Unit 1 - Types of Account
If a member firm suspects exploitation in the account of a specified adult, proceeds from sales may be put on temporary hold for A.) 15 business days B.) One month C.) Until the need for the hold ends D.) 15 calendar days
A.) 15 business days
Which of the following is a tax-qualified retirement plan for employees of nonprofit organizations? A.) 403(b) B.) SEP IRA C.) 401(k) payroll deduction plan D.) Keogh plan
A.) 403(b)
A FINRA member making a bulk transfer of customer's assets would most likely give notification through A.) A negative response letter B.) A broadly circulated publication such as the Wall Street Journal C.) FINRA's Central Registration Depository (CRD) D.) A positive response letter
A.) A negative response letter
Which of the following would be considered an inappropriate investment for your client's traditional IRA? A.) A unit investment trust whose portfolio consists solely of tax-free municipal bonds B.) A mutual fund whose portfolio consists solely of share of OTC stocks C.) a valuable collection of rare postage stamps C.) a taxable municipal bond
A.) A unit investment trust whose portfolio consists solely of tax-free municipal bonds
Penalty-free distribution from a traditional IRA can begin at age 59 1/2 and must begin no later than A.) Age 72 B.) An age as determined by IRS life expectancy table using the account-holders year of birth C.) age 65 D.) 15 years from the individual's date of retirement
A.) Age 72
The concept of double taxation applies to shareholders of A.) C corporations B.) Limited partnerships C.) S corporations D.) General partnerships
A.) C corporations
A registered rep of a FINRA member firm specializes in handling business accounts. In which of the following accounts are the business owners subject to double taxation? A.) C corporations B.) LLCs C.) S corporations D.) Sole proprietorships
A.) C corporations First the corporation pays income tax on its earnings. Then, any dividends paid from the after-tax income are tax again, this time to the shareholders
Which of the following persons must sign a stock or bond power to effect good delivery of securities sold from an account set up under the Uniform Transfers to Minors Act? A.) Custodian B.) Minor C.) Parent D.) Donor
A.) Custodian
One of the differences between a traditional IRA and a Roth IRA is A.) Deductive contributions are possible with a traditional IRA but not with a Roth IRA B.) Traditional IRAs offer tax-deferred growth while a Roth does not C.) Both allow for tax-free withdrawals in retirement D.) Traditional IRAs have higher annual contribution levels
A.) Deductive contributions are possible with a traditional IRA but not with a Roth IRA There are two key differences between a traditional IRA and a Roth IRA. One of those is that the traditional IRA allows for tax-deductible contributions while the Roth IRA does not. Both offer tax-deferred growth and the same annual contribution limits. The other key difference is that only the Roth IRA allows for tax-free withdrawals when meeting the specific requirements. All deductible contributions to a traditional IRA, as well as all deferred earning are taxable at withdrawal
The term churning refers to A.) Entering more transactions than necessary, solely for the purpose of generating commissions B.) Repeatedly purchasing stock to keep the price up C.) Purchasing calls on a particular stocks for your own accounts before entering a large customer order for the stock D.) Repeatedly selling a stock short to prevent a price rise
A.) Entering more transactions than necessary, solely for the purpose of generating commissions
All of the following statements regarding a qualified pension plan are true except A.) Growth in the account is tax free B.) It must comply with nondiscrimination rules C.) It must cover all of its eligible employees D.) It requires advance approval from the IRA
A.) Growth in the account is tax free
Which of the following individuals are eligible to participate in a tax-sheltered annuity (TSA)? I. A maintenance engineer at a state university II. A student in a public school system III. A minister IV. An office clerk at a small corporation A.) I and III B.) II and IV C.) I and II D.) III and IV
A.) I and III
An agent may open a joint account for which of the following? I. Lee and his 13-year-old son, Tom II. Mary and Kelley, two adult college roommates III. Jerry and Mark, friends and partners in business for more than 20 years IV. Melinda and her minor nephew, John for whom she is guardian A.) II and III B.) II and IV C.) I and IV D.) I and III
A.) II and III Join account owners share ownership of the accounts and must be adults
A customer who has just started an IRA will be vested A.) Immediately B.) In five years C.) In two years D.) at age 70
A.) Immediately
You are at a social gathering speaking with an individual who is a tenured professor of astrophysics at the state university. She mentions that she participates in the school's TSA plan. That means she A.) Is participating in a retirement plan likely offering tax sheltered annuities B.) Has qualified for additional compensation because she has earned tenure C.) Is a participant in the teacher-student-administration plan for school betterment D.) Is training employees of the Transportation Security Administration
A.) Is participating in a retirement plan likely offering tax sheltered annuities
