Consolidated Exams

A) MMA: 22.05 - 22.25, 10 x 8.

A client of your broker-dealer accepts your recommendation and turns in a market order to purchase 600 shares of MNOP Corporation common stock. Based on the following market maker quotes, it would be expected that the firm's trader would direct the market order to A) MMA: 22.05 - 22.25, 10 x 8. B) MMB: 22.08 - 22.25, 6 x 5. C) MMC: 22.10 - 22.28, 10 x 6. D) MMD: 22.11 - 22.30, 6 x 6.

A) 25 years

A couple, ages 63 and 66, are long-time clients of your firm and are in good health. They plan to retire from gainful employment in 4 years and wish to discuss decumulation strategies. One of the important factors to consider is the time horizon for this couple. Which of the following would be the best estimate to use? A) 25 years B) 8 years C) 4 years D) 10 years

B) Corporation

A feature of which of the following business entities is limited liability but no flow-through of earnings or losses? A) Limited partnership B) Corporation C) Sole proprietorship D) LLC

C) I and II Providing advice on federal covered securities listed on the NYSE does not make the adviser a federal covered adviser. Determining if one is a federal covered investment adviser is not based on affiliations; it is generally a function of AUM or managing an investment company.

A federal covered investment adviser is one who I. has $110 million or more in assets under management II. manages an investment company registered under the Investment Company Act of 1940 III. limits his advice to securities listed on the NYSE IV. is affiliated with a federally chartered bank A) I and III B) II and III C) I and II D) I, II, III and IV

C) a substantial part of his business is providing investment supervisory services

A federal covered registered investment adviser who receives compensation for advice and whose business is primarily as an investment adviser may describe its business as investment counsel if A) it receives SEC approval to use the definition B) it maintains its registration by filing an updating amendment to its Form ADV annually C) a substantial part of his business is providing investment supervisory services D) it maintains custody of customer funds and/or securities

A) Complex trust Simple trusts may not make charitable contributions, and they provide no discretion on income distribution. The two types of charitable trusts mentioned provide no ongoing discretion as to when income is distributed or who the beneficiaries are.

A professional tennis player comes to you seeking advice on setting up a trust. She is interested in giving to charity and also wants discretion as to when income is distributed to the beneficiaries, her parents. Which trust do you advise she use? A) Complex trust B) Simple trust C) Charitable lead trust D) Charitable remainder trust

C) the closed-end management investment company.

A registered investment company whose capitalization may include preferred stock and/or bonds is A) the open-end management investment company. B) the unit investment trust. C) the closed-end management investment company. D) the face-amount certificate company.

D) selling 3,000 shares of ABC as directed by a client at a price that the agent determines, without oral or written discretionary authority. It is not unethical for an agent to choose time and price of a trade as long as the client has determined the asset, the action, and the amount.

According to NASAA's Statement of Policy on Unethical or Dishonest Business Practices of Broker-Dealers and Agents, all of the following practices are considered unethical for an agent except A) determining the quantity of a specific security to purchase once the client has designated that security and the action to be taken. B) receiving written discretionary authority from a client within 10 business days of first executing a discretionary trade with oral authority from the client. C) selling 3,000 shares of ABC at a price the agent determines is the best the client can get, without oral or written discretionary authority. D) selling 3,000 shares of ABC as directed by a client at a price that the agent determines, without oral or written discretionary authority.

D) 45

According to the Investment Advisers Act of 1940, the SEC must either grant investment adviser registration or begin proceedings to determine whether registration should be denied within how many days of filing? A) 30 B) 90 C) 60 D) 45

D. 45

According to the Investment Advisers Act of 1940, the SEC must either grant investment adviser registration or begin proceedings to determine whether registration should be denied within how many days of filing? A) 30 B) 60 C) 90 D) 45

A) a successor firm is exempt from filing a consent to service of process until the renewal date When one firm succeeds another, no fees are due until renewal date. However, the successor firm must file a consent to service of process at the time it registers.

All of the following statements regarding registration of broker-dealers under the Uniform Securities Act are true EXCEPT A) a successor firm is exempt from filing a consent to service of process until the renewal date B) no broker-dealer can be required to meet financial requirements in excess of those of the SEC C) broker-dealers with discretion over client accounts may be required to post a surety bond D) a successor firm is exempt from paying registration fees until the renewal date

C) principal repayment on partnership debt. Principal repayments are not an expense for tax purposes. The interest on the debt is an expense and, along with depletion and depreciation expense, does flow through to the limited partners as passive loss.

All of the following would flow through as a loss to limited partners except A) depletion. B) interest payments on partnership debt. C) principal repayment on partnership debt. D) accelerated depreciation.

B) they are traded on listed exchanges.

Among the characteristics of exchange-traded funds (ETFs), which distinguish them from mutual funds is that A) their portfolio may be designed to mimic an index. B) they are traded on listed exchanges. C) their NAV is computed daily. D) they are registered with the SEC.

