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

Step by Step Explanation:

FINRA Rule 3210: Requires registered representatives to obtain written consent from their employing broker-dealer before opening accounts at other financial institutions if securities transactions will occur.

Incorrect Options:

A, B, and C: These accounts are exempt because they do not involve direct securities transactions requiring monitoring.

References:

FINRA Rule 3210 (Accounts at Other Institutions): FINRA Rule 3210.

Step by Step Explanation:

Liquidity Risk: Refers to the difficulty of selling a security quickly without significantly affecting its price. This is common in thinly traded securities or complex instruments.

Other Risks:

Credit Risk: Relates to the possibility of default by the issuer.

Market Risk: Pertains to overall price changes due to market conditions.

Prepayment Risk: Associated with mortgage-backed securities and early repayment of loans.

References:

SEC Investor Bulletin on Risks: SEC Risk Guidance.

A covered call involves selling a call option on a stock the investor already owns. The strategy generates income in the form of the premium collected for selling the call, providing additional returns on the stock position.

D is correctbecause the primary goal of a covered call is to generate income.

Ais incorrect because covered calls do not hedge against large declines in the stock price.

Bis incorrect because speculation involves taking higher risks, not a covered call’s conservative strategy.

Cis incorrect because no strategy guarantees a profit.

Step by Step Explanation:

Securitization: The process of pooling financial assets, such as mortgage loans, and creating asset-backed securities that investors can buy.

Incorrect Options:

B: Hypothecation refers to pledging assets as collateral.

C & D: Loan and claim processing are administrative terms, not related to the creation of securities.

References:

SEC Guidance on Asset-Backed Securities: SEC ABS Info.

Refunding involves replacing existing debt with new debt, usually to take advantage of lower interest rates.

B is correctbecause the company issues new bonds to pay off the existing debt.

Ais incorrect as refunding involves issuing debt, not equity.

Cis incorrect because the company is not obligated to buy back bonds at a discount.

Dis incorrect because a sinking fund is used for gradual repayment, not refunding.

An option’s premium consists of intrinsic value and time value:

Intrinsic value= Current stock price - Strike price = $40 - $35 = $5.

Time value= Total premium - Intrinsic value = $7 - $5 =$2.

B is correctbecause $2 represents the time value.

A,C, andDare incorrect because they miscalculate the time value based on the option's total premium.

Step by Step Explanation:

Rule 144 Holding Period: Restricted securities held by affiliates require a six-month holding period before sale, provided the issuer is subject to SEC reporting requirements.

Other Options:

Notification to FINRA (C) is incorrect; Form 144 is submitted to the SEC, not FINRA.

The 10% ADTV limitation (D) applies to the volume of shares sold, not the conditions for sale.

References:

SEC Rule 144 (Selling Restricted Securities): SEC Rule 144.

The Securities Act of 1933 requires securities offered to the public to be registered with the SEC unless they qualify for an exemption. Open-end investment companies (mutual funds) are not exempt and must register.

D is correctbecause mutual funds are publicly offered and require registration.

Ais incorrect because private placements are exempt under Regulation D.

Bis incorrect because municipal securities are exempt under Section 3(a)(2).

Cis incorrect because U.S. government securities are also exempt under Section 3(a)(2).

In cumulative voting, shareholders can allocate all their votes to a single candidate. The total number of votes is calculated by multiplying the number of shares owned by the number of seats available:

Total votes = 100 shares × 10 seats =1,000 votes.

The investor can allocate all votes to one candidate.

C is correctbecause cumulative voting allows all votes to be concentrated.

Treasury securities are among the most liquid investments, as they are backed by the U.S. government and trade actively in large volumes.

A is correctbecause Treasuries are highly liquid, making them easy to buy and sell.

Bis incorrect because most Treasury securities are not callable.

Cis incorrect because FDIC insurance applies to bank deposits, not Treasuries.

Dis incorrect because U.S. government securities have negligible default risk.