FINRA FINRA-SERIES-7 Online Practice Questions and Exam Preparation

FINRA FINRA-SERIES-7 Online Questions & Answers

• Question 341:

  Bubba opens a new account with a broker/dealer and asks for a copy of the firm's financial statement. If the firm has not been subject to a formal audit by an independent public accountant for quite some time, what should it do in response to the request?

  A. give Bubba its latest available statement
  B. wait until after the next audit is completed before providing a statement to Bubba
  C. delay sending a statement until Bubba has had an account with the firm for at least six months
  D. refuse to provide a financial statement
  A. give Bubba its latest available statement

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  Explanation/Reference:

  give Bubba its latest available statement. Bubba, like any customer, must be provided with the most recent available information.

• Question 342:

  Bubba maintains an individual cash account as well as a joint account with his wife, Bubbette. While Bubba is out of town on a fishing trip, Bubbette calls the brokerage firm with an order to buy 100 shares of Great Company, Inc., at the

  market value for Bubba individual account. It is a stock Bubba has previously informed the brokerage he wanted to buy at the "right price".

  What does the brokerage do?

  A. refuse to accept the order unless Bubba has provided a signed trading authorization in favor of Bubbette
  B. execute the order as requested
  C. enter the order only after receipt of written instructions to do so from Bubba
  D. buy the stock in the joint account and, after verification from Bubba, journal the security to his individual account
  A. refuse to accept the order unless Bubba has provided a signed trading authorization in favor of Bubbette

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  Explanation/Reference:

  refuse to accept the order unless Bubba has provided a signed trading authorization in favor of Bubbette. Unless Bubbette has been given written trading authorization over Bubba's account, trading orders cannot be accepted from her or any other person.

• Question 343:

  Mutual fund salespersons may not represent that a product is like of safer than:

  A. an insurance policy
  B. a fixed annuity
  C. a corporate debt instrument
  D. all of the above
  D. all of the above

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  Explanation/Reference:

  all of the above. A broker/dealer must demonstrate that what is said or printed about a product is not fraudulent. Representing a mutual fund as safer than any of the choices above is likely fraudulent.

• Question 344:

  A new stock offering by Bubba Corporation provides details that state between 1,000,000 and 1,500,000 shares will be sold depending upon market conditions. This offering is a: A. best efforts

  B. standby
  C. mini-max
  D. market potential
  C. mini-max

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  Explanation/Reference:

  mini-max. These offerings state the minimum and maximum number of shares offered.

• Question 345:

  Which of the following does not describe an underwriting procedure?

  A. best efforts
  B. all or none
  C. standby
  D. fill or kill
  D. fill or kill

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  Explanation/Reference:

  fill or kill. Fill or kill is an order qualifier. It requests immediate execution of the whole order or immediate cancellation. A best efforts underwriting, frequently linked to all or none, is usually seen on small new issues. A standby underwriting is utilized to guarantee the success of a rights offering.

• Question 346:

  Provisions of SEC Rule 145 normally apply to an exchange of one security for another as a result of:

  A. a stock split
  B. a change in par value
  C. a merger
  D. a "no-sale" ruling issued by the SEC
  C. a merger

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  Explanation/Reference:

  a merger. Rule 145 basically applies to mergers, consolidations, and acquisitions.

• Question 347:

  Municipal bond brokers generally conduct the following:

  A. trade for dealer banks
  B. trade for non-bank dealers
  C. trade for their own account
  D. both A and B
  D. both A and B

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  Explanation/Reference:

  both A and B. Brokers generally operate as agents attempting to locate buyers or sellers for bond dealers. They do not trade for their own accounts or deal directly with individual investors.

• Question 348:

  Which of the following is true about a customer with a frozen account?

  A. may not trade corporate securities under any circumstances
  B. may make purchases but not sales of corporate securities
  C. must deposit the full purchase cost before an order is executed
  D. must deposit sufficient cash for each transaction no later than the settlement date
  C. must deposit the full purchase cost before an order is executed

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  Explanation/Reference:

  must deposit the full purchase cost before an order is executed. A "frozen" account is restricted to full cash payment in advance for any purchase.

• Question 349:

  Which of the following has the least active secondary market?

  A. treasury bills
  B. banker's acceptances
  C. certificates of deposit
  D. commercial paper
  D. commercial paper

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  Explanation/Reference:

  commercial paper. The sizes of secondary markets for these securities are listed in order with treasuries first, then banker's acceptances, followed by certificates of deposit. There is only a very small secondary market for commercial paper.

• Question 350:

  Bubba wishes to invest $50,000 in three mutual funds offered by different underwriters with growth as the main objective. A recommendation to purchase only one such fund for $50,000 might be more suitable to Bubba if:

  A. the growth in one fund will be greater than the combined growth in three
  B. the income from one fund will be greater than the combined income in three
  C. a withdrawal plan would be easier to employ using a single fund
  D. the purchase of one fund would probably be made at a break point allowing more dollars to be invested in fund shares
  D. the purchase of one fund would probably be made at a break point allowing more dollars to be invested in fund shares

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  Explanation/Reference:

  the purchase of one fund would probably be made at a break point allowing more dollars to be invested in fund shares. There is nothing inherently unsuitable about recommending three different funds. However, in most cases, a single fund offers satisfactory diversification and can be purchased with a reduction in sales charge.