Series 66 Missed Questions

Which of the following transactions for ERISA plans is not specifically prohibited?

A transfer of plan income or assets for the benefit of a plan beneficiary or plan participant which they are entitled according to the provisions within the plan ERISA serves as a basis of rules which protect the beneficiaries and plan participants. It is permitted for a fiduciary to transfer plan income or assets for the benefit of a plan beneficiary or a plan participant which they are entitled according to the provisions within the plan. It is not allowable for the fiduciary to transfer or loan plan assets for the benefit of a disqualified person such as the fiduciary of the plan or a person providing services to the plan.

An issuer is planning to offer securities for sale in State A and several other states. Which of the following statements regarding registration in State A under the Uniform Securities Act is NOT true?

"The Administrator may not, as a condition of registration by qualification or coordination, require the security be deposited in escrow and the proceeds be impounded until the issuer receives a specified amount." The Administrator may, as a condition of registration by qualification or coordination, require the security to be deposited in escrow and the proceeds to be impounded until the issuer receives a specified amount. It is true that every registration must specify the amount of securities to be sold in the state, the states in which offering is to be made, and any adverse order or judgment of a regulatory authority. The Administrator may by order permit omission of any item of information or document from a registration statement. The Administrator may, as a condition of registration by qualification or coordination, rule that the securities may only be sold on a specified form of subscription and that a signed copy be filed with the Administrator.

What is a QRDO

. A QDRO (qualified domestic relations order) is a court-issued order that gives someone the right to an individual's qualified plan assets, typically an ex- (or soon-to-be-ex-) spouse, and the QDRO is usually issued in the course of divorce proceedings or to satisfy child support obligations.

Qualified annuity plans offered under Section 403(b) of the Internal Revenue Code, referred to as tax-sheltered annuities (TSAs), are not available to

403(b) plans are available to employees of 501(c)(3) nonprofit organizations and schools, not to students.

Which of the following statements regarding a QDRO is correct?

A QDRO applies only to assets in a qualified employer plan.

An employer offers its employees the opportunity to use tax-deductible funds to pay for health costs, as long as they enroll in a high-deductible health plan. This would be a description of

A health savings account (HSA) requires that the employee enroll in a health insurance plan with a high deductible. The flexible spending account (FSA) makes no stipulation regarding the deductible.

Under the Uniform Securities Act, which of the following may have to qualify as an investment adviser representative?

A solicitor for an investment advisory firm who is paid a fee for his services If the goal is obtaining clients for the investment adviser, a solicitor is generally considered an investment adviser representative under the Uniform Securities Act. Although the term, solicitor, has been largely replaced in the federal law with the term, promoter, we expect you'll still see frequent usage of solicitor on the state (NASAA) exams. An employee who performs clerical or administrative functions only is not an investment adviser representative. Precious metals are not securities, and a person advising on them is not considered an IAR. An agent is a representative of a broker-dealer.

Averaging techniques would include all of the following EXCEPT

maintaining a constant ratio plan Averaging techniques involve some form of regular investing; a constant ratio plan involves buying and selling different asset classes to keep the ratio between them at a static percentage.

To make a quantitative evaluation using the future value computation, which of the following is NOT needed?

Account value at the start of the period.

Under the Uniform Securities Act, a civil suit to recover damages may not be brought by an advisory client if I. more than 2 years ago, the client realized the advice rendered was improper II. the adviser has died III. The client willingly signed a statement waiving the adviser's compliance with the provision of the act on which the suit is based

Answer: I Only The statute of limitations for civil cases is 2 years after discovery or 3 years after the event, whichever is sooner. The death of neither the adviser nor the client removes a cause of action for civil liability, and clients may not waive an adviser's compliance with the rules.

When a broker-dealer registers with the state Administrator, which of the following persons are automatically registered as agents of the broker-dealer in the state?

Any agent who is a partner, officer, or director, or a person occupying a similar status or performing similar functions

An individual has just received an inheritance of $15,000 and has the goals of preservation of capital and income. The client is in a low tax bracket. Which of the following would be the most suitable choice?

Bank-insured CDs When preservation of capital is a goal and one of the choices is an insured bank CD, pick it. When the question refers to a low tax bracket, municipal bonds will never be the correct choice. Newly issued Treasury bonds have maturities of at least 10 years. During that time, changes to interest rates in the market place would cause the market price of those bonds to fluctuate. Although the public utilities will offer income frequently higher than the CD, there are no guarantees the principal will remain intact. (Some public utilities have gone bankrupt.)

