SIE Module 11 Test Bank


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1. An investment adviser promises to refund part of his fee in the first year if it is higher than the return on the portfolio he is managing. This most likely represents:

2. An agent of a broker/dealer is convinced that the stock of SuperCo will rise significantly in the future. The agent offers to buy the stock back from her customers at 12% higher than the stock’s current price at any time during the next four months. Is this a permitted act?

3. Painting the tape is a form of market manipulation whereby:

4. Which one of the following Acts increased the penalties for insider trading and also granted the SEC broader rulemaking authority concerning Chinese Walls?

5. Which one of the following represents the manipulation of a security’s market price through large purchases on the stock market in an attempt to prevent the price from falling?

6. Jorge wants to buy 1,000 shares of Super Company stock. Awesome Bank is the market maker for this stock and advertises at 9:00 a.m. on Wednesday that the bid price for Super Company stock is $45.57 and its asking price is $46.10. Jorge places an order to buy 1,000 shares at $46.10, but Awesome Bank claims the bid price is now $45.77 and the ask price is now $46.60. Awesome Bank’s actions represent:

7. Kevin, an agent of a broker/dealer, receives an order from a major client to purchase 750,000 shares of ABC Company stock. Kevin realizes this large purchase will most likely increase the price of ABC Company stock. As a result, prior to purchasing the stock in his client’s account, Kevin purchases 1,000 shares of ABC Company stock for his own personal investment account. Kevin’s actions represent the unethical business practice of:

8. Which one of the following represents the practice of selling large amounts of a commodity or security in order to prevent a rise in the price?

9. Melissa is an agent of a broker/dealer. Unbeknownst to the broker/dealer, she is selling interests in a hedge fund to existing clients of the broker/dealer. Melissa receives a commission on the sales of the hedge fund interests and on the sales of other securities in the clients’ accounts. She is violating the Uniform Securities Act because she is engaging in:

10. Ian is an agent for ABC Brokerage. Tommy is Ian’s client. Tommy wants to purchase stock of Washburn Company, which is a private company not traded on public exchanges. Washburn is offering stock directly through an agency that underwrites private placements. ABC Brokerage has not performed the necessary due diligence on Washburn Company, so their private stock is not on the list of approved products for sale. Ian, however, wants to earn the commission associated with the sale of Washburn Company stock, so Ian completes the transaction on behalf of Tommy by using a third-party broker, Discount Securities, who has approval for Washburn Company stock. Ian has engaged in: