FULL Series 6 Questions

Tocoma Coffee 5% preferred stock trades at $95 a share. What is the current yield?

A 5% preferred stock would pay $5 annually. To calculate current yield divide the annual dividend by the current market value. 5 / 95 = 5.25%

Which of the following is not a financial consideration? A) A customer's risk tolerance B) A customer's debt C) A customer's income D) The value of a customer's home

A) A customer's risk tolerance Financial considerations are those that are expressed as a dollar amount of a stream of payments. Financial considerations may be found on a customer's balance sheet or income statement.

T-bills are direct obligations of the U.S. government and 1)are issued at par. 2)trade in the secondary market. 3)are redeemable. 4)are issued at a discount.

2 and 4 T-bills are short-term obligations and, unlike most other debt securities, are issued at a discount from par. Once they are issued, T-bills trade in the secondary market.

Which of the following, though issued by a municipality, is not backed by its taxing authority? A)Industrial development bond B)General obligation bond C)Courthouse bond D)School bond

A)Industrial development bond

A generic advertisement A)must include the name of the broker-dealer placing the advertisement. B)is filed with FINRA. C)may describe performance, as long as it is made clear that past results are no assurance of the future. D)must mention the name of the investment being advertised.

A)must include the name of the broker-dealer placing the advertisement. The name of the firm placing the ad must be disclosed. A generic (no-name) ad can never mention the name of the specific security being advertised. That is why it is called a generic ad

Which of the following would not be an acceptable method for a customer opting-out of information sharing? A) Requesting a form that must be properly completed and returned B) Calling a toll free number C) Opting out electronically D) Checking a box

A) Requesting a form that must be properly completed and returned REMEMBER it must be EASY to opt out

An offering of a new issue in which the underwriters act as principals is called what? A)Market baker B)Firm commitment C)Best effort D)Maximum effort

B)Firm commitment "Underwriter acts as principals" is the one where the underwriter purchases all the shares to sell.

All of the following are exempt transactions except A)private placement offerings. B)commercial paper offerings. C)Regulation A offerings. D)Regulation D offerings.

B)commercial paper offerings. Commercial paper is an exempt security; commercial paper transactions are not exempt. Regulation A and private placements (Regulation D) are examples of exempt transactions.

Your customer, in his 30s, is extremely optimistic about business, not just in the United States but worldwide. He has received a $50,000 legacy and would like to invest it for long-term growth. Which of the following funds would make the most suitable recommendation? A) KPF Long-Term Bond Fund B) Clements International Common Stock Fund C) Clements Global Equity Fund D) AXL Biotechnology Fund

C) Clements Global Equity Fund Long-term growth requires an equity rather than a debt investment. This customer expects both foreign and U.S. business to do well in the coming years. An international, or foreign, stock fund would have only foreign stocks in it, no U.S. stocks. A global or worldwide equity fund would include both American and foreign stocks.

Which of the following would be appropriate recommendations for a customer looking for income? A)Long call option B)Warrant C)Utility fund D)Income bond

C) Utility fund

Regulation A was passed as part of which of the following laws? A)Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001 B)American Recovery and Reinvestment Act (ARRA) of 2009 C)Jumpstart Our Business Startups (JOBS) Act of 2012 D)Tax Cuts and Jobs Act (TCJA) of 2017

C)Jumpstart Our Business Startups (JOBS) Act of 2012

Which of the following statements regarding an open-end investment company that operates pursuant to a 12b-1 plan are true? 1) Shareholders are charged for sales expenses involved in the distribution of new fund shares. 2) The 12b-1 charges may not exceed 0.25%. 3) The plan can be terminated by a majority vote of the shareholders only. 4) Fees are deducted quarterly from a mutual fund's assets.

1 and 4 Mutual funds may not act as distributors for their own fund shares except under Section 12b-1 of the Investment Company Act of 1940. A 12b-1 fee may not exceed 0.75% and is deducted each quarter from a mutual fund's assets to cover the costs of marketing and distributing the fund to investors. The 12b-1 plan may be terminated at any time by a majority vote of the noninterested directors or a majority vote of outstanding shares.

Seabird Airlines pays a $1.20 quarterly dividend. If the current yield is 4% the stock must be trading at which of these prices?

A dividend yield is an annual figure. $1.20 × 4 = $4.80 (the annual dividend). Divide this figure by the yield (0.04) to find the market price of $120.00.

Which of the following will not be found in a final prospectus? A) The SEC approval date B) A description of senior management C) Material financial information D) A legal opinion

A) The SEC approval date The SEC does not approve a new issue, though they do release it for sale. The other items listed are requirements for the final prospectus.

Which of the following is an advantage of purchasing a lump-sum deferred annuity as opposed to a periodic payment deferred annuity? A) The entire amount of the purchase has the maximum amount of time to grow. B) Sales charge discounts are lower for a lump-sum deferred annuity than for a periodic payment deferred annuity. C) Most investors find it easier to make a single large payment rather than many small ones spread out over years. D) Periodic payment annuities usually have a lower cost base.

A) The entire amount of the purchase has the maximum amount of time to grow. If you said B, re read it, it says discounts are lower double negative BS.

Which of the following securities is not exempt from registration based solely on the type of security? A) Two-year T-note B) Six-month T-bill C) Six-month commercial paper D) Six-month banker's acceptance

A) Two-year T-note READ CAREFULLY. what isn't exempt based solely on the security. The two-year T-note is exempt because it is issued by the federal government, not solely because of the type of issue. Commercial paper and banker's acceptances are exempt based on the type of security (exempt issues). The T-bill is both too short (six months) and issued by the government.

Some mutual funds that are in a family of funds managed by the same company offer an exchange privilege. This privilege gives a shareholder the right to A) convert shares to a different mutual fund within the family of funds on a dollar-for-dollar basis. B) convert mutual fund shares to securities listed on the New York Stock Exchange. C) reinvest dividends and capital gains without a sales charge. D) switch shares to an investment company within the family of funds and defer the taxes on any capital gains due to the exchange.

A) convert shares to a different mutual fund within the family of funds on a dollar-for-dollar basis.

Under Rule 506(c) of Regulation D, advertising is permitted when A) the issue is limited to accredited investors. B) the advertisements have been approved by a principal. C) there are no more than 35 nonaccredited investors. D) the advertisements have been filed with FINRA.

A) the issue is limited to accredited investors. Rule 506 of Regulation D of the Securities Act of 1933 has two parts. Rule 506(b) prohibits any advertising of the private placement, while Rule 506(c) permits it. The primary condition to be met is that the issue is offered solely to accredited investors. It is Rule 506(b) that has a limit of 35 nonaccredited investors, but that has nothing to do with the advertising restriction. Regulation D applies to issuers, not broker-dealers, so there is no principal to go to for approval. In the same vein, because issuers are not FINRA members, filing with FINRA is irrelevant.

If a registered representative wishes to open a joint account with his brother, who is a client of his, which of the following rules would not apply? A)The sharing in profits and losses in the account must be proportional to each party's investment in the account. B)The representative's principal must approve the opening of the account. C)The account can be opened as joint tenants with right of survivorship (JTWROS). D)The Conduct Rules would not apply to this situation.

A)The sharing in profits and losses in the account must be proportional to each party's investment in the account.

Seabird Airlines owes JetA Fuel Corporation $250,000 for fuel delivered at the Seattle-Tacoma airport. Where would this figure be included on JetA's balance sheet? A)Current assets B)Long term liabilities C)Current liabilities D)Intangibles

A. These funds are owed to JetA, so they are an asset.

Your customer would like to do a 1035 exchange of his variable annuity for a life insurance policy and wants to be sure there will be no adverse tax consequences. You tell him that A)he may do the exchange, but he must pay income tax on any growth the annuity has experienced. B)1035 exchanges are not allowed from annuities to life insurance. C)he can get tax deferral for such an exchange, but not tax exemption. D)he may do the exchange, but only to variable life insurance.

B) 1035 exchanges are not allowed from annuities to life insurance.

Which of the following are not considered public communications of a broker-dealer and therefore not filed by the broker-dealer with FINRA? A) Telephone directory advertisements B) Prospectuses C) Market letters D) Research reports

B) Prospectuses Prospectuses are not prepared by the broker-dealer, they are prepared by issuers—not broker-dealers.

Which of the following would be a reasonable comparison when choosing between two investments? A) Money market fund and a large company stock fund B) Small foreign company fund and an emerging market fund C) Certificate of deposit and a small company fund D) Emerging markets fund and an international bond fund

B) Small foreign company fund and an emerging market fund its foreign to foreign

Under the Employee Retirement Income Security Act of 1974 (ERISA), all of the following guidelines for the regulation of retirement plans are true except A) all qualified plans require a written plan document. B) a corporation in business for three years must establish a retirement plan for employees. C) fully vested employees are entitled to the accumulated retirement accounts if they leave the employer. D) funds contributed to a retirement plan are required to be segregated from corporate assets.

B) a corporation in business for three years must establish a retirement plan for employees. A corporation is not required to sponsor retirement plans for employees, but should it choose to sponsor a qualified retirement plan, it must follow ERISA guidelines.

