quiz 7
Which of the following would be considered a sale of securities? I. A car dealership gives each customer a gift of one free share of stock for buying a new car. II. An investor converts a bond into 50 shares of common stock. III. A minor is named as a beneficiary of a trust containing common stock. IV. An individual inherits a security from the estate of a deceased parent. I only I and II only II, III, and IV only I, II, III, and IV
I only If an individual is required to pay for an item in order to receive a free security, then the security investment is not actually free. The required payment would constitute a sale of the security. The other examples involve either the gift or transfer of securities and would not be considered a sale.
Which of the following items may not be bought on margin? Pink Sheets securities Nasdaq securities Options Futures Open-end investment company shares I only I and III only II, IV, and V only I, III, and V only
I, III, and V only Nonmarginable securities include those found in the Pink Sheets, on the OTCBB, as well as options, new issues, including IPOs, and mutual fund shares.
Which TWO of the following investments impose income limits on contributors? A Traditional IRA A Coverdell ESA A 529 plan A Roth IRA I and III I and IV II and III II and IV
II and IV Not everyone is eligible to make contributions to a Coverdell ESA and a Roth IRA. With a Roth IRA, single filers may not contribute if adjusted gross income is greater than $132,000 (an increase from $131,000 for 2015). There is a phaseout between $117,000 and $132,000 (an increase from $116,000 and $131,000 for 2015). For joint filers, no contribution is allowed if adjusted gross income is greater than $194,000 (an increase from $193,000 for 2015). There is a phaseout between $184,000 and $194,000 (an increase from $183,000 and $193,000 for 2015). With a Coverdell ESA, a single filer may not contribute if adjusted gross income is greater than $110,000. For a joint filer, the adjusted gross income limit is $220,000.
Which of the following statements are TRUE regarding the administrative proceedings under the Uniform Securities Act? Denial orders issued by the Administrator are final, binding, and may not be appealed Administrators are not permitted to retroactively enforce orders and revocations Administrators are permitted to issue summary orders denying certain exemptions The burden of proof for qualifying for an exemption is on the party claiming the exemption I and II only I, II, and IV only II and III only II, III, and IV only
II, III, and IV only Choice (I) is not true since orders issued by the Administrator may be appealed within 60 days. All of the other choices are true statements
If a client's objective is long-term capital appreciation, all of the following insurance policies may be recommended by an adviser, EXCEPT: Term life Whole life Variable life Universal life
Term Life A term life policy would not provide future capital as it does not accumulate cash value. A whole life policy would accumulate cash value, though generally at a low rate. Universal life would also accumulate cash value that can be used to pay the premium, which reduces the cash value. With a variable life policy, a portion of the premium is invested in the separate account, which historically would provide a higher market based return.
Which TWO of the following statements are TRUE of stop orders? I. A stop order may be described as a suspended market order II. A stop order may be executed only at the stop price or better III. A stop order, when triggered, guarantees an execution IV. A stop order, when triggered, becomes a limit order and needs its limit price to be satisfied for execution a. I and III b. I and IV c. II and III d. II and IV
a. I and III A stop order becomes a market order (in turn receiving immediate execution) when a round-lot trades at or through its stop price. A stop-limit order becomes a limit order when a round-lot trades at or through its stop price, and requires that its limit price be satisfied to receive an execution. A stop order is sometimes described as a suspended market order since execution depