Upgrade to remove ads
Only $35.99/year

SIE PT 10/4 78%

Terms in this set (18)

A "short swing" profit is defined as a profit achieved by an insider who trades his or her company's stock within:
A. 3 months
B. 6 months
C. 9 months
D. 12 months
The best answer is B. A "short swing" profit is defined as one achieved by an insider (officer, director or 10% shareholder) trading that company's stock within a six month period. Short swing profits must be returned to the corporation under the Act
Trades of all of the following securities will settle in Fed Funds EXCEPT:
A. Treasury Bills
B. Treasury Note
C. Municipal Bonds
D. Agency Bonds
The best answer is C. Securities that are eligible to be traded by the Federal Reserve are those backed by the guarantee of the U.S. Government as well as certain agency obligations. Both Treasury Bills and Treasury Notes are eligible securities. Trades in eligible securities settle through the Federal Reserve system, and therefore settle in "Fed Funds." Municipal bond trades and trades in corporate securities are not eligible for trading and settling through the Federal Reserve system; these securities settle in "clearing house" funds.
The municipal bond counsel opines on which of the following ?
A. Viability
B. Feasibility
C. Validity
D. Marketability
The best answer is C. The bond counsel examines new municipal issues for legal or tax problems and renders an opinion on the validity, legality and tax exempt status of the issue. Bond counsels do not render economic opinions, which is the same as rendering an opinion on feasibility of an issue.
What is the minimum percentage of assets that a REIT must invest into real estate or mortgages?
A. 50%
B. 66 2/3 %
C. 75%
D. 90%
The best answer is C.
REITs do not invest in limited partnerships, which are tax shelter vehicles. This makes sense because REITs cannot pass losses to their shareholders.
They invest primarily in real estate and mortgages (under the tax code, at least 75% of the REIT's assets must be invested in real estate or mortgages). Any excess funds can be invested in securities, such as U.S. Governments and can also be invested in the shares of other REITs, though this rarely happens.
A customer buys 100 shares of ABC stock at $49 and sells 1 ABC Jan 50 Call @ $4. This covered call writing strategy is:
A. the same as buying a put
B. subject to large losses
C. an effective hedge
D. used to immunize a portfolio
The best answer is B. The worst case is the stock becomes worthless. The customer loses the full value of the stock ($4,900) net of the $400 in collected premiums, for a net loss of $4,500. So, writing a call does not afford the same level of protection as buying a put!
Payment for U.S. Government securities that are sold through auction is made on:
A. Auction Date
B. Auction Date + 1
C. Issue Date
D. Issue Date + 1
The best answer is C. Payment for U.S. Government securities that are won at auction must be made on issue date (Thursday of the auction week for T-Bills and the 15th of the month for STRIPS, TIPS, Treasury Notes, and Treasury Bonds). Payment is to be made in cash, Federal Funds, or in similar maturing Government securities (effecting a direct "rollover" of that debt).
Who can give trading authorization to another party in a brokerage account
A. A second party can give trading authorization to a first party
B. A first party can give trading authorization to a second party
C. A third party can give trading authorization to a second party
D. A first party can give trading authorization to a third party
The best answer is A.
The parties to an account are:
First Party: Brokerage Firm
Second Party:Customer
Third Party:Someone Other Than the Broker or Customer
Since only Second Parties can open accounts, only a Second Party can give trading authorization to either a First Party (a discretionary account) or to a Third Party (a Third Party trading authorization).
Which statement is TRUE about 401(k) Plans?
A. They are established by the corporate employee
B. The cost basis in the plan is "0"
C. The maximum contribution amount is lower than that permitted for a SIMPLE IRA
D. Distributions at retirement age are tax-free
The best answer is B.
401(k) Plans are corporate-sponsored salary reduction plans allow employees to contribute up to $20,500 in 2022 as a salary reduction, so these are pre-tax dollars going into the plan. The cost basis in retirement plans only consists of after tax dollars. Therefore, the cost basis is "0" and when distributions commence at retirement age, they are 100% taxable at ordinary income tax rates (since none of the dollars were ever taxed).
SIMPLE IRAs are corporate-sponsored salary reduction plans for small companies, but the maximum contribution in 2022 is $14,000.
If a customer buys a fully-paid security that is part of the DTC DRS program, the customer will receive:
A. standard physical stock certificates
B. book entry registration in the name of the client's broker-dealer
C. a negotiable DRS certificate that may be deposited at any member firm
D. uncertificated book-entry registration
The best answer is D.
DTC (Depository Trust Corporation) safekeeps almost all physical securities certificates for member firms. Physical securities are kept in an airtight "bunker" and computer systems keep track of the "transfer" of these certificates from one owner to another - they are no longer physically moved, unless the customer actually wants delivery of the physical certificate (for which DTC imposes a substantial charge). Once DTC could track change of ownership by computer, the next step was to create a "book entry" registration system for stocks, where there are no more physical certificates (saves time and money).
This is called "DRS" - the Direct Registration System. Because the owner's name is electronically recorded on the books of the transfer agent, payments of dividends and interest are made directly from the transfer agent to the customer/owner. Note, in contrast, that "street name" securities held in margin accounts do not record the owner's name with the transfer agent. In this case, the broker-dealer is the owner of record, and payments of dividends and interest are made by the transfer agent to the broker-dealer. The broker-dealer, in turn, credits each customer that is the beneficial owner of the "street-name" shares
