STC CHs 11-15

C During the cooling-off period

When is the earliest that an underwriter is permitted to discuss a new issue with potential customers?

QID:6207629

Mark For Review

A When the registration statement is being prepared

B During the due diligence period

C During the cooling-off period

D In the post-registration period

B Offering Memorandum

Which of the following is used as the disclosure document for a private placement?

QID:6207625

Mark For Review

A Official Statement

B Offering Memorandum

C Statutory Prospectus

D Free Writing Prospectus

D Initial public offering

A private company has decided to raise capital by issuing securities to the public. This is BEST referred to as a(n):

QID:6207626

Mark For Review

A Primary distribution

B Follow-on offering

C Private placement

D Initial public offering

B Voter approval must be received.

In order to issue a general obligation bond, which of the following requirements must be satisfied?

QID:6207635

Mark For Review

A The offering must be registered with the SEC.

B Voter approval must be received.

C A feasibility study must be conducted.

D The IRS must guarantee the tax-exempt nature of the bond

D 90 days

For an unlisted IPO, for how long must a prospectus be delivered in the aftermarket?

QID:6207630

Mark For Review

A There is no requirement.

B 25 days

C 40 days

D 90 days

C 40 days

For unlisted follow-on offerings, for how long must a prospectus be delivered in the aftermarket?

QID:6207624

Mark For Review

A There is no requirement

B 25 days

C 40 days

D 90 days

B The greater of 1% of the total outstanding shares or the stock's weekly average over the past four weeks

• The maximum amount of restricted or control stock that can be sold without the filing of Form 144 is 5,000 shares as long as the aggregate dollar amount doesn't exceed $50,000.

After filing Form 144, what's the maximum amount of restricted securities that can be sold within a 90-day period?

QID:6207628

Mark For Review

A 5,000 shares as long as the aggregate dollar amount doesn't exceed $50,000

B The greater of 1% of the total outstanding shares or the stock's weekly average over the past four weeks

C The greater of 5% of the total outstanding shares or the stock's weekly average over the past four weeks

D The greater of 10% of the total outstanding shares or the stock's weekly average over the past four weeks

A Statutory prospectus

A customer who purchases a new issue through a public offering must be provided with a:

QID:6207637

Mark For Review

A Statutory prospectus

B Preliminary prospectus

C Free-writing prospectus

D Offering memorandum

A The SEC allows the securities to be sold

• The SEC does NOT approve, qualify as accurate, recommend, or endorse any offerings. During the “cooling-off period,” the SEC reviews the registration statement to determine whether full disclosure has been made. Remember, during the cooling-off period, only indications of interest can be accepted. No sales can be finalized until the registration is declared effective

What does it mean when a registration statement becomes effective?

QID:6207622

Mark For Review

A The SEC allows the securities to be sold

B The SEC has found that the registration statement is accurate

C The SEC has endorsed the offering

D The SEC has approved the final prospectus and recommends the offering

B "The SEC has deemed the registration effective."

Which of the following statements is an underwriter permitted to make regarding a new issue?

QID:6207634

Mark For Review

A "The SEC has guaranteed the accuracy of the registration statement."

B "The SEC has deemed the registration effective."

C "The SEC has approved of the new issue."

D "The SEC has guaranteed the new issue."

A Split offering

• The issuer receives the proceeds on the shares it sells, while the selling shareholders receive the proceeds on the shares they sell

An offering in which some shares are sold by the issuer and some are offered by selling shareholders is considered a:

QID:6207638

Mark For Review

A Split offering

B Private placement

C Standby offering

D Follow-on offering

A Accept a cash deposit for the new issue

• Accepting cash deposits for sales of new issues are not permitted until the post-registration period

During the cooling-off period, an underwriter is NOT permitted to:

QID:6207623

Mark For Review

A Accept a cash deposit for the new issue

B Discuss the issue

C Provide a preliminary prospectus to potential customers

D Compile a list of indications of interest from customers

A Syndicate agreement

• also referred to as the agreement among underwriters, specifies each member's rights and obligations to each other as well as to the manager

The document that specifies each syndicate member's rights and obligations to each other as well as to the manager is the:

QID:6207640

Mark For Review

A Syndicate agreement

B Selling agreement

C Underwriting agreement

D Offering agreement

A A feasibility study

• The study is essentially an engineer's opinion that there's a need for the project and it’s a sound economic investment

Which of the following is typically associated with a revenue bond offering?

QID:6207627

Mark For Review

A A feasibility study

B The offering must be registered with the SEC

C Voter approval must be received

D Additional backing by the municipality

B The reimbursement for SEC registration fees

• Being reimbursed by an issuer for registration fees associated with filing a new issue is not a violation of FINRA rules. However, receiving compensation for publishing a quote and/or acting as a market maker are violations of FINRA rules

A broker-dealer is NOT in violation of FINRA rules if it received payment from an issuer for:

QID:6207636

Mark For Review

A Publishing a quote

B The reimbursement for SEC registration fees

C Acting as a market maker

D Submitting an application related to market making activity

C It only applies to equity securities.

