FINRA Updated SIE Exam Questions and Answers by neave

A transfer agent is responsible for maintaining accurate records of shareholder purchases, redemptions, and account balances. They also handle the issuance and cancellation of shares and ensure shareholders receive appropriate distributions.

D is correctbecause maintaining shareholder records is a core duty of a transfer agent.

Ais incorrect because underwriting is the responsibility of a broker-dealer.

Bis incorrect because distributing the prospectus is handled by the fund’s distributor.

Cis incorrect because custody of securities is the role of a custodian, not the transfer agent.

Step by Step Explanation:

Liquidity Risk: Refers to the difficulty of selling a security quickly without significantly affecting its price. This is common in thinly traded securities or complex instruments.

Other Risks:

Credit Risk: Relates to the possibility of default by the issuer.

Market Risk: Pertains to overall price changes due to market conditions.

Prepayment Risk: Associated with mortgage-backed securities and early repayment of loans.

References:

SEC Investor Bulletin on Risks: SEC Risk Guidance.

Under the Insider Trading and Securities Fraud Enforcement Act of 1988, the SEC may impose acivil penalty of up to three timesthe profit gained or loss avoided (referred to as "treble damages") on individuals found guilty of insider trading.

B is correctbecause treble damages equal three times the profit or avoided loss.

Ais incorrect because the penalty is not limited to one time the profit.

CandDare incorrect because the penalty is capped at three times, not six or ten times.

Step by Step Explanation:

Secondary Offering: Involves the sale of shares by an existing shareholder, such as an insider, rather than the company itself issuing new shares.

Incorrect Options:

A: Rights offerings involve giving existing shareholders the opportunity to buy additional shares.

B: Private offerings are not registered with the SEC and involve limited investors.

C: An exempt offering refers to securities exempt from SEC registration, such as Regulation D offerings.

References:

SEC Guide on Secondary Offerings:SEC Secondary Offerings.