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Question 1 of 10
1. Question
Which of the following statement is/are true regarding broker-dealer?
I. A broker-dealer is a person or firm in the business of buying and selling securities for its own account or on behalf of its customers
II. A broker-dealer account is registered under Bank Secrecy Act
III. Provides investment advice to customers, supplying liquidity through market making activities, facilitating trading activities, publishing investment research and raising capital for companies
IV. Broker-dealers range in size from small independent boutiques to large subsidiaries of giant commercial and investment banks.Correct
Rule no 4210. Margin Requirements
(A) A member may carry the proprietary account of another broker-dealer, which is registered with the SEC, upon a margin basis which is satisfactory to both parties, provided the requirements of Regulation T and Rules 400 through 406 of SEC Customer Margin Requirements for Security Futures and Rules 41.42 through 41.49 under the CEA are adhered to and the account is not carried in a deficit equity condition. The amount of any deficiency between the equity maintained in the account and the haircut requirements pursuant to SEA Rule 15c3-1 and, if applicable, Rule 4110(a), shall be charged against the member’s net capital when computing net capital under SEA Rule 15c3-1 and Rule 4110(a). However, when computing charges against net capital for transactions in securities covered by paragraphs (e)(2)(F) and (e)(2)(G) of this Rule, absent a greater haircut requirement that may have been imposed on such securities pursuant to Rule 4110(a), the respective requirements of those paragraphs may be used, rather than the haircut requirements of SEA Rule 15c3-1.Incorrect
Rule no 4210. Margin Requirements
(A) A member may carry the proprietary account of another broker-dealer, which is registered with the SEC, upon a margin basis which is satisfactory to both parties, provided the requirements of Regulation T and Rules 400 through 406 of SEC Customer Margin Requirements for Security Futures and Rules 41.42 through 41.49 under the CEA are adhered to and the account is not carried in a deficit equity condition. The amount of any deficiency between the equity maintained in the account and the haircut requirements pursuant to SEA Rule 15c3-1 and, if applicable, Rule 4110(a), shall be charged against the member’s net capital when computing net capital under SEA Rule 15c3-1 and Rule 4110(a). However, when computing charges against net capital for transactions in securities covered by paragraphs (e)(2)(F) and (e)(2)(G) of this Rule, absent a greater haircut requirement that may have been imposed on such securities pursuant to Rule 4110(a), the respective requirements of those paragraphs may be used, rather than the haircut requirements of SEA Rule 15c3-1. -
Question 2 of 10
2. Question
Which of the following statement is/are true regarding Securities Exchange Act 1934?
I. The Securities Exchange Act of 1934 (SEA) was created to govern securities transactions on the secondary market
II. After issue, ensuring greater financial transparency and accuracy and less fraud or manipulation
III. The SEC does not have the power to oversee securities—stocks, bonds, and over-the-counter securities
IV. All companies listed on stock exchanges must follow the requirements outlined in the Securities Exchange Act of 1934Correct
Rule no 0160. Definitions
All companies listed on stock exchanges must follow the requirements outlined in the Securities Exchange Act of 1934. Primary requirements include registration of any securities listed on stock exchanges, disclosure, proxy solicitations, and margin and audit requirements. The purpose of these requirements is to ensure an environment of fairness and investor confidenceIncorrect
Rule no 0160. Definitions
All companies listed on stock exchanges must follow the requirements outlined in the Securities Exchange Act of 1934. Primary requirements include registration of any securities listed on stock exchanges, disclosure, proxy solicitations, and margin and audit requirements. The purpose of these requirements is to ensure an environment of fairness and investor confidence -
Question 3 of 10
3. Question
Which of the following statement is/are true regarding Investment Adviser Act?
I. The Investment Advisers Act of 1940 is a U.S. federal law that defines the role and responsibilities of an investment adviser/adviser
II. The act provides the legal groundwork for monitoring those who advise pension funds, individuals and institutions on investing
III. It specifies what qualifies as investment advice and stipulates who must register with state and federal regulators in order to dispense it
IV. Prompted in part by a 1935 report to Congress on investment trusts and investment companies prepared by FINRACorrect
Rule no 0160. Definitions
The original impetus of the Investment Advisers Act of 1940, as with most other financial regulations of the 1930s and 1940s, was the stock market crash of 1929 and its disastrous aftermath, the Great Depression.
Those calamities inspired the Securities Act of 1933, which succeeded in introducing more transparency in financial statements so investors could make informed decisions about investments, and to establish laws against misrepresentation and fraudulent activities in the securities marketsIncorrect
Rule no 0160. Definitions
The original impetus of the Investment Advisers Act of 1940, as with most other financial regulations of the 1930s and 1940s, was the stock market crash of 1929 and its disastrous aftermath, the Great Depression.
