7th Set

Question 1

Are negotiable CDs considered money market securities?

Answer 1

Yes

“Commercial paper and negotiable certificates of deposit are short-term debt securities and are considered money market securities.”

Question 2

Listed options on U.S. exchanges are available on all of the following currencies except

A)
the U.S. dollar.
B)
the Japanese yen.
C)
the Euro.
D)
the Canadian dollar.

Answer 2

A) U.S dollar

> In the US, no options on USD

“In the U.S., exchange-listed currency option contracts exist on foreign currencies, not on the U.S. dollar. With U.S. exchange-listed currency option contracts, the U.S. dollar is the base currency to which movements in the foreign currency is compared.”

Question 3

Under Rule 144 an affiliate holding restricted stock can sell the greater of the weekly average volume for the last 4 weeks or __% of the outstanding shares, whichever is greater

Answer 3

1%

Can sell greater of 1% oustanding shares or weekly average volume for last four weeks

Question 4

Are munis and us gov securities exempt from the registration and disclosure provisions of the Securities Act of 1933??

Answer 4

Yes they both are

Question 5

Which of the following securities are exempt from the registration and disclosure provisions of the Securities Act of 1933?

Any interest in a railroad equipment trust certificate
Municipal bonds
U.S. government securities
Commercial paper maturing in 270 days or less

Answer 5

All of them

“All the securities listed are exempt from the registration and disclosure provisions of the Securities Act of 1933.”

Question 6

Which of the following competitive bids on a new municipal issue is most likely to be awarded the bid?

A)
Eight percent coupon with premiums over par
B)
Six percent coupon with premiums over par
C)
Six percent coupon with no premiums over par
D)
Seven percent coupon with no premiums over par

Answer 6

In a competitive bid bond sale, the winning bid is the one that provides the issuer with the lowest net interest cost. If the syndicate pays the issuer more than par for the bonds, the issuer is taking in more money than it must pay out at maturity. Therefore, its net interest cost is lower than the 6% coupon on the bonds.

Question 7

T/F: Any interest in a railroad equipment trust certificate is exempt from registration/disclosure provisions of Securities Act of 1933

Answer 7

True

railroad equipment trust certificate exempt

Question 8

T/F: For 75% of diversified management company assets, can’t own more than 5% of voting control of single company

Answer 8

False, it’s 10% voting control

> 75% of assets must be invested in such a way that don’t own more than 10% of voting control of single company

Question 9

T/F: Planned amortization class (PAC) collateralized mortgage obligations are designed to eliminate prepayment risk

Answer 9

False
They reduce, not eliminate

“PACs reduce, but cannot eliminate, prepayment risk for tranche holders”

Question 10

T/F: All new municipal bonds are issued either in fully registered or book entry form.

Answer 10

True

Issued either fully registered or book entry

Question 11

T/F: munis can be in book entry form

Answer 11

True

Can be book entry or fully registered form

Question 12

What were planned amortization class (PAC) collateralized mortgage obligations are designed to do?

Answer 12

Reduce (not eliminate) pre-payment risk

> PACs try to reduce pre payment risk

Question 13

T/F: If delivery of a security should have been rejected, reclamation represents the right to return a security that had previously been accepted.

Answer 13

True

“Reclamation is available if a member inadvertently accepts a delivery from another member as good and later discovers that the delivery should have been rejected. Reclamation represents the right to return a security that had previously been accepted.”

Question 14

T/F: T bill are sold at auction

Answer 14

True

T bills sold at auction

Question 15

Private placements may be advertised if _____

Answer 15

if all of those solicited are accredited investors.

“To solicit or advertise private securities offerings, all purchasers of the advertised securities must be accredited investors, or the business must reasonably believe that the investors are accredited investors at the time of the sale.”

Question 16

Are bonds delivered that are subject to an in whole call subject to reclamation?

Answer 16

No
no reclamation if in whole call

“Reclamation is available if a member inadvertently accepts a delivery from another member as good and later discovers that the delivery should have been rejected. Reclamation represents the right to return a security that had previously been accepted. Bonds subject to an in-whole call are never subject to reclamation.”

Question 17

Would informational material on a new mutual fund intended for sales personnel be considered communication with the public?

Answer 17

No

Internal things are not considered communication with the public

Question 18

Does retail communication concerning DPPs have to be filed with FINRA?

Answer 18

No

Doesn’t have to be filed

Question 19

100% equity is required when purchasing these 3 things

Answer 19

1) new issues
2) options
3) mutual fund shares

Question 20

T/F: Under the Code of Arbitration Procedure, a respondent has 45 days to respond to both the director and the claimant.

