66 Final #4 - Part 2
Under the Uniform Securities Act, an investment adviser is prohibited from taking custody of a client's funds if the: I Administrator prohibits this by rule II firm fails to notify the Administrator that it has custody or may take custody III firm is registered as a broker-dealer as well as an investment adviser A. I only B. I and II C. II and III D. I, II, III
B. I and II
The holder of a put on a listed stock exercises. The holder MUST: I deliver stock II deliver cash III take delivery of stock IV take delivery of cash A. I and III B. I and IV C. II and III D. II and IV
B. I and IV
An individual holding a CFP designation can get a waiver from taking the: A. Series 63 examination B. Series 65 examination C. Series 66 examination D. Either the Series 65 or 66 examination
B. Series 65 examination
Many years ago, a customer bought 100 shares of ABC stock at $40. The customer gifts the stock to her son when is valued at $50. The son sells the security at $55. The tax consequence to the son is: A. no capital gain or loss B. $10 per share capital gain C. $15 per share capital gain D. $55 per share capital gain
C. $15 per share capital gain
To form a limited partnership, there must be at least: A. 1 limited partner B. 1 general partner C. 1 limited partner and 1 general partner D. 10 limited partners for each general partner
C. 1 limited partner and 1 general partner
In an initial public offering, a member who acted as manager or co-manager CANNOT issue a research report on that company within how many days following the effective date? A. 2 calendar days B. 5 calendar days C. 10 calendar days D. 15 calendar days
C. 10 calendar days
The lowest investment grade rating is: A. B B. BB C. BBB D. CCC
C. BBB
Which is NOT a feature of a safe harbor 401(k) plan? A. Mandatory annual employer matching contributions B. No annual "top heavy" benefits testing C. Immediate 100% vesting of employer-paid benefits D. 100% of eligible employees must choose to participate
D. 100% of eligible employees must choose to participate
An individual that has made a passive investment has bought into a: A. sole proprietorship B. general partnership C. LLC D. DPP
D. DPP
State "blue sky" laws provide for registration of: I broker-dealers II agents III investment advisers IV investment adviser representatives A. I only B. I and III C. II and IV D. I, II, III, IV
D. I, II, III, IV
Administration of the Investment Advisers Act of 1940 is done by: A. FINRA B. CFTC C. NASAA D. SEC
D. SEC
The investment approach that searches for individual stocks that are likely to have exceptional performance potential, prior to considering the impact of general economic factors, is known as the: A. resistance level B. support level C. top down approach D. bottom up approach
D. bottom up approach
All of the following terms apply to index ETFs EXCEPT: A. benchmarked B. passively managed C. marginable D. redeemable
D. redeemable
In January, a customer buys 1 ABC Jun 80 Call @ $7 when the market price of ABC is 81. The customer's maximum potential gain is: A. $700 B. $7,300 C. $8,000 D. unlimited
D. unlimited
A customer sells 1 ABC Jan 35 Call @ 2 when the market is at 33. The maximum potential gain is: A. $200 B. $2,000 C. $3,700 D. unlimited
A. $200
A married couple has a combined net worth of $5,000,000. If one dies in 2017, the taxable amount of the estate to the surviving spouse is: A. 0 B. $500,000 C. $1,500,000 D. $5,000,000
A. 0
Investment advisers that manage $100,000,000 or more of assets are subject to: A. Federal registration only B. State registration only C. Both Federal and State registration D. Neither Federal nor State registration
A. Federal registration only
If the Required Rate of Return (RRR) on a security is less than the Internal Rate of Return (IRR) on that security, then the: A. security should be purchased for investment B. security should not be purchased for investment C. security has a positive risk premium D. security has a negative risk premium
A. security should be purchased for investment
Compute the non-compounded annualized inflation adjusted rate of return for the following investment held for 3 years. Initial Investment Value: $5,000 Ending Investment Value: $4,400 Dividends Received Over The Period: $900 Inflation Rate Over The Period: 6% A. -1% B. 0% C. +1% D. +2%
B. 0%
Which customer could be charged an advisory fee based on account performance? A. A customer that deposits $250,000 to be invested by the adviser B. A customer with a $2,000,000 net worth C. A customer that deposits $500,000 with the adviser D. Any of the above
B. A customer with a $2,000,000 net worth
