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Question 1 of 10
1. Question
Which of the following statements is not included in the Suspicious Activity Report?
Correct
SARs typically include the following information:
1. Who is conducting the suspicious activity?
2. What instruments or mechanisms are being used to facilitate the suspect’s activity?
3. When and where did the suspicious activity take place?
4. Why is the activity in question suspicious?
5. How did the suspicious activity occur?Incorrect
SARs typically include the following information:
1. Who is conducting the suspicious activity?
2. What instruments or mechanisms are being used to facilitate the suspect’s activity?
3. When and where did the suspicious activity take place?
4. Why is the activity in question suspicious?
5. How did the suspicious activity occur? -
Question 2 of 10
2. Question
Which of the following statements is false regarding Cash and margin accounts?
Correct
Cash and margin accounts
Cash accounts are the most common types of brokerage accounts. They are used by most investors for their simplicity and low risk as an account type. Cash accounts are acceptable accounts for all investor types. Gains in cash accounts are limited by the amount of capital available to the investor. Margin accounts are accounts whereby investors have access to loanable funds, or leverage. The loanable funds are used to magnify gains but have the potential to magnify losses.Incorrect
Cash and margin accounts
Cash accounts are the most common types of brokerage accounts. They are used by most investors for their simplicity and low risk as an account type. Cash accounts are acceptable accounts for all investor types. Gains in cash accounts are limited by the amount of capital available to the investor. Margin accounts are accounts whereby investors have access to loanable funds, or leverage. The loanable funds are used to magnify gains but have the potential to magnify losses. -
Question 3 of 10
3. Question
Which of the following statements is true regarding Important dates?
Correct
Important dates
The following dates are in order from first to last to occur:
Declaration date: This is the date on which the payment of a dividend is announced.
Ex-dividend date: This is the date at which point the seller of the security will be entitled to the dividend payment.
Record date: On the record date, the company determines the current equity security holders, as those are the individuals who will receive the dividend
Payment date: The payment date is the date on which dividends are actually distributed to investors.Incorrect
Important dates
The following dates are in order from first to last to occur:
Declaration date: This is the date on which the payment of a dividend is announced.
Ex-dividend date: This is the date at which point the seller of the security will be entitled to the dividend payment.
Record date: On the record date, the company determines the current equity security holders, as those are the individuals who will receive the dividend
Payment date: The payment date is the date on which dividends are actually distributed to investors. -
Question 4 of 10
4. Question
Which of the following statements is not included in the Information provided to the customer Under Rule 10b-10 of the Securities Exchange Act of 1934?
Correct
Information provided to the customer
Under Rule 10b-10 of the Securities Exchange Act of 1934, a broker or dealer is required, at or before the sale of a security, to disclose the following information:
1. The date and time of the transaction (or that such information will be provided upon completion of the transaction)
2. The identity, price, and number of shares or units of each security sold or purchased
3. The name of the person from whom the security was purchased, or to whom it was sold, or the fact that this information will be provided upon the customer’s written request
4. The amount of any remuneration received by the broker from the transaction, unless governed by a previously written agreement with the customer on a basis other than transactional
5. Whether the customer paid any odd-lot fees in connection with the transactionIncorrect
Information provided to the customer
Under Rule 10b-10 of the Securities Exchange Act of 1934, a broker or dealer is required, at or before the sale of a security, to disclose the following information:
1. The date and time of the transaction (or that such information will be provided upon completion of the transaction)
2. The identity, price, and number of shares or units of each security sold or purchased
3. The name of the person from whom the security was purchased, or to whom it was sold, or the fact that this information will be provided upon the customer’s written request
4. The amount of any remuneration received by the broker from the transaction, unless governed by a previously written agreement with the customer on a basis other than transactional
5. Whether the customer paid any odd-lot fees in connection with the transaction -
Question 5 of 10
5. Question
Which of the following statements is true regarding Obtaining negotiable instruments drawn from a customer’s account?
Correct
Obtaining negotiable instruments drawn from a customer’s account
Generally speaking, FINRA Rule 4514 prohibits a member or associated person from obtaining checks drafts or other negotiable instruments from customers.
However, in the case where the customer has provided express written authorization, this may be permitted. The written authorization may be included on
the instrument itself, or may be provided separately. If provided separately, the member or associated person involved in the transaction must maintain a copy of the authorization for at least three years from the date on which the authorization expires.Incorrect
Obtaining negotiable instruments drawn from a customer’s account
Generally speaking, FINRA Rule 4514 prohibits a member or associated person from obtaining checks drafts or other negotiable instruments from customers.
