66

An application to register securities may be filed under the Uniform Securities Act by any of these except A) an issuer. B) a broker-dealer acting on behalf of the issuer. C) an agent of a broker-dealer. D) a person on whose behalf the offering is made.

C) an agent of a broker-dealer.

Civil liability may arise under the Uniform Securities Act if which of these occur? I. An agent acting on behalf of an issuer fails to guarantee the safety of a new issue of debt securities rated BBB or higher. Il. An agent uses an artifice or scheme that could reasonably be considered misleading in connection with a securities offering. III. An agent effects a sale of a nonexempt new issue of securities before filing a registration statement in that state. IV. An agent fails to disclose an immaterial fact A) Il and III B) Il and IV C) I and II D) I and III|

A) Il and III

Which of the following is not affected by the issuance of a bond? A) Shareholders' equity B) Total liabilities C) Working capital D) Assets

A) Shareholders' equity Explanation When bonds are issued, cash is received (thus increasing current assets) and long-term debt increases (increasing total liabilities). Because there is no corresponding increase in current liabilities, working capital increases. There is no effect on shareholders' equity because the increased liability is offset by the asset (cash) received.

If general interest rates increase, the interest income of a bond unit investment trust will probably A) remain the same. B) change as soon as the portfolio manager can take advantage of the higher rates now available in the marketplace. C) increase. D) decrease.

A) remain the same Explanation Because the portfolio of a UIT is fixed, the income generated by that portfolio will not change. Remember, a UlT does not have a portfolio manager.

A bond analyst is plotting a yield curve and notices that short-term maturities have higher yields than intermediate and long-term maturities. This is an example of A) an algorithmic yield curve. B) a normal yield curve. C) a positive yield curve. D) an inverted yield curve.

D

An investment adviser registered in 4 states would be permitted to enter into an advisory contract with all of the following prospective clients except | A) a single parent. B) a registered investment company. C) a charitable foundation. D) a university endowment fund.

B) a registered investment company.

Defalcator Investment Advisers (DIA), registered in States A, K, and R, would be required to provide a balance sheet as part of its brochure if it charged fees of A) $500 for the next six months of advisory service. B) $1,000 for the next three months of advisory service. C) $500 for the next three months of advisory service. D) $1,000 for the next year's advisory service.

D) 1,000 for the next year's advisory service.

Under the Investment Advisers Act of 1940, an adviser's registration usually becomes effective how many days after it is filed? A) 30 B) 10 C) 20 D) 45

D) 45

A purchaser of which of the following investments has an obligation? A) Warrants B) Stock rights C) Options D) Forwards

D) Forwards

When discussing employment and production, which of the following industries are typically more affected by a recession? I. Capital goods Il. Consumer durable goods Ill. Consumer nondurable goods IV. Services A) III and IV B) Il and IV C) I and III D) I and II

D) I and II

The Uniform Securities Act authorizes the state Administrator to require which of these? I. Either oral or written qualification examinations of investment adviser representatives and officers of investment adviser partnerships or corporations Il. Officers of investment advisers to pass a qualification examination III. An applicant for initial registration to publish an announcement of the application in one or more specified newspapers published in the state IV. Investment adviser representatives to pass a qualification examination A) I only B) Ill and IV C) I and I| D) I, I|, I||, and IV

D) I, I|, I||, and IV

Which of the following statements is true about sales of new issues under the Securities Exchange Act of 1934? A) Credit may be used in purchasing new issues. B) Installment payments are allowed on purchases. C) The SEC determines what issues may be purchased on margin. D) The use of credit to purchase new issues is prohibited for the first 30 days.

D) The use of credit to purchase new issues is prohibited for the first 30 days.

Which of the following does not meet the compensation test for defining investment advisers under SEC Release 1A-1092? A) Subscription payments are received by a publisher of a newsletter providing impersonal securities-related advice. B) A real estate agent advertises that she will give free advice regarding investing the proceeds from the sale of any home she lists. C) An insurance agent sells a life insurance policy and receives a commission on that policy. During the sale of the insurance policy, the agent provides some securities investment advice. D) Your next-door neighbor recommends the purchase of a certain security from his broker, which you eventually do.

D) Your next-door neighbor recommends the purchase of a certain security from his broker, which you eventually do.

Question #48 of 50 Transparent Investment Advisers, Inc. (TIA), is registered in three states and has $55 million in assets under management. TIA maintains custody of customer securities. TIA's chief financial officer reports that the net worth of the firm has suddenly fallen to $28,000. This requires TIA to A) issue $7,000 of stock. B) obtain a surety bond in the amount of $7,000. C) borrow $7,000 from the owners. D) obtain a surety bond in the amount of $10,000.

D) obtain a surety bond in the amount of $10,000.

One reason for including commodities in an investment portfolio is because they have a high correlation to A) the bond market B) the stock market C) the U.S. dollar. D) the inflation rate.