If the RST Corporation has issued several different debt securities, an investor would expect the lowest income stream from RST's A) speculative bonds. B) convertible debentures. C) ordinary debentures. D) subordinated debentures.

B) convertible debentures. convertible is an advantage so obviously it pays less

Your customer has invested in a mutual fund with a 12b-1 fee. You explain to her that a charge will be deducted from his account A) annually. B) quarterly. C) semiannually. D) monthly.

B) quarterly. 12b-1 fees are deducted from fund assets every quarter.

Although municipal securities are exempt from SEC registration, disclosure must still be provided through A)an MSRB prospectus. B)an official statement. C)an offering circular. D)an offering memorandum.

B)an official statement. The disclosure document for a new municipal bond issue is the official statement (OS).

Under the rules governing the activities of broker-dealer firms, prior consent of the employing firm would not be required in order for a registered representative of the firm to A)have trading authority in a spouse's account at another broker-dealer. B)discuss investment strategies with a brother whose account is at another broker-dealer. C)open a cash account at another broker-dealer. D)open a margin account at another broker-dealer.

B)discuss investment strategies with a brother whose account is at another broker-dealer. Discussing investment strategies with a sibling who has an account at another broker-dealer does not require notification or consent of the employing broker-dealer.

Which of the following is not true regarding Regulation A Tier 1 offerings? A) The general public may invest B) General solicitations are allowed C) Investors must be qualified investors D) Offering must not exceed $20 million

C) Investors must be qualified investors Investors in a Tier 1 Regulation A offering are not required to meet any specific qualifications.

Included in the operating expenses of an investment company would be all of the following except A) custodian bank charges. B) investment management fee. C) redemption fees. D) compensation to members of the fund's board of directors.

C) redemption fees. Redemption fees, typically found with Class B and Class C shares, are not an operating expense of the fund. They are a cost incurred by the investor.-----

If interest rates increase, the interest payable on outstanding corporate bonds will A) decrease. B) change according to the inverse payout theory. C) remain unchanged. D) increase.

C) remain unchanged. The interest payable is the nominal yield, which is stated on the face of the bond. It is the percentage of face value the bond will pay each year, regardless of the prevailing interest rates in the market. It is the market price of bonds, not the interest payable, that responds inversely to changes in interest rates.

A customer who participates in a FINRA arbitration hearing would expect that A) a majority of the arbitration panel would comprise industry personnel. B) an award that is disputed could be appealed to the National Adjudicatory Council. C) the award will be stated in writing and rendered to the claimant within 30 days. D) the maximum amount awarded would not exceed $10,000.

C) the award will be stated in writing and rendered to the claimant within 30 days.

A best efforts underwriting in which the entire issue must be sold or the entire offer is cancelled is called what? A)In-the-entirety B)Maximum sale C)All-or-none D)Firm commitment

C)All-or-none

As written in the Investment Company Act of 1940, all of the following statements are true except A)an investment company must have at least $100,000 capitalization to be offered to the public. B)shareholders have the right to vote on a company's change from a closed-end to an open-end investment company. C)an investment company's board of directors may be composed of up to 70% of the company's interested persons. D)open-end investment companies must redeem securities within seven days after a redemption request.

C)an investment company's board of directors may be composed of up to 70% of the company's interested persons.

A meeting between the issuer and the underwriter to ensure that the prospectus is true and accurate is called A)syndicate meeting. B)negotiation meeting. C)due diligence meeting. D)presales meeting.

C)due diligence meeting. The final meeting before the end of the cooling-off period is known as a due diligence meeting and is always held before the effective date of the new offering.

Which of the following individuals may make an early withdrawal from a traditional IRA without penalty? A) A person withdraws funds from his IRA to buy a principal residence after he sold his first home as a result of medical expenses B) A parent withdraws funds from her IRA to pay for the education of a nephew C) A parent supplements a home equity loan with funds from her IRA to pay for a vacation home D) A wealthy individual withdraws $10,000 from his IRA to purchase his first principal residence

D) A wealthy individual withdraws $10,000 from his IRA to purchase his first principal residence FIRST RESIDENCE

Which of the following does not require the delivery of a specific disclosure regarding liquidity or the option disclosure document? A) Hedge funds B) Options C) Limited partnerships D) Option income fund

D) Option income fund An option income fund is a type of mutual fund and requires no special disclosure beyond those required for a mutual fund (a prospectus).

Sales of exempt securities under Regulation A require the distribution of A) a prospectus. B) an official statement. C) a Form S-1. D) an offering circular.

D) an offering circular. Regulation A requires the use of an offering circular.

An investor might expect to receive the greatest gain on an investment in a corporate bond by purchasing A) short-term bonds when interest rates are high. B) long-term bonds when interest rates are low. C) short-term bonds when interest rates are low. D) long-term bonds when interest rates are high.

D) long-term bonds when interest rates are high.

The primary purpose for creating ERISA was to A) provide all employees, both government and nongovernment, with an additional source of retirement income in the event that the Social Security system defaults. B) promote a retirement fund for government employees. C) establish a means for self-employed persons to provide for their own retirement. D) protect employees from the mishandling of retirement funds by corporations and unions.

D) protect employees from the mishandling of retirement funds by corporations and unions.

The price of closed-end investment company shares trading in the secondary market is determined by A) the board of directors. B) the net asset value plus the sales charge. C) the Financial Industry Regulatory Authority. D) supply and demand.

D) supply and demand. CLOSED END TRADING IN SECONDARY

When discussing the benefits of a Section 1035 exchange with a client, it would be appropriate to point out that the main benefit is A) saving the death benefit. B) a reduction in surrender charges. C) the opportunity to move from one separate account to another. D) tax savings.

D) tax savings. Section 1035 of the Internal Revenue Code permits the exchange of one annuity for another without incurring any current tax liability. In other words, the earnings continue to be deferred until the money is actually withdrawn.

Before your customer buys shares of XYZ Invest Mutual Fund, shortly before the ex-dividend date, he should understand that A) there is a great advantage to his purchasing the shares immediately so that he can receive the dividend. B) the ex-date is two business days before the record date. C) if he reinvests the dividend, he will not be liable for taxes on the dividend received. D) the price of the shares will decline on the ex-dividend date by the amount of the distribution.

D) the price of the shares will decline on the ex-dividend date by the amount of the distribution. Share prices decline on the ex-dividend date by the amount of the dividend. Dividend distributions also cause a tax liability, so the purchase of shares right before an ex-dividend date is not a good idea.

Which of the following would not be sufficient to verify a customer's identity when opening an account? A)U.S. Department of Defense ID B)U.S. passport C)State issued drivers license D)Student ID card

D)Student ID card

Which of the following statements regarding a corporate bond quoted as QRS Zr 20 is true? A)The bond pays $200 interest annually. B)The bond pays $20 interest annually. C)The interest payable is tax free. D)The bond pays no interest until maturity.

D)The bond pays no interest until maturity.

A policy loan provision must be offered by the insurer after three years, allowing the variable life policy contract holder to borrow at least what percentage of cash value?

The minimum that must be available in a VL contract after three years is 75% of cash value.

All of the following would be subject to the Conduct Rules regarding public appearances except A) an internet chat room. B) a presentation at a high school about mutual funds. C) a seminar discussing the products your firm has available for sale. D) a radio spot saying that your offices have moved.

a radio spot saying that your offices have moved. A radio ad is not a public appearance because it is not interactive. The other choices fit into the definition of public appearance and are required to meet the standards for public communications.

Those industries that are least affected by normal business cycles are

defensive industries.

Institutional communications include all of the following except 1) informational material on a new mutual fund offered by a registered investment company intended for use by registered sales personnel only. 2) television appearances by an officer of a member firm. 3) a recommendation report prepared for an insurance company. 4) a research report specifically prepared for a Section 457 plan with 100 participants.

1 and 2

FINRA allows sales charges up to a maximum of

8.5% on mutual funds.

Which of the following is a requirement for opening a new brokerage account with a FINRA member firm? A) A principal's signature B) A signature from a FINRA officer C) The representative's signature D) The customer's signature

A) A principal's signature To open a new account, the account form must be accepted by a principal of the firm by signature. The regulations do not require a customer's signature, though most firms do.

Which of the following is not a management company under the Investment Company Act? A) A unit investment trust (UIT) B) An exchange-traded fund C) A mutual fund D) A closed-end fund

A) A unit investment trust (UIT) UITs are a type of investment company but are not actively managed. Mutual funds, closed-end funds, and ETFs are all examples of management companies.

Which of the following is a type of employer-sponsored nonqualified retirement plan? A) Deferred compensation plan B) Defined contribution plan C) Pension plan D) 529 plan

A) Deferred compensation plan A deferred compensation plan is a type of nonqualified plan in which the employer sets money aside earmarked to pay the employee after retirement. The funds in a deferred compensation plan remain the employer's asset until the employee claims them in the future. Defined contribution plans—like 401(k) and pension plans—are employer-sponsored qualified retirement plans. 529 plans are for education savings.

