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General Securities Representative Flashcards

7 cards from real FINRA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 General Securities Representative flashcards as text

  1. A customer instructs her broker to sell 500 shares of XYZ 'at the market.' If the current best bid is $42.10 and the best ask is $42.20, at what price should the order execute?

    Answer: $42.10

    A market sell order executes at the best available bid price, which is $42.10.

  2. Under FINRA rules, which of the following is considered a 'restricted person' prohibited from purchasing shares in a hot IPO?

    Answer: A broker-dealer employee and member of their immediate family

    FINRA Rule 5130 restricts broker-dealer employees and their immediate family members from purchasing new issue equity securities in a public offering.

  3. A convertible bond with a conversion ratio of 25 is trading at par ($1,000). The stock is trading at $38. What is the conversion premium?

    Answer: 5.26%

    Parity value is 25 × $38 = $950; conversion premium = ($1,000 − $950) / $950 = 5.26%.

  4. Which money market instrument is an unsecured, short-term promissory note issued by a corporation to finance short-term liabilities?

    Answer: Commercial paper

    Commercial paper is an unsecured short-term debt instrument issued by corporations, typically with maturities up to 270 days.

  5. A customer buys 1 ABC Jan 50 Call for $3 and simultaneously sells 1 ABC Jan 60 Call for $1. What is the maximum gain on this bull call spread?

    Answer: $800

    Max gain = (difference in strikes − net debit) × 100 = (10 − 2) × 100 = $800.

  6. Under SEC Rule 144, which of the following is required before an affiliate can sell restricted securities?

    Answer: Holding the securities for at least 6 months and complying with volume limitations

    Rule 144 requires affiliates to satisfy a 6-month holding period and volume restrictions before selling restricted securities.

  7. A registered representative receives a tip from a friend who works at a pharmaceutical company that the FDA is about to approve a major drug. Trading on this information would violate which regulation?

    Answer: SEC Rule 10b-5 (insider trading)

    Trading on material nonpublic information (inside information) violates SEC Rule 10b-5, which prohibits fraud and deception in securities transactions.

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