032318
Initial and renewal contracts between investment advisers and their clients must be in writing when the contract is under the jurisdiction of the I. Securities Exchange Act of 1934 II. Investment Company Act of 1940 III. Investment Advisers Act of 1940 IV. Uniform Securities Act A) II and IV B) I and III C) II, III, and IV D) I, II, and III
*Investment company act of 1940 and the Uniform Securities Act
You are trying to explain to an advisory client that the U.S. economy goes through somewhat repeatable phases over a period of time. Which of these terms does NOT describe one of those business cycles? A) Inflation B) Contraction C) Peak D) Expansion
A. Inflation
An investment adviser representative is meeting with a potential advisory client. Among the items of information the IAR needs to obtain in order to develop the proper plan are the prospect's: anticipated number of years until retirement. location of current bank and brokerage accounts. current savings and investments. college alma mater. A) III and IV. B) I and III. C) II and IV. D) I and II.
Anticipated number of years until retirement and current savings and investments
Given below are the EPS for the previous four quarters for four different companies being analyzed by your research department. Which of these companies is exhibiting earnings momentum? A) JKL - Q1: $0.82; Q2: $0.90; Q3: $0.83; Q4: $0.92 B) GHI - Q1: $0.25; Q2: $0.27; Q3: $0.30; Q4: $0.36 C) ABC - Q1: $0.58; Q2: $0.61; Q3: $0.64; Q4: $0.67 D) DEF - Q1: $0.58; Q2: $0.52; Q3: $0.50; Q4: $0.49
B) GHI - Q1: $0.25; Q2: $0.27; Q3: $0.30; Q4: $0.36
Although there are others that may be used in construction of a portfolio, the primary asset classes used in asset class allocation include: bonds. cash. commodities. stock. A) II and III. B) I, II, III, and IV. C) I, II, and IV. D) I and IV.
B) I, II, III, and IV.
Rank the following bonds in order of shortest to longest duration. ABC 8s of 2035. DEF 9s of 2034. GHI 5s of 2036. JKL zeros of 2033. A) III, I, II, IV. B) II, I, III, IV. C) IV, III, I, II. D) IV, II, I, III.
B) II, I, III, IV. The lower the coupon the longer the duration
The term used to describe investment vehicles whose value is based on an underlying asset is: A) separate account. B) parity. C) funded debt. D) derivative.
D) derivative.
Question ID: 635711 Form ADV-E A) may be used to amend any information included in an investment adviser's registration statement (e.g., business address) B) is used to claim an exemption from registration C) is only used by those advisers not subject to an annual surprise examination D) must be completed by investment advisers that have custody of client funds or securities
D) must be completed by investment advisers that have custody of client funds or securities
If a client prefers owning an investment company whose portfolio consists primarily of companies that have a history of paying regular dividends, rather than companies reinvesting their earnings for the purpose of generating capital appreciation, what type of mutual fund would you recommend? A) An income fund. B) A government bond fund. C) A growth fund. D) An index fund.
A) An income fund.
Under the Uniform Securities Act, which of the following would NOT be considered an exempt transaction? A) The sale of ABCD common stock, listed on the OTC Bulletin Board, to an insurance company. B) An executor liquidates the estate's portfolio. C) An agent sells U.S. treasury bonds to an individual client. D) The sale of an unregistered nonexempt security to an individual client at that client's request.
C) An agent sells U.S. treasury bonds to an individual client.
Which of the following actions are prohibited under the NASAA Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers? A) Notifying the Administrator that the adviser intends to maintain custody of customer securities. B) Depositing securities in lieu of a required surety bond. C) Determining the price and time of execution of customer orders without written discretionary authority. D) Claiming that advisory fees are negotiable, but maintaining a fixed fee schedule.
Claiming that advisory fees are negotiable but maintaining a fixed fee schedule.
Question ID: 632354 When a market maker publishes a quote, what prices will be shown? Bid. Market. Offer. Spread. A) I and III. B) I and II. C) III and IV. D) II and IV.
I and III bid and offer
An investment adviser with $20 million under management exercises investment discretion over client portfolios. If the firm's accounting manager were to discover that the firm's net worth was only $8,500, the USA would require the firm to: cancel all discretionary powers. immediately raise an additional $1,500. send notice to the Administrator before the close of business on the day following discovery. send a financial report to the Administrator before the close of business on the day following the sending of notice. A) II and III. B) III and IV. C) I and IV. D) I and II.
3. send notice to the Administrator before the close of business on the day following discovery. 4. send a financial report to the Administrator before the close of business on the day following the sending of notice.
Under the Uniform Security Act, all of the following persons with no place of business in the state are exempt from registration as an investment advisers EXCEPT: A) advisers who have conducted business with no more than 6 individual clients in the state within the last 12 months. B) advisers who deal exclusively with federal covered investment advisers located in the state. C) advisers who deal exclusively with investment companies registered under the Investment Company Act of 1940. D) advisers who deal exclusively with savings banks located in the state.
A) advisers who have conducted business with no more than 6 individual clients in the state within the last 12 months.
When a security is being registered under coordination, all of the following are required EXCEPT: A) filing with the Administrator of a statement of the maximum and minimum proposed offering price and maximum underwriting discounts or commissions concurrently with the filing of the registration statement with the SEC. B) prompt filing with the Administrator of any amendments filed with the SEC. C) none of these are exceptions. D) a description of the proposed use of the proceeds of the underwriting.
A) filing with the Administrator of a statement of the maximum and minimum proposed offering price and maximum underwriting discounts or commissions concurrently with the filing of the registration statement with the SEC.
All of the following are exchange traded EXCEPT: A) forward contracts. B) index options. C) ETFs. D) futures contract.
A) forward contracts.
An investment adviser representative has constructed a portfolio for a client that is 20% U.S. government bonds, 20% corporate bonds, 20% preferred stock, 15% common stock in public utilities, 10% in cash and 15% in small cap stocks. From this, you could safely assume that the client's investment objective is: A) growth with income. B) preservation of principal. C) income. D) capital appreciation.
A) growth with income.
Registration with the state as an investment adviser would be required for a person with an office in this state who: A) manages $13 million in assets for 4 clients. B) serves as a pension consultant to the XYZ Employees Retirement Plan, covering 1,200 employees with total assets of $278 million. C) manages the portfolio of the KPF Balanced Fund, a registered open-end investment company with $22 million in net assets. D) only gives advice on securities issued by or guaranteed by the government of the United States.
A) manages $13 million in assets for 4 clients.
When market conditions are such that a passively managed portfolio no longer meets its target allocation, the tool most commonly used to rectify the situation is A) rebalancing B) tactical management C) sector rotation D) retargeting
A) rebalancing
Each of the following would be considered a systematic risk EXCEPT: A) regulatory risk. B) inflation risk. C) interest rate risk. D) market risk.
A) regulatory risk.
When an investment adviser representative terminates employment with a federal covered investment adviser and then registers with a different federal covered investment adviser in the state where the individual resides: A) the investment adviser representative and each of the federal covered advisers must notify the Administrator promptly. B) only the investment adviser representative must notify the Administrator promptly. C) only the terminating investment adviser must notify the Administrator. D) the investment adviser representative and the employing adviser must notify the Administrator promptly.
A) the investment adviser representative and each of the federal covered advisers must notify the Administrator promptly.
A portfolio manager with a growth style would probably diversify by: A) placing a portion of the portfolio into high-yield bonds. B) concentrating in stocks in one or two industries. C) attempting to build a portfolio with a very high correlation. D) devoting a portion of the portfolio to securities with a negative correlation.
A) devoting a portion of the portfolio to securities with a negative correlation. Securities with a negative correlation add diversification to a growth portfolio because they move in the opposite direction of the balance of the holdings. Therefore, losses are offset by gains.
Under which of the following asset allocation programs is it most likely that commission expense will have a significant impact on portfolio performance? A) Tactical. B) Rebalancing. C) Strategic. D) Buy and hold.
A. Tactical
Mr. Peabody Fawcett and his sister, Ms. Gwenyth Paige-Newberry open a brokerage account at your firm with an initial deposit of $11 million. The account is opened as tenancy in common (TIC) with Peabody owning 40% and Gwenyth the balance. Several years later, Peabody is fatally injured while playing polo. As a result A) Mr. Fawcett's share will be transferred to his sister and an individual account will be opened in her name B) 40% of the value of the account will be transferred to an estate account in his name and 60% will be transferred into an individual account in her name C) the account will be frozen until receiving instructions from the executor of Mr. Fawcett's account D) the account will be frozen until the results of the probate court are released
B) 40% of the value of the account will be transferred to an estate account in his name and 60% will be transferred into an individual account in her name
A 45-year-old client has just received an inheritance and would like to invest $100,000 into a growth mutual fund offered by your firm. The client intends to use the money to supplement retirement. You should probably recommend the purchase of A) a fixed annuity B) Class C shares C) Class B shares D) Class A shares
B) Class C shares
Which of the following statements regarding an agent's registration is CORRECT? A) Agents may be licensed in a state even if their broker-dealer is not. B) Revocation of the registration of an agent's broker-dealer will result in placing that agent's effective registration in suspense. C) If the broker-dealer with which that agent is registered should have its registration revoked, the agent may continue to do business only with existing clients and may not acquire any new ones until registered with an active broker-dealer. D) If the broker-dealer with which that agent is registered should have its registration revoked, the agent's license will be held by the Administrator and the agent will be required to register with an active broker-dealer within 30 days.
B) Revocation of the registration of an agent's broker-dealer will result in placing that agent's effective registration in suspense.
Financial planners frequently assist their clients with budgeting. One can't really prepare a budget without knowing the family's cash flow. In preparing a family cash flow statement, all of the following items would appear except A) salary B) assets C) taxes D) interest on saving accounts
B) assets
Section 401(b) of the Uniform Securities Act defines an agent as an individual who represents a broker-dealer or an issuer in effecting or attempting to effect purchases or sales of securities. However, the term agent would not include an individual: A) employed by a broker-dealer selling securities on behalf of an issuer. B) employed by an issuer to research industry trends. C) representing a non-exempt issuer in the sale of the issuer's securities in a non-exempt transaction. D) employed by the investment banking firm engaged to underwrite a new issue of nonexempt securities.
B) employed by an issuer to research industry trends.
The Uniform Securities Act invests the office of the Administrator with a number of powers. However, the act does not permit the Administrator to: A) insist that specific forms be used to register securities. B) issue an injunction. C) issue a cease and desist order without prior notice. D) subpoena witnesses.
B) issue an injunction
An individual is currently registered as an agent with a broker-dealer. The firm recently began offering wrap fee programs to select clients. If the agent would like to offer these wrap fee programs through the firm, all of the following statements are correct EXCEPT A) the agent would now come under a greater fiduciary responsibility B) the agent would have to become registered as an investment adviser C) the agent would have to become registered as an investment adviser representative D) the broker-dealer would have to be registered as an investment adviser
B) the agent would have to become registered as an investment adviser
It has been a great year at Capital Funding, Inc., an SEC-registered broker-dealer that is also registered in 22 states. The company decides to share its good fortune with employees by paying a year-end bonus equal to 31% of annual salary. In order for clerical personnel to receive this bonus: A) they must be licensed as agents. B) they must be employees of the broker-dealer. C) they must be licensed as investment adviser representatives. D) the bonus must be sales related.
B) they must be employees of the broker-dealer.
A life insurance policy with benefits tied to the performance of a separate account that allows the policyholder to skip premium payments is called a(n): A) fixed premium variable life insurance policy. B) universal life insurance policy. C) scheduled premium variable life insurance policy. D) flexible premium variable life insurance policy.
B) universal life insurance policy.
One of the purposes of filing the annual updating amendment to the Form ADV Part 1A is to: A) provide updated information on those associated persons who are in charge of giving investment advice. B) verify that the investment adviser still qualifies for SEC registration. C) disclose the amount and location of securities or funds of clients that are being held by the adviser or a qualified custodian. D) ensure that full disclosure has been made in the adviser's brochure.
B) verify that the investment adviser still qualifies for SEC registration.
Three sisters are interested in forming a business together. They have three initial concerns: How to maximize their benefits from the fact that the business is not expected to earn money for at least the first 2 years Making sure that the business will be able to continue in the event one or two of the sisters dies Minimizing their personal liability for the obligations of the business On the basis of the sister's concerns, which form of business is appropriate for the situation? A) LLC. B) C corporation. C) Limited partnership. D) General partnership.
B)LLC. The LLC will allow losses to flow through to the sisters, continue in the event one or two sisters should die, and have the same type of protection as offered by a C corporation.
Which of the following statements correctly describes the relationship between annuity units and their value during the payout period of a variable annuity? A) the number of units remains constant, the unit value remains constant. B) the number of units remains constant, the unit value varies. C) the number of units varies, the unit value remains constant. D) the number of units varies, the unit value varies.
B. The number of units remains the same but the value varies
When preparing a client profile, it is prudent to investigate the prospect's non-financial considerations. Included would be that client's: age. attitudes. experience with investments. values. A) II and IV. B) I and III. C) I, II, III, and IV. D) I, II, and IV.
C) I, II, III, and IV.
Which of the following are methods of portfolio rebalancing? I. You can sell off investments from over-weighted asset categories and use the proceeds to purchase investments for under-weighted asset categories. II. You can purchase new investments for under-weighted asset categories. III. If you are making continuous contributions to the portfolio, you can alter your contributions so that more investments go to under-weighted asset categories until your portfolio is back into balance. IV. You can purchase new investments for better performing asset categories. A) III and IV. B) I, III, and IV. C) I and III. D) I, II, and III.
C) I, III, and IV.
Without prior authorization from the client, an investment adviser could release information relating to the client's account: in order to comply with the brochure delivery requirements of the USA. when requested by the IRS. for the purpose of furnishing information for a statistical survey being compiled by the Administrator. upon the receipt of a subpoena from a court of competent jurisdiction. A) I, III, and IV. B) I, II, III, and IV. C) II and IV. D) II and III.
C) II and IV. When requested by the IRS and upon the receipt of a subpoena from a court of ompetant juridiction
The XYZ corporation, listed on the NYSE, has 100 million shares of common stock outstanding. Warren has owned four million shares since 1999. If Warren were to acquire 1.1 million additional shares, which of the following statements is CORRECT? A) Schedule 13D would have to be filed before the end of the 2nd business day following the transaction. B) Because Warren does not own more than 10% of the outstanding shares, no form is required to be filed. C) Schedule 13D would have to be filed within 10 business days of the transaction. D) Form 144 would have to be filed concurrent with the transaction.
C) Schedule 13D would have to be filed within 10 business days of the transaction.
The assumptions underlying the efficient market hypothesis (EMH) lead its proponents to believe that stock market prices react rapidly to newly released information and, therefore, limit the ability of the investor to achieve abnormal gains. Which of the forms of EMH concludes that an investor cannot achieve abnormal gains using fundamental analysis? A) Spring form B) Strong form C) Semi-strong form D) Weak form
C) Semi-strong form
If a portfolio manager wished to reduce inflation risk, which of the following would be most appropriate to add to the portfolio? A) Fixed annuities issued by an insurance company with Best's highest rating. B) Preferred stock. C) Tangible assets. D) AAA bonds.
C) Tangible assets.
All of the following are requirements to be a salesman of variable products EXCEPT A) possession of a valid FINRA registration B) possession of a valid life insurance license C) affiliation with a registered investment adviser D) affiliation with a registered broker-dealer
C) affiliation with a registered investment adviser
One of the terms found in the Securities Exchange Act of 1934 is that of a "person associated with a broker-dealer." Included in that definition would be all of the following EXCEPT A) any person directly or indirectly controlling, controlled by, or under common control with the broker-dealer B) the individual managing the firm's smallest branch office C) an individual whose sole duties are ministerial in nature D) an individual registered with the broker-dealer as an agent who does not maintain a place of business in the state
C) an individual whose sole duties are ministerial in nature
In designing a client's portfolio, a registered investment adviser representative of Greater Wealth Advisory Services recommends the purchase of several stocks from the inventory of Greater Wealth's wholly owned broker-dealer. Under the Investment Advisers Act of 1940 this activity requires written: A) consent of and the disclosure to the client prior to completion of the transaction. B) consent of the client. C) disclosure to the client. D) consent of and the disclosure to the client prior to execution of the transaction.
C) disclosure to the client and consent prior to completion of the transaction
Special tax treatment is afforded to REITs if they A) receive at least 90% of their income from real estate B) distribute at least 75% of their taxable income to their investors C) distribute at least 90% of their taxable income to their investors D) agree to flow-through losses to their investors
C) distribute at least 90% of their taxable income to their investors
Richard, Tim, Sam, and Fred have a regular golf foursome every weekend. During one of their outings, they decide that it is time that they did something constructive with their money and they should open an account with a brokerage firm. If the account is opened tenants in common, suitability information would be required for: A) each of the individuals, and if married, their spouses. B) only that individual with the authorization to trade the account. C) each of the four individuals. D) whichever person has been designated by the group as their spokesman.
C) each of the four individuals.
When making a sales presentation to a prospective client, an agent of a broker-dealer would not be exempt from the anti-fraud provisions of the Uniform Securities Act if the product being offered was a A) fixed annuity B) futures contract C) federal covered security D) forex contract
C) federal covered security
A client invests $100,000 in a commercial real estate venture taking a 10% interest as a limited partner. Unfortunately, the demand for new office space deteriorates and the partnership is unable to meet the mortgage payments. The end result is foreclosure with a net loss of $2 million. This would have the effect of: A) a potential claim against the agent who sold the client this program. B) requiring the client to pay his share of the loss to the creditors. C) giving the client a passive loss of $100,000. D) giving the client a passive loss of $200,000.
C) giving the client a passive loss of $100,000.
An investment adviser whose primary business is the rendering of investment advice providing investment supervisory services is entitled to use the term: A) senior adviser. B) pension consultant. C) investment counsel. D) financial planner.
C) investment counsel.
When discussing direct ownership of investment real estate with a client, an agent should point out that A) the use of leverage usually has the effect of reducing potential returns B) real estate tends to be a hedge against deflation C) investment real estate is generally illiquid when compared to listed stocks D) real estate prices tend to mirror those of the overall stock market
C) investment real estate is generally illiquid when compared to listed stocks
John Johnson was convicted 5 years ago of failure to pay child support, a misdemeanor in his home state. Mr. Johnson would now like to register as an IAR in a neighboring state where that crime is considered a felony. Under the Uniform Securities Act, the Administrator of the neighboring state will: A) determine Mr. Johnson's status on the basis of the extent to which his child support payments are being paid. B) consider granting registration to Mr. Johnson, but only if he receives heightened supervision. C) consider Mr. Johnson to be statutorily disqualified since in this state his crime is a felony. D) disregard that conviction when determining Mr. Johnson's qualifications for registration.
