Greenlight 2

A Regulation D offering may be sold to a maximum of:

15 nonaccredited investors

15 accredited investors

35 nonaccredited investors

35 accredited investors

During a recession when inflation is low, which of the following actions is the Federal Reserve expected to take?

Increase taxes

Raise the federal funds rate

Increase the reserve requirement for banks

Buy bonds in the open market

If a bond is currently selling for less than par value, then:

The current yield is lower than the nominal yield

The current yield is equal to the nominal yield

The current yield is higher than the nominal yield

Interest rates are currently lower than when the bond was originally issued

How are in-the-money S&P 500 Index call options settled at expiration?

Delivery of the same number of S&P 500 Index put options

Delivery of S&P 500 exchange-traded fund (ETF) shares

Delivery of the stocks that make up the S&P 500 Index

Delivery of cash

A 529 plan may be offered by which of the following methods?

Directly sold only

Sold by an adviser only

Sold by an employee who is not associated with a brokerage firm

Sold directly or by an adviser

Which of the following statements about Regulation T is correct?

Regulation T is set by the FRB

Regulation T requires payment by settlement date

Regulation T is set by FINRA

Regulation T is set by the SEC

Class A shares of an open-end investment company are different from Class B shares in that:

Class A shares are common shares, while Class B shares are preferred shares

Class A shares have a front-end sales charge, while Class B shares have a contingent deferred sales charge

Class A shares pay quarterly dividends, while Class B shares pay a monthly dividend

Class A shares can be purchased directly from the fund, while Class B shares are offered through broker-dealers

Which of the following statements best describes the difference between Settlement date and Regulation T payment date?

Regulation T payment date is the date the two broker-dealers exchange security and money and Settlement date is the date the customers must pay their broker-dealer.

Settlement date is the date the two broker-dealers exchange security and money and Regulation T payment date is the date the customers must pay their broker-dealer.

Settlement date is for cash accounts and Regulation T payment date is for margin accounts.

Settlement date is for margin accounts and Regulation T payment date is for cash accounts.

If an investor owns Treasury bonds that will mature in 20 years, she is exposed to:

Credit risk

Inflationary risk

Political risk

Capital risk

A broker-dealer's customer is attempting to raise money for a new business venture. The customer's registered representative (RR) agrees to assist by referring other clients and, in return, the RR will receive free services from the new business venture. This arrangement is:

Normal business practice

Acceptable as long as the free services are considered fair and reasonable

Acceptable if the firm was provided prior written notice

Acceptable if the firm was provided prior written notice and it maintains records of all transactions on the firm's books

A rise in the prices of several key goods and services would be an indicator of:

Inflation

A recession

A weak dollar

Political instability

Which of the following is responsible for updating state securities laws?

NASAA

FINRA

SEC

Nasdaq

A facility is created by the issuance of industrial development revenue bonds. The bonds are backed by:

The local municipal district in which the facility is domiciled

The state in which the facility is domiciled

The corporation that leases the facility

Both the corporation that leases the facility and the municipality

Repurchase agreements (repos) and reverse repos would MOST likely be used by:

A municipality borrowing to build a new highway

Institutions that have a need to borrow on a short-term basis, or have money to lend on a short-term basis

Corporations issuing stock to raise money

Importers and exporters in connection with foreign trade that represents money to be paid in the future and is guaranteed by a bank

When executing customer orders, best execution rules require the broker-dealer to:

Obtain the lowest price available in the market at the time

Use reasonable diligence to obtain the best price possible

Obtain a price that balances the customer's interests with the firm's need to make a profit

Always use an automated execution system

Federal and state registration requirements apply to all of the following, EXCEPT:

Publicly traded limited partnerships

Preferred stock

Municipal securities

Open-end investment companies

Joan owns 100 shares of XYZ, which is currently trading at $57 per share. She wishes to liquidate the position when she can receive $6,000 from the trade. Which of the following orders is the BEST choice to fulfill Joan's intentions?

Sell Stop @ 57

Sell Stop @ 60

Sell Limit @ 57

Sell Limit @ 60

An investor, age 52, with funds in a 401(k) plan, is leaving her employer and wants to transfer the funds to an IRA account at your firm. Which of the following statements is TRUE?

There will be a 10% penalty

There will be a 50% penalty

There will be no penalty

There will be no penalty but the amount transferred will be taxable

A broker-dealer executes but does not process transactions. If the firm processing the transactions knows the identity of the customers, this arrangement is known as a(n):

Prime broker

Clearing broker

Omnibus account

Fully disclosed account

A disciplinary action concerning a registered representative (RR) is reported by the firm through which of the following?

