Achievable SIE Exam 2024 Questions &
Answers 100% Correct!!
issuer - ANSWERan organization that distributes and sells securities to investors
security - ANSWERlegal term for investment (stocks, bonds, mutual funds, options, ETFs)
equity - ANSWERformal term for ownership
two ways to make money on common stock - ANSWER1. capital appreciation/gains
2. cash dividends
retained earnings - ANSWERprofits retained by a company that are often used to expand and
reinforce business operations, NOT paid by dividend
growth companies - ANSWERdirect 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) - ANSWERgroup of individuals voted in by stockholders (one vote per
share), large influence over direction and success of company
statutory vote - ANSWERstockholder applies only the amount of votes they have to each BOD
position being voted on, better for large stockholders
cumulative vote - ANSWERstockholder applies total amount of votes they have to any BOD position
being voted on, better for small stockholders
proxies - ANSWERvoting materials used by investors unable to attend the annual meeting
two dilutive effects on ownership - ANSWERissuance of new shares, issuance of convertible securities
forward stock split - ANSWERincrease numbers of shares, lowers price; same overall value, require
stockholder approval
warrants - ANSWERissued 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 - ANSWERtrade in the secondary market between investors
redeemable securities - ANSWERpurchased directly from the issuer, not another investor
primary distribution - ANSWERsale of securities occurs and proceeds go to the issuer
secondary distribution - ANSWERstock 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 - ANSWERfinancial companies that primarily help their customers buy and sell
securities
introducing brokers - ANSWERsmaller broker-dealers that primarily maintain relationships with
customers and facilitate their trades
clearing brokers - ANSWERlarge 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
reverse stock split - ANSWERdecrease number of shares, raise price; same overall value, require
stockholder approval
order of rights to assets upon liquidation - ANSWER1. 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 - ANSWERmaintains book of stockholders, issues and redeems shares when a
transaction occurs, distributes proxies and dividends to stockholders
types of shares - ANSWERauthorized, issued, outstanding, treasury
rights - ANSWERpre-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
clearinghouse - ANSWERan organization responsible for ensuring a trade is properly finalized,
ensures buyers deliver cash and sellers deliver securities
settlement types - ANSWERregular-way: two business days after trade
cash: same day if executed by 2:30 pm
selling short - ANSWERselling borrowed securities, bearish, unlimited risk
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 - ANSWERwhen dividend is paid to shareholders, controlled by BOD, reportable to IRS
on this date
Financial Industry Regulatory Authority (FINRA) - ANSWERa self-regulatory organization (SRO) that is
empowered to enforce laws and regulations in finance
American depositary receipts (ADRs) - ANSWERUS-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
Answers 100% Correct!!
issuer - ANSWERan organization that distributes and sells securities to investors
security - ANSWERlegal term for investment (stocks, bonds, mutual funds, options, ETFs)
equity - ANSWERformal term for ownership
two ways to make money on common stock - ANSWER1. capital appreciation/gains
2. cash dividends
retained earnings - ANSWERprofits retained by a company that are often used to expand and
reinforce business operations, NOT paid by dividend
growth companies - ANSWERdirect 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) - ANSWERgroup of individuals voted in by stockholders (one vote per
share), large influence over direction and success of company
statutory vote - ANSWERstockholder applies only the amount of votes they have to each BOD
position being voted on, better for large stockholders
cumulative vote - ANSWERstockholder applies total amount of votes they have to any BOD position
being voted on, better for small stockholders
proxies - ANSWERvoting materials used by investors unable to attend the annual meeting
two dilutive effects on ownership - ANSWERissuance of new shares, issuance of convertible securities
forward stock split - ANSWERincrease numbers of shares, lowers price; same overall value, require
stockholder approval
warrants - ANSWERissued 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 - ANSWERtrade in the secondary market between investors
redeemable securities - ANSWERpurchased directly from the issuer, not another investor
primary distribution - ANSWERsale of securities occurs and proceeds go to the issuer
secondary distribution - ANSWERstock 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 - ANSWERfinancial companies that primarily help their customers buy and sell
securities
introducing brokers - ANSWERsmaller broker-dealers that primarily maintain relationships with
customers and facilitate their trades
clearing brokers - ANSWERlarge 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
reverse stock split - ANSWERdecrease number of shares, raise price; same overall value, require
stockholder approval
order of rights to assets upon liquidation - ANSWER1. 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 - ANSWERmaintains book of stockholders, issues and redeems shares when a
transaction occurs, distributes proxies and dividends to stockholders
types of shares - ANSWERauthorized, issued, outstanding, treasury
rights - ANSWERpre-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
clearinghouse - ANSWERan organization responsible for ensuring a trade is properly finalized,
ensures buyers deliver cash and sellers deliver securities
settlement types - ANSWERregular-way: two business days after trade
cash: same day if executed by 2:30 pm
selling short - ANSWERselling borrowed securities, bearish, unlimited risk
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 - ANSWERwhen dividend is paid to shareholders, controlled by BOD, reportable to IRS
on this date
Financial Industry Regulatory Authority (FINRA) - ANSWERa self-regulatory organization (SRO) that is
empowered to enforce laws and regulations in finance
American depositary receipts (ADRs) - ANSWERUS-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