D) the inflation rate.

An agent of a broker-dealer has a client who lost her job but will be starting a new job in 3 weeks. The client is in need of 5900 for the 3-week gap. Under what circumstances may the agent arrange a loan for the client?

If the client has $5,000 in her brokerage account Loans may be made to clients if the person making the loan is in the lending business. Broker-dealers are permitted to lend money against securities held in client's portfolios. This is known as a margin loan. In fact, with $5,000 in the account, current regulations would permit a loan of up to $2,500. If the existing account is not a margin account, the agent would have the client open a margin account, transier the funds into the new margin account, and then make the loan.

DEF Investment Advisers, organized as a partnership, is currently registered with State Y. Marjorie is one of the partners and is registered as an IAR. If DEF were to register with State Z, A) Marjorie's registration as an IAR in State Z would become effective after passing the Series 65 or Series 66 exam. B) because DEF is a state-registered investment adviser, Marjorie could only register in State Z if she is a resident of the state. C) Marjorie would be required to complete an application for IAR registration with State Z. D) Marjorie would automatically be registered as an IAR in State Z.

Marjorie would automatically be registered as an IAR in State Z.

A married couple, both age 28, are considering the purchase of an annuity to help them save monthly for their retirement at age 65. They want an annuity that will allow them to participate in the equities market, and because of their long-term investment horizon, they are not particularly concerned about safety of principal. Which of the following annuity products best meets their needs? A) Periodic payment deferred variable annuity B) Single premium deferred fixed annuity C) Single premium deferred variable annuity D) Periodic payment deferred fixed annuity

Periodic payment deferred variable annuity

Which of the following statements is true concerning variable life separate account valuation? A) Unit values are computed monthly and cash values are computed weekly. B) Unit values are computed weekly and cash values are computed monthly. C) Unit values are computed daily and cash values are computed monthly. D) Unit values are computed monthly and cash values are computed daily.

Unit values are computed daily and cash values are computed monthly.

A customer opens a margin account with a broker-dealer and signs a loan consent agreement. The loan consent agreement allows the firm to...

loan out the customer's margin securities

The Uniform Securities Act contains a number of exemptions from registration of securities. Which of the following do not qualify for any of those exemptions? I. A bond issued by a corporation Il. A bond issued by the City of Athens, Greece II. A bond issued by the Province of Manitoba IV. A security Issued by a credit union authorized to do business in the state A) III and IV B) I and I C) I and IV D) I and III|

B) I and I

Which of the following statements regarding the private placement exemption under the USA are TRUE? I. There may be no more than ten offers to noninstitutional purchasers during any consecutive 12-month period. Il. The seller reasonably believes that the retail buyer is purchasing for investment only. III. No investors may resell stock acquired in a private placement without a prescribed holding period. IV. Commissions may be paid on sales to noninstitutional purchasers. A) III and IV. B) I and II. C) I and III. D) Il and III.

B) I and II.

Under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, which of the following must be included in an advisory contract? I. Whether the contract grants discretionary power to the adviser Il. The term of the contract III. A clause preventing assignment without consent IV. The formula used for computing the fee A) II only B) I, II, Ill, and IV C) I, II, and IV D) I and I|

B) I, II, Ill, and IV

The USA places a number of recordkeeping requirements on investment advisers. Records required to be kept by all state-registered investment advisers include all of the following except A) a list of discretionary accounts. B) a record by security showing each client's interest and the location thereof. C) bank records. D) emails.

B) a record by security showing each client's interest and the location thereof.

Due to changes in market rates, a corporation is able to purchase some of its outstanding 20-year bonds at a discount. Which of the following is correct? I. Working capital is increased II. Working capital is reduced. Ill. Net worth is increased. IV. Net worth is reduced. A) Il and IV B) I and IV C) I and III D) Il and IlI

* D) Il and IlI

It would be correct to state that I. the specialist stands ready to buy or sell stock on the floor of an exchange in an effort to keep an orderly market Il. the specialist stands ready to buy or sell stock on the over-the-counter market in an effort to keep an orderly market Ill. the market maker stands ready to buy or sell stock on the floor of an exchange in an effort to keep an orderty market IV. the market maker stands ready to buy or sell stock on the over-the-counter market in an effort to keep an orderly market

1 & 4

One of your customers called you on Wednesday at 8:00 am ET and asked you to buy $10,000 of the Liberty Balanced Fund Class A shares. If the Wednesday morning financial pages show the fund's NAV to be $45.83 and the POP to be $48.24 and the Thursday morning quote shows the NAV as $46.22 and the POP as 48.65, how many shares did the customer receive? А) 207.297 B) 218.198 С) 205.550 D) 216.357

205.550 Mutual fund pricing is based on the forward pricing rule. That is, the price is based on the next calculated net asset value per share after the order is received. That calculation is always done after the 4:00 pm ET close of the market. Therefore, an order received anytime on Wednesday before 4:00 pm will be executed based on the NAV calculated at that time. That 4:00 pm price will be shown in the financial section of Thursday morning's newspapers. Remember, when purchasing shares, the price is always the POP. That makes the math $10,000 ÷ $48.65 which rounds to 205.550

Active Technicians (AT) is a state-registered investment adviser. In its brochure supplement, it would include information relating to each of the following individuals except A) members of AT's board of directors who are active in the firm's business. B) those exercising discretion over assets of clients in this state, even if no direct contact is involved. C) those providing investment advice and having direct contact with institutional clients in the state. D) those providing investment advice and having direct contact with retail clients in the state.