C) disregard that conviction when determining Mr. Johnson's qualifications for registration. The conviction on Mr. Johnson's record is for a non-securities-related misdemeanor. The fact that the same crime is a felony in another state is not relevant to Mr. Johnson's application for registration in that state.
If the Administrator were examining the actions of a particular agent to determine whether the agent engaged in churning a client's account, focus would be placed upon the: A) amount of profits generated in the client's account. B) length of time the account had been opened. C) client's objectives, financial resources, and the character of the account. D) number of complaints received relating to that agent.
C. clients objectives, financial resources and the character of the account
An investor contacts you somewhat puzzled over the fact that she saw a newspaper listing for the KAPLOW Fund where the net asset value per share was $10.27 and the asking price was $14.14 per share. She wants to know why the difference between the two is so great. You would respond, A) "There is probably a misprint in the paper and, more than likely, the asking price is $11.22 making the sales charge 8.5%." B) "That this is probably an unregistered hedge fund, not subject to SEC rules." C) "KAPLOW Fund is being investigated by the SEC for being sold with a sales charge in excess of the 8.5% maximum limit." D) "KAPLOW Fund is a closed-end company whose selling price is not based upon NAV as is the case with an open-end fund."
D) "KAPLOW Fund is a closed-end company whose selling price is not based upon NAV as is the case with an open-end fund."
Which of the following statements regarding agent registration under the Uniform Securities Act are TRUE? I.In the absence of any action by the Administrator, the effective date of a registration is noon of the 30th day. II.The Administrator may initiate a disciplinary action within 2 years of an agent's withdrawal of registration. III. The Administrator may request the agent furnish a statement of assets and liabilities. IV. If, before the effective date of the registration, the Administrator requires amendments to the application, the registration will be considered to have first been filed upon filing of those amendments. A) III and IV. B) II and III. C) I and IV. D) I and II.
D) III and IV.
Which of the following is required to effectuate annual renewal of the registration of an investment adviser representative affiliated with a federal covered adviser? A) Form U-4. B) Renewal notice to the SEC. C) Consent to service of process. D) State licensing fee.
D) State licensing fee.
It would be considered a violation of the anti-fraud provisions of the Uniform Securities Act for an agent to: A) disregard client complaints sent to the agent's personal email address. B) inform the client that he has recently passed the Series 66 examination and is now a registered investment adviser representative. C) tell a client that the stock he is recommending has applied for listing on the NYSE. D) attempt to prevent a possible heart attack by telling his elderly client that the largest position in the client's account is only down 10% when, in fact, the company is preparing to file for protection under the bankruptcy laws and the stock is now almost worthless.
D) attempt to prevent a possible heart attack by telling his elderly client that the largest position in the client's account is only down 10% when, in fact, the company is preparing to file for protection under the bankruptcy laws and the stock is now almost worthless.
Under federal law, the brochure rule requires: A) concurrent delivery of the Form ADV Part 1A. B) delivery no later than 48 hours before entering into an investment advisory contract. C) delivery no later than 5 business days after the formalizing of the advisory. D) delivery of a brochure, or summary of material changes, to all clients within 120 days of the end of the adviser's fiscal year.
D) delivery of a brochure, or summary of material changes, to all clients within 120 days of the end of the adviser's fiscal year.
Most states have replaced the Uniform Gifts to Minors Act with the Uniform Transfers to Minors Act. One of the major advantages of UTMA is: A) better tax benefits. B) reduced fiduciary exposure to the custodian. C) the beneficiary has access to the account at an earlier age. D) greater flexibility in the choice of investments.
D) greater flexibility in the choice of investments.
Under the Uniform Securities Act, a private placement is considered an exempt transaction if: A) the sale is unsolicited. B) no payment is made with any purchase. C) the security is rated in the top three grades by a recognized rating agency. D) the number of noninstitutional offers is limited to a maximum of 10 in any 12-month period.
D) the number of noninstitutional offers is limited to a maximum of 10 in any 12-month period.
You have a 45-year-old client wishing to save for retirement. The client does not have a great deal of investment sophistication and inquires about the risks you have exposed him to by placing the majority of his portfolio in listed common stocks. You would respond that one risk he should not concern himself with is: A) liquidity risk. B) inflation risk. C) business risk. D) systematic risk.
