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

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Viewing questions 81-90 out of questions

Questions # 81:

Under FINRA rules, If a customer sells shares In an Investment company that Includes a contingent deferred sales charge (CDSC) on redemptions, in which of the following ways must the deferred sales charge be reported to the customer?

Options:

In writing, at the time of redemption

On the trade confirmation

On the broker-dealer's website

On the customer's account statement

Answer

Questions # 82:

Which of the following statements best describes the permissibility of a borrowing arrangement between a registered representative (RR) and a customer who is also the RR's grandfather?

Options:

It is permissible subject to FINRA approval.

It is permissible if the grandfather agrees in writing.

It is permissible if the loan was made on commercially reasonable terms.

It is permissible provided that the loan was made in accordance with the firm's policies.

Answer

Explanation

Step by Step Explanation:

FINRA Rule 3240: Permits borrowing or lending arrangements between RRs and customers under specific conditions, including familial relationships, provided the arrangement complies with the firm’s policies.

Incorrect Options:

A: FINRA approval is not required; firm approval is.

B: A written agreement alone is insufficient without firm approval.

C: Commercially reasonable terms are not the sole criterion for permissibility.

[:, FINRA Rule 3240 (Borrowing from or Lending to Customers): FINRA Rule 3240., ]

Questions # 83:

Which of the following entitles is primarily responsible for providing Internal settlement, accounting and tax support services for securities owned by an investment company?

Options:

Custodian

Market maker

Broker-dealer

Fund manager

Answer

Questions # 84:

Which of the following statements characterizes the typical relationship between the market value of a municipal bond portfolio and interest rates?

Options:

As interest rates increase, the market value goes up.

As interest rates decrease, the market value goes up.

As the market value goes down, interest rates decrease.

As the market value goes up, interest rates stay constant.

Answer

Explanation

Step by Step Explanation:

Inverse Relationship: Bond prices and interest rates have an inverse relationship. When interest rates fall, existing bonds with higher coupon rates become more valuable, leading to an increase in market value.

Incorrect Options:

A: Market value decreases as interest rates increase.

C: Interest rates and bond values move inversely, not in the same direction.

D: Interest rates are not constant; they fluctuate over time.

[:, SEC Municipal Bonds Overview: SEC Municipal Bonds., ]

Questions # 85:

Which of the following characteristics is true of open-end mutual fund shares?

Options:

They terminate and dissolve on an established date.

Their price is calculated intra-day based on the changing market value of the fund.

They are purchased by investors in the secondary market.

They are purchased by investors directly from the fund or through a broker-dealer offering the fund.

Answer

Explanation

Open-end mutual funds do not trade on secondary markets. Instead, shares are continuously issued or redeemed by the fund at the net asset value (NAV), calculated at the market close.

D is correct because investors purchase and redeem shares directly through the fund or authorized brokers.

A is incorrect because mutual funds do not have a predetermined dissolution date.

B is incorrect because mutual fund shares are priced at the NAV calculated once daily after the market closes.

C is incorrect because secondary market trading applies to closed-end funds and ETFs, not open-end mutual funds.

[Reference: Investment Company Act of 1940; SIE Study Guide, Chapter 5, , ]

Questions # 86:

How does an individual acquire restricted stock?

Options:

By participating in an SEC Regulation D offering

By participating in an initial public offering (IPO)

By exercising publicly traded warrants

By exercising an option for exchange-traded calls

Answer

Explanation

Restricted stock refers to securities acquired through private placements, such as those offered under Regulation D. These securities are not registered with the SEC and are subject to holding period restrictions before resale.

A is correct because Regulation D offerings involve private placements, resulting in restricted stock.

B is incorrect because IPOs involve publicly traded shares, not restricted stock.

C and D are incorrect because restricted stock is not obtained through warrants or exchange-traded options.

[Reference: SEC Regulation D, Rule 144 (Restricted and Control Securities), , ]

Questions # 87:

At least how often Is a firm required to provide a customer with a statement In writing as to the availability of an Investor brochure posted on the MSRB website?

(AC?)

Options:

Monthly

Quarterly

Annually

Once every three years

Answer

Questions # 88:

SEC regulations permit a company to issue securities exempted from registration requirements of the Securities Act of 1933 under which of the following conditions?

Options:

Offerings sold inside of the U.S. to non-U.S. persons

Offerings sold with no more than 40 accredited investors

Offerings sold with an aggregate price exceeding $5 million

Offerings with no more than 35 non-accredited investors and an unlimited number of accredited investors

Answer

Explanation

Step by Step Explanation:

Regulation D (Rule 506(b)): Allows offerings to an unlimited number of accredited investors and up to 35 non-accredited investors, provided certain disclosure requirements are met.

Incorrect Options:

A: Refers to Regulation S, which governs offshore offerings, not domestic exemptions.

B: There is no 40-investor limit in Regulation D.

C: The $5 million limit applies to Rule 504, not Rule 506(b).

[:, SEC Regulation D: SEC Regulation D., ]

Questions # 89:

Under which of the following circumstances, if any, is it permissible for an individual without a Power of Attorney (POA) to sign a customer's name on their behalf?

Options:

Upon approval by a firm principal

Upon receipt of verbal authorization provided that written authorization is subsequently provided

When accounts are fully discretionary

Never permissible to sign a customer's name on their behalf

Answer

Explanation

Step by Step Explanation:

Prohibition on Signing Customer Names: It is never permissible to sign a customer's name without written authorization (POA) due to legal and ethical concerns. Unauthorized signing constitutes forgery and violates FINRA rules.

Incorrect Options:

A: Firm principal approval does not override this prohibition.

B: Verbal authorization is insufficient.

C: Discretionary authority does not allow unauthorized signing.

[:, FINRA Rule 4512 (Customer Account Information): FINRA Rule 4512., ]

Questions # 90:

The financial risk that a given security is not readily tradable in the market without impacting the market price is known as:

Options:

Credit risk

Market risk

Liquidity risk

Prepayment risk

Answer

Explanation

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.

[:, SEC Investor Bulletin on Risks: SEC Risk Guidance., ]

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