A

The Uniform Securities Act provides an exemption from registration for certain securities and for certain transactions. However, the Administrator is not empowered to deny an exemption from state registration to which of these? I. U.S. government securities II. Private placement transactions II. A transaction with an insurance company IV. Municipal bonds issued by another state A) I and IV B) Il and III C) I and III D) Il and IV

A) I and IV

The Uniform Securities Act defined many terms. Among them is the term sale. Which of the following would be included in the definition of sale? I. An offer of common stock in a new issue properly registered or exempt from registration in the state Il. A gift of assessable stock III. An investor exercising preemptive rights previously recelved directly from the issuer IV. A corporation distributing 10 million new shares as part of a 2-for-1 stock split to all holders of its $1.00 par common stock A) Il and III B) I and IV C) I and II| D) III and IV Explanation A gift of assessable stock is always considered an offer and sale

A) Il and III

While listening to a commentator on cable TV, you hear the statement, "The flight to quality has ended." What would you expect the effect of this to be? A) Yield spreads are narrowing. B) Airline stocks are in for a beating. C) Yield spreads are widening. D) Pessimism is spreading.

A) Yield spreads are narrowing. Explanation The term yield spread refers to the difference in yield between very-high-quality debt instruments, such as U.S. government bonds, and those with lower ratings. The spread compensates for the additional risk. When investors perceive that the risk has lessened, they won't demand as much in return from the lower-rated instruments...

An owner of an equity index annuity would be wise to use the high-water crediting method if the underlying index was expected to A) be volatile. B) change its objective. C) remain steady. D) decline.

A) be volatile.

The Investment Company Act of 1940 requires certain types of investment companies to compute their net asset value on a regular basis. Excluded from this requirement are A) face-amount certificate companies. B) unit investment trusts. C) open end management investment companies. D) closed-end management investment companies.

A) face-amount certificate companies. Explanation The two investment companies offering redeemable securities, open-end funds and UITs, must compute their NAV on a daily basis. Closed end funds can do it daily; many compute every Friday. The concept of NAV makes no sense with a FACC.

The owner of a fixed annuity is protected against A) longevity risk. B) purchasing power risk. C) loss of money due to early death. D) infiation risk.

A) longevity risk.

When contrasting preemptive rights and warrants, it would be correct to state that, at issuance, A) rights have intrinsic and time value while warrants only have time value. B) rights have intrinsic value while warrants have intrinsic and time value. C) rights have intrinsic and time value while warrants only have intrinsic value. D) rights have time value while warrants have intrinsic and time value.

A) rights have intrinsic and time value while warrants only have time value.

Under Section 303 of the Uniform Securities Act, in order for an issue to register using coordination, it must simultaneously register under the provisions of A) the Securities Act of 1933. B) the Uniform Securities Act. C) the Investment Company Act of 1940. D) the Securities Exchange Act of 1934.

A) the Securities Act of 1933.

A bond analyst reports that there is currently an inverted yield curve. That would mean A) the closer the bond is to its maturity date, the higher the yield. B) the further the bond is from its maturity date, the higher the yield. C) the closer the bond is to its maturity date, the lower the yield. D) bonds with intermediate maturities have the highest yields.

A) the closer the bond is to its maturity date, the higher the yield. Explanation An inverted yield curve shows near-term maturities with higher yields than those of long-term maturities. Sometimes called a negative yield curve, it is usually an indication that interest rates are near a peak and the trend should soon reverse.

Which of the following would NASAA consider to be a substantial prepayment of fees? A) $600 covering the next calendar quarter B) $500 covering the next six months C) $600 covering the entire contract year D) $1,000 covering the next month

C) $600 covering the entire contract year NASAA defines a substantial prepayment of fees to be more than $500 six or more months in advance. A payment of $600 covering a full year qualifies on both points; it is more than $500 and for more than six months. A payment of $500 covering the next six months meets the time requirement, but it is not more than $500. Payments of $600 for the next quarter or $1,000 for the next month meet the dollar amount but not the time requirement.

