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General Securities Representative
SIE
Securities Industry Essentials Exam (SIE) Questions and Answers

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Viewing page 12 out of 13 pages

Viewing questions 111-120 out of questions

Questions # 111:

Which of the following activities is permitted during the cooling-off period of an initial public offering (IPO)?

Options:

Distribute final prospectus

Deliver securities to purchasers

Conduct sales to public investors

Market the new security to potential investors

Answer

Explanation

The cooling-off period begins after the registration statement is filed with the SEC and lasts for at least 20 days. During this time, the issuer and underwriters can market the securities but cannot finalize sales.

D is correct because marketing (e.g., roadshows) is permitted during the cooling-off period.

A is incorrect because the final prospectus is distributed after the offering is effective.

B and C are incorrect because sales and deliveries are prohibited until the registration becomes effective.

[Reference: Securities Act of 1933, Section 5, , ]

Questions # 112:

When making a mutual fund recommendation to a customer, a registered representative must consider all of the following factors except:

Options:

the age of the customer.

the tax status of the customer.

the fund’s independent ranking

the investment objective of the fund.

Answer

Questions # 113:

Which of the following is not a pass-through entity for tax purposes?

Options:

A C corporation

An S corporation

A limited liability company (LLC)

A real estate investment trust (REIT)

Answer

Explanation

A pass-through entity does not pay corporate income taxes; instead, income is passed to owners, who report it on their individual tax returns.

A is correct because C corporations are not pass-through entities; they pay corporate taxes.

B, C, and D are all pass-through entities for tax purposes.

[Reference: Internal Revenue Code, Subchapter S and REIT Taxation Rules, , ]

Questions # 114:

Which of the following statements is true of an index exchange-traded fund (ETF)?

Options:

It has a high portfolio turnover ratio.

It is priced once daily, generally at the market close.

It offers an opportunity to outperform the index it tracks.

Passive ETFs will typically have lower fees than those associated with actively managed ETFs.

Answer

Explanation

Passive ETFs track an index and require minimal management, leading to lower expenses compared to actively managed ETFs.

D is correct because passive ETFs are cost-efficient and have lower fees.

A is incorrect because index ETFs have low turnover since they replicate an index.

B is incorrect because ETFs are priced continuously throughout the trading day.

C is incorrect as ETFs aim to match, not outperform, the index.

[Reference: SIE Study Guide, Chapter 7: Exchange-Traded Funds, , ]

Questions # 115:

Which of the following statements is true with regard to SIPC and FDIC?

Options:

SIPC coverage is only for securities, and FDIC coverage is only for cash.

SIPC protects brokerage accounts, and FDIC protects bank deposits.

Money market mutual funds are covered by the FDIC and are not covered by SIPC.

Securities held at broker-dealers are covered by the FDIC and are not covered by SIPC.

Answer

Explanation

Step by Step Explanation:

SIPC Coverage: Protects customers of brokerage firms against the loss of securities and cash due to broker-dealer insolvency, but it does not protect against market losses.

FDIC Coverage: Protects bank deposits (checking, savings, CDs) up to $250,000 per depositor, per institution.

Incorrect Options:

A: SIPC covers both securities and cash held at brokerage firms (within limits).

C & D: Money market mutual funds are not FDIC insured, and securities are not covered by the FDIC.

[:, SIPC Overview: SIPC Coverage., FDIC Insurance: FDIC Coverage., ]

Questions # 116:

An investor who lives on a fixed income and is concerned about inflation is most exposed to which of the following risks?

Options:

Market risk

Economic risk

Interest rate risk

Purchasing power risk

Answer

Explanation

Purchasing power risk, also known as inflation risk, occurs when inflation reduces the real value of a fixed-income stream. Fixed payments (e.g., bond interest or annuity payments) lose buying power as inflation rises.

D is correct because inflation directly affects fixed income by eroding purchasing power.

A is incorrect because market risk relates to fluctuations in market prices, not inflation.

B is incorrect because economic risk generally refers to broader economic downturns.

C is incorrect because interest rate risk involves changes in bond prices due to interest rate movements, not inflation.

[Reference: SIE Study Guide, Chapter 3: Risks of Fixed-Income Investments, , ]

Questions # 117:

A company files a registration statement with the SEC to register a new Issue of securities. The company does not plan to sell all the registered shares at this time and instead plans to gradually sell new shares over a three-year period. This registration is called a:

Options:

shelf registration.

Rule 144 offering.

best efforts offering.

SEC Regulation S offering.

Answer

Questions # 118:

Under the Investment Company Act of 1940, which of the following products are considered redeemable securities?

Options:

Short-term paper

Master limited partnerships

Shares issued by a closed-end investment company

Shares of unit investment trusts (UITs) purchased through a public offering

Answer

Explanation

Redeemable securities are those that can be sold back to the issuer.

D is correct because unit investment trusts (UITs) issue redeemable securities.

C is incorrect because closed-end fund shares are traded on secondary markets, not redeemable.

A and B do not meet the definition of redeemable securities.

[Reference: Investment Company Act of 1940, Section 2(a)(32), , ]

Questions # 119:

A retail investor owns shares of Mutual Fund ABC that paid a $0.25 dividend on September 1 and closed at $10.00. What is the opening price once this fund trades on the ex-dividend date?