Pass the FINRA General Securities Representative SIE Questions and answers with ExamsMirror

The sales load is calculated as a percentage of the POP, using the formula:Sales load = (POP − NAV) ÷ POP × 100

POP = $15.50, NAV = $14.35.

Sales load = ($15.50 − $14.35) ÷ $15.50 × 100 =8.50%.

C is correctbecause the calculation results in an 8.50% load.

A,B, andDare incorrect due to incorrect calculations.

Step by Step Explanation:

ETF Expense Ratios: ETFs generally have lower expense ratios compared to mutual fundsdue to their passive management style.

Incorrect Options:

A: ETFs do not have sales loads; they are traded like stocks.

B: ETFs can be purchased on margin, like other equities.

C: ETFs are traded throughout the day at market prices, not NAV.

References:

SEC ETF Fact Sheet: SEC ETF Info.

A statutory disqualification occurs if an RR has been convicted of certain crimes, violated securities laws, or been barred by a regulatory authority. Under FINRA rules, the RR cannot associate with a member firm in any capacity unless they obtain a waiver from FINRA.

B is correctbecause the disqualified person must obtain a waiver to continue employment.

AandCare incorrect because the RR is not allowed to associate with the firm in any capacity without a waiver.

Dis incorrect because statutory disqualification directly affects the RR’s employment status.

A FINRA member is a broker-dealer that is registered with FINRA and regulated by a national securities association. Individuals employed by the member firm (e.g., registered representatives) are associated persons, not members themselves.

D is correctbecause FINRA membership applies to broker-dealers, not individuals.

A,B, andCare incorrect because they refer to individuals or roles within member firms, not the firms themselves.

The announcement of negative regulatory changes introducesunsystematic risk, specific to the technology sector. Diversification into unrelated sectors can reduce exposure to this risk.

A is correctbecause uncorrelated holdings reduce portfolio risk.

Bis incorrect because adding more microchip companies increases exposure to sector-specific risk.

Cdoes not address the core issue of over-concentration.

Dis the opposite of mitigating risk.

Step by Step Explanation:

Government Bond Funds: Invest in government-backed securities, but the value of the fund itself is not guaranteed by the government, as these funds are subject to market risks.

Incorrect Options:

A: Diversification depends on the fund’s investment strategy.

B: Interest/dividend payments may fluctuate.

C: If interest rates fall, NAVs typically rise, not drop.

References:

SEC Guidance on Mutual Funds: SEC Government Bond Funds.

Step by Step Explanation:

Equity Index Options: These are cash-settled because the underlying asset is not a physical security but a theoretical value representing the index.

Incorrect Options:

Preferred Stock, Master Limited Partnerships, and ETFs: These involve physical delivery of the underlying asset upon exercise.

References:

Options Clearing Corporation (OCC) Guidelines:OCC Cash-Settled Options.

FINRA Rule 5130 restricts participation in IPOs for certain individuals (e.g., restricted persons) to prevent potential conflicts of interest. Restricted persons include employees of broker-dealers and their immediate family members.

C is correctbecause the president of a local bank is not considered a restricted person under FINRA Rule 5130.

Ais incorrect because employees (registered or not) of broker-dealers are restricted.

Bis incorrect because immediate family members of broker-dealer employees are restricted,even if unemployed.

Dis incorrect because the immediate family of a registered representative is restricted.

Step by Step Explanation:

Summary Prospectus Content: Must include key information such as the fund’s investment objectives, risks, fees, and past performance. This helps investors make informed decisions.

Incorrect Options:

A: Projected returns are speculative and not included in the prospectus.

C & D: Detailed portfolio holdings and control persons are included in the full prospectus, not the summary.

References:

SEC Rule 498 (Summary Prospectuses): SEC Prospectus Requirements.

Step by Step Explanation:

Consumer Discretionary Sector: Includes products and services that are not essential, such as luxury items, travel, and entertainment. Revenues increase as disposable income risesduring economic expansion.

Consumer Staples and Utilities: These sectors are defensive and less impacted by economic cycles.

Healthcare: Also less correlated with economic cycles due to its essential nature.

References:

SEC and FINRA Guidance on Sectors: Investopedia Sector Overview.