issuance of securities for clients?

Only registered investment advisers

Who can charge a client for securities-related advice?

Introducing BD

A BD using another BD to handle cash and securities, trade execution, reporting, clearing, and confirmation

Registered Representatives

BD employees who are involved in the investment banking and securities business are called

Clearing Firm

Firm that is responsible for the efficient confirmation, settlement, and delivery of securities transactions

Secondary Market

The market on which existing securities are traded

Omnibus Arrangement

A clearing firm doesn’t have information on each individual customer of an introducing firm

Only registered Broker-dealers can levy transaction-based charges. Remember, investment advisers charge fees for advice.

Who can charge a client for buying or selling securities?

Dealer

A person engaged in the business of buying securities for, and selling securities from, his own account

Broker

Any person engaged in the business of effecting transactions in securities for the account of others

Trading

Which department of a broker dealer executes securities transactions

The over-the-counter market (OTC)

Which market is the decentralized, negotiated market

A broker

Person that executes agency transactions in securities for the account of others

Issue and cancel securities, pay dividends and interest, mail shareholder reports, handle lost or stolen certificates

Responsibilities of a transfer agent

Process paperwork, handle funds and securities transfers, and settle and confirm transactions

What is the role of a broker-dealer’s operations department

Dark Pool

Place for large institutional investors and high frequency traders to trade directly with one another

Electronic Communication Network (ECN)

Any one of several systems which permit the entry and dissemination of quotes

The Options Clearing Corporation (OCC)

Who gurantees and issues all exchange-listed option contracts

The Pink Market

Where can quotes be found for stocks that are not listed on an exchange or Nasdaq

Primary and secondary

What are the two types of securities markets

Prime-brokerage Arrangement

Situation in which multiple BDs execute a client’s trades and report them to one independent BD for settlement

The bid price

What is the price at which a dealer is willing to buy

Qualified institutional buyer

What does QIB stand for

Corporations, the U.S. Treasury, foreign governments, states and other municipalities

List examples of issuers

Holding securities in street name

When client securities are held by and registered in the name of the BD

Bonds

For what types of securities is a trustee required

Third Market

Where trades of NYSE listed securities occur in the OTC market

Registered Representative

What is RR

An entity that owns and invests on a discretionary basis at least $100 million in securities of unaffiliated issuers

What is a QIB

Exchange markets (NYSE or Nasdaq) and the Over-the-counter markets (OTCQX, Pink Limited Market)

List the two main types of secondary markets

Fully Disclosed and Omnibus

What are the two types of arrangements that an introducing firm can have with a carrying firm?

Market maker

A person who enters quotes and stands ready to buy and sell securities for his own account on a regular basis

Third Market

What is the term used to describe NYSE listed securities trading over the counter

a Broker Dealer

What is a RR’s employer referred to as

Dealer

any person that executes principal transactions in securities for its own account

The client trades through multiple BDs, but has its trades cleared and settled with one prime BD

What does it mean for a client to use a prime brokerage account

Non-carrying firm

A BD that does not hold a customers cash or securities is known as a

Prime Broker

A BD that clears and settles trades effected by one or more executing brokers at the direction of the customer

real time electronic quotation system for over the counter equities

What are the OTCQX, OTCQB, OTCID Basic, and Pink limited markets

The ask or offer price

What is the price at which a dealer is willing to sell

primary market

The new issue market is also known as

Fully disclosed account

account where information about each customer of the introducing firm is sent to the clearing firm.

secondary market

a Nasdaq listed stock trades in the

Primary Market

Market on which new securities are offered

New Issues

The Securities Act of 1933 regulates

SIPC coverage is provided for 250k of cash and the full 185k of securities

Jim’s cash account contain 275k of cash and 185k of securities. How much SIPC coverage is provided

The MSRB

What entity is responsible for the formulation and interpretation of rules for the municipal industry

True : Jim’s cash and margin account are combined for coverage, but Jim’s joint account with his spouse is separate.