KPT, Inc., is preparing to report its net income for the past year. An increase in which of the following causes a decrease in the reported net income? 1. Tax rate Il. Cash dividend Ill. Interest charged on bank loans A) II only B) I only C) I and III D) I and Il

C) I and III

A frequently used metric by analysts is the yield, or credit, spread. Common methods of computing this would be comparing which of these? I. Bonds of similar quality and similar maturities Il. Bonds of similar quality and different maturities Ill. Bonds of different quality and different maturities IV. Bonds of different quality and similar maturities A) I and III B) I and IV C) Il and IV D) ll and I|

C) Il and IV

An investor looking for liquidity would be least likely to consider A) ETFs. B) REITs. C) NFTs. D) CEFs.

C) NFTs Explanation NFTs are nonfungible tokens and, because they are nonfungible, their liquidity is limited. CEFs (closed-end funds) and ETFs (exchange-traded funds) are highly liquid. Although there are nontraded REITS, for exam purposes, all REITs are considered to be publicly traded unless something in the question indicates otherwise.

A profitable company reports net income of $10 million. A cash dividend of $7 million is declared. From an accounting standpoint, the other $3 million will be credited to which balance sheet account? A) Dividends payable B) Working capital C) Retained earnings D) Capital surplus

C) Retained earnings

A management investment company owns portfolio securities with a current market value of $100 million. The company owes $10 million for securities purchased but not yet paid for and accrued management fees of $5 million. If there are 2,611,437 shares outstanding and the current asking price of the shares is $36.38 per share, it would be correct to state that this investment company is A) an open-end investment company. B) selling at NAV. C) selling at a premium. D) selling at a discount.

C) selling at a premium.

One way in which an investment adviser acting in the capacity of an agent in a transaction with a client differs from a broker-dealer performing the same task is that the investment adviser A) shall notify the Administrator of its capacity in the proposed transaction. B) may not charge a commission on the transaction. C) shall obtain client consent before completion of the transaction. D) shall disclose the agency capacity before the transaction.

C) shall obtain client consent before completion of the transaction

Three years ago, one of your clients invested $100,000 into the newly formed GHI Corporate Bond UIT. Another client invested $100,000 into the JKL Corporate Bond Fund, an open-end investment company. At that time, both investments were yielding about 7%. Today, the yield on corporate bonds of comparable quality is 5%. Therefore, one would expect that A) the investor owning the bond fund is receiving more current income than the investor owning the UIT. B) the management fee on the GHI UIT is higher than that of the JKL fun. C) the investor owning the UIT is recelving more current income than the investor owning the bond fund. D) both investors are receiving approximately the same current income.

C) the investor owning the UIT is recelving more current income than the investor owning the bond fund.

Under the Investment Advisers Act of 1940, a third party receiving compensation from an investment adviser in return for providing an endorsement of the advisers' service is permitted A) only if the referring party is registered as an investment adviser representative. B) with no restrictions. C) when a written agreement providing certain disclosures has been entered into between the investment adviser and the third party if the compensation exceeds $1,000 over a 12-month period. D) under no circumstances.

C) when a written agreement providing certain disclosures has been entered into between the investment adviser and the third party if the compensation exceeds $1,000 over a 12-month period.

What information is required on an application for registration as an agent? I. The form of business (corporation, partnership, LLC, etc.) Il. Felony convictions, whether securities related or not III. A statement of financial condition IV. Citizenship information A) I and II B) III and IV C) I and III D) Il and IV

D

A manufacturer of soybean oil is concerned that the price of soybeans will increase over the next six months. The best strategy to employ would probably be A) a trimmed hedge. B) a short hedge. C) a neutral hedge. D) a long hedge. Explanation The concern is that the price will go up. Just as with options, when we are concerned that the price of something will go up, we go long that item. With options, it would be a long call; with futures, it is simply hedging by going long (buying) the soybean futures. The soybean farmer who would be concerned about a decline in the price would go short soybean futures.

D) Explanation The concern is that the price will go up. Just as with options, when we are concerned that the price of something will go up, we go long that item. With options, it would be a long call; with futures, it is simply hedging by going long (buying) the soybean futures. The soybean farmer who would be concerned about a decline in the price would go short soybean futures.

An investment adviser must meet the net worth requirements of the Administrator. When doing the computation, which of the following assets would be included? I. A sofa in the reception area Il. The value of the copyright on an investment manual authored by the investment adviser III. The reputation of the investment adviser IV. Patents held by the investment adviser on a stock-tracking software program A) IV only B) ||, Ill, and IV C) I, Il, and IlI D) I only

D) I only

Which of the statements below best describes why a normal yield curve is positively sloped? A) Investors logically demand higher returns from government securities than they do from corporate securities. B) Stocks generally have lower yields than bonds, although their total returns may be higher. C) Short-term bonds generally fluctuate in price more than long-term bonds. D) Investors demand higher interest when lending their money for longer periods.

D) Investors demand higher interest when lending their money for longer periods.