Which of the following payout options for a variable annuity will produce the highest payout? A) Life only B) Life with period certain C) Unit refund option D) Joint life annuity

A) Life only

Which of the following is an exempt security? A) MNO Corp 90-day commercial paper B) MNO Corp common stock C) MNO Corp 400-day notes D) MNO Corp secured bonds

A) MNO Corp 90-day commercial paper Commercial paper (maximum maturity of 270 days) is an exempt issue. Nothing else here is exempt under the Securities Act.

Which of the following is guaranteed by a variable life policy? A) Cash value B) Minimum death benefit C) No sales charge D) Minimum separate account performance

B) Minimum death benefit A variable life policy has a minimum guaranteed death benefit, but there is no minimum guaranteed cash value. There is no performance guarantee on separate accounts.

You are the representative for three individuals who have a tenants in common account with your firm. If one individual dies, which of the following statements is true? A) The account is converted to joint tenants with right of survivorship. B) The account must be liquidated and the proceeds split evenly among the two survivors and the decedent's estate. C) Trading is discontinued until the executor names a replacement for the deceased. D) Two survivors continue as cotenants with the decedent's estate.

D) Two survivors continue as cotenants with the decedent's estate.

A variable annuity (VA) is an example of A) a non-securities based retirement savings plan. B) an qualified retirement plan. C) an employer sponsored nonqualified retirement plan. D) a self-sponsored nonqualified retirement plan.

D) a self-sponsored nonqualified retirement plan. A VA may be funded with available cash and does not require an employer. VAs are a securities product; the separate account is invested in an open-end investment company.

Sales of exempt securities under Regulation A require the distribution of A) an official statement. B) a prospectus. C) a Form S-1. D) an offering circular.

D) an offering circular. Regulation A requires the use of an offering circular.

Qualified dividends are taxed at what rate? A) The customer's investment income tax rate B) The customer's ordinary income tax rate C) The customer's capital gains tax rate D) The customer's hybrid capital gains and income tax rate

C) The customer's capital gains tax rate Qualified dividends are taxed as capital gains. Most other investment income is taxed as ordinary income. There is no hybrid rate.

A Regulation A exemption covers A) an offering of $75 million or more in 12 months. B) a private offering. C) an offering of $50 million or less in 12 months. D) an offering of letter stock.

C. an offering of $50 million or less in 12 months. Its a trick question, its max is 75mil or less in 12 months, so out of those options C is true, answer A says 75mil or MORE

A convertible preferred stock issue (par value $100) is selling at $125 and is convertible into five shares of common stock. The conversion price of the common stock is A) $100. B) $25. C) $1,200. D) $20.

D) $20.

A cash settlement trade must be completed by A) by the close of business on the trade date. B) by 2:30 pm on the day after the trade date. C) 4:00 pm ET on the trade date. D) 2:30 pm ET on the trade date.

D) 2:30 pm ET on the trade date. Cash settlement trades must completed by 2:30 pm ET on the trade date.

A qualified profit-sharing plan offered by a corporation to its employees has all of the following features except A)the amount of the contribution is tax deductible to the employee. B)the earnings on the contribution are tax deferred until payout. C)the employee may elect to roll over a lump-sum distribution into a traditional IRA. D)the corporation may elect to omit or reduce contributions in years when profits from business operations fall.

A)the amount of the contribution is tax deductible to the employee.

Which of the following statements is true? A)A measure of a stock or portfolio's volatility is alpha, and a measure of its performance is beta. B)A measure of a stock or portfolio's volatility is beta, and a measure of its performance is alpha. C)Alpha and beta each use different measures of overall performance expectations but cannot be used to measure volatility. D)Both alpha and beta are measures of volatility only, and neither measures performance.

B) A measure of a stock or portfolio's volatility is beta, and a measure of its performance is alpha.

Strategic asset allocation is considered what style of portfolio management? A) Active management B) Aggressive management C) Passive management D) Post-modern management

C) Passive management Strategic asset allocation calls for fixed percentage allocations with little trading. It is a strategic approach to asset management.

The GEM Growth Fund has announced that it will pay a dividend of $0.73 per share to all holders of record as of Monday, October 4. The ex-dividend date is A)determined by FINRA or an exchange and would probably be Tuesday, October 5. B)the last date an investor purchasing shares of the GEM Fund will be eligible to receive that dividend. C)determined by the fund's board of directors and would probably be Thursday, September 30. D)determined by the fund's board of directors and would probably be Tuesday, October 5.

D)determined by the fund's board of directors and would probably be Tuesday, October 5. Unlike that of individual stock in the secondary market, the ex-dividend date for a mutual fund is set by the fund's board of directors

Which of the following terms are associated with over-the-counter trading? Market maker Floor broker Auction market Negotiated market

Market maker Negotiated Market The over-the-counter market is a negotiated market. Within it, market makers are broker-dealer firms that provide a source for stock that customers wish to buy and a repository for stock that customers wish to sell.

Your customer wishes to increase and diversify his equity holdings as simply as possible. He is not risk averse, and he would like to gain some returns from growth, but he does not want to engage in a large number of transactions. You might suggest that he A) invest in a blend/core fund. B) invest in a balanced fund. C) sign a contract with an investment adviser to help him select and acquire a diversified stock portfolio. D) invest in a judicious selection of stock mutual funds, both growth funds and income funds.

A) invest in a blend/core fund. The blend/core fund would allow the investor to diversify his equity holdings and, in exchange for the usual risks of equity securities, make some possible gains from growth while investing in a single mutual fund.

All of the following communications may be filed with FINRA by an established firm within 10 business days after use except A)literature on an investment company that includes a ranking prepared by the member firm. B)a research report that includes performance data on a mutual fund that is provided to retail investors of the firm. C)a form letter sent to all the firm's clients about a new mutual fund family the firm will now be offering. D)literature on an investment company that uses a bond volatility rating.

A)literature on an investment company that includes a ranking prepared by the member firm.

Morgan and Mackenzie have a joint tenants account with your firm. The account is under Morgan's Social Security number. In order to bring the assets under Mackenzie's Social Security number, what forms will the firm require? A) Mackenzie will need to open an individual account, authorize the transfer, and then add Morgan on to the account. B) They will need to open a new joint account and both authorize a journal transfer to the new account. C) They will need to open a new account and perform a transfer through the ACATs system. D) They will need to provide a letter of authorization to make the change.

B) They will need to open a new joint account and both authorize a journal transfer to the new account. They will need to open a new joint account and then both authorize the transfer.

If your client wants to accumulate $50,000 over the next 10 years for her daughter's college education, to achieve this investment objective you would recommend A)a large-cap fund. B)an aggressive growth fund. C)zero-coupon bonds maturing in 10 years. D)a high-yield corporate bond fund.

C)zero-coupon bonds maturing in 10 years. Zero-coupon bonds are well suited for achieving investment goals of a stated sum within a fixed period of time. They are purchased at a discount and mature to their face value. Investors do not receive current income.

A registered representative with a Series 6 registration can sell which of the following? A)An ETF trading on the Nasdaq B)A REIT on its initial public offering C)A mutual fund that redeems its own shares D)A closed-end management investment company selling just above its NAV in the secondary market

C. The Series 6 is a limited license only allowing the sale of investment companies and variable products where a prospectus is required. This would exclude any secondary trading such as in ETFs and closed-end funds. The REIT is not an investment company, so the Series 6 would not suffice.

The portion of the JOBS Act that eases the requirements for small and medium-sized companies to raise capital is known as A) Small Company Relief Act. B) Regulation BD. C) Regulation D. D) Regulation A.

D) Regulation A. Regulation A allows two tiers of offerings: Tier 1 to $20 million and Tier 2 to $75 million, and ease requirements for small and medium size companies

The GEM Growth Fund has announced that it will pay a dividend of $0.73 per share to all holders of record as of Monday, October 4. The ex-dividend date is A) the last date an investor purchasing shares of the GEM Fund will be eligible to receive that dividend. B) determined by FINRA or an exchange and would probably be Tuesday, October 5. C) determined by the fund's board of directors and would probably be Thursday, September 30. D) determined by the fund's board of directors and would probably be Tuesday, October 5.

D) determined by the fund's board of directors and would probably be Tuesday, October 5. Unlike that of individual stock in the secondary market, the ex-dividend date for a mutual fund is set by the fund's board of directors (or the fund's principal underwriter). It commonly falls on the first business day after the record date. Remember that mutual fund purchases and redemptions are done with the fund itself and not through the secondary markets.

Which of the following statements describe an open-end investment company? 1) The company may sell new shares in any quantity at any time. 2) The company may never suspend sales of shares to new investors. 3) The company may redeem shares in any quantity at any time but may restrict the redemption of shares at the board of directors' discretion. 4) The company must redeem shares in any quantity at any time, except that it may suspend the redemption of shares with SEC approval.

1 and 4 Under the Investment Company Act of 1940, an investment company selling mutual funds need not continuously offer new shares for sale. In fact, a fund often suspends sales to new investors when it grows too large to adequately meet its investment objective. The Act of 1940 does require a fund to continuously offer to redeem shares, and this redemption privilege may only be suspended during non-business days or with the SEC's approval.

An individual purchasing a flexible premium variable life contract should know which of the following? 1)Timing and amount of premiums generally are discretionary. 2)The death benefit will generally be higher than that of a comparable whole life policy. 3)The face amount is fixed at the beginning of the contract. 4)The performance of the separate account directly affects the policy's cash value.