Answer 20

True

respondent has 45 days to respond to director and claimant

Question 21

T/F: You have just received a statement of claim from the director of arbitration. One of your customers is claiming that your failure to follow his instructions led to a loss of $36,000. Under FINRA rules, you must respond within the next 15 business days

Answer 21

False
45 days

“Under the Code of Arbitration Procedure, a respondent has 45 days to respond to both the director and the claimant.”

Question 22

T/F: The third market is defined as the trade of exchange-listed stocks OTC

Answer 22

True

third market exchange listed stocks OTC

Question 23

can Open-end investment company shares be purchased in the third market?

Answer 23

No

The third market is defined as the trade of exchange-listed stocks OTC. Because mutual funds are never listed on the exchanges, this would not apply to their shares.

Question 24

One of your customers purchased 1,000 shares of PKZ stock on the day preceding the ex-dividend date. Her account instructions are to have all purchases registered in her name. Several weeks after the payable date, she contacts you with the news that she did not receive the dividend from the issuer. The proper procedure is

A)
to commence the reclamation process.
B)
to have your broker-dealer send a due bill to the firm representing the seller.
C)
explain to your customer that she purchased the PKZ too late to be entitled to the dividend.
D)
to have your broker-dealer send a DK notice to the firm representing the seller.

Answer 24

A) to commence the reclamation process.

“The ex-dividend date is the first day on and after which purchasers of a stock are not entitled to a previously declared dividend. The “ex” means without. This customer purchased before the ex-date, so she is entitled to the dividend; the seller of the stock is not. Broker-dealers use a due bill when the incorrect party receives a distribution from the issuer. Therefore, your firm would send a due bill to the broker-dealer representing the seller, who is the party obligated to remit the dividend amount. “

Question 25

In a long margin account, does a decrease of the debit balance increase equity?

Answer 25

Yes

“An increase to the market value increases the equity, as does a decrease to the debit balance.”

Question 26

Does a reduction to the debit balance increase SMA in a long margin account?

Answer 26

Yes, reduction to debit balance increases SMA for long margin acct

“SMA changes when there is a monetary change to the account. “

Question 27

Regarding muni underwritings, does net interest cost (NIC) take into account time value of money

Answer 27

No

> NIC does not reflect time value
True interest cost (TIC) does

Question 28

Do donor income limits apply to 529 plans? (Education savings)

Answer 28

No

Unlike the Coverdell ESA, there are no donor income limits with a 529 plan

Question 29

A confirmation of each customer trade must be given when?

Answer 29

on or before the settlement date.

Question 30

A confirmation of each customer trade must be given when?

Answer 30

on or before the settlement date.

Question 31

The underwriting of most corporate issues is done on a negotiated basis. The investment banker who negotiates with the issuer on a firm commitment underwriting is known as

A)
the principal underwriter.
 B)
the syndicate manager.
 C)
the prime investment banker.
 D)
the chief negotiator.

Answer 31

B) syndicate manager

“Explanation
When a syndicate is formed, it is the responsibility of the syndicate manager to negotiate with the issuer and keep the syndicate records of the underwriting. You might also see this position referred to as the managing underwriter or the lead underwriter.”

Question 32

T/F: The SEC does not approve or disapprove of new offerings; it releases them for sale after determining that enough information is available for public investors to make sound investment decisions.

Answer 32

True

It is true

Question 33

T/F: The SEC does not approve or disapprove of new offerings; it releases them for sale after determining that enough information is available for public investors to make sound investment decisions.

Answer 33

True

It is true

Question 34

T/F: Additional information may not be added to a red herring at a later date

Answer 34

False, additional info CAN be added at a later date

Question 35

T/F: Options Clearing Corporation (OCC) rules allow broker-dealers to assign customers using first-in, first-out or random selection methods. In addition, the OCC also states that any other fair method is allowed.

Answer 35

True

First in first out, random, or any other fair method

Question 36

T/F: Options Clearing Corporation (OCC) rules allow broker-dealers to assign customers using first-in, first-out or random selection methods. In addition, the OCC also states that any other fair method is allowed.

Answer 36

True

First in first out, random, or any other fair method

Question 37

T/F: Once the IRS determines that a tax shelter is abusive, it may disallow all deductions

Answer 37

True

May do that

Question 38

T/F: Once the IRS determines that a tax shelter is abusive it may charge interest on back taxes

Answer 38

True

Can do that