Under the Uniform Securities Act, which of the following is a non-exempt security? A. A warrant issued by a NYSE traded company B. A stock issued by an industrial corporation C. A bond issued by the Canadian Government D. A bond issued by a province of the Canadian Government
B. A stock issued by an industrial corporation
Which statement is TRUE regarding family limited partnerships? A. At least 1 parent and 1 child must be general partners in the venture B. The venture must have a legitimate business purpose other than tax avoidance C. Both the general partner(s) and limited partner(s) can assume a management role D. Only intangible financial assets can be held in the partnership
B. The venture must have a legitimate business purpose other than tax avoidance
Given the set of the following numbers: 6, 7, 7, 14, 11, 2, 9, what is the range? A. 8 B. 10 C. 12 D. 14
C. 12
A father is writing his will (the testator) and is naming as beneficiaries his 2 adult sons - Son A and Son B. Each one will get an equal share of the father's estate "per stirpes" upon the father's death. Each of the sons has children (the grandchildren of the testator) who are not yet adults. Son A has 2 young children - Grandchild A1 and Grandchild A2. If Son A predeceases the testator, then: A. Son A's 1/2 share goes into his estate B. Son A's share goes to Son B C. Grandchild A1 gets 25% and Grandchild A2 gets 25% of the estate's assets upon the death of the testator D. the deceased son's share reverts back to the father's estate
C. Grandchild A1 gets 25% and Grandchild A2 gets 25% of the estate's assets upon the death of the testator
If the Administrator summarily suspends a registration of an agent, which of the following statements are TRUE? I The Administrator must notify the agent promptly that the order has been entered II The Administrator must obtain a court order prior to issuing its own order III An opportunity for a hearing must be given within 15 days of written request IV The individual is prohibited from acting as an agent in that State A. I and II only B. III and IV only C. I, III and IV D. I, II, III, IV
C. I, III and IV
A corporation has issued 10% AA rated sinking fund debentures at par. Three years later, similar issues are being offered in the primary market at 8%. Which are TRUE statements about the outstanding 10% issue? I The current yield will be higher than the nominal yield II The current yield will be lower than the nominal yield III The dollar price of the bond will be at a premium to par IV The dollar price of the bond will be at a discount to par A. I and III B. I and IV C. II and III D. II and IV
C. II and III
In most States, persons convicted of fraudulent actions involving an offer of securities may be: I fined $1,000 II fined $5,000 III imprisoned for 3 years IV imprisoned for 5 years A. I and III B. I and IV C. II and III D. II and IV
C. II and III
Which of the following is NOT included in the calculation of net present value of a 10-year fixed rate non-callable bond? A. Coupon rate B. Par value C. Volatility D. Purchase price
C. Volatility
An agent of a broker-dealer registered in all 50 States is located in the State of Missouri, where the broker-dealer maintains a call center. The agent is only registered in the State of Missouri. A new customer that is a resident of Florida has seen one of the broker-dealer's television advertisements and calls the "800" number in the advertisement, reaching this agent. The customer states that she wants to "Buy some good stocks - what do you recommend?" Under the Uniform Securities Act, the agent: A. can recommend securities to the customer because the broker-dealer is registered in the State of Florida B. can recommend securities to the customer because the call was received in the State of Missouri where the agent is registered C. cannot recommend securities to the customer because the agent is not registered in the State of Florida D. cannot recommend securities to the customer unless the securities recommended are exempt from registration
C. cannot recommend securities to the customer because the agent is not registered in the State of Florida
Frederick Kruger, an investment adviser representative, has decided to leave his current firm and accept a position with another investment adviser. Freddy makes an agreement with an investment adviser representative at his old firm to handle his accounts after he leaves. The IAR at the old firm will set aside and pay 50% of any fees that he receives to Frederick for the next 3 years. Which statement is TRUE? This arrangement is: A. acceptable because the commissions are being shared between 2 registered individuals B. acceptable because an oral contract is binding on both parties under the Uniform Securities Act C. prohibited because commissions cannot be shared by individuals that are registered at different advisory firms D. prohibited because sharing in commissions is not allowed under any circumstances
