SIE Exam Dumps - FINRA General Securities Representative Questions and Answers

Step by Step Explanation:

Debentures: Corporate bonds not backed by physical assets or collateral. They rely on the issuer’s creditworthiness.

Incorrect Options:

B: Trust certificates are a legacy term for bonds backed by a trust.

C: Collateral trust bonds are secured by financial assets.

D: GO bonds are issued by municipalities, not corporations.

References:

SEC Guide on Corporate Bonds:SEC Corporate Bonds.

Step by Step Explanation:

Closed-End Funds: Trade on exchanges like stocks, and the investor receives the bid price (market price) minus any applicable commissions.

Incorrect Options:

A & B: NAV applies to open-end mutual funds, not closed-end funds.

D: POP applies to initial sales of mutual fund shares.

References:

SEC Guidance on Closed-End Funds: SEC Closed-End Funds.

An option’s premium consists of intrinsic value and time value:

Intrinsic value= Current stock price - Strike price = $40 - $35 = $5.

Time value= Total premium - Intrinsic value = $7 - $5 =$2.

B is correctbecause $2 represents the time value.

A,C, andDare incorrect because they miscalculate the time value based on the option's total premium.

FINRA Rule 3270 requires registered representatives to disclose all outside business activities that involve compensation or could reasonably be perceived as a conflict of interest.

C is correctbecause serving as a board member for a publicly traded company is a business activity requiring disclosure, even if compensation is indirect.

Ais incorrect because volunteer work for charities does not require disclosure.

Bis incorrect because acting as a trustee for a personal or family estate is generally not considered an OBA.

Dis incorrect because unpaid board membership for a not-for-profit entity does not typically require disclosure.

Form U4 (Uniform Application for Securities Industry Registration or Transfer) requires disclosure of any felony convictions, regardless of whether they are securities-related. A felony conviction for drunk driving falls under this requirement.

B is correctbecause a felony conviction must be reported on Form U4.

Ais incorrect as misdemeanor speeding tickets do not require disclosure unless they involve fraud, theft, or dishonesty.

Cis incorrect as bench warrants are not reportable unless they lead to a conviction.

Dis incorrect because gross misdemeanors (except those involving fraud or dishonesty) do not require reporting.

The cost basis of a stock represents the purchase price and does not include dividends received. Taxes paid on dividends also do not affect the cost basis.

Original purchase price per share =$20.00.

Dividends and taxes on dividends do not adjust the stock’s cost basis.

A is correctbecause the cost basis remains $20.00.

B,C, andDincorrectly assume that dividends or taxes change the cost basis.

Step by Step Explanation:

Consumer Discretionary Sector: Includes products and services that are not essential, such as luxury items, travel, and entertainment. Revenues increase as disposable income risesduring economic expansion.

Consumer Staples and Utilities: These sectors are defensive and less impacted by economic cycles.

Healthcare: Also less correlated with economic cycles due to its essential nature.

References:

SEC and FINRA Guidance on Sectors: Investopedia Sector Overview.

Step by Step Explanation:

Suspicious Activity: The use of multiple money orders, lack of investment activity, andrequest to wire funds to another firm raise red flags for potential money laundering.

FINRA Rules: The RR should escalate the issue by reporting internally and potentially filing a Suspicious Activity Report (SAR).

Incorrect Options:

A: Denying the request without investigation may violate customer instructions.

B: Freezing the account requires a valid legal or regulatory basis.

D: Processing the request without investigation could facilitate illegal activity.

References:

FINRA Anti-Money Laundering (AML) Guidance: FINRA AML Rules.

FINRA Rule 4511 requires member firms to retain records, including electronic communications, in anon-rewriteable, non-erasable format(often referred to as WORM: Write Once, Read Many). This ensures that records cannot be altered or deleted once stored.

D is correctbecause firms must store records in a tamper-proof format.

A,B, andCare incorrect because these formats do not guarantee compliance with the tamper-proof requirements set forth by FINRA and the SEC.

A secondary market transaction occurs when securities are bought and sold between investors, typically on an exchange.

C is correctbecause securities purchased on a registered exchange are secondary market transactions.

Ais incorrect as open-end mutual fund shares are purchased directly from the issuer.

Brefers to the primary market.

Dis also incorrect as private placements occur in the primary market.