Delta Advisers is registered in Alabama, Mississippi, and Louisiana. Billy Joe works for Delta Advisers rendering investment advice to individual clients. He works out of Delta's Jackson, MS office and has 3 clients in Mississippi, 6 clients in Alabama and 4 in Louisiana. Billy's friend, Bobby Ray, works for Biloxi Investments, a federal covered adviser with offices in several cities in Mississippi. Bobby Ray works out of the Tupelo, MS office and has 45 retail clients in Tennessee, 4 in Georgia, and 6 in Alabama. With regards to registration as an IAR, which of the following statements is TRUE?

Billy Joe must register in MS and AL and Bobby Ray must register in MS. Working for a state registered investment adviser, Billy Joe must register in the state in which he maintains a place of business (MS) and any other state in which his clients exceed the de minimis limit of 5 (AL in this case). Working for a federal covered investment adviser, Bobby Ray needs to only register in those states in which he maintains a place of business, regardless of the number of clients. That means he is only required to register in MS.

The employer does not get a current tax deduction when offering which of the following retirement plans?

Deferred compensation plan Because there is no constructive receipt of income until the deferral period is over, the employing company does not get a current tax deduction. Of course, the employee doesn't report taxable income until then. In the other plans, all qualified, any contributions made by the employer represent a current business expense and are deductible from the company's income.

Which of the following statements regarding estates are CORRECT?

Estate taxes are due 9 months after the date of death of the deceased Assets are valued based on their market value as of the date of death, or, alternatively, 6 months later

Which of the following would be most useful information for an IAR attempting to determine the ability of a client to have the necessary funding to purchase an investment with a $25,000 minimum entry level?

Family balance sheet. Some clients invest in a lump sum, others with periodic payments and others do both. Since this is lump sum question, the balance sheet indicates the ability to commit funds at one time.

While the Administrator has great power, the USA does place some limitations on the office. Which of the following statements regarding those powers are TRUE?

I. In conducting an investigation, an Administrator can compel the testimony of witnesses. IV. An Administrator may deny the registration of a securities professional who has been convicted of any felony within the past 10 years.

A 401(k) offering which of the following choices would be most likely to be in compliance with Section 404(c) of ERISA?

Money market fund, intermediate-term government bond fund, large-cap stock index fund

Washington, Adams, and Jefferson, Inc. (WAJI) is an investment adviser whose principal and only office is in Alexandria, VA. WAJI's sole business is advising institutional investors. Rutherford Buchanan is employed by the firm in the main office and has the responsibility of servicing the firm's bank and insurance company clients. Which of the following statements is correct regarding Rutherford's licensing requirements?

Rutherford must register as an IAR of WAJI with the state of Virginia. Regardless of whom the clients are, Rutherford has a place of business in Virginia and that requires registration with the Administrator as an IAR. If WAJI does business in other states where it does not have a place of business, it is exempt from registration because the only clients are institutions. If WAJI is not registered in the state, Rutherford can't register as their IAR. The de minimis exemption for fewer than 6 retail clients only applies when there is no place of business in the state.

Which of the following is the beneficial owner of securities in an UTMA account?

The minor is always the beneficial owner under an UTMA account. The custodian merely exercises her best judgment in handling investment decisions on the minor's behalf.

What are "settlor" functions?

The most common settlor functions are design decisions involving: establishment of the plan, defining who are the covered employees and benefits to be provided, and amending or terminating the plan. Because the likelihood of an IAR ever performing settlor functions is quite remote (usually they are done by employees of the sponsoring employer), I cannot fathom why NASAA would ask something like this on the exam, but, just in case.

An employer has a qualified retirement plan that promises to pay employees a specific percentage of their average salary if they complete 20 years of service. This type of pension plan is

a defined benefit pension plan A defined benefit pension plan is one that promises to pay employees a certain specified benefit at retirement. The modern trend is toward a defined contribution plan, in which the employer promises to make certain contributions to the plan each year, but does not commit to paying employees a specific benefit when they retire. A profit-sharing plan is a type of defined contribution pension plan.

An investment adviser would be most likely to be the contra-party to a trade when acting as

a principal.

In general, in a defined benefit plan, the pension to be received upon retirement is based on the number of years of service and the individual's

final salary.