B) in State W. Snowbird exemption

Angelo lives and votes in State W. He winters in State C, splitting his time 60/40 between the 2 states. Angelo has a brokerage account with Sunset Investment Securities (SIS) and trades with an agent housed in SIS's State W office. SIS is also registered in States M and I but, having no place of business there, is not registered in State C. In order for Angelo's agent to handle the account, registration as an agent is required A) in State W and State C. B) in State W. C) in State C. D) solely with FINRA.

C) $87,000 Distributable Net Income (DNI) is dividends and interest plus capital gains that have not been reinvested back into the trust.

During the previous fiscal year, The Kaplan Family Trust received $24,000 in dividends and $35,000 in interest from corporate bonds. Securities transactions during the year resulted in long-term capital gains of $48,000, $20,000 of which were reinvested in the corpus. The DNI for the Kaplan Family Trust is A) $79,000 B) $11,000 C) $87,000 D) $107,000

C) I and II Contributions are NOT exempt from payroll taxes

Employee contributions to a 401(k) plan are subject to I. Social Security taxes II. federal unemployment taxes III. federal income tax withholding IV. state income tax withholding A) III and IV B) I and III C) I and II D) II and IV

C) I and II When an individual's identity is stolen, it is common to find that the thief takes over the current credit card accounts and also applies for new ones.

Examples of identity theft would include I. taking over an individual's credit card account II. applying for new credit cards in the compromised individual's name III. lending money in the name of the compromised individual IV. purchasing lottery tickets in the name of another individual A) III and IV B) II and III C) I and II D) I and IV

1000 hours

Full time employee, how many hours to they work per year?

A) A limited liability company (LLC) If a businessowner's goal is ease in raising capital, the limited liability company (LLC) is preferable because it has no restrictions on the number or nationality of investors. While the regular or C corporate form is also preferable, the S form of corporation is limited to a maximum of 100 potential shareholders, none of whom may be a nonresident alien.

If a businessowner's goal is to establish an entity that features ease in raising capital, which of these entities is the most appropriate? A) A limited liability company (LLC) B) An S form of corporation C) A sole proprietorship D) A general partnership

C) the predictability of income Obviously, if there is no predictable cash flow (as there is with the interest payments on a bond), there are no reliable numbers to plug into the formula.

One of the reasons why the discounted cash flow method of valuation is useful in assessing the value of fixed income instruments is A) the availability of ratings B) the known maturity date C) the predictability of income D) the priority of claim on earnings

D) Trustee and beneficiary

One of your clients approaches you about setting up a trust. If your client assumes the role of grantor, what additional roles may be taken? A) Beneficiary B) As the grantor, no other roles may be taken C) Trustee D) Trustee and beneficiary

D) the participation rate Virtually all index annuities have a specified participation rate, the percentage of the index's earnings that will be credited to the account

One of your customers owns an index annuity. The percentage of the index's return the insurance company credits to the annuity is determined by A) the cap rate B) the CDSC C) the annuity reset rate D) the participation rate

B) II and III

The Investment Company Act of 1940 requires that a mutual fund do which of the following? I. Provide a monthly balance sheet to investors II. Have $100,000 minimum capitalization prior to making a public offering III. Provide semiannual reports to shareholders IV. Not acquire more than 5% of the outstanding shares of another registered investment company A) I and IV B) II and III C) I and III D) II and IV

B) pricing securities based on their systematic risk Under the CAPM, securities are priced based on their systematic risk only, because this risk cannot be eliminated through diversification.

The capital asset pricing model (CAPM) is an investment theory that serves as a model for A) pricing securities based on their total risk B) pricing securities based on their systematic risk C) pricing securities based on their unsystematic risk D) measuring the correlation between a security and the overall market

B) 1,000

Under Keogh plan provisions, a full-time employee is defined as one working at least how many hours per year? A) 2,000 B) 1,000 C) 500 D) 100

B) The transactions are authorized in writing by the broker-dealer before execution of the transactions.

Under which of the following circumstances can an agent conduct customer transactions without the activity being recorded on the books and records of his broker-dealer employer? A) The securities are exempt under the Uniform Securities Act. B) The transactions are authorized in writing by the broker-dealer before execution of the transactions. C) The agent will receive no compensation. D) The customer is a member of the agent's immediate family.

A) Time to maturity

Which of the following factors has a direct relationship to a bond's duration? A) Time to maturity B) Coupon rate C) Yield to maturity D) Rating

D) Yield to maturity Yield to maturity has an inverse relationship to duration. That is, the higher the YTM, the lower (shorter) the duration.

Which of the following factors has an inverse relationship to a bond's duration? A) Par value B) Rating C) Time to maturity D) Yield to maturity

D) Municipal bond interest

Which of the following is not included in adjusted gross income on an individual's federal income tax return? A) Unemployment compensation B) Dividends paid on preferred stock C) Salary and commissions D) Municipal bond interest

B) II and IV In both 401(k) plans and defined benefit plans, tax advantages accrue to both the employer and the employees. Employer contributions are deductible, and earnings growth is tax deferred to the employee.