C. prohibited because commissions cannot be shared by individuals that are registered at different advisory firms
The defining characteristic of global investing is the: A. selection of a range of investments in the portfolio with the goal of eliminating foreign exchange risk B. emphasis on portfolio investments in third world countries that have emerging markets C. spreading of portfolio investments in a weighted manner in both domestic and foreign securities D. fact that every company in the developed world is included in the portfolio
C. spreading of portfolio investments in a weighted manner in both domestic and foreign securities
The purchase of an emerging markets foreign stock index fund will subject the shareholder to all of the following risks EXCEPT: A. exchange rate risk B. political risk C. stock-specific risk D. business risk
C. stock-specific risk
An investment adviser buys 1,000 shares of ABC stock for his personal account. Shortly afterwards, the adviser buys 100,000 shares of ABC stock and allocates them to the customer accounts that he manages. This investment adviser has acted: A. ethically B. ethically as long as he discloses his ownership position to his customers C. unethically because he is front running his customers' accounts D. unethically because he is trading against his customers' accounts
C. unethically because he is front running his customers' accounts
An insurance agent also prepares financial plans for customers for a fee as a sideline. The agent is registered as an investment adviser representative in the State. Which statement is TRUE? A. The insurance agent may say that he is registered with the SEC B. The insurance agent may say that he or she is an investment counsel C. The insurance agent may say that his qualifications as a planner have been certified by the State D. The insurance agent may say that he is registered in the State
D. The insurance agent may say that he is registered in the State
A 40-year old man wishes to remove funds from his IRA to buy his child an automobile for commuting to work after school. The customer has: A. no tax liability B. regular income tax liability only on the amount withdrawn C. 10% penalty tax only on the amount withdrawn D. both regular income tax liability and 10% penalty tax on the amount withdrawn
D. both regular income tax liability and 10% penalty tax on the amount withdrawn
In order to register as a broker-dealer in the State, the Administrator can require filing of a: A. Form BD B. Form U-4 C. Form U-5 D. Form U-10
A. Form BD
An investment adviser that claims that it is a "fee only" adviser could be compensated based on: I a percentage of assets under management II a flat annual or hourly fee for all work performed III 12b-1 fees paid by mutual funds IV commissions paid by broker-dealers A. I and II B. III and IV C. I, II, IV D. I, II, III, IV
A. I and II
An issuer hires an agent and registers that individual to distribute an offering of its securities. Which statement is TRUE under NASAA rules? A. If the agent solicits transactions in a State where the agent is not registered, the issuer can be held liable B. If the agent finishes distributing this securities offering and there is time left until the agent's registration lapses at year end, he or she can work for another issuer distributing that issuer's securities C. The agent is only permitted to sell the issuer's securities to employees of that issuer D. The agent must also affiliate with a registered broker-dealer in order to distribute the offering of securities
A. If the agent solicits transactions in a State where the agent is not registered, the issuer can be held liable
Which statement is FALSE regarding the powers of the State Administrator over a new investment adviser opening an office in that State? The Administrator: A. cannot audit a new investment adviser if the Securities and Exchange Commission has audited that investment adviser within the preceding 6 months B. can inspect the office of an investment adviser in that State, even if the investment adviser's headquarters are located in another State C. can require that additional records be kept by the investment adviser D. can require that a larger surety bond be posted due to the nature of the investment adviser's business
A. cannot audit a new investment adviser if the Securities and Exchange Commission has audited that investment adviser within the preceding 6 months