CRD

Form U4

Form U5

BrokerCheck®

A customer executing a short sale anticipates:

A decrease in the market value of a security

An increase in the market value of a security

No change in the market value of a security

Either a large increase or decrease in the market value of a security

What is the required annual income for a married couple to be considered an accredited investor under Regulation D?

$100,000

$300,000

$1 million

$5 million

An registered person has received a letter from a customer which includes a complaint about a recent new issue that declined substantially on its first day of trading. The customer purchased the shares based on a recommendation by the registered person and now claims that the recommendation was unsuitable. Which of the following statements is TRUE?

The firm must keep a copy of the complaint for six years.

The principal must review the complaint and submit a written response to the customer.

A memo must be prepared describing any action taken in response to the complaint.

The firm must promptly enter into arbitration (or mediation) with the customer to determine whether a reimbursement is warranted.

ERISA stipulates that employers with qualified plans are not permitted to exclude employees who have worked for the employer at least one year and:

Are age 18 or older

Are age 21 or older

Are age 18 or older and have worked a minimum of 1,000 hours during the year

Are age 21 or older and have worked a minimum of 1,000 hours during the year

Which organization is charged with the responsibility of regulating the blue-sky laws?

SEC

MSRB

FINRA

State securities regulators

If a person fails a qualification exam on her third attempt, for how long is she required to wait before retaking that same exam?

30 days

90 days

Two years

Six months

An investor notices a specific stock is trading at a higher price on one exchange than on another. If the investor takes advantage of this difference, it's referred to as:

Front running

Arbitrage

Insider trading

Trading ahead

A corporate bond that has no specific collateral backing and is guaranteed by the "full faith and credit" of the issuing corporation is called a(n):

Debenture

Guaranteed bond

Income bond

Equipment trust certificate

Which of the following is typically completed prior to determining whether to issue a revenue bond?

Registration statement

Referendum certification

Prospectus

Feasibility study

The time at which an employee is eligible to receive at least some of the retirement benefits that have been contributed to the plan by the employer is referred to as:

Eligibility

Qualification

Contributory

Vested

Which of the following is/are characteristics of direct participation programs (DPPs)?

Transparency and liquidity

The ability to invest in reporting companies directly

Returns that are correlated with the market and higher than average returns

Steady returns and non-correlated investments

FINRA requires a registered representative to notify his broker-dealer if he's involved in which of the following activities?

Volunteering as youth basketball team's coach

Driving on a part-time basis for a ridesharing company on the weekends

Winning over $15,000 from gambling at a casino

Selling non-proprietary mutual fund products through his firm

Listed equity options cease trading at:

11:00 a.m. Eastern Time on the expiration date

2:30 p.m. Eastern Time on the expiration date

4:00 p.m. Eastern Time on the expiration date

5:30 p.m. Eastern Time on the expiration date

A 529A or ABLE account provides which of the following?

Taxable qualified withdrawals

Tax-free growth on qualified withdrawals

Pre-tax contributions

Growth that's taxed at a lower rate

Prior to the maturity of a variable-rate demand obligation, an investor has the right to receive the:

Current market value

Par value

Par value plus accrued interest

Par value less accrued interest

An investor purchases 1,000 shares of ABC stock at $30 per share and receives an annual dividend of $1.20. After one year, the stock’s market value has increased to $36 per share. What is the investor’s total return?

17%

20%

24%

Which of the following will reduce sales charges?

Churning

Switching shares

Breakpoint sales

Rights of accumulation

A corporation wishes to open a cash account. Which of the following documents is required?

A corporate resolution

A copy of the corporate charter

A hypothecation agreement

A risk disclosure document

Which of the following activities by a market maker is NOT prohibited by FINRA's Anti-Intimidation/Coordination Interpretation?

The market maker setting its own bid and ask prices in a Nasdaq security

The market maker attempting to influence another firm to adjust its quotation

The market maker attempting to influence another firm to alter its ask price

The market maker coordinating quotations with another broker-dealer

Which of the following statements regarding warrants and rights are TRUE?

Both warrants and rights are short-term.

Warrants are short-term, while rights are long-term.

Both warrants and rights are long-term.

Warrants are long-term, while rights are short-term.

A customer contacts her registered representative to buy an OTC stock. Rather than buying it directly from a market maker, the broker-dealer contacts another broker-dealer, who buys it from a market maker creating two levels of transaction fees. This is known as:

Free-riding and withholding

Interpositioning

Backing away

Churning

If an investor buys 1 XYZ Aug 40 put for $5 and also buys 100 shares of XYZ for $40 per share, what's her breakeven point?

