4.16
What is the term used to describe a common stock issued below its par value? A) Below book. B) Subpar. C) Assessable. D) Nonassessable.
Assessable.
A fixed-premium variable life insurance contract offers a: I. guaranteed maximum death benefit. II. guaranteed minimum death benefit. III. guaranteed cash value. IV. cash value that fluctuates according to the contract's performance. A) II and III. B) I and III. C) I and IV. D) II and IV.
II and IV.
Which of the following would NOT be considered evidence of custody of a client's funds or securities? A) The client makes a partial purchase, and the broker/dealer holds the securities until full payment is made. B) Client funds and securities are kept at a qualified custodian. C) The adviser writes checks on the client's account to pay for client's securities. D) The investment adviser has discretionary authority over the client's account.
The investment adviser has discretionary authority over the client's account.
All of the following statements regarding corporate insiders are true EXCEPT: A) only public information can be used to make transactions. B) purchases may not be made through the exercise of options. C) reports of changes in holdings must be filed with the SEC. D) short selling is prohibited.
purchases may not be made through the exercise of options.
An analyst is viewing a subject company's financial statements. She notices that the company has current assets of $20 million, fixed assets of $50 million, and total liabilities of $45 million (of which $10 million is considered long-term). This company's debt to equity ratio is A) 28.6% B) 40% C) 64.3% D) 22.2%
28.6% 20+50=70M Net Worth=70M-45M=25M 25M+10M=35M 10M/35M=28.57%
A broker/dealer having no place of business in a state is not required to be registered in that state if the broker/dealer: A) does no business in that state other than with institutional clients. B) is licensed/registered in its state of residence. C) is a member of FINRA. D) is a member of the New York Stock Exchange.
does no business in that state other than with institutional clients.
In order to make a quantitative evaluation using the present value computation, which of the following is NOT needed? A) Time period involved. B) Anticipated rate of return of the portfolio. C) Account value at the end of the period. D) Account value at the beginning of the period.
Account value at the beginning of the period.
Under the Investment Advisers Act of 1940, it is legal for an investment adviser to: I. reduce a client's fee by any commissions earned on mutual fund sales to that client. II. rebate the commission on a mutual fund sale to a client who has already paid a fee for investment advice. III. keep the commission on a mutual fund sale when the client who purchased the shares has paid for investment advice. A) I and III. B) I and II. C) I, II and III. D) II and III.
I and III.
A feature of which of the following business entities is limited liability but no flow-through of earnings or losses? A) Limited partnership. B) Sole proprietorship. C) Corporation. D) LLC.
Corporation.
Which of the following is not considered to be a derivative? A) Warrant. B) Unit investment trust. C) Call option. D) Futures contract.
Unit investment trust.
In 1933, Congress passed the Securities Act which required the registration of new issues before their offering to the public. However, the law contained a number of exemptions including that for: A) obligations of the Canadian government. B) corporate common stock listed on the NYSE. C) equipment trust certificates issued by a regulated common carrier. D) stock issued by regulated insurance company.
equipment trust certificates issued by a regulated common carrier.
All of the following actions, if performed by a registered agent, would be considered a prohibited activity under the Uniform Security Act EXCEPT: A) Accepting an order from a client wishing to purchase a nonexempt security that is not properly registered in the state. B) The agent saves the client money by deliberately withholding the client's buy order for a stock when the agent sees the stock price is trending down. When the order is finally placed later in the day, the execution price is $1 less than when the agent received the order. C) The agent backdates customer confirmations in order to enable the client to achieve a long-term holding period, thereby saving considerable income taxes. D) The client informs the agent that the appropriate written discretionary authorization forms are being hand-couriered to the agent and should arrive within the hour. Knowing the required paperwork is on its way, the agent begins discretionary trading in the account.
Accepting an order from a client wishing to purchase a nonexempt security that is not properly registered in the state.
When preparing a client profile, it is prudent to investigate the prospect's non-financial considerations. Included would be that client's: I.attitudes. II.demographics. III.experience with investments. IV.values. A) I, II, III and IV. B) II and IV. C) I and III. D) I, II and IV.
I, II, III and IV.