The contraction phase of the business cycle is least likely accompanied by Question ID: 1518259 A) decreasing inflation pressure. B) decreasing business and consumer expenditures C) low or negative economic growth. D) decreasing unemployment.

D) decreasing unemployment.

Which of the following would be a difference between a universal life insurance policy and a scheduled premium variable life insurance policy? A) The universal life policy will generally outperform the variable life policy during a period of falling interest rates and rising stock prices. B) Premiums on a scheduled premium variable life policy are fixed, while those on a universal life policy are flexible. C) There is a minimum guaranteed return on the variable life, while there is no guaranteed return on the universal. D) There Is a greater choice of separate account subaccounts in the universal life policy.

Premiums on a scheduled premium variable life policy are fixed, while those on a universal life policy are flexible.

John is the owner of Mississippi Advisory Services (MAS), an independent financial planning organization. He is registered as an investment adviser representative of SSC Securities and Investments, registered as a broker-dealer, and an investment adviser with the SEC. Supervision over John's advisory activities is the responsibility of A) MAS's CCO. B) SSC's CCO. C) the SEC. D) John

SSC's CCO

Which of the following is not a type of life insurance policy? A) Term to 65 policy B) Endowment policy C) Universal life policy D) Variable annuity policy

Variable annuity policy

A 68-year-old individual, who purchased a single premium immediate fixed annuity, elected monthly payments for life with a 10-year certain settlement option. If the individual lives to the age of 80, A) monthly payments will remain fixed until age 78 and then reduce until death. B) monthly payments will continue to the beneficiary(s) for 10 years after the annuitant's death. C) monthly payments will cease at age 78. D) monthly payments will continue until death.

monthly payments will continue until death.

A customer purchased a variable annuity from an agent 5 years ago with an initial investment of $200,000. The annuity's surrender fee will expire in year 7, which coincides with the customer's anticipated need for the funds. In the 5th year of the contract, the value of the annuity increased from $300,000 to $375,000. The agent notices that the general market is on the decline and recommends she enter a 1035 exchange of the variable contract for another, thus increasing her death benefit and locking it in at a higher minimum. This recommendation is A) unsuitable because of surrender fees B) suitable because 1035 exchanges have no adverse tax consequences C) suitable because of the increased death benefit D) unsuitable unless the customer agrees with the recommendation

unsuitable because of surrender fees

One of your customers called you on Wednesday at 8:00 am ET and asked you to buy $10,000 of the Liberty Balanced Fund Class A shares. If the Wednesday morning financial pages show the fund's NAV to be $45.83 and the POP to be $48.24 and the Thursday morning quote shows the NAV as $46.22 and the POP as 48.65, what is the price per share for this purchase? A) $48.24 B) $48.65 C) $46.22 D) $45.83

$48.65 Mutual fund pricing is based on the forward pricing rule. That is, the price is based on the next calculated net asset value per share after the order is received. That calculation is always done after the 4:00 pm ET close of the market. Therefore, an order received anytime on Wednesday before 4:00 pm will be executed based on the NAV calculated at that time. That 4:00 pm price will be shown in the financial section of Thursday morning's newspapers. Remember, when purchasing shares, the price is always the POP.

If an investment adviser files an initial registration with a state on June 30, which of the following statements regarding the filing fee to be paid is true? A) The full year's fee must be paid. B) The fee will be prorated from the effective date. C) No filing fee is required until December 31. D) The fee will be prorated from the filing date.

A) The full year's fee must be paid. Explanation While some states make exceptions for filings late in the year, under the USA, there is no pro rating of filing fees. The full year's fee must be paid with the initial registration request

Which of the following investment vehicles provides for redemption by the issuer? A) Unit investment trust (UIT) B) Exchange-traded fund (ETF) C) Face-amount certificate (FAC) D) Closed-end fund (CEF)

A) Unit investment trust (UIT) Explanation A UIT typically issues redeemable securities (or units), like a mutual fund, which means that the UIT will buy back an investor's units, at the investor's request, at their approximate net asset value. ETFs and CEFs are traded in the secondary markets, and investors sell their shares in the marketplace rather than redeeming them through the issuer. Face-amount certificates are not redeemable—the investor's funds are returned when the debt is paid off.

Which of the following statements regarding civil liabilities under the Uniform Securities Act are true? I. In a fraudulent securities transaction, the customer is entitled to recover the amount of the transaction with interest at a rate set by the Administrator, less any income earned on the security plus attorney's fees Il. Causes of action under the USA survive the death of either plaintiff or defendant Ill. No suit may be initiated more than three years after the transaction or two years after the discovery of the violation, whichever occurs first. V. Rights and remedies in this act are in lieu of any others that exist under other laws. A) III and IV B) I, Il, and Ill C) I|, III, and IV D) I and I|

B

Generally, an inverted yield curve is caused by A) investors buying short-term bonds and selling long-term bonds. B) investors buying long-term bonds and selling short-term bonds. C) rising interest rates. D) declining interest rates.

