SIE Quiz

Those persons employed by a Financial Industry Regulatory Authority (FINRA)-registered broker-dealer to do nothing other than provide training for its associated persons

• 
  need not be registered

• 
  must be registered as a principal.

• 
  

  must be registered as a representative.

• 
  are exempt from the firm element of the firm's continuing education requirement.

Answer explanation

Those who manage any part of a member's securities activities must be registered as a principal with FINRA, including those involved solely in training associated persons.

All of the following are true for 529 plans except

• 
  contributions to the plan are considered gifts for tax purposes.

• 
  withdrawals would be tax free at the federal level if used for qualified education expenses.

• 
  any adult can open a 529 plan for a student.

• plan donors must be related to the student benefactor.

Answer explanation

Donors to 529 plans need not be related to the student benefactor. Each of the remaining statements is true.

Regarding purchases on margin, which of the following is true?

• Warrants and rights can both be purchased on margin.

• 
  Neither rights nor warrants can be purchased on margin.

• Warrants can be purchased on margin, but rights cannot.

• Rights can be purchased on margin, but warrants cannot.

Answer explanation

Warrants are marginable securities, but rights are not.

Typically, a corporation would not issue

• 
  debentures.

• option contracts.

• 
  preferred stock.

• common stock.

Answer explanation

Corporations issue equity securities (stock) and debt securities (bonds and debentures), but they do not issue options. Options are issued by the Options Clearing Corporation (OCC).

All of the following are stages of money laundering except

• 
  diversification.

• 
  integration.

• 
  placement.

• 
  layering.

Answer explanation

Money laundering consists of moving illegally obtained funds into the financial system (placement), concealing its origins by the use of multiple transactions (layering), and then commingling it with legitimate funds in legitimate enterprises (integration). Diversification is an investment principle.

A customer wanting to open a margin account is told that the securities will be held in street name. This means that the securities will be registered in

• 
  the name of the bank supplying the loan.

• 
  the name of the customer.

• 
  the name of the broker-dealer.

• 
  the names of the customer and the broker-dealer jointly.

Answer explanation

Securities held in street name are registered in the name of the broker-dealer, who is the named or nominal owner. The customer remains as the beneficial owner.

Which of the following preferred stocks allows the issuer to pay the shareholders par and cease dividend payments following a stated period?

• 
  Redeemable

• 
  Puttable

• 
  Callable

• Adjustable

Answer explanation

The issuer can pay off callable preferred at any time after the call protection period, and dividends will cease.

Which of the following option positions would offer a full hedge to a long stock position?

• 
  Long call

• 
  Short put

• 
  Long put

• Short call

Answer explanation

The best way to hedge a long stock position is with a long put.

An official statement is a disclosure document that would be used in connection with an offering of which of the following securities?

• Common of preferred stock offered privately

• Limited partnership interests

• Municipal bonds

• 
  U.S. Treasury notes

Answer explanation

An official statement serves as a disclosure document and contains any material information an investor might need about a municipal bond issue. Municipal bonds are exempt from registration under the Securities Act of 1933.

When interest rates in the open market move up or down, a bond's coupon rate will

• 
  be adjusted to match the open-market rates.

• be unaffected by the open-market interest rates.

• 
  move inversely to the open-market interest rates.

• 
  move with the open-market interest rates.

Answer explanation

Though the price of a bond will react to market forces, such as supply and demand, and be interest-rate sensitive (inverse), the coupon is always the same: A fixed percentage of par value established by the issuer when the bond was first issued.