• Rule 144A allows for the immediate sale of restricted securities to qualified institutional buyers (QIBs). A QIB is an institution that owns and invests at least $100 million in securities. Rule 144A applies to both equity and debt securities and can be used by both domestic and foreign issuers. The purpose of Rule 144A is to create a more liquid market for restricted securities

Each of the following statements are TRUE regarding Rule 144A, EXCEPT:

QID:6207632

Mark For Review

A It may eliminate the holding period requirement for Rule 144 stock.

B It applies to QIBs.

C It only applies to equity securities.

D It creates a more liquid market for restricted securities.

C Justification

Which of the following is NOT a method of registering securities at the state level?

QID:6207633

Mark For Review

A Notification

B Coordination

C Justification

D Qualification

A Rule 144

• An individual who owns more than 10% of a company's voting shares is considered a control person. If such a person acquired the stock in the secondary market, he's permitted to sell at any time, but Rule 144 limits the amount that he's able to sell

An individual owns more than 10% of a company's outstanding shares. What provision determines the amount of this stock that the individual is able to sell at any given time?

QID:6207631

Mark For Review

A Rule 144

B Regulation A

C Regulation D

D There is no rule which determines the amount of stock the individual may sell.

A Spread

• The spread is the total compensation that underwriters receive and represents the difference between the public offering price and the price that underwriters pay to the issuer when they buy the shares. The spread is then split up to compensate the different members of the underwriting group through the takedown, additional takedown, and concession

An underwriter's total compensation is the:

QID:6207639

Mark For Review

A Spread

B Takedown

C Additional takedown

D Concession

C Additional takedown and the concession

• When a syndicate member receives credit for a sale of a new issue, the member receives the additional takedown plus the concession. The additional takedown plus the concession is referred to as the total takedown. The additional takedown is the portion received for assuming risk, while the concession is the portion received for selling

When a syndicate member receives credit for a sale of a new issue, the member receives the:

QID:6207641

Mark For Review

A Total spread

B Manager's fee and the additional takedown

C Additional takedown and the concession

D Concession only

C Qualified institutional buyers

Which of the following can freely trade restricted securities without the limitations imposed by Rule 144?

QID:6207648

Mark For Review

A Accredited investors

B Individuals who have $100 million under management

C Qualified institutional buyers

D Any corporation

C Selling group

During the underwriting of a new offering, which of the following firms DOES NOT assume any liability?

QID:6207660

Mark For Review

A Underwriting manager

B Syndicate members

C Selling group

D Co-managers of the offering

D Potential customers

• The purpose of a due diligence meeting is to review the different aspects of a proposed new issue. The attendees include the managing underwriter, members of the syndicate, officers of the issue, attorneys, and accountants, but not potential customers

Participation in the due diligence meeting for a new issue offering will not include:

QID:6207651

Mark For Review

A The managing underwriter

B Officers of the issuer

C Attorneys

D Potential customers

C Firm commitment

• In a firm commitment underwriting, the underwriter agrees to purchase the entire offering and keep any of the unsold securities. This is referred to as acting in a principal capacity

In which of the following offerings is the underwriter acting in a principal capacity?

QID:6207643

Mark For Review

A Best-efforts

B All-or-none

C Firm commitment

D Mini-maxi

C Official statement

What's the primary disclosure document for a municipal offering?

QID:6207658

Mark For Review

A Red herring

B Prospectus

C Official statement

D Registration statement

B Rule 145

A merger that results in the exchange of one security for another must be registered under:

QID:6207652

Mark For Review

A Rule 144

B Rule 145

C Rule 147

D Regulation D

C Rule 147

Public offerings that occur entirely in one state may be exempt from SEC registration under which rule or regulation?

QID:6207661

Mark For Review

A Rule 144

B Regulation D

C Rule 147

D Rule 145

 A Total spread

• Because the manager performed the administrative functions of the syndicate, assumed risk for the shares, and also sold the shares, it's entitled to the total spread

When a syndicate manager receives credit for a sale of a new issue, the manager receives the:

QID:6207649

Mark For Review

 A Total spread

B Manager's fee and the additional takedown

 C Additional takedown and the concession

D Concession only

A The confirmation of the sale

The final prospectus for new issues of common stock must be delivered to the client by no later than:

QID:6207655

Mark For Review

A The confirmation of the sale

B The trade date

C 10 days after the confirmation

D 25 days after the confirmation

B Investors can be directed to EMMA to receive the official statement.