Mary is a bowling buddy of Susan, a covered investment adviser. Mary refers Amanda, a wealthy widow, to Susan and, after a very pleasant meeting, Amanda places $15 million under management with Susan. If Susan were to give Mary a cash payment for the referral A) only Susan would have to make disclosure to Amanda B) both Susan and Mary would have to disclose the cash payment to Amanda C) she would have to obtain Mary's permission first D) she would be engaging in an prohibited practice
she would be engaging in an prohibited practice
Which of the following investment advisers would be required to register with the state? A) An IA whose annual updating amendment showed a drop in AUM from $109 million to $87 million. B) An IA whose annual updating amendment showed a drop in AUM from $141 million to $99 million. C) an IA who expects to have $132 million in AUM within 120 days. D) an IA who is under contract to manage a registered investment company.
An IA whose annual updating amendment showed a drop in AUM from $109 million to $87 million. Must be above 90M to stay with SEC
Beth Jamison is an agent and an IAR for Consolidated Wealth Planning, a FINRA member broker/dealer and SEC registered investment adviser. An advisory client purchases 300 shares of RMBN and the sale is made from Consolidated's inventory. Under the NASAA Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives and Federal Covered Advisers, A) Beth must obtain consent of any advisory client whenever a sale is made as principal B) the amount of commission charged for this transaction must be clearly disclosed C) selling out of inventory to advisory clients would be considered an unethical business practice D) Beth would not be required to obtain consent for this principal transaction if it was not the subject of a recommendation
Beth would not be required to obtain consent for this principal transaction if it was not the subject of a recommendation
With respect to the recordkeeping rules under the USA, which of the following statements is NOT correct? A) Broker/dealers must maintain records of trade blotters for a minimum of three years. B) Broker/dealers must maintain records of electronic communications for a minimum of three years. C) Investment advisers must maintain copies of all powers of attorney and other evidences of the granting of any discretionary authority by any client to the adviser for a minimum of five years. D) Following termination of the business, investment advisers organized as corporations must maintain copies of their articles of incorporation for a minimum of five years.
Following termination of the business, investment advisers organized as corporations must maintain copies of their articles of incorporation for a minimum of five years.
Nonsecurities derivatives would include I.Forward contracts II.Futures contracts III.Hedge funds IV.REITs
I and II
Which of the following statements is TRUE regarding Section 529 Plans? I. Funds withdrawn for qualified education expenses are always free of federal income tax. II. Funds withdrawn for qualified education expenses are always free of state income tax. III. The maximum contribution limits are determined on a federal level. IV. The maximum contribution limits are determined on a state level. A) II and III. B) II and IV. C) I and III. D) I and IV.
I and IV.
Which of the following are defined as securities under the Uniform Securities Act? I.Real estate investment trust certificates. II.Preorganization subscription agreements. III.Shares of treasury stock. IV.Voting-trust certificates issued by a corporation undergoing a reorganization. A) I, II, III and IV. B) I only. C) I, II and III. D) I and IV.
I, II, III and IV.
Which of the following is NOT an exempt transaction as defined in Section 402 of the USA? A) Sale of common stock by the county sheriff at the request of the state securities Administrator. B) Isolated sale of a corporate bond on behalf of the bond's issuer. C) Sale of XYZ common stock, traded on the OTC Bulletin Board, to an individual investor by the executor of an estate. D) Corporate bond sale to an insurance company.
Isolated sale of a corporate bond on behalf of the bond's issuer.
Which of the following U.S. government securities do NOT bear a stated interest rate but are sold at a discount through weekly auctions? A) TIPS. B) Treasury bills. C) Treasury bonds. D) Treasury notes.
Treasury bills.
Greater Wealth Managers (GWM) is a federal covered investment adviser that has no place of business in the state of Wisconsin although they serve several institutional clients located in the state. The Wisconsin Administrator: A) is vested with the authority to audit GWM's records, but must give prior notice. B) cannot audit nor request any other Administrator to audit GWM's records. C) is vested with the authority to request the Administrator of the state where GWM has its principal office to audit GWM's records. D) is vested with the authority to audit GWM's records without prior notice.
cannot audit nor request any other Administrator to audit GWM's records.