D) liquidity risk. Explanation A portfolio of listed common stocks will have little to no liquidity risk as listed shares are easily traded. Even though common stock tends to offer protection against inflation, there is no assurance that the portfolio will keep pace with the rising cost of living.
Popular strategies used by bond investors to mitigate the effects of changes in interest rates would include any of the following EXCEPT the A) barbell strategy B) laddering strategy C) bullet strategy D) strategy of lengthening the maturities of their holdings
D. Strategy of lengthening the maturities of their holdings
Which of the following would offer your client check-writing privileges and FDIC insurance coverage? A) Negotiable CD B) DDA C) Government securities money market fund D) GIC
DDA
Which of the following is NOT registered with the SEC under the Investment Company Act of 1940? A) Open-end investment companies B) Exchange-traded funds C) Unit investment trusts D) Exchange-traded notes
Exchange Traded Notes
A client of yours purchased a periodic payment variable annuity 10 years ago. Each month, the client invested $200 and then died suddenly when the account contained 1,355 accumulation units with a value of $16.23 each. Which of the following statements is CORRECT? The beneficiary will receive 21,991.65. The beneficiary will receive $24,000. There is no income tax liability on the part of the beneficiary. If the beneficiary is younger than 59½, there is a 10% tax penalty on any distribution. A) I and IV. B) I and III. C) II and III. D) II and IV.
I and III
NASAA's Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents states that it is unethical for an agent registered with a broker-dealer to: 1. personally lend money to the broker-dealer firm with which the agent is registered. 2. personally lend money to a bank that is a client of the broker-dealer firm with which the agent is registered. 3. split commissions with an agent registered with a broker-dealer that is under common control. 4. borrow money from a mortgage broker who is a client of the agent. A) I and III. B) I and IV. C) II and III. D) II and IV.
I and IV
Which of the following statements are accurate when describing preferred stock? Owners of preferred stock have a security with a claim senior to that of common stock. Unlike any other securities the company may issue, the return on preferred stock is fixed. Issuing preferred stock confers certain tax benefits to the company. In general, preferred stock does not have a maturity date. A) I and IV B) I and II C) II and III D) III and IV
I and IV Owners of preferred stock have a security with a claim senior to that of common stock. In general, preferred stock does not have a maturity date.
Which of the following items fall within the Section 28(e) safe harbor? Proprietary research reports analyzing the performance of a specific industry. Research reports prepared by a third party other than the broker-dealer. Software used to analyze client's portfolios. Software used to simplify the investment adviser's preparation of its tax returns. A) I and III. B) I, II, and III. C) III and IV. D) I and IV.
I, II, and III
Which of the following are restrictions on the operations of registered open-end investment companies under the Investment Company Act of 1940? No registered investment company may commence a public offering with less than $1 million of capital. No investment company may own more than 3% of the voting stock of another registered investment company. No investment company may purchase portfolio securities on margin. A) I and II B) I and III C) II and III D) I, II, and III
II and III No investment company may own more than 3% of the voting stock of another registered investment company and no investment company may purchase portfolio securities on margin
To be in compliance with the rules under the Investment Advisers Act of 1940, which of the following statements regarding a registered investment adviser's relationship with solicitors are CORRECT? I. An individual who is subject to statutory disqualification from registration as an investment adviser representative may solicit clients for the adviser as an employee of a third-party solicitor. II. There must be a written agreement between the investment adviser and the solicitor. III. Although the sales script used may be written by the solicitor, its content is the responsibility of the adviser IV. Cash referral fees to solicitors may only be paid in the case of impersonal advisory services. A) I and II. B) I and IV. C) II and III. D) III and IV.
II. There must be a written agreement between the investment adviser and the solicitor. III. Although the sales script used may be written by the solicitor, its content is the responsibility of the adviser
Both the Investment Advisers Act of 1940 and SEC Release IA-1092 specifically exclude from the definition of "investment adviser" certain persons who provide investment advice solely incidental to the practice of their profession. Which of the following would NOT by definition qualify for this exclusion? . I. An accountant who provides high tax bracket clients with a useful chart showing them how to compute the tax equivalent yield for municipal bonds II. A divorce attorney who, after obtaining settlements for clients, provides them with a list of suggested investment alternatives encouraging them to be prudent with their newfound wealth III. A university professor who provides investment advice for a substantial fee to fewer than 15 clients during any consecutive 12-month period, none of whom is an investment company IV. An economist who consults with very large corporate employee benefit plans on how to best invest their funds A) III and IV B) I and IV C) I and II D) II and III
III. A university professor who provides investment advice for a substantial fee to fewer than 15 clients during any consecutive 12-month period, none of whom is an investment company IV. An economist who consults with very large corporate employee benefit plans on how to best invest their funds
Mr. J.B. Rich founded Rich, Inc. and owns a substantial block of stock with a very low cost basis. Which of the following statements are true regarding the disposition of Mr. Rich's stock? I. If it is given away, the recipient of the gift assumes Mr. Rich's cost basis. II. If it is given away, the recipient of the gift receives a stepped-up basis to the market value as of the date of the gift. III. If it is inherited, the beneficiary will assume Mr. Rich's cost basis. IV. If it is inherited, the beneficiary receives a stepped-up basis to the market value as of the date of Mr. Rich's death. A) II and IV. B) II and III. C) I and IV. D) I and III.
