SIE Chapters 1 - 5

Large blocks of stock can be traded anonymously through

Dark Pools

If an investment adviser has $400 million of assets under management, it must register with

The SEC

A broker-dealer that clears its trades through another broker-dealer is referred to as

An Introducing Firm

When used in reference to activities performed by a brokerage firm, the term "dealer" means

Any person that buys a security from or sells a security to a customer from/for its own account

When executing an agency trade for a customer, a broker-dealer will earn

A Commission

When equity securities fail to qualify for listing on either a physical or electronic exchange, the securities are referred to as

Over-The-Counter (OTC) Equities

According to FINRA, a person with assets of $80 million is considered

An Institutional Investor

When used in reference to activities performed by a brokerage firm, the term "broker" means

Any person that buys or sells securities for the accounts of others

Since a broker-dealer does not clear its own transactions, it sets up an account at a clearing broker-dealer and provides the clearing broker-dealer with information on each of its individual customers. This account is referred to as a(n)

Fully Disclosed Account

A market maker's quote for a stock is as follows: Bid $23.20 - Offer $23.70

A market participant is able to sell stock to the market maker at:

$23.20

Which of the following is NOT defined as an accredited investor?

A person who has a current Series 79 registration

A person who invests in equity securities will typically receive:

A Cash Dividend

Which of the following is NOT considered an issuer of securities?

The SEC

What type of account will hedge funds use when clearing their trades?

A Prime Brokerage Account

In order to be defined as an accredited investor, a person must have:

A net worth of at least $1 million (excluding his primary residence) or at least $200,000 in gross annual income in each of the last two years

Which of the following responsibilities is NOT provided by a transfer agent?

Maintaining the issuer's ownership register for each issue of its securities

Which of the following earns a fee based on the amount of assets it has under management?

An Investment Adviser

If an exchange has one entity that controls the trading in a specific stock, this entity is referred to as a:

Designated Market Maker (DMM)

Which of the following statements is NOT TRUE regarding corporate debt securities?

If the corporation has sufficient funds, it will pay the owners a cash dividend.

When executing a principal trade for a customer, a broker-dealer will earn:

A Markup or Markdown

The investment banking department of a broker-dealer will NOT perform which of the following functions?

Make recommendations as to which companies investors should purchase or sell

Concerning insider trading:

Both tippers and tippees may be held liable

SIPC provides protection for customers against broker-dealer insolvency in amounts up to:

$500,000 in total, of which up to $250,000 may be in cash

A signed disclosure document must be received from the client prior to the execution of what type of trade?

An OTC equity with a price of $4.75

The term "Blue-sky" law refers to:

Rules established by each individual state

The manual which details the rules and identifies the person(s) responsible for enforcing these rules is referred to as:

The written supervisory procedures (WSP) manual

A customer has a individual brokerage account, an IRA, and is the custodian for a minor's account. SIPC considers this person as being a separate customer in how many instances?

Three

Which of the following investments is NOT protected under SIPC?

Stocks held by the customer in his name

If a customer is located on the East Coast (in the Eastern Time Zone), which of the following is a violation of the Telephone Consumer Protection Act?

A cold call made at 7:30 a.m. ET

If a broker-dealer violates a rule of the Municipal Securities Rulemaking Board (MSRB), the violation would be enforced by:

FINRA

Short sellers will profit if the stock's price:

Decreases

A person traded on material, non-public information (MNPI) and realized a profit of $2 million. In this case, the SEC may sue for up to:

$6 million

The current coverage provided by the Federal Deposit Insurance Corporation (FDIC) is:

$250,000

Which of the following has jurisdiction in a criminal proceeding involving a violation of a federal securities law?

The Department of Justice (DOJ)

Which of the following covers the regulatory requirements of a 401(k) plan?

The Employee Retirement Income Security Act of 1974 (ERISA)

If a broker-dealer declares bankruptcy, which of the following positions is fully covered by SIPC?

