SIE Opitmized

SECTION 1: CAPITAL MARKETS (CARDS 1–40)

1. Q: What is the main mission of the SEC?
A: Protect investors & maintain fair, orderly markets.

2. Q: Which Act created the SEC?
A: Securities Exchange Act of 1934.

3. Q: What principle guides SEC oversight?
A: Full and fair disclosure.

4. Q: Does the SEC bring criminal charges?
A: No, DOJ handles criminal cases.

5. Q: Who regulates broker-dealers?
A: FINRA.

6. Q: FINRA gets authority from?
A: SEC oversight.

7. Q: Who writes rules for municipal securities?
A: MSRB.

8. Q: Who enforces MSRB rules for broker-dealers?
A: FINRA.

9. Q: What does SIPC protect?
A: Customer securities & cash when BD fails.

10. Q: SIPC coverage limit?
A: $500k total / $250k cash.

11. Q: Does SIPC prevent market losses?
A: No.

12. Q: FDIC insures?
A: Bank deposits up to $250k.

13. Q: Define primary market.
A: Where new securities are issued.

14. Q: Define secondary market.
A: Trading of existing securities.

15. Q: What is OTC?
A: Trading of unlisted securities.

16. Q: What is the third market?
A: OTC trading of exchange-listed stocks.

17. Q: What is the fourth market?
A: Institution-to-institution direct trading (often dark pools).

18. Q: What is an ECN?
A: Electronic matching of buy/sell orders.

19. Q: Who are institutional investors?
A: Large entities like banks, funds.

20. Q: Accredited investor income requirement?
A: $200k individual / $300k joint (2 years).

21. Q: Accredited investor net worth requirement?
A: $1M excluding primary residence.

22. Q: Underwriter role?
A: Assists issuer selling securities.

23. Q: Syndicate definition?
A: Group of underwriters sharing risk.

24. Q: Clearing corporation example?
A: DTCC.

25. Q: What is a transfer agent?
A: Handles shareholder record-keeping.

26. Q: What is a custodian?
A: Holds assets for safekeeping.

27. Q: What is a broker?
A: Agent executing trades for customers.

28. Q: What is a dealer?
A: Principal trading from inventory.

29. Q: Economic indicators include?
A: Leading, coincident, lagging.

30. Q: Leading indicator example?
A: Building permits.

31. Q: Lagging indicator example?
A: CPI.

32. Q: Coincident indicator example?
A: GDP.

33. Q: Business cycle stages?
A: Expansion, peak, contraction, trough.

34. Q: Inflation harms which investors most?
A: Bondholders.

35. Q: Fed buying securities causes interest rates to?
A: Fall.

36. Q: Fed selling securities causes rates to?
A: Rise.

37. Q: Strong dollar helps?
A: Importers.

38. Q: Weak dollar helps?
A: Exporters.

39. Q: Keynesian theory focuses on?
A: Fiscal policy.

40. Q: Monetarist theory focuses on?
A: Money supply.

🔵 SECTION 2: PRODUCTS & RISKS (CARDS 41–100)

(This is 44% of the exam, most important section.)

EQUITY

41. Q: Common stock represents?
A: Ownership.

42. Q: Preferred stock offers?
A: Fixed dividends.

43. Q: Rights give shareholders ability to?
A: Buy new shares at a discount.

44. Q: Warrants allow?
A: Purchase at a set (usually higher) strike.

45. Q: ADRs represent?
A: Foreign shares traded in the U.S.

46. Q: ADR holders face what unique risk?
A: Currency risk.

DEBT

47. Q: Par value of a bond?
A: $1,000.

48. Q: Coupon rate?
A: Annual interest / par.

49. Q: Current yield formula?
A: Interest ÷ price.

50. Q: YTM includes what that coupon doesn’t?
A: Gain/loss to par.

51. Q: Bond prices & rates relationship?
A: Inverse.

52. Q: Longer maturity bonds have more?
A: Interest rate risk.

53. Q: T-bills maturity?
A: ≤ 1 year.

54. Q: T-notes maturity?
A: 2–10 years.

55. Q: T-bonds maturity?
A: 20–30 years.

56. Q: Agency securities examples?
A: GNMA, FHLMC, FNMA.

57. Q: Municipal GO bonds backed by?
A: Taxing power.

58. Q: Revenue bonds backed by?
A: Project revenue.

MONEY MARKETS

59. Q: Money market examples?
A: CP, T-bills, BA, repos.

60. Q: Money market key feature?
A: High liquidity.

OPTIONS

61. Q: Call option gives right to?
A: Buy.

62. Q: Put option gives right to?
A: Sell.

63. Q: Call ITM when?
A: Market > strike.

64. Q: Put ITM when?
A: Market < strike.

65. Q: Premium consists of?
A: Intrinsic + time value.

66. Q: Covered call benefit?
A: Income from premium.

67. Q: Naked call risk?
A: Unlimited loss.

OPTION TAX RULES (HIGH-YIELD)