If it is given away, the recipient of the gift assumes Mr. Rich's cost basis and if it is inherited, the beneficiary receives a stepped-up basis to the market value as of the date of Mr. Rich's Death
The Uniform Securities Act provides for civil penalties in the event of illegal activities of broker-dealers and their agents. Under the act, a purchaser would be entitled to claim: the original consideration paid for the security or the current market value, whichever is greater. interest at the state's legal rate, reduced by any income received on the security. attorney's fees. court costs. A) I, II, III, and IV. B) II, III, and IV. C) I and II. D) III and IV.
Interest at the states legal rate; reduced by any income received on the security, attorney fees and court costs.
The Investment Advisers Act of 1940 excludes from the definition of "investment adviser" persons whose advice: relates solely to municipal issues. relates solely to issues issued by or guaranteed by the U.S. Treasury. is solely incidental to their professional practice as an aeronautical engineer. is limited to insurance companies only. A) II and III. B) I, II, and IV. C) I, II, III, and IV. D) III and IV.
Relates solely to issues issued by or guaranteed by the U.S. Treasury or is solely incidental to their professional practice as an aeronautical engineer
If the administrator of a corporate 401(k) plan ensures that a wide variety of investment alternatives are available to employees along with the ability for the employees to monitor their accounts and make frequent changes as needed, ERISA: A) removes the requirement for "top-heavy" testing. B) might find the administrator to be shirking his fiduciary responsibility. C) removes the requirement for the plan to provide employees with quarterly reports. D) shifts the responsibility for account performance to the employee.
Removes the requirement for the plan to provide employees with quarterly reports and shifts the responsibility for account performance to the employee
The Securities Exchange Act of 1934 granted authority to the SEC to require registration of which of the following? A) APOs B) IPOs C) SPOs D) SIPs
SIPs - Securities Information Process
The management style that is most similar to buy and hold is: A) contrarian. B) active management. C) strategic management. D) tactical management.
Strategic management
A technical analyst who wishes to smooth out the fluctuations of stock market prices would probably chart A) the 100-day moving average B) the trendlines C) the short interest D) the support and resistance levels
The 100 day moving average
XYZ Brick Company wishes to raise capital by issuing some securities in its home state. The CEO of the company feels that registration with the Administrator is unnecessary because the issue is exempt. Should XYZ be served with a court order, the burden of proving its issue is exempt is on the: A) company. B) CEO. C) Administrator. D) court.
The company
An investment adviser representative has a client who needs a safe, secure investment that generates regular income. Which of the following choices would be appropriate? U.S. Treasury bill. U.S. Treasury bond. U.S. Treasury note. U.S. Treasury STRIP. A) II and III. B) I and IV. C) I and II. D) II and IV.
U.S. Treasury bond. U.S. Treasury note. Treasury Bills and STRIPS are purchased at a discount and pay no interest so neither of them would be appropriate investments based upon the client's need for regular income.
To comply with the safe harbor requirements of Section 404(c) of ERISA, the trustee of a 401(k) plan must: offer plan participants at least 3 different investment alternatives. ensure that plan participants are insulated from control over their portfolios. allow plan participants to change their investment options no less frequently than quarterly. allow plan participants to purchase U.S. Treasury securities. A) II and IV. B) II and III. C) I and IV. D) I and III.
offer plan participants at least three different investment alternatives. allow plan participants to change their investment options no less frequently than quarterly.
Early in the year, an investor purchased 100 shares of KAP common stock at a price of $60 per share. Just before the end of the year, after receiving three quarterly dividends of $1, the investor liquidated all of the KAP at a price of $59 per share. If the CPI increased by 3%, the investor's total return over the holding period was: A) 2%. B) 3.33% C) 0.33%. D) 5%
3.33%
Question ID: 686330 Unless renewed, the registration of which of the following securities professionals expires on December 31? Agents. Broker-dealers. Investment advisers. Investment adviser representatives. A) I, II, III, and IV. B) I and II. C) II and III. D) III and IV.
A) I, II, III, and IV.
According to standard terminology used in the securities industry, when a person sells securities out of inventory, that person is acting in the capacity of a (an): A) principal. B) agent. C) broker. D) investor.
