S66 10/04

When referring to a federal covered investment adviser, all of the following are supervised persons except A) the chief securities analyst. B) an individual contracted to promote the firm to potential advisory clients. C) the receptionist who works for the investment adviser and analyzes client financial profiles. D) an investment adviser representative.

B

For which of the following is there no active secondary market? A) ETFs B) Options C) Forward contracts D) Futures contracts

C

An investment adviser cannot adequately advise a client without knowing the client's financial status. When determining that status, it is important to differentiate between financial and nonfinancial considerations. Which of the following would be considered a financial consideration rather than a nonfinancial one? A) Client's membership in Greenpeace B) Fact that both parents were smokers who died of lung cancer C) Client's marital status D) Client's stamp collection

D

In order to compute an investor's after-tax return on a corporate bond, all of the following are necessary except A) marginal tax bracket B) appreciation C) interest payments D) inflation rate

D

Olga holds XYZ stock. The stock recently increased in value by 50%. She would like to preserve as much of this gain as possible and retain the potential for additional price increases. Which strategy best meets Olga's goal? A) Write a call option B) Short the stock C) Buy a call option D) Buy a put option

D

Pontourny Advisory and Investment Services (PAIS) is a federal covered investment adviser. Its principal office is in State X. PAIS also maintains branch offices in States Y and Z. Brenda is the manager of the branch office in State Y. Some of the individuals being supervised by Brenda have clients in States X and Y, and others have clients in States Y and Z. Brenda must register as an IAR in A) States X, Y, and Z. B) States Y and Z. C) States X and Y. D) State Y.

D

When comparing a clearing firm to an introducing firm, it would be expected that A) the fully disclosed firm must comply with the customer protection rule (15c3-3). B) the fully-disclosed firm will generally have clearing arrangements with many carrying firms. C) the clearing firm holds funds but not securities belonging to the customers of the introducing firm. D) the clearing firm has higher financial requirements.

D

A state-registered investment adviser would like to employ the services of an individual as a solicitor to help bring in more business. The solicitor will be compensated by receiving a percentage on all assets placed under management. In order to do this, all of the following must be complied with except A) the client must sign the advisory contract at the same time that the investment adviser's brochure is delivered. B) the terms of the investment adviser's compensation must be spelled out. C) the solicitor is considered a supervised person. D) the solicitor must be registered as an investment adviser representative in order to receive compensation based upon advice.

A

A wealthy individual has set up a GRAT. Should she die during the time the trust is active, how are the remaining assets in the trust taxed? A) The original value plus any appreciation is taxed as part of the grantor's estate. B) No tax is due if the grantor should die during the term of the trust. C) The original value plus any appreciation passes to the beneficiaries but is subject to gift tax. D) The original value plus any appreciation passes to the beneficiaries and is taxed as ordinary income.

A

During your annual review with your clients, Matt and Sally Eberhart, they indicate that they think it is time to start putting away some money for college for their 3-year-old son. They ask you to describe the advantage of using an UTMA account over a Coverdell ESA. You would likely point out all of the following as advantages except A) contributions to the UTMA are made with after-tax dollars B) there is no limit to the amount that can be contributed to an UTMA C) there are no earnings limits for making UTMA contributions D) withdrawals for other than qualified education expenses are not subject to any penalties

A

The antifraud provisions of the Uniform Securities Act apply to all of the following except A) an individual employed by a registered broker-dealer whose sole function is selling commodity futures contracts. B) newsletter publishers who do not give advice to subscribers on the subscribers' specific investment situations. C) persons availing themselves of the de minimis exemption. D) a broker-dealer registered pursuant to the limited registration option available to Canadian broker-dealers and their agents.

A

All of the following statements concerning the EMH are correct except A) the weak form of market efficiency involves market data, whereas the semi-strong and strong form involve the assimilation of all public and private information, respectively. B) investors usually react slowly to new and random information pertaining to all currently-available security market information. C) the efficient market hypothesis states that securities markets are efficient, with the prices of securities reflecting their current economic value. D) an efficient market is one in which the prices of securities quickly and fully reflect all currently-available security market information.

