Pass the FINRA General Securities Representative SIE Questions and answers with ValidTests

During the "quiet period" after filing the registration statement, issuers are restricted in what they can communicate to the public to avoid influencing the market.

C is correct because promotional statements, such as those supporting the company’s valuation, are prohibited during this time.

A, B, and D are factual, non-promotional statements and are permitted.

Step by Step Explanation:

Definition of Accredited Investor: As per SEC Regulation D, Rule 501, an accredited investor includes:

Individuals with a net worth exceeding $1 million (excluding primary residence equity).

Individuals with an annual income exceeding $200,000 (or $300,000 jointly with a spouse) for the past two years.

Elimination of Incorrect Answers:

$500,000 threshold (option B) is too low to qualify under Regulation D.

Option D is incorrect as it requires assets of $5 million, not $2.5 million.

Accounts held individually are subject to probate, which is the legal process of administering the decedent’s estate. Probate determines the distribution of assets according to the deceased’s will or state intestacy laws.

A is correct because individual accounts require probate to transfer assets.

B is incorrect because irrevocable trusts bypass probate.

C is incorrect because TOD accounts allow direct transfer of assets to named beneficiaries without probate.

D is incorrect because JTWROS accounts transfer ownership to the surviving account holder automatically.

Treasury securities are among the most liquid investments, as they are backed by the U.S. government and trade actively in large volumes.

A is correct because Treasuries are highly liquid, making them easy to buy and sell.

B is incorrect because most Treasury securities are not callable.

C is incorrect because FDIC insurance applies to bank deposits, not Treasuries.

D is incorrect because U.S. government securities have negligible default risk.

Step by Step Explanation:

Suspicious Activity: The use of multiple money orders, lack of investment activity, and request 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.

Step by Step Explanation:

FINRA Rule 3210: Requires registered representatives to obtain written consent from their employing broker-dealer before opening accounts at other financial institutions if securities transactions will occur.

Incorrect Options:

A, B, and C: These accounts are exempt because they do not involve direct securities transactions requiring monitoring.

FINRA prohibits the payment of referral fees or splitting of commissions with individuals who are not registered with a broker-dealer. However, taking a friend out to dinner as a gesture of gratitude is allowed, as it does not involve cash or monetary compensation directly tied to the referral.

C is correct because non-monetary expressions of gratitude (like a dinner) are permitted under FINRA rules.

A is incorrect because commission splitting with unregistered individuals is prohibited.

B is incorrect because paying referral fees is also prohibited without registration.

D is incorrect because giving prepaid credit cards tied to commission income violates compensation rules.

Step by Step Explanation:

FINRA Rule 3220: This rule limits gifts to $100 per person annually to prevent conflicts of interest.

Aggregate Limit: There is no provision for exceeding the $100 annual limit, regardless of the number of gifts.

Purpose: The rule ensures that gifts do not influence decisions or create unethical relationships.

Step by Step Explanation:

Regular-Way Settlement: For equity securities, settlement occurs on a T+2 basis, meaning two business days after the trade date.

Calculation:

Trade Date (T): Thursday, August 2.

T+2 Settlement: Excludes weekends, so settlement falls on Monday, August 6.

Incorrect Options:

A: Reflects T+1, not the correct settlement cycle.

C & D: Extend beyond the standard T+2 cycle.

Refunding involves replacing existing debt with new debt, usually to take advantage of lower interest rates.

B is correct because the company issues new bonds to pay off the existing debt.

A is incorrect as refunding involves issuing debt, not equity.

C is incorrect because the company is not obligated to buy back bonds at a discount.

D is incorrect because a sinking fund is used for gradual repayment, not refunding.