B) investors buying long-term bonds and selling short-term bonds. Explanation First of all, what is an inverted yield curve? That is what we get when the yields on short-term debt are higher than the yields on long-term debt. Next, what happens to make the yield of a bond go up? When the price of the bond falls, the yield rises. Conversely, when the price of a bond rises, the yield falls. Finally, what causes the price of a security, any security, to go up or go down? Supply and demand in the marketplace. That is, when there are more buyers than sellers, that demand pushes the price up. Likewise, if there are more sellers than buyers, the price will go down. That's the basic economics of supply and demand. When investor demand is for long-term bonds, the price of those bonds will rise, causing the yields to fall. And, when investors are selling short-term bonds, that selling pressure causes the price to drop and the yields to increase. That is what has happened in this question: more demand for the long-term, resulting in higher prices and lower yields, and more supply for the short-term, resulting in lower prices and higher

Under the Uniform Securities Act, broker-dealers are required to prepare and maintain certain records. Which of the following statements reflects the position of the act? A) A firm registered in more than one state must meet the recordkeeping requirements of the state where its principal office is located, even if those requirements are less comprehensive than those of some of the other states where it is registered. B) Afirm must maintain records of every email sent from the office by agents. C) A broker-dealer's website is considered advertising. D) Once a broker-dealer's trade blotter has been posted, it may be discarded.

C) A broker-dealer's website is considered advertising.

Economists have determined that the economy is slowing down. Orders for durable goods have been declining and unemployment, while not a reason for concern, has been steadily increasing over the past year. Given the information provided, what phase of the business cycle is the economy currently experiencing? A) Trough B) Deflation C) Contraction D) Expansion

Contraction

Current IRS regulations permit an unlimited contribution to which of the following tax-deferred plans? A) 401(k) B) Roth IRA C) SEPIRA D) Annuity

D) Annuity Nonqualified annuities offer tax deferral similar to that of qualified retirement plans. However, unlike qualified plans and IRAs, the IRS places no limitation on the amount that may be contributed.

Both the Investment Advisers Act of 1940 and SEC Release IA-1092 specifically exclude from the definition of investment adviser certain persons who provide investment advice solely incidental to the practice of their profession. Which of the following would not by definition qualify for this exclusion? I. An accountant who provides high-tax-bracket clients with a useful chart showing them how to compute the tax-equivalent yield for municipal bonds Il. A divorce attorney who, after obtaining settlements for clients, provides them with a list of suggested investment altematives encouraging them to be prudent with their newfound wealth III. A university professor who provides investment advice for a substantial fee to fewer than 15 clients during any consecutive 12-month period, none of whom is an investment company IV. An economist who consults with very large corporate employee benefit plans on how to best invest th

D) Ill and IV

Securities of a nonexempt corporate issuer that are not registered with the SEC may only be registered with the Administrator in which of the following ways? A) Condemnation B) Coordination C) Notification D) Qualification

D) Qualification

Alexander is registered as an agent with WorthMore Securities, a broker-dealer registered with the SEC and 10 states. He is also an investment adviser representative (IAR) with their wholly owned subsidiary, WorthMore Investments, a federal covered investment adviser. Many of Alexander's advisory clients also maintain brokerage accounts at WorthMore Securities. If one of those clients were to call Alexander and enter an order to purchase shares of a stock the broker-dealer is selling out of inventory, A) consent of the client would be necessary anytime an advisory client is sold securities out of the broker-dealer's inventory. B) the commission charged on the trade would have to be fair and reasonable. C) the order would have to be refused because of the potential conflict of interest. D) consent of the client would not be necessary as long as the only capacity in which Alexander is acting is that of an agent.

D) consent of the client would not be necessary as long as the only capacity in which Alexander is acting is that of an agent.

The powers of the Administrator include the ability to determine A) surety bond requirements for investment advisers who do not exercise discretion or maintain custody B) minimum net worth requirements for agents who exercise discretion. C) maximum net capital requirements for broker-dealers. D) minimum net worth requirements for investment advisers.

D) minimum net worth requirements for investment advisers.

A potential investor in mutual funds is bewildered by the different share classes. You are asked for advice. When comparing Class A, B, and C shares, it would be fair to state that all of the following are features unique to Class A shares except A) low or no 12b-1 charges. B) breakpoints. C) rights of accumulation. D) the method of calculating the redemption price.

D) the method of calculating the redemption price.

A notice filing would be most appropriate for which of the following new issues? A) Open-end investment company shares B) Intrastate offering C) Railroad equipment trust certificate D) Federal credit union shares

A) Open-end investment company shares Investment companies registered under the Investment Company Act of 1940 are exempt from registration with the states under the NSMIA. However, most states require notice filing and the payment of fees. Federal credit union shares and railroad equipment trust certificates are exempt securities, and intrastate issues would have to register using qualification.

