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Wiley Series 24 Exam Review 2015 + Test Bank: The General Securities Principal Qualification Examination

Wiley Series 24 Exam Review 2015 + Test Bank: The General Securities Principal Qualification Examination

The Securities Institute of America, Inc.

ISBN: 978-1-118-85692-5

Oct 2014

480 pages

Select type: Paperback

Product not available for purchase

Description

The go-to guide to acing the Series 24 Exam!

Passing the General Securities Principal Qualification Examination (Series 24) qualifies an individual to act as a principal of a general securities broker-dealer and to supervise the firm and its agents. The exam covers the supervision of such areas as investment banking, underwriting, and research practices; trading and market-making; brokerage office operations; and sales practices and agents, as well as compliance with financial responsibility rules. Candidates must have passed the Series 62 or Series 7 prior to taking the Series 24 Exam.

Created by the experts at The Securities Institute of America, Inc., Wiley Series 24 Exam Review 2015 arms you with everything you need to pass this intensive 150-question test. Designed to help you build and fine-tune your knowledge of all areas covered in the exam and to guarantee that you're prepared mentally and strategically to take the test, it provides:

  • Dozens of examples
  • Assorted practice questions for each subject area covered in the exam
  • Priceless test-taking tips and strategies
  • Helpful hints on how to study for the test, manage stress, and stay focused

Wiley Series 24 Exam Review 2015 is your ticket to passing the Series 24 test on the first try—with flying colors!