Those calamities inspired the Securities Act of 1933, which succeeded in introducing more transparency in financial statements so investors could make informed decisions about investments, and to establish laws against misrepresentation and fraudulent activities in the securities markets -
Question 4 of 10
4. Question
Which of the following statement is/are true about equity securities?
I. An equity security represents ownership interest held by shareholders in an entity (a company, partnership or trust), realized in the form of shares of capital stock
II. Holders of equity securities are typically not entitled to regular payments
III. Although equity securities often do pay out dividends—but they are able to profit from capital gains when they sell the securities
IV. Equity securities do not entitle the holder to some control of the companyCorrect
Rule no 2251. Processing and Forwarding of Proxy and Other Issuer-Related Materials
For an equity security, the member, subject to paragraph (e) of this Rule and applicable SEC rules, shall process and forward:
(A) all proxy material, as provided in paragraph (c) of this Rule, that is furnished to the member by the issuer of the securities or a stockholder of such issuer; and
(B) all annual reports, information statements and other material sent to stockholders that are furnished to the member by the issuer of the securities.Incorrect
Rule no 2251. Processing and Forwarding of Proxy and Other Issuer-Related Materials
For an equity security, the member, subject to paragraph (e) of this Rule and applicable SEC rules, shall process and forward:
(A) all proxy material, as provided in paragraph (c) of this Rule, that is furnished to the member by the issuer of the securities or a stockholder of such issuer; and
(B) all annual reports, information statements and other material sent to stockholders that are furnished to the member by the issuer of the securities. -
Question 5 of 10
5. Question
Which of the following statement is/are true regarding Investment Company Act?
I. The legislation is enforced and regulated by the Securities and Exchange Commission (SEC)
II. The Investment Company Act of 1940 was created through an act of Congress to regulate the organization of investment companies and the activities they engage in
III.It builds on the Sarbanes Oxley Act which requires registration of securities
IV. The Act has introduced industry standards, such as regular public disclosure of their investment policiesCorrect
Rule no 0160. Definitions
The Investment Company Act of 1940 was created through an act of Congress to regulate the organization of investment companies and the activities they engage in. This act also set standards for the industry. This piece of legislation clearly defines the responsibilities and requirements of investment companies and the requirements for publicly traded investment product offerings, including open-end mutual funds, closed-end mutual funds, and unit investment trusts. It primarily targets publicly traded retail investment productsIncorrect
Rule no 0160. Definitions
The Investment Company Act of 1940 was created through an act of Congress to regulate the organization of investment companies and the activities they engage in. This act also set standards for the industry. This piece of legislation clearly defines the responsibilities and requirements of investment companies and the requirements for publicly traded investment product offerings, including open-end mutual funds, closed-end mutual funds, and unit investment trusts. It primarily targets publicly traded retail investment products -
Question 6 of 10
6. Question
Which of the following statement is/are true regarding SEC?
I. The SEC can bring only civil actions against lawbreakers, but works with the Justice Department on criminal cases
II. After the Great Recession, the SEC recovered close to $1 billion in penalties and other damages as a result of its prosecutions
III. The Securities and Exchange Commission (SEC) is responsible for overseeing the securities markets and protecting investors
IV. The SEC promotes full public disclosure, protects investors against fraudulent and manipulative practices in the marketCorrect
Rule no 0160. Definitions
The U.S. Securities and Exchange Commission (SEC) is an independent federal government agency responsible for protecting investors, maintaining fair and orderly functioning of the securities markets, and facilitating capital formation. It was created by Congress in 1934 as the first federal regulator of the securities markets. The SEC promotes full public disclosure, protects investors against fraudulent and manipulative practices in the market, and monitors corporate takeover actions in the United States. After the Great Recession, the SEC recovered close to $4 billion in penalties and other damages as a result of its prosecutionsIncorrect
Rule no 0160. Definitions
The U.S. Securities and Exchange Commission (SEC) is an independent federal government agency responsible for protecting investors, maintaining fair and orderly functioning of the securities markets, and facilitating capital formation. It was created by Congress in 1934 as the first federal regulator of the securities markets. The SEC promotes full public disclosure, protects investors against fraudulent and manipulative practices in the market, and monitors corporate takeover actions in the United States. After the Great Recession, the SEC recovered close to $4 billion in penalties and other damages as a result of its prosecutions -
Question 7 of 10
7. Question
Which of the following statement is/are true regarding Securities Act 1933?
I. The Securities Act of 1933 was the first major legislation regarding the purchase of securities
II. The legislation had two main goals: to ensure more transparency in financial statements so investors could make informed decisions about investments
III. To establish laws against misrepresentation and fraudulent activities in the securities markets
IV. The legislation addressed the need for better disclosure by requiring companies to register with the Securities and Exchange Commission (SEC)Correct
Rule no 0160. Definitions
The Securities Act of 1933 was the first major legislation regarding the sale of securities. Prior to this legislation, the sales of securities were primarily governed by state laws. The legislation addressed the need for better disclosure by requiring companies to register with the Securities and Exchange Commission (SEC). Registration ensures that companies provide the SEC and potential investors with all relevant information by means of a prospectus and registration statement.