A. Principal
Which of the following bonds would most likely be exposed to the greatest amount of interest rate risk? A) DEF 6s of 2041. B) JKL 4s of 2018. C) ABC 5s of 2040. D) GHI 7s of 2042.
ABC 5s of 2040 The bond with the longest duration is generally going to have the greatest exposure to interest rate risk. Since there is very little difference between maturity dates of 2040 through 2042, the bond with the lowest coupon will have the longest duration. The 4s of 2015 have a relatively short duration, even though their coupon is low.
Many corporations make available dividend reinvestment plans for their shareholders. Among the benefits of using these plans are all of these EXCEPT: A) avoiding taxation until the shares are sold. B) discounts from the current market price. C) the ability to add additional funds to the dividend. D) reduced or eliminated commissions.
Avoiding taxation until the shares are sold
The Uniform Securities Act prohibits broker-dealers from engaging in activity that has the effect of manipulating stock market prices. These would include: A) selling unregistered nonexempt securities. B) matched orders. C) higher than reasonable commissions or markups. D) churning.
B. Matched Orders
Which of the following would be included in the USA's definition of "exempt transaction"? 1.Isolated nonissuer transactions. 2. Private placements. 3. Sales by fiduciaries. 4. Sales of registered nonexempt securities by agents to their individual clients. A) IV only. B) I, II, III, and IV. C) I and III. D) I, II, and III.
I and III Isolated non issuer transactions and sales by fiduciaries
Causes listed in the Uniform Securities Act that could lead to the revocation of the registration of a broker-dealer would include: the conviction of a principal officer for a securities related crime. the firm had no employees. the firm was unable to meet its obligations as they came due. A) I, II, and III. B) I and III. C) I and II. D) II and III.
I and III he conviction of a principal officer for a securities related crime. and the firm was unable to meet its obligations as they came due.
Ways in which a Section 529 Plan differs from a Coverdell ESA include: tax-free distributions when the funds are used for qualifying educational expenses. higher contribution limits. no earnings limitations. contributions may be made by someone other than a parent or legal guardian. A) II and III. B) I and IV. C) II and IV. D) I and II.
higher contribution limits. no earnings limitations. Contributions to an ESA are limited to $2,000 per beneficiary per year, whereas the 529 limit is set by the plan sponsor, sometimes as high as $300,000. Unlike the ESA, where there is a ceiling on the earnings for a contributor, there is no limit for someone setting up a 529. Both Section 529 Plans and Coverdell ESAs enjoy tax-free distributions and plans may be established by almost anyone.
One of your clients is a widow with three grown children. She wants the assets in her account to go to her children upon her death; 50% to her daughter and 25% to each of her sons. She does not want the estate to have to deal with probate on these assets. How should her account be set up? A) Tenants in common B) Tenants in the entirety C) Joint tenants with right of survivorship D) Transfer on death
D) Transfer on death
In general, the civil liabilities codes of the Securities Act of 1933 allow a purchaser of a security where the registration statement contains a false statement of a material fact or omission of a material fact to sue any of the following EXCEPT A) any control person of the issuer B) every person who signed the registration form C) all directors of the issuer D) underwriters of the issue
A) any control person of the issuer
In the field of portfolio management, there are a number of different management styles. One of those styles involves committing additional capital to the market when others are reducing their exposure, or eliminating positions while others are increasing theirs. This style is generally referred to as: A) contrarian. B) value. C) growth. D) active.
A) contrarian.
On a scheduled premium variable life insurance policy, the insured is guaranteed: A) that premiums may be reduced due to better than projected performance in the separate account. B) nothing. C) at least 100% of the stated death benefit. D) at least 100% of the stated cash value.
C) at least 100% of the stated death benefit.
As defined in the Uniform Securities Act, the term person would include: a limited partnership. a political subdivision. an unincorporated association. the executor of an estate for a deceased individual. A) I, II, III, and IV. B) I and IV. C) I, II, and III. D) II and III.
I, II, III, IV
A bullish client invests into a 3x leveraged fund based on the S&P 500 Index. If the index should rise by 10%, your client's investment would be expected to A) decrease by 30% B) increase by 20% C) increase by 50% D) increase by 30%
D) increase by 30%
A portfolio manager who follows the growth style of investing would most likely purchase shares A) at the lower end of their price range for the past 52 weeks B) that are currently trading with a lower than average volume C) at the higher end of their price range for the past 52 weeks D) based on their market capitalization
at the higher end of their price range for the past 52 weeks
The prohibited practice of an investment adviser placing the same security in the accounts of all of the firm's clients is known as: A) discretionary misrepresentation. B) blanket recommendations. C) matched purchases. D) churning.
blanket recommendations