Mixed Deck — All SIE Topics Flashcards

Rule 144 governs the sale of:

Answer: Restricted and control securities

SEC Rule 144 establishes the conditions under which restricted and control securities can be publicly resold without registration.

Regulation NMS (National Market System) was designed primarily to:

Answer: Promote fair competition and best execution across equity markets

Regulation NMS modernized equity market rules to promote competition, transparency, and best execution by requiring orders be routed to the market with the best price.

An investor buys a Treasury bond in the secondary market from another investor. This transaction occurs on the:

Answer: Secondary market

When securities trade between investors after the initial offering, those transactions occur on the secondary market.

A corporation issues new shares directly to existing shareholders in proportion to their current holdings through a:

Answer: Rights offering

A rights offering gives existing shareholders the right to purchase additional shares at a set price, usually below market, proportional to their current holdings.

A general obligation (GO) municipal bond is backed by:

Answer: The issuing government's taxing power

GO bonds are backed by the full taxing authority of the issuing municipality, making them generally less risky than revenue bonds.

The National Best Bid and Offer (NBBO) rule requires broker-dealers to:

Answer: Execute customer orders at the best available prices across all exchanges

The NBBO rule requires broker-dealers to execute customer orders at the best available bid or offer price across all trading venues.

Political contributions made by covered associates of member firms are restricted under FINRA pay-to-play regulations. For covered associates with voting rights at the time of the donation, the maximum contribution is set at:

Answer: $350 for every election

FINRA's pay-to-play rules, specifically MSRB Rule G-37, restrict political contributions made by municipal finance professionals (MFPs) and other covered associates to municipal officials. For covered associates who have voting rights in the jurisdiction where the contribution is made, the de minimis exception allows a maximum contribution of $250 per election. However, for covered associates without voting rights, the limit is $350 per election, which is the correct answer here.

Which of the following is a characteristic of exchange-traded options?

Answer: Standardized contracts with set strike prices and expirations

Exchange-listed options are standardized contracts with fixed strike prices, expiration dates, and contract sizes.

Which of the following is a characteristic of a Real Estate Investment Trust (REIT)?

Answer: REITs must distribute at least 90% of taxable income to shareholders

To qualify as a REIT, the trust must distribute at least 90% of its taxable income to shareholders each year.

What is the primary purpose of the USA PATRIOT Act requirement for customer identification programs (CIP)?

Answer: To verify customer identity and prevent money laundering

CIP requirements under the PATRIOT Act require firms to verify customer identity to combat money laundering and terrorist financing.

Which of the following is considered a leading economic indicator?

Answer: Building permits issued

Building permits are a leading indicator because they signal future construction activity and economic expansion before it occurs.

An investor buys a stock for $40 and sells it after 8 months for $55. This gain is taxed as a:

Answer: Short-term capital gain

Short-term capital gains apply to assets held for one year or less (here 8 months) and are taxed at ordinary income rates.

Short selling requires investors to borrow securities because:

Answer: They are selling securities they do not currently own

Short sellers borrow securities to sell them first, expecting to buy them back cheaper later and return the borrowed shares.

A limit order is an instruction to buy or sell a security:

Answer: At a specific price or better

A limit order specifies the maximum price a buyer will pay (or minimum price a seller will accept) and will only execute at that price or better.

What is a 'fund of funds'?

Answer: A mutual fund that holds shares of other mutual funds or ETFs

A fund of funds is a pooled investment that allocates capital across multiple underlying funds rather than directly in securities.

Which of the following best describes the role of the Options Clearing Corporation (OCC)?

Answer: It acts as guarantor and central counterparty for listed options trades

The OCC acts as the central counterparty and guarantor for all exchange-listed options contracts, ensuring performance of obligations.

Which of the following is NOT a function of the Securities Investor Protection Corporation (SIPC)?

Answer: Insuring against investment losses from market declines

SIPC protects customers when a broker-dealer fails, but it does not protect against investment losses due to market fluctuations.

What does EPS (Earnings Per Share) measure?

Answer: Net income divided by total outstanding shares

EPS is calculated by dividing a company's net income by the number of outstanding shares.

Purchasing power risk (inflation risk) in investing refers to:

Answer: The risk that rising prices will erode the real value of investment returns over time

Purchasing power risk is the danger that inflation will outpace investment returns, reducing the real (inflation-adjusted) value of the money earned or received.

Variable life insurance differs from whole life insurance primarily because:

Answer: Variable life cash value depends on investment subaccount performance

Variable life insurance ties the policy's cash value to investment subaccounts, so its value fluctuates with market performance.