• Providing a link to receive an official statement through EMMA is acceptable as "access equals delivery." However, if a customer requests a printed copy, the broker-dealer must provide it

Which of the following statements is TRUE when an official statement is submitted into Electronic Municipal Market Access (EMMA)?

QID:6207644

Mark For Review

A Investors must be sent a printed copy of the official statement.

B Investors can be directed to EMMA to receive the official statement.

C Investors must be directed to EMMA and be sent a printed copy of the official statement.

D Printed copies of the official statement are no longer required to be sent.

D Concession only

• Since selling group members don't assume risk and only sell, they're entitled to simply the concession

When a selling group member receives credit for a sale of a new issue, the selling group member receives the:

QID:6207659

Mark For Review

A Total spread

B Manager's fee and the additional takedown

C Additional takedown and the concession

D Concession only

B Competitive sale

If numerous bids are submitted in an effort to win a municipal underwriting, the offering is being conducted through a:

QID:6207653

Mark For Review

A Negotiated sale

B Competitive sale

C Both a negotiated and competitive sale

D Neither a negotiated nor competitive sale

A CUSIP

• The Committee on Uniform Securities Identification Procedures (CUSIP) provides a specific number that's used to identify all securities, including municipals and their maturities

What organization assists in identifying municipal securities and their maturities?

QID:6207656

Mark For Review

A CUSIP

B SIPC

C EMMA

D MSRB

B Rights offering

• When a company issues additional shares, it may be required to offer its existing shareholders the first right to purchase those shares through a rights offering. To ensure that all shares will be sold if not subscribed to by existing shareholders, the issuer may have an underwriter "standing by" to purchase any unsold shares after the rights offering is conducted

If a company enters into a standby underwriting agreement with an investment banking (IB) firm, the IB firm pledges to purchase all of the company's shares that remain unsold after a(n):

QID:6207642

Mark For Review

A Execution of warrants

B Rights offering

C Initial public offering

D Private placement

B Market-out clause

The ability of an underwriter to remove itself from an agreement with an issuer is found in the:

QID:6207645

Mark For Review

A Cancellation clause

B Market-out clause

C Commitment clause

D Distribution clause

D Notice of Sale

For a competitive offering, potential underwriters are generally notified through the issuance of a(n):

QID:6207647

Mark For Review

A Official statement

B Legal opinion

C Feasibility study

D Notice of Sale

A To provide a legal opinion as to whether a bond issue will qualify for tax-exempt status

• For a municipality, the bond counsel creates the "legal opinion" which attests to the validity and tax-exempt status of the municipal offering. However, the legal opinion doesn't provide any specific guarantee related to the offering

For a municipality, what's the purpose of the bond counsel?

QID:6207654

Mark For Review

A To provide a legal opinion as to whether a bond issue will qualify for tax-exempt status

B To guarantee that a bond issue will qualify for tax-exempt status

C To represent bond investors in any litigation with the issuer

D To review any bids that are submitted for a competitive offering

D It can be sold to an unlimited number of investors that have net worth of no less than $500,000.

• Under the provisions of Regulation D, the offering can be made to no more than 35 non-accredited investors, but to an unlimited number of accredited investors (e.g., institutions, officers/directors of the issuer, and individuals who meet a financial test). For an individual to be considered an accredited investor, he must have net worth of at least $1,000,000 or annual income of at least $200,000 ($300,000 with a spouse) for the past two years with the expectation of the same level of income going forward

Which of the following statements is NOT TRUE of a private placement offering that's conducted under Regulation D?

QID:6207650

Mark For Review

A It can be sold to no more than 35 non-accredited investors.

B It can be sold to an unlimited number of banks.

C It can be sold to an unlimited number of officers/directors of the issuer.

D It can be sold to an unlimited number of investors that have net worth of no less than $500,000.

B 25 days

For securities that will be listed on Nasdaq, for how long must a prospectus be delivered in the aftermarket?

QID:6207663

Mark For Review

A There is no requirement

B 25 days

C 40 days

D 90 days

D Shelf registration

The type of registration that allows an issuer to continuously issue securities over a three-year period is referred to as a:

QID:6207664

Mark For Review

A Stand-by registration

B Secondary registration

C Preliminary registration

D Shelf registration

C 80%

What's the minimum percentage of gross revenues that must be derived from a company's operations in a state in which a Rule 147 offering is going to be conducted?