Obtaining all of the following complies w/the regulations regarding customer identification programs except A.) Post office box, instead of physical address, if its the primary mailing address B.) Taxpayer Identification Number 3.) DOB D.) Name
A.) Post office box, instead of physical address, if its the primary mailing address
Which of the following qualified plans are covered by ERISA guidelines expect A.) Public sector plans B.) Private sector plans C.) 401(k) plans D.) Profit-sharing plans
A.) Public sector plans Public sector plans are not covered by ERISA guidelines. Corporate and certain union retirement plans are subject to ERISA guidelines
All of the following statements regarding Coverdell Education Savings Accounts (ESA) are true except A.) Used balances may be used for any purpose the beneficiary chooses B.) A beneficiary's unused balance may be rolled over to an ESA account for another child C.) The beneficiary may be the contributor's child or grandchild or child of a friend of the contributor D..) The maximum annual contribution is $2,000 per beneficiary
A.) Used balances may be used for any purpose the beneficiary chooses
Which of the following businesses would have the simplest requirements for opening an account at a FINRA member firm? A.) a sole proprietorship B.) an S corporation C.) a general partnership D.) a limited partnership
A.) a sole proprietorship
An incorporated business model that allows flow-through of business income and losses directly to shareholders in order to avoid double taxation is A.) an S corporation B.) a C corporation C.) a general partnership D.) a limited partnership
A.) an S corporation correct answer because the question is asking about the incorporated business model
Services offered by prime brokers include all of the following except A.) complying with FINRA's advertising rules. B.) providing back office support. C.) processing transactions. D.) supplying clearing services.
A.) complying with FINRA's advertising rules. Prime brokers provide services primary to institutional investors. They have nothing to do with that institution's advertising.
In an IRA, a 6% penalty will be levied in the account owner A.) makes an excess contribution B.) makes a premature withdrawal C.) fails to make a contribution by April 15 D.) changes the beneficiary designation more than once during any calendar year
A.) makes an excess contribution
All of the following are benefits of a traditional IRA except A.) that no penalty is charged for failing to withdraw funds after age 72 B.) earnings accumulate on a tax-deferred basis C.) contributions may be tax deductible D.) that funds may be withdrawn without penalty for certain exemptions
A.) that no penalty is charged for failing to withdraw funds after age 72
The federal legislation that requires broker-dealers to verify the identify of any person opening an account is A.) the USA Patriot Act of 2001 B.) the Insider Trading Act C.) the Maloney Act D.) the Securities Exchange Act of 1934
A.) the USA Patriot Act of 2001
The Customer Identification Program requires that a tax identification number must be obtained when opening a new account. When the account is an UTMA, the SSN number used is that of A.) the minor who is the beneficiary of the account B.) a parent or guardian of the minor C.) the appointed custodian D.) either the custodian, a parent or guardian, or the minor
A.) the minor who is the beneficiary of the account
When opening a new account for an individual investor, FINRA asks its member to make a reasonable effort to obtain certain information about the account. Included information would be all of the following except A.) the name(s) of the customer's dependents. B.) whether the customer is an associated person of another member. C.) the customer's tax identification or Social Security number. D.) the occupation of the customer and name and address of the employer.
A.) the name(s) of the customer's dependents.
All of the following statements about SEP IRAs are true except A.) there are no minimum earning requirements to be an eligible participant. B.) the retirement account is usually set up at a bank or other financial institution. C.) SEP IRAs are established for small-business owners and their employees. D.) SEP IRAs allow employers to make contributions.
A.) there are no minimum earning requirements to be an eligible participant Eligibility to participate in a SEP IRA is limited to employees who have earned a minimum of $600 for the year in question
Three brothers open a joint account instructing you that if one of them dies, they want the cash and securities in the account to go to the remaining parties of the account. The account should be opened A.) with right of survivorship B.) as community property C.) as tenants in common D.) as tenants by the entireties
A.) with right of survivorship
A teacher has a 403(b) plan and the school system he works for has deposited $10,000 into his plan over a 12-year period. At retirement if the teacher withdraws the total value of $16,000, on what amount does he pay tax? A.) $10,000 B.) $16,000 C.) $8,000 D.) $6,000
B.) $16,000 A 403(b) plan is a qualified retirement plan; contributions to the plan are made before taxes, and the growth of the contract is tax deferred. Any distribution from a 403(b) plan is fully taxable to the participant at the ordinary income tax rate.