The act—also known as the “Truth in Securities” law, the 1933 Act, and the Federal Securities Act—requires that investors receive financial information from securities being offered for public saleIncorrect
Rule no 0160. Definitions
The Securities Act of 1933 was the first major legislation regarding the sale of securities. Prior to this legislation, the sales of securities were primarily governed by state laws. The legislation addressed the need for better disclosure by requiring companies to register with the Securities and Exchange Commission (SEC). Registration ensures that companies provide the SEC and potential investors with all relevant information by means of a prospectus and registration statement.
The act—also known as the “Truth in Securities” law, the 1933 Act, and the Federal Securities Act—requires that investors receive financial information from securities being offered for public sale -
Question 8 of 10
8. Question
Covered investment pool is registered under which Act?
Correct
2030. Engaging in Distribution and Solicitation Activities with Government Entities
Covered investment pool” means:
(A) Any investment company registered under the Investment Company Act that is an investment option of a plan or program of a government entity; or
(B) Any company that would be an investment company under Section 3(a) of the Investment Company Act but for the exclusion provided from that definition by either Section 3(c)(1), 3(c)(7) or 3(c)(11) of that Act.Incorrect
2030. Engaging in Distribution and Solicitation Activities with Government Entities
Covered investment pool” means:
(A) Any investment company registered under the Investment Company Act that is an investment option of a plan or program of a government entity; or
(B) Any company that would be an investment company under Section 3(a) of the Investment Company Act but for the exclusion provided from that definition by either Section 3(c)(1), 3(c)(7) or 3(c)(11) of that Act. -
Question 9 of 10
9. Question
Which of the following statement is/are true regarding shelf registered securities?
I.A shelf offering is a provision that allows an issuer to register a new issue of security without selling the entire issue at once
II. The issuer can sell portions of the issue over a five-year period
III. The issuer can sell portions of the issue without re-registering the security or incurring penalties
IV. A shelf offering enables an issuer to access markets quickly, with little additional administrative paperwork, when market conditions are optimal for the issuerCorrect
Rule no 4210. Margin Requirements
Shelf-Registered Securities — The equity to be maintained in margin accounts of customers for securities which are the subject of a current and effective registration for a continuous or delayed offering (shelf-registered securities) shall be at least the amount of margin required by paragraph (c) of this Rule, provided the member:
(i) obtains a current prospectus in effect with the SEC, meeting the requirements of Section 10 of the Securities Act, covering such securities;
(ii) has no reason to believe the Registration Statement is not in effect or that the issuer has been delinquent in filing such periodic reports as may be required of it with the SEC and is satisfied that such registration will be kept in effect and that the prospectus will be maintained on a current basis; and
(iii) retains a copy of such Registration Statement, including the prospectus, in an easily accessible place in its files. Shelf-registered securities which do not meet all the conditions prescribed above shall have no value for purposes of this Rule. Also see subparagraph (C) below.Incorrect
Rule no 4210. Margin Requirements
Shelf-Registered Securities — The equity to be maintained in margin accounts of customers for securities which are the subject of a current and effective registration for a continuous or delayed offering (shelf-registered securities) shall be at least the amount of margin required by paragraph (c) of this Rule, provided the member:
(i) obtains a current prospectus in effect with the SEC, meeting the requirements of Section 10 of the Securities Act, covering such securities;
(ii) has no reason to believe the Registration Statement is not in effect or that the issuer has been delinquent in filing such periodic reports as may be required of it with the SEC and is satisfied that such registration will be kept in effect and that the prospectus will be maintained on a current basis; and
(iii) retains a copy of such Registration Statement, including the prospectus, in an easily accessible place in its files. Shelf-registered securities which do not meet all the conditions prescribed above shall have no value for purposes of this Rule. Also see subparagraph (C) below. -
Question 10 of 10
10. Question
What does the term exercise settlement amount mean?
Correct
Rule no 4210. Margin Requirements
The term “exercise settlement amount” shall mean tThe term “exercise settlement amount” shall mean the difference between the “aggregate exercise price” and the “aggregate current index value” (as such terms are defined in the pertinent By-Laws of The Options Clearing Corporation). (as such terms are defined in the pertinent By-Laws of The Options Clearing Corporation).Incorrect
Rule no 4210. Margin Requirements
The term “exercise settlement amount” shall mean tThe term “exercise settlement amount” shall mean the difference between the “aggregate exercise price” and the “aggregate current index value” (as such terms are defined in the pertinent By-Laws of The Options Clearing Corporation). (as such terms are defined in the pertinent By-Laws of The Options Clearing Corporation).