1 and 4. A flexible premium policy allows the insured to determine the amount and timing of premium payments, provided minimums are met. Depending on the policy, the face amount (death benefit) is recalculated each year. It is intended that the death benefit receive some inflation protection, but this cannot be guaranteed. If separate account performance causes the cash value to drop below an amount necessary to maintain the policy in force, the policy lapses unless the requisite amount is received within 31 days.

Which of the following investors are eligible to establish an IRA? 1) An independently wealthy individual whose sole source of income is $125,000 per year in dividends and interest 2) A law student who earned $1,200 in a part-time job 3) An individual who earned $3,500 last year selling encyclopedias but whose spouse is covered by a company profit-sharing plan 4) A property owner whose income is solely from rent charged on family dwellings he owns

2 and 3 An individual may contribute 100% of earned income up to a maximum allowable dollar limit, whichever is less. Interest and dividend income is portfolio income and rent is passive income, not earned income.

The Investment Company Act of 1940 requires that a mutual fund do which of the following? 1) Provide a monthly balance sheet to investors 2) Have $100,000 minimum capitalization 3) Provide semiannual reports to shareholders 4) Redeem shares at the net asset value per share calculated as of the close of the next business day following the redemption request

2 and 3 The Investment Company Act of 1940 requires that an investment company's assets amount to at least $100,000 and that it furnish shareholders with at least semiannual reports. The forward-pricing rule requires use of the next calculated NAV, which may be available on the day the redemption request was received.

Your client informs you that he has recently sold his home and is constructing a new one. He has approximately $150,000 in proceeds from the sale, on which he would like to earn a return. The funds must be available in about six months to pay the contractor. Which of the following might you suggest? 1)ABC 8% preferred stock, callable at par in five months 2)U.S. 5% Treasury bond, maturing in six months 3)Banker's acceptance 4)XYZ common stock, listed on the NYSE

2 and 3 This client's needs are best met by placing the funds into the money market, defined as high-quality debt securities with one year or less to maturity. The banker's acceptance and the Treasury bond meet those criteria.

Which of the following might bring about a change in the NAV of a mutual fund? 1) There are a large number of redemptions 2) The fund pays a dividend. 3) The portfolio increases in market value. 4) A large number of shares are purchased.

2 and 3 When a mutual fund pays a dividend, cash (an asset) is no longer held by the fund. This would reduce the amount of assets when computing net asset value. On the other hand, if there is an increase in the value of the holdings of the fund, assets increase, causing a corresponding increase to the NAV. Because purchases and redemptions are made at NAV, the fact that investors may be buying or redeeming has no impact on the fund's NAV.

Which of the following statements about corporate bonds are true? 1) They represent ownership in the corporation. 2) They generally involve less investment risk than common stock. 3) They pay a variable rate of income. 4) They are long-term instruments.

2 and 4 Bonds represent a creditor relationship; stock represents an ownership interest. Normally, corporate bonds are issued with a stated rate of interest and mature in 10 or more years. Because of their steady interest payments, bond prices tend to be less volatile than stock prices.

A registered representative is hosting a seminar to solicit sales of a specific mutual fund. He has highlighted features of the fund in the prospectuses he will hand out and has prepared summary sheets of the prospectus for distribution. Regarding this situation, which of the following statements are true? 1) It is acceptable to highlight the key points in the prospectus. 2) A prospectus may not be highlighted. 3) Distributing summary sheets of a prospectus is acceptable. 4) The representative may not distribute summary sheets of the prospectus.

2 and 4 The registered representative may neither highlight portions of the prospectus nor distribute a summary sheet.

Your client is interested in some of the tax ramifications of investing in variable annuities. You could tell her that 1)withdrawals before age 59½ are not subject to tax penalty if the investment has been held at least five years. 2)partial withdrawals from nonqualified plans are taxed on a LIFO (last in, first out) basis. 3)choice of settlement option has no effect upon taxation of the distributions. 4)if she is dissatisfied with one company, Section 1035 of the Internal Revenue Code will permit her to liquidate one variable annuity and place the funds into a different one without being taxed.

2 and 4 Withdrawal from an annuity is taxed on a LIFO (last in, first out) basis. Section 1035 permits investors to change from one annuity to another without tax, as long as the transfer is not directly to the investor. The customer should also be warned that there may be penalties imposed by the insurance company for early withdrawal.

All of the following are characteristics of convertible bonds except 1) the price of the bond can be affected by the price of the underlying stock. 2) the coupon is invariably lower than similar nonconvertible corporate bonds. 3) the coupon is invariably higher than similar nonconvertible corporate bonds. 4) at issue, the conversion price is set lower than the market value of the underlying stock.

3) the coupon is invariably higher than similar nonconvertible corporate bonds. 4) at issue, the conversion price is set lower than the market value of the underlying stock. The coupon on convertible bonds is invariably less than the coupon of similar nonconvertible bonds. This is because investors are willing to accept less interest income for the privilege of being able to convert the bond into stock. When convertible bonds are issued, the conversion price is set higher than the current market value of the stock; otherwise, the bonds would be instantly converted.

An investor in Class B shares with a seven-year contingent deferred sales charge liquidates shares four years after purchase. The CDSC is A) deducted from the next computed NAV when those shares are redeemed. B) ignored because the investor held those shares more than 50% of the seven-year period. C) deducted from the lower of the original cost or the POP when those shares are redeemed. D) deducted from the higher of the original cost or the NAV when those shares are redeemed.

A) deducted from the next computed NAV when those shares are redeemed.

Your customer wishes to increase and diversify his equity holdings as simply as possible. He is not risk averse, and he would like to gain some returns from growth, but he does not want to engage in a large number of transactions. You might suggest that he A) invest in a blend/core fund. B) sign a contract with an investment adviser to help him select and acquire a diversified stock portfolio. C) invest in a judicious selection of stock mutual funds, both growth funds and income funds. D) invest in a balanced fund.

A) invest in a blend/core fund. The blend/core fund would allow the investor to diversify his equity holdings and, in exchange for the usual risks of equity securities, make some possible gains from growth while investing in a single mutual fund.

An announcement of a new issue of a security that gives the name of the issuer, the price, and the name of the underwriter is called A)a tombstone. B)a red herring. C)an offering memorandum. D)a prospectus.

A. A tombstone is an announcement of a new issue that includes the name of the issuer, the price of the security, and the name of the underwriter from whom it can be purchased

Which of the following securities is not exempt from the registration provisions of the Securities Act of 1933? A) An equity security issued in only one state solely to residents of that state B) A new stock being offered in three states C) A U.S. government bond D) A high-quality corporate debt security with a maturity of 180 days

B) A new stock being offered in three states Government securities, debt offerings with a maturity not exceeding 270 days, and intrastate offerings are exempt from the registration provisions of the 1933 Act. A stock being offered in three states would have to register with the SEC and with those states, unless qualifying for an exemption as a federal covered security.

Under Rule 506(b) of Regulation D, when is advertising permitted? A) The advertisements have been approved by a principal. B) Advertising (general solicitation) is never permitted under Rule 506(b). C) The advertisements have been filed with FINRA. D) There are no more than 35 nonaccredited investors.

B) Advertising (general solicitation) is never permitted under Rule 506(b). Rule 506 of Regulation D of the Securities Act of 1933 has two parts. Rule 506(b) prohibits any advertising of the private placement, while Rule 506(c) permits it if only sold to accredited investors. It is Rule 506(b) that has a limit of 35 nonaccredited investors, but that has nothing to do with the advertising restriction. Regulation D applies to issuers, not broker-dealers, so there is no principal to go to for approval. In the same vein, because issuers are not FINRA members, filing with FINRA is irrelevant.

Which of the following would make an employee ineligible to participate in a company's qualified retirement plan? A) He works only 1,200 hours a year for the company. B) He is only 20 years old. C) He has been with the company for only two years. D) He is not a member of the company's management team.

B) He is only 20 years old. Under the Employee Retirement Income Security Act, anyone over the age of 21, management or not, who has been with the company for at least one year, and who works 1,000 or more hours per year for the company, must be allowed to participate in the company's qualified plan.

John owns a nonqualified, tax-deferred annuity. When he retires, what will be the tax consequences of his annuity payments? A)His annuity payments are partly taxable as capital gain and partly taxable as ordinary income. B)His annuity payments are partly taxable and partly tax-free return of capital. C)His annuity payments are all taxable as ordinary income. D)His annuity payments are tax free.

B) His annuity payments are partly taxable and partly tax-free return of capital. The key word here is nonqualifed! The investment John made was with after-tax dollars, the money grows tax deferred, and only the earnings are taxed at distribution.

On November 10, your customer purchased 1,000 shares of the ABC open-end investment company. On November 22 of the same year, ABC sold 25,000 shares of TCB common stock at a profit. ABC had held the shares for three years. On December 15, ABC distributed the gain from the sale of TCB to shareholders. How will your customer be taxed on this distribution? A) The customer is not taxed because he did not sell the TCB; ABC is liale for all taxes. B) The income is taxed as a long-term capital gain. C) The income is taxed as a long-term gain qualifying for the 60% exclusion. D) If the customer has been using automatic reinvestment, he is not taxed at all.

