SIE - PROHIBITED ACTIVITIES EXAM
QUESTIONS WITH CORRECT ANSWERS
Matching Orders - ANSWER -A manipulation that involves one party selling stock to
another with the understanding that the stock will be repurchased later at virtually the
same price with the intent of such transactions to make it appear that far more activity in
a stock exists than actually does
Rule 5130 - ANSWER -Ensures that members make a bona fide public offering of
securities at the public offering price, members do not withhold securities in a public
offering for their own benefit or use such securities to reward persons who are in a
position to direct future business, and industry insiders do not take advantage of their
insider status to gain access to new issues for their own benefit at the expense of public
customers
Insider Trading Penalties - ANSWER -Up to 5 million and 20 years in prison for an
individual and fines up to 3 times damages or up to 25 million whichever is greater
Conduct Rules - ANSWER -Permit the following five types of lending arrangements
there is an immediate family relationship between the representative and customer,
customer is in business of lending money, customer and rep are both registered
persons with the same firm, customer and rep ahve a personal relationship outside the
broker-customer relationship, customer and rep have a business relationship outside
the broker-customer relationship
A representative's BD must have procedures in place allowing for borrowing or lending
arrangements with customers - ANSWER -If the firm does not allow for such
arrangements then a representative may not enter into such an arrangement with a
customer
Guarantees - ANSWER -BDs, investment advisors, and RRs may not promise any
customer against a loss or for gain
Account Sharing - ANSWER -Member firms and reps are prohibited from sharing in
profits or losses in a customer's account with exception made if a joint account has
received the member's firm's prior written approval and the RR shares in the profits and
losses only to the extent of his proportionate financial contribution to the joint account
Inside Information - ANSWER -Any material non-public information that is any
information that has not been disseminated to or is not readily available to the general
public
Contemporaneous Traders - ANSWER -Persons who enter at or near the same time but
on the other side of the market in the same security as a person who has inside
QUESTIONS WITH CORRECT ANSWERS
Matching Orders - ANSWER -A manipulation that involves one party selling stock to
another with the understanding that the stock will be repurchased later at virtually the
same price with the intent of such transactions to make it appear that far more activity in
a stock exists than actually does
Rule 5130 - ANSWER -Ensures that members make a bona fide public offering of
securities at the public offering price, members do not withhold securities in a public
offering for their own benefit or use such securities to reward persons who are in a
position to direct future business, and industry insiders do not take advantage of their
insider status to gain access to new issues for their own benefit at the expense of public
customers
Insider Trading Penalties - ANSWER -Up to 5 million and 20 years in prison for an
individual and fines up to 3 times damages or up to 25 million whichever is greater
Conduct Rules - ANSWER -Permit the following five types of lending arrangements
there is an immediate family relationship between the representative and customer,
customer is in business of lending money, customer and rep are both registered
persons with the same firm, customer and rep ahve a personal relationship outside the
broker-customer relationship, customer and rep have a business relationship outside
the broker-customer relationship
A representative's BD must have procedures in place allowing for borrowing or lending
arrangements with customers - ANSWER -If the firm does not allow for such
arrangements then a representative may not enter into such an arrangement with a
customer
Guarantees - ANSWER -BDs, investment advisors, and RRs may not promise any
customer against a loss or for gain
Account Sharing - ANSWER -Member firms and reps are prohibited from sharing in
profits or losses in a customer's account with exception made if a joint account has
received the member's firm's prior written approval and the RR shares in the profits and
losses only to the extent of his proportionate financial contribution to the joint account
Inside Information - ANSWER -Any material non-public information that is any
information that has not been disseminated to or is not readily available to the general
public
Contemporaneous Traders - ANSWER -Persons who enter at or near the same time but
on the other side of the market in the same security as a person who has inside