When operating a Keogh plan, a self-employed individual must make contributions for

full-time employees who are at least 21 years old and have worked for the company for 1 or more years Employees must be covered under a Keogh plan if they are at least 21 years old, have been employed a minimum of 1 year, and work full time (at least 1,000 hours per year). Keogh plans do not include employees who are under 21 or have just started working with the employer.

Compliance with delivery requirements pertaining to an adviser's brochure under the Uniform Securities Act would require an adviser to:

furnish clients with a copy of the brochure within 120 days of the end of the adviser's fiscal year unless there have been no material changes.

It would be incorrect to state that a lump-sum distribution from a 401(k) before retirement may be

tax free if the recipient is disabled A distribution to someone who is disabled is free of the 10% penalty tax but is still subject to taxation as ordinary income. Distributions from a qualified retirement plan (e.g., a 401(k) plan) prior to retirement are subject to tax and possible penalty unless the funds are rolled over or transferred into a traditional IRA. If, instead, the move is made into a Roth IRA, there is no penalty, but tax would be due just the same as if one converted from a traditional to a Roth IRA.

Your client, Jane, died, and her 53-year-old son, Patrick, is the beneficiary of her IRA account. There is $750,000 in the account at the time of her death. All contributions were made with pre-tax dollars. Ten years later, the account has grown to $1.2 million, and Patrick begins to take distributions. The distributions will be

taxed on the amount withdrawn in a given year The account beneficiary is responsible for the taxes due on the funds that are withdrawn. One hundred percent of the distribution is taxable in the tax year the withdrawal is made.

An investment adviser representative of a federal covered investment adviser registers with

the Administrator. Registration of IARs is done solely on the state level. IARs register with the Administrator of each state in which they are required to be registered.

A widower wants to fund a Section 529 plan for his daughter. What is the maximum amount he may initially contribute in 2019 without having to pay gift taxes?

$75,000 A special rule under Section 529 allows the donor to load front-end load contributions and avoid paying gift taxes. Five years' worth may be used under this method (5 × $15,000 = $75,000). If he remarries, his wife may also consent to gift split, thereby doubling this amount to $150,000. Please note: The annual exclusion was increased to $15,000 effective January 1, 2018.

Create A Large Legacy (CALL), Inc., is a state-registered investment adviser with offices in States X, Y, and Z. CALL currently does not have a place of business in State W, but does have 5 retail clients who are residents there. Opening an account for which of the following prospective clients domiciled in State W would now require CALL to register in State W?

A trust having 4 minor children as beneficiaries with total trust assets of $5 million Regardless of the assets involved, a trust account, unless one for an employee benefit plan with at least $1 million in assets, is considered a retail rather than institutional client. Once the investment adviser goes over the de minimis limit of 5, registration with the state is required. Regardless of the assets involved, institutional clients, such as insurance companies, banks and government instrumentalities, do not count toward the de minimis limit.

To make a quantitative evaluation using the future value computation, which of the following is NOT needed?

Account value at the end of the period. Future value is calculated to determine the value of a specific amount of money at some point in the future. The anticipated interest rate, the present amount to be invested, and a time period for the life of the investment are required to calculate the future value.

Examples of issuer transactions include

An IPO, the purchase of mutual fund shares, and the purchase of limited partnership interests all benefit the issuer and are called issuer transactions.

The Investment Advisers Act of 1940 requires that firm and customer records of an investment adviser be:

An investment adviser's records must be maintained for 2 years in the principal office and must be readily accessible for 5 years.

Which of the following would fall under the USA's definition of exempt transaction?

An issuer sells a new issue to a broker-dealer Transactions between issuers and broker-dealers (but not investment advisers) are exempt transactions. As long as the sale is to the public, regardless of commissions charged (or not charged), the transaction is nonexempt. Don't be lured into thinking that accepting an order from a client is unsolicited. That's not true in this case because it is as the result of the research report.

Which of the following accurately describes a cease and desist order as authorized by the USA?

An order by the Administrator to refrain from a practice of business believed by that Administrator to be unfair A cease and desist order is a directive from an administrative agency to immediately stop a particular action. The order can come from a federal, state, or judicial body; it is not exclusive to any single body. However, because this question is referring to the Uniform Securities Act, we focus on the actions of the Administrator, not a federal agency. Administrators may issue cease and desist orders with or without a hearing. Courts issue injunctions, usually when the cease and desist order is ignored. Brokerage houses cannot issue cease and desist orders to each other.

