General Securities Representative SIE Dumps PDF

Under Federal Reserve Regulation T, if a customer does not pay for a purchase in a cash account within the required payment period and the firm does not grant an extension, the firm must liquidate the securities (sell them) and impose a 90-day freeze on the account’s ability to purchase securities on credit, which corresponds to choice B. The “freeze” means that for 90 days the customer must make full payment in advance (or deliver fully paid funds) before new purchases can be made in that account. This is a classic SIE test area tied to cash account payment rules and settlement discipline.

Choice A is incorrect because the rule does not require the firm to close the account; the standard remedy is liquidation and restriction (freeze). Choice C is incorrect because merely warning the customer does not satisfy the regulatory requirement; the firm must take action to address the unpaid trade. Choice D is incorrect because firms cannot simply convert the transaction into a margin obligation to avoid Regulation T cash account rules. Establishing a margin account requires proper account documentation and suitability/approval, and it does not retroactively “cure” a cash account payment violation.

The compliance purpose behind this rule is to prevent “free riding” behavior—customers attempting to buy securities and then selling them before paying, using sale proceeds to cover the purchase without providing funds. Regulation T supports orderly markets by requiring timely payment and imposing restrictions when customers fail to meet obligations. For exam purposes, remember the key pairing: failure to pay → liquidation + 90-day freeze (unless an extension is granted).

The federal funds rate, which is the interest rate banks charge each other for overnight loans, changes frequently due to daily fluctuations in bank reserves and market conditions.

D is correct as it is the most sensitive to short-term market forces.

A, B, and C change less frequently.

A bond’s current yield is calculated as annual interest (coupon payment) divided by the bond’s current market price. For a fixed-rate bond, the annual interest amount is based on the coupon rate times par value (typically $1,000 par). With a 7% coupon, annual interest is $70 per $1,000 of par value. Since the coupon payment is fixed, the current yield becomes higher when the purchase price is lower, because you are receiving the same $70 of annual interest while paying less for the bond.

In this question, the possible market prices are 92, 100, 102, and 107 (quoted as percentages of par). A price of 92 means the bond costs $920 per $1,000 par. The current yield at 92 is $70 ÷ $920, which is higher than $70 ÷ $1,000 (at par), higher than $70 ÷ $1,020, and higher than $70 ÷ $1,070. Therefore, the bond has the highest current yield at the lowest price, which is 92.

This question is testing a fundamental SIE relationship: for bonds, yield and price move inversely. While “current yield” is a simpler measure than yield to maturity (YTM) because it ignores time to maturity and any gain/loss if the bond is redeemed at par, it is still widely used as a quick comparison tool. The exam expects you to recognize that as price declines (discount), current yield rises; as price increases (premium), current yield falls—assuming the coupon rate is fixed. The SIE outline includes debt instrument basics such as coupon, par, yield, and price/yield relationships.

Step by Step Explanation:

SIPC Coverage Limits: Protects up to $500,000 per customer, including a maximum of $250,000 for cash.

In this case, $300,000 in cash exceeds the SIPC limit, so only $250,000 is protected.

Incorrect Options:

A: $150,000 understates the SIPC limit for cash.

C: The full $300,000 in cash is not protected.

D: Total coverage exceeds SIPC limits.

SIPC Coverage Details: SIPC Protection.