QID:6207662

Mark For Review

A 50%

B 75%

C 80%

D 100%

D Execute the trade, but mark the order ticket "unsolicited"

A client wants her registered representative to execute a specific trade in her account. However, if the representative doesn't believe that trade is in the client's best interest, he should:

QID:6207678

Mark For Review

A Refuse to execute the trade

B Execute the trade as long as it's marked "solicited"

C Notify a supervisor

D Execute the trade, but mark the order ticket "unsolicited"

B 3.51%

• = (16.20-15.65) / 15.65= 3.51%

If a firm is quoting a security at $15 bid, $15.75 offer, and the inside market is $15.15 bid, $15.65 offer, when the firm sells the security to a customer at $16.20, the markup would equal:

QID:6207682

Mark For Review

A 2.86%

B 3.51%

C 6.93%

D 8%

B Listed stocks

• The 5% Markup Policy applies to agency and principal trades involving exchange-listed and non-exchange-listed securities. However, mutual funds, variable annuities, new issues, municipal bonds, and government securities are exempt from the policy. Keep in mind, the 5% policy is a guideline, but not a rule

Each of the following are exempt from the FINRA 5% Markup Policy, EXCEPT:

QID:6207680

Mark For Review

A Mutual funds

B Listed stocks

C New issues

D Municipal bonds

A Markup or markdown

• When the cost of executing a trade is built into the net price of the trade, the firm is assessing a markup or markdown. This is how principal trades are priced

When a firm's compensation is built into the net price of a trade, it's considered to be the:

QID:6207681

Mark For Review

A Markup or markdown

B Commission

C Sales charge

D Dealer concession

C Dealer

• Agent, broker, and commission all relate to a firm executing a trade for a customer by finding another party willing to take the other side of the transaction. A dealer acts in a principal capacity and takes the other side of the trade itself

Each of the following terms are associated with a firm that executes a customer order by locating another party willing to take the other side of the transaction, EXCEPT:

QID:6207673

Mark For Review

A Agent

B Broker

C Dealer

D Commission

B Bearish

The strategy for a customer who sells securities short is:

QID:6207672

Mark For Review

A Bullish

B Bearish

C Neutral

D Long-term

B The order is cancelled without executing the additional 200 shares.

A customer enters a Good-'Til-Cancelled (GTC) order to purchase 500 shares and indicates that it's good for one week. During the week, if 300 shares are purchased, what happens at the end of the week?

QID:6207667

Mark For Review

A The order is extended for an additional week.

B The order is cancelled without executing the additional 200 shares.

C The order is cancelled and the execution for the 300 shares is reversed.

D The order is extended until the additional 200 shares can be purchased.

B Long

• Since the securities are being held in the client's account, the order ticket will be marked "long." The fact that the securities are in street name (in the broker-dealer's name) is irrelevant. The client is still the beneficial owner

A client has requested for her firm to sell 2,500 shares of DFG common stock. The stock is being held in street name within the client's account. As for the location of the securities, the order ticket is marked:

QID:6207666

Mark For Review

A Short

B Long

C Street

D Short covered

D The order is not executed.

• A sell stop limit order is triggered (activated) when the price reaches the stop price or below. In this example, the order is triggered if the stock's price falls to $62.00 or if it trades through (lower than) $62.00. Once a sell stop limit order is triggered, it becomes a limit order and can only be executed at the limit price or higher. Although this order would have been triggered when the market trades at $61.94, since the stock hasn't increased back to $62.00, the order cannot be executed

A sell stop limit order is placed at 62.00 After the order is placed, the following trades occur: 62.65, 62.02, 61.94, 61.96, 61.98. Regarding the sell stop limit order, which of the following statements is TRUE?

QID:6207676

Mark For Review

A The order is triggered at 62.02.

B The order is triggered at 62.65.

C The order is executed at 61.94.

D The order is not executed.

B Inside market

The high bid and low ask on a security are referred to as the:

QID:6207684

Mark For Review

A Best market

B Inside market

C Broker's market

D Negotiable market

B Market order

If a client wants to place an order that will be given priority over all other type orders, what type of order should be entered?

QID:6207685

Mark For Review

A Stop order

B Market order

C Limit order

D Day order

D The order is not triggered.

• Sell stop orders are typically placed by investors who are long the underlying stock and want protection from downside risk. A sell stop order is triggered (activated) when the price falls to the stop price or below it. In this example, the order would be triggered if the stock's price drops to $104 or if it trades through 104. Since there are no trades that occurred at $104 or lower, the order was not triggered

A sell stop order is placed at 104. After the order is placed, the following trades occur: 106.50, 106.00, 105.25, 105.12, 104.25, 105.12. Which of the following statements are TRUE regarding the order?

QID:6207670

Mark For Review

A The order is triggered at 104.25.

B The order is triggered at 104.00.

C The order is executed at 104.25.

D The order is not triggered.

C The difference is considered the commission on a trade

Which of the following is NOT TRUE of the difference between the bid price and offer (ask) price on a stock?

