SIE Exam Unit 1 with 100% correct answers

The securities industry's primary regulatory body and created under what act? SEC, Securities Exchange Act of 1934 Function under the SEC's oversight and is accountable to the Commission for enforcing federal securities laws, as well as supervising securities practices within an assigned jurisdiction. Self Regulatory organizations (SRO) what are the largest SROs Financial Industry Regulation Authority (FINRA), Chicago Board Options Exchange (CBOE), Municipal Securities Rulemaking Board (MSRB) Members pay assessments into a general insurance fund that is used to meet customer claims in the event of a broker-dealer bankruptcy. Securities Investor Protection Act and Corporation (SIPC) All BD registered with the SEC must be SIPC members except which three? 1. banks deal with munis, 2. firms deal with US govt securities deal with redeemable investment co securities has a net worth of $1 million or more or has had an annual income of $200k or more in each of the two most recent years accredited investor this type of BD offers all types of investment products ie stocks, bonds, mutual funds, options, and many others full service BD this BD incorporates proprietary trading, where they trade in the account of the BD this is known as what market making this firm carries customer accounts and accepts funds and securites from customers carrying firm this type of BD has the ability to do trade executions, clear and settle transactions, take custody of customer funds and securities, and handle all back office tasks carrying firm carrying firms are required to maintain a higher _____ than that of firms who do not accept custody of funds or securities net capital this type of BD must segregate customer funds and securities held in their custody from the firms capital and securities Carrying firms this type of BD introduces its customers to a clearing firm fully disclosed or introducing BD an introducing firm may receive customer checks but they must be made out to who the clearing firm carrying or clearing firms who clear their own transactions full service BD investment advisor act of what year 1940 Any entity, individual or institution, willing to accept the risk of holding a particular security in its own account to facilitate trading and provide liquidity in that security is known as a market maker or trader An institution or a person responsible for making all investment, management, and dis-tribution decisions in an account maintained in the best interests of another is known as custodian an introducing firm may recieve customer checks, but they must be made out to who? the clearing firm firm sometimes referred to as "full service firms" are also know as what? and what do they do on their own? carrying or clearing firms, clear their own transactions this type of account allows a customer, generally an institution, to select one member firm to provide custody and other services, while other firms handle all trades placed by the customer prime account a member firm for a prime acct that provides custody and other services prime broker a member firm for a prime acct that handles all trades placed by the customer executing brokers for a RR who has been charging commissions for transactions and now wants to charge separately for investment advice what act would the RR need to register under? and what exam(s) would need passed? investment advisor act of 1940 and series 65 or 66 an entity ie corporation or municipality, might offer or propose to offer its securities for sale to the investing public for the purpose of what? what are these type of entities called? raising capital, issues of securities these are groups of BD or investment bankers that work with an issue to bring its securities to the market and sell them to the investing public underwriters willing to accept the risk of holding a particular security in its own acct to facilitate trading and proved liquidity in that security is known as a what? market maker or trader typically stand ready to buy/sell (make markets) in securities with the ultimate goal of being profitable market makers an institution or person responsible for making all investment, management, and distribution decisions in an acct maintained in the best interest of another is known as a what? custodian an institution or a person responsible for making all investment, management, and distribution decisions in an acct maintained in the best interests of another has been legally appointed to is known as what? trustee a fiduciary appointed to manage assets in a trust is know as what? trustee this agency recieves and delivers payments and securities on behalf of both the buyer and seller side clearing agency the depository trust and clearing co (DTCC) is part of what the federal reserve system clearing agent for options contracts options clearing corporation (OCC) stock and bond markets capital markets where securities are sold to the investing public known as issuer transactions primary market where securities trade between investors secondary market or stock exchange a trading market in which exchange-listed-securities are traded in the over-the-counter (OTC) market third market or Nasdaq intermarket who can do transactions in the nasdaq intermarket BD registered as OTC market makers what securites are eligible for OTC trading as long as the trades are reported to the Consolidated tape 10 seconds of execution all securities listed on the NYSE and most listed on the regional exchanges this market is for institutional investors in which large blocks of stock, both listed and unlisted, trade in transactions unassisted by BDs fourth market where do 4th market transactions take place? how long are they open? and act soley as what? through electronic communications networks (ECNs), 24hrs, agents 3 policy tools the FRB uses to affect the Money Supply (Ms)? 1. open-market operations- buy/sell government securities 2. changes in discount rate- rate FRB charges memeber banks for loans 3. changes in reserve requirements (RR) fiscal policy tools 1. federal spending 2. taxes 3. federal budget deficits/surpluses consists of currency in circulation and demand deposits that can be converted to currency immediately M1 consists of M1 and time deposits (less than $100M) and overnight repurchase agreements M2 consists of M1, M2, and time deposits greater than $100M and repurchase agreements more than 1 day M3 us govt securities include what treasury bills, notes, and bonds this interest rate is the rate the commercial banks charge each other for overnight loans of $1MM or more fed funds rate this rate is considered to be the barometer of the direction of ST int rates fed funds rate this int rate is what the Fed Reserve charges for ST loans to member banks discount rate this rate indicates the direction of FRB monetary policy discount rate this int rate is what commercial banks charge their most creditworthy corp borrowers for unsecured loans prime rate this int rate is what banks charge BDs on money they borrow to lend to margin acct customers (options contracts)--3 names broker loan rate or call loan rate or call money rate the economy is in a recession when a decline in real output of goods and services (GDP) lasts for how many months or more? 6 months or more