68. Q: Premium of exercised call becomes?
A: Added to cost basis.

69. Q: Premium of exercised put becomes?
A: Added to proceeds.

70. Q: Expired options taxed as?
A: Capital loss.

PACKAGED PRODUCTS

71. Q: Mutual fund NAV priced?
A: Once daily at close.

72. Q: Index fund style?
A: Passive.

73. Q: ETF trades?
A: Intraday.

74. Q: ETN risk?
A: Issuer credit risk.

75. Q: UIT characteristic?
A: Fixed portfolio, no active management.

VARIABLE PRODUCTS

76. Q: Variable annuities regulated by?
A: SEC + state insurance.

77. Q: VA risk borne by?
A: Investor.

REITs

78. Q: REIT avoids corporate tax by distributing?
A: ≥90% of income.

79. Q: Equity REIT invests in?
A: Properties.

80. Q: Mortgage REIT invests in?
A: Mortgages.

HEDGE FUNDS

81. Q: Hedge fund traits?
A: Illiquid, high minimums.

529 PLANS & MUNICIPAL FUND SECURITIES

82. Q: 529 savings plan uses?
A: Market investments.

83. Q: 529 prepaid plan uses?
A: Locks future tuition.

84. Q: ABLE account used for?
A: Disability expenses.

RISKS

85. Q: Market risk type?
A: Systematic.

86. Q: Business risk type?
A: Unsystematic.

87. Q: Mitigation for unsystematic?
A: Diversification.

88. Q: Reinvestment risk occurs when?
A: Rates fall.

89. Q: Prepayment risk applies to?
A: MBS in falling rates.

90. Q: Extension risk applies to?
A: MBS in rising rates.

91. Q: Liquidity risk?
A: Cannot sell easily.

92. Q: Credit risk?
A: Issuer may default.

93. Q: Political risk?
A: Foreign securities.

94. Q: Inflation risk?
A: Loss of purchasing power.

HEDGING

95. Q: Hedge long stock with?
A: Long put.

96. Q: Hedge short stock with?
A: Long call.

97. Q: Protective put protects?
A: Long stock.

PORTFOLIO

98. Q: Asset allocation is?
A: Distribution across asset classes.

99. Q: Rebalancing does what?
A: Restores target allocation.

100. Q: Diversification reduces what?
A: Unsystematic risk.

🔵 SECTION 3: TRADING, ACCOUNTS, AML (CARDS 101–125)

101. Q: Market order executed at?
A: Best available price.

102. Q: Limit order executed at?
A: Specified price or better.

103. Q: Stop order becomes?
A: A market order when triggered.

104. Q: Stop-limit becomes?
A: A limit order when triggered.

105. Q: Bid price?
A: Dealer buys.

106. Q: Ask price?
A: Dealer sells.

107. Q: Spread?
A: Ask − bid.

108. Q: Long position benefits from?
A: Price increases.

109. Q: Short position benefits from?
A: Price decreases.

110. Q: T+2 settlement applies to?
A: Stocks, corporate bonds, munis.

111. Q: T+1 applies to?
A: Options & Treasuries.

112. Q: Cash settlement occurs?
A: Same day.

113. Q: Corporate action examples?
A: Splits, mergers, dividends.

114. Q: Ex-dividend date is?
A: 1 business day before record date.

115. Q: Cash account requires?
A: Full payment.

116. Q: Margin account requires?
A: 50% under Reg T.

117. Q: Discretionary account requires?
A: Written customer approval.

118. Q: Numbered accounts require?
A: Customer ID on file.

AML

119. Q: AML program governed by?
A: Bank Secrecy Act.

120. Q: AML flag for $10k+ cash?
A: CTR (Currency Transaction Report).

121. Q: SAR filed when?
A: Suspicious activity ≥ $5k.

122. Q: SAR filing deadline?
A: 30 days.

123. Q: OFAC monitors?
A: SDN (sanctioned persons) list.

124. Q: Structuring means?
A: Breaking transactions to avoid reporting.

125. Q: Layering refers to?
A: Moving money between accounts to hide origin.

SECTION 3: CUSTOMER ACCOUNTS, KYC, SUITABILITY (CARDS 126–170)

126. Q: What rule requires firms to know essential customer info?
A: FINRA Rule 2090 (KYC).

127. Q: What rule sets suitability standards?
A: FINRA Rule 2111.

128. Q: Suitability components?
A: Reasonable-basis, customer-specific, quantitative.

129. Q: What is reasonable-basis suitability?
A: Product must be suitable for any investor.

130. Q: Customer-specific suitability?
A: Suitable for the specific client.

131. Q: Quantitative suitability?
A: No excessive trading (churning).

132. Q: What is a discretionary account?
A: Rep chooses action, asset, amount.

133. Q: What requires written authorization?
A: Discretionary accounts.

134. Q: What is time-and-price discretion?
A: RR may pick time or price same day; does NOT require written authorization.