B

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

B

Starflier Mutual Fund, regulated under the Investment Company Act of 1940, wishes to change its investment policy. It may do so with approval of A) the fund's investment adviser. B) a majority of the outstanding shares. C) a majority of the board of directors. D) the Securities and Exchange Commission (SEC).

B

The Canadian government is looking to create their own digital coin that will allow them to regulate digital assets safely and securely. What is the name of this developing stablecoin? A) Ethereum B) Central Bank Digital Currency C) CanadaCoin D) Bitcoin

B

The term investment counsel can be used by investment advisers A) who are also attorneys. B) with a primary business of rendering investment advice. C) who are also registered as broker-dealers. D) who are registered with the SEC under the Investment Advisers Act of 1940.

B

When advisory clients wish to structure their portfolios to support companies that engage in social or environmental policies that they agree with, it is known as A) program-related investing. B) impact investing. C) asset allocation. D) engineered investing.

B

A client plans to purchase a home within the next three months and will require $100,000 for the down payment. The client has the money in her DDA and asks you for your recommendation as to the best place to put the money. Your recommendation would probably be for the client to A) move the money into a 1-year CD. B) purchase a GNMA for the monthly income. C) keep the money where it is. D) use the money to buy IPOs until the home is purchased.

C

If an agent has secured a signed statement from a customer that waives the customer's right to sue for a transaction in violation of the Uniform Securities Act, the agreement is A) legal. B) legal but only in a criminal case. C) null and void. D) legal but only in a civil case.

C

The Uniform Securities Act defines a guaranteed security as one A) where a party other than the issuer offers a guarantee that investors are assured of never receiving less than their original investment. B) that may only be sold to institutional investors. C) where the payment of interest and principal (bond) or dividend (stock) is guaranteed by a party other than the issuer. D) involving a guarantee of a minimum profit by a party other than the issuer.

C

The regulators are concerned when a broker-dealer operates on the premises of a financial institution. However, the rules only apply when which of the following activities takes place on those premises? A) Mortgage loan applications are accepted B) Safe deposit boxes are available C) Retail deposits are taken D) Personal loans are made

C

The terms mean, median, and mode are all measures of A) correlation coefficient B) standard deviation C) central tendency D) beta coefficient

C

Wealth Creation Advisers (WCA) is a federal covered investment adviser specializing in consulting to pension plans. WCA's principal office is located in State L. The governor of State L is running for re-election. If WCA were to make a $350 contribution to the campaign, under the SEC's pay-to-play rule, WCA A) would be prohibited from rendering any advisory services to any agency of State L for two years. B) could continue with business as usual, as the contribution is within the de minimis limitation because their principal office is located in State L. C) would be prohibited from receiving compensation for advisory services rendered to any agency of State L for two years. D) could be subject to disciplinary action.

C

Your client often makes irrational financial decisions because she bases her decisions on information that should have no influence on the decision at hand. The client's behavior is known as A) confirmation bias. B) herd mentality. C) anchoring. D) overconfidence.

C

Which of the following statements regarding Section 529 plans is correct? A) Qualified expenses would include all residence costs incurred by a full-time student. B) Residents of some states receive a deduction on their federal income tax returns. C) Funds not used for qualified expenses by age 30 must be distributed or rolled over. D) Qualified expenses could include tuition for attendance at a foreign university.

D

Under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, which of the following must be included in an investment advisory contract? I. The formula used to determine the investment adviser's compensation II. A statement of the discretionary authority, if any, given to the investment adviser III. A statement that the investment adviser may assign the contract without the consent of the client

I & II

In order to compute an investor's after-tax return on a corporate bond, which of the following are necessary? I. marginal tax bracket II. appreciation III. interest payments IV. inflation rate

I, II, & III

What is the profit margin formula?

Profit margin = net profit ÷ sales

True or False? The weak form of market efficiency involves market data, whereas the semi-strong and strong form involve the assimilation of all public and private information, respectively.

True

What would happen if you (an IAR) donated more than the allowable contribution limit to a political campaign in a specific state?

You wouldn't be able to be compensated for advisory services rendered to any agency in the state for two years.