ABOUT THE SERIES 24 EXAM XIX

ABOUT THIS BOOK XXIII

ABOUT THE TEST BANK XXIV

ABOUT THE SECURITIES INSTITUTE OF AMERICA XXV

CHAPTER 1 BROKERAGE OFFICE PROCEDURES 1

Hiring New Employees 1

Resignation of a Registered Representative 2

Registration Exemptions 3

Persons Ineligible to Register 4

Disciplinary Actions Against a Registered Representative 5

Termination for Cause 5

Outside Employment 6

Private Securities Transactions 6

Gift Rule 6

Sharing in a Customer’s Account 7

Borrowing and Lending Money 8

Order Tickets 8

Executing an Order 8

Becoming a Stockholder 10

Violation 11

Clearly Erroneous Reports 11

Execution Errors 11

Corporate and Municipal Securities Settlement Options 12

When-Issued Securities 13

Government Securities Settlement Options 14

Accrued Interest 14

Close Outs 15

Customer Confi rmations 16

Rules for Good Delivery 17

Rejection of Delivery 18

Reclamation 18

Marking to the Market 19

Customer Account Statements 19

Carrying of Customer Accounts 20

Dividend Distribution 20

Pretest 25

CHAPTER 2 RECORD KEEPING, FINANCIAL REQUIREMENTS, AND REPORTING 29

Blotters 29

General Ledger 30

Customer Accounts 30

Subsidiary (Secondary) Records 30

Securities Position Book (Ledger) Stock Record 30

Order Tickets 31

Confi rmations and Notices 31

Monthly Trial Balances and Net Capital Computations 31

Employment Applications 31

Records Required to Be Maintained for Three Years 31

Records Required to Be Maintained for Six Years 32

Records Required to Be Maintained for the Life of the Firm 32

Requirement to Prepare and Maintain Records Under SEC 17a-3 and 17a-4 34

Financial Requirements 34

Aggregate Indebtedness 37

Haircuts 38

Box Counts 39

Missing and Lost Securities 40

The Customer Protection Rule 41

The Early Warning Rule 44

FINRA Financial Requirements 45

Subordinated Loans 46

Temporary Subordination Agreements 47

Calculating Net Capital 47

Fidelity Bonds 48

Pretest 49

CHAPTER 3 ISSUING CORPORATE SECURITIES 55

The Prospectus 56

The Final Prospectus 57

Providing the Prospectus to Aftermarket Purchasers 57

SEC Disclaimer 58

Misrepresentations 58

Tombstone Ads 59

Free Riding and Withholding/FINRA Rule 5130 59

Underwriting Corporate Securities 61

Types of Underwriting Commitments 61

Types of Off erings 63

Awarding the Issue 64

The Underwriting Syndicate 64

Selling Group 64

Underwriter’s Compensation 65

Underwriting Spread 66

Factors That Determine the Size of the Underwriting Spread 66

Review of Underwriting Agreements by FINRA 66

Underwriter’s Compensation 67

Exempt Securities 68

Exempt Transactions 69

Rule 137 Nonparticipants 75

Rule 138 Nonequivalent Securities 75

Rule 139 Issuing Research Reports 75

Rule 415 Shelf Registration 76

Securities Off ering Reform Rules 77

SEC Rule 405 77

Additional Communication Rules 78

Pretest 81

CHAPTER 4 TRADING SECURITIES 85

Types of Orders 85

The Exchanges 89

Priority of Exchange Orders 90

The Role of the Specialist/DMM 90

Crossing Stock 93

Do Not Reduce (DNR) 93

Adjustments for Stock Splits 94

Stopping Stock 95

Commission House Broker 95

Two-Dollar Broker 95

Registered Traders 96

Super Display Book (SDBK) 96

Short Sales 96

Affirmative Determination 97

Regulation SHO 97

Rule 200 Definitions and Order Marking 98

Rule 203 Security Borrowing and Delivery Requirements 99

Threshold Securities 100

Block Trades 101

Trading Along 101

Circuit Breakers 102

Limit Up Limit Down (LULD) 102

Listing Requirements for the NYSE 103

Reading the Consolidated Tape 104

Exchange Qualifiers 105

Over-the-Counter/Nasdaq 106

Market Centers 118

SEC Regulation NMS 119

SEC Regulation ATS 119

Nasdaq International 120

Non-Nasdaq OTCBB 121

Pink Sheets 121

Third Market 122

Nasdaq Market Center for Listed Securities 122

Fourth Market 123

Nasdaq Listing Standards 123

Market Maker Regulations and Responsibilities 124

Times for Entering a Quote 124

Withdrawing Quotes 126

Handling and Displaying Customer Limit Orders 128

The Order Audit Trail System (OATS) 130

The Manning Rule 130

Automated Confirmation System (ACT)/Trade Reporting Facility (TRF) 131

ACT Trade Scan 132

Nasdaq Trade Reporting Facility (TRF) 132

Step Out Trades 136

Market Making During Syndication 136

Regulation M, Rule 101 137

Penalty Bids 137

Regulation M, Rule 102 138

Regulation M, Rule 103 138

Passive Market Makers’ Daily Purchase Limit 139

Regulation M, Rule 104 139

Syndicate Short Positions 140

Regulation M, Rule 105 141

Trade Reporting and Compliance Engine (TRACE) 141

Broker vs. Dealer 143

FINRA 5 Percent Markup Policy 144

Markups/Markdowns When Acting as a Principal 144

Riskless Principal Transactions 145

Proceeds Transactions 146

Firm Quote Rule 146

Trade Complaints Between Members 147

Arbitrage 148

Pretest 149

CHAPTER 5 RECOMMENDATIONS TO CUSTOMERS 155

Investment Objectives 156

Capital Asset Pricing Model (CAPM) 158

Risk vs. Reward 158

Alpha 160

Beta 161

Developing the Client Profi le 161

Professional Conduct when Making Recommendations 162

Recommending Mutual Funds 163

Periodic Payment Plans 164

Mutual Fund Current Yield 164

Fair Dealings with Customers 164

Recommendations to an Institutional Customer 168

Short Sales in Connection with Recommendations 169

Issuing Research Reports 169

Regulation FD 172

Pretest 173

CHAPTER 6 GENERAL SUPERVISION 177

The Role of the Principal 177

Supervisor Qualifications and Prerequisites 178

Continuing Education 179

Tape Recording Employees 180

Heightened Supervisory Requirements 181

Information Obtained from an Issuer 182

Customer Complaints 182

Investor Information 183

Member Offices 183

Annual Compliance Review 185

Business Continuity Plan 185

Currency Transactions 185