$400,000 of securities, $75,000 of cash

An accountant charges one fee to prepare taxes and another fee to provide advice regarding securities. In this case, the accountant:

Must register as an investment adviser

A Wrap Account is one in which:

An investment adviser charges one fee which covers advisory services plus transaction costs

If a customer exceeds SIPC limits:

The customer is a general creditor for the excess amount

When a broker-dealer opens an account for a customer, it's not required to take which of the following actions regarding SIPC?

Provide the name of the SIPC trustee.

Which of the following federal securities laws establishes the disclosure requirements for new issues?

The Securities Act of 1933

Margin requirements were established under which of the following Acts?

The Securities Exchange Act of 1934

An investor owns 1,000 shares of preferred stock which has a 6% dividend. What quarterly amount will the investor receive?

$1,500

Authorized Shares of a company represent:

The number of shares that a company is permitted to issue

A person who owns restricted stock has filed a Rule 144 notice to sell his shares. Four months later, if the person wants to sell additional shares of restricted stock, he is:

Required to file another Rule 144 notice

Which type of preferred stock may increase the most if the value of the company's common stock appreciates?

Convertible preferred stock

Which of the following statements is TRUE regarding both restricted and control stock?

Both restricted securities and control securities must be sold according to the provisions of Rule 144.

RSR Corporation is authorized to issue 40 million shares, but actually issued only 22 million shares. If RSR currently has 19 million shares outstanding, how many treasury shares does it have?

3 million

An investor wants to purchase shares of an individual company that's based in Asia, but whose shares are listed on the NYSE. The investor will be purchasing which of the following?

A Sponsored ADR

The current bid/ask spread is $34.50 - $34.75, and the last independent transaction price was $34.55. The highest price at which an issuer can buy back its stock is:

$34.55

Which of the following is MOST likely a cyclical stock?

A company that manufactures household appliances

In order to prohibit management and early investors from cashing out too early from an IPO, underwriters will request which of the following?

A Lock-Up Agreement

A company has seven candidates who are running for four available positions on its board of directors. If the company is using statutory voting, what's the maximum number of votes that a shareholder can cast for a candidate if she owns 1,000 shares?

1,000

An investor owns 500 shares of 3% convertible preferred stock. If the conversion price is $20 and the investor converts them, he will own:

2,500 shares of common stock

NRB Corporation common stock is listed on the NYSE. If the CEO of NRB purchases 15,000 shares of the stock in the secondary market, these shares are:

Control Stock

A corporation that's authorized to issue 30 million shares has issued 28 million shares. If the corporation has 4 million shares of treasury stock and a stock price of $18, what's the corporation's market capitalization?

$432 million

A corporation has 8% non-cumulative preferred stock outstanding. Two years ago, the company paid a $6 dividend, and last year, it paid a $7 dividend. If the company wants to pay a common stock dividend in the current year, the non-cumulative preferred stockholders must first receive a dividend of:

$8

A warrant has a subscription price of $50. If the market price of the common stock is $56 and the market price of the preferred stock is $75, the warrant's intrinsic value is:

$6

A company is considering buying its stock in the secondary market. One of the regulatory concerns is:

The number of broker-dealers it uses on any given day

A company is conducting a rights offering. The company currently has 2 million shares of common stock outstanding and intends on offering an additional 1 million shares. How many rights will the owner of 600 shares of preferred stock receive?

None

Stocks have which of the following characteristics?

Cash Dividends

A corporation's 5% convertible preferred stock is convertible at $50 and the common stock is trading $56 per share. The price of the preferred stock will MOST likely trade near:

$112

An investor who has received rights will NOT:

Be able to purchase the shares at a price that's lower than the subscription price

An issuer has 9 million shares outstanding and the average weekly trading volume for the past four weeks is 75,000 shares. A person who owns 250,000 shares of restricted stock is permitted to sell how many of her shares under Rule 144?

90,000

A broker-dealer is also a public company and its stock is listed on Nasdaq. In this case, which of the following statements is TRUE?

Customers of the broker-dealer are permitted to purchase shares of this company if proper disclosure is made.

Which of the following statements is TRUE regarding warrants?

Warrants are considered long-term.

A corporation has 7% cumulative preferred stock outstanding. Two years ago, the company paid a $3 dividend, and last year, it paid a $5 dividend. If the company wants to pay a common stock dividend in the current year, the cumulative preferred stockholders must first receive a dividend of:

$13

Common shareholders do not have the right to:

Vote for Dividends

A company is involved in an internet-based business and plans on using its earnings to expand its opportunities and does not intend on paying out a cash dividend. The company's stock is MOST likely a(n):

Growth Stock

An issuer of securities that's engaged in a stock buyback is NOT able to purchase its shares at:

9:30am

Preemptive rights give stockholders the right to:

Purchase the common stock of the same company

When interest rates are changing, how do the prices of short-term bonds relate to those of long-term bonds?

The prices of long-term bonds are more volatile than short-term bonds.

The term "Level debt service" represents:

Interest and principal payments that are equal each year

The risk that an issuer may be unable to meet its debt service obligations is referred to as:

Credit Risk

For corporate and municipal bonds, accrued interest is calculated on the basis of a(n):

30-day month and a 360-day year

A bond offering that's issued on the same date and matures on the same future date is referred to as a:

Term Maturity

Which of the following statements is TRUE concerning the put provisions of a bond?

The bondholder is likely to exercise a put provision when interest rates are rising.

A bond is convertible at $25 and is currently trading at $1,100. If the underlying common stock is trading at $28, how much will an investor receive if he converts the bond and immediately sells the stock?

$1,120

A bond's debt service represents:

The interest that's due over the bond's life and the principal that's due at maturity

Which of the following statements is TRUE concerning the call provisions on a bond?

The issuer is likely to exercise a call provision when interest rates are falling.

A bond was issued at par and has a 5% coupon. Shortly after issuance, it was yielding 5.5%, but is now yielding 4.5%. The bond is now trading at:

A Premium

When the first coupon for a bond offering covers a period of less than six months, it's referred to as a:

Short Coupon

A bond is convertible at $20. If the bond is currently priced at $960 and the underlying stock is trading at $15, how many shares will an investor receive if the bond is converted?

50 Shares

An individual owns a bond at $960 and it's convertible at $40. If she converts the bond at a time when the stock is trading at $42 per share and the bond is trading at $1,040, which of the following statements is TRUE?

She receives 25 shares.

A utility company is offering $750 million of 8% bonds at a price of 99.25% of par value. An investor who buys the bonds will receive yearly interest of:

$80.00 per $1,000 of face amount

Which of the following bonds is the MOST advantageous to a bondholder?

A bond with a put provision

Which of the following calls features is NOT disclosed on a bond confirmation?

Catastrophe

Which of the following statements is NOT TRUE concerning zero-coupon bonds?

They're appropriate for investors who are seeking current income.

When a bond's first coupon covers a period of more than six months, it's referred to as a:

Long Coupon

If interest rates are rising, the prices of existing bonds will likely be:

Falling

Issuers generally pay the interest on their bonds:

Semiannually

A bond offering that's issued on the same date, but that matures at different times, is referred to as a:

Serial Maturity

What's the price of a bond with a put feature compared to the price of an otherwise equivalent traditional bond?

It's greater than the price of a traditional bond.

The Treasury bond with a principal value of $1,000 is priced at 94-18. What's the dollar value of this bond?

$945.63

A $1,000 municipal bond is priced at 99 5/8. The bond is callable this month at 102 and is putable at 98. If an investor is considering purchasing this bond, he would pay:

$996.25

A bond offering that's issued on the same date, but with small amounts maturing in the early years and a large amount maturing at the end, is referred to as a:

Balloon Maturity

If two bonds are issued at the same time, one with a short maturity and the other with a longer maturity, the coupon rate will likely be:

Lower on the bond with the short maturity, but higher on the bond with the longer maturity

Which of the following statements is NOT TRUE regarding a convertible bond?

Any gain is taxable when the bonds are converted.

Short-term municipal obligations which are payable from funds that are typically received from the federal government are:

Grant Anticipation Notes

If investors want to be guaranteed that their order for a Treasury security will be filled at auction, they should submit a:

Non-Competitive Bid