135. Q: What is a fiduciary account?
A: Account managed for beneficiary.

136. Q: UGMA / UTMA accounts owned by?
A: The minor.

137. Q: Who controls UGMA/UTMA?
A: Custodian.

138. Q: Custodian may use funds for?
A: Benefit of minor.

139. Q: Margin accounts require what agreement?
A: Margin agreement + credit disclosure.

140. Q: Reg T governs what?
A: Margin requirements (initial 50%).

141. Q: Minimum margin for long positions?
A: 25%.

142. Q: Minimum margin for short positions?
A: 30%.

143. Q: Options can be purchased in what type of account?
A: Cash & margin.

144. Q: Selling uncovered options requires?
A: Margin account approval.

145. Q: What is a fee-based account?
A: Charges annual fee instead of commissions.

146. Q: Fee-based accounts best for?
A: Active traders.

147. Q: Wrap account includes?
A: Advisory fee + brokerage.

148. Q: Wrap accounts require what registration?
A: Investment Adviser (IA).

149. Q: What is a numbered account?
A: Customer uses a number instead of name.

150. Q: What must firm still have for numbered account?
A: Customer identity on file.

151. Q: What is churning?
A: Excessive trading for commissions.

152. Q: What does the credit agreement disclose?
A: Loan terms for margin.

153. Q: Hypothecation agreement allows?
A: Firm to pledge securities to bank.

154. Q: Rehypothecation?
A: Firm pledges customers’ securities to secure its own loan.

155. Q: Arbitration mandatory between?
A: Firms & employees.

156. Q: Arbitration for customers?
A: Only if signed agreement.

157. Q: Mediation binding?
A: Only if settlement agreement is signed.

158. Q: Frozen accounts?
A: Customer must deliver full cash upfront for 90 days.

159. Q: Regulation S-P governs what?
A: Privacy of customer information.

160. Q: When must privacy notice be delivered?
A: At account opening & annually.

161. Q: Customer may opt-out of?
A: Sharing with unaffiliated third parties.

162. Q: POA types?
A: Full, limited, durable.

163. Q: Durable POA continues after?
A: Incapacitation.

164. Q: What stops after death?
A: All POA authority.

165. Q: Customer complaints must be kept how long?
A: 4 years.

166. Q: Account statements sent how often?
A: Quarterly, monthly if activity.

167. Q: What is an ACATS?
A: Automated account transfer system.

168. Q: Transfer must be validated in?
A: 1 business day.

169. Q: Asset transfer must be completed in?
A: 3 business days.

170. Q: Mailing of customer checks requires?
A: Written instructions.

🔵 SECTION 3: PROHIBITED ACTIVITIES (CARDS 171–220)