A client with a bullish outlook on a particular stock would be able to benefit most from taking which of the following actions?

Buying the stock on margin. If one is bullish on a stock, the advantage of purchasing on margin is due to the leverage employed. In other words, by putting up half the money, you get 100% of the growth. Selling short is a technique used by investors who are of the opinion that the market price of a stock is going to fall.

Earnings momentum would be important to an analyst using which of the following portfolio management styles?

Growth Growth managers are looking for companies whose earnings are growing at an increasing rate. That is the basic definition of earnings momentum.

Which of the following is not included in adjusted gross income on an individual's federal income tax return?

Municipal bond interest Although tax-exempt interest is reported on the Form 1040 (line 8b), it is not included in adjusted gross income.

Which of the following does NOT constitute market manipulation under the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents?

Excessive trading in a client's account for the sole benefit of increasing commission income. Excessive trading for the purpose of increasing commissions is the prohibited practice known as churning, but it is not a form of market manipulation. Intentionally providing inaccurate quotes, creating fictitious volume, and entering orders to prevent a stock from moving up or down are forms of market manipulation.

A registered representative presenting a variable life insurance policy proposal to a prospect must disclose which of the following about the insured's rights of exchange of the VLI policy?

Federal law requires the insurance company to allow the insured to exchange the VLI policy for a form of permanent life insurance issued by the same company for 2 years with no additional evidence of insurability.

In addition to the normal required filings, an investment adviser who maintains custody of client funds and/or securities will be required to complete

Form ADV-E The Form ADV-E (E for Examination) is completed by every investment adviser who maintains custody of client assets. Then, the form is used by the independent accountant who performs the surprise annual examination of the adviser's records. The accountant is the one who submits the ADV-E to the SEC (or the state, if appropriate).

A state-registered investment advisory firm that plans to take custody of clients' securities must do which of the following?

Give notice to the state Administrator. Provide a copy of its balance sheet to clients.

A 45-year-old employment counselor has a Keogh plan for himself and 3 full-time employees who have been working for him for the past 4 years. If he earns $150,000 this year and contributes the maximum amount allowed to his Keogh plan, how much may he invest in an IRA?

He may contribute 100% of earned income or the maximum allowable IRA limit, whichever is less. Regardless of how much is invested in a Keogh plan, an investor may still invest in an IRA if he has earned income. The maximum contribution to an IRA is 100% of earned income or the maximum allowable limit, whichever is less. In this individual's case, however, the contribution would probably be nondeductible.

Advisers that manage $110 million or more in customer assets are required to do which of the following? I. Register with the Securities Exchange Commission II. File notice with FINRA III. Post a bond in an amount specified by the appropriate regulatory body IV. File notice with the state in which their principal office is located if notice filing is required by the Administrator

I and IV Advisers that manage $110 million or more in customer assets are federal covered advisers and are required to register with the SEC under the Investment Advisers Act of 1940. In addition, they are normally required to file notice in each state where they conduct business. There are no bonding requirements for federal covered advisers.

ABCO Materials, Inc., is in the process of raising money from the public for the first time. Which of the following must be disclosed in ABCO's registration statement filed with the Administrator? I. Biographical sketches of each of the members of the board of directors, as well as ABCO's principal officers II. Expected use of the proceeds of the offering III.Performance of the company's stock over the last five years or since the founding of the company, whichever is the shorter period IV. Expected range of the public offering price

I, II, and IV A registration statement will always include the expected use of the proceeds of the offering, as well as short biographies of the members of the board of directors (and key officers as well). This question stated that it was the company's IPO, so there could not be any previous stock performance, although the public offering price is not determined until the effective date, the expected range is indicated to the state(s).

Which of the following statements is TRUE regarding the civil liability provisions of the Uniform Securities Act?

If the registration statement contains misrepresentations that were made deliberately, criminal penalties, in addition to civil ones, may be levied.

How does one qualify for the safe harbor provision under 404(c)?

In order to qualify for the safe harbor under 404(c), the portfolio selections must include at least 3 different asset classes, such as equity, debt, and cash equivalent. All equities or all debt won't qualify.

Which factor is least important when assessing a defined benefit pension?

Investment performance of the fund Under a defined benefit plan, the pension payable is related to the length of service and usually expressed as a proportion of final earnings. The investment performance of the fund is therefore the least important factor to consider.

Which of the following statements regarding a qualified profit-sharing plan is TRUE?

