STOCKBROKER Test 1 — Questions and Answers
Question 1: How often must existing margin account holders get the Margin Disclosure Statement?
- Semiannually
- Monthly
- Annually (Correct answer)
- Quarterly
Correct answer: Annually
Explanation: <br> Margin customers must get the Margin Disclosure Statement at least once a year.
Question 2: Which of the following statements is true about people who will work as research analysts?
- They must pass a qualifying examination for research analysts only.
- They must be registered as general securities representatives and pass a research analyst qualification examination. (Correct answer)
- They must be registered as a general securities representative only.
- None of the above
Correct answer: They must be registered as general securities representatives and pass a research analyst qualification examination.
Explanation: <br> Research analysts must first register as general securities representatives and then pass a research analyst qualification examination.
Question 3: In a Short Margin Account, what is the equity formula?
- + Credit + Short Market Value = Equity
- + Credit - Short Market Value = Equity (Correct answer)
- - Credit - Short Market Value = Equity
- - Credit + Short Market Value = Equity
Correct answer: + Credit - Short Market Value = Equity
Explanation: <br> Equity in a Short Margin Account is calculated as follows: <br> Equity = Credit Balance - Short Market Value
Question 4: Which of the following types of investors are considered institutional?
- An employee benefit plan that meets the requirement of Section 403(b) or Section 457 of the Internal Revenue Code and has at least 100 participants
- A qualified plan as defined in Section 3(a)(12)(C) of the Exchange Act and that has at least 100 participants
- A governmental entity
- All of the above (Correct answer)
Correct answer: All of the above
Explanation: <br> Institutional investors include: <br> Governmental entities. <br> Employee benefit plans that meet the requirements of Section 403(b) or Section 457 of the Internal Revenue Code and have at least 100 participants. <br> Qualified plans that meet the requirements of Section 3(a)(12)(C) of the Exchange Act and have at least 100 participants. <br>
Question 5: The Securities Act of 1933 is primarily concerned with the registration of:Which of the following is defined as "advertising" in the Securities Act of 1933?
- Letters of an “individual” nature sent to customers
- Options website (Correct answer)
- Options disclosure document
- Standard option worksheet
Correct answer: Options website
Explanation: <br> Optional rationale Any sales content that reaches a public audience through a mass medium, such as websites, newspapers, periodicals, magazines, radio, television, telephone recordings, motion pictures, billboards, signs, or sales communications to the public, is described as advertising. <br> Correspondence is a letter sent to a customer, whereas sales literature is characterized as an options worksheet. The Options Disclosure Document (ODD) is the mandatory offering information that must be provided to customers when they open an options account and any options communication that makes a recommendation, indicates prior performance, or makes a prognosis.
Question 6: What are the three requirements for general telemarketing?
- Time of Day Restriction, Firm-Specific Do-Not-Call List, and State Do-Not Call List
- Time of Day Restriction, State Do-Not-Call List, and National Do-Not-Call List
- Time of Day Restriction, National Do-Not-Call List, and Firm-Specific Do Not Call List (Correct answer)
- State Do-Not-Call List, National Do-Not-Call List, and Firm-Specific Do-Not-Call List
Correct answer: Time of Day Restriction, National Do-Not-Call List, and Firm-Specific Do Not Call List
Explanation: <br> The three General Telemarketing Requirements are the Time of Day Restriction, the Firm-Specific Do-Not-Call List and the National Do-Not-Call List.
Question 7: Except for the following, all of the following statements about the municipal financial advisor in competitive bid underwritings are true:
- Financial advisor will be the underwriter of the offering (Correct answer)
- Issuer pays the financial advisor
- Financial advisor helps the issuer structure a new bond offering
- Financial advisor is usually a municipal broker-dealer
Correct answer: Financial advisor will be the underwriter of the offering
Explanation: <br> Municipal financial advisors are municipal broker-dealers who are knowledgeable about the municipal market. The financial advisor receives a fee from the municipality for assisting in creating a competitive bid offering. The firm acting as the advisor tries to get the issuer the best interest rate possible. If the underwriter is the same firm, there is an inherent conflict of interest. As the underwriter, the firm wants the issuer to pay the maximum interest rate possible, making it simpler to sell the issuer. The financial adviser cannot also be the underwriter in the transaction, which applies to competitive bids and negotiated offerings.
Question 8: If a registered principal or registered representative's registration has been cancelled or terminated for a period of ___________ or more, he or she must repeat the qualifying exam.
- 3 years
- 2 years (Correct answer)
- 1 year
- 5 years
Correct answer: 2 years
Explanation: <br> If your registration has been revoked or canceled for more than two years, you must retake the qualifying exam.
Question 9: A consumer who owns 100 shares of stock may be protected by:
- Buying a put (Correct answer)
- Selling a put
- Buying a car
- Buying another 100 shares of the stock
Correct answer: Buying a put
Explanation: <br> The easiest way to hedge a long stock position against a market downturn is to buy a put. If the market declines, the holder of a long put option can put (sell) the stock at the exercise price, shielding the stock position from market risk.
STOCKBROKER Test 1
How often must existing margin account holders get the Margin Disclosure Statement?