Securities Industry Essentials Comprehensive Cert. Exam (2024) || With 100% Accurate Solutions
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Securities Industry Essentials
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Securities Industry Essentials
Securities Industry Essentials Comprehensive Cert. Exam (2024) || With 100% Accurate Solutions
Securities Industry Essentials Comprehensive Cert. Exam (2024) || With 100% Accurate Solutions
Which are the safest of all securities? - ANSWER - U.S. government securities such as Treasury notes (T-n...
, Securities Industry Essentials
Comprehensive Cert. Exam (2024) ||
With 100% Accurate Solutions
Which are the safest of all securities? - ANSWER - U.S. government securities such
as Treasury notes (T-notes): they're backed by the fact that the government can
always print more money to pay off the securities that it issues
How do you determine current yield? - ANSWER - current yield = (annual interest) /
(market price)
When determining the current yield of a bond, all you need is the market price of the
bond and the coupon (interest) rate. To determine the current yield, divide the annual
interest by the market price.
How many minors and custodians can there be under an UGMA account? -
ANSWER - There can only be one minor and one custodian per account.
Uniform Gifts to Minors Act (UGMA) accounts are set up for minors who are too
young to have their own accounts. Each account is limited to one minor and one
custodian.
What does the 5% Markup Policy cover? - ANSWER - The 5% Markup Policy
applies to nonexempt securities sold to or purchased from customers.
I. It covers commissions charged to customers when executing trades on an agency
basis.
II. It covers markups on stock sold to customers from inventory.
III. It covers markdowns on stock purchased from customers for inventory.
IV. Riskless and simultaneous transactions are covered.
What is the relationship between the number of shares and the price of the stock for
a forward stock split? - ANSWER - In a forward stock split, the number of shares
increases and the price of the stock decreases.
The Securities Act of 1933 - ANSWER - This act — also called the Truth in
Securities Act, the Paper Act, the Full Disclosure Act, the Prospectus Act, and the
New Issues Act — regulates new issues of corporate securities. An issuer of
corporate securities must provide full and fair disclosure about itself and the offering.
Included in this act are rules to prevent fraud and deception.
The Securities Exchange Act of 1934 - ANSWER - The Act of 1934, which
established the SEC, was enacted to protect investors by regulating the over-the-
counter (OTC) market and exchanges, such as the New York Stock Exchange
(NYSE),
In addition, the Act of 1934 regulates:
- The extension of credit in margin accounts
- Transactions by insiders
,- Customer accounts
- Trading activities
The Trust Indenture Act of 1939 - ANSWER - This act prohibits bond issues valued
at over $5 million from being offered to investors without an indenture. The trust
indenture is a written agreement that protects investors by disclosing the particulars
of the issue (coupon rate, maturity date, any collateral backing the bond, and so on).
As part of the Trust Indenture Act of 1939, all companies must hire a trustee who's
responsible for protecting the rights of bondholders.
What is the difference between Schedule A and Schedule B Registration
Statements? - ANSWER - Schedule A typically applies to corporations issuing new
securities.
Schedule B applies to local government issues (typically municipal bonds). The
information required when a local government issues securities is geared toward
what a local government would have to supply in its registration statement. Most of
the information required is very similar; in fact, you can substitute the word
"municipality" for "company" for most of the items required.
What is shelf registration and for how long does it apply? - ANSWER - Shelf
registration (SEC Rule 415) allows issuers to sell securities that were previously
registered with the SEC without needing additional permission. Shelf registration
allows issuers up to two to three years (depending on their status) to sell previously
registered shares.
The initial maturity on a standard option is: - ANSWER - nine (9) months
Long-Term Equity AnticiPation Securities (LEAPS) may have initial maturities of: -
ANSWER - one, two, or three years
Accounts are frozen for: - ANSWER - 90 days
New securities can't be purchased on margin for: - ANSWER - 30 days
The options account agreement must be returned within: - ANSWER - 15 days after
the account is approved
What type of company is most affected by interest rate fluctuations? - ANSWER -
Utility companies are most affected by interest rate fluctuations because they're
highly leveraged (issue a lot of bonds).
What do cumulative voting rights do for smaller stockholders? - ANSWER -
Cumulative voting rights give smaller stockholders an easier chance to gain
representation on the board of directors because a stockholder may combine their
total voting rights and vote the cumulative total in any way they want.
In order from first to last, what actions are taken when opening a new options
account? - ANSWER - I. Send the customer an options risk disclosure document
(ODD).
II. Have the registered options principal (ROP) approve the account.
, III. Execute the transaction.
IV. Have the customer sign and return an options account agreement (OAA) within
15 days after the account is approved by the ROP.
What is the minimum requirement of wealth and/or income for an individual to be
considered an accredited (sophisticated) investor? - ANSWER - The minimum
requirement is a net worth of $1,000,000 and/or a yearly income of $200,000
(individually, or $300,000 for joint income with spouse) in the most recent two years,
with a reasonable expectation of reaching that same level in the current year.
What type of stock do mutual funds issue? - ANSWER - Mutual/open-end funds only
issue common stock and can only be purchased directly from the issuer.
What type of stock do closed-end funds issue? - ANSWER - Closed end funds issue
common stock, preferred stock, and debt securities, and their shares can be
purchased in the market.
Given a balance sheet, where can you find the value placed on a corporation? -
ANSWER - To find the value placed on a corporation, look for "Goodwill" on the
balance sheet. "Goodwill" means a value placed on the reputation of a company.
How long is the cooling-off period and what happens in that time? - ANSWER - After
the issuer files a registration statement (the filing date) with the SEC, a 20-day
cooling-off period begins. During the 20-day (and often longer) cooling-off period, the
SEC reviews the registration statement. At the end of the cooling-off period, the
issue will (hopefully) be cleared for sale to the public (the effective date of
registration).
What is the only form of advertisement allowed prior to the effective date? -
ANSWER - A tombstone ad — a newspaper ad, typically rectangular with black
borders — is simply an announcement (but not an offer) of a new security for sale.
It's the only advertisement allowed during the cooling-off period. They are not
required and do not have to be filed with the SEC. These ads contain just a simple
statement of facts about the new issue. In addition, tombstone ads provide investors
with information about how to obtain a prospectus, and they may or may not include
the price of the security being offered. They must contain a disclaimer stating that
the ad is not an offer to sell nor a solicitation of an offer for any of these securities
(this offer is made only through a prospectus).
How do underwriters obtain indications of interest from prospective purchasers? -
ANSWER - Underwriters and selling group members use the preliminary prospectus
to obtain indications of interest from prospective customers. The preliminary
prospectus must be made available to all customers who are interested in the new
issue during the cooling-off period.
What is a due diligence meeting for and when is it held? - ANSWER - The
underwriter holds a due diligence meeting toward the end of the cooling-off period.
This meeting is required by law. During this meeting, the underwriter provides
information about the issue and what the issue will use the proceeds of the sale for.
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