B) The income is taxed as a long-term capital gain. The customer owned shares of the mutual fund when it distributed the gain and is liable for taxes on the distribution. This gain is considered long term (over one year) and is taxed at long-term capital gains rates. It does not matter how long the customer had held the shares when the gain was distributed, but how long the fund had held the securities before it sold them.

A nonqualified variable annuity valued at $400,000 is annuitized, and the annuitant received $220,000 in payments until his death. At his death, if his spouse received a lump-sum payment of $180,000, this example illustrates A) a cash balance annuity. B) a unit refund annuity. C) a straight life annuity. D) a joint and last survivor annuity.

B) a unit refund annuity. When the unit refund option is chosen, the insurer guarantees, at minimum, to distribute the amount of money that funded the annuity. At the annuitant's death, if the guaranteed amount has not been fully distributed, the survivor receives the balance of the account—typically, in a lump-sum payment.

A 55-year-old customer in the 18% tax bracket wants to maximize current return with a moderate degree of risk. He has just inherited $25,000 and seeks a bond investment. A suitable bond would have which of the following features? A) Little or no call protection B) Rating below Ba but above D C) Relatively high rating D) Tax-exempt status

C) Relatively high rating The investor's tax bracket is not high enough to take advantage of a bond's tax-exempt status, but a bond with a low rating is not suitable because the investor is willing to bear only moderate risk. A bond with call protection and a relatively high rating would meet this customer's needs.

Mutual fund shares represent an undivided interest in the fund, which means that A)the number of shares outstanding is limited to a predetermined maximum. B)investors can only purchase full shares. C)each investor owns a proportional part of every security in the portfolio. D)the fund can only hold securities of certain companies.

C)each investor owns a proportional part of every security in the portfolio.

All of the following communications may be filed with FINRA by an established firm within 10 business days after use except A) a research report that includes performance data on a mutual fund that is provided to retail investors of the firm. B) a form letter sent to all the firm's clients about a new mutual fund family the firm will now be offering. C) literature on an investment company that uses a bond volatility rating. D) literature on an investment company that includes a ranking prepared by the member firm.

D) literature on an investment company that includes a ranking prepared by the member firm. If literature uses a ranking prepared by an independent entity, the firm may post-file. If the ranking is generally not published or is the creation of an investment company or a member firm, prefiling is required.

An RR of a FINRA member firm uses her personal smartphone to send a client a text message about a security in the client's portfolio. This practice is A)not permitted under FINRA rules; all electronic communications must be on company-owned devices. B)a personal message and does not come under the FINRA rules on communications with the public. C)considered a retail communication and must have principal approval. D)considered an electronic communication and must be reviewed by a principal.

D)considered an electronic communication and must be reviewed by a principal.

Which of the securities listed below is issued without a stated rate of return? A)Treasury bond B)Preferred stock C)Treasury note D)Treasury bill

Treasury bills are not issued with a stated coupon rate. Instead, they are sold through auctions at a discount to their par value of $1,000. They mature at their face amount, and the discount represents the interest earned.

You have a customer who values professional stock selection. He is willing to accept moderate risk in his investments and is interested in long-term capital gains. This client's needs and preferences suggest which of the following funds? A) Small-cap growth fund B) International index fund C) S&P 500 index fund D) Large-cap growth fund

D) A large-cap growth fund is the most appropriate choice because large capitalization stocks are generally less volatile than small caps and provide long-term capital growth with moderate rather than high risk. Index funds merely follow the selected index.

For a registered investment company to implement a 12b-1 plan, the plan must have majority approval from each of the following except A) outstanding voting shares of the company. B) the board of directors. C) noninterested members of the board of directors. D) the investment advisory board.

D) the investment advisory board. A 12b-1 plan must be approved by a majority vote of the shares, board of directors, and noninterested members of the board of directors. The fee must be reapproved annually by the board.

A shareholder has redeemed some mutual fund shares that were purchased over a period of 10 years. If the shareholder has not indicated the specific dates of purchase and cost of the shares that were redeemed on his tax return, the IRS will follow which of the following methods in determining the cost basis of shares redeemed?

FIFO If another method is not chosen, the IRS will assume the FIFO (first in, first out) method of accounting in determining the cost basis of the shares redeemed

If GEM Fund has an NAV of $8.50 and a POP of $8.20, it is A) a no-load mutual fund. B) an open-end investment company. C) a closed-end investment company. D) a face-amount certificate company.

GEM Fund must be a closed-end investment company because the offering price is less than the NAV (GEM Fund is selling at a discount from its NAV).

Broker-dealers are required to have a customer identification program (CIP) under the provisions of which of the following? A) USA PATRIOT Act B) Investment Company Act C) Securities and Exchange Act D) Securities Act of 1933

A) USA PATRIOT Act The CIP requirement is part of the USA PATRIOT Act.

FINRA's Code of Arbitration Procedure was originally established to mediate unresolved industry disputes. It is mandatory in controversies involving all of the following except A) a customer against a member. B) a member against another member. C) a member against an associated person. D) an associated person against another associated person.

A) a customer against a member. The code does not require that disputes with customers be resolved through arbitration. However, almost all new account forms include a pre-dispute arbitration agreement. The code always applies to the other examples mentioned here.

Assuming that expense ratios for the funds listed are identical, rank the funds below in order, from lowest to potentially highest yield. Municipal bond fund Government bond fund Investment-grade corporate bond fund Speculative income fund

Municipal bond fund Government bond fund Investment-grade corporate bond fund Speculative income fund

A joint life with last survivor annuity 1) covers more than one person. 2) continues payments as long as one annuitant is alive. 3) continues payments as long as all annuitants are alive. 4) guarantees payments for a certain period of time.

1 and 2 A joint life with last survivor contract covers multiple annuitants and ceases payments at the death of the last surviving annuitant.

FINRA Rule 2330, dealing with members' responsibilities regarding variable annuities, applies under which of the following circumstances? 1) The initial purchase of a deferred variable annuity 2) The initial purchase of an immediate variable annuity 3) The initial subaccount allocations 4) Subaccount reallocations

1 and 3 This rule applies to recommended purchases and 1035 exchanges of deferred variable annuities (not immediate) and recommended initial subaccount allocations.

An individual purchasing a flexible premium variable life contract should know which of the following? 1) Timing and amount of premiums generally are discretionary. 2) The death benefit will generally be higher than that of a comparable whole life policy. 3) The face amount is fixed at the beginning of the contract. 4) The performance of the separate account directly affects the policy's cash value.

1 and 4 A flexible premium policy allows the insured to determine the amount and timing of premium payments, provided minimums are met. Depending on the policy, the face amount (death benefit) is recalculated each year. It is intended that the death benefit receive some inflation protection, but this cannot be guaranteed. If separate account performance causes the cash value to drop below an amount necessary to maintain the policy in force, the policy lapses unless the requisite amount is received within 31 days.

One of your clients owns shares in several of the mutual funds offered by the ABC Fund family. Unhappy with their performance, she wishes to liquidate the entire account and move the money to shares of the XYZ Growth Fund and the XYZ International fund. In doing this, the client would 1) incur a taxable event. 2) be able to make the switch without tax as long as the money was transferred directly from one family to the other. 3) be able to acquire the XYZ shares without sales charge. 4) incur the full sales charge appropriate to the purchase of the XYZ shares.

1 and 4 Liquidation of shares, whether an intrafamily exchange using the conversion privilege or a sale and new purchase as in this example, is always a taxable event. The only time an exchange may be made at NAV (without sales charge) is when it is done within the same family. Purchasing shares in a different family will incur the full sales charges appropriate for the breakpoint level (if any) reached.

A customer is considering entering into an accumulation plan with his mutual fund. He is worried about committing to sending in so much per month that he may have trouble meeting the obligation, but he doesn't wish to commit to so little per month that his account does not build rapidly enough to meet his investment objectives. The registered representative explains that accumulation plans 1) are binding on the investor. 2) are binding on the mutual fund. 3) are not binding on the investor. 4) are not binding on the mutual fund.

2 and 3 An investor is not obligated to meet the terms of an accumulation plan, even if it is a contractual plan that he has signed. If he cannot send money in for some period, he need not. The plan is, however, binding on the fund. When the fund does receive a payment, it must use it to purchase the appropriate shares.

A mutual fund investor wants to know how closely your firm adheres to the industry's standardized breakpoint schedule and where he can find out more about breakpoints offered with the funds he is investing in. You tell him 1) FINRA's standard breakpoint schedule is available only to professionals. 2) there is no industry standard breakpoint schedule. 3) the breakpoint schedule for a mutual fund is given in full only in the SAI. 4) the complete breakpoint schedule for a fund is given in the prospectus.

2 and 4

Which of the following business structures protects the business s D) C corporation

A C corporation is a separate tax-paying entity that protects investors from the company's liabilities. S corps and LLCs provide protection; they report the business results, but the liability for taxes rests on the owners. General partnerships provide no liability protection, and the tax consequences of the business pass through to the investors.

