Section 1 Practice Quiz | Securities Industry Essentials Exam

1. The principal difference between a broker-dealer and an investment adviser is:

Broker-dealers are commission-based businesses whereas investment advisers charge fees for their investment advisory and portfolio management services.

Broker-dealers are transaction-based businesses that manage portfolios for clients whereas investment advisers advise clients on which stocks to purchase.

Broker-dealers engage in investment banking whereas investment advisers buy and sell securities as requested by clients.

None of the above

2. An SEC provision allows an issuer to register a new issue security without selling the entire issue at once. The issuer may sell limited portions of the issuer over three years without reregistering the security or incurring penalties is called:

Public offering

Secondary offering

Primary offering

Shelf offering

3. The Securities Investor Protection Corporation (SIPC) protects securities investors by providing:

Fidelity bonding to brokerage firms and their employees and agents.

Insurance protection in the event of a brokerage firm bankruptcy.

Investment insurance to individual but not institutional customers of brokerage firms.

Account insurance for those customers who elect to pay a small premium for it.

4. NYSE-listed stock transactions generally take place on the floor of the NYSE. However, when they occur off the floor, this is referred to as a:

Secondary transaction

Trade-through

Third-market transaction

Non-issuer transaction

5. Key economic variables that economists use to predict a new phase of the economy:

Leading indicators

Inflation

GDP

Primary market

6. Setting a minimum level for number of shares to sold is known as:

Fiscal policy

Mini-max underwriting

Capital market

Best efforts underwriting

7. The term ‘Issuer’ may refer to:

The U.S. Government

Counties

Corporations

All of the above

8. The ADR is an investment vehicle best known for:

Enabling domestic corporations to offer their shares abroad.

Facilitating trading in foreign shares by investors in the U.S.

Enabling foreign investors to receive dividends and interest denominated in U.S. dollars.

Its place as a liquid short-term investment in money market portfolios.

9. Treasury stock:

Is stock repurchased in the secondary market by the corporate issuer.

Is stock held back by corporate issuers as part of an IPO for use in stock options, warrants, convertible securities, and other purposes.

Is stock issued by the U.S. Treasury.

Is stock re-issued by the U.S. Treasury.

10. Transactions initiated by the client and not the agent is known as:

Primary Offering

Unsolicited Transactions

All Transactions

Monetary Policy

11. Function under SEC’s oversight. Each SRO is accountable to the commission for enforcing federal securities as well as supervising securities practices within assigned jurisdiction (FINRA, CBOE, MSRB)

Unsolicited transactions

Initial Public Offering (IPO)

Self Regulatory Organizations (SROs)

Carrying (clearing firm)

12. The underlying equation of a corporation’s balance sheet is commonly expressed as:

Net Worth + Total Assets = Total Liabilities

Total Assets – Total Liabilities = Capital Structure

Total Assets – Total Liabilities = Net Worth

Current Assets – Current Liabilities = Net Working Capital

13. The exchange-listed stock traded OTC primarily by institutional investors:

Fourth market

Primary market

Secondary market

Third market

14. Self-regulatory organizations (SROs) include each of the following except:

FINRA

NYSE

SEC

All of the above

15. A group of broker-dealers or investment that work with an issuer to bring its securities to the market and help them sell it to the public:

Brokers

Custodian

Underwriters

Broker-dealers

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