However, in the case where the customer has provided express written authorization, this may be permitted. The written authorization may be included on
the instrument itself, or may be provided separately. If provided separately, the member or associated person involved in the transaction must maintain a copy of the authorization for at least three years from the date on which the authorization expires. -
Question 6 of 10
6. Question
Which of the following statements is true regarding COD orders?
Correct
COD orders
FINRA Rule 11860 prohibits cash on delivery transactions for securities unless the transaction adheres to a strict set of rules. Before the transaction is entered into, the FINRA member must be aware that the transaction will be cash on delivery, the transaction should be marked as such, and the customer must receive a confirmation of the transaction by the end of the next business day. The FINRA member must receive a signed agreement from the customer stating that the “customer will furnish his agent instructions with respect to the receipt or delivery of the securities involved in the transaction promptly upon receipt by the customer of each confirmation, or the relevant data as to each execution” to help ensure that good and prompt delivery is made.Incorrect
COD orders
FINRA Rule 11860 prohibits cash on delivery transactions for securities unless the transaction adheres to a strict set of rules. Before the transaction is entered into, the FINRA member must be aware that the transaction will be cash on delivery, the transaction should be marked as such, and the customer must receive a confirmation of the transaction by the end of the next business day. The FINRA member must receive a signed agreement from the customer stating that the “customer will furnish his agent instructions with respect to the receipt or delivery of the securities involved in the transaction promptly upon receipt by the customer of each confirmation, or the relevant data as to each execution” to help ensure that good and prompt delivery is made. -
Question 7 of 10
7. Question
Which of the following statements is not of Code of procedure? It outlines the —
Correct
Code of procedure
Purpose and application- the Code of Procedure outlines the proceedings for disciplining a member or person associated; proceedings for regulating the
activities of a member with financial or operational difficulties; proceedings for suspension, cancellation, bars, prohibitions, or limitations; and proceedings for obtaining relief from FINRA eligibility requirements.Incorrect
Code of procedure
Purpose and application- the Code of Procedure outlines the proceedings for disciplining a member or person associated; proceedings for regulating the
activities of a member with financial or operational difficulties; proceedings for suspension, cancellation, bars, prohibitions, or limitations; and proceedings for obtaining relief from FINRA eligibility requirements. -
Question 8 of 10
8. Question
Which of the following statements is true regarding Taxability risk?
Correct
Taxability risk
Taxability risk is defined as the possibility that an investment’s return will be negatively impacted because of a change in the tax treatment of the investment’s earnings. Returns on equity investments are impacted by prevailing tax rates on dividends and short- and long-term capital gains, while fixed income coupons may be taxable or may be tax-exempt, depending on the issuer. An equity investor could be subject to taxability risk if he purchased a small-cap growth security that he plans to hold for five years.Incorrect
Taxability risk
Taxability risk is defined as the possibility that an investment’s return will be negatively impacted because of a change in the tax treatment of the investment’s earnings. Returns on equity investments are impacted by prevailing tax rates on dividends and short- and long-term capital gains, while fixed income coupons may be taxable or may be tax-exempt, depending on the issuer. An equity investor could be subject to taxability risk if he purchased a small-cap growth security that he plans to hold for five years. -
Question 9 of 10
9. Question
Which of the following statements is not true regarding Market risk?
Correct
Market risk
Market risk is defined as a source of non-diversifiable risk that would be expected to negatively impact the returns on all securities. Some examples of systemic or market risks include terrorist attacks, natural disasters, and bank runs. These risks cannot be controlled by the security’s issuing company and will impact all of their competitors. Equity securities were significantly impacted following the terrorist attacks on 9/11.Incorrect
Market risk
Market risk is defined as a source of non-diversifiable risk that would be expected to negatively impact the returns on all securities. Some examples of systemic or market risks include terrorist attacks, natural disasters, and bank runs. These risks cannot be controlled by the security’s issuing company and will impact all of their competitors. Equity securities were significantly impacted following the terrorist attacks on 9/11. -
Question 10 of 10
10. Question
Which of the following statements is true regarding Currency exchange risk?
Correct
Currency exchange risk
Currency exchange risk is defined as the possibility that fluctuations in exchange rates will negatively impact an investor’s return on a foreign equity or fixed income investment when translated back to home currency terms. An equity investor from the United States who makes an investment in an equity security of a Chinese firm must consider not only the return that the company will generate, but how fluctuations in the exchange rate will increase or decrease that return over time.Incorrect
Currency exchange risk
Currency exchange risk is defined as the possibility that fluctuations in exchange rates will negatively impact an investor’s return on a foreign equity or fixed income investment when translated back to home currency terms. An equity investor from the United States who makes an investment in an equity security of a Chinese firm must consider not only the return that the company will generate, but how fluctuations in the exchange rate will increase or decrease that return over time.