SIE Exam 3: Questions & Answers: Latest Updated Solution

Which of the following activities by a RR would require registration as an Investment Adviser Representative? [A] Advising a customer about various financial planning tools [B] Advising a customer about tax and insurance matters [C] Printing Certified Financial Planner (CFP) on the RRs business cards [D] Recommending a stock to a customer based on an asset allocation model (Ans- [D] - An Investment Adviser Representative (IAR) is a state registration category. The Uniform Securities Act, a model state securities statute, requires registration as an IAR if the agent of the IA firm makes recommendations about any securities. When converting accumulation units to annuity units when annuitizing a variable annuity contract, all of the following would be considered EXCEPT the [A] annuitant's age [B] annuitant's gender [C] assumed interest rate[D] beneficiary's choice of payout options (Ans- [D] - The choice of payout options is made by the annuitant, not the beneficiary. The annuitant's age and gender are important in calculating the number of years in the annuitant's life expectancy. The assumed interest rate is important in estimating the rate of return that the insurance company can expect to earn during the life expectancy of the annuitant. A person who has a Series 6 license would be allowed to say which of the following to a potential client? [A] "Now that I am registered with FINRA, I can sell mutual funds in your state." [B] "The S6 registration allows me to sell only securities that have been approved by the SEC." [C] "As a registered representative I am required to disclose all material facts about the mutual funds that I offer." [D] "My registration allows me to recommend some basic option strategies." (Ans- [C] -The S6 registration satisfies FINRA requirements; the individual now has to register as an agent in each state. The SEC does not approve any security. Lastly, the S6 registration does not approve an individual to sell options. Which of the following BEST describes a call feature? [A] This is a feature of a bond that allows the bond to be converted to common stock at the option of the issuer. [B] A feature that allows the issuer of a bond to redeem the bond ahead of the final maturity date, typically including a premium above face value of the bond and most commonly used when interest rates have decreased. [C] This is a feature of a bond that allows the bond's coupon rate to be adjusted upward or downward in relation to interest rates in the current market. [D] A feature that forces the issuer to redeem a bond ahead of schedule at the option of the bondholder. (Ans- [B] - A call feature allows the issuer of a bond to redeem or call in the bond ahead of the bond's final maturity date. If bonds are called, there is typically a premium that is added to the face or par value of the bond to compensate for payout ahead of final maturity. The most common reason that a bond is called is due to a reduction in interest rates, whichwould allow the issuer to reduce interest costs associated with the debt. Conversion features differ from call features in that they allow the bondholder to convert their bond to common stock. Variable rate bonds can exist, where the bond's coupon rate is adjusted for interest rate fluctuations, but this feature of a bond differs significantly from a call feature. In relation to call features, issuers have control over redemption, not bondholders. S & P 100 index options when exercised are settled by the use of which of the following? [A] Cas