QID:6207683

Mark For Review

A It is referred to as the spread

B It is the source of the profit for a market maker

C The difference is considered the commission on a trade

D A small spread is evidence of a marketable security

C The order is executed at 33.00

• A sell limit order is not triggered, but is executed if the limit price or better (higher) is reached. In this example, the assumption is that the sell limit order would be executed by the trade at $33.00

A sell limit order is placed at 33.00 After the order is placed, the following trades occur: 32.17, 32.85, 33.00, 33.05. Regarding the sell limit order, which of the following statements is TRUE?

QID:6207668

Mark For Review

A The order is triggered at 32.17

B The order is triggered at 32.85

C The order is executed at 33.00

D The order is executed 33.05

C The order is executed at 27.08.

• Buy stop orders are typically placed by short sellers as protection in the event that the stock's price rises. A buy stop order is triggered (activated) when the price reaches the stop price or above it. In this example, the order will be triggered if the stock's price rises to $27.00 or if it trades through (higher than) $27.00. Once a buy stop order is triggered, it becomes a market order. In this example, the buy stop order is triggered by the trade at 27.05 and then executed at $27.08

A buy stop order is placed at 27. After the order is placed, the following trades occur: 26.57, 26.89, 27.05, 27.08, 27.00. Regarding the buy stop order, which of the following statements is TRUE?

QID:6207669

Mark For Review

A The order is triggered at 26.57.

B The order is triggered at 26.89.

C The order is executed at 27.08.

D The order is not executed.

A A sell limit order

• A sell limit order directs a broker-dealer to sell stock at the limit price or higher

A customer who wants to sell stock at a specified price or higher should enter:

QID:6207677

Mark For Review

A A sell limit order

B A buy limit order

C A buy stop order

D A day order

D She must execute the short sale in a cash account.

• All short sales must be executed in a margin account

An investor who sells stock short should understand all of the following concepts, EXCEPT:

QID:6207679

Mark For Review

A She wants the stock to decline in value.

B She's potentially subject to unlimited loss.

C She's borrowing stock.

D She must execute the short sale in a cash account.

B The order is triggered at 45.00.

• A buy stop limit order is triggered (activated) when the price reaches the stop price or above it. In this example, the order is triggered when the stock's price rises to $45.00 or if it trades through (higher than) $45.00. Once a buy stop limit order is triggered, it becomes a limit order and can only be executed at the limit price or lower. For this question, the buy stop limit order is triggered by the trade at $45

A buy stop limit order is placed at 45. After the order is placed, the following trades occur: 44.88, 44.88, 45.00, 45.12, 45.00. Regarding that trade, which of the following statements is TRUE?

QID:6207671

Mark For Review

A The order is triggered at 44.88.

B The order is triggered at 45.00.

C The order is executed at 44.88.

D The order is not triggered.

D A 5% markup may be considered excessive.

• If Firm A is charging a markup of less than 5% and Firm B is charging a markup of 5% for the same security and same type of trade, Firm B's markup may be considered excessive. The 5% Policy is a guideline, not a rule. Factors that can influence the markup include the price of the security and the expenses incurred in executing the trade. High-priced securities tend to have lower percentage markups, while low-priced securities tend to have higher percentage markups

Which of the following statements is TRUE of FINRA's 5% Markup Policy?

QID:6207675

Mark For Review

A It's a rule that prohibits compensation from exceeding 5%.

B High-priced securities typically have higher percentage markups.

C Low-priced securities typically have lower percentage markups.

D A 5% markup may be considered excessive.

A The order is executed at 78.00.

• Unlike stop orders, a buy limit order is not one that gets triggered and then potentially executed. Instead, with a buy limit order, if the stock trades at or lower than the limit price, the order will be executed. In this example, the assumption is that the buy limit order would be executed once the price declines to $78.00

A buy limit order is placed at 78.00. After the order is placed, the following trades occur: 78.55, 78.22, 78.02, 78.00, 77.95. Regarding the buy limit order, which of the following statements is TRUE?

QID:6207674

Mark For Review

A The order is executed at 78.00.

B The order is triggered at 78.02.

C The order is executed at 77.95.

D The order is not executed.

C The transfer agent

• The transfer agent is the final judge as to whether the security meets the requirements of good delivery

If a security has been damaged in such a way that good delivery is in question, which entity is able to make the determination as to whether the security is acceptable?

QID:6207696

Mark For Review

A The custodian

B The distributor

C The transfer agent

D The registered principal

C The total value of the shares increases.

• In a forward stock split (e.g., 2-for-1), the number of shares increases and the market price per share decreases. However, the total value of the shares remains the same pre-split and post-split

Which of the following statements is NOT TRUE of a forward stock split?

QID:6207694

Mark For Review

A The number of shares increases.

B The market price per share decreases.

C The total value of the shares increases.

D The ex-date is the business day following the payable date.