All of the following are exempt transactions EXCEPT: A) unsolicited, nonissuer transactions. B) commercial paper with a maturity of no longer than 270 days. C) isolated, nonissuer transactions. D) the sale of securities to a closed-end investment company.
commercial paper with a maturity of no longer than 270 days.
Rule 501 of the Securities Act of 1933 creates a category of person known as an accredited investor. Included in that definition would be all of the following EXCEPT: A) pension plans. B) banks. C) investment adviser representatives. D) insurance companies.
investment adviser representatives.
An individual has been employed by a broker/dealer to solicit new subscriptions for the firm's free monthly stock market report. The individual is paid a salary plus bonus based on his success rate with signing up subscribers. Under the USA, this person would: A) have to be registered as an investment adviser representative. B) not have to be registered as an agent of the broker/dealer. C) only be allowed to contact existing clients of the broker/dealer. D) have to be registered as an agent of the broker/dealer.
not have to be registered as an agent of the broker/dealer.
If the required rate of return is less than anticipated in a present value calculation, the effect would be that the: A) yield to maturity would decrease. B) present value would be lower. C) future value would be lower. D) present value would be higher.
present value would be higher.
If general interest rates increase, the interest income of a bond unit investment trust will probably: A) increase. B) remain the same. C) decrease. D) change as soon as the portfolio manager can take advantage of the higher rates now available in the marketplace.
remain the same.
Nonqualified corporate retirement plans differ from qualified retirement plans because: I. nonqualified plan contributions are not exempt from current income tax. II. nonqualified plan earnings accumulate on a tax-deferred basis. III. the corporation need not comply with nondiscrimination rules that apply to qualified plans. IV. the corporation must comply with ERISA requirements dealing with communications to plan participants. A) II and III. B) I and III. C) II and IV. D) I and II.
I and III.
Which of the following activities would violate the Uniform Securities Act? I.An investment advisory partnership admits a renowned securities analyst to the partnership without informing its clients of this highly desirable addition. II.An investment adviser incorporated in California fails to inform its clients of the departure of the chief financial officer who did not have an equity position in the firm. III.An investment advisory firm incorporated in Illinois charges clients a share of the capital gains on the basis of a guaranteed performance level above a designated benchmark. IV.An investment advisory firm assigns those accounts that fall to a low level to other firms willing to accept them with the consent of the account holder. A) II and III. B) I, III and IV. C) I and II. D) I and III.
I and III.
An investment adviser representative is required to make disclosure to the client when: I. the IAR, in preparing a recommendation, uses research provided by a third party with whom the IAR is not affiliated. II. the IAR recommends a specific insurance policy for the client's overall financial plan, where a commission will be received on that sale. III. transactions recommended to a specific client are inconsistent with those for other clients with objectives that are identical to that particular client. IV. transactions recommended to the client are inconsistent with those for the IAR's own account. A) I, II and III. B) II and IV. C) I and III. D) II, III and IV.
II and IV.
Under the Securities Exchange Act of 1934, the SEC is granted the power to regulate the activities of: I.custodian banks. II.federal covered investment advisers. III.securities information processors. IV.transfer agents. A) III and IV. B) I and II. C) I and IV. D) II and III.
III and IV.
An exemption from registration under the USA would be granted to securities offered by: A) a charitable organization to help fund their for-profit activities. B) a credit union organized and supervised under the laws of a neighboring state. C) a non-regulated public utility. D) an issuer relying on Rule 506 of the Securities Act of 1933.
an issuer relying on Rule 506 of the Securities Act of 1933.
An exemption from registration under the USA would be granted to securities offered by: A) a charitable organization to help fund their for-profit activities. B) a non-regulated public utility. C) a credit union organized and supervised under the laws of a neighboring state. D) an issuer relying on Rule 506 of the Securities Act of 1933.
an issuer relying on Rule 506 of the Securities Act of 1933.
An investment adviser representative, who also receives commissions as an agent at a brokerage firm, has opened an account with a client whose net worth is $200,000. The customer wants the account aggressively traded and wishes the investment adviser to be compensated based on the account's performance. In this account, payment on a performance basis is: A) permissible. B) permissible with approval from the principal of the brokerage firm and written permission from the customer at the time the account is opened. C) permissible if the customer's net worth is a minimum of $1 million. D) not permissible.
not permissible.