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.) 30 B.) 60 C.) 90 D.) 45
B.) 60
One of your customers is a self-employed insurance agent specializing in long-term care insurance. She employs her 8 year old daughter to perform certain clerical duties, such as filing and mailing. The daughter's hourly wage is competitive with industry standards. Your customer asks about her daughter's eligibility for a Roth IRA. The proper response is A.) as a self-employed person, the mother would have to open a Keogh plan then over her daughter B.) Because the daughter has earned income, she may contribute up to 100% of that or the current limit C.) No child under the age of majority may open any IRA D.) The daughter can open the account only if her parent's income does not exceed the Roth limit
B.) Because the daughter has earned income, she may contribute up to 100% of that or the current limit
If a new joint tenants with right of survivorship account is opened, all of the following statements except A.) In the event of death, the decedent's interest in the account goes to the other party B.) Checks may be drawn in the name of either party C.) Order may be given by either party D.) Mail may be sent to either party (with the permission of each party)
B.) Checks may be drawn in the name of either party While either party may enter an order, any money or securities delivered out of the account must be in the names of both owners
Which of the following statements regarding both traditional and Roth IRAs are true? A.) Contributions are tax deductible B.) Contribution limits are the same C.) Withdrawals at retirement are tax free D.) Distributions must begin in the year after the owner reaches age 72
B.) Contribution limits are the same
Features of an employee stock purchase program (ESPP) include all of the following except A.) The purchase price is discounted B.) Contributions are made with pre-tax dollars C.) Contributions are a percentage of pre-tax income D.) Participants can sell the stock at any time
B.) Contributions are made with pre-tax dollars
Which of the following would make an employee ineligible to participate in a company's qualified retirement plan? A.) He has been with the company for only two years. B.) He is only 20 years old. C.) He is not a member of the company's management team. D.) He works only 1,200 hours a year for the company.
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 who works 1,000 or more hours per year or 500 houses per year for three consecutive for the company, must be allowed to participate in the company's qualified plan
For individual retirement accounts, the IRS mandates that if distributions do not begin by April 1 of the year after the individual turns age 72, a 50% insufficient distribution penalty applies. The amount to be withdrawn each year is based on IRS life expectancy tables. These IRA distribution concepts are known as I. a required beginning date (RBD) II. a required minimum distribution (RMD) III. Lockup provisions IV. Vesting A.) III and IV B.) I and II C.) II and IV D.) II and III
B.) I and II For individual retirement accounts, the IRS mandates the distributions must begin by April 1 of the year after the individual turns 72. This is known as the RBD. The amount to be withdrawn each year is based on IRS life expectancy tables. This is known as the RMD.
Which of the following statements regarding joint accounts registered as TIC are true? I. Each party specifies a percentage of interest in the account II. Each party has equal interest in the account III. The interest of a deceased tenant passes to the estate of the decedent IV. The interest of a deceased tenant passes to the co-tenant A.) II and IV B.) I and III C.) II and III D.) I and IV
B.) I and III
Which of the following statements regarding Roth IRAs are true? I. Contributions are made with pretax dollars II. Earnings can accumulate tax free III. Distributions are not taxable if an age requirement and holding period are met IV. Distributions in excess of growth are always taxable A.) II and IV B.) II and III C.) I and IV D.) I and III
B.) II and III
You are at a social gathering speaking with an individual who is a tenured professor of astrophysics at the state university. She mentions that she participates in the school's TSA plan. That means she A.) Is training employees of the Transportation Security Administration B.) Is participating in a retirement plan likely offering tax sheltered annuities C.) Has qualified for additional compensation because has earned tenure D.) Is a participant in the teacher-student-administration plan for school betterment
B.) Is participating in a retirement plan likely offering tax sheltered annuities
Section 408 of the Internal Revenue Code set the minimum age requirement to establish an IRA at A.) the age of majority in the individuals state of residence B.) No minimum C.) 18 years D.) 21 years
B.) No minimum No min age requirement but to be eligible to make an IRA contribution you must have earned income such as wages or tips
On Monday, John bought and sold 1,000 shares each of MEDX and CETN stock. On Wednesday he purchased an additional 500 shares of CETN and 1600 share of KRS which he closed in two trades of 800 shares each, later that day. On Friday John executed a trade to purchase 2000 shares of BUV and sell 300 shares of the CETN he purchased on Wed. Under FINRA rules, John meets the definition of A.) Day trader B.) Pattern day trader C.) Frequent trader D.) Designated expert