B Sent to the broker-dealer

If a brokerage customer is an objecting beneficial owner (OBO) and owns stock of XYZ Company, information from XYZ Company would be:

QID:6207708

Mark For Review

A Held at the issuer

B Sent to the broker-dealer

C Sent to the customer

D Sent to the custodian

A Seller's option

• Delayed delivery is a settlement option in which the delivery of securities is made on a later date than the typical settlement date. This is also referred to as seller's option because the seller either cannot or chooses not to deliver on a regular-way basis. With seller's option, the delivery date can be the second business day after the trade or on a date that's specifically written in the contract

As it relates to a negotiated settlement, which of the following is also referred to as a delayed delivery?

QID:6207691

Mark For Review

A Seller's option

B Special settlement

C Due bill

D When issued

B There's an increase in the market price.

• When a company declares a reverse stock split (e.g., 1-for-10), the number of outstanding shares decreases and the stock's market price increases proportionately. Reasons to execute a reverse split include increasing the value of the stock to make it more attractive than a very cheap stock, or to prevent the stock from being delisted from an exchange

A company declares a reverse stock split. What's the initial effect on the stock's market price?

QID:6207704

Mark For Review

A There's no effect on the market price.

B There's an increase in the market price.

C There's a decrease in the market price.

D There's an increase in the market price and an increase in the number of shares outstanding.

B Wednesday, April 9

• Since the trade involves a corporate security, it will settle regular-way one business day after the trade date (i.e., T + 1). Therefore, settlement of this trade is made by no later than Wednesday, April 9

A trade involving a corporate bond was executed on Tuesday, April 8. When will the trade settle?

QID:6207702

Mark For Review

A Friday, April 11

B Wednesday, April 9

C Thursday, April 10

D Monday, April 14

C Needs the buyer's agreement to the expedited settlement

• This is referred to as special settlement and requires the buyer's agreement to this condition prior to the transaction. FINRA or SEC approval is not required.

An individual has an immediate need for funds and wants to sell securities. If the individual wants to use same-day settlement rather than T + 1, he:

QID:6207693

Mark For Review

A Needs to receive the approval of FINRA

B Needs to receive approval from the SEC

C Needs the buyer's agreement to the expedited settlement

D Cannot because it's prohibited

A The customer

When securities are held in street name, the beneficial owner is:

QID:6207695

Mark For Review

A The customer

B The broker-dealer

C The issuer

D The custodian

A T + 1

When an investor either opens or closes an option position, when is the settlement date?

QID:6207699

Mark For Review

A T + 1

B T + 2

C T + 3

D Same day

C T + 1

In a regular-way transaction involving a municipal bond, a customer is required to make payment by no later than:

QID:6207703

Mark For Review

A T + 4

B On the trade date

C T + 1

D T + 2

C The rights will be sent to the issuer's transfer agent for exercise.

• the transfer agent of the issuer is generally contacted. For a limited period, the rights will trade in the same market as the underlying stock. Neither the OCC nor the NYSE handles the exercise of rights

Which of the following statements is TRUE if a shareholder wants to exercise the rights he has received?

QID:6207697

Mark For Review

A Rights cannot be exercised; they must be sold in the secondary market.

B Rights must be exercised through the Options Clearing Corporation.

C The rights will be sent to the issuer's transfer agent for exercise.

D The NYSE handles the exercise of all rights.

A The issuer

• a broker-dealer will charge back an issuer for forwarding information to beneficial owners. The broker-dealer is only required to forward issuer information to customers if the issuer reimburses the firm for any expenses involved

When financial information is sent from an issuer to a broker-dealer for distribution to beneficial owners, who's charged for the costs of distribution?

QID:6207692

Mark For Review

A The issuer

B The broker-dealer

C The customer

D The transfer agent

A On the same day as the trade

If a municipal bond is sold on a cash basis, when will the trade settle?

QID:6207698

Mark For Review

A On the same day as the trade

B T + 1

C T + 2

D T + 3

A T + 1

In a regular-way transaction involving a U.S. Government bond, a customer is required to make payment:

QID:6207705

Mark For Review

A T + 1

B T + 2

C T + 4

D On the trade date

A When issued

• In the new issue market, securities may be authorized, but not yet available and are therefore unissued. In this situation, settlement is completed on a when issued basis

In the primary market, what form of settlement may be used when certificates are not ready for delivery?

QID:6207701

Mark For Review

A When issued

B Special settlement

C Seller's option

D Prepared for delivery

C An amount that's equal to the proportionate number of shares accepted.

• When a tender offer is made for a fixed number of shares and more shares are tendered, a proportionate number of shares will be accepted from those who tender their shares. For example, if twice as many shares are tendered than those for which the offer is made, each shareholder will have half of her shares accepted

An individual has made a tender offer for a fixed number of shares of XYZ Corporation. If more shares are tendered than desired by the individual, a shareholder who has offered her shares will have what amount of them accepted?

