SIE Understanding Trading, Customer Accounts and Prohibited Activities Practice Test 5

1. Which of the following is NOT included in cost basis of a security?

A. Commissions

B. Markups

C. Sales proceeds

D. Purchase price

2. Which rules may require the cost basis to use the oldest shares purchased?

A. Internal Revenue Code

B. Securities Exchange Commission Act of 1934

C. FINRA Rules

D. MSRB Rules

3. Which of the following situations would NOT make determination of cost basis more complicated than usual?

A. The issuing firm changed its name.

B. Multiple purchases were made.

C. Stock dividends were declared.

D. The firm returned capital to shareholders.

4. Which of the following statements is NOT true regarding benchmarks and indices?

A. They are not usually used to measure investment managers' performance.

B. They allow comparison of a security's return with that of similar securities.

C. They allow comparison of a security's return with that of investments other than securities.

D. They allow comparison of a security's return with compensation threshold conditions.

5. Which of the following statements correctly defines trade settlement?

A. Trade settlement refers to the time in business days between the date the trade is agreed to, until the seller's broker-dealer receives payment and the buyer's broker-dealer receives ownership.

B. Trade settlement refers to the time in business days during which a security is held.

C. Trade settlement refers to the time in calendar days between the declaration date for stock dividends and the ex-dividend date.

D. Trade settlement refers to the time in calendar days between the first trade for which an investor places a market order and the confirmation of the order's execution is reported to the investor's broker-dealer.

6. Ownership of a security is changed by which of the following actions?

A. The purchaser is entered as owner on the books of the issuer.

B. Publication in the Wall Street Journal

C. Publication in a local newspaper of legal record

D. Communication from the broker-dealer of the seller to the broker-dealer of the buyer

7. On which date does ownership change when a security is sold?

A. Settlement date

B. Declaration date

C. Record date

D. Ex-dividend date

8. Which of the following resulted in corporate stock and corporate bonds settling more quickly?

A. SEC rule in 2017 called "T+2"

B. SEC Regulation T

C. Consumer Credit Protection Act of 1968 (CCPA)

D. Sarbanes-Oxley (SOX) Act of 2002

9. Which of the following is NOT true regarding settlement?

A. Settlement may occur one trade day prior to the trade date (T-1).

B. If the buyer or seller prefers to settle during other than regular-way, this special settlement is agreed to before the trade takes place.

C. If the buyer and seller agree a cash trade, it may settle on the trade date (T).

D. If the seller is not able to provide ownership by the time expected, the seller may request additional time to settle.

10. Which of the following is the oldest method of ownership settlement?

A. Book entry settlement

B. Stock certificate delivery settlement

C. Electronic settlement

D. Paperless settlement

SIE Understanding Trading, Customer Accounts and Prohibited Activities Practice Test 5

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