171. Q: Insider trading governed by?
A: 1934 Act + Insider Trading Enforcement Act of 1988.

172. Q: Material nonpublic info?
A: Info that impacts price and is not public.

173. Q: Tippee liability?
A: If the tipper breached duty and the tippee traded knowing info was nonpublic.

174. Q: Penalties for insider trading?
A: 3× profits + criminal charges.

175. Q: Front-running defined as?
A: Trading ahead of customer orders.

176. Q: Trading ahead of research reports prohibited under?
A: FINRA Rule 5280.

177. Q: Pump-and-dump scheme involves?
A: Inflating price via false info, then selling.

178. Q: Marking the close?
A: Manipulating stock at end of day.

179. Q: Marking the open?
A: Manipulating stock at market open.

180. Q: Wash trade?
A: Trading with oneself to create false volume.

181. Q: Backing away?
A: Market maker fails to honor quoted price.

182. Q: Painting the tape?
A: Coordinating trades to mislead market.

183. Q: Excessive trading = ?
A: Churning.

184. Q: Selling dividends?
A: Recommending purchase right before dividend without benefits.

185. Q: Free-riding?
A: Buying without paying and selling before payment deadline.

186. Q: Free-riding penalty?
A: 90-day frozen account.

187. Q: Sharing in customer accounts allowed?
A: Yes, only with proportional sharing and approval.

188. Q: Borrowing from customers allowed?
A: Only if customer is bank or family.

189. Q: Outside business activities governed by?
A: FINRA Rule 3270.

190. Q: Private securities transactions governed by?
A: Rule 3280.

191. Q: Political contribution rule for munis?
A: MSRB G-37.

192. Q: Limit under G-37?
A: $250 if eligible to vote.

193. Q: Firm contributions allowed?
A: No.

194. Q: Penalty for exceeding $250?
A: 2-year ban on negotiated muni business.

195. Q: OBA must be reported when?
A: Prior written notice to firm.

196. Q: OBA example?
A: Paid consulting job outside BD.

197. Q: PST (selling away) requires?
A: Firm pre-approval.

198. Q: Books and records rule?
A: FINRA Rule 4511.

199. Q: Required record retention for customer account records?
A: 6 years.

200. Q: Required record retention for trade confirmations?
A: 3 years.

201. Q: Complaint retention?
A: 4 years.

202. Q: AML record retention?
A: 5 years.

203. Q: What is a breakpoint?
A: Reduced mutual fund sales charge at investment tiers.

204. Q: Breakpoint sales violation?
A: Not offering available discount.

205. Q: Switching?
A: Recommending unnecessary mutual fund trades.

206. Q: Mutual fund 12b-1 fees used for?
A: Marketing & distribution.

207. Q: Max 12b-1 fee for no-load fund?
A: 0.25%.

208. Q: Can firms guarantee returns?
A: No.

209. Q: Can firms share losses with customers?
A: Prohibited.

210. Q: Can BD lend money to reps?
A: Yes if firm allows.

211. Q: Senior exploitation rule?
A: FINRA Rule 2165.

212. Q: Firm may hold suspicious disbursements for how long?
A: 15 business days.

213. Q: Can unregistered persons take orders?
A: No.

214. Q: Can unregistered persons cold-call?
A: Yes, if no recommendations.

215. Q: Telemarketing hours allowed?
A: 8am–9pm local.

216. Q: Do-not-call list must be checked every?
A: 31 days.

217. Q: Confirmations must be sent?
A: At or before settlement.

218. Q: Best execution rule?
A: FINRA Rule 5310.

219. Q: IPO purchase restrictions?
A: FINRA Rule 5130.

220. Q: Restricted persons include?
A: RR, BD employees, portfolio managers, immediate family.

🔵 SECTION 3: TRADING PRACTICES + ORDERS (CARDS 221–250)

221. Q: Market orders prioritize?
A: Speed over price.

222. Q: Limit orders prioritize?
A: Price over speed.

223. Q: Stop order purpose?
A: Protect a position.

224. Q: Sell stop triggers when?
A: Market falls to stop price.

225. Q: Buy stop triggers when?
A: Market rises to stop price.

226. Q: A stop-limit does what?
A: Turns into limit order after trigger.

227. Q: Fill-or-kill order?
A: Fill immediately, or canceled.

228. Q: Immediate-or-cancel?
A: Fill what you can; cancel rest.

229. Q: All-or-none?
A: Fill entire order or none; no time requirement.

230. Q: Not-held order?
A: RR can choose time/price that day.

231. Q: Good-’til-canceled lasts?
A: Until executed/canceled; usually 6 months.

232. Q: Market maker is what?
A: Dealer providing continuous quotes.

233. Q: Dark pools provide?
A: Anonymous institutional trading.

234. Q: Order routing must follow what rule?
A: Best execution.

235. Q: OTCBB and Pink markets quote?
A: Unlisted securities.

236. Q: Reg SHO governs?
A: Short sales.

237. Q: Naked short selling allowed?
A: No.

238. Q: Locate requirement required for?
A: Short sales.

239. Q: Threshold list identifies?
A: Fail-to-deliver problem securities.

240. Q: Treasury securities settle?
A: T+1.

241. Q: Corporate bonds settle?
A: T+2.

242. Q: Municipal bonds settle?
A: T+2.

243. Q: Options trades settle?
A: T+1.

244. Q: Options exercise settles?
A: Stock: T+2
Premium: same day.

245. Q: Cash settlement?
A: Same day.

246. Q: Forward stock splits?
A: Increase shares, reduce price.

247. Q: Reverse stock splits?
A: Decrease shares, increase price.

248. Q: Stock dividends affect cost basis how?
A: Adjust downward (spread across more shares).

249. Q: Tender offer?
A: Offer to buy shares at premium price.

250. Q: Mergers & acquisitions cause?
A: Exchange of shares.

SECTION 3–4 MIXED HIGH-YIELD CONTENT (CARDS 251–300)

