Finra SIE Exam Dumps

A stock dividend increases the number of shares owned without affecting the total cost basis. The new cost basis per share is calculated by dividing the original total investment by the new number of shares:

Original total investment = 100 shares $50.00 = $5,000

After a 10% stock dividend, the investor owns 110 shares.

New cost basis = $5,000 110 shares = $45.45 per share.

B is correct because it reflects the adjusted cost basis per share.

Step by Step Explanation:

Penny Stocks: These are low-priced, highly speculative stocks often issued by small or distressed companies. They generally have low liquidity, meaning they can be difficult to buy or sell without significantly impacting the price.

Incorrect Options:

Dividends: Penny stocks rarely pay dividends, unlike blue-chip stocks.

Price Stability: Penny stocks are highly volatile compared to blue-chip stocks.

Capitalization: Blue-chip companies are far better capitalized.

SEC Bulletin on Penny Stocks: SEC Penny Stocks.

FINRA Rule 2360 requires that customers receive the Options Disclosure Document (ODD), published by the Options Clearing Corporation (OCC), before they are approved to trade options. The ODD explains the risks and characteristics of options trading.

D is correct because the ODD is mandatory for options account approval.

A is incorrect because a prospectus is not specific to options trading.

B is incorrect because the MSRB Investor Brochure applies to municipal securities.

C is incorrect because a margin disclosure statement is required only for margin accounts.

A covered call involves selling a call option on a stock the investor already owns. The strategy generates income in the form of the premium collected for selling the call, providing additional returns on the stock position.

D is correct because the primary goal of a covered call is to generate income.

A is incorrect because covered calls do not hedge against large declines in the stock price.

B is incorrect because speculation involves taking higher risks, not a covered call's conservative strategy.

C is incorrect because no strategy guarantees a profit.

Step by Step Explanation:

Regulation D (Rule 506(b)): Allows offerings to an unlimited number of accredited investors and up to 35 non-accredited investors, provided certain disclosure requirements are met.

Incorrect Options:

A: Refers to Regulation S, which governs offshore offerings, not domestic exemptions.

B: There is no 40-investor limit in Regulation D.

C: The $5 million limit applies to Rule 504, not Rule 506(b).

SEC Regulation D: SEC Regulation D.