Chapter 1

Question 1

What is the series 7 exam required for?

Answer 1

required for me to act as a general securities registered representative

Question 2

What are Registered Representatives?

Answer 2

Persons who perform sales activities at brokerage firms

Question 3

What is the purpose of the securities industry?

Answer 3

the process of matching investors who have money, with issuers that need funding. Wall Street bridges between those with capital and those in need of financing

Question 4

The success of the US Economy is due in large part to?

Answer 4

the free flow of capital between corporations, governmental bodies, and investors

Question 5

How is the flow of money within an economy facilitated?

Answer 5

highly developed capital markets system with issuers selling securities to investors with financial firms acting as intermediaries (Debt or Bonds, and Equity or stocks)

Question 6

What is a bond?

Answer 6

A security that evidences the indebtedness amount (principal) on the part of the issuer

Question 7

As lenders, bond holders are considered?

Answer 7

creditors of the issuer

Question 8

Equity Issuers have several ways to obtain capital which are:

Answer 8

Removing funds from their bank accounts, borrowing from a bank, borrowing from investors (bonds), offering ownership stake in company (issuing stock)

Question 9

What is the primary market?

Answer 9

covers the sale of securities by issuers to investors (IPO, weekly offering of treasuries). Key is that securities are being sold by the issuer

Question 10

What are secondary markets?

Answer 10

Trading markets; provide system for trading existing financial instruments among investors

Question 11

Trading markets are broken into which two types of categories?

Answer 11

physical (NYSE) and electronic (NASDAQ). Today, majority of physical exchanges are hybrids

Question 12

What is a broker-dealer?

Answer 12

Financial firms offering help to access capital

Question 13

Sales professionals within broker-dealers are also referred to as?

Answer 13

registered representatives

Question 14

What are the three tiers for regulation?

Answer 14

Federal Laws, SRO Rules and Regulations, and firm-specific policies and procedures

Question 15

What is federal regulation?

Answer 15

Laws (or acts) passed by congress and enforced by the securities and exchange commission.

Question 16

what is SRO Regulation?

Answer 16

The creation and enforcement of day to day rules are usually handled by self-regulatory organizations, such as FINRA or MSRB. Not part of federal Govt but self-policing organizations.

Primary purpose to promote fair and equitable trading practices.

Question 17

What are SRO Rules?

Answer 17

require that firms use reasonable due diligence when dealing with customers. Since they are not part of Govt, cannot arrest people

Question 18

What are blue-sky laws?

Answer 18

state regulation; issuers registering their securities in given state; codified under uniform securities act (USA)

Question 19

What is FINRA’s 3 categories of personnel?

Answer 19

Registered Representatives, Registered Principals, and unregistered employees

Question 20

The individuals who manage Registered Reps are called?

Answer 20

Principals, required to pass General Securities Sales Supervisor Exam (Series 9/10) or the Series 24.

Question 21

What is Series 4?

Answer 21

Registered Option Principal Examination

Question 22

What is Series 53?

Answer 22

Municipal Securities Principal

Question 23

What is series 27 or 28?

Answer 23

Financial Operations Principal

Question 24

The best course of action when a problem occurs is to check with?

Answer 24

your principal

Question 25

What is the Securities Act of 1933?

Answer 25

First federal legislation covering industry, specifically primary market. Concerned with Full and Fair Disclosure

Question 26

What is the Securities Exchange Act of 1934?

Answer 26

Covers Secondary Market Activities. Also created SEC. Also gives regulatory oversight regarding extension of credit in securities industry to the Federal Reserve Board

Question 27

What is the Maloney Act of 1938?

Answer 27

Enabled creation of non exchange SROs. also created municipal securities rule making board in 1975

Question 28

NASD is what created when?

Answer 28

created in 1939 to act as self regulatory org for the OTC Market

Question 29

in 2007, NYSE and NASD merged member regulation and enforcement and created?

Answer 29

FINRA

Question 30

What is the Trust indenture Act of 1939?

Answer 30

provides added security for corporate bond investors. in brief, requires agreement between corporation issuing bonds and a trustee who has been appointed to act for the benefit of the owners of the bonds if corporation should fail to meet obligation