Mark's company, which is located in Oregon, makes unfinished wood furniture. His company sells this furniture directly to the public from a large warehouse. Theresa's company, which is located in souther Georgia, grows cotton for t-shirt manufacturers. Which of the following statements correctly identity hedging strategies for Mark and Theresa? I. Mark should buy lumber futures. Il. Theresa should sell cotton futures. III. Mark should sell lumber futures. IV. Theresa should buy cotton futures. A) Il and III B) I and II| C) Ill and IV D) I and IV

B) I and II|

Which of the following may be done only with the approval of the shareholders of an investment company? I. A change from diversified to nondiversified status Il. The purchase of particular bonds on the open market III. Personnel changes in the transfer agent's organization IV. A change in the fund's objectives A) I and III| B) I and IV C) Il and IV D) Il and III|

B) I and IV Explanation Any substantive change in an investment company's form, structure, investment objective, or business operation must be approved by a majority vote of the outstanding shares. Bond purchases are left to the fund's portfolio manager, and the transfer agent is trusted with its organization's personnel changes.

If an investment adviser representative of a federal covered adviser that transacts business in a state terminates employment with that investment adviser, which of the following statements is true? A) The investment adviser must notify the Administrator. B) Both the representative and the investment adviser must notify the Administrator. C) The representative must notify the Administrator. D) No notice to the Administrator is required.

C) The representative must notify the Administrator.

The issuance of a long-term debt instrument, such as a bond, by a company would have an immediate effect on which of the following balance sheet items? I. Total assets II. Total liabilities Ill. Working capital IV. Shareholders' equity A) II, III, and IV B) I, Il, and IV C) I, III, and IV D) I, Il, and III

D) I, Il, and III

If Wallace resigned his position as an agent with Rockland Securities to work for Gibraltar Securities, which of the following parties must notify the Administrator of Wallace's move? A) Gibraltar and Wallace B) Wallace and Rockland C) Rockland and Gibraltar D) Rockland, Gibraltar, and Wallace

D) Rockland, Gibraltar, and Wallace

When advising an investor on the purchase of mutual funds, the agent should instruct the client to compare open-end mutual funds with the same objective for all of the following except A) liquidity. B) services offered. C) portfolio turnover. D) costs.

liquidity

News reports indicate that the wheat crop scheduled to be harvested in three months will be much larger than normal. To hedge, a wheat farmer would most likely A) take a short position in wheat futures. B) sell wheat stock short. C) grow corn instead. D) take a long position in wheat futures.

take a short position in wheat futures. Explanation A bumper crop means lower prices for the producers (farmers). The appropriate protection is a short hedge-selling wheat futures. Think of it this way: if you thought a stock's price was going to decline, you would sell that stock short. Here, believing that wheat prices will decline, you take a short position in that commodity futures contract. There is no such thing as wheat stock, and the wheat has already been planted; it is too late to switch crops.

One of your customers called you on Wednesday at 8:00 am ET and asked you to buy $10,000 of the Liberty Balanced Fund Class A shares. If the Wednesday morning financial pages show the fund's NAV to be $45.83 and the POP to be $48.24 and the Thursday morning quote shows the NAV as $46.22 and the POP as 48.65, what is the price per share for this purchase?

$48.65 Mutual fund pricing is based on the forward pricing rule. That is, the price is based on the next calculated net asset value per share after the order is received. That calculation is always done after the 4:00 pm ET close of the market. Therefore, an order received anytime on Wednesday before 4:00 pm will be executed based on the NAV calculated at that time. That 4:00 pm price will be shown in the financial section of Thursday morning's newspapers. Remember, when purchasing shares, the price is always the POP.

Which of the following situations would require registration as an investment adviser? I. A broker-dealer provided investment research services to a customer and charged a fee for the services. Il. An agent of a broker-dealer recommends the purchase of ABC securities to a customer, who then purchases 100 shares, and the agent earns a commission. III. A broker-dealer has its agents prepare complete financial plans for customers for a nominal fee. The plans recommend specific securities transactions, and when the customers place orders, the agents earn commissions on those securities transactions. IV. A broker-dealer charges its customers for collecting dividends and maintaining their accounts in addition to commission charges for transactions executed. A) I, II, III, and IV B) I and IlI C) 1, III, and IV D) I only

* B) I and IlI

When comparing the limited offering exemption under federal law with that of the exemption in the Uniform Securities Act, which of the following statements is true? A) The Uniform Securities Act's exemption for such transactions is narrower than the comparable federal exemption because offers are limited to a smaller number of nonqualified offerees. B) The federal law does not permit compensation on investments made by retail investors, while the state law does. C) The statutory resale restriction is the same under both state and federal law. D) The federal law permits purchases by both accredited and nonaccredited investors, while state law limits offers solely to those who are accredited investors

A) The Uniform Securities Act's exemption for such transactions is narrower than the comparable federal exemption because offers are limited to a smaller number of nonqualified offerees

Early in the year, an investor purchased shares of the GEMCO Fund at $10.40 per share when the net asset value per share was $9.53. Just before the last trading day of the year, this investor liquidated the position at $10.60 per share when the net asset value per share was $10.77. From this, you can discern that GEMCO Fund is A) a closed-end investment company. B) a unit investment trust. C) a face-amount certificate company. D) an open-end investment company.