It must be established under a trust agreement. All qualified retirement plans must be established under a trust agreement. Contributions with this type of plan are not required annually, nor can the plan make direct cash payouts to participants before retirement.

Mountain High Securities is a broker-dealer registered in Wyoming and Colorado with its principal office located in Colorado. With reference to the Uniform Securities Act, it would be correct to state that

Mountain High Securities must meet the recordkeeping requirements of the SEC For BDs registered in more than one state must be registered with the SEC because they are dealing in interstate commerce. Unlike investment advisers, BDs register with both the SEC and the states (unless it is an intrastate BD). In general, the recordkeeping requirements under state and federal law are similar. However, no state can impose stricter recordkeeping or financial requirements on an SEC-registered firm than those of the SEC. Neither the SEC or an Administrator has to give approval of the method of recordkeeping. If, during an examination of the firm, the appropriate regulator determines that the records are not being kept in accordance with the regulations, disciplinary action may be taken.

Which of the following is an exempt security under the Uniform Securities Act?

Negotiable certificates of deposit with $100,000 denominations. A negotiable certificate of deposit issued by a bank is an exempt security. Insurance company shares are nonexempt if the issuer is not authorized to do business in that particular state. While debt securities issued by the United Kingdom are exempt, corporate securities issued by British companies are not. Commercial paper loses its exemption if the maturity is longer than 270 days.

To protect the benefits of plan participants and beneficiaries, ERISA prescribes standards for the execution of the plan fiduciary's duties and responsibilities. Which of the following CORRECTLY describes those standards?

Participants must be offered a broad range of investment options. The rules prohibit transactions between the plan and persons who have conflicts of interest with the plan even though a particular transaction may benefit the plan participants.

Under the Uniform Securities Act, the Administrator may require the filing of advertising and sales literature in which of the following offerings?

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

The term security would include which of the following?

Section 529 plans

Tim earns $30,000 at his employment and is not offered a pension plan. His spouse is not currently employed. What is the best way to set up an IRA to give maximum retirement benefits?

Set up separate accounts for $6,000 each. A one-worker couple can open a spousal IRA. This type of arrangement allows the contribution of a total of $12,000 to the two accounts and no more than $6,000 in either account. Selecting separate accounts totaling $12,000 could imply that one account could exceed $6,000 while the other would be less. IRAs are always individual accounts. The spousal IRA allows contributions on behalf of a nonworking spouse.

Which of the following is the most suitable investment for the IRAs of a young couple with a combined annual income of $80,000?

Shares of a growth fund For this couple, the IRA should be established with an objective of long-term appreciation. DPPs, IPOs of small companies, and options on large-cap common stock are riskier investments and are generally considered imprudent for IRAs.

In most cases, the front cover of a prospectus for a registered stock offering must contain a statement to the effect that the SEC, or state if an intrastate offering, had not approved or disapproved of the security. This statement is known as

The disclaimer

Those persons meeting the Uniform Securities Act's definition of a broker-dealer in a state must, unless otherwise exempted, register in that state. Which of the following is correct regarding the initial registration and expiration of the registration of a broker-dealer?

The effective date of an initial registration is at noon on the 30th day after receipt of a completed application; expiration, unless renewed, is each December 31st.

With defined benefit plans, who bears the investment risk?

The employer With defined benefit plans, the employer (not the employee) bears the investment risk. The employer must fund the defined benefits, regardless of the investment performance of funds set aside for this purpose. The retiree receives a defined benefit regardless of investment performance.

In which of the following cases would an individual representing an issuer in a transaction with a client be excluded from the Uniform Securities Act's definition of an agent?

The individual successfully solicits an order from an insurance company to purchase 10,000 shares of the issuer's stock. Individuals representing issuers in the sale of their securities may or may not be defined as agents. When the transaction is exempt, such as sale to an institution like an insurance company, the individual is not defined as an agent. There are two ways to earn the exclusion. One of them is when the transaction in the issuer's security is exempt. The other is when the issuer is in one of the five categories of exempt security listed in the USA. Each of the other three choices represents an exempt security, but none of the three are included in the USA's list of those where the individual representing the issuer is not an agent.

Quick and Fast Executions, Inc., a broker-dealer registered with the Administrator, maintains a website describing the services offered by the firm. Which of the following statements would be in compliance with the requirement to maintain certain books and records?

The original website design must be retained for a period of at least three years from initial use.

