SIE Practice Test Achievable Questions
with All Accurate Solutions.
issuer - Answer an organization that distributes and sells securities to investors
security - Answer legal term for investment (stocks, bonds, mutual funds, options, ETFs)
equity - Answer formal term for ownership
two ways to make money on common stock - Answer 1. capital appreciation/gains
2. cash dividends
retained earnings - Answer profits retained by a company that are often used to expand and
reinforce business operations, NOT paid by dividend
growth companies - Answer direct profits back into operations and do not pay dividends, grow
faster than the general economy
rights of common stockholders - Answer - right to pro-rate share of dividends
- right to vote
- right to inspect books and records
- right to maintain proportionate ownership
- right to vote for stock splits
- right to assets upon liquidation
- right to transfer ownership
types of dividends - Answer - cash: paid on a per share basis on common stock
- stock: payment of extra shares, same value of position overall
- product: in form of inventory or another company's stock, not common bc taxable regardless
of investor's desire for product
board of directors (BOD) - Answer group of individuals voted in by stockholders (one vote per
share), large influence over direction and success of company
statutory vote - Answer stockholder applies only the amount of votes they have to each BOD
position being voted on, better for large stockholders
,cumulative vote - Answer stockholder applies total amount of votes they have to any BOD
position being voted on, better for small stockholders
proxies - Answer voting materials used by investors unable to attend the annual meeting
two dilutive effects on ownership - Answer issuance of new shares, issuance of convertible
securities
forward stock split - Answer increase numbers of shares, lowers price; same overall value,
require stockholder approval
reverse stock split - Answer decrease number of shares, raise price; same overall value,
require stockholder approval
order of rights to assets upon liquidation - Answer 1. unpaid wages
2. unpaid taxes
3. secured creditors (lien)
4. unsecured creditors (no lien)
5. junior unsecured creditors
6. preferred stockholders
7. common stockholders
*lien: right to property if a loan can't be repaid
transfer agent - Answer maintains book of stockholders, issues and redeems shares when a
transaction occurs, distributes proxies and dividends to stockholders
types of shares - Answer authorized, issued, outstanding, treasury
rights - Answer pre-emptive right: right to purchase new shares at a fixed price before they're
publicly offered (to maintain percent ownership without dilution)
- have intrinsic value at issuance
-little time value, short term (90 days or less)
-outcomes: exercise, trade, expire
warrants - Answer issued at a fixed exercise price at a premium to the market price, as a
"sweetener" directly from the company during the sale of another security
,- no intrinsic value at issuance
- have time value, long-term (typically 5 years +)
- outcomes: exercise, trade, expire
negotiable securities - Answer trade in the secondary market between investors
redeemable securities - Answer purchased directly from the issuer, not another investor
primary distribution - Answer sale of securities occurs and proceeds go to the issuer
secondary distribution - Answer stock is sold to the public for the first time, but shares were
previously owned by a party other than the issuer (officers or directors)
types of market within secondary market - Answer -first market: listed stocks trade on stock
exchanges
-second market: unlisted stocks trade OTC
-third market: listed stocks trade OTC
-fourth market: institutions trade through ECNs
broker-dealers - Answer financial companies that primarily help their customers buy and sell
securities
introducing brokers - Answer smaller broker-dealers that primarily maintain relationships with
customers and facilitate their trades
clearing brokers - Answer large broker-dealers that maintain custody, process orders, and
provide clearing services in addition to facilitating trades for their customers; acts as
intermediary between investors and clearinghouses
clearinghouse - Answer an organization responsible for ensuring a trade is properly finalized,
ensures buyers deliver cash and sellers deliver securities
settlement types - Answer regular-way: two business days after trade
cash: same day if executed by 2:30 pm
selling short - Answer selling borrowed securities, bearish, unlimited risk
, *only for sophisticated investors with high risk tolerance
cash dividend dates - Answer declaration date, record date, ex-dividend date, payable date
declaration date - Answer the day the BOD publicly declares the dividend
record date - Answer stockholder must be on the books by this date, controlled by BOD
ex-dividend date - Answer investors buying the stock don't receive the dividend, investors
selling the stock keep the dividend
stock: one business day prior to record date
cash: day after payable date
controlled by NYSE for NYSE trades, controlled by FINRA for OTC market
payable date - Answer when dividend is paid to shareholders, controlled by BOD, reportable to
IRS on this date
Financial Industry Regulatory Authority (FINRA) - Answer a self-regulatory organization (SRO)
that is empowered to enforce laws and regulations in finance
American depositary receipts (ADRs) - Answer US-registered receipts for foreign investments
created by domestic financial firms with foreign branches, traded in US dollars in US markets
-subject to currency exchange risk
-no voting or preemptive rights
- dividends paid in USD
-foreign gov't tax withholding creates a US tax credit
holder of ADR benefits from - Answer weak US dollar or strong foreign currency
buyer of ADR benefits from - Answer strong US dollar or weak foreign currency
Securities Exchange Act of 1933 - Answer requires most issuers to register securities with the
SEC, divulge any "material" information
with All Accurate Solutions.