Which of the following qualified retirement plans offer tax advantages to both the employer and the employee? I. Individual retirement arrangements (IRAs) II. 401(k) plans III. Deferred compensation plans IV. Defined benefit plans A) I and IV B) II and IV C) I and III D) II and III

D) I and IV

Which of these features are common to both variable annuities and scheduled premium variable life insurance? I. Income earned in the separate account is tax deferred. II. Separate account performance below the AIR causes a reduction in cash value. III. Fixed contributions are required. IV. Contract owners have voting rights. A) I and II B) III and IV C) II and III D) I and IV

D) an annuity. One of the unique characteristics of an annuity (variable or fixed) is that it guarantees monthly payments for the life of the annuitant.

You have a 70-year-old client who is in excellent health. Both parents lived into their late 90s and the client is concerned about outliving her money. One product that should be considered to alleviate this concern is A) whole life insurance. B) an index fund. C) a 30-year term policy. D) an annuity.

A) has a zero net present value If the market is efficiently pricing that bond, its market price should be equal to its present value, resulting in an NPV of zero.

A client owns an investment-grade bond with a coupon of 7%. If similarly rated bonds are being issued today with coupons of 5%, and the market is efficient, it would be expected that the client's bond A) has a zero net present value B) will be selling at a discount from par C) has a negative net present value D) has a positive net present value

A) accept unsolicited orders only Tergiversation = fickle

An agent has a new client who is prone to tergiversation. As such, it would probably make sense to: A) accept unsolicited orders only B) open a discretionary account C) make recommendations on a frequent basis D) obtain permission from both the client and the broker-dealer before sharing in the profits and losses in the account

D) a registered investment company. In order for an investment adviser to enter into an advisory contract with an investment company, the adviser must be SEC registered (federal covered). Federal covered investment advisers are never registered in any states.

An investment adviser registered in 4 states would be permitted to enter into an advisory contract with all of the following prospective clients except A) a charitable foundation. B) a university endowment fund. C) a single parent. D) a registered investment company.

D) He will offset $1,000 ordinary income this year. Only $3,000 of last year's loss can be deducted against that year's income. Therefore, the losses carried forward from the previous year are the remaining $2,000. These losses are netted against the gain of $1,000 for a net loss of $1,000. That loss can be used to offset $1,000 of ordinary income. There are now no longer any losses to carry forward.

Last year, an investor had a $5,000 loss after netting all realized capital gains and losses. This year the investor has a $1,000 capital gain. After netting his gains and losses, what will be his tax situation this year? A) He will have a $1,000 gain. B) There will be no tax consequences. C) He will have a $1,000 loss to carry over to the next year. D) He will offset $1,000 ordinary income this year.

D) I ,II, and III

NASAA holds that the most important duty of an investment adviser is the disclosure of all information relating to the relationship between an adviser and a client. As far as the topic of compensation is concerned, which of the following must be disclosed? I. Transaction-based compensation, such as commissions on recommended securities II. 12b-1 trails on no-load mutual funds in the client's portfolio III. Expenses reimbursed by third-party sources IV. Compensation-sharing arrangements between the investment adviser and its representatives A) I and III B) III and IV C) I, II, III, and IV D) I ,II, and III

B) a copy of the articles of incorporation for the business. A sole propietorship is not a corporation.

To register a sole proprietorship as an investment adviser in a state, the application for initial registration (Form ADV) must be filed with the appropriate party. This application must include all of the following except A) the appropriate fees. B) a copy of the articles of incorporation for the business. C) any information to be furnished or disseminated to any client or prospective client. D) a consent to service of process.

C) The preliminary prospectus

Charlotte is an agent of Gibraltar Securities. Her most active customer told Charlotte that he is thinking about buying 10,000 shares of a retailer's stock for which Gibraltar will be participating in the underwriting syndicate. The SEC release date for the stock is anticipated within 10 business days. What may Charlotte send to the client today? A) The final prospectus B) The preliminary prospectus and a reprint of a popular advertisement placed by the issuing corporation C) The preliminary prospectus D) An order request

C) None, because no obligation may be placed on the callers

If an investment adviser places an advertisement in a newspaper offering a free brochure to those who call, under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, what may the adviser require from callers as a condition of receiving the brochure? A) A purchase B) The names of three friends who might be interested C) None, because no obligation may be placed on the callers D) A financial profile

C) 3 times the amount of the profit gained or loss avoided on the transaction TREBLE DAMAGES ARE ALLOWED

Under the Insider Trading and Securities Fraud Enforcement Act of 1988, a person who has violated the prohibition against insider trading is liable for a civil penalty of A) 10 times the amount of the profit gained or loss avoided on the transaction B) the amount of the profit gained or loss avoided on the transaction C) 3 times the amount of the profit gained or loss avoided on the transaction D) twice the amount of the profit gained or loss avoided on the transaction

A) mandate the method used to maintain and file records Administrator doesn't have the power to make any specific bookkeeping method mandatory. The only requirement is that the books and records must accurately reflect the nature of the firm's business.

Under the USA, the Administrator may do all of the following EXCEPT A) mandate the method used to maintain and file records B) take jurisdiction over any person who sells or offers to sell either when the offer is made in the state or when an offer to buy is made and accepted in the state C) prescribe form and content of financial statements required under the act D) conduct hearings in public, unless at the Administrator's discretion and with agreement of all parties, the Administrator decides otherwise

B) The offer of the security may not be advertised. There are three requirements for a preorganization subscription to qualify as an exempt transaction. A preorganization subscription may be advertised.

Under the Uniform Securities Act, which of the following is NOT a requirement for a preorganization subscription to be an exempt transaction? A) There may be no more than 10 subscribers. B) The offer of the security may not be advertised. C) No payment may be made by any subscriber. D) No commission may be paid to anyone for soliciting potential subscribers.

B) 457 plan Because the 457 plan is technically non-qualified, it does not come under the non-discrimination rules of ERISA.

Which of the following employer-sponsored plans allows coverage to discriminate in favor of key employees? A) 401(k) plan B) 457 plan C) Defined benefit pension plan D) 403(b) plan

A) I only "Custody" means possession (even temporarily) of a client's funds or securities.

Which of the following would NOT constitute custody of a client's account under the Investment Advisers Act of 1940? I. Client prepayment of $1,000 of advisory fees, 6 months in advance II. Having temporary custody of a client's securities III. Depositing client funds in bank accounts accessible by the investment adviser A) I only B) I, II, and III C) II only D) II and III

A) this exchange is considered a taxable event as of the date of the exchange. The exchange privilege allows for an exchange at net asset value (NAV) between funds that are members of the same "family".

You have a client who invested in the PQR Growth Fund 10 years ago and now, as retirement age approaches, asks you about using the exchange privilege to move into the PQR Balanced Fund. The client should know that A) this exchange is considered a taxable event as of the date of the exchange. B) the exchange qualifies for any breakpoint reduction. C) the old shares are liquidated at NAV and the new shares are purchased at the POP. D) any tax consequences are deferred until the Balanced Fund shares are liquidated.

B) when informed by the investment adviser that the representative's registration is effective Admin notifies the IA who then notifies the individual

An individual who has passed the NASAA examination for registration as an investment adviser representative may begin soliciting advisory clients A) when informed by the Administrator that the representative's registration is effective B) when informed by the investment adviser that the representative's registration is effective C) within 48 hours D) immediately

B) $10.65, less redemption fee, if any An investor redeeming his shares will receive the NAV less any redemption fee that may be described in the prospectus.

An investor reading the open-end investment company section of today's The Wall Street Journal sees that Bull in the Teashop Fund has a NAV of $10.65 and an offering price of $11.15. He knows that he would have received which of the following if his redemption order had been received by the fund prior to yesterday's market close? A) $10.65 B) $10.65, less redemption fee, if any C) $11.15, less redemption fee, if any D) $10.65, less commission

B) 7%, the net present value (NPV) of Bond Y will exceed the NPV of Bond X. The simple explanation is to compare the IRR with the required rate of return. Anytime the IRR is above the required rate, you've got a good deal (and that is what a positive NPV tells us).

Bond X has an internal rate of return (IRR) of 7%. Bond Y has an IRR of 9%. Both bonds pay interest semiannually. If the required rate of return is A) 9%, both bonds will have a positive NPV. B) 7%, the net present value (NPV) of Bond Y will exceed the NPV of Bond X. C) 9%, the net present value (NPV) of Bond X will exceed the NPV of Bond Y. D) 7%, the net present value (NPV) of Bond X will exceed the NPV of Bond Y.

C) the investor's account will be credited with 80% of the growth of the index. The participation rate of an index annuity is the percentage of the growth of the index credited to the investor's account. One of the benefits of an index annuity is that it only shares in the growth, never any losses.

If an index annuity has a participation rate of 80%, it means A) the investor's account will be charged with 80% of the amount lost by the index. B) the investor's account will participate in 80% of the gains and losses of the index. C) the investor's account will be credited with 80% of the growth of the index. D) the investor's account will never be less than 80% of the initial investment.

B) I and IV Owners of S corporations are stockholders, whereas those in an LLC are members.

Which of the following statements regarding an S corporation owner and an owner of an LLC are TRUE? I. Creditors have very limited recourse rights to the owners. II. They may not be nonresident aliens. III. They both are considered stockholders. IV. Both receive the tax benefit of owning flow-through entities. A) II and III B) I and IV C) I and III D) II and IV

C) an investment adviser will be acting in the capacity of a principal In those uncommon cases where an investment adviser acts in the capacity of a principal (or agent) with an advisory client, consent of the client before completion of the transaction is required. In the case of broker-dealers, disclosure of capacity on the trade confirmation, but not consent, is needed.