A person is excluded from the definition of investment adviser under the Investment Advisers Act of 1940 if the investment advice and reports are restricted to

U.S. government securities

Which of the following does not provide for a change of beneficiary?

UTMA account

The statute of limitations for civil suits is...

Under state law, civil suits must be filed within 2 years of the date of discovery of the improper action or 3 years after the sale, whichever comes sooner.

Mary teaches physics at the local high school and makes about $70,000 per year. She could maximize her annual retirement savings by participating in...

a 403(b) and a 457 plan.

Walter and Wanda Willingham are new client's. While reviewing their holdings, you notice an account at a local bank titled, "Walter Willingham, in Trust for Walter Willingham, Jr." The account provides that, upon Walter's death, the assets in the account will pass to his son. This is an example of

a Totten trust A Totten trust is an informal trust that is set up as a bank account. The person who sets up the Totten account is the trustee of the account and can name any person as the beneficiary of the account. Upon the death of the trustee, the money will immediately be made available to the named beneficiary.

Under the Uniform Securities Act, each of the following statements regarding a sale, an offer, or an offer and sale is true EXCEPT

a bona fide pledge is considered an offer and sale The term "sale" does not include a bona fide pledge. It does, however, include securities given as a bonus with a purchase and gifts of assessable stock because the owner of the stock may be called on to produce additional money. Sales of rights or warrants are considered sales of the underlying security.

A broker-dealer registered with State A created a website 2 years ago to promote its services. Recently, they hired a new media person who totally redesigned the site. Under the recordkeeping requirements of the Uniform Securities Act,

a copy of the original website page must be maintained for 3 years from original use

As defined in the Uniform Securities Act, the term "offer to sell" would include

a gift of warrants. Even though a gift is not normally a sale or an offer to sell, when it is of a warrant, a right, or any convertible security, it is considered to be an offer to sell the underlying security. Although a gift of assessable stock is considered both a sale and an offer to sell, a gift of nonassessable stock is simply a gift. A sale of Treasury bonds is a sale, not an offer, and the attempt to sell gold coins is an offer to sell, but not of a security, and the USA is only concerned with an offer to sell a security.

All of the following permit investments into various securities, such as stocks, bonds, and mutual funds EXCEPT

an FSA. Flexible spending accounts (FSAs) allow deductions from an employee's paycheck. That money is held by the company and is used to pay allowable claims by the employee. A health savings account (HSA) permits the employee to invest in a wide variety of securities. IRAs, traditional and Roth, have always permitted investment flexibility.

In the Howey decision, the U.S. Supreme Court held that in order for an investment contract to be considered a security, it must represent

an investment of money in a common enterprise with the expectation of profit from the managerial efforts of others..

A 61-year-old wanting to take a lump-sum distribution from his Keogh will

be taxed at ordinary income rates

In which of the following situations has the investment adviser acted properly in disclosing confidential information about clients under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers?

borrowing money or securities from a client who is a broker-dealer, an affiliate of the broker-dealer, or a financial institution engaged in the business of loaning funds

As the number of stocks in a portfolio increases, the portfolio's systematic risk

can increase or decrease depending on the beta of the added stocks

One of the ways that individuals can accumulate funds for retirement is through individual retirement arrangements (IRAs). There are a wide range of investments eligible for inclusion in an IRA and would include all of the following except

life insurance contracts.

Registration statements for securities

may be amended after their effective dates as to the amount of securities issued, provided that underwriting fees and the initial offering price have not changed Registration of securities under the USA may be amended after their effective dates as to the amount of securities issued, provided that underwriting fees and initial offering prices have not changed. Securities registration statements remain effective for 1 year from their effective date, and do not expire on December 31 of each year. Registrations of agents, investment advisers, and broker-dealers expire on December 31 and need to be renewed. Registration statements are effective for 1 year from their effective dates (or longer if the securities are still under distribution by the underwriters).

Emmet opened an investment advisory service 3 years ago and raised $50 million in capital from family, friends, and contacts and then closed to new investors. If Emmet's stock picks expanded assets under management to $110 million, Emmet

must register with the SEC When the annual updating amendment filed by a state-registered investment advisory firm indicates that the $110 million threshold has been reached, the firm has 90 days to register with the SEC.

An investor who resides in New York reads a newspaper ad for advisory services in a newspaper published in New Jersey. More than 80% of the newspaper's circulation is in the state of New York. According to the Uniform Securities Act, an offer has been made in

neither New Jersey nor New York An offer is not made when a newspaper is circulated but not published in the state nor if it is published in the state but has more than 2/3 of its circulation outside of the state.

