FIN4103 Quiz1

What is the primary purpose of the securities industry in relation to investors and issuers?

To match investors who have money with issuers who need capital for financing purposes.

Which of the following entities may be considered issuers in the securities industry?

State and local governments

Which of the following statements is true about debt securities?

Debt securities represent the issuer's promise to pay the investor.

The department of a broker-dealer that works with issuers to arrange securities offerings is: 

Investment banking

Which of the following terms is associated with an entity that sells securities from its own inventory? 

Market Marker

What is the difference between a broker and a dealer in the securities industry?

A broker matches up buyers and sellers for a commission, while a dealer buys and sells securities for its own account.

What is a principal transaction in the securities industry?

A transaction in which a dealer buys and sells securities for its own account

Which of the following is NOT considered a Qualified Institutional Buyer? 

An individual with a $100,000,000 portfolio

A husband and wife have combined earnings of greater than $300,000 in each of the last two years. If it's reasonably expected that this level of income will remain the same, the couple is considered:

An accredited investor

A financial services firm that charges customers based on a percentage of the assets under management is BEST defined as:

An investment adviser

The issuer and guarantor of exchange-traded options is:

The Options Clearing Corporation

The third market is concerned with:

Securities listed on an exchange, but traded in the OTC market

A broker-dealer that executes orders, but also settles and clears trades, is referred to as: 

A full-service firm

Which of the following services is typically offered by a prime brokerage?

Consolidated services for hedge funds and institutional investors

What is the main responsibility of a clearing broker in a trade?

Handling the clearing and settlement process for trades

What is the primary function of the Depository Trust & Clearing Corporation (DTCC)?

Automating and centralizing the clearing and settlement of trades

If an investment adviser has assets under management of less than $100 million, it's regulated by which of the following?

The state(s) in which the adviser conducts business

Which of the following organizations enforces municipal securities regulations for broker-dealers?

FINRA

Which of the following choices does NOT hold customer cash or securities?

The Depository Trust Company

Which of the following statements is NOT TRUE concerning a clearing corporation?

It is responsible for automated book-entry changes in the ownership of securities.

The goal of which of the following entities is to increase the volume of securities transactions by eliminating physical delivery with a book entry system?

DTCC

The Pink Marketplace displays:

The market makers for stocks that are not listed on either the NYSE or Nasdaq

If a company's insiders are buying its shares, what will most likely happen to the share price?

It will appreciate

If SIPC does not cover in full a customer's account in a brokerage firm that has gone bankrupt, the investor is a:

General creditor

If ABC Brokerage (a broker-dealer) purchases 600 shares of stock from a customer and places the securities into its inventory, it likely acted as a(n):

Agent

Which of the following organizations provides clearing services for equity securities?

The National Securities Clearing Corporation (NSCC)

In the secondary market, the "spread" for a security represents the difference in:

The bid and offer prices

The Investment Advisers Act of 1940 regulates which of the following?

The fee charged by an accountant for providing advice concerning securities

If there is a violation of securities laws, which of the following is responsible for taking criminal action?

The Department of Justice (DOJ)

Which of the following statements is TRUE concerning electronic communication networks (ECNs)?

They can be used by investors who want to trade anonymously.

Which of the following statements is TRUE regarding the role of SIPC?

SIPC covers separate customers.

Four customers have accounts at a broker-dealer with the following balances:

 

	Securities	Cash	Commodities & Futures	Options
Customer 1	$50,000	$20,000	$0	$30,000
Customer 2	$40,000	$10,000	$0	$20,000
Customer 3	$30,000	$20,000	$10,000	$40,000
Customer 4	$50,000	$40,000	$0	$40,000

 

Under SIPC rules, which customer will not be fully covered if the broker-dealer declares bankruptcy?

Customer 3

A broker-dealer is clearing its trades through another broker-dealer but is not disclosing specific information regarding its clients. Who is responsible for maintaining the account records?

The introducing broker-dealer.

The department of a brokerage firm that advises a corporation regarding the structure and timing of a potential stock offering and also assists in the underwriting of securities is the:

Investment banking department

"Blue Sky Laws" were established by:

Uniform Securities Act

A broker-dealer executes but does not process transactions. If the firm processing the transactions does not know the identity of the customers, this is known as a(n):

Omnibus account

The purpose of a depository facility is to:

Hold securities in book-entry form

The primary purpose of a self-regulatory organization (SRO) is to:

Promote fair and equitable practices among members

A customer has an account with a discount broker-dealer that specializes in online trading. If the customer is being charged a commission, the firm is MOST likely acting in which of the following capacities?

Agent

If a customer exceeds SIPC limits:

The customer is a general creditor