FINRA Series 31 - Quiz 1 - Pauline.new
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Question 1 of 10
1. Question
Which of the following documents FINRA believes will facilitate the full accurate delivery of breakpoint discounts and members are reminded the registered representatives must understand terms upon which mutual funds offer breakpoints?
Correct
FINRA believes that a written disclosure statement includes the given information. There is other information that must be included in this document besides from the delivery of breakpoint markdowns and terms where mutual funds offer breakpoints. Set of rules about the accumulation rights and letters of intent and valuation must be contained within to guarantee the distribution of breakpoint discounts. The use of this written disclosure statement does not lessen the duties and responsibilities of members to train and oversee registered representatives who sell mutual funds.
Incorrect
FINRA believes that a written disclosure statement includes the given information. There is other information that must be included in this document besides from the delivery of breakpoint markdowns and terms where mutual funds offer breakpoints. Set of rules about the accumulation rights and letters of intent and valuation must be contained within to guarantee the distribution of breakpoint discounts. The use of this written disclosure statement does not lessen the duties and responsibilities of members to train and oversee registered representatives who sell mutual funds.
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Question 2 of 10
2. Question
Which of the following documents is furnished by a brokerage firm to an individual to provide basic facts about purchasing securities on margin?
Correct
A Margin Disclosure Statement shows the basic facts needed about the purchase of securities on margin and this is provided by the brokerage firm to an individual. It also gives alerts and updates about the risks involved in a margin account about the trading of securities. In a margin account, an individual must know that before trading stocks, an individual must thoroughly understand the margin agreement provided by a firm.
Incorrect
A Margin Disclosure Statement shows the basic facts needed about the purchase of securities on margin and this is provided by the brokerage firm to an individual. It also gives alerts and updates about the risks involved in a margin account about the trading of securities. In a margin account, an individual must know that before trading stocks, an individual must thoroughly understand the margin agreement provided by a firm.
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Question 3 of 10
3. Question
Which of the following risks in trading securities on margin shows that most firms will attempt to notify their customers of margin calls but are not required to do so?
Correct
There are few risks that must be remembered when it comes to trading securities on margin. One of the risks is the firm can sell an individual’s securities or other assets without contacting them. In this case, most firms will try to update their customers of margin calls, but they are not mandatory to do so. Even when a firm updates the individual, a firm can make applicable steps to protect its financial welfare such as selling the securities without further notice to the customer.
Incorrect
There are few risks that must be remembered when it comes to trading securities on margin. One of the risks is the firm can sell an individual’s securities or other assets without contacting them. In this case, most firms will try to update their customers of margin calls, but they are not mandatory to do so. Even when a firm updates the individual, a firm can make applicable steps to protect its financial welfare such as selling the securities without further notice to the customer.
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Question 4 of 10
4. Question
Which of the following is true about the Margin Disclosure Statement?
Correct
In the Margin Disclosure Statement, stated in Regulation T of the Board of Governors of the Federal Reserve System, no member shall open a margin account. However, there is an exemption regarding to or at the time of opening of the account, the member shall furnish to an individual, either written or electronically. Lastly, any member that documents non-institutional customers, either in opening of accounts or engaging in transactions online, must post such margin disclosure statements on the website of the member in a clear and noticeable method.
Incorrect
In the Margin Disclosure Statement, stated in Regulation T of the Board of Governors of the Federal Reserve System, no member shall open a margin account. However, there is an exemption regarding to or at the time of opening of the account, the member shall furnish to an individual, either written or electronically. Lastly, any member that documents non-institutional customers, either in opening of accounts or engaging in transactions online, must post such margin disclosure statements on the website of the member in a clear and noticeable method.
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Question 5 of 10
5. Question
Which of the following documents is filed with the SEC and it is prepared by one or more options markets?
Correct
The documents that are filed with the Securities and Exchange Commission and are prepared by one or more options markets are called a Disclosure Document. This document must contain general descriptive information regarding the procedure of purchasing, writing, and exercising options. The following risks involved, uses and market for the options, the costs of transaction and appropriate margin requirements are some of the information that must be included in a disclosure document.
Incorrect
The documents that are filed with the Securities and Exchange Commission and are prepared by one or more options markets are called a Disclosure Document. This document must contain general descriptive information regarding the procedure of purchasing, writing, and exercising options. The following risks involved, uses and market for the options, the costs of transaction and appropriate margin requirements are some of the information that must be included in a disclosure document.
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Question 6 of 10
6. Question
Which of the following documents is amended by the Securities and Exchange Commission, which brokers or dealers are required to furnish customers prior to engaging in transactions in penny stocks?