The Patriot Act 185

U.S. Accounts 187

Foreign Accounts 187

Pretest 189

CHAPTER 7 CUSTOMER ACCOUNTS 193

Holding Securities 195

The Depository Trust Company (DTC) 196

Mailing Instructions 197

Individual Account 197

Joint Account 197

Joint Tenants with Rights of Survivorship (JTWROS) 197

Joint Tenants in Common (JTIC) 198

Transfer on Death (TOD) 198

Death of a Customer 198

Corporate Accounts 199

Trust Accounts 199

Partnership Accounts 200

Trading Authorization 200

Operating a Discretionary Account 200

Managing Discretionary Accounts 201

Third-Party and Fiduciary Accounts 201

Uniform Gifts to Minors Act (UGMA) 203

Accounts for Employees of Other Broker Dealers 205

Numbered Accounts 205

Prime Brokerage Accounts 205

Account Transfer 206

Margin Accounts 207

Guaranteeing a Customer’s Account 208

Day Trading Accounts 208

Commingling Customer’s Pledged Securities 209

Wrap Accounts 209

Regulation S-P 209

Pretest 211

CHAPTER 8 MARGIN ACCOUNTS 215

Regulation of Credit 215

House Rules 218

Establishing a Long Position in a Margin Account 218

An Increase in the Long Market Value 219

Special Memorandum Account (SMA) Long Margin Account 221

A Decrease in the Long Market Value 222

The Minimum Equity Requirement for Long Margin Accounts 223

Establishing a Short Position in a Margin Account 224

A Decrease in the Short Market Value 225

An Increase in the Short Market Value 226

The Minimum Equity Requirement for Short Margin Accounts 227

Margin Requirements for Day Trading 228

Combined Margin Accounts 229

Portfolio Margin Accounts 230

Pretest 231

CHAPTER 9 INVESTMENT COMPANIES 235

Investment Company Philosophy 235

Types of Investment Companies 236

Open-End vs. Closed-End Funds 237

Exchange-Traded Funds (ETFs) 238

Exchange Traded Notes (ETNs) 238

Diversifi ed vs. Nondiversified 239

Investment Company Registration 240

Registration Requirements 240

Investment Company Components 242

Mutual Fund Distribution 244

Selling Group Member 245

Distribution of No-Load Mutual Fund Shares 245

Distribution of Mutual Fund Shares 245

Mutual Fund Prospectus 245

Additional Disclosures by a Mutual Fund 247

Anti-Reciprocal Rule 247

Money Market Funds 248

Valuing Mutual Fund Shares 248

Changes in the NAV 249

Sales Charges for Open-End Funds 250

Sales Charges for Closed-End Funds 250

Front-End Loads 250

Back-End Loads 251

Other Types of Sales Charges 251

12B-1 Fees 252

Calculating a Mutual Fund’s Sales Charge Percentage 253

Finding the Public Off ering Price 253

Sales Charge Reductions 254

Breakpoint Schedule 254

Letter of Intent 255

Breakpoint Sales 255

Rights of Accumulation 255

Automatic Reinvestment of Distributions 256

Combination Privileges 256

Conversion or Exchange Privileges 257

30-Day Emergency Withdrawal 257

Voting Rights 258

Yields 258

Portfolio Turnover 258

Voluntary Accumulation Plans 259

Dollar Cost Averaging 259

Contractual Accumulation Plans 260

Hedge Funds 261

Pretest 263

CHAPTER 10 VARIABLE ANNUITIES AND RETIREMENT PLANS 267

Annuities 267

Annuity Purchase Options 271

Accumulation Units 272

Annuity Units 272

Annuity Payout Options 272

Factors Affecting the Size of the Annuity Payment 274

Taxation 275

Sales Charges 275

Variable Annuity vs. Mutual Fund 275

Retirement Plans 275

Individual Plans 276

Individual Retirement Accounts (IRAs) 276

Keogh Plans (HR-10) 281

Tax-Sheltered Annuities (TSAs) and Tax-Deferred Accounts (TDAs) 282

Corporate Plans 284

Employee Stock Ownership Plans (ESOPs) 286

Profit Sharing Plans 286

401(k)s and Thrift Plans 287

Rolling Over a Pension Plan 287

Employee Retirement Income Security Act of 1974 (ERISA) 287

Pretest 289

CHAPTER 11 SECURITIES INDUSTRY RULES AND REGULATIONS 293

The Securities Exchange Act of 1934 293

The Securities and Exchange Commission (SEC) 294

Extension of Credit 295

Trading Suspensions 295

Issuers Repurchasing Their Own Securities 295

Tender Offers 297

Stockholders Owning 5 Percent of An Issuer’s Equity Securities 298

The National Association of Securities Dealers (NASD) 298

Becoming a Member of FINRA 300

Foreign Broker Dealers 302

Registration of Agents/Associated Persons 302

Retiring Representatives/Continuing Commissions 303

State Registration 303

Retail Communications/Communications with the Public 303

FINRA Rule 2210 Communications with the Public 304

Broker Dealer Websites 307

Blind Recruiting Ads 307

Generic Advertising 308

Tombstone Ads 308

Testimonials 309

Free Services 309

Misleading Communications 309

Securities Investor Protection Corporation Act of 1970 309

Customer Coverage 310

The Securities Acts Amendments of 1975 311

The Insider Trading and Securities Fraud Enforcement Act of 1988 311

Firewall 312

The Telephone Consumer Protection Act of 1991 312

The Penny Stock Cold Call Rule 313

Violations and Complaints 314

Resolution of Allegations 314

Minor Rule Violation 314

Electronic Blue Sheets 315

Mediation 316

Code of Arbitration 316

The Arbitration Process 316

Political Contributions 318

Investment Adviser Registration 319

Investment Adviser Representative 319

The National Securities Market Improvement Act of 1996 320

Investment Adviser Registration 321

Investment Adviser Capital Requirements 321

Exams for Investment Advisers 321

Investment Adviser Advertising and Sales Literature 322

Investment Adviser Brochure Delivery 323

Soft Dollars 323

Broker Dealers on the Premises of Other Financial Institutions 324

The Uniform Securities Act 325

Sarbanes-Oxley Act 326

SEC Regulation S-K 327

SEC Regulation M-A 328

The Hart-Scott-Rodino Act 329

FINRA Rule 2290 (Fairness Opinion) 330

SEC Regulation S-X 330

Pretest 333

ANSWER KEYS 339

APPENDIX 349

GLOSSARY OF EXAM TERMS 371

INDEX 437