SIE Study Guide| 315 QUESTIONS|
WITH COMPLETE SOLUTION
Section 1: Knowledge of Capital Markets Correct Answer:
The SEC
purpose/mission
when created
jurisdiction
authority Correct Answer: protect investos, maintin fair orderly & efficient markets, facilitate
capital formation
by congress in 1934
US federal government
enforce federal security laws & create laws that regulate securities industry
enforces Securities act 1933/1934, trust indenture act 1939, investment company act 1940,
investment advisors act 1940
SROs (Self-Regulatory Organizations)
what is the largest SRO? Correct Answer: organization formed to regulate certain professions &
industires
to create rules that promote order among businesses& orgs, supplemental to laws/gov
FINRA
CBOE
jurisdiction? Correct Answer: originated the VIX
Chicago board options exchange
1st nationally recognized sec exchange listing and trading options.
(lgest option market)
SRO
jurisdiction over all writing and trading of standardized options and related contracts listed on
exchange
FINRA
,government? Correct Answer: Financial Industry Regulatory Authority
license and regulate B/Ds
license security dealer, audit dealers/associated firms, ensure compliance, write/enforce rules
governing BDs, regulate trading equities corps bonds sec features options
independent NONgovernmental
largest SRO
MSRB
supports? Correct Answer: Municipal Securities Rulemaking Board
BOD oversee Us municipal & responsible for setting/governing rules
support FINRA
SRO
Department of Treasury/IRS Correct Answer: manage federal finances by collecting taxes and
paying bills & managing currency/gov accs /public debt
IRS- US gov agency responsible for collecting most federal taxes and for administering tax rules
and regulations
State Regulators Correct Answer: state/local public service/utilities commission,
insurance/annuity, banking, company info, consumer protection
NASAA
what is it? Correct Answer: North American Securities Administrators Association
oldest international investor protection organization
(a state regulator)
The Federal Reserve
fiscal or monetary policy?
composed of?
when tighten policy? Correct Answer: the central bank of the United States
control inflation/encourage employment, responsible for clearing checks & supplying currency,
most important to loan $ to other banks & set interest rates, make bank reserve requirements
independent body (meaning looks after broader interests rather than for ones own political
interests)
,lower rate= more money borrowed= more money in circulation
BOG (board of governors), 12 fed reserve banks, fed open market committee (FOMC=set
monetary policy)
when inflation is too high
SIPC
oversees? Correct Answer: Securities Investor Protection Corporation
protects customers account in BD bankruptcy cash/securities up to 500,000, cash only 250,000
oversee liquidation of member firms
nonprofit
FDIC
type of agency?
why created?
funded by? Correct Answer: Federal Deposit Insurance Corporation
insures depositors of insured banks
independent agency
created by congress to maintain stable financial system, make lg/complex fin institutions
resolvable
funded by premium banks and saving associations, not taxpayers
backed by full faith and credit of US
Market Participants and Their Roles Correct Answer:
Investors
accredited
institutional (ex)
retail Correct Answer: commit capital in expectation of receiving financial returns
long term strategic position
-knowledgeable to handle risks with unregistered securities
-company/org must invest OBO ex) mutual funds, pensions, insurance companies, retirement
funds... less restrictive regulations bc better educated...can buy a lot of shares in company to
aquire voting rights in order to control
-nonprofessional, invest thru trading or online brokerage in sm amts
, Broker Dealers
introducing
clearing
prime brokers Correct Answer: buy/sell securities for own acc or OBO customers
broker(agent)- when execute orders OBO
dealer(principal)- when trade 4 own acc
-contacts w clearing firm tht handles execution of orders, has direct relationship w customer
primary goal- customer service act as middle man
-liason between investor and clearing corp, make sure trade settlement/transaction successful,
responsible for paperwork associated w clearing/execution, maintain custody of acc holders
sec/assets,
clears own trades as well as others
also called carrying broker
-provide clearing,custody,servicing security agent between client and all brokers. central source
4 closing/servcicing assets. charges fee
ex)goldmansacs
Prime Broker Correct Answer: invest manage open brokerage acc @ several clearing houses.
process and have back office clearing/processing thru a single B/D
Investment Advisors Correct Answer: person/group making investment recommendations or
doing security analysis for fee thru direct management of assets or written publications
Municipal Advisors Correct Answer: give advice to state/local gov (cities/counties/schools) on
municipal products/issuance offer advice on municipalities bond offerings
Issuers and Underwriters Correct Answer: legal entity tht develops, registers, and sell securities
2 finance
issuers can be governments, municipalities, corps, investment trusts
assume risk of managing/selling
Traders....vs investors
cons of trading(2)? Correct Answer: capitalize on short term trends vs long term
hold less assets for shorter period
capital gains taxing, commission to brokers
Market Makers
how does a market maker act? Correct Answer: stand ready to buy/sell securities to maintain
liquidity & fair/orderly market, will accomadate if noones selling what u want or buying what u
have
WITH COMPLETE SOLUTION
Section 1: Knowledge of Capital Markets Correct Answer:
The SEC
purpose/mission
when created
jurisdiction
authority Correct Answer: protect investos, maintin fair orderly & efficient markets, facilitate
capital formation
by congress in 1934
US federal government
enforce federal security laws & create laws that regulate securities industry
enforces Securities act 1933/1934, trust indenture act 1939, investment company act 1940,
investment advisors act 1940
SROs (Self-Regulatory Organizations)
what is the largest SRO? Correct Answer: organization formed to regulate certain professions &
industires
to create rules that promote order among businesses& orgs, supplemental to laws/gov
FINRA
CBOE
jurisdiction? Correct Answer: originated the VIX
Chicago board options exchange
1st nationally recognized sec exchange listing and trading options.
(lgest option market)
SRO
jurisdiction over all writing and trading of standardized options and related contracts listed on
exchange
FINRA
,government? Correct Answer: Financial Industry Regulatory Authority
license and regulate B/Ds
license security dealer, audit dealers/associated firms, ensure compliance, write/enforce rules
governing BDs, regulate trading equities corps bonds sec features options
independent NONgovernmental
largest SRO
MSRB
supports? Correct Answer: Municipal Securities Rulemaking Board
BOD oversee Us municipal & responsible for setting/governing rules
support FINRA
SRO
Department of Treasury/IRS Correct Answer: manage federal finances by collecting taxes and
paying bills & managing currency/gov accs /public debt
IRS- US gov agency responsible for collecting most federal taxes and for administering tax rules
and regulations
State Regulators Correct Answer: state/local public service/utilities commission,
insurance/annuity, banking, company info, consumer protection
NASAA
what is it? Correct Answer: North American Securities Administrators Association
oldest international investor protection organization
(a state regulator)
The Federal Reserve
fiscal or monetary policy?
composed of?
when tighten policy? Correct Answer: the central bank of the United States
control inflation/encourage employment, responsible for clearing checks & supplying currency,
most important to loan $ to other banks & set interest rates, make bank reserve requirements
independent body (meaning looks after broader interests rather than for ones own political
interests)
,lower rate= more money borrowed= more money in circulation
BOG (board of governors), 12 fed reserve banks, fed open market committee (FOMC=set
monetary policy)
when inflation is too high
SIPC
oversees? Correct Answer: Securities Investor Protection Corporation
protects customers account in BD bankruptcy cash/securities up to 500,000, cash only 250,000
oversee liquidation of member firms
nonprofit
FDIC
type of agency?
why created?
funded by? Correct Answer: Federal Deposit Insurance Corporation
insures depositors of insured banks
independent agency
created by congress to maintain stable financial system, make lg/complex fin institutions
resolvable
funded by premium banks and saving associations, not taxpayers
backed by full faith and credit of US
Market Participants and Their Roles Correct Answer:
Investors
accredited
institutional (ex)
retail Correct Answer: commit capital in expectation of receiving financial returns
long term strategic position
-knowledgeable to handle risks with unregistered securities
-company/org must invest OBO ex) mutual funds, pensions, insurance companies, retirement
funds... less restrictive regulations bc better educated...can buy a lot of shares in company to
aquire voting rights in order to control
-nonprofessional, invest thru trading or online brokerage in sm amts
, Broker Dealers
introducing
clearing
prime brokers Correct Answer: buy/sell securities for own acc or OBO customers
broker(agent)- when execute orders OBO
dealer(principal)- when trade 4 own acc
-contacts w clearing firm tht handles execution of orders, has direct relationship w customer
primary goal- customer service act as middle man
-liason between investor and clearing corp, make sure trade settlement/transaction successful,
responsible for paperwork associated w clearing/execution, maintain custody of acc holders
sec/assets,
clears own trades as well as others
also called carrying broker
-provide clearing,custody,servicing security agent between client and all brokers. central source
4 closing/servcicing assets. charges fee
ex)goldmansacs
Prime Broker Correct Answer: invest manage open brokerage acc @ several clearing houses.
process and have back office clearing/processing thru a single B/D
Investment Advisors Correct Answer: person/group making investment recommendations or
doing security analysis for fee thru direct management of assets or written publications
Municipal Advisors Correct Answer: give advice to state/local gov (cities/counties/schools) on
municipal products/issuance offer advice on municipalities bond offerings
Issuers and Underwriters Correct Answer: legal entity tht develops, registers, and sell securities
2 finance
issuers can be governments, municipalities, corps, investment trusts
assume risk of managing/selling
Traders....vs investors
cons of trading(2)? Correct Answer: capitalize on short term trends vs long term
hold less assets for shorter period
capital gains taxing, commission to brokers
Market Makers
how does a market maker act? Correct Answer: stand ready to buy/sell securities to maintain
liquidity & fair/orderly market, will accomadate if noones selling what u want or buying what u
have