issuer - Answer an organization that distributes and sells securities to investors
security - Answer legal term for investment (stocks, bonds, mutual funds, options, ETFs)
equity - Answer formal term for ownership
two ways to make money on common stock - Answer 1. capital appreciation/gains
2. cash dividends
retained earnings - Answer profits retained by a company that are often used to expand and
reinforce business operations, NOT paid by dividend
growth companies - Answer direct profits back into operations and do not pay dividends, grow
faster than the general economy
rights of common stockholders - Answer - right to pro-rate share of dividends
- right to vote
- right to inspect books and records
- right to maintain proportionate ownership
- right to vote for stock splits
- right to assets upon liquidation
- right to transfer ownership
types of dividends - Answer - cash: paid on a per share basis on common stock
- stock: payment of extra shares, same value of position overall
- product: in form of inventory or another company's stock, not common bc taxable regardless
of investor's desire for product
board of directors (BOD) - Answer group of individuals voted in by stockholders (one vote per
share), large influence over direction and success of company
statutory vote - Answer stockholder applies only the amount of votes they have to each BOD
position being voted on, better for large stockholders
,cumulative vote - Answer stockholder applies total amount of votes they have to any BOD
position being voted on, better for small stockholders
proxies - Answer voting materials used by investors unable to attend the annual meeting
two dilutive effects on ownership - Answer issuance of new shares, issuance of convertible
securities
forward stock split - Answer increase numbers of shares, lowers price; same overall value,
require stockholder approval
reverse stock split - Answer decrease number of shares, raise price; same overall value,
require stockholder approval
order of rights to assets upon liquidation - Answer 1. unpaid wages
2. unpaid taxes
3. secured creditors (lien)
4. unsecured creditors (no lien)
5. junior unsecured creditors
6. preferred stockholders
7. common stockholders
*lien: right to property if a loan can't be repaid
transfer agent - Answer maintains book of stockholders, issues and redeems shares when a
transaction occurs, distributes proxies and dividends to stockholders
types of shares - Answer authorized, issued, outstanding, treasury
rights - Answer pre-emptive right: right to purchase new shares at a fixed price before they're
publicly offered (to maintain percent ownership without dilution)
- have intrinsic value at issuance
-little time value, short term (90 days or less)
-outcomes: exercise, trade, expire
warrants - Answer issued at a fixed exercise price at a premium to the market price, as a
"sweetener" directly from the company during the sale of another security
,- no intrinsic value at issuance
- have time value, long-term (typically 5 years +)
- outcomes: exercise, trade, expire
negotiable securities - Answer trade in the secondary market between investors
redeemable securities - Answer purchased directly from the issuer, not another investor
primary distribution - Answer sale of securities occurs and proceeds go to the issuer
secondary distribution - Answer stock is sold to the public for the first time, but shares were
previously owned by a party other than the issuer (officers or directors)
types of market within secondary market - Answer -first market: listed stocks trade on stock
exchanges
-second market: unlisted stocks trade OTC
-third market: listed stocks trade OTC
-fourth market: institutions trade through ECNs
broker-dealers - Answer financial companies that primarily help their customers buy and sell
securities
introducing brokers - Answer smaller broker-dealers that primarily maintain relationships with
customers and facilitate their trades
clearing brokers - Answer large broker-dealers that maintain custody, process orders, and
provide clearing services in addition to facilitating trades for their customers; acts as
intermediary between investors and clearinghouses
clearinghouse - Answer an organization responsible for ensuring a trade is properly finalized,
ensures buyers deliver cash and sellers deliver securities
settlement types - Answer regular-way: two business days after trade
cash: same day if executed by 2:30 pm
selling short - Answer selling borrowed securities, bearish, unlimited risk
, *only for sophisticated investors with high risk tolerance
cash dividend dates - Answer declaration date, record date, ex-dividend date, payable date
declaration date - Answer the day the BOD publicly declares the dividend
record date - Answer stockholder must be on the books by this date, controlled by BOD
ex-dividend date - Answer investors buying the stock don't receive the dividend, investors
selling the stock keep the dividend
stock: one business day prior to record date
cash: day after payable date
controlled by NYSE for NYSE trades, controlled by FINRA for OTC market
payable date - Answer when dividend is paid to shareholders, controlled by BOD, reportable to
IRS on this date
Financial Industry Regulatory Authority (FINRA) - Answer a self-regulatory organization (SRO)
that is empowered to enforce laws and regulations in finance
American depositary receipts (ADRs) - Answer US-registered receipts for foreign investments
created by domestic financial firms with foreign branches, traded in US dollars in US markets
-subject to currency exchange risk
-no voting or preemptive rights
- dividends paid in USD
-foreign gov't tax withholding creates a US tax credit
holder of ADR benefits from - Answer weak US dollar or strong foreign currency
buyer of ADR benefits from - Answer strong US dollar or weak foreign currency
Securities Exchange Act of 1933 - Answer requires most issuers to register securities with the
SEC, divulge any "material" information