251. Q: Do stock dividends provide cash?
A: No; they issue more shares.

252. Q: Stock dividends taxable?
A: Not until shares are sold.

253. Q: Formula for adjusted cost basis after stock dividend?
A: Total cost ÷ new number of shares.

254. Q: Rights offering benefit?
A: Protects shareholders from dilution.

255. Q: Warrants issued typically as?
A: “Sweeteners” with bonds.

256. Q: Rights are good for?
A: Short-term (30–45 days).

257. Q: Warrants valid for?
A: Long-term (years).

258. Q: What is tendering shares?
A: Submitting shares to buyer for a tender offer.

259. Q: Who regulates tender offers?
A: SEC under the Williams Act.

260. Q: Who must approve corporate actions?
A: Board of Directors.

261. Q: When must a proxy statement be sent?
A: Before shareholder vote.

262. Q: Forward stock split effect?
A: More shares, lower per-share price.

263. Q: Reverse split effect?
A: Fewer shares, higher price.

264. Q: Example of forward split?
A: 2-for-1.

265. Q: Example of reverse split?
A: 1-for-4.

266. Q: What is par value for common stock?
A: Arbitrary accounting value.

267. Q: What is treasury stock?
A: Previously issued, repurchased shares.

268. Q: EPS formula?
A: (Net income – preferred dividends) ÷ shares outstanding.

269. Q: Diluted EPS includes?
A: Options, warrants, convertibles.

270. Q: What is market capitalization formula?
A: Share price × shares outstanding.

MUTUAL FUNDS + ETFs

271. Q: NAV updated how often?
A: Daily after market close.

272. Q: POP formula for mutual funds?
A: NAV ÷ (1 – sales charge).

273. Q: Front-end load charged when?
A: At purchase.

274. Q: Back-end load charged when?
A: At redemption.

275. Q: 12b-1 fees used for?
A: Marketing/distribution.

276. Q: Max 12b-1 fee for a “no-load”?
A: 0.25%.

277. Q: ETFs trade?
A: Intraday on exchanges.

278. Q: ETF tax efficiency reason?
A: In-kind creation/redemption.

279. Q: ETNs are?
A: Unsecured debt instruments.

280. Q: UIT portfolio?
A: Fixed, no active management.

281. Q: UIT redeemable?
A: Yes, with sponsor.

282. Q: Mutual funds redeemable?
A: Yes, with fund.

283. Q: Closed-end funds redeemable?
A: No — traded on exchange.

284. Q: Expense ratio includes?
A: Operating expenses.

285. Q: Turnover ratio?
A: Measures trading activity.

ANNUITIES

286. Q: Variable annuity regulated by?
A: SEC + state insurance + FINRA.

287. Q: VA separate account invests in?
A: Equity subaccounts.

288. Q: Who bears investment risk in VAs?
A: Customer.

289. Q: Who bears risk in fixed annuity?
A: Insurance company.

290. Q: Are fixed annuities securities?
A: No.

291. Q: Are variable annuities securities?
A: Yes.

292. Q: Surrender charge applies when?
A: Early withdrawal.

293. Q: 1035 exchange allows?
A: Tax-free annuity-to-annuity exchange.

294. Q: Bonus annuity risk?
A: Longer surrender period & higher fees.

295. Q: VA suitability concerns?
A: Liquidity, age, time horizon.

REITs

296. Q: To qualify as REIT, must distribute?
A: ≥90% of taxable income.

297. Q: REIT avoids?
A: Double taxation.

298. Q: Mortgage REIT invests in?
A: Mortgages & MBS.

299. Q: Equity REIT invests in?
A: Properties.

300. Q: Hybrid REIT invests in?
A: Both properties & mortgages.

🔵 MUNICIPAL SECURITIES (CARDS 301–340)