When a Form U4 is filed requesting an exam, a window for completing the exam is opened. How many days long is this window? A) 120 days B) 60 days C) 180 days D) 90 days

A) 120 days

A customer who submits a letter of intent (LOI) must fulfill the terms of the letter within what time frame? A) 13 months B) 15 months C) 6 months D) One year

A) 13 months

Municipal securities are exempt from SEC registration. Material information on municipal securities may be found in what document? A) An official statement B) None, there is no required disclosure document for exempt securities C) An MSRB prospectus D) An offering circular

A) An official statement The disclosure document for a new municipal bond issue is the official statement (OS). It is the equivalent of a prospectus for a registered issue. A preliminary official statement (POS), equivalent to the red herring for a new stock issue, may have preceded the OS.

Which of the following is a typical feature of a qualified plan? A) Contributions are tax deductible B) A trust is not required for these plans C) Income is taxed in the year earned D) Only the growth is taxed at distribution

A) Contributions are tax deductible Most qualified plans allow the contribution to be deducted from income in the year the contribution is made; as a result, all distributions are taxable. Qualified plans require a trust be established to hold the assets. Gains are tax deferred.

Which of the following is not true regarding discretionary trades? A) Discretionary trades do not require principal approval. B) Each discretionary order must be identified as such at the time it is entered for execution. C) A record must be kept of all transactions. D) A principal of the brokerage house must approve each order promptly and in writing but not necessarily before order entry.

A) Discretionary trades do not require principal approval. Principal approval is required for all discretionary trades, though the approval may occur after order entry.

A 65-year-old man called the branch manager to complain about a recent exchange of a deferred variable annuity proposed and performed by a new representative. The customer said he was unaware that there would be charges associated with the transaction and was shocked that the account value diminished substantially during a recent downturn in the market. The manager should do which of the following? A) Interview the representative to ascertain whether firm procedures were followed with regard to suitability and disclosure of charges and risks associated with the exchange. B) Promptly refund the customer's losses and unwind the transaction. C) Document the facts of the complaint and submit a report to FINRA. D) Retrain the new representative to make exchanges in variable products only by prospectus and require future sales calls to be recorded.

A) Interview the representative to ascertain whether firm procedures were followed with regard to suitability and disclosure of charges and risks associated with the exchange.

Which of the following is not a method of investing in a variable annuity? A) Periodic payment immediate annuity B) Single premium immediate annuity C) Single premium deferred annuity D) Periodic payment deferred annuity

A) Periodic payment immediate annuity A periodic payment immediate annuity not only does not make sense, but also they do not exist.

The know your customer rule (KYC) places an obligation on a member firm and associated persons to do which of the following? A) Seek information from customers B) Seek only financial information from customers C) Obtain information from customers D) Require information from customers

A) Seek information from customers Best effort to get the info, not mandatory to obtain it.

Which of the following documents should be provided to a potential investor before selling a mutual fund? A) Summary prospectus B) Terminal prospectus C) Omitting prospectus D) Statement of additional information (SAI)

A) Summary prospectus Either the full (statutory) or summary prospectus is considered sufficient disclosure when selling a mutual fund. If the summary prospectus is used, then access to the full prospectus must be available.

Which of the following would be found on a customer's balance sheet? A) The value of a customer's comic book collection B) The customer's monthly debt service C) The customer's alma mater D) The customer's income

A) The value of a customer's comic book collection Information on a balance sheet will be financial assets and liabilities. Income and expense information is on the income statement. Where you went to school is a non-financial consideration.

SEC Rule 135a on generic advertising would apply to all of the following advertisements from a broker-dealer except A) a list of the 10 best funds for early retirees. B) a list of the securities the firm offers. C) a description of exchange and reinvestment privileges with mutual funds. D) an explanation of the nature of mutual funds.

A) a list of the 10 best funds for early retirees. A "10 best" list that recommends specific funds would not qualify as generic. An explanation of the nature of a feature or product that is not tied to a specific product would be acceptable, as would a simple list of what a firm offers.

All of the following must meet the nondiscrimination provisions of the Employee Retirement Income Security Act (ERISA) except A) deferred compensation plans. B) profit-sharing plans. C) 401(k) plans. D) defined benefit plans.

A) deferred compensation plans. Deferred compensation plans are nonqualified and therefore do not have to meet the nondiscrimination provisions of ERISA.

A dispute arises between two FINRA member firms over unpaid commissions in the amount of $35,000. This dispute would be handled by A) simplified industry arbitration. B) court action. C) the minor rule violation rules of the Code of Procedure. D) acceptance, waiver, and consent.

A) simplified industry arbitration. Simplified industry arbitration is used in disputes between member firms or their associated persons when the amount in dispute does not exceed $50,000. If the dispute involves a customer, then it goes to simplified arbitration. MRV and AWC are used for Code of Procedure violations, not disputes.

When an option is trading, all of the following are fixed except A) the premium. B) the expiration date. C) the strike price. D) the underlying security.

A) the premium.

Where must the SEC's no-approval clause appear in a prospectus?

On the cover.

As part of a well-diversified portfolio, your client is examining a potential new investment. Currently, the portfolio contains five secured, corporate bonds that will be maturing in two weeks. The plans are to potentially purchase three unsecured bonds and to replace two secured bonds identified in the secondary market, all of which have a 6% coupon rate. If overall interest rates decline before the investor can purchase the new bonds in two weeks, he can expect the income from the new bonds to A) increase to more than $60 per year. B) remain at $60 per year. C) pay no interest. D) decline to less than $60 per year.

B) remain at $60 per year.

In a variable life annuity with 10-year period certain, a contract holder receives A)variable payments for 10 years, followed by fixed payments for life. B)a minimum of 10 years of variable payments, followed by additional variable payments for life. C)10 years of variable payments. D)fixed payments for 10 years, followed by variable payments for life.

B) a minimum of 10 years of variable payments, followed by additional variable payments for life.

All of the following are exempt transactions except A)Regulation A offerings. B)commercial paper offerings. C)Regulation D offerings. D)private placement offerings.

B) commercial paper offerings.

A customer inherited from a relative 500 shares of BigCo, Inc., common stock. The stock was originally purchased 10 years ago for $10 per share and was trading for $20 per share when the customer inherited the shares. The customer subsequently sold the shares for $25 per share. What is the customer's cost basis in the position at the time of sale? A) $12,500 B) $10,000 C) $2,500 D) 5,000

B) $10,000 The cost basis for inherited shares is set at the time of the decedent's death. At that time, the 500 shares were worth $10,000 (20 x 500).

Mesa Verde Coffee Company (a mid-sized company) stock has a beta of 1.5 when compared to the mid-cap index. Last year the index increased 10% and Mesa Verde grew 13% over the same period. What is Mesa Verde's alpha? A) 3% B) -2% C) -3% D) 2%

B) -2% Alpha is calculated by first finding the expected return by multiplying the index return by the security's beta (10% × 1.5 = 15%). Then subtract the expected return from the actual return (13% - 15% = -2).

Which of the following bond prices would fluctuate the most if the interest rates fell? A) 10-year zero coupon with duration of 10 B) 20-year mortgage bond with duration of 16 C) 30-year corporate bond with duration of 14 D) 15-year unsecured bond with duration of 12

B) 20-year mortgage bond with duration of 16 Generally speaking, the rule of thumb is that bonds with long-term maturities will have greater fluctuations in price than will short-term maturities, given the same move in interest rates. What we need to pay attention to here is not the original maturity of the bond but how much time is left. The truest measure of sensitivity (volatility) is the bonds' duration and the greater the duration, the greater the fluctuation in price when interest rates move.

A fund that specializes in investing in a specific industry must have what percentage of the portfolio within that industry? A) 75% B) 25% C) 90% D) 50%

B) 25%

In an arbitration, the respondent has how many days to respond to both the director and the claimant? A) 15 days B) 45 days C) 60 days D) 25 days

B) 45 days The respondent has 45 calendar days to respond to both the director and the claimant. The answer must specify all available defenses and any related counterclaim the respondent may have against the claimant. A respondent who fails to answer within 45 days may, at the sole discretion of the director, be barred from presenting any matter, arguments, or defenses at the hearing.

A durable limited power of attorney (LPOA) continues until A) five years later. B) the grantor dies. C) the grantor becomes incapacitated. D) the grantor makes a verbal request to revoke the power. Explanation

B) the grantor dies. All POAs end with the death of the grantor. A durable power survives incapacity of the grantor, but not death. Powers of attorney must be revoked in writing by the grantor.

Which of the following is not a criterion for an offering made under Rule 147, the Intrastate Offering Rule? A) At least 80% of the issuer's assets are located in the state. B) At least 80% of the issuer's employees must be based in the state. C) At least 80% of the proceeds of the offering will be used in the state. D) The issuer receives at least 80% of its income from the state.

B) At least 80% of the issuer's employees must be based in the state. The rule is that a majority of the issuer's employees must work in the state. The issuer must meet one of the criteria listed to qualify under Rule 147.

Which of the following new issues would require registration with the Securities and Exchange Commission (SEC) under the Securities Act of 1933? A) BigCo Corporation 180-day commercial paper B) BigCo Corporation two-year convertible notes C) First National Bank certificate of deposit D) Small Town 3% Revenue Bonds

B) BigCo Corporation two-year convertible notes The BigCo notes would require registration. Municipal securities, short term securities, and issues of chartered national and state banks are exempt.

