SIE Understanding Trading, Customer Accounts and Prohibited Activities Practice Test 4

1. In FINRA Rule 2121 – Fair Prices and Commissions, 5 percent compensation is provided as which of the following?

A. Minimum

B. Maximum

C. Guideline

D. Absolute

2. Which of the following pairs are commonly-used references for the same positions?

A. Open or naked

B. Long or covered

C. Short or open

D. Long or naked

3. Which of the following are covered by both of the following rules: FINRA 5210 – Publication of Transactions and Quotations and MSRB G-13 – Quotations?

A. Over-the-counter equity securities with prices published in multiple markets must be published with the same prices in each market, unless a customer submits a limit order.

B. Published quotes must represent prices that investors can actually pay when buying or receive when selling.

C. A broker-dealer must only make offers to buy or sell if willing to actually buy or sell at the prices offered.

D. A member must process an order without separating it into multiple orders if the main cause for the multiple orders is to receive higher compensation.

4. As provided in the Securities Exchange Act of 1934, Section 15 – Rules Relating to Over-the-Counter Markets, how frequently must a broker-dealer report to the customer the current value of each penny stock held in the customer's account?

A. Annually

B. Monthly

C. Weekly

D. Quarterly

5. Which of the following are covered by both of the following rules: FINRA 5310 – Best Execution and Interpositioning and MSRB G-18 – Best Execution?

A. Information about each trade will be submitted promptly to the Real-time Transaction Reporting System (RTRS)

B. Inv Co Act 1940 17a-6 – Exemption for Transactions with Portfolio Affiliates

C. Inv Co Act 1940 17a-7 – Exemption of Certain Purchase or Sale Transactions Between an Investment Company and Certain Affiliated Persons Thereof

D. A broker-dealer will be conscientious in finding the best market and handling the trade to provide the best price practical to a customer.

6. Investment return is calculated in which of the following ways?

A. The difference between the sales proceeds and the purchase price

B. Cash received while the security is held

C. The excess of net cash received over what was expected

D. Cash received while the security is held, plus the difference between the sales proceeds and the purchase price, less any commissions, adviser fees, custody fees and recordkeeping costs, less income tax

7. Which of the following is the most accurate calculation of return on investment?

A. Difference between the sales proceeds and the cost when purchased

B. Cash received while the security is held, plus the difference between the sales proceeds and the purchase price, less any commissions, adviser fees, custody fees and recordkeeping costs

C. Cash received while the security is held, plus the difference between the sales proceeds and the purchase price, less any commissions, adviser fees, custody fees and recordkeeping costs less estimated income tax

8. Which of the following is determined by the rules of the exchange on which the stock is traded?

A. Record date

B. Payment date

C. Declaration date

D. Ex-dividend date or ex-date

9. Which of the following measures of bond interest is determined when the bonds are issued?

A. Yield to maturity

B. Yield to call

C. Nominal yield

D. Current yield

10. Which of the following is used to calculate a trading profit for tax purposes?

A. Basis points

B. Bid price

C. Ask price

D. Cost basis

SIE Understanding Trading, Customer Accounts and Prohibited Activities Practice Test 4

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