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Understanding Trading, Customer Accounts and Prohibited Activities

SIE Exam: Understanding Trading, Customer Accounts and Prohibited Activities Practice Test 6

1. Which of the following is NOT a corporate action?

A. Tender offer

B. Stock reverse split

C. Stock buyback

D. Change in market price of its securities

2. Which of the following is typically approved by a board of directors when the trading price is so high that it inhibits trading?

A. Rights offer

B. Reverse stock split

C. Tender offer

D. Stock split

3. Which of the following results in an increase in treasury stock?

A. Merger

B. Buyback

C. Tender offer

D. Rights offer

4. Which of the following does NOT occur when a reverse stock split is approved by the board of directors?

A. The new shares may have twice the par value of the old shares.

B. The firm buys shares from shareholders to reduce the quantity of shares outstanding.

C. One new share is exchanged for two old shares.

D. The new shares will begin trading at twice the price of the old shares.

5. Which of the following is a reason for the board of directors to approve a rights offer?

A. To provide another security's shares in exchange for the desired shares

B. To publicly announce an offer to purchase shares for a certain price if a minimum quantity of shares are provided in response to the offer

C. To replace old shares with new shares with twice the par value

D. To raise additional capital by offering current shareholders the opportunity to purchase the number of shares to maintain proportional ownership

6. Which of the following prevents persons involved with a securities offering from artificially influencing the price?

A. IRS Code

B. Regulation M

C. Investment Company Act of 1940

D. FINRA Rules

7. Which of the following is true regarding a reverse stock split?

A. The market price for a share of stock is reduced.

B. The cost basis for a share of stock is adjusted.

C. The quantity of treasury stock is increased.

D. This is required in the event of a merger.

8. How is notice of a corporate action given?

A. For over-the-counter shares, the SEC provides notices.

B. For over-the-counter shares, the NYSE provides notices.

C. For exchange-traded shares, the exchange provides notices.

D. For exchange-traded shares, FINRA communicates the actions.

9. Which of the following statements is true regarding proxies?

A. FINRA Rule 2251 governs proxies for owners of stocks, corporate bonds, and municipal bonds.

B. A FINRA member must provide proxy materials to the beneficial owner of stock whether or not the issuer provides enough copies of proxy materials.

C. A FINRA member must provide proxy materials to the beneficial owner of stock whether or not the issuer requests this service.

D. A shareholder may authorize another party to cast the votes which the shareholder is entitled to cast.

10. 1934 Act Section 14 – Proxies provides guidance to which of the following?

A. FINRA members

B. Boards of directors

C. Over-the-counter market makers

D. Qualified Investors

Test Information

10 questions
14 minutes
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