Which of the following retirement plans is governed under the Employee Retirement Income Security Act (ERISA)? A) Federal Employee Retirement System B) Bigcity Transport, Inc., Pension Plan C) State Teachers Retirement Plan D) BigCity public utilities retirement plan

B) Bigcity Transport, Inc., Pension Plan ERISA applies only to private, corporate plans. The "Inc." is your clue that you are looking at a private company. Individual retirement plans (IRA) rules are also found in ERISA.

Which of the following would be a suitable recommendation for a customer concerned about capital preservation? A) Common stock B) Certificate of deposit C) Limited partnership D) High yield corporate bonds

B) Certificate of deposit A certificate of deposit would be a suitable recommendation for a customer whose primary goal is preservation of capital. All of the others listed here have too much capital risk for this type of investor.

All of the following statements regarding Government National Mortgage Association (GNMA) pass-through securities are true except A) interest is taxed at all levels—federal, state, and local. B) GNMAs are considered to be the riskiest of the agency issues. C) investors own an undivided interest in a pool of mortgages. D) investors receive a monthly check representing both interest and a return of principal.

B) GNMAs are considered to be the riskiest of the agency issues. GNMA securities, which are backed by the full faith and credit of the U.S. government, are considered to be the safest of the agency issues.

Which of the following associated persons will not be exempt from the requirement to be fingerprinted? A) Persons selling only variable annuities B) Persons selling only common stock C) Persons selling only limited partnerships D) Persons selling only mutual funds

B) Persons selling only common stock Persons who sell mutual funds, variable annuities, and direct participation programs may be exempt from the fingerprinting requirement because these securities do not have physical certificates. A person selling an individual security that may be represented by a physical certificate will need to submit fingerprints.

Which of the following account registrations may allow margin purchases? A) Individual retirement accounts B) Trust account, if the trust specifically allows margin C) Custodial accounts under the Uniform Transfers to Minors Act D) Trust, as long as the trust does not forbid it

B) Trust account, if the trust specifically allows margin Trust accounts may have a margin feature if the trust specifically allows for the hypothecation of the trust's assets. If the trust is silent on the issue, margin purchases are not allowed. IRAs and UTMA accounts may not trade on margin.

All of the following securities would be exempt from the requirement to register with the SEC under the Securities Act of 1933 except A) Long Beach Import Financing Bank banker's acceptances. B) Vineyard Bank Holdings, Inc., mortgage bonds. C) Seabird Airlines, Inc., 90-day commercial paper. D) Vineyard Bank certificates of deposit.

B) Vineyard Bank Holdings, Inc., mortgage bonds. The issues of a bank holding company are not exempt from registration requirements. Banks are exempt issuers, and BA's and commercial paper are both types of exempt issues.

While trying to plan for retirement, your client, who just celebrated their 70th birthday in June, stated they plan to start withdrawals from their IRA in January, two-and-a-half years from now. Which of the following should your client be made aware of? A) Any distributions for the previous year must be completed by December 31. B) Waiting two-and-a-half years will mandate that an extra RMD be withdrawn before April 1. C) The distributions after December 31 of that year can be taken penalty tax free D) All distributions will be taxed as ordinary income.

B) Waiting two-and-a-half years will mandate that an extra RMD be withdrawn before April 1.

Your new client is interested in purchasing corporate bonds. When speaking about the different risks associated with this investment, you explain that reinvestment risk is the risk that, between now and when the bond matures or is called, interest rates will A) adjust upward for inflation. B) fall. C) rise. D) stay the same.

B) fall. If interest rates decline, it becomes difficult for bond investors to invest the proceeds from the bond and maintain the same level of income and the same general risk level.

All of the following are types of joint tenants registration except A) joint tenants with rights of survivorship. B) joint tenants in the collective. C) tenants in common. D) tenants in the entirety.

B) joint tenants in the collective. There is no such thing as collective.

A prospect has primary investment objectives of current income and safety of principal. During the initial public offering of a closed-end government bond fund, an agent explains to the prospect that the fund invests in U.S. government-backed bonds, which keeps principal safe, and plans to make monthly distributions. Therefore, little could go wrong. Taken as a whole, this representation is A) accurate because the fund offers current income. B) misleading because closed-end fund shares are subject to market pricing. C) misleading because government bonds experience considerable credit risk. D) accurate because the fund invests in government bonds.

B) misleading because closed-end fund shares are subject to market pricing.

Securities held in street name are A) registered in the customer's name and held by the broker-dealer. B) registered in the broker-dealer's name and held by the broker-dealer. C) registered in the broker-dealer's name and held by the customer. D) registered in the customer's name and held by the customer.

B) registered in the broker-dealer's name and held by the broker-dealer. Securities held in street name are registered in the BD's name and held by the BD. Although the BD is the securities' nominal owner, the customer is the beneficial owner.

In a mutual fund, the amount of increases and decreases in the NAV over past years can be reviewed in A) the official statement. B) the prospectus. C) the tombstone. D) the customer account statement.

B) the prospectus. Assuming the fund has existed for that long, changes in NAV for the past 10 years will be found in the prospectus.

A distribution from a corporate pension plan to be rolled over into an IRA must be completed within how many days to maintain its tax-deferred status? A) 90 days B) 30 days C) 60 days D) 45 days

C) 60 days Rollovers from pension plans into IRAs must be accomplished within 60 days in order to retain tax-deferred status.

The ABC Bond Fund has a public offer price (POP) of $20 per share and a sales charge (SC) of 4%. What is the fund's net asset value (NAV)? A) $20.80 B) $19 C) $19.20 D) $18.80

C) $19.20 The formula for this problem is NAV + SC = POP. Sales charges are expressed as a percentage of the POP. For this problem NAV + (20 x 4%) = 20. NAV + .80 = 20. NAV = 19.2.

ABC Corporation is currently traded at $75 a share. ABC pays a $0.75 quarterly dividend. What is ABC Corporation's current yield? A) 2% B) 3% C) 4% D) 1%

C) 4% Current Yield is annually so you gotta add up the quarters.

Which of the following persons could not participate in a Section 457 retirement saving plan? A) A full-time fire captain in a rural community B) A janitor in a state-owned museum C) A property manager of a federal office building D) A police officer for a small city

C) A property manager of a federal office building Section 457 plans are nonqualified retirement plans that may be offered to state and local government employees. They are not available to federal employees.

Which of the following investments does not require the delivery of a prospectus to complete a purchase? A) A mutual fund B) A variable annuity C) An exchange traded fund (ETF) D) A unit investment trust (UIT)

C) An exchange traded fund (ETF) An ETF normally trades in the secondary market and does not require a prospectus be delivered before purchase. A prospectus must be provided upon request, and it is strongly recommended that an investor read the prospectus before investing. All the other investments listed here are sold via a primary market offering and require a prospectus.

Which of the following would not result in an automatic disqualification for registration? A) A court injunction prohibiting the person form acting as an investment adviser B) Willful misstatements made on the Form U4 C) An indictment for a misdemeanor involving securities fraud entered five years ago D) A conviction for felony assault entered eight years ago

C) An indictment for a misdemeanor involving securities fraud entered five years ago Only a conviction—not just an indictment—will result in a disqualification. Likely causes for disqualification are a felony conviction (either domestic or foreign) or a misdemeanor conviction involving securities or money within the past 10 years; misstatements willfully made in an application for membership or registration as an associated person; and court injunctions prohibiting the individual from acting as an investment adviser, an underwriter, or a BD or in other capacities aligned with the securities and financial services industry.

Simplified arbitration may be used in disputes that meet which of the criteria below? A) Disputes involving up to $100,000 B) Disputes involving $50,000 to $100,000 C) Disputes involving $50,000 or less D) Disputes involving $100,000 or less

C) Disputes involving $50,000 or less

All of the following debt instruments pay interest semiannually except A) municipal general obligation bonds. B) industrial development bonds. C) Ginnie Mae pass-through certificates. D) municipal revenue bonds.

C) Ginnie Mae pass-through certificates. Ginnie Maes pay interest on a monthly basis, not semiannually.

Which of the following account types would not allow a minor as the beneficial owner? A) Custodial account B) Trust account C) Joint account D) Guardianship account

C) Joint account A joint account is owned by two or more adults, no minors. A minor may be the beneficiary of any of the other types of accounts.

A bank customer, concerned about the low savings rate of a CD, stepped up to the teller window and asked about moving money from the soon-maturing CD into a money market mutual fund. Because of Rule 3160, which of the following is allowed? A) The teller directs the customer to see the representative sitting at the new accounts desk across the lobby. B) The teller hands the customer a flyer that details the terms and conditions of investing in a money market mutual fund. C) The customer is instructed to follow the signs and see the representative located on the second floor. D) The customer signs a transfer request form.

C) The customer is instructed to follow the signs and see the representative located on the second floor.

Which of the following would be found on a customer's income statement? A) The customer's 401(k) balance B) The customer's risk tolerance C) The customer's debt service D) The value of the customer's primary residence

C) The customer's debt service Information on a balance sheet will be financial assets and liabilities. Income and expense information is on the income statement. Risk tolerance is a non-financial consideration.