Consent of the client before completion of a trade made between the firm and a client must be made when A) a broker-dealer will be acting in the capacity of a principal B) a broker-dealer will be acting in the capacity of an agent C) an investment adviser will be acting in the capacity of a principal D) a broker-dealer will be acting as a contra party to the trade

C) 20-year zero-coupon Treasury bond currently trading at a deep discount The lower the coupon, the longer the duration.

If interest rates were to decline sharply, which of the following securities is likely to appreciate the most? A) 20-year municipal bond currently trading at par B) 20-year mortgage-backed security currently trading at a small discount C) 20-year zero-coupon Treasury bond currently trading at a deep discount D) 20-year corporate bond currently trading at a small premium

A) ABCD, Inc. preferred stock paying a 6% dividend Corporations have a 50% dividend exclusion on dividends received from other companies.

XYZ, Inc. is a C corporation in the 21% federal income tax bracket. Which of the following investments offers the company the highest after-tax return? A) ABCD, Inc. preferred stock paying a 6% dividend B) Municipal bond with a 5% coupon rate C) Corporate bond with a 6.75% coupon D) REIT paying a 6.5% dividend

A) Long-term capital gain of $5,040 In the case of a gift of securities, the donee acquires the donor's cost basis, $9.21 per share. Sale (redemption) takes place at the NAV ($14.25) for a profit of $5.04 per share (times 1,000 shares).

A client purchases 1,000 shares of the ABC Global Growth Fund when the NAV is $8.75 and the POP is $9.21. Three years later, the client makes a gift to her daughter when NAV is $9.50 and POP is $10.00, and the daughter elects to receive all distributions in cash. Two years later, she sells all shares when the NAV is $14.25 and POP is $15.00. What are the tax consequences of this sale? A) Long-term capital gain of $5,040 B) Long-term capital gain of $4,750 C) Long-term capital gain of $5,500 D) Long-term capital gain of $5,000

C) a solicitor and required to register as an IAR

An individual employed by or associated with an investment adviser that is registered or required to be registered under the Uniform Securities Act, or who has a place of business in this state and is employed by or associated with a federal covered adviser and whose only role is to solicit, offer, or negotiate for the sale of or sell investment advisory services would be considered A) an IAR only if soliciting noninstitutional clients B) a solicitor and required to register as an IA C) a solicitor and required to register as an IAR D) an administrative employee exempt from registration

A) A 91-day U.S. Treasury bill A beta of zero means an investment whose price is not generally affected by fluctuations in the stock market. One could say that makes them free of market risk.

An investment adviser representative is researching a security and notices that its beta is zero. Which of the following securities is probably the subject of that research? A) A 91-day U.S. Treasury bill B) A public utility stock C) A 5-year U.S. Treasury note D) An ETF tracing the index of gold stocks

D) a mutual fund that matches the investor's stated objective

An elderly widower explains to his investment adviser representative that he requires his investments to provide the maximum current income. The IAR should recommend A) a zero-coupon bond B) a growth fund C) a widow fund, structured specifically for this type of investor D) a mutual fund that matches the investor's stated objective

C) She will pay income taxes on the full amount she withdraws each year.

If the owner of a $1 million IRA leaves it to his daughter, which of the following best describes the income tax treatment to the daughter? A) She will pay no income taxes because the estate taxes have already been paid. B) She will pay income taxes on the full $1 million immediately. C) She will pay income taxes on the full amount she withdraws each year. D) She will pay income taxes only on a portion of the withdrawals which exceed $1 million.

C) Accept the certificate and give the customer a receipt. *Gives the receipt on the spot

What is the appropriate procedure to follow when an advisory client delivers a stock certificate to the office of a broker-dealer? A) File a currency transaction report if the current market value of the stock represented by the certificate exceeds $10,000. B) Instruct the client to send the certificate to the transfer agent because you cannot accept it. C) Accept the certificate and give the customer a receipt. D) Accept the certificate and send the customer a receipt within 24 hours of the delivery.

A) Qualified plans must meet the requirements of ERISA. ERISA regulations are primarily focused on the non-tax aspects of qualified plans, such as nondiscrimination rules and fiduciary obligations.

Which of the following statements regarding ERISA and qualified plans is CORRECT? A) Qualified plans must meet the requirements of ERISA. B) ERISA requires the fiduciary to invest for maximum gain under the prudent person rule. C) ERISA regulations are primarily focused on the income tax aspects of qualified plans. D) ERISA only applies to defined benefit pension plans.

D) II and IV Without the prior consent of the client, an IA may disclose information relating to specific accounts only when requested by the IRS or by court order.