A) a closed-end investment company. Explanation It is only the closed-end investment company where shares trade at a premium or discount to the NAV per share.

Under the Uniform Securities Act (USA), requirements for registration as an investment adviser in a state include which of the following? I. Included in the registration requirements is the filing of Form ADV Part 18. Il. There are minimum financial requirements for federal covered advisers with a place of business in the state who have custody of customer funds and/or securities, or have discretionary authority over customer accounts. Ill. For those needing a surety bond, it must provide that any customer who can prove a violation is entitled to collect against the bond. A) I and I| B) I and Ill C) 1, II, and III| D) Il and III

B) I and III

Which of the following persons are excluded from the definition of, or exempt from registration as, a broker-dealer under the Uniform Securities Act? I. A broker-dealer with no office in the state that effects trades exclusively with other broker-dealers in the state Il. A trust company with an office in the state that deals with the general public Ill. A broker-dealer with no office in the state that has no more than five retail clients resident in the state within the past year IV. A broker-dealer with no office in the state that effects securities trades exclusively with trust companies or other broker-dealers A) I, II, III, and IV B) I, II, and IV C) III and IV D) I and Il

B) I, II, and IV

An upward-sloping yield curve represents all of the following except A) time value of money. B) inflation expectations. C) foreign interest rate differentials. D) increased risk of default over time.

C) foreign interest rate differentials. Explanation Foreign interest rate differentials are not reflected in an upward-sloping yield curve. Interest rate differentials between countries reflect differences in domestic monetary and fiscal conditions. The time value of money is reflected in the upward-sloping yield curve. Longer-term rates require higher rates to compensate for loss of current buying power and liquidity. Longer-term funds bear a higher risk of default than do shorter-term funds and, as a result, command higher rates. Increasing inflation expectations cause the yield curve to slope upward to compensate lenders for the loss of future buying power. This is an example of how you get a question correct by process of elimination.

An agent has 4 clients who have purchased variable annuities, all of who are about to enter the annuitization phase. Client 1 purchased a single premium deferred annuity 20 years ago with a premium of $30,000. Client 2 purchased a single premium deferred annuity 10 years ago with a premium of $50,000. Client 3 purchased a periodic payment annuity 15 years ago and has made monthly premium payments totaling $60,000. Each of these 3 annuities has a current surrender value of $100,000. Client 4 just purchased an immediate annuity with a premium of $100,000. Assuming that all of these clients are of the same sex and the same age, when the annuity payout begins, which of the clients will receive the lowest amount of taxable income? A) Client 1 B) Client 2 C) Client 3 D) Client 4

Client 4 When it comes to taxation on annuitization, each payment consists of a combination of income and return of principal, how much of which depends on the exclusion ratio. In the case of Client 4, with an immediate annuity, it is unlikely that there is much in the way of income - almost all of the monthly payout will represent a nontaxable return of principal. Each of the other clients has tax-deferred income ranging from Client 1's $70,000 to Client 3's $40,000. When using the exclusion ratio to determine how much is income and how much is return of principal, Client 1 will have the greatest amount of taxable income followed by Client 2 and then Client 3.

Under the Uniform Securities Act, the Administrator may require the filing of advertising and sales literature in which of the following offerings? A) Sale of preferred stock of a long-established company registered with the SEC whose common shares trade on the New York Stock Exchange B) Sale of the bonds of AAA insurance company organized under the laws of the state C) Sale of a U.S. Treasury bond maturing in more than 10 years D) Sale of an IPO limited to residents of the state

D) Sale of an IPO limited to residents of the state Explanation The state securities Administrator may require the filing of advertising and sales literature of an IPO limited to residents of the state. The other choices are securities of exempt issuers or, in the case of the NYSE-listed issuer, federal covered securities. The Administrator may not require exempt and federal covered securities to file advertising and sales literature

One of your clients expresses interest in purchasing a unique piece of art in digital form. More than likely, the client is referring to A) cryptocurrency. B) a nonfungible token. C) a way to add liquidity to the portfolio. D) a new way to decorate the home.

a nonfungible token.

The main benefit that scheduled premium variable life insurance has over whole life insurance is A) an adjustable premium. B) the availability of policy loans. C) a lower sales charge. D) the potential for a higher cash value and death benefit.

the potential for a higher cash value and death benefit.