Pass the FINRA General Securities Representative SIE Questions and answers with CertsForce

A limit order to buy allows the investor to specify the maximum price he is willing to pay for the stock. The order will only execute if the stock price falls to or below the specified price.

B is correctbecause a limit order to buy aligns with the investor’s desire to secure a better price.

Ais incorrect because a limit order to sell is used when an investor wants to sell at a minimum price.

CandDare incorrect because market orders execute at the current market price, not at a preferred price.

Treasury securities are among the most liquid investments, as they are backed by the U.S. government and trade actively in large volumes.

A is correctbecause Treasuries are highly liquid, making them easy to buy and sell.

Bis incorrect because most Treasury securities are not callable.

Cis incorrect because FDIC insurance applies to bank deposits, not Treasuries.

Dis incorrect because U.S. government securities have negligible default risk.

Step by Step Explanation:

Discount Bonds: These are issued or traded below par value. Over time, their price moves closer to par as they approach maturity, assuming yields remain constant.

Other Options:

Par Value Changes: The par value of a bond does not change over time; only its price fluctuates.

References:

SEC and FINRA Bond Basics: SEC Discount Bonds.

The Securities Investor Protection Corporation (SIPC) protects customers if a broker-dealer fails due to insolvency. Coverage applies to cash and securities in customer accounts, up to $500,000total, including $250,000 for cash.

A is correctbecause SIPC’s purpose is to protect against losses arising from a broker-dealer’s insolvency.

Bis incorrect because SIPC does not guarantee investment performance.

Cis incorrect because SIPC does not cover market losses.

Dis incorrect because futures contracts are not covered under SIPC.

Step by Step Explanation:

Ex-Dividend Date Pricing: On the ex-dividend date, the mutual fund's price is adjusted downward by the amount of the dividend.

Closing Price: $10.00

Dividend: $0.25

Adjusted Opening Price: $10.00 - $0.25 = $9.75.

Incorrect Options:

A: $9.25 subtracts more than the dividend amount.

C: $10.00 does not reflect the dividend adjustment.

D: $10.25 adds to the price rather than subtracting the dividend.

References:

SEC Guidance on Mutual Fund Pricing: SEC Mutual Funds.

Step by Step Explanation:

Warrants: Are often issued alongside fixed-income securities, such as bonds, to enhance their appeal to investors. Warrants give the holder the right to purchase company stock at a specific price in the future.

Incorrect Options:

Options: Not typically bundled with fixed-income securities.

Common and Preferred Stock: Usually issued separately, not as part of a package with bonds.

References:

SEC Guide on Warrants: SEC Warrants Information.

The cooling-off period begins after the registration statement is filed with the SEC and lasts for at least 20 days. During this time, the issuer and underwriters can market the securities but cannot finalize sales.

D is correctbecause marketing (e.g., roadshows) is permitted during the cooling-off period.

Ais incorrect because the final prospectus is distributed after the offering is effective.

BandCare incorrect because sales and deliveries are prohibited until the registration becomes effective.

Step by Step Explanation:

Call Provision: This allows the issuer to redeem bonds before their maturity date, usually at a premium to the par value, which benefits the issuer in a declining interest rate environment.

Put Provision: Allows bondholders, not issuers, to sell the bond back to the issuer.

Conversion: Relates to convertible bonds that can be converted into equity.

Defeasement: Refers to the removal of a bond issuer’s obligation by setting aside cash or securities to cover the debt.

References:

SEC Guide on Callable Bonds: SEC Callable Bonds.

Step by Step Explanation:

Common Stock: Holders of common stock typically have voting rights, which allow them to participate in decisions like electing the board of directors or approving major corporate actions.

Other Securities:

Preferred Stock: Usually does not carry voting rights.

Corporate and Convertible Bonds: Debt instruments, so they do not confer voting rights.

References:

SEC Guide on Stock Voting Rights: SEC Voting Rights.

Step by Step Explanation:

Telemarketing Rules (FINRA Rule 3230): Require firms to check the National Do Not Call Registry before contacting individuals, even if those individuals provide their contact information voluntarily.

Incorrect Options:

A: Approval isn’t required for individual follow-ups; compliance with the registry is.

B: While calls must be limited to appropriate hours, the registry check is still mandatory.

C: Written consent does not override the registry requirement.

References:

FINRA Rule 3230 (Telemarketing): FINRA Rule 3230.