GENERAL OBLIGATION BONDS

301. Q: GOs backed by?
A: Full faith & credit (tax revenue).

302. Q: GO bonds issued by?
A: States, counties, cities.

303. Q: GO approval sometimes requires?
A: Voter referendum.

304. Q: Limited-tax GO means?
A: Cap on tax raising power.

305. Q: Unlimited-tax GO means?
A: No cap.

REVENUE BONDS

306. Q: Backed by?
A: Project revenue.

307. Q: Examples?
A: Toll roads, airports, bridges.

308. Q: Feasibility study required for?
A: Revenue bonds.

309. Q: Typical muni maturity?
A: 20–30 years.

310. Q: Municipalities sometimes use which structure?
A: Serial bonds.

MUNI MONEY MARKET INSTRUMENTS

311. Q: TAN = ?
A: Tax anticipation note.

312. Q: RAN = ?
A: Revenue anticipation note.

313. Q: BAN = ?
A: Bond anticipation note.

314. Q: TRAN = ?
A: Tax & revenue anticipation note.

315. Q: VRDO = ?
A: Variable rate demand obligation.

316. Q: VRDO feature?
A: Rate resets; has put feature.

317. Q: ARS = ?
A: Auction rate security.

318. Q: ARS risk?
A: Auction failure → illiquidity.

MUNI STRUCTURES

319. Q: Double-barreled bond backed by?
A: Revenue + GO support.

320. Q: Special tax bond backed by?
A: Specific tax (e.g., tobacco).

321. Q: Special assessment bond backed by?
A: Charges to benefiting properties.

322. Q: Moral obligation bond requires?
A: Legislature to approve payment (not guaranteed).

323. Q: Industrial development revenue bond (IDR)?
A: Benefits private company.

324. Q: IDR risk?
A: Credit risk of private user.

MUNI TAXATION

325. Q: Municipal bond interest taxed federally?
A: Exempt.

326. Q: Example of federally taxable muni?
A: BABs (Build America Bonds).

327. Q: State tax exemption applies when?
A: Investor resides in the state.

328. Q: OID muni bond accretion?
A: Tax-exempt.

MUNICIPAL FUND SECURITIES HIGH-YIELD

329. Q: 529 plan tax treatment?
A: Tax-free withdrawals for education.

330. Q: ABLE account used for?
A: Disability-related expenses.

331. Q: LGIP is?
A: Government investment pool.

332. Q: 529 prepaid tuition protects against?
A: Tuition inflation.

MSRB RULES

333. Q: MSRB G-17 covers?
A: Fair dealing.

334. Q: G-30 covers?
A: Pricing & commissions.

335. Q: G-32 covers?
A: Disclosures in muni offerings.

336. Q: G-41 requires?
A: AML program.

337. Q: G-37 covers?
A: Political contributions.

338. Q: Muni confirmations governed by?
A: G-15.

339. Q: Books & records governed by?
A: G-8 + G-9.

340. Q: Time-of-trade disclosure rule?
A: G-47.

🔵 UNDERWRITING & ISSUANCE RULES (CARDS 341–375)