Which of the following characteristics of brokered CDs should be disclosed to customers?
A. CDs are actively traded instruments, so the customer should experience minimal marketability risk if the CD is sold prior to maturity
B. The CD may have an initial interest rate that is higher than the market rate of interest, but that rate will be lowered after the CD is held for a stated time period
C. CDs can be redeemed at any time with the issuer, but the issuer can impose a penalty for early withdrawal of funds
D. CDs can be callable, and if interest rates rise during the life of the instrument, the issuer may call the CD, forcing the holder to reinvest at lower current rates
The best answer is B.
Brokered CDs can be "step-up, step-down" instruments. As such, they can have an introductory "teaser" interest rate that is substantially higher than the market; and then the rate "steps-down" to a more realistic market rate after the 1st 6 month interest payment is made.
Most of these instruments are held to maturity, so the secondary market is very limited. There is no penalty for early withdrawal of funds on brokered CDs - however the amount of interest earned will be pro-rated over the shorter life of the deposit. Brokered CDs, which can have lives of up to 5 years, can be callable.
If interest rates drop (not rise) after issuance, then the issuer can call in the CD, forcing the investor to reinvest the refunded monies at lower current market interest rates
Under the provisions of Regulation T, monies must be collected for securities purchases:
A. promptly
B. on the business day after trade date
C. on the second business day after trade date
D. on the fifth business day after trade date
The best answer is A. Regulation T requires that payments for securities purchases be collected "promptly," but no later than "S+2" - or no later than industry "regular way settlement" of 2 business days + 2 additional "grace" days; for a maximum time period to collect of 4 business days
Which of the following must be disclosed, or be disclosed upon customer request, in competitive bid municipal underwritings?
A. Spread
B. Names of other buyers off the issue
C. Participation amount of each underwriter
D. Order priority provisions
The best answer is D.
In competitive bid municipal underwritings, the offering price of each maturity must be disclosed, but there is not requirement to disclose the spread, which is typically very thin.
There is no requirement to disclose the participation amounts of the underwriters (since this in no way affects the customer).
However, the order priority provisions must be disclosed (the usual priority is Pre-Sale; Group Net; Designated; Member Takedown-remember; Pro Golfers Don't Miss!).
Obviously, the names of other clients who purchased the issue are confidential
The only order listed that is reduced on ex date is an open:
A. buy stop
B. sell stop
C. sell limit
D. sell stop DNR
The best answer is B. The orders that are reduced on ex date are "OBLOSS" - Open Buy Limits and Open Sell Stops. These are the orders below the current market. The intent is to make sure that the order does not become executable due to the fact that the stock's opening price is reduced by the dividend amount. Therefore, Choice B would be reduced. If the order is DNR, this means Do Not Reduce and on ex date the order would NOT be adjusted.
Which statement is TRUE about the tax deductibility of 529 Plan contributions?
A. Contributions are generally deductible at the federal level
B. Contributions are generally deductible at the state level
C. Contributions are generally deductible at the state level regardless of the state in which the plan was established
D. Contributions are generally not deductible at either the federal or state level
The best answer is B. 529 Plan contributions are not deductible at the federal level. However, most states that have income taxes allow a deduction for contributions made to a plan established by that state (and a handful of states allow a tax deduction for contributions made to any state's 529 Plan!). This is a tax benefit of making 529 Plan contributions.
All of the following transactions are permitted in a custodial account EXCEPT:
A. Short sale of common stock
B. Sale of pre-emptive rights
C. Purchase of warrants
D. Purchase of mutual fund shares
The best answer is A. Custodial accounts cannot be margin accounts - so short sales are prohibited. If securities are purchased, they must be paid in full. If securities are sold, they must be long sales with the proceeds being used for other investments or expenses that benefit the minor. Any type of security can be purchased in a custodial account, as long as the investment is "prudent."
Treasury Bonds are issued by the U.S. Government in:
A. bearer form for minimum denominations of $100
B. bearer form for minimum denominations of $10,000
C. book entry form for minimum denominations of $100
D. book entry form for minimum denominations of $10,000
The best answer is C. The U.S. Government issues Treasury Bonds (and Treasury Bills and Notes) in book entry form, in minimum denominations of $100.
Which choice is TRUE regarding the recordkeeping requirement for customer account records (statements)?
A. Customer account statements must be retained by the member firm for 2 years
B. Customer account statements must be retained by the member firm for 4 years
C. Customer account statements must be retained by the member firm for 6 years
D. Customer account statements must be retained by the member firm for 8 years
The best answer is C. Customer account statements must be retained for 6 years.
New issues of short term municipal notes and bonds are available in which form?
A. Bearer
B. Book Entry
C. Registered to Principal only
D. Registered to Principal and Interest
The best answer is B. New issues of municipal notes are available only in "book entry" form
Other sets by this creator