Among the restrictions placed on open-end investment companies by the Investment Company Act of 1940 are

no public offering may commence unless the fund has at least $100,000 in net assets no registered investment company may own more than 3% of the voting shares of another registered investment company

Greater Wealth Managers, (GWM) is an investment adviser registered in States A, B, C, and D. They have recently hired an individual to solicit new advisory accounts for the firm. This person will not be engaged in giving advice of any kind, and all activities will be closely supervised by senior personnel of the firm. Under Section 201 of the Uniform Securities Act,

registration as an investment adviser representative is required for this individual Because GWM is registered on the state level, it comes under the provisions of the Uniform Securities Act. Under the USA, the definition of investment adviser representative includes, among others, those who solicit for the services of the investment adviser. Therefore, these individuals must register as IARs.

Following the publication of a tombstone advertisement relating to an issue undergoing registration with SEC, an agent of a broker/dealer receives a call from a client who expresses the desire to purchase 100 shares at the best available price. The agent is permitted to:

send a preliminary prospectus.

When a corporation establishes a qualified money purchase plan,

the corporation is obligated to make annual contributions at the rate stated in the plan Money purchase plans have required contributions. The employer must make a contribution to the plan each year for the plan participants. With a money purchase plan, the plan states the contribution percentage that is required. For example, let's say that the money purchase plan has a contribution of 5% of each eligible employee's pay. The employer needs to make a contribution of 5% of each eligible employee's pay to each employee's account. A participant's benefit is based on the amount of contributions to her account and the gains or losses associated with the account at her retirement.

KAPCO has an outstanding 6% $100 par preferred stock issue as well as a $1 par common stock. If KAPCO's last reported earnings per share for the year were $3 and the market price of the preferred stock is $120 and the common is $45, it would be correct to state that

the price-to-earnings ratio is 15:1 The price-to-earnings ratio (PE) is only computed on the common stock, never the preferred. Although we do know the current yield on the preferred stock (we assume they are paying the dividend) is 5%, we have no idea what the yield is on the common stock because no indication is given for the dividend, if any. The preferred stock is selling above par value, not book value (and book value is only computed for common stock).

Under the Uniform Securities Act, a nonissuer transaction is

the purchase and sale of shares of common stock on the CHX In a nonissuer transaction, the proceeds do not flow to the issuer; rather, the proceeds are credited to selling shareholders. A secondary market trade, such as a transaction executed on the floor of an exchange, is a nonissuer transaction. An IPO, the purchase of mutual fund shares, and the purchase of limited partnership interests all benefit the issuer and are called issuer transactions.

What is true regarding qualified corporate retirement plans

they are covered under ERISA all qualified retirement plans are either defined contribution or defined benefit plans all corporate pension and profit-sharing plans must be established under a trust agreement

When a participant in a 401(k) plan dies before retirement, the proceeds are distributed

to the designated beneficiary without going through probate. Most qualified retirement plans require naming a designated beneficiary (or beneficiaries). Upon the death of the participant, the account proceeds are distributed without going through the probate process. This is done without regards to the terms of the will, similar to the beneficiary of a life insurance policy.

Terms used to describe the practice of buying and selling securities to create the appearance of active trading volume include:

wash trades matching orders.

Under the Uniform Securities Act, registration by coordination becomes effective

when the registration with the SEC becomes effective The registration by coordination becomes effective at the same time it is released (made effective) by the SEC, provided it was filed with the Administrator, in most states at least 10 days before the SEC effective date.

Mrs. Beech, age 52, as the sole survivor of her mother, recently inherited, among other assets, an IRA. After receiving a distribution of the account's assets, she dutifully rolled over 100% of the account value into a new rollover IRA. As a result, Mrs. Beech

will have to declare the entire IRA value as ordinary income When an IRA is inherited, other than from a spouse, the only way to avoid a reportable distribution is to do a trustee-to-trustee transfer. Because Mrs. Beech received the distribution, the normal rollover rules do not apply. However, Mrs. Beech will not have to pay the 10% penalty tax.

When a nonspouse inherits an IRA, the beneficiary can choose from all of the following options...

withdrawing all of the funds immediately opening a separate inherited IRA in the name of the deceased FBO the beneficiary withdrawing the funds over a 10-year period following the death of the owner