UNDERWRITING STRUCTURES

341. Q: Firm commitment underwriting?
A: Underwriter buys entire issue.

342. Q: Best efforts?
A: Sell what you can; issuer bears risk.

343. Q: Mini-max offering?
A: Minimum to proceed, max limit.

344. Q: All-or-none?
A: Entire issue must sell.

345. Q: Standby underwriting?
A: Underwriter buys unsubscribed rights offering shares.

346. Q: Syndicate letter outlines?
A: Responsibilities & liability.

347. Q: Selling group participates in?
A: Distribution only (no liability).

REGISTRATIONS / EXEMPTIONS

348. Q: Reg D applies to?
A: Private placements.

349. Q: Max non-accredited investors in Reg D?
A: 35.

350. Q: Accredited investor net worth threshold?
A: $1M excluding primary residence.

351. Q: Rule 506(b) allows?
A: No general solicitation.

352. Q: Rule 506(c) allows?
A: General solicitation if all purchasers are accredited.

353. Q: Rule 147 used for?
A: Intrastate offerings.

354. Q: Rule 147 residency requirement?
A: 80% tests (assets, revenue, sales).

355. Q: Reg A+ Tier 2 limit?
A: $75M.

356. Q: Reg S allows sales to?
A: Foreign investors offshore.

357. Q: Rule 144 governs?
A: Resale of restricted & control stock.

358. Q: Holding period for restricted stock under Rule 144?
A: 6 months (reporting companies).

359. Q: Control person volume limit under Rule 144?
A: 1% of outstanding shares or average weekly volume.

360. Q: Rule 145 covers?
A: Corporate reorganizations (M&A).

361. Q: Shelf registration rule?
A: Rule 415.

362. Q: Prospectus delivery required for?
A: Primary offerings.

363. Q: Cooling-off period minimum?
A: 20 days.

364. Q: During cooling-off period, allowed communication?
A: Red herring (preliminary prospectus).

365. Q: Roadshow allowed?
A: Yes, cannot solicit sales.

366. Q: Tombstone ad includes?
A: Basic info; not an offer.

367. Q: Free-writing prospectus allowed when?
A: After registration filed.

368. Q: Blue-sky laws regulate?
A: State-level securities registration.

369. Q: Reg T payment deadline?
A: T+4.

370. Q: Penalty for late Reg T?
A: Sell-out & freeze account for 90 days.

371. Q: FINRA Rule 2269 requires?
A: Disclose if BD has interest in distribution.

372. Q: Rule 2266 requires?
A: Provide SIPC info.

373. Q: MSRB G-11 covers?
A: Primary offering practices.

374. Q: Municipal CUSIP requirements covered under?
A: MSRB G-34.

375. Q: Securities Act of 1933 mission?
A: Regulate primary markets.

376. Q: What is DTC/DTCC?
A: Depository/clearing corporation that settles trades.

377. Q: OCC guarantees what?
A: Options contract performance.

378. Q: A broker acts as?
A: Agent.

379. Q: A dealer acts as?
A: Principal.

380. Q: Market maker profit source?
A: The spread.

381. Q: Quote 10.00–10.10 means?
A: Bid = 10.00, ask = 10.10.

382. Q: Inside market refers to?
A: Highest bid & lowest ask.

383. Q: Locked market?
A: Bid equals ask.

384. Q: Crossed market?
A: Bid is higher than ask.

385. Q: On an exchange, who matches trades?
A: The matching engine.

386. Q: Circuit breakers halt trading during?
A: Extreme volatility.

387. Q: Dark pools allow?
A: Anonymous institutional trading.

388. Q: TRACE reports?
A: Corporate bond trades.

389. Q: MSRB RTRS reports?
A: Municipal bond trades.

390. Q: Consolidated Tape reports?
A: Stock trades on exchanges.

391. Q: OTC securities quoted on?
A: OTC Markets (Pink/Open).

392. Q: Penny stock definition?
A: < $5, non-NASDAQ equity.

393. Q: Penny stock disclosure rule?
A: Rule 15g-9.

394. Q: Best execution enforced by?
A: FINRA Rule 5310.

395. Q: OATS (retired) replaced by?
A: CAT (Consolidated Audit Trail).

396. Q: ADF quotes from?
A: Alternative trading systems.

397. Q: NBBO stands for?
A: National Best Bid and Offer.

398. Q: Short sale can only be executed when?
A: In a margin account.

399. Q: “Locate” requirement under?
A: Reg SHO Rule 203(b)(1).

400. Q: Fail-to-deliver rules apply to?
A: Threshold securities.

🔵 SECTION 4: REGULATORY FRAMEWORK (CARDS 401–450)