B.) Pattern day trader
What can a broker dealer do it suspects tampering with the account of a senior investor? A.) Close the account and send the funds and securities to the customer B.) Place a temporary hold on disbursements of cash or securities form the account C.) Assess an investigation fee to the account D.) Sell investments to cover any losses caused by the tampering
B.) Place a temporary hold on disbursements of cash or securities form the account
An employee of a FINRA member firm wishes to open an account at another member firm. The employee opening the account must A.) Notify FINRA, in writing, of the intent to open the account B.) Receive prior written consent from his employer C.) Obtain prior written consent from FINRA before opening the account D.) Make written notification to the SEC before the account can be opened
B.) Receive prior written consent from his employer
An investor, age 40, earns $65,000 annually and contributes 3.5% to his employer's 401(k). With the 401(k), his only retirement savings, he wants to do more for retirement and hopes to invest in such a way as to have some tax-free income when he takes. distributions laters in life. Which of the following is the most suitable given the investor's goals and objectives? A.) Municipal Bonds B.) Roth IRA C.) Traditional IRA D.) A non-qualified variable annuity
B.) Roth IRA
Which of the following types of business organizations does not protect owner's personal assets from losses incurred by the business? A.) S corporation B.) Sole proprietorship C.) C Corproation D.) LLC
B.) Sole proprietorship
All of the following statements concerning IRA contributions are true except A.) If you file your taxes on Jan 15 you may deduct your IRA contribution even if it is not made until April 15 B.) You may make contributions for the past year after April 15, provided you have filed an extension on a timely basis C.) Between Jan 1 and April 15 you may make contributions for the current year, the past year, or both D.) you may contribute to this year's IRA from Jan 1 of this year until April 15 of the next year
B.) You may make contributions for the past year after April 15, provided you have filed an extension on a timely basis You may contribute to an IRA only until the first tax filing deadline (April 15th) even if you filed an extension
One of your clients has appointed his daughter as a trusted contact per FINRA Rule 2165. She contacts you to explain that her father's cognitive abilities are declining. Because of that, before it gets too late, she wants to know what can be done to giver her control over the account. It is likely that the best suggestion would be have her father sign A.) a limited power of attorney B.) a durable power of attorney C.) the discretionary power authorization D.) a full power of attorney
B.) a durable power of attorney A durable power of attorney is used when the account owner has diminished physical or mental capacity. It is durable because it survives the client becoming legally incompetent (but does not survive death)
A corporate profit-sharing plan must be set up under A.) an administrator B.) a trust C.) a beneficial ownership D.) a conservatorship
B.) a trust
A broker-dealer has set up a prime brokerage account for one of its customers. This customer is most likely A.) an individual retain customer B.) an institutional customer C.) two spouses each having individual accounts an a join account together D.) an investment club
B.) an institutional customer A prime brokerage account is one in which a customer - generally an institutional customer - selects one member firm (the prime broker) to provide custody and other services, which other firms - called executing brokers - handle all trades places by the customer
Which of the following occurs in a partnership account is if one of the partners dies? A.) the surviving partners receive the deceased partner's share B.) the account is frozen until a new or amended partnership agreement is received C.) the surviving partners are considered joint tenants D.) the surviving partners are considered joint tenants and receive the deceased partner's share
B.) the account is frozen until a new or amended partnership agreement is received Upon a partner's death, a partnership account is automatically frozen until a new or amended partnership agreement is received. The deceased partner's share usually goes to an estate no the other partners
It is generally understood that the least complicated employer-sponsored retirement plan is the Savings Incentive Match Plan for Employees (SIMPLE). These plans tend to have certain restrictions. Among them are the restriction that A.) employer matching contributions are made with after-tax funds. B.) the business cannot have another retirement plan in place. C.) the catch-up provision for those 50 and older is limited to $1,000. D.) there must be fewer than 100 employees who earned at least $5,000 during the preceding calendar year.
B.) the business cannot have another retirement plan in place.
Under ERISA, a plan trustee wishing to write uncovered calls may do so A.) without restriction. B.) under no circumstances. C.) if approved by the IRS in writing. D.) if explicitly allowed in the plan document.
B.) under no circumstances.