A customer will have positive financial leverage if: A. money borrowed at a 4% rate of interest is used to make an investment yielding 5% B. money borrowed at a 5% rate of interest is used to make an investment yielding 4% C. one can borrow in a margin account at the broker loan rate to buy recommended investments D. one can borrow on a home equity line and use the proceeds to make valuable home improvements
A. money borrowed at a 4% rate of interest is used to make an investment yielding 5%
An investment adviser representative (IAR) prepares an investment plan for a customer and explains to the customer that he places trades through ABC broker-dealer with whom the IAR has a soft dollar relationship. The customer tells the IAR that he wants ½ of the trades placed through DEF broker-dealer. The IAR should: A. place ½ the trades with ABC broker-dealer and ½ the trades with DEF broker-dealer B. place all of the trades through ABC broker-dealer since the customer has no say in which broker performs the IAR's trades C. place all the trades though DEF broker-dealer since such an arrangement is a conflict of interest D. close the account and refund all monies to the customer
A. place ½ the trades with ABC broker-dealer and ½ the trades with DEF broker-dealer
Which of the following statements are TRUE about a Life Annuity? I A Life Annuity will cease when the person dies II A Life Annuity will continue to pay to a beneficiary if the person dies before a stated date III The periodic payment for a Life Annuity will be lower than the periodic payment for a Period Certain annuity IV The periodic payment for a Life Annuity will be higher than the periodic payment for a Period Certain annuity A. I and III B. I and IV C. II and III D. II and IV
B. I and IV
Which of the following are non-exempt securities under the Securities Act of 1933? I Government National Mortgage Association Mortgage Pass-Through Certificates II Small Business Investment Company Shares III Commercial Paper maturing over 270 days IV Variable Annuity Contracts A. I and II B. III and IV C. II, III, IV D. I, II, III, IV
B. III and IV
A potential client is 81 years old and has asked his representative for recommendations of speculative "Dot Com" stocks. The customer has a broadly diversified bond and high dividend paying stock portfolio that provides retirement income, in addition to the customer receiving social security. The customer is concerned that his purchasing power is decreasing and wishes to allocate an increased portion of his portfolio to aggressive growth stocks. The BEST recommendation for this customer is to: A. not allocate any of his portfolio to "Dot Com" stocks because they give no current income, which this customer needs B. allocate a portion of the customer's portfolio to "Dot Com" stocks that will not reduce the customer's retirement income below the amount needed for comfortable living C. allocate a portion of the customer's portfolio to "Dot Com" stocks as dictated by the customer, since he is making the investment decision D. tell the customer that aggressive growth stocks are not suitable for a person who is at such a late stage of life
B. allocate a portion of the customer's portfolio to "Dot Com" stocks that will not reduce the customer's retirement income below the amount needed for comfortable living
Monte Carlo simulation: A. is used to determine the expected value of an investment's return based on the probability of a specific result occurring B. establishes a frequency distribution of investment returns over a range of different conditions C. predicts the variability of return that can occur relative to the mean or median return D. establishes the asset allocation percentages applied to each asset class based upon an investor's objectives, risk tolerance, and time horizon
B. establishes a frequency distribution of investment returns over a range of different conditions
The essential difference between the arithmetic mean return and the geometric mean return is: A. arithmetic mean return considers compounding while geometric mean return does not B. geometric mean return considers compounding while arithmetic mean return does not C. arithmetic mean return considers probability while geometric mean return does not D. geometric mean return considers probability while arithmetic mean return does not
B. geometric mean return considers compounding while arithmetic mean return does not
Under ERISA Rule 404(c), a 401(k) plan fiduciary would be relieved from liability resulting from the plan participant's investment directions if the plan offered which investment options? A. Money Market Fund; Equity Fund; Growth Fund B. Capital Preservation Fund; Money Market Fund; Fixed Income Fund C. Government Bond Fund; Fixed Income Fund; Money Market Fund; Capital Preservation Fund D. Fixed Income Fund; Growth Fund; Capital Preservation Fund