QID:6207706

Mark For Review

A All of her shares will be accepted.

B Shares are accepted on a first offered basis.

C An amount that's equal to the proportionate number of shares accepted.

D None of her shares will be accepted.

B A stock or bond power may be used

As an alternative to a customer's signature, what (if anything) may be used as proper endorsement of a certificate?

QID:6207700

Mark For Review

A Nothing; the customer's signature must be on the certificate.

B A stock or bond power may be used.

C A signature that's been approved by a registered principal may be used.

D A signature that's been approved by a registered representative may be used.

B Physical delivery of securities are made through firms.

• In book-entry settlement, there's no physical delivery of securities. Instead, a registered clearing depository (e.g., DTCC) journals the movement of securities positions and funds between the clearing firm's accounts. This type of settlement requires the securities to be depository-eligible

Each of the following statements are TRUE regarding book-entry settlement, EXCEPT:

QID:6207707

Mark For Review

A This can be used for depository-eligible securities.

B Physical delivery of securities are made through firms.

C Settlement is made through a registered depository.

D Settlement is made through journal entries moving positions through each firm's account.

D T + 3

In a regular-way transaction involving the purchase of a listed option, a customer is required to make payment by no later than:

QID:6207689

Mark For Review

A On the trade date

B T + 1

C T + 2

D T + 3

D A call option on the stock

• Owning a call option on the stock doesn't allow an individual to participate in the tender offer. To participate, the call option would need to first be exercised. The ownership of a convertible security, warrant, and right would only need to be converted/exercised into the stock if the tender was accepted

Ownership of which of the following securities will not allow an individual to participate in a tender offer for an issuer's stock?

QID:6207690

Mark For Review

A A security that's convertible into the stock

B A warrant for the stock

C A right for the stock

D A call option on the stock

D $20,000 is a return of capital and $80,000 is taxed as ordinary income

• When after-tax contributions are made to a retirement plan, they're taken as a return of capital which are not taxed. The remainder consists of employer contributions as well as earnings and is taxed as ordinary income

An individual has made $20,000 of after-tax contributions to a retirement plan. With employer contributions, the value at retirement is $100,000. What's the tax implication if the person withdraws the entire amount?

QID:6207730

Mark For Review

A The entire amount is taxed as ordinary income.

B The entire amount is taxed as a capital gain.

C $20,000 is a return of capital and $80,000 is taxed as a capital gain.

D $20,000 is a return of capital and $80,000 is taxed as ordinary income.

A Revocable trust

Which of the following trusts can be changed at any time after it's signed?

QID:6207723

Mark For Review

A Revocable trust

B Irrevocable trust

C Both revocable and irrevocable trusts

D Neither revocable nor irrevocable trusts

B Contributions are permitted at any age.

• Contributions to a Coverdell ESA can only be made until the beneficiary reaches the age of 18. If the funds are not used by the age of 30, the account can be transferred to another family member who's under the age of 30. Although the contributions are after tax, they grow on a tax-deferred basis

Each of the following statements are TRUE of a Coverdell ESA, EXCEPT:

QID:6207721

Mark For Review

A Contributions are made after-tax.

B Contributions are permitted at any age.

C Contributions grow on a tax-deferred basis.

D The account can be transferred to another family member who's under the age of 30.

C Within 15 calendar days of approval

After the opening of an options account has been approved, the customer must sign and return the Options Account Agreement:

QID:6207715

Mark For Review

A At the approval of the account

B Within 10 business days of approval

C Within 15 calendar days of approval

D Within 20 calendar days of approval

A The agreement gives the broker-dealer permission to pledge a customer’s securities to a bank as collateral for a margin loan.

Which of the following BEST describes the purpose of a hypothecation agreement in a margin account?

QID:6207734

Mark For Review

A The agreement gives the broker-dealer permission to pledge a customer’s securities to a bank as collateral for a margin loan.

B The agreement gives the broker-dealer permission to lend the customer’s securities to other investors who are executing short sales.

C It describes the provisions of the loan that the customer is taking out for trading on margin.

D It details the terms of the loan that the broker-dealer is taking out to comply with industry net capital requirements.

C Contributions are always tax-deductible.

• The tax-deductibility of a person's contributions is dependent on the person's taxable income and whether he's covered by an employer-sponsored plan. However, regardless of those details, the person may still contribute, but not on a tax-deductible basis. For 2026, the maximum annual contribution is $7,500 with an additional $1,100 for individuals who are age 50 and older

Which of the following statements is NOT TRUE regarding Traditional individual retirement accounts (IRAs)?

QID:6207726

Mark For Review

A Any person with earned income is allowed to contribute.

B For individuals who are age 50 and older, annual contributions of up to $8,600 are permitted.

C Contributions are always tax-deductible.

D Earnings grow on a tax-deferred basis.