Without prior authorization from the client, an investment adviser could release information relating to the client's account I. in order to comply with the brochure delivery requirements of the USA II. when requested by the IRS as part of litigation against the client III. for the purpose of furnishing information for a statistical survey being compiled by the Administrator IV. upon the receipt of a subpoena from a court of competent jurisdiction A) I, II, III, and IV B) II and III C) I, III, and IV D) II and IV

A) continue to manage the account unless the advisory contract called for termination upon death or informed otherwise by the executor Unless the advisory contract has a termination upon death provision or the executor wishes to assume management of the account, the investor adviser may continue to manage the account of the estate. Trades made in the account must take into consideration tax implications as with any other account. Estate taxes are due 9 months (not 6) after death, and unless there are other assets not listed here, no tax is due because this estate is less than $11.4 million (the amount exempt from taxation for 2019).

An advisory client of yours dies in 2019, and you transfer the $1.4 million of securities in the individual's name to the estate account. You will A) continue to manage the account unless the advisory contract called for termination upon death or informed otherwise by the executor B) tell the executor that he will be receiving a Form 1099 for tax purposes, representing the transfer of account over to the estate account C) notify the executor of the estate that he is able to do any trades to rebalance the account, and that taxes will be of no consideration D) inform the executor that you need to keep sufficient liquid funds in the account because estate taxes will be due in 6 months

D) at least the information required by Appendix 1 of Form ADV Part 2A, but not if another adviser has already furnished such a statement on the program to the client duplicates need not be provided to clients who have already received the required disclosure on that program from another adviser.

An investment adviser compensated for a client's participation in a wrap fee program must provide the client with a written disclosure statement containing A) at least the information required by Appendix 1 of Form ADV Part 2A, even if another adviser has already furnished such a statement on the program to the client B) at least the information in Form ADV Part 2A C) only the services and fees of the program D) at least the information required by Appendix 1 of Form ADV Part 2A, but not if another adviser has already furnished such a statement on the program to the client

A) High-water mark with look back offers the best return during periods of high volatility. Using the annual high-water mark with look back will generally result in the highest return during periods of high volatility. The reason is because under this method, the highest anniversary value is used to determine the gain.

Concerning index annuities and their method of crediting interest, which of the following is TRUE? A) High-water mark with look back offers the best return during periods of high volatility. B) On average, annual reset has a higher participation rate than point to point. C) Point to point offers the best return when the market has had a single drastic decline during the period. D) Annual reset offers the best return regardless of market fluctuations.

A) maintains a place of business in a single state, only deals with residents of that states, and does not execute transactions in securities traded on a national exchange. The only exemption from SEC registration applies to broker-dealers functioning strictly on an intrastate basis.

In general, a broker-dealer is required to register with the SEC. An exception to that requirement would apply to a broker-dealer who A) maintains a place of business in a single state, only deals with residents of that states, and does not execute transactions in securities traded on a national exchange. B) does not have a place of business in the state and limits its clientele to institutional clients. C) is currently registered with the SEC as an investment adviser. D) is registered with the Administrator of the states in which it does business and only deals with issuers of the securities it trades.

A) request the court to appoint a receiver to freeze the bank accounts of a broker-dealer who is the subject of an injunction *In order to deny a registration, not only must it be in the public interest, but there must be some other issue, such as insolvency, incomplete application, et cetera

Included among the powers of the Administrator is the ability to A) request the court to appoint a receiver to freeze the bank accounts of a broker-dealer who is the subject of an injunction B) arrest an agent who violates the USA C) deny the registration of a securities professional, if doing so is in the public interest D) sentence an investment adviser representative who has been convicted of fraud to a prison sentence, not to exceed 3 years

D) State P. As an IAR for a federal covered investment adviser, Stillman is required to register only in those states in which he (Stillman) has a place of business. Although Stillman has clients in several states, the question tells us that his place of business is the office in State P. Please note that, as long as an IAR with a covered adviser does not maintain a place of business in a state, there is no numerical limit on the number of clients he can have and still be exempt from registering in that state.

James Stillman is an investment adviser representative with Rock, Feller, and Standard (RFS), a covered adviser with its principal office in State O. Stillman works out of an office in State P and has 4 retail clients there. In addition, Stillman has 25 retail clients in State D, 6 retail clients in State M, and 1 retail client in State O. Stillman would be required to register as an investment adviser representative in A) States P, D, and M. B) States D and M. C) States P and O. D) State P.

C) Inadequate life insurance coverage

One of your prospective clients is considered a key employee at his place of business. This individual has a net worth of almost $6 million, currently earns in excess of $500,000 per year, and is married with 2 teenage children. He currently has a little over $1 million in his 401(k), more than half of which is invested in his employer's common stock. The company is the beneficiary of a $1.5 million key person life insurance policy on his life. Given these facts, what is your greatest concern as his adviser? A) Too high a percentage of the retirement plan invested in the company's stock B) Alternative minimum tax C) Inadequate life insurance coverage D) Inadequate funding for college savings

C) it takes into consideration the time value of money The internal rate of return compounds returns and takes into consideration the time value of money.