True or false: Jim’s joint account with his wife is considered a separate customer by SIPC

To adopt, administer, and enforce rules in the securities industry

What is FINRA’s primary objective

Federal Deposit Insurance Corporation

what does FDIC stand for

No, SIPC protects customers from losses due to BD bankruptcy

Does SIPC protect customers from market losses

Securities and Exchange Commission

What does SEC stand for

SIPC provides coverage of 500k of which no more than 250k can be cash

how much coverage does the SIPC provide and how much of it can be cash

False. The investment Advisers Act of 1940 is the Act that requires money managers to register

True or false: The investment Company Act of 1940 requires mutual fund managers to register

The Securities Act of 1933

Which federal law governs the registration of new issues

True

True or false: The MSRB has no authority or control over municipal issuers

To establish and modify the Uniform Securities Act, which is the basis for most states securities laws.

What is NASAA’s primary responsibility

250k per depositor, per bank

What amount of coverage is provided by FDIC

The Securities Exchange Act of 1934

Which federal law governs the registration of RRs and their firms

To insure bank deposits and also to examine and supervise financial institutions for safety and soundness

What is the purpose of the FDIC

SIPC does not insure bank deposits. Instead, it insures BD clients against the loss of securities due to BD bankruptcy

How is the FDIC different from SIPC

Investment Company Act of 1940

What is the IC Act of ‘40

True. The MSRB also regulates municipal advertising

True or False: MSRB rules regulate the municipal activities of BDs, banks, and the employee of these institutions

In a margin account, SIPC covers the net equity (market value minus debit) in this example, 450k

Ben’s margin account has a market value of 800k and a debit balance of 350k. How much SIPC coverage is provided?

No. it is a non-profit entity funded by assessments on BD members

is SIPC part of the US GVMT

Non-exchange traded securities that are priced at less than $5 per share

Define Penny stock

Securities Investor Protection Corporation (SIPC)

What protects customers from BD bankruptcy

The Securities and Exchange Commission (SEC)

What U.S. GVMT agency, created by the ‘34 Act, enforces securities laws?

100

The IC act of ‘40 requires a fund with more than ___ shareholders to register with the SEC

A broker-dealer that is a member of FINRA

What is a member firm

Securities Investor Protection Corporation. SIPC protects separate customers in the event of BD bankruptcy

What is SIPC

Tim’s accounts are combined for SIPC coverage purposes

Tim has both a cash and margin account with the same BD. If BD bankruptcy occurs, how are Tim’s accounts handled

Anyone who misuses material non-public information

Who is subject to the insider trading act

False

True or false: SIPC is backed by the full faith and credit of the US GVMT

through assessments on BDs that are SIPC members

How is SIPC funded

False. This situation would be handled under the code of Arbitration

True or false: The code of Procedure can be used by a customer against a member firm to resolve a monetary dispute

Censure, fine, suspension, request to requalify, or expulsion of the respondent

What actions may the hearing panel take regarding rule violations

Arbitration

Industry disputes are handled through ___

They are distributed to the client without regard to the dollar amount limit.

For SIPC purposes, what happens to securities that are able to be specifically identified as belonging to a client

Employee Retirement Security Act

what does ERISA stand for

FINRA, MSRB, CBOE, and other exchanges

Name some self-regulatory organizations (SROs)

The NASD. in 2007, the regulatory units of the NASD and NYSE merged to create FINRA

The Maloney Act of 1938 is credited with creating which SRO

The Financial Industry Regulatory Authority. Created by the merger of the NASD and NYSE regulatory authorities

What is FINRA

North American Securities Administrators Association

what does NASAA stand for

Only the customer’s equity (securities clear of any outstanding loan)

What will SIPC cover in a customer’s margin account

They are returned to the customer without regard to SIPC limitations

IF a BD goes bankrupt, what happens to securities registered in the customer’s name?

To guarantee the safety of cash deposited in FDIC member banks against bank failure

What is the purpose of the Federal Deposit Insurance Corporation

Telephone Consumer Protection Act

What does TCPA stand for

The Chicago Board Options Exchange (CBOE)

What is the SRO for exchange-traded options

The cash account is one customer and the IRA is a second customer. SO 500k for each customer

If mary has a cash account as well as an IRA account, what coverage will SIPC provide.

Secondary Market

The Securities Exchange Act of 1934 regulates the ____ _____

An account that charges the client a single fee that covers transaction execution and account management

Describe a wrap account

No. The MSRB has no enforcement authority.

Does the MSRB have the authority to enforce its own rules

The Federal Reserve Board

What organization is responsible for implementing monetary policy in the US