PT 2 S66
a firm's endorsement of the content of a third-party site
Adoption
Money market funds (do/do not) require prospectus?
As with all mutual funds, a prospectus is required
the higher the YTM, the __________ the duration
lower (shorter)
the longer the duration, the ________ susceptible to interest rate movement
more
In adverse market conditions, not only do some investors stop putting money in, they liquidate their holdings If new sales fall while liquidations rise, the effect could be ______
net redemptions
when a firm (or one of its representatives) contributes to the third-party information and then posts it.
Entanglement
_____________ orders are the only orders that have triggers
Stop
True or False An agent must submit separate registrations for each broker-dealer with which he is registered
True
Insolvency is cause for revocation under the __________
USA
regarding nonqualified annuities, the exclusion ratio only applies during the
payout period
Under the IAA of 1940 Rebating commissions on mutual fund sales is
prohibited -However, because mutual fund commissions are not negotiable, the adviser may reduce the client's advisory fee by the commission or, with appropriate disclosure, keep the commission
Regressive taxes are those where the rate
remains the same
The NSMIA defines "federal covered adviser" as a person who is either - OR -
required to register with the SEC under the IAA of 1940 OR is specifically excluded from the definition of "investment adviser" under that act.
All qualified retirement plans must be established
under a trust agreement
Under IAA of 1940 - disclosures required
- Comp paid to advisor by issuer for recommendation - Comp paid to advisor by BD - Comp paid to advisory by insurance company - Ability of the customer to use any BD to execute recommended portfolio transactions (does not have to effect trades through BD favored by IA)
Referral fees may be paid to certain professionals (lawyers, accountants, insurance agents, etc.) as long as the fee is - AND -
- a nominal amount (up to several hundred dollars) AND - is the same amount for any referral
Under no circumstances may an adviser guarantee that a client will achieve any investment result
- either that a gain will be achieved or that no loss will occur
In a present value computation, the - - -
- future value - time period, and - earnings rate are known
An adviser's financial impairment must be disclosed to clients if the adviser: - - -
- has discretion or - has custody or - requires prepayment of more than $1,200 in fees, 6 or more months in advance
Investment advisers are generally prohibited from divulging any information about their clients unless - -
- required by law or the courts -if the client specifically approves -- the IA must act within the limits stated by the client
If the Consumer Price Index (CPI) rose 5% during the past year, during which time your client held a 6% bond, what would be the approximate annualized inflation-adjusted return?
1%
Parker and Mary have recently divorced. For Mary to receive Social Security benefits based on Parker's earnings, they must have been married at least _______
10 years
qualifying dividends are taxed at a maximum rate of
15%
n order to charge a performance-based fee, investors must have a net worth in excess of ...
2.2 Million (7.1)
When a check made payable to a third party is received by the investment adviser, it will not be deemed to be custody under the Uniform Securities Act if the check is forwarded within
3 business days
Employees of public schools can legally maintain both a
403(b) plan and a 457 plan -In 2018, if both plan limits are contributed, that can be $37,000 ($49,000 if Mary is 50 or older and uses the $6,000 catch-up provision available with both plans)
The 5-day withdrawal provision applies to state-registered investment advisers when the brochure is not delivered at least ________________ the signing of the contract
48 hours prior to (not after)
The current yield on a bond with a coupon rate of 5.5% selling at 110 is
5% - it is the annual interest of $55 ($1,000 x 5.5%) divided by $1,100 and that equals 5%
The USA specifically excludes _____ from its definition of investment adviser
IARs
Those who supervise the activities of investment adviser representatives are themselves defined as
IARs
Insolvency is not a cause for revocation under the________________________
Investment Advisers Act of 1940
DEF Investment Advisers, organized as a partnership, is currently registered with State Y. Marjorie is one of the partners and is registered as an IAR. If DEF were to register with State Z,
Marjorie would automatically be registered as an IAR in State Z.
The unethical business practice of purchasing and selling a security for the purpose of creating an appearance of market activity
Matched order - sometimes referred to as painting the tape
taxes where the tax rate increases as the dollar amount being taxed increases
Progressive
True or False Certain states prohibit agents from dual or multiple registration
True - an agent may be prevented from multiple registration in those states
Mutual funds do not receive the sales charges—they go to the
Underwriter
______ has an inverse relationship to a bond's duration
YTM
Under the Uniform Securities Act, If an adviser accepts more than $500 in prepaid fees, 6 months or more in advance of services, a ________________ must be included in the brochure (Part 2 of Form ADV) given to customers
a balance sheet
In general, an agent will only be registered with
a single broker dealer - the USA does permit registration with more than one under certain conditions
Under the Uniform Securities Act, an investment adviser is a person, corporation, partnership, or sole proprietorship who, in the regular course of business
advises others as to the advisability of selling securities
UTMA contributions are made with (pre/after) tax dollars
after
A civil suit may only be filed by an ____________
aggrieved purchaser - The Administrator could take administrative action against the broker-dealer (issuing a cease and desist order, for example) but has no civil powers.