One way in which internal rate of return (IRR) differs from most return computations is that A) it takes into consideration the rate of inflation B) its application to debt securities is limited C) it takes into consideration the time value of money D) it is always an annualized rate of return

A) within 120 days of the end of its fiscal year, a free, updated brochure and related brochure supplements which include or are accompanied by a summary of material changes. Those individuals who represent broker-dealers registered in the state must register as agents in that state if they wish to sell securities to that state's residents.

Under the NASAA brochure rule requirements for investment advisers, an investment adviser (unless qualifying for an exemption) must deliver, A) within 120 days of the end of its fiscal year, a free, updated brochure and related brochure supplements which include or are accompanied by a summary of material changes. B) a free, updated brochure and related brochure supplements every year even when there are no material changes. C) within 90 days of the end of its fiscal year, a free, updated brochure and related brochure supplements which include or are accompanied by a summary of material changes. D) at least 48 hours in advance of entering into the advisory contract, a copy of the adviser's brochure.

B) Institutional investment managers who exercise discretion over accounts valued at $100 million or more of 13(f) securities must file reports quarterly.

Under the Securities Exchange Act of 1934, which of the following statements regarding reports required to be filed with the SEC is TRUE? A) Persons who become the beneficial owner of more than 5% of a security registered under the Securities Exchange Act of 1934 must file a report within 2 days. B) Institutional investment managers who exercise discretion over accounts valued at $100 million or more of 13(f) securities must file reports quarterly. C) Institutional investment managers who exercise discretion over accounts valued at $100 million or more need not file reports if all their clients are insurance companies. D) Persons who become the beneficial owner of more than 2% of a security registered under the Securities Exchange Act of 1934 must file a report within 5 days.

D) I and IV The Securities Exchange Act of 1934 regulates broker-dealers and transfer agents. Investment advisers are regulated under the Investment Advisers Act of 1940 (and, to a certain extent, the Investment Company Act of 1940), whereas pension plans in the private sector are regulated under ERISA.

Which of the following are regulated under the Securities Exchange Act of 1934? I. Broker-dealers II. Investment advisers III. Pension plans IV. Transfer agents A) II and III B) III and IV C) I and II D) I and IV

B) I, II, and III There is no put provision that guarantees the return of an investor's purchase price associated with mutual fund shares.

Which of the following statements regarding a mutual fund that offers class A, B, and C shares are TRUE? I. Class A shares have a front-end sales charge and a low 12b-1 fee. II. Class B shares have a declining contingent-deferred sales charge and a high 12b-1 fee. III. Class C shares have a high 12b-1 fee and a level contingent-deferred sales charge. IV. Class B and C shares allow investors to put the shares back to the fund for their original purchase price for up to 1 year after purchase. A) I only B) I, II, and III C) I and II D) I, II, III, and IV

B) the client could open the Roth IRA without any restriction As long as a married couple's AGI does not exceed 208,000 (for 2021), a Roth IRA can be opened without any restrictions. Contributions are never deductible.

Your married client has an AGI of $105,000 per year and is covered by his employer's defined benefit pension plan. When inquiring about opening a Roth IRA, you would respond that A) one cannot be a participant in a qualified plan and a Roth IRA at the same time B) the client could open the Roth IRA without any restriction C) the client could open a Roth but, depending on future earnings, might not be able to deduct all of the annual contribution D) the client's earnings exceed the Roth limits so the plan could not be opened

B) selling at a premium. divide the net assets (assets minus liabilities) by the number of outstanding shares assets = 100mn liabilities = 15mn 85mn / 2,611,437 = $32.55 ... NAV is lower than what it is trading for

A management investment company owns portfolio securities with a current market value of $100 million. The company owes $10 million for securities purchased but not yet paid for and accrued management fees of $5 million. If there are 2,611,437 shares outstanding and the current asking price of the shares is $36.38 per share, it would be correct to state that this investment company is A) selling at NAV. B) selling at a premium. C) an open-end investment company. D) selling at a discount.

B) he has donated funds to a nonprofit medical research institute that owns securities that the investment adviser representative has recommended No conflict of interest is present that requires an affirmative duty to disclose. The fact that the institute owns securities consistent with the IAR's recommendations is not relevant to his relationship with his client.

As a fiduciary, the investment adviser representative owes his clients an affirmative duty of utmost good faith, and full and fair disclosure of all material facts. This affirmative duty of disclosure is required by the IAR in all of the following situations EXCEPT A) he receives compensation from his employing broker for transactions that are executed through the brokerage house B) he has donated funds to a nonprofit medical research institute that owns securities that the investment adviser representative has recommended C) the advice he is providing is outside the scope of his brokerage employment and is not under the control or supervision of his employer D) his family has a beneficial interest in a private medical equipment firm that he recommends to the client

A) is acceptable because the referral fee is being paid to a registered investment adviser. When a referral fee is paid to another registered firm, there is no problem. The only other requirement is that disclosure of this relationship and any additional cost possibly resulting from the referral fee must be made to each client who signs up with RIP as a result of the referral.