$35

$40

$45

Jim sits on the board of directors of a corporation. He has told his neighbor that his company will soon announce a revolutionary new product that should double the company's revenues. As a result, his neighbor purchases the stock. Jim does not purchase shares of the company. Who may be liable for violating insider trading restrictions?

Only the neighbor, since she is the person who bought the stock.

Only Jim, since he is the one who violated his duty to his shareholders.

Both Jim as the tipper and the neighbor as the tippee.

Unless the neighbor profits on the transaction, neither person is in violation.

A sales breakpoint of a mutual fund is:

The minimum dollar amount of a purchase of a mutual fund where a volume discount is given

The minimum share amount of a purchase of a mutual fund where a volume discount is given

The point at which a letter of intent can be obtained

The point at which a letter of intent can be backdated

Which of the following statements is TRUE about revenue bonds?

Interest is usually paid from the earnings of the facility for which the bond was issued

Interest is subject to federal taxes

Revenue bonds are considered safer than general obligation bonds

The state public utility commission must approve each interest payment

What is the real interest rate for a bond that's yielding 6%, while the level of inflation is 2%, and the prime rate is 5%?

The BG mutual fund has a NAV of $11.72 and an offering price of $12.67. What is the sales charge for this fund?

7.5%

8.10%

8.50%

Which of the following statements is TRUE regarding REITs?

Their shares are exempt from the Securities Act of 1933.

They're regulated investment companies.

They're able to pass through losses to their investors.

Their shares may be traded on an exchange.

In which of the following situations can a registered person of a broker-dealer borrow funds from a customer without approval of her firm?

The customer is the brother-in-law of the registered person

The customer is an institutional investor

The customer is a personal friend of the registered person's sister

The loan is based on a business relationship that's independent from the member firm-customer relationship

What's required on Form U5?

Notary stamp

Disciplinary actions that are taken by a regulator

The reason for termination

Signature of the registered representative

Which one of the following persons is permitted to purchase an equity IPO in her personal account?

The cousin of a registered representative

The mother-in-law of a registered representative

A portfolio manager of a mutual fund

A person employed by an insurance company who buys and sells securities

A withdrawal from an IRA may be made prior to age 59 1/2 without incurring a 10% penalty tax in which of the following situations?

To purchase a vacation home

To pay for the college tuition of the investor's daughter

As a result of the permanent and total disability of the investor's spouse.

To cover the costs of the funeral of the investor's father.

A member of the Federal Reserve System is seeking to borrow funds from another member bank. The interest rate that's charged on the loan is referred to as the:

Fed funds rate

Discount rate

Call rate

Prime rate

Which of the following is the rate that's charged on overnight loans between commercial banks?

Prime rate

Discount rate

Federal funds rate

Call rate

An investor has purchased 10,000 shares of a mutual fund for a total investment of $860,000. The investor has also received $20,000 in dividends and reinvested these funds back into the fund. What's the investor's total cost basis for the mutual fund shares?

$860,000

It depends on the market price when the investor ultimately redeems the shares.

$20,000

$880,000

Which of the following statements is TRUE for a bond trading at par?

The bond will trade at a yield basis equal to the prevailing prime funds rate

Due to the effect of compounding, the bond will trade at a basis above its coupon rate

Due to the time value effect of discounting, the bond will trade at a basis less than its coupon rate

The basis and coupon will be identical

Broker-dealers must provide a privacy notice to every consumer:

When the account is opened

When the first trade occurs

Before disclosing nonpublic, personal information

If requested

If an issuer's convertible bonds are converted by bondholders, what is the effect on the issuer's outstanding common stock?

It will no have no effect.

It will decrease the number of outstanding shares.

It will provide existing shareholders with a larger dividend.

It will increase the number of outstanding shares.

A portfolio manager has recently taken his client's equity holdings out of technology stocks and moved them into manufacturing stocks. The manager has historically moved client funds from one industry to another during defined periods. What is this type of strategy called?

Dollar cost averaging

Sector rotation

Asset rebalancing

Portfolio rebalancing

Under the New Issue Rule, all of the following persons are defined as restricted persons, EXCEPT:

The portfolio manager of an investment company

A registered person of a broker-dealer

The brother of a registered person of a broker-dealer who has an account with a different broker-dealer

The parents of a registered person of a broker-dealer who reside in the same house as the registered person

A corporation that has issued common or preferred stock has created:

Debt obligations

Outstanding equity

A current tax liability

A leveraged position

According to the Customer Identification Program, broker-dealers are required to verify each customer's identity:

Before the account is opened

Before the privacy notice is given

Before the first trade

Within a reasonable period

A call premium is best described as the amount the:

Investor pays above the par value

Investor will receive if the bond is sold above the par value

Issuer pays above 100 to retire bonds prior to maturity

Bondholder receives at maturity

Which of the following is TRUE concerning the beneficiary of a Coverdell ESA?