Your customer opened a Roth IRA on February 2 and deposited $5,000. In August of the same the year, the value of the account had risen to $6,000, but by December, the value declined to $5,100 and the customer closed the securities positions and withdrew the entire amount. If the customer was age 55 at the time of the withdrawal, what would be the early withdrawal penalty? A.) 0 B.) $500 C.) $10 D.) $510
C.) $10 The customer would have an early withdrawal penalty of $10. A 10% early withdrawal penalty applies to the taxable amount withdrawn for those aged less than 59 1/2. In a Roth IRA, the investment is made with after tax dollars. There for the increase the investment is subject to an early withdrawal penalty. In this case the earnings of $100 would be taxable and have the 10% penalty
If a customer wishes to open a cash account in her name only and allow her spouse to make purchases and receive checks in his name only, she must instruct her BD to open A.) A cash account with limited power of attorney B.) A cash account C.) A cash account with full power of attorney D.) A margin account
C.) A cash account with full power of attorney
Which of the following individuals would not be permitted to contribute to an IRA? A.) A self employed attorney who already has a Keogh plan established B.) A corporate officer who is covered by a company-sponsored 401(k) plan C.) An individual with current income consisting of dividends and capital gains only D.) An individual divorced on Dec 26 2018 whose sole income is alimony and child support from a former spouse
C.) An individual with current income consisting of dividends and capital gains only
Which of the following statements regarding Coverdell ESAs is true? A.) Contributions are tax deductible, and distributions for any reason are tax free B.) Contributions are not tax deductible, and distributions for any reason are tax free C.) Contributions are not tax deductible, and distributions are tax free when used for qualified educational expenses D.) Contributions are tax deductible, and distributions are always taxable
C.) Contributions are not tax deductible, and distributions are tax free when used for qualified
Which of the following is not a benefit gained by using a TOD account? A.) Percentage allocations can be changed at any time B.) Probate is avoided C.) Estate taxes are reduced D.) Beneficiaries can be changed at any time
C.) Estate taxes are reduced
Which of the following statements regarding Coverdell Education Savings Account are true? I. After-tax contributions of up to an indexed maximum per students are allowed II. Unless dealing with a special needs beneficiary, contributions may not be made for students past their 18th birthday III. If the account value is not used for educational purposes, it can be rolled over into a traditional IRA IV. Distributions are always taxable A.) III and IV B.) II and IV C.) I and II D.) I and III
C.) I and II
Which of the following statements regarding Coverdell Education Savings Accounts (ESAs) are true? I. After tax-contributions of up to an indexed maximum per student per year are allowed II. Contributions may not be made for students past their 18th birthday III. If the account value is not used for educational purposes, it can be rolled over into a traditional IRA IV. Distributions are always taxable A.) I and III B.) III and IV C.) I and II D.) II and IV
C.) I and II Allow after-tax contributions of up to $2,000 per student, per year until the child's 18th birthday. If the accumulated value in the account is not used by age 30 the funds must be distributed and are subject to income tax and a 10% penalty or they are rolled over into a different Coverdell ESA for another family member
BDs who reserve the right to disclose nonpublic private information about their customers to unaffiliated third parties must I. Provide notice to customers at the time of the account opening II. Provide notice to customers each time a transaction occurs within the account III. Provide reasonable means for customers to opt out of such disclosures IV. Require that customers wishing to opt out send a written request with a signature witnessed by a notary A.) I and II B.) II and III C.) I and III D.) II and IV
C.) I and III
An unmarried couple wants to open a new account registered as joint tenants with rights of survivorship (JTWROS). Which of the following should occur? I. The registered rep should discuss the resulting consequences of opening an account registered as JTWROS, should one part to the account die II. A principal of the firm should be notified immediately so that a report can be filed with FINRA regarding the account registration III. The registered rep must refuse to open the account IV. the registered rep may open the account A.) I and III B.) II and IV C.) I and IV D.) II and III
C.) I and IV
One of your customers with a JTWROS account contacts you to remove the other tenant and put the account into the customer's own name. This can be done only A.) if the customer has a fully power of attorney over the account B.) upon the death of the other tenant C.) If the change has been authorized by a qualified and registered principal designated by the member D.) if you contact the other tenant and get their approval