D 60 days

To avoid an IRA rollover from being taxable, it must be completed within:

QID:6207727

Mark For Review

A 15 days

B 30 days

C 45 days

D 60 days

C 403(b)

• Employees of public school systems, and from most charitable or religious organizations, use 403(b) plans as their retirement vehicle

Employees of a public school would MOST LIKELY use which of the following plans as their retirement vehicle?

QID:6207732

Mark For Review

A 401(k)

B Roth 401(k)

C 403(b)

D Profit-sharing plans

B Roth 401(k)

Distributions from which of the following retirement plans may be tax-free?

QID:6207733

Mark For Review

A 401(k)

B Roth 401(k)

C 403(b)

D Profit-sharing plans

B Participants are subject to income limitations.

• Roth IRAs are open to any person whose income level doesn't exceed a certain amount. The contributions are not tax-deductible (i.e., they're made on an after-tax basis) and being covered by an employer-sponsored retirement plan doesn't impact a person's eligibility

Which of the following statements is TRUE of Roth IRAs?

QID:6207728

Mark For Review

A They're open to every person without restriction.

B Participants are subject to income limitations.

C They're not available to individuals who have access to an employer-sponsored retirement plan.

D The contributions are tax-deductible.

B Irrevocable trust

Which of the following trusts cannot be changed at any time after it's signed?

QID:6207724

Mark For Review

A Revocable trust

B Irrevocable trust

C Both revocable and irrevocable trusts

D Neither revocable nor irrevocable trusts

A Defined benefit plans

• Defined benefit plans provide employees with guaranteed payouts at retirement. Payouts from defined contribution, 401(k), and profit-sharing plans are based on performance of the investments in the account

Which of the following employer-sponsored retirement plans provides employees with guaranteed payouts at retirement?

QID:6207729

Mark For Review

A Defined benefit plans

B Defined contribution plans

C 401(k) plans

D Profit-sharing plans

C Margin and option accounts

• In order to open either a corporate margin or corporate option account, obtaining a copy of the corporate charter is required. It's important to note that obtaining a copy of the corporate resolution is required to open all corporate accounts

A corporate charter is required to open which of the following corporate accounts?

QID:6207722

Mark For Review

A Margin accounts only

B Option accounts only

C Margin and option accounts

D Cash, margin, and option accounts

A Limited trading authorization

Which type of discretionary authority allows a registered representative to place orders for an account, but not make withdrawals?

QID:6207716

Mark For Review

A Limited trading authorization

B Full trading authorization

C Both limited trading and full trading authorization

D Neither limited trading nor full trading authorization

D The turnover of investments in the account

• Fee-based accounts charge an annual fee based on the assets under management (AUM) regardless of the number of transactions. Customers who tend to use a buy-and-hold approach with little turnover are not suitable candidates for fee-based accounts because paying commissions on each trade will likely be less than the annual fee

Which of the following is a fundamental concern for clients who are considering a fee-based account?

QID:6207720

Mark For Review

A The commissions they will be charged for each transaction

B The advice they will receive

C The types of securities that can be purchased in their account

D The turnover of investments in the account

C Churning

• In a discretionary account, churning is the primary concern. Churning involves executing trades for the sole purpose of generating commissions. This is also referred to as excessive trading in the customer's account

What's the primary concern in discretionary accounts?

QID:6207718

Mark For Review

A Trading without authorization

B Receiving customer approval for a trade

C Churning

D Infrequent trading

B Gifts are limited to $19,000 per year

• It's important to note that there's no limitation on the amount of any gift. However, if a donor gifts more than $19,000 (for 2025), the donor will be responsible for taxes on any amount that exceeds $19,000

Each of the following statements are TRUE of Uniform Transfers to Minors Act accounts, EXCEPT:

QID:6207725

Mark For Review

A There may be only one custodian and one minor per account.

B Gifts are limited to $19,000 per year.

C Investment discretion can be given to a third party.

D Margin accounts are not permitted.

D No approval is required.

• When a customer specifies the action (buy or sell), the asset (the specific security), and the amount (number of shares or units), it's referred to as a not-held order and doesn't require approval from the customer or principal. An RR is able to determine the price and/or time of execution of this order without holding discretionary authority

If a customer indicates the specific security, whether to buy or sell, and the dollar amount or the number of units, is the registered representative required to obtain approval as to when to execute the order?

QID:6207719

Mark For Review

A No, but only if the registered representative has discretionary authority.

B Yes, from the customer.

C Yes, from a principal.

D No approval is required.

B Full trading authorization

Which type of discretionary authority allows the registered representative to place orders for an account and also make withdrawals?

QID:6207717

Mark For Review

A Limited trading authorization

B Full trading authorization

C Both limited trading and full trading authorization

D Neither limited trading nor full trading authorization