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SIE
| Question | Answer |
|---|---|
| Is the customer’s signature legally required on a new cash account form? | While the firm must gather and verify the customer's details, the only signature legally required to open a standard cash account is the Principal's signature accepting the account. |
| What happens to account assets upon the death of an owner in a JTWROS account vs. a Tenants in Common (TIC) account? | JTWROS: Assets automatically pass to the surviving owner, bypassing probate. TIC: The deceased party's specific percentage share passes directly to their estate, not to the co-owner. |
| Can an UGMA or UTMA account have multiple custodians or multiple minor beneficiaries? | No. Custodial accounts are strictly limited to one custodian and one minor per account. |
| What are the "3 Ds" that dictate whether a trade requires registered discretionary authority? | Asset (what to buy/sell), Action (buy vs. sell), and Amount (quantity or dollar total). If the representative decides any of these three details, a written Power of Attorney (POA) must be on file prior to execution. Note: If a client gives you the 3 Ds |
| What document must a corporation provide to prove who is legally permitted to trade on the company's behalf? | A Corporate Resolution. Note: If the corporation wants to trade on margin, they must also provide a Corporate Charter proving margin trading isn't explicitly banned by the company's bylaws. |
| What is the maximum duration a member firm can hold a customer's mail, and what triggers it? | Up to 3 months. It requires written instructions from the customer that include a specific, valid reason (e.g., safety or extended travel). |
| Under Regulation S-P, when must a broker-dealer provide a privacy notice to a consumer/customer? | At the time the relationship is established (account opening) and annually thereafter. The notice must include clear instructions on how the consumer can opt out of third-party data sharing. |
| that an account holder has passed away? | Cancel all open orders (Good-Til-Canceled orders do not survive death). Freeze the account (mark it "deceased"). Await legal documents (death certificate, letters testamentary). |
| How frequently must a broker-dealer send account statements to a client? | Quarterly by default if the account is inactive. However, if there is any trading activity in the account during a given month, or if the account holds penny stocks, statements must be sent monthly. |
| What is the mandatory deadline for sending a trade confirmation to a client? | At or before the completion of the transaction (which is legally defined as the settlement date). |
| Securities Act of 1933 main purpose | Regulates the primary market and new issues, requiring full and fair disclosure through a registration statement and prospectus. |
| Securities Exchange Act of 1934 main purpose | Regulates the secondary market, trading, broker-dealers, and their associated persons, and created the SEC. |
| Role of the Federal Reserve Board FRB | Controls monetary policy using tools like the discount rate, reserve requirements, and open-market operations. |
| Monetary vs Fiscal Policy | Monetary policy is controlled by the FRB via money supply; Fiscal policy is controlled by Congress via taxation and government spending. |
| Four stages of the economic business cycle | Expansion, Peak, Contraction, and Trough. |
| Invasion of inflation on bond prices | As inflation rises, interest rates go up, causing existing bond prices to fall due to their inverse relationship. |
| Common stock residual rights | In the event of a corporate liquidation, common stockholders are the last in line to receive any remaining assets. |
| Preemptive rights vs Warrants | Rights are short-term with a subscription price below current market value; Warrants are long-term with an exercise price above market value. |
| Preferred stock features | Behaves like a debt instrument with a fixed dividend, sensitive to interest rates, and lacks voting rights. |
| Cumulative preferred stock | If a company skips a dividend, all missed dividends must be paid to cumulative preferred holders before common holders receive any. |
| Inverse relationship of bonds | When market interest rates go up, existing bond prices fall. When market interest rates go down, existing bond prices rise. |
| Nominal vs Current vs Yield to Maturity YTM | Nominal is the coupon rate. Current yield is annual income divided by market price. YTM is the overall total return if held to end. |
| Premium bond yield hierarchy from highest to lowest | Nominal Yield is highest, followed by Current Yield, then Yield to Maturity, and Yield to Call is the lowest. |
| Discount bond yield hierarchy from lowest to highest | Nominal Yield is lowest, followed by Current Yield, then Yield to Maturity, and Yield to Call is the highest. |
| General Obligation GO vs Revenue bonds | GO bonds are backed by the full faith, credit, and taxing power of the municipality; Revenue bonds are backed by user fees. |
| Treasury Bills T-Bills features | Short-term debt securities issued at a discount, mature in 1 year or less, and do not pay standard semi-annual interest. |
| Open-end vs Closed-end management companies | Open-end funds issue unlimited shares bought/sold via NAV; Closed-end funds issue fixed shares traded on secondary markets. |
| Mutual fund Class A vs Class B shares | Class A shares have front-end sales loads and lower ongoing fees; Class B shares have back-end loads and higher ongoing fees. |
| Exchange Traded Funds ETFs features | Passively managed index tracking shares that trade in real-time on an exchange floor throughout the entire trading day. |
| Long Call option contract sentiment and rule | Bullish strategy where the investor pays a premium for the right to buy stock at the strike price. |
| Long Put option contract sentiment and rule | Bearish strategy where the investor pays a premium for the right to sell stock at the strike price. |
| Short Call option contract obligation | Bearish strategy where the investor collects a premium and is obligated to sell stock if the buyer exercises. |
| Short Put option contract obligation | Bullish strategy where the investor collects a premium and is obligated to buy stock if the buyer exercises. |
| Breakeven for a Call option contract | Strike Price plus the Option Premium. |
| Breakeven for a Put option contract | Strike Price minus the Option Premium. |
| Direct Participation Programs DPPs tax structure | Pass-through investment vehicles that flow passive income and passive losses directly to investors to avoid double taxation. |
| Real Estate Investment Trusts REITs tax benefit | Avoids corporate taxation if it invests at least 75 percent in real estate and distributes at least 90 percent of net income to shareholders. |
| The 20-day cooling-off period restrictions | No sales, no advertising, and no orders can be taken; only indications of interest can be gathered via a red herring. |
| Exempt securities under the 1933 Act | US Government debt, municipal bonds, commercial paper under 270 days, bank issues, and charitable offerings. |
| Broker-Dealer Broker vs Dealer capacity | Broker means acting as an Agent for a commission; Dealer means acting as a Principal for a markup or markdown. |
| Market order vs Limit order | Market order executes immediately at the next available best price; Limit order executes only at a specified price or better. |
| Stop order vs Stop-Limit order | Stop order triggers a live market order once a price hit; Stop-Limit triggers a live limit order once a price hit. |
| Minimum initial equity in a new margin account | Must deposit 100 percent of purchase if under 2000 dollars, exactly 2000 dollars if between 2000 and 4000 dollars, and 50 percent if over 4000 dollars. |
| Currency Transaction Report CTR threshold | Must be filed with FinCEN within 15 days for any cash transaction exceeding 10000 dollars in a single business day. |
| Suspicious Activity Report SAR threshold | Must be filed with FinCEN within 30 days for any suspicious transaction totaling 5000 dollars or more. |
| FINRA Rule 5130 New Issue Rule restricted persons | Prohibits broker-dealers, industry employees, and their immediate family members from purchasing common stock IPOs. |
| Form U4 purpose and update timeline | Used to register an associated person with FINRA; must be updated within 30 days of any material change. |
| Form U5 purpose and timeline | Filed by a firm within 30 days of terminating an associated person registration, copy sent to the former employee. |
| Statutory Disqualification triggers | Felony conviction or securities-related misdemeanor conviction within the past 10 years bars registration. |
| Regulatory Element vs Firm Element continuing education | Regulatory Element is required on the 2nd anniversary of registration and annually thereafter; Firm Element is done annually. |
Created by:
ria868