C.) If the change has been authorized by a qualified and registered principal designated by the member
Which of the following securities is the least suitable recommendation for a qualified retirements account plan account? A.) A-rated corporate bond B.) Blue child common stock C.) Investment-grade municipal bond D.) Treasury bill
C.) Investment-grade municipal bond Municipal bonds provide tax-exempt interest payments and, consequently, offer lower yields. Because earnings in a qualified retirement plan account grow tax deferred the municipal bond is not a suitable investment. In additional they will be fully taxed upon withdrawal
To avoid tax and a penalty, an IRA may be rolled over A.) Every three years within 90 days B.) Every five years by the end of the calendar year C.) No more than once every 12 months within 60 days of the distribution D.) Each quarter by the end of the calendar quarter
C.) No more than once every 12 months within 60 days of the distribution
Jack Mercure, age 72, has been a client of yours for many years. You may have noticed he's a bit slower than before but nothing troublesome. This morning you get a call from Jack, and wants you to wire a relatively substantial sum from his account to someone with a foreign address. Fearing this might be a case of senior exploitation, you discuss this with your manager. If the feeling is mutual, FINRA rules permit your firm to A.) Report this situtation to OFAC B.) Contact Jack's physician to inquire about any cognitive decline C.) Put a temporary hold on releasing the funds for not longer than 15 business days D.) Freeze the client's account for not longer than 15 business days
C.) Put a temporary hold on releasing the funds for not longer than 15 business days
A married couple are both employed by firms that cover them under the company pension plans, and each earns approximately $300,000 annually. If they both open a traditional IRA and make the maximum contribution, how much of their contribution could they deduct? A.) Both may deduct the entire contribution B.) Neither is eligible to make a contribution in any amount (deductible or not) C.) They are ineligible to deduct any contributions made D.) Only one spouse is eligible to deduct their entire contribution
C.) They are ineligible to deduct any contributions made While each are eligible to make the max contribution - at this income level, neither spouse - both of whom are covered under employee-sponsored plans - would be eligible to deduct their contributions to their respective IRAs.
Which of the following would be least appropriate investment in a traditional IRA for a 67 year old client A.) Treasury notes B.) Corporate bonds C.) Variable annuities D.) Common stock
C.) Variable annuities A variable annuity will provide no additional tax savings and will likely increase the expense of the IRA. In addition to sales and surrender charges, variable annuities may impose other charges such as mortality and expense risk charges, administrative fees, etc.
Which of the following investment strategies would be permitted in your customer's IRA? A.) Buying stock on margin B.) Selling uncovered put options C.) Writing covered call options D.) Taking short positions
C.) Writing covered call options
Two friends would like to open a joint account but have the tax filed under the name of the nonemployed individual. That could be done in A.) an account opened as a partnership. B.) a joint account with a TOD designation. C.) a JTWROS account with the Social Security number of the designated person used. D.) a tenants in common account with the percentage ownership in the name of the designated person.
C.) a JTWROS account with the Social Security number of the designated person used.
A customer opens an account, and payment and delivery instructions are established. Beyond the opening of the account, these instructions may A.) be changed at any time for all transactions going forward. B.) be changed for individual transactions only. C.) be changed for individual transactions, or going forward, for all transactions. D.) not be changed unless a new account is established.
C.) be changed for individual transactions, or going forward, for all transactions.
Minimum distributions from a traditional IRA must begin A.) a year after the owner turns 59 1/2 B.) as soon as the owner turns 72 C.) by April 1 of the year after the owner turns 72 D.) Once the owner retires
C.) by April 1 of the year after the owner turns 72
Qualified distributions from Roth IRAs are A.) tax deferred B.) 100% taxable C.) tax free D.) taxable only to the extent of earnings
C.) tax free
All of the following are benefits of a traditional IRA except A.) that funds may be withdrawn without penalty for certain exemptions B.) that earning accumulate on a tax-deferred basis C.) that no penalty is charged for failing to withdraw funds after age 72 D.) that contributions may be tax deductible
C.) that no penalty is charged for failing to withdraw funds after age 72
When an investor opens a new account at a member firm, FINRA rules require A.) the applicant's Social Security number. B.) the applicant's signature. C.) the signature of the principal signifying that the account has been accepted. D.) the applicant's date of birth.
C.) the signature of the principal signifying that the account has been accepted.