Exceptional Results Advisers (ERA) has $15 billion in AUM and does not accept new clients who are unable to place at least $25 million under ERA's management. From time to time, ERA's clients ask for recommendations for friends or family who don't meet ERA's minimum investment level. In most cases, ERA recommends these prospects to Rational Investment Planning (RIP), a state-registered investment adviser, and receives a referral fee for each person who becomes a client of RIP. The practice A) is acceptable because the referral fee is being paid to a registered investment adviser. B) would only be acceptable if the fee was nominal and not based on the size of the account. C) would only be acceptable if the fee was used to reduce the referring client's advisory fees. D) is prohibited under any circumstance.

D) An agent shares in the profits and losses in a customer's account without making a financial contribution to the account As long as the agent has the consent of the customer and the employing broker-dealer, profits and losses may be shared and no financial contribution is required of the agent.

Which of the following activities would NOT be considered a prohibited practice under the NASAA Statement of Policy on Unethical or Dishonest Business Practices of Broker-Dealers and Agents? A) An agent opens a brokerage account at his employing broker-dealer in his wife's maiden name in order to purchase an IPO being underwritten by the firm B) In order to meet production quotas, an agent opens several accounts under fictitious names C) An agent purchases a suitable stock for a client's account prior to receiving written discretionary authorization D) An agent shares in the profits and losses in a customer's account without making a financial contribution to the account

B) 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 and III C) I and II D) I, III, and IV

A) Net present value (NPV) is the difference between the initial cash outflow (investment) and the future value of discounted cash flows. Net present value (NPV) is the difference between the initial cash outflow (investment) and the present value of discounted cash flows (NPV = PV of CF − cost of investment). That is why it is called net present value instead of net future value.

Which of the following statements is NOT correct? A) Net present value (NPV) is the difference between the initial cash outflow (investment) and the future value of discounted cash flows. B) Net present value analysis (NPV) is a commonly used time value of money technique employed by businesses and investors to evaluate the cash flows associated with capital projects and capital expenditures. C) Time-weighted returns show performance without the influences of additional investor deposits or withdrawals from the account. D) Internal rate of return (IRR) is a method of determining the exact discount rate to equalize cash inflows and outflows, thus allowing comparison of rates of return on alternative investments of unequal size and investment amounts.

C) Roth IRAs are not subject to the minimum distribution rules until the death of the owner/participant of the plan.

Which of the following statements regarding Roth IRAs is TRUE? A) Like traditional IRAs, Roth contribution eligibility is restricted by active participation in an employer's retirement plan. B) Roth IRA withdrawals are tax free in their entirety regardless of the participant's age at withdrawal. C) Roth IRAs are not subject to the minimum distribution rules until the death of the owner/participant of the plan. D) Like traditional IRAs, Roth IRA contributions may not be made after the participant reaches age 72.

B) A QDRO applies only to assets in a qualified employer plan. A QDRO applies only to assets in a qualified employer plan; it would not be applicable to an IRA or a SEP. Under IRS regulations, early distributions that are taken pursuant to a qualified domestic relations order, or QDRO, are exempt from the 10% penalty. A QDRO is a court-issued order that gives someone the right to an individual's qualified plan assets, typically an ex- (or soon-to-be-ex-) spouse, and the QDRO is usually issued in the course of divorce proceedings or to satisfy child support obligations.

Which of the following statements regarding a QDRO is correct? A) A QDRO applies to assets in a qualified employer plan and a traditional IRA. B) A QDRO applies only to assets in a qualified employer plan. C) A QDRO applies only to assets in a traditional IRA. D) A QDRO must comply with ERISA to be effective.

B) Growth managers focus on the denominator in the P/E ratio, searching for firms and industries where high expected earnings growth will drive the stock price up even higher.

Which of the following statements regarding the growth style of investing is correct? A) Growth managers look for a high-dividend yield and often take a contrarian approach. B) Growth managers focus on the denominator in the P/E ratio, searching for firms and industries where high expected earnings growth will drive the stock price up even higher. C) Growth managers believe that, although a firm's earnings are depressed now, the earnings will rise in the future as they revert to the historical range. D) Growth managers focus on the numerator in the P/E ratio, desiring a low stock price relative to earnings or book value of assets.

D) Transactions between the issuer and the underwriter The Uniform Securities Act specifically exempts transactions between an issuer and an underwriter. There is no exemption for investment clubs or transactions that result in a loss. Rule 501 defines an accredited investor, but when an individual (as mentioned here), there is no exemption as there would be with an institution.

Which of the following transactions is exempt under provisions incorporated into the Uniform Securities Act? A) Transactions between an agent and an individual who meets the requirements under Rule 501 of the Securities Act of 1933 B) Transactions involving investment clubs C) Transactions that do not result in a capital gain D) Transactions between the issuer and the underwriter