D. Fixed Income Fund; Growth Fund; Capital Preservation Fund
Which statement is TRUE about hedge fund fees? A. Hedge fund managers can only charge fees based on a percentage of assets under management B. Hedge fund managers can only charge a fixed annual fee C. Hedge fund managers can charge performance fees that are limited in amount by the Investment Advisers Act of 1940 D. Hedge fund managers can charge performance fees that are not limited in amount
D. Hedge fund managers can charge performance fees that are not limited in amount
Under the Uniform Securities Act, which of the following transactions are voidable by the buyer? I A customer was unknowingly sold stocks at prices higher than the current market at the time of the trade II Material facts were unknowingly omitted by the agent who sold the stock to the customer III A customer was unknowingly sold unsuitable securities A. I only B. I and II C. II and III D. I, II, III
D. I, II, III
Prior to recommending a specific 529 college savings plan to a customer, a representative should consider which of the following? I Customer's investment objective(s) II Age of the beneficiary III Number of years until the funds are needed IV Performance history of the recommended investment A. I only B. I and IV C. II and III D. I, II, III, IV
D. I, II, III, IV
The State Administrator, under the Uniform Securities Act, is empowered to: I require examinations for officers of investment advisers and for investment adviser representatives II set different passing grades for examinations administered to officers of investment advisers and investment adviser representatives III waive an examination requirement under specified circumstances IV give either oral examinations or written examinations A. I only B. I and II only C. III and IV only D. I, II, III, IV
D. I, II, III, IV
When a 3rd party solicitor retained by an Investment Adviser (IA) visits a potential client to make a presentation, what must be given to the customer, and what must be signed by the customer? I The Investment Adviser's Brochure must be delivered to the client II The Solicitor's Brochure must be delivered to the client III The client must sign an acknowledgment that the Investment Adviser's Brochure was received IV The client must sign an acknowledgment that the Solicitor's Brochure was received A. I and III only B. II and IV only C. I and II only D. I, II, III, IV
D. I, II, III, IV
Which of the following are deductible from a taxable estate? I Funeral and administrative expenses II Claims against the estate III State death taxes IV Mortgages against real property owned by the estate A. I and III only B. II and IV only C. II, III and IV only D. I, II, III, IV
D. I, II, III, IV
Registration by Coordination in a State would MOST likely be used for which securities offering? A. Mutual fund shares registered under the Investment Company Act of 1940 B. Secondary offering of a company that is NASDAQ listed C. An initial public offering made under a Rule 147 Intrastate exemption D. Initial public offering of an issue that will be listed in the OTCBB
D. Initial public offering of an issue that will be listed in the OTCBB
Under the Securities Exchange Act of 1934, all of the following issuers must report to the SEC EXCEPT: A. Corporations B. Investment Companies C. Master Limited Partnerships D. Municipalities
D. Municipalities
An older customer with failing eyesight requests that his mail be delivered to the agent's brokerage firm branch office rather than to his home. He also requests that his agent be the one to read, on at least a monthly basis, his statements to him. If the agent cannot commit to this, the customer wishes that the agent's secretary be the one to read the mail. Which of the following actions may be taken? A. As long as written authorization is received from the customer's doctor detailing the customer's ailment, the customer's request may be honored B. Upon written confirmation from the customer, the customer's request may be honored C. As long as the action is not prohibited by the State Administrator, the customer's request may be honored D. The agent must refuse the customer's request because all mail must be sent to the customer's address or P.O. box
D. The agent must refuse the customer's request because all mail must be sent to the customer's address or P.O. box
All of the following are defined as "persons" under the Uniform Securities Act EXCEPT: A. individuals B. joint stock companies C. unincorporated organizations D. trusts where the interests of the beneficiaries are not evidenced by a security
D. trusts where the interests of the beneficiaries are not evidenced by a security