Your client who has not yet attainted the age of 59 1/2 wants to take a withdrawal from his traditional IRA. Not being disabled or meeting any other qualifying reason allowing for an early withdrawal, you explain that the amount taken will be subject to a penalty of A.) 25% B.) 5% C.) 15% D.) 10%
D.) 10%
A deferred compensation plan would be most suitable for A.) An employer who wants employees to make their own set contributions to a plan as an incentive for them to remain with the firm B.) An employer who wants to provide a plan for all the firm's employees who are in lower tax brackets C.) An employer who wants a retirement plan to benefit the younger employees of the company D.) An employer with a few highly paid employees who are near retirement age and want to reduce current taxes
D.) An employer with a few highly paid employees who are near retirement age and want to reduce current taxes Deferred compensation plans are non-qualified plans that allow an employer to select which employees may participate in the plan. These plans are more suitably for highly compensated employees who are just a few years from retirement, allowing them to defer earning and taxation until then. Offering the type of plan to young employees is less suitable due to the risk that the business could fail or the risk that they may leave the firm before retirements, and thus forfeit any benefit. Defined contributions plans are considered more suitable for those further from retirement.
What is the latest date that an IRA participant may make an IRA deposit for the current year? A.) April 15 of the current year B.) July 15 of the following year, if extensions have been filed C.) December 31 of the current year D.) April 15 of the following year
D.) April 15 of the following year
Which of the following forms of business is preferred when the goal is raising a significant amount of capital? A.) General Partnership B.) S corporation C.) LLC D.) C corporation
D.) C corporation
Which of the following plans requires an actuary's services? A.) Defined contribution B.) Profit-Sharing C.) 401(K) D.) Defined benefit
D.) Defined benefit In a defined benefit plan, the payout is established, and employers must contribute annually to assure payment of the benefit amount. An actuary must calculate the annual contribution amount necessary to meet the benefit requirement
One of your clients is an active investor using a tactical asset allocation strategy. As such, the client engages in numerous transactions every month. With each transaction, the client pays a separate transaction fee. Your firm has just begun offering an account to its client whereby the client can pay one flat fee to cover all the trades in that account. You immediately bring this news to the client and suggest making the change. What type of account is this? A.) Pattern day trading account B.) Wrap-fee account C.) Margin Account D.) Fee Based Account
D.) Fee Based Account
If one of your clients dies, upon notification of death you should immediately I. mark the account Deceased until proper documents are received II. cancel all good-till-cancelled ordered for the account III. obtain a letter from the attorney representing the estate with instructions for transfer IV. obtain the names and addresses of the beneficiary of the estate A.) II and III B.) III and IV C.) I and III D.) I and II
D.) I and II
If a registered representative (RR) of a FINRA member firm wants to open an account with another member firm, which of the following statements are true? I. The account may only be opened if the RR is also a principal of his employing broker-dealer. II. The account may be opened, but the RR may not engage in securities transactions that he could do through his own firm. III. The member firm opening the account must send duplicate confirmations to the employing member firm if the employing member firm has requested that the member firm do so. IV. The employing broker-dealer must receive prior written notice and give prior written consent in order for the account to be opened. A.) II and IV B.) I and III C.) I and II D.) III and IV
D.) III and IV
Which of the following are considered joint accounts? I. UTMA II. Guardianship account III. Tenants in common IV. Tenants w/rights of survivorship A.) II and III B.) I and II C.) I and III D.) III and IV
D.) III and IV
An incorporated business model that allows flow-through of business income and losses directly to shareholders in order to avoid double taxation is A.) General Partnership B.) a C corporation C.) an S corporation D.) Limited Partnership
D.) Limited Partnership
An individual has given full power of attorney to a third party. This means that the designee is permitted to A.) Originate trades in the account but not remove funds or securities B.) Close the account and reopen it in the designee's name C.) Remove funds or securities from the account but not originate trades D.) Originate trade in the accounts and remove funds or securities
D.) Originate trade in the accounts and remove funds or securities Full POA gives the names third party - the designee - all of the power of the owner except the right to change the name on the account
When an individual associated with another FINRA member firm wishes to open an investment account at another member firm, the executing member must A.) Obtain a copy of the individual Form U4 to verify registration status B.) Receive permission from the employer member before the initial transaction may take place C.) Notify the employer member of the associated person's intent to open the account D.) Provide duplicate statements and confirmations if requested by the employer member
D.) Provide duplicate statements and confirmations if requested by the employer member