REGISTRATION & FORM U4/U5

401. Q: Form U4 used for?
A: Registering an associated person.

402. Q: Info required on U4?
A: Employment history, addresses, disclosures.

403. Q: Update U4 when?
A: 30 days (10 days for disciplinary).

404. Q: Statutory disqualification includes what?
A: FELONY; securities-related misdemeanors.

405. Q: Is DUI a statutory disqualification?
A: Only if felony DUI.

406. Q: U5 filed when?
A: Termination within 30 days.

407. Q: U5 disclosures include?
A: Reasons for termination.

408. Q: Can reps re-associate?
A: Yes, must file new U4.

409. Q: BrokerCheck shows?
A: Rep background & disciplinary records.

410. Q: Fingerprinting required for?
A: All associated persons handling securities.

FINRA MEMBERSHIP & RULES

411. Q: Who must register with FINRA?
A: Broker-dealers.

412. Q: Who approves BD membership?
A: FINRA & SEC oversight.

413. Q: Conduct Rules apply to?
A: Dealings with customers.

414. Q: Code of Procedure governs?
A: Disciplinary actions.

415. Q: Code of Arbitration governs?
A: Settling disputes.

416. Q: Mediation is?
A: Voluntary.

417. Q: Sanctions under FINRA?
A: Censure, fines, suspension.

CONTINUING EDUCATION

418. Q: Regulatory Element required when?
A: After 1 year, then annually.

419. Q: Firm Element required when?
A: Annually.

420. Q: Who designs Firm Element?
A: The BD.

421. Q: CE applies to?
A: All registered reps.

GIFTS, GRATUITIES & NON-CASH COMP

422. Q: FINRA gift limit?
A: $100/person/year.

423. Q: Non-cash compensation allowed if?
A: Not tied to sales.

424. Q: Business entertainment allowed if?
A: Representative attends.

425. Q: Cash compensation from product sponsors allowed?
A: Only via firm & disclosed.

POLITICAL CONTRIBUTIONS

426. Q: Muni political rule?
A: MSRB G-37.

427. Q: Max contribution if voting-eligible?
A: $250.

428. Q: Ban length if exceeded?
A: 2 years on negotiated business.

BOOKS & RECORDS

429. Q: Customer account records kept?
A: 6 years.

430. Q: Complaints kept?
A: 4 years.

431. Q: Advertising records?
A: 3 years.

432. Q: Partnership articles?
A: Life of firm + 3 years.

433. Q: Trade blotters?
A: 6 years.

434. Q: Emails?
A: 3 years.

BUSINESS CONTINUITY PLANS

435. Q: BCP rule?
A: FINRA Rule 4370.

436. Q: BCP must include?
A: Emergency contacts, procedures.

437. Q: BCP updated?
A: Annually.

TELEMARKETING

438. Q: Telemarketing hours?
A: 8am–9pm local.

439. Q: Check DNC list how often?
A: Every 31 days.

440. Q: Telemarketing regulation?
A: FINRA 3230; FTC TSR.

COMMUNICATIONS WITH THE PUBLIC

441. Q: Retail communication =?
A: >25 retail investors in 30 days.

442. Q: Correspondence =?
A: ≤25 retail investors in 30 days.

443. Q: Institutional communication =?
A: To institutional investors only.

444. Q: Communications rule?
A: FINRA Rule 2210.

445. Q: Testimonials must disclose?
A: Whether paid.

RESEARCH RULES

446. Q: Analyst certification required by?
A: Rule 2241.

447. Q: Research reports must disclose?
A: Conflicts, compensation.

448. Q: Analysts cannot trade in?
A: Securities they cover.

449. Q: Quiet periods limit?
A: Research after IPO.

450. Q: Investment banking influences research?
A: Prohibited.

🔵 FINAL HIGH-YIELD TAX, FORMULAS, SUITABILITY & DEFINITIONS (CARDS 451–500)

TAXATION

451. Q: Qualified dividends taxed at?
A: Long-term capital gains rates.

452. Q: Ordinary dividends taxed at?
A: Ordinary income.

453. Q: Interest from corporate bonds taxed?
A: Federal + state.

454. Q: Interest from Treasuries taxed?
A: Federal only.

455. Q: Muni interest taxed?
A: Usually tax-free federally.

456. Q: Capital gain holding period long-term?
A: >1 year.

457. Q: Wash sale rule disallows losses if?
A: Substantially identical security bought within 30 days.

458. Q: Mutual fund distributions include?
A: Dividends, capital gains.

459. Q: Bond accretion increases?
A: Cost basis.

460. Q: Bond amortization decreases?
A: Cost basis.

SUITABILITY HIGH-YIELD

461. Q: Preservation of capital → best choice?
A: U.S. Treasuries.

462. Q: Income → best choice?
A: Bonds.

463. Q: Tax-free income → best choice?
A: Muni bonds.

464. Q: Growth → best choice?
A: Common stock.

465. Q: Aggressive growth → best?
A: Small-cap.

466. Q: Safety → best?
A: Bank CDs / Treasuries.

467. Q: Hedge equity → best?
A: Long puts.

468. Q: Hedge short position → best?
A: Long calls.

469. Q: Short-term liquidity → best?
A: Money market funds.

470. Q: Retiree needing income → best?
A: Bonds (NOT high-yield).

471. Q: Young investor → best?
A: Growth equities.

472. Q: High-yield bond risk?
A: Credit/default risk.

473. Q: Variable annuity suitable for?
A: Long time horizon.

474. Q: Unsuitable for?
A: Seniors needing liquidity.

475. Q: Limited partnerships suitable for?
A: Accredited investors with high risk tolerance.

OPTIONS (FINAL)

476. Q: Breakeven on long call?
A: Strike + premium.

477. Q: Breakeven on long put?
A: Strike – premium.

478. Q: Max loss long call/put?
A: Premium.

479. Q: Max gain long call?
A: Unlimited.

480. Q: Max gain long put?
A: Strike – premium.

481. Q: Covered call max profit?
A: Premium + difference between strike & cost basis.

482. Q: Protective put breakeven?
A: Stock price + premium.

483. Q: Time value formula?
A: Premium – intrinsic value.

FORMULAS (FINISHING)

484. Q: Current yield formula?
A: Annual interest ÷ market price.

485. Q: Dividend yield formula?
A: Annual dividend ÷ stock price.

486. Q: Price-weighted index example?
A: Dow Jones Industrial Average.

487. Q: Market-cap-weighted index example?
A: S&P 500.

488. Q: NAV formula?
A: (Assets – liabilities) ÷ shares outstanding.

489. Q: POP formula (mutual fund)?
A: NAV ÷ (1 – sales charge).

490. Q: Sharpe ratio measures?
A: Risk-adjusted return.

491. Q: Alpha measures?
A: Performance vs expectations.

492. Q: Beta measures?
A: Market sensitivity (systematic risk).

REGULATORY DEFINITIONS

493. Q: Control person owns?
A: ≥10% of company.

494. Q: Insider includes?
A: Officers, directors, 10% holders.

495. Q: Chinese Wall = ?
A: Info barrier between IB & research.

496. Q: Correspondent firm?
A: Uses another BD for clearing.

497. Q: Introducing firm?
A: Introduces accounts; no custody.

498. Q: Clearing firm?
A: Handles settlement & custody.

499. Q: Associated person?
A: Anyone employed by BD except clerical.

500. Q: Investment adviser under 1940 Act?
A: One who provides advice for compensation.