Under the Uniform Securities Act, the Administrator may require a broker-dealer to post a surety bond of
an amount not in excess of that set by the SEC
A viatical sale would generally involve
an individual with a terminal illness - and a life expectancy of 2 years or less - It is the sale of a life insurance policy, almost always whole life or another form of permanent insurance - rarely a term insurance policy
Making irrational decisions based on information that should have no influence on the decision at hand is known as
anchoring
earnings in an UTMA (are/are not) taxable
are - and, if over a certain amount, might be taxed at the parent's top marginal rate.
ESA withdrawals for other than qualified education expenses (are/are not) subject to any penalties
are -a 10% tax penalty on the earnings withdrawn for nonqualified educational expenses
there (are/are not) earnings limits for making ESA contributions
are -couples earning in excess of $220,000 per year are not eligible to contribute
UTMA withdrawals for other than qualified education expenses (are/are not) subject to any penalties
are not
there (are/are not) earnings limits for making UTMA contributions
are not
earnings in an ESA (are/are not) taxable
are not - if used for qualified educational expenses
The balance sheet formula is
assets − liabilities = net worth
Note also that by requiring prepayment of over $1,200 in fees, 6 or more months in advance, an adviser is required to include an _________________ with Part 2 of Form ADV
audited balance sheet - which must be filed with the SEC and made part of the adviser's disclosure brochure
A company's working capital equals its
current assets minus its current liabilities
Authority to withdraw funds or securities from the custodian or automatic deduction for fee payments are forms of
custody
A money purchase pension plan is a ___________ established by the employer
defined contribution plan - thereby making the contributions mandatory. -Voluntary employee contributions are optional - Employees who contribute to the plan usually contribute a percentage of their income.
Under the Uniform Securities Act, prepaid advisory fees prepaid fees are permitted if they are
detailed in the advisory contract and there is a refund of the fees if the contract is canceled prematurely
under the Uniform Securities Act, selling certificates of interest in mining leases or similar items
does not make one an issuer
If an investment adviser who otherwise would not qualify for SEC registration would be required to register in 15 or more states, the Dodd-Frank Act makes that adviser ___________
eligible for federal registration
Under the Uniform Securities Act. transactions between the issuer and a broker-dealer are ____________ transactions
exempt transactions
The capital asset pricing model (CAPM) is most commonly used to determine an investor's
expected return -expected return is a form of risk-adjusted return and is the more specific answer to this question
An IAR representing a federal covered investment adviser need only register in the state or states in which she (the IAR) _________________
has a place of business
A growth investor focuses on
high earnings-per-share, growth, and high profitability.
longer the time to maturity, the ________ the duration
higher (longer)
When it comes to a bond's duration, the bond's rating and par value are ______
irrelevant
there (is/is not) a limit to the amount that can be contributed to an ESA
is -a $2,000 per year per child limit
there (is/is not) a limit to the amount that can be contributed to an UTMA
is not
When a check is made payable to the investment adviser for deposit to the client's account, it must be returned to the sender within 3 business days or
it will be considered maintaining custody
the lower the coupon on the bond, the _______ the duration
longer
value investors look for stocks with lower price-to-earnings and ________ price-to-book value ratios
lower
An advertisement describing a charting system or any type of formula must always
state that there are limitations and difficulties to using said system
regarding nonqualified annuities, it is possible to receive distributions from an annuity before age 59½ without incurring
tax penalties
regarding nonqualified annuities, withdrawals due to death or disability or taking substantially equal annuity distributions over the life of the insured can begin before age 59½ without being subject to a
tax penalty
The issuance of a stop order by a state securities Administrator requires
that the subject of the stop order be given an opportunity for a hearing
The percentage of the index's return the insurance company credits to the annuity is determined by
the participation rate
A client who wishes to have $50,000 available to help fund a 3-year-old child's college education in 15 years estimates that if the portfolio can earn 7%, a deposit of $18,122.30 will be required today. This deposit is referred to as
the present value
Selling speculative or hot issues to a retired couple of modest means is an
unsuitable transaction
An individual who has passed the NASAA examination for registration as an investment adviser representative may begin soliciting advisory clients
when informed by the investment adviser that the representative's registration is effective
The Uniform Securities Act defines a guaranteed security as one
where the payment of interest and principal (bond) or dividend (stock) is guaranteed by a party other than the issuer
Money market funds are offered (with/without) sales loads or redemption fees
without