Series 66- part 2

For federal covered investment advisers, a prepayment in excess of __________ and for periods of _____________ or more in advance requires the adviser to submit an annual audited ___________________ as part of its ______________ (and brochure)

$1,200, 6 months, balance sheet, ADV Part 2

Under the USA, what are the maximum penalties for a securities-related felony?

$5,000 and 3 years imprisonment

What are not considered securities?

- Insurance endowments and Annuity Contracts - Interest in a retirement plan - Commodities - Interest in retirement plans - Currency

What are characteristics of Fixed Annuities? Who assumes the risk?

- Monthly payout is fixed - Guarenteed interest rate - Investment risk is assumed by the insurance company - General Account

What are characteristics of Fixed Annuities? Who assumes the risk?

- Monthly payout varies - Variable rate of return - Risk assumed by annuitant - Separate account

What are exempt transactions?

- Non-issuer transactions that dont involve financial professionals - Unsolicited brokerage transactions - Underwriter transactions - bankruptcy, conservator or guardian transactions - Institutions - Limited offering (10 or less accredited investors) - Non issuer transaction by bona finde pledge

What are exempt securities?

- U.S. and Canadian government securities - Foreign Government Securities (only from the Country themselves and not a municipality) - Depository Institutions - Insurance Companies (but not Variable Annuities) - Utility Securities - Fed covered - Non profits - Employee benefit plans - Commercial paper

What are the main differences between Whole and Term life Insurance?

- Whole life cover your whole and term is only until a specified date - Whole builds Cash value and term does not - Whole life offers a death benefit and a cash surrender value, term only offers a death benefit

Covered Securities include:

-Investment companies - securities listed on a US stock exchange - Securities offered pursuant of Rule 506(b) or Reg D

As long as a broker-dealer has at least ___ retail client in a state, registration is required. Furthermore, an agent cannot do business with a client who has become a resident of a state unless she is registered as an agent of a registered broker-dealer in that state

1

What is the main difference between IARs and Agents?

Agents execute buy and sell orders while IARs offer investment advise

If a agent terminates employment to work at another BD, who needs to notify the Administrator?

All parties

What is the difference in how BDs and IAs make money?

BDs earn commissions and mark-ups and IAs charge fees

Securities sold in exempt transactions do not have to:

Be registered in the state

Securities that are non exempt are required to:

Get State Registration

Point to point is a method to compute interest for what kind of annuity?

Index

The only types of accounts that may have the Transfer on Death (TOD) designation are:

Individual and JTWROS

the IAR is only required to register in states where they:

Maintain a place of business

The _____________________ permits performance-based fees if the client has at least ________________ in assets under management or a net worth in excess of _________________, provided the compensation is based on _______________. Unlike the Investment Advisers Act of 1940, under the NASAA Model Rule, _____________________ advisers must make additional disclosures, including the incentive to take _______________________.

NASAA Model Rule, $1.1 million, $2.2 million, gains and losses, state-registered, additional risk

A bond issued in the state of Ohio is federally covered everywhere but,

Ohio

If an agent terminates his employment with a broker-dealer, when must the agent and the broker-dealer notify the State Administrator?

Promptly

_________________is an attempt to fall under the $10,000 limit to avoid a CTR filing by the receiving institution.

Structuring

It is the performance of the specific ___________________ selected that determines the investment return for a variable annuity

Subaccounts

Non-qualifying dividends are:

Taxed at the full 30% instead of the qualified 15%

Under what act are Federally covered securities registered under?

The Investment Act of 1940

An agent can only do business with the resident of another state if:

The agent is registered in that state

A day order is entered to buy 500 LMN at 24.35. By the close, the firm has 100 shares at 24.25 and 200 at 24.35. If the remainder is unfilled, what is the outcome?

The customer must accept the execution for 300 shares, and the remainder of the order is canceled after the close.

Why are class C shares attractive to investors with a short horizon?

They charge a 1% CDCS that goes away after one year

What kind of annuity is considered a security?

Variable annuities

Notice Filing is

When the state forces a Federally covered issuer to pay a filing fee

In a qualified plan, if the employer makes all the contributions, the employee's cost basis is

Zero

NASAA considers it to be an unethical business practice to use any advertising or sales presentation in such a fashion as to be deceptive or misleading. Examples of such practices would be

a distribution of any nonfactual data; any material or presentation based on conjecture; unfounded or unrealistic claims in any brochure, flyer, or display by words, pictures, or graphs; or anything otherwise designed to supplement, detract from, supersede, or defeat the purpose or effect of any prospectus or disclosure.

Coverdell Education Savings Accounts allow ________-tax contributions of up to ______________ per student, per year, for children until their _______ birthday. If the accumulated value in the account is not used by age 30, the funds must be distributed and subject to ______________ and a ____________, or rolled over into a different Coverdell ESA for another family member.

after, $2,000, 18th, income tax, 10% penalty

A viatical sale would generally involve

an individual with a terminal illness.

Under industry rules, customers who wish to trade options must receive a copy of the options disclosure document (ODD)

at or before account approval

Any excess distribution representing earnings that is not used to meet qualified education expenses is taxable to the ___________________ .

beneficiary

Alpha is the

difference in the expected return of the portfolio, given the portfolio's beta and the actual return the portfolio achieved.

An investment constraint that is unique to private foundations is the requirement to

distribute 5% of its assets each year as qualifying distributions.

The debt-to-equity ratio is computed by

dividing the issuer's long-term debt by their total capitalization

The Uniform Securities Act authorizes the state Administrator to require:

either oral or written qualification examinations of investment adviser representatives and officers of investment adviser partnerships or corporations officers of investment advisers to pass a qualification examination an applicant for initial registration to publish an announcement of the application in one or more specified newspapers published in the state investment adviser representatives to pass a qualification examination

Fundamental analysis attempts to value stock by examining: Technical analysis, on the other hand, tries to:

general economic conditions identify trends and predict changes in the market

Under no circumstances may an adviser:

guarantee that a client will achieve any investment result

A fixed-premium variable life insurance contract offers

guaranteed minimum death benefit. cash value that fluctuates according to the contract's performance.

Under the USA, it is unlawful for any person to offer or sell an unregistered security in a state unless

it is registered under the Act; the security or transaction is exempted from registration under the Act; or it is a federal covered security.

A customer wishes to open a new account but refuses to provide suitability information. Under NASAA rules, the agent

may open the account, but may not make any recommendations

What qualifies someone as an accredited investor?

net worth over $1 million or income over $200,000 in each of the two most recent years or 300,000 jointly

The consent to service of process is a:

permanent document submitted with the initial application for registration.

Section 1031 of the Internal Revenue code deals with like-kind exchanges of _________________

real property

A federal covered security has a federally imposed exemption from _________________

state registration

The main disadvantage of a contributory defined contribution pension plan is that

the actual sum an employee will receive at retirement is unknown.

According to the NASAA investor advisory regarding fees charged by broker-dealer firms for services and maintenance of investment accounts,

the schedule should be made available on the broker-dealer's public website without requiring any login or password

An owner of an equity index annuity would be wise to use the high-water crediting method if the underlying index was expected to

to be volatile

Warrants are often issued:

with other securities to make the offering more attractive.