Contributions can be made until age 18 and must be used by age 30.

Contributions can be made until age 25 and must be used by age 30.

Contributions can be made until age 18 and used at any age.

Contributions can be made until age 25 and used at any age.

Which of the following statements regarding exchange-traded funds (ETFs) is TRUE?

ETF shares cannot be traded in the secondary market.

ETFs typically have lower fees than actively managed portfolios.

ETF shares are priced once per day and sold at their net asset value (NAV).

ETFs don't pay cash dividends to their shareholders.

Which of the following statements is TRUE concerning filing a registration application with FINRA?

It is acceptable not to answer certain questions due to privacy concerns.

It is a violation for an application to be incomplete or misleading.

If a person has already been registered and changes firms, a new application is not required.

All registered persons are required to update their application every two years.

If an annuitant cancels her variable annuity during the accumulation period, she may be required to pay which of the following?

A penalty to the IRS

A surrender charge

An additional management fee

An additional administrative fee

A bond has a 6% coupon and is trading with an 8.34% basis. The bond is trading at which of the following price levels?

Par

A discount

A premium

Cannot be determined

A security with a high beta:

Outperforms the market when it is gaining and losing

Underperforms the market when it is gaining and losing

Outperforms the market when its gaining and underperforms the market when its losing

Underperforms the market when its gaining and outperforms the market when its losing

When an ETF is purchased, what is the transaction cost paid by the client?

A sales charge

A load

A commission

A fee

Many investors prefer to receive variable annuity payments under the straight-life payout option because it:

Is the most conservative method for receiving payments

Allows for a beneficiary for the entire payout period

Provides the maximum cash flow of all payout options

Provides an equal amount each month for the investor's lifetime

If a newly hired person is employed by a broker-dealer and will be offering mutual fund shares, she can become FINRA registered by:

Passing the SIE Exam only

Passing the Series 6 Exam only

Passing the SIE Exam and the Series 6 Exam

Passing the SIE Exam and the Series 63 Exam

The practice of selling dividends is prohibited because:

The amount of the dividend is already included in the price the customer pays for the fund

The investor must pay a capital gains tax on any fund distribution

The dividend is tax-free

This would constitute making a recommendation on nonpublic information

By using a dollar-cost averaging investment strategy, an investor will generally find the:

Average price of securities being purchased are less than the average cost of the securities over a long period

Average cost of securities purchased is more than the average price of the securities purchased over a short period

Average price of the securities purchased will be more than the average cost of the securities over a long period

Average cost of the securities will be equal to the average price of the securities over a long period

All of the following statements are TRUE regarding private securities transactions that are executed by an associated person of a member firm, EXCEPT:

The transactions may not involve private placements, even if the activity is otherwise acceptable

If a registered person will be compensated, the firm must approve of the transactions in writing

If a registered person will not be compensated, the firm must be notified of the person's participation

A registered person's personal transactions in mutual funds are not covered by this rule

Which entity maintains a record of the shareholders that are eligible to receive additional shares after a stock split?

The transfer agent

A qualified custodian

The issuer

The Depository Trust Company (DTC)

Which of the following choices is a characteristic of preferred stock?

It has no fixed dividend.

It has a dividend that is guaranteed.

The board of directors are not required to declare the dividends.

It carries no voting rights.

When illicit funds have entered the banking system undetected and appear to be legitimate, the funds are referred to as:

Structured

Layered

Integrated

Properly washed

When a broker-dealer is not acting for its own account but is making securities transactions for the accounts of others, the firm is acting as a(n):

Broker

Principal

Underwriter

Dealer

Exchange-traded notes are most susceptible to which risks?

Regulatory and interest-rate risk

Credit and market risk

Legislative and business risk

Currency and political risk

For a person who has a variable life insurance policy, which of the following risks is of the greatest concern?

Credit risk

Interest rate risk

Inflation risk

Market risk

Three basis points are equal to:

3/10th of 1%

3/100th of 1%

3/1000th of 1%

It is most beneficial to the holder of a call if the price of the underlying security is:

Falling

Rising

Remaining the same

Fluctuating

A client owns stock that's trading at $52.50 and wants to sell her shares, but only if she can sell at $54.00 or higher. She should place which of the following orders?

A sell limit

A sell stop

A sell stop-limit

A buy stop

Deposits of cash that are held at a bank are insured by which of the following?

The Federal Deposit Insurance Corporation (FDIC)

The Internal Revenue Service (IRS)

The Securities Investors Protection Corporation (SIPC)

The Securities Exchange Commission (SEC)

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