Correct
The Penny Stocks Disclosure Document is a document that is amended by the SEC, where brokers or dealers are required to provide customers regarding the engaging of transactions in penny stocks, based from the Penny Stocks Disclosure Rules of the SEC. With regards to the distribution to customers, the members are encouraged to have a photocopy of the said document. Lastly, the staff of the Securities and Exchange Commission directed the members they may not use their letterhead paper when copying the document.
Incorrect
The Penny Stocks Disclosure Document is a document that is amended by the SEC, where brokers or dealers are required to provide customers regarding the engaging of transactions in penny stocks, based from the Penny Stocks Disclosure Rules of the SEC. With regards to the distribution to customers, the members are encouraged to have a photocopy of the said document. Lastly, the staff of the Securities and Exchange Commission directed the members they may not use their letterhead paper when copying the document.
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Question 7 of 10
7. Question
Which of the following determines the amount of collateral that customers are expected to maintain in their margin accounts?
Correct
As stated in the FINRA Rule 4210 also known as the Margin Requirements, it designates the margin requirements that regulate the amount of collateral that is expected to be maintained in a margin account of a customer. This also includes the strategy-based and portfolio margin accounts. Lastly, this rule will show and explain the margin requirements regarding equity and fixed income securities, options, security futures, and warrants.
Incorrect
As stated in the FINRA Rule 4210 also known as the Margin Requirements, it designates the margin requirements that regulate the amount of collateral that is expected to be maintained in a margin account of a customer. This also includes the strategy-based and portfolio margin accounts. Lastly, this rule will show and explain the margin requirements regarding equity and fixed income securities, options, security futures, and warrants.
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Question 8 of 10
8. Question
Under the other provisions of the Margin Requirement, which of the following shows the active securities dealt in on a national securities exchange shall be valued at current market prices provided with options contracts?
Correct
Under the Margin Requirements, there are other provisions that must be included. One of these is the Determination of Value for Margin Purposes. Stated in this provision, that active securities distributed on a national securities exchange must be valued at its current market prices. This also shows that other securities shall be valued predictably depending on the view of the current market prices and upon the liquidation where the amount is realized. Lastly, the substantial additional margin must be also included in all cases where the securities are subject to oddly rapid changes in value.
Incorrect
Under the Margin Requirements, there are other provisions that must be included. One of these is the Determination of Value for Margin Purposes. Stated in this provision, that active securities distributed on a national securities exchange must be valued at its current market prices. This also shows that other securities shall be valued predictably depending on the view of the current market prices and upon the liquidation where the amount is realized. Lastly, the substantial additional margin must be also included in all cases where the securities are subject to oddly rapid changes in value.
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Question 9 of 10
9. Question
What account needs to be maintained on any transaction or net position in each “when issued” security?
Correct
In the Margin Requirements under the “When Issued” and “When Distributed” Securities, it is stated in Margin Accounts that the margin that needs to be maintained on any transaction in each “when-issued” security shall be the same as if there are issued securities. It should be margined separately, and any unrealized revenue shall be of value only that the amount of margin required is provided. Lastly, when there is a “short” position in “when-issued” security, such a “short” position shall be noticeable to the market, and as stated in this rule that the balance in the account shall be adjusted.
Incorrect
In the Margin Requirements under the “When Issued” and “When Distributed” Securities, it is stated in Margin Accounts that the margin that needs to be maintained on any transaction in each “when-issued” security shall be the same as if there are issued securities. It should be margined separately, and any unrealized revenue shall be of value only that the amount of margin required is provided. Lastly, when there is a “short” position in “when-issued” security, such a “short” position shall be noticeable to the market, and as stated in this rule that the balance in the account shall be adjusted.
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Question 10 of 10
10. Question
Which of the following is an alternative to the “strategy-based” margin requirements where members may elect to apply the following requirements to all margin equity securities?
Correct
One of the margins is the Portfolio Margin, it is an alternative to the “strategy-based” margin requirements set forth. Additional information about portfolio margin is that a member that is a Futures Commission Merchant and a clearing individual of a futures cleaning organization or has an associate that is a clearing member of a futures cleaning body is allowed to combine an eligible related instrument of a participant with such options. Lastly, the portfolio margin under the provisions of this rule shall not apply to Individual Retirement Accounts.
Incorrect
One of the margins is the Portfolio Margin, it is an alternative to the “strategy-based” margin requirements set forth. Additional information about portfolio margin is that a member that is a Futures Commission Merchant and a clearing individual of a futures cleaning organization or has an associate that is a clearing member of a futures cleaning body is allowed to combine an eligible related instrument of a participant with such options. Lastly, the portfolio margin under the provisions of this rule shall not apply to Individual Retirement Accounts.