An agent taking which of the following actions would be committing a violation? A.) Selling securities from a corporate account by using limited power of attorney trading authority for the account B.) Buying securities in a joint at the request of one party only C.) Buying securities in a cash account with the consent of the customer D.) Selling securities from a minor's custodial account without the custodian's consent but the with the beneficial owner's consent
D.) Selling securities from a minor's custodial account without the custodian's consent but the with the beneficial owner's consent
A 45-year-old employment counselor has a savings incentive match plan for employees (SIMPLE)plan for herself and three full-time employees who have been working for her for the past four years. If she earns $150,000 this year and contributes the maximum amount allowed to her SIMPLE plan, how much may she invest in a traditional IRA? A.) She may have an IRA B.) She may invest any amount up to 100% of his earned income C.) She may have an IRA but may not make a contribution for this year D.) She may contribute 100% of earned income or the maximum allowable IRA limit, whichever is less
D.) She may contribute 100% of earned income or the maximum allowable IRA limit, whichever is less
A customer and her spouse own shares in the ABC Fund as JTWROS. If the customer dies, what happens to the shares in the account? A.) Half of the shares would belong to the spouse, and the remaining half would be distributed to the customer's estate B.) Ownership of the shares must be determined by probate court C.) The account would be frozen until the estate was settled D.) The spouse would own all of the shares
D.) The spouse would own all of the shares
Buying municipal bonds would normally not be considered suitable for A.) a mutual fund portfolio B.) an individual investor C.) a corporation's investment account D.) a define benefit plan portfolio
D.) a define benefit plan portfolio A defined benefit plan is a form of qualified tax-deferred corporate pension plan. Tax-free municipal bonds would never considered suitable for a tax-deferred account on the exam. An individual investor, a mutual funds portfolio, and a corporate investment account could benefit from receiving tax-free municipal bond interest
Broker-Dealers are required to maintain customer identification programs and check the names of new clients against A.) a list maintained by the SEC B.) the FBI's most wanted list C.) a list of sanctioned people and organizations maintained by the Department of Enforcement D.) a list compiled by OFAC
D.) a list compiled by OFAC
An institution sends a communication to its clients indicating an action the institution plans to change. The communication states that this change will take place in 45 days and any client wishing to opt-out must notify the institution before the end of this period. This is known as A.) a change letter B.) an unethical procedure C.) an informational communication D.) a negative response letter
D.) a negative response letter
A joint account could be opened for any of the following except A.) a corporation B.) three business associates C.) two parents in a limited partnership D.) a parents and a minor
D.) a parents and a minor
Nancy is a 55-year-old tenured world history professor at the local state university. She has been participating in the school's 403(b) tax-sheltered annuity (TSA) program for a number of years. Her current account balance is $386,000, which is more than twice the amount of her pre-tax contributions. Nancy is taking a sabbatical for the year and plans to travel the world to visit many of the places she teaches about. To help pay for the trip, she plans to withdraw $60,000 from her account. If she is in the 24% tax bracket, the effect of this withdrawal will be A.) No tax because the money will come out of the invested principal before the earnings B.) a tax liability of $14,400 C.) Impossible to calculate because we do not know her cost basis D.) a tax liability of $20,400
D.) a tax liability of $20,400 B/c Nancy is not yet 59 1/2 the 10% penalty applies. 34% of $60,000 = $20,400
An agent is permitted to open all of the following customer accounts except A.) a corporate account opened by the designated officer B.) a partnership account opened by the designated partner C.) A minor's account opened by a custodian D.) an account in the name of Mrs. jones opened by Mr. Jones
D.) an account in the name of Mrs. jones opened by Mr. Jones
Under ERISA, all of the following retirement plans must set standards for vesting, eligibility, and funding except A.) profit-sharing plans. B.) 401(k) plans. C.) corporate pension plans. D.) deferred compensation plans.
D.) deferred compensation plans. deferred compensation plans are not qualified plans and may be discriminatory
Prime brokerage accounts are most often used by A.) investment advisers B.) investment bankers C.) broker-dealers D.) institutions
D.) institutions
All of the following are the advantages of a margin account except A.) leveraging is possible B.) Less cash is needed C.) money is borrowed D.) losses are minimized
D.) losses are minimized
A new client turns in the new account form. While reviewing the information on the form, the registered representative handling the account notices that the space for listing the Social Security number is blank. Under the provisions of the USA PATRIOT Act of 2001, A.) the account can be opened without the number if at least two pieces of government ID are presented. B.) the account cannot be opened until the number has been received. C.) the account can be opened if the client assures you that an application will be filed. D.) the account can be opened if the client has already applied for a number.
D.) the account can be opened if the client has already applied for a number.
Which of the following accounts are billed a single fee annually for a group of services? A.) cash account B.) margin account C.) options account D.) wrap account
D.) wrap account
