Unit 9 Quiz Deck Flashcards
The SEC can do all of the following except
A) approve broker-dealers to participate in the securities business.
B) limit activities of broker-dealers.
C) revoke registration of broker-dealers.
D) fine broker-dealers who violate SEC regulations.
A) approve broker-dealers to participate in the securities business.
The SEC does not approve anyone: they “allow” them to become reregistered.
SIPC coverage is best described by which of the following?
A) Covers up to $500,000 in cash and securities but no more than $250,000 in securities
B) Covers $500,000 in cash and securities
C) Covers up to $500,000 in cash and securities but no more than $250,000 in cash
D) Covers up to $500,000 in cash and $500,000 in securities
C) Covers up to $500,000 in cash and securities but no more than $250,000 in cash
The maximum coverage is up to $500,000 in cash and securities but no more than $250,000 in cash.
A customer has multiple accounts at a bank that also owns accounts at a broker-dealer. All of the following accounts would be covered by FDIC insurance up to the specified limits except
A) both spouses’ individual savings account.
B) a checking account in a money market mutual fund.
C) an IRA in a five-year CD.
D) a joint savings account with a spouse.
B) a checking account in a money market mutual fund.
A money market mutual fund is not considered a deposit of the bank; it is a security, so it is not covered by the FDIC.
If an associated person is expelled from the securities industry, which of the following is true?
A) The individual may associate with another member firm with SEC permission.
B) The individual may never associate with another member for life.
C) The individual may still be employed as a paid adviser to a member firm.
D) The individual may still serve as an officer or director of a member firm but have no sales function.
A) The individual may associate with another member firm with SEC permission.
If the SEC expels or bars an associated person, no broker-dealer may allow that person to associate with it in any capacity unless the SEC has granted express permission to do so.
Under the Securities Exchange Act of 1934, registration is required for
A) foreign securities exchanges.
B) initial public offerings (IPOs).
C) securities.
D) broker-dealers.
D) broker-dealers.
Under the Securities Exchange Act of 1934, broker-dealers and domestic exchanges are required to register with the Securities and Exchange Commission (SEC). Registration of securities and IPOs is a requirement of the Securities Act of 1933, sometimes called the Paper or New Issues Act. The SEC does not have authority over foreign exchanges.
The law that provides the legal framework for state registration of securities is
A) the Uniform Securities Act.
B) the Trust Indenture Act of 1939.
C) the Securities Exchange Act of 1934.
D) the Securities Act of 1933.
A) the Uniform Securities Act.
The Uniform Securities Act provides a legal framework for the state registration of securities, as well as the registration requirements applicable to broker-dealers, investment advisers, investment adviser representatives, and registered representatives.
A customer of a broker-dealer has a cash balance in an account of $175,000 and securities holdings of $125,000. The customer asks about SIPC coverage, and you explain that the current coverage is
A) $100,000 securities and $100,000 cash for total coverage of $200,000.
B) all of the securities and none of the cash for total coverage of $125,000.
C) $175,000 cash and $125,000 securities for total coverage of $300,000.
D) the cash balance only, up to $250,000.
C) $175,000 cash and $125,000 securities for total coverage of $300,000.
The SIPC covers customer accounts in broker-dealers to a maximum of $500,000, of which no more than $250,000 may be cash. In this case, the full $175,000 of the cash balance and all of the $125,000 securities holdings are covered for a total of $300,000.
Which of the following must be a member of the Securities Investor Protection Corporation (SIPC)?
A) A firm that deals only in over-the-counter (OTC) and exchange-listed stocks
B) A firm that deals only in industrial development revenue bonds
C) A firm that deals only in U.S. government bills, notes, and bonds
D) A firm that deals only with mutual funds
A) A firm that deals only in over-the-counter (OTC) and exchange-listed stocks
The Securities Investor Protection Act, which established SIPC, was passed in 1970 to protect persons with brokerage accounts from loss due to failure of their broker-dealer. Firms with such accounts are required to join, with the exception of dealers exclusively in government and municipal bonds and those involved only with investment company securities.
What is the name for the legal framework of state laws for broker-dealers, registered representatives, investment advisors and investment advisor representatives?
A) The Securities and Exchange Act of 1934
B) The Uniform Securities Act
C) The Investment Advisor Act
D) The Securities Act of 1933
B) The Uniform Securities Act
The Uniform Securities Act is a template for state securities laws in the United States
Which of the following federal securities acts provides the legal framework for the registration of securities at the state level?
A) 1933 Securities Act
B) National Securities Markets Improvement Act of 1996
C) 1934 Securities Exchange Act
D) Uniform Securities Act
D) Uniform Securities Act
It is the Uniform Securities Act that provides the framework for state securities registration. It should be noted that the National Securities Markets Improvement Act of 1996 designates certain securities to be federally covered, meaning that the states do not have registration jurisdiction over them.
A customer has a significant amount of money in bank deposit accounts: $225,000 in a savings account titled in the customer’s name; $240,000 in a checking account titled jointly with a spouse; and $100,000 in an account where the customer is custodian for a grandchild. Should that bank fail, the Federal Deposit Insurance Corporation (FDIC) insurance would cover
A) a total of $250,000, divided proportionately among the three accounts.
B) $250,000 for the savings and checking accounts and $100,000 for the custodial account.
C) the entire $565,000.
D) $225,000 for the savings account, $100,000 for the custodial account, and nothing for the checking account.
C) the entire $565,000.
The FDIC provides deposit insurance guaranteeing the safety of a depositor’s accounts in member banks up to $250,000 for each deposit ownership category in each insured bank. Each account listed (savings, checking, and custodial) is a separate ownership category under FDIC rules, so all the money in each of them is covered
If a married couple have a joint account with a market value of $1 million and a debit balance of $600,000, all of which is in securities, how much coverage would this account have?
A) $400,000
B) $600,000
C) $500,000
D) $1 million
A) $400,000
A joint account has a maximum coverage of $500,000; however, in a margin account only the equity is covered, so the debit balance is subtracted from the market value, leaving $400,000 equity.
Broker-dealers that transact securities business with customers or other broker-dealers must apply and be approved for registration with
A) the Municipal Securities Rule Board (MSRB).
B) the Chicago Board Options Exchange (CBOE).
C) the Financial Industry Regulatory Authority (FINRA).
D) the Securities and Exchange Commission (SEC).
D) the Securities and Exchange Commission (SEC).
The SEC is the securities industry’s primary regulatory body. Broker-dealers that transact securities business with customers or with other broker-dealers must apply and be approved for registration with the SEC.
Which of the following pairs are not covered by the Federal Deposit Insurance Corporation (FDIC) at any level?
A) Certificates of deposit and mutual funds
B) Mutual funds and annuities
C) Savings accounts and annuities
D) Certificates of deposit and self-directed IRAs
B) Mutual funds and annuities
Investment products that are not deposits are not covered by the FDIC. This would include life insurance policies, mutual funds, annuities, and individual securities such as stocks and bonds. At any level means neither partially nor fully.
The Uniform Securities Act (USA) provides a legal framework for the registration of
A) mutual funds at the federal level.
B) foreign securities traded abroad.
C) securities at the state level.
D) variable annuities at both state and federal levels
C) securities at the state level.
The USA provides a legal framework for the state registration of securities. It may be adopted by individual states and adapted to their needs.
