SIE Exam 1 (Chapters 1-7)Questions &
Answers 100% Correct!!
A market maker is quoting a stock as follows: Bid 23.50, Offer 23.70. This means that the market
maker will:
-Sell shares at a price higher than 23.70 and buy shares at a price lower than 23.70
- Buy and sell shares at a price between 23.50 and 23.70
- Buy shares at 23.50 and sell shares at 23.70
-Buy shares at 23.70 and sell shares at 23.50 - ANSWERBuy shares at 23.50 and sell shares at 23.70
A broker dealer is clearing its trades through another broker-dealer but is not disclosing specific
information regarding its clients. Who is responsible for maintaining the account records?
-The clearing broker-dealer.
- The introducing broker-dealer.
-The broker-dealer appointed by FINRA to prepare the records
- Both the clearing and introducing broker-dealers - ANSWERThe introducing broker-dealer
The Pink Marketplace displays:
-All trades involving OTC equities that occurred on the previous day
-The market makers for stocks that are not listed on either the NYSE or Nasdaq
-The designated market maker assigned to each stock that trades on the NYSE
-The market makers f - ANSWERThe market makers for stocks that are not listed on either the NYSE
or Nasdaq
The investment banking department of a broker-dealer does NOT typically perform which of the
following activities?
-Buying and selling securities for both customers and the firm's own account
-Assisting a corporation in raising capital
-Acting as an underwriter when an issuer wants to offer bonds
-Assisting a company that's restructuring after declaring bankruptcy - ANSWERBuying and selling
securities for both customers and the firms own account
,An investment advisory firm will charge customers which of the following?
- fee that's based on assets under management
-A fee that's based on the number of transactions
-The difference between the price it pays an issuer and the price at which it sells the securities to the
public
-A fee that's based on the size of the transaction - ANSWERA fee thats based on assets under
management
The third market is concerned with:
-OTC equity securities trading on an exchange
- Securities listed on an exchange, but traded in the OTC market
-Securities listed on an exchange that are traded directly between institutional investors
-Listed securities trading on an exchange - ANSWERSecurities listed on an exchange, but traded in
the OTC market
Which of the following statements is FALSE regarding a broker-dealer acting as a market maker in a
stock? - ANSWERIt makes money by charging commissions for executing transactions
A customer sells 500 shares of stock to a broker-dealer that makes a market in the stock. The broker-
dealer acted in a(n):
-Agency capacity and charged the customer a commission
-Principal capacity and charged the customer a commission
-Agency capacity and charged the customer a markup
-Principal capacity and charged the customer a markdown - ANSWERPrincipal capacity and charged
the customer a markdown
A municipal advisor provides advice to which of the following?
-A corporation that intends to issue securities
-Investors who buy and sell securities that are issued by states and cities
-A local town that intends to issue securities
,-A brokerage firm that executes trades in securities that are issued by local towns - ANSWERA local
town that intends to issue securities
The OTC Bulletin Board (OTCBB) is BEST defined as: - ANSWERA quotation system for securities that
are not listed on either the NYSE or Nasdaq
The type of market in which an issuer raises capital by selling its securities to investors is referred to
as the:
-Secondary market
- Primary market
-Third market
-Fourth market - ANSWERPrimary market
An investor who is searching for a quote on a non-listed stock may find it on:
- Nasdaq
- OTCBB
-OCC
-NYSE - ANSWEROTCBB
Which of the following is NOT considered a self-regulatory organization (SRO)?
- The Securities Exchange Commission (SEC)
-Financial Industry Regulatory Authority (FINRA)
-The Municipal Securities Rulemaking Board (MSRB)
-Chicago Board Options Exchange (CBOE) - ANSWERThe Securities Exchange Commission (SEC)
Which of the following statements is NOT TRUE concerning a clearing corporation?
- It provides trade comparison and reporting services.
- It offers customers the ability to have real-time trade matching.
-It is responsible for automated book-entry changes in the ownership of securities.
-It assists broker-dealers in transferring assets in a customer account to another broker-dealer. -
ANSWERIt is responsible for automated book-entry changes in the ownership of securities.
The goal of which of the following entities is to increase the volume of securities transactions by
eliminating physical delivery with a book entry system?
, - FINRA
- DTCC
-OCC
-SEC - ANSWERDTCC
A broker-dealer acting in an agency capacity will charge customers a:
-Fee
- Commission
-Markdown
-Markup - ANSWERCommission
If ABC Brokerage (a broker-dealer) purchases 600 shares of stock from a customer and places the
securities into its inventory, it likely acted as a(n):
-Dealer
-Designated market maker
-Agent
-Underwriter - ANSWERDealer
Which of the following statements is TRUE regarding a prime broker?
-It is only permitted to execute transactions for a hedge fund
-It may execute and clear transactions, but may not provide securities lending services to a hedge
fund
-It may execute and clear transactions, and may also provide securities lending services to a hedge
fund
-It is only permitted to clear transactions for a hedge fund - ANSWERIt may execute and clear
transactions, and may also provide securities lending services to a hedge fund
The Securities Investor Protection Corporation is funded by: - ANSWERAssessments on broker-
dealers
"Blue Sky Laws" were established by:
- Uniform Securities Act
Answers 100% Correct!!
