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Securities Representative Certification (SRC) Exam

“SRC exam” for the CSR,

the Certified Securities

Representative

Venue: Securities & Exchange Commission, 10th floor. Computer ROOM.

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TOPICS COVERED cash dividends – when cash div is paid Which shares get cumulative preferred? do “participating preferred shares” get

cash dividends? What kind of dividends. stock dividends– what happens to the

stock price of 60 after a 10% stock dividend?

What is a 1:4 rights offerring price of a stock, before and after the

rights offering. Calculate the change.

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TOPICS COVERED How to calculate EBIT How to calculate net profit (ebit –

interest – taxes) How to calculate earnings per

share, given date: EBIT, net Profit, authorized shares, subscribed shares, outstanding # of shares.

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TOPICS COVERED If the central bank raises rates, is it

“tightening” or “loosening”? If reserve requirements are raised,

what is the effect on business? Answer: higher rates on business loans.

What is the sequence: ex-div date, record date, declaration date, payment date….?

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SAMPLE QUESTIONS What is a reverse split of shares What happens if you buy stocks

one day after ex-Div date What are debentures; do they

have any collateral, underlying them?

Which is the “senior debt”, bank loan or bonds?

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Bond Pricing If you buy a bond that is quoted

at 101 ¼, and you know that bonds normally are priced in the thousands of pesos, then, how much is the bond?

= 101 + 1/4 , converted to 1000’s= 101.25 x 10 = P1012.5 = is the price

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TRUE or FALSE GNP is the economic growth due to

Philippine citizens, whether in PHILS or abroad?

Citizens + local residents? Foreign investors?

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TRUE or FALSE If you buy a mutual fund, does it

mean “that you own the underlying securities”?

Or does it simply mean that “you own shares in the mutual fund” ?

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True or False An “exchange” is any party that

acts as a counterparty in making or taking delivery of shares …. To effect settlement in a securities transaction.

True ? Or False ?

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Suspicious transactions A broker can combine an order for

his account, with an order for a client, for the same security, provided proper accounting is done at the end of the day.

True ? or False ?

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“Cash Ratio”A. Is it “Cash + Marketable

Securities”? B. Is it “Cash - Marketable

Securities”?

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Ratios What is “quick asset ratio” How to calculate “days of A/R

turnover” How to calculate “inventory

turnover ratio” How to calculate “days of

inventory turnover”

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Inventory Turnover ratio

= Sales / InventoryIf Sales is 2000 and Inventory is 70

= 2000/70 = “28.5” is inventory T/o ratio

“Days of Inventory” = Days of the Year/Inventory T/o Ratio = 365 / 28.5 = 12.8 Answer

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True or False: “Brokers are strictly prohibited

from guaranteeing against loss unless such declarations are suggested by statistical and empirical data.”

True, or False ?

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Clearing HouseWhen does a broker settle a trade

with a clearing house The day after ? 3 days after ? 5 days after ?

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New cash basis What is the new cash basis per

share, after a stock dividend? Exercise, using a numerical

example.

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True or False T / F. On the ex-dividend date, the

stock price is adjusted downward by the amount of the dividend.

T / F. For those purchasing shares after the ex-dividend date, they no longer have a claim to the dividend, so the exchange adjusts the price downward to reflect this fact.

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True or False Dividend payments, whether they

are cash or stock, reduce retained earnings by the total amount of the dividend.

True ? False?

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Interest RatesWhat is the effect on interest rates if the central bank buys Gov’t

Securities from the public if the central bank sells Gov’t

Securities to the public

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Property Dividend What is a property dividend. Give some examples of a property

dividend. See PSE website.

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Exempted txn What transactions are exempted

from registering with the SEC? What is a proxy vote. What is a minority shareholder. What is an INDEPENDENT director

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Preferred shares Who has priority in cash dividends,

common shareholders, or preferred shareholders.

What are “participating preferred” shares

What are “cumulative preferred” shares, with respect to cash dividends, declared by the company.

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Risk What is unsystematic risk What is systematic risk What is market risk

What is Beta Describe the movement of a stock

that has a Beta greater than 1. What is credit risk What is prepayment risk

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Market manipulation What is securities fraud What is front-running What is a “wash sale” What is “painting the tape” What is “market surveillance”

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Increase in capital stock

Do you require shareholders’ approval, for an increase in capital stock?

Do you need “SEC approval” for an increase in capital stock?

Do you merely “need to inform” the SEC about an increase in capital stock?

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Can a broker sell shares

A client bought a stock on recommendation of the broker. The broker said he will keep the client informed about prospects for the stock. Bad news comes up. Market crisis. Share prices fall. The client is unreachable via telephone or any means. Can a broker, as a precaution, sell the shares of the client.

Yes ? No ?

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Salesman’s license Does a salesman’s license expire

in three years or five years? May a registered salesman do the

work of an associated person, if temporarily, the associated person is sick or absent.

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Broker-dealer What is a broker-dealer What is a specialist What is a market-maker What is a dealer, as opposed to

floor broker, or commission broker.

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Format of Quiz Questions

Sometimes there are four statements

Then they ask you, “Which is true,….” A: statements 1, 3, and 4 B: statements 2, 3, and 4 C: statements 1 and 4 only

Exam Results come out after one week

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Format of Quiz Questions

They show four statements, then ask:

Which of the four statements is “not false.” statement 1 statement 2 statement 3, or All of the above are true / are false.

Exam Results come out after one week

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One examinee per computer.

One computer per examinee.

Layout of the Exam ROOM

“Sit anywhere. Choose any

PC.”

SEC Exam ROOM looks something like this.

________

Layout of the Exam ROOM

Keep BAGs at this counter

________

________

________

________

________

“Proctor” or Monitor gives

you a code number &

code name.DOOR

Bathrooms Elevator

________

One examinee per computer.

One computer per examinee.

________

Water Dispenser. Free cups.

“Sit anywhere. Choose any

PC.”

Get scratch paper from Monitor.

27

TYPE in candidate number,

example “27”

You may go back & forth the 120 questions. You may review your answers, edit them. Change from “A” to

“C”.

Your name will appear.

First name Last name

Next, type in your password

Your exam screen will appear *after three

minutes.

After you reach question 120, you may

review…

If you are truly finished, click on ‘SUBMIT” button.

When finished:

Are you sure?

“SUBMIT”

Yes No

“test results were

submitted”

Question # If the cash dividend is 10…

__ If the cash dividend is 10, and the stock

price is 60, how much is the

dividend yield on the stock?

Full Question

0 A. 10% 0 B. 20%0 C. 16.67

Question # If the EBIT is … __

Question # Broker’s license must be … __

Question # Money-Laundering is … __

Question #“Know your

client” means …

__

IF you Click on “C”…

Then “C” will appear in this

blank

View of the computer monitor at SRC exam

“Choices”

120 questions for 180 minutes

C

Overview of the Questions

Don’t look at your hand, too much. The proctor may get suspicious, even if there is

no reason.

TRUE OR FALSE? The proctors check for three arms, written fingernails…