A client of yours, Natalia, has been using dollar cost averaging to invest in the XYZ open-end management company family for 20 years and has an average cost of $21.40. During the last six months, she has refrained from making any more contributions into the fund due to poor health. According to her will, upon her death, the fund, which held 8,670.436 shares, passed into the possession and ownership of her 30-year old daughter. The fund carried, at the time of her passing, a NAV of $30.00 with an asking price of $31.50. Based on the facts stated, which of the following is true? A) The new cost basis of the inheritance is stepped up to $31.50. B) Natalia's cost basis of $21.40 is passed to her daughter at her death. C) The new cost basis of the inheritance will be stepped up to the next computed NAV. D) When Natalia's daughter sells the shares, only the last purchased shares will receive the stepped-up cost basis.

C) The new cost basis of the inheritance will be stepped up to the next computed NAV.

Contribution limits for non-qualified plans are set by which of the following? A) Contribution limits are set by legislation and adjusted periodically. B) Contribution limits are set by legislation and may not be changed. C) There are no regulatory or legal limits for contributions to non-qualified plans. D) Contribution limits are set by FINRA.

C) There are no regulatory or legal limits for contributions to non-qualified plans. Non-qualified plans do not have any contribution limits set by law.

All of the following are terms associated with a broker-dealer making a market in a security except A) mark-up. B) inventory. C) commission. D) principal.

C) commission. A market maker is a broker-dealer working as a dealer in the OTC market. A broker-dealer may not charge a commission when acting as a dealer.

A variable annuity contract holder commences the payout period, receiving an initial benefit of $400 based on an assumed interest rate of 4%. In the second month, the contract holder receives $425 on the basis of an annualized rate of return of 10% earned by the separate account. If the separate account experiences an annualized net investment rate of 8% during the third month, the payout to the contract holder will be A) less than $400. B) $425. C) more than $425. D) less than $425 but more than $400.

C) more than $425. The assumed interest rate (in this case, 4%) serves as a base of projection for calculating periodic payments. If the actual return is greater than the AIR, the next month's benefit check will increase in value. Because the account actually earned 8%, which is higher than the AIR, the value of the check would increase again (greater than $425). Always compare the actual return to the AIR, not to the previous month's performance.

If your client wants to accumulate $50,000 over the next 10 years for her daughter's college education, to achieve this investment objective you would recommend A) an aggressive growth fund. B) a large-cap fund. C) zero-coupon bonds maturing in 10 years. D) a high-yield corporate bond fund.

C) zero-coupon bonds maturing in 10 years. Zero-coupon bonds are well suited for achieving investment goals of a stated sum within a fixed period of time. They are purchased at a discount and mature to their face value. Investors do not receive current income.

Which of the following characteristics describes a final prospectus? A)Used to solicit indications of interest in a new issue B)Filed with the SEC semiannually C)Filed with the SEC and not available to the general public D)Complies with the full and fair disclosure requirements of the Securities Act of 1933

D) Complies with the full and fair disclosure requirements of the Securities Act of 1933

In order for an individual to meet the requirements to be an accredited investor they must meet how many of the criteria listed in Regulation D? A) Four of the criteria B) Three of the criteria C) Two of the criteria D) One of the criteria

D) One of the criteria An investor only needs to meet one of the criteria for individual investors listed in the regulation.

Which of the following types of annuity contracts could your customer not purchase? A) Single payment immediate life annuity B) Periodic payment deferred annuity C) Single payment deferred annuity D) Periodic payment immediate life annuity

D) Periodic payment immediate life annuity Periodic payment annuities may be purchased only on a deferred basis. Annuitization and regular payments into an annuity may not occur simultaneously.

When illustrating hypothetical returns for variable life insurance cash value, the maximum gross return that may be illustrated is A) 10%, provided a 0% return is also illustrated. B) 8%, provided a 2% return is also illustrated. C) 15%, provided a negative return is also illustrated. D) 12%, provided a 0% return is also illustrated.

D) 12%, provided a 0% return is also illustrated. A hypothetical return of no more than 12% may be illustrated under the regulation. In addition, the 12% return can only be illustrated as long as a 0% return is also illustrated for the customer.

Which of the following statements regarding qualified plans is true? A) Growth may be distributed tax free. B) A plan may discriminate in favor of key employees. C) A separate trust is not required. D) A plan must meet IRS standards.

D) A plan must meet IRS standards. A qualified plan is qualified because it meets certain IRS rules. Among those rules is that the plan may not discriminate and must be held in a trust. Generally the growth inside these plans is taxable upon distribution.

Which of the following would be needed to change the authorized person on a corporate account? A) A resolution of the partners authorizing a new person to control the account B) A resolution of the board of directors appointing a new trustee C) A resolution of the board of directors appointing a new power of attorney D) A resolution by the board authorizing a new person to control the account

D) A resolution by the board authorizing a new person to control the account A corporation authorizes a person to control a corporate account by a resolution of the board of directors. A partnership would need a resolution of the partners. This person is not put into place by a POA or a trusteeship.

An active portfolio manager may position the portfolio in stocks within a few market sectors, frequently trading in and out of the individual stocks, and subsequently, sectors. This type of management style can be suitable for certain investors. When explaining this strategy, you can help your investor see this as which of the following? A) Opportunity speculation B) Sector selection C) Defensive rotation D) Sector rotation

D) Sector rotation

If an underwriter of a rights issue exercises any unexercised rights on the ex-rights date, this is an example of what type of issue? A) All or none B) Best efforts C) Firm commitment D) Standby

D) Standby

In a fixed annuity the premiums from customers are placed in which account? A) The fund's separate account B) A subaccount C) The broker dealer's transitory account D) The insurance company's general account

D) The insurance company's general account Premiums in a fixed annuity are placed in the insurance company's general account.

For a complaint, FINRA's definition of a customer would include all of the following except A) an accredited investor. B) a nationally chartered bank. C) a financial advisor firm. D) another FINRA member firm.

D) another FINRA member firm. For FINRA's purposes, the term customer includes any person other than a BD with whom the member has engaged or has sought to engage in securities activities.

Once a variable annuity has been annuitized, A) the number of annuity units is fixed, and their value remains fixed. B) each annuity unit's value and the number of annuity units vary with time. C) each annuity unit's value is fixed, but the number of annuity units varies with time. D) each annuity unit's value varies with time, but the number of annuity units is fixed.

D) each annuity unit's value varies with time, but the number of annuity units is fixed. During the payout period, payments are based on a fixed number of annuity units established when the contract was annuitized. The value of an annuity unit varies from month to month according to the performance of the separate account in comparison with the assumed interest rate.

All of the following are ways to secure a better breakpoint except A) rights of accumulation. B) letter of intent. C) combination privilege. D) exchange privilege.

D) exchange privilege. An exchange privilege allows an investor to move from one fund to another within a fund family with no sales charge. The other items are all ways of aggregating purchases to achieve a better breakpoint. (exchange privilege is about moving money to diff accounts, nothing to do with breakpoints)

An agent of a broker-dealer must obtain all of the following when opening a customer account except A) investment objectives. B) date of birth. C) marital status. D) occupational history.

D) occupational history. A customer's occupational history is not required when opening an investment account. Their current occupation is requested and is considered an important part of knowing your customer, but it is not a regulatory requirement.

Premiums paid for a variable life insurance policy are placed into A) the internal account and the separate account. B) the internal account and the external account. C) the general account and the variable account. D) the general account and the separate account.

D) the general account and the separate account. A portion of the premiums paid for a variable life insurance policy are placed in the insurance company's general account in order to pay for the minimum life insurance benefit, and the excess is invested into the separate account.

What's an S-1 form offer

Its what starts the cooling off period thing

During the cooling-off period of a securities registration, the underwriters will generally distribute a preliminary prospectus. This document 1) may contain incomplete information. 2) will not contain the effective date. 3) may be used to solicit indications of interest, as long as payment of postdated checks only is accepted. 4) may be accompanied by a special report on the security, prepared for the occasion by the underwriter's research department.

1 and 2 A preliminary prospectus is frequently called a red herring. This is due to the statement, printed in red ink, that information contained therein may undergo change, completion, or amendment. The effective date is found in the final prospectus only. No payment of any kind may be accepted from potential investors, and special research reports or other promotional material on the new issue are prohibited.

The prospectus of the ABC Fund contains the phrase "will have at least one-quarter of common stock investments in the field of business machines." The ABC Fund is A)a specialized fund. B)a growth and income fund. C)a diversified fund. D)a balanced fund.

A)a specialized fund. A fund that, as part of its investment policy, makes a commitment to invest 25% or more of its assets into a particular economic or geographical sector is a specialized fund

Assuming that expense ratios for the funds listed are identical, rank the funds below in order, from lowest to highest expected income yield. Municipal bond fund Government bond fund Corporate bond fund Growth stock fund

Read, EXPECTED INCOME YIELD. -Growth is lowest, because that's capital gains not income. -Municipal next, it is less than government bonds -Government next, because interest paid on them is federally taxable -Corporate bonds are the greatest credit risk, therefore the highest yield.