A market maker is quoting a stock as follows: Bid 23.50, Offer 23.70. This means that the market
maker will:
-Sell shares at a price higher than 23.70 and buy shares at a price lower than 23.70
- Buy and sell shares at a price between 23.50 and 23.70
- Buy shares at 23.50 and sell shares at 23.70
-Buy shares at 23.70 and sell shares at 23.50 - ANSWERBuy shares at 23.50 and sell shares at 23.70
A broker dealer is clearing its trades through another broker-dealer but is not disclosing specific
information regarding its clients. Who is responsible for maintaining the account records?
-The clearing broker-dealer.
- The introducing broker-dealer.
-The broker-dealer appointed by FINRA to prepare the records
- Both the clearing and introducing broker-dealers - ANSWERThe introducing broker-dealer
The Pink Marketplace displays:
-All trades involving OTC equities that occurred on the previous day
-The market makers for stocks that are not listed on either the NYSE or Nasdaq
-The designated market maker assigned to each stock that trades on the NYSE
-The market makers f - ANSWERThe market makers for stocks that are not listed on either the NYSE
or Nasdaq
The investment banking department of a broker-dealer does NOT typically perform which of the
following activities?
-Buying and selling securities for both customers and the firm's own account
-Assisting a corporation in raising capital
-Acting as an underwriter when an issuer wants to offer bonds
-Assisting a company that's restructuring after declaring bankruptcy - ANSWERBuying and selling
securities for both customers and the firms own account
,An investment advisory firm will charge customers which of the following?
- fee that's based on assets under management
-A fee that's based on the number of transactions
-The difference between the price it pays an issuer and the price at which it sells the securities to the
public
-A fee that's based on the size of the transaction - ANSWERA fee thats based on assets under
management
The third market is concerned with:
-OTC equity securities trading on an exchange
- Securities listed on an exchange, but traded in the OTC market
-Securities listed on an exchange that are traded directly between institutional investors
-Listed securities trading on an exchange - ANSWERSecurities listed on an exchange, but traded in
the OTC market
Which of the following statements is FALSE regarding a broker-dealer acting as a market maker in a
stock? - ANSWERIt makes money by charging commissions for executing transactions
A customer sells 500 shares of stock to a broker-dealer that makes a market in the stock. The broker-
dealer acted in a(n):
-Agency capacity and charged the customer a commission
-Principal capacity and charged the customer a commission
-Agency capacity and charged the customer a markup
-Principal capacity and charged the customer a markdown - ANSWERPrincipal capacity and charged
the customer a markdown
A municipal advisor provides advice to which of the following?
-A corporation that intends to issue securities
-Investors who buy and sell securities that are issued by states and cities
-A local town that intends to issue securities
,-A brokerage firm that executes trades in securities that are issued by local towns - ANSWERA local
town that intends to issue securities
The OTC Bulletin Board (OTCBB) is BEST defined as: - ANSWERA quotation system for securities that
are not listed on either the NYSE or Nasdaq
The type of market in which an issuer raises capital by selling its securities to investors is referred to
as the:
-Secondary market
- Primary market
-Third market
-Fourth market - ANSWERPrimary market
An investor who is searching for a quote on a non-listed stock may find it on:
- Nasdaq
- OTCBB
-OCC
-NYSE - ANSWEROTCBB
Which of the following is NOT considered a self-regulatory organization (SRO)?
- The Securities Exchange Commission (SEC)
-Financial Industry Regulatory Authority (FINRA)
-The Municipal Securities Rulemaking Board (MSRB)
-Chicago Board Options Exchange (CBOE) - ANSWERThe Securities Exchange Commission (SEC)
Which of the following statements is NOT TRUE concerning a clearing corporation?
- It provides trade comparison and reporting services.
- It offers customers the ability to have real-time trade matching.
-It is responsible for automated book-entry changes in the ownership of securities.
-It assists broker-dealers in transferring assets in a customer account to another broker-dealer. -
ANSWERIt is responsible for automated book-entry changes in the ownership of securities.
The goal of which of the following entities is to increase the volume of securities transactions by
eliminating physical delivery with a book entry system?
, - FINRA
- DTCC
-OCC
-SEC - ANSWERDTCC
A broker-dealer acting in an agency capacity will charge customers a:
-Fee
- Commission
-Markdown
-Markup - ANSWERCommission
If ABC Brokerage (a broker-dealer) purchases 600 shares of stock from a customer and places the
securities into its inventory, it likely acted as a(n):
-Dealer
-Designated market maker
-Agent
-Underwriter - ANSWERDealer
Which of the following statements is TRUE regarding a prime broker?
-It is only permitted to execute transactions for a hedge fund
-It may execute and clear transactions, but may not provide securities lending services to a hedge
fund
-It may execute and clear transactions, and may also provide securities lending services to a hedge
fund
-It is only permitted to clear transactions for a hedge fund - ANSWERIt may execute and clear
transactions, and may also provide securities lending services to a hedge fund
The Securities Investor Protection Corporation is funded by: - ANSWERAssessments on broker-
dealers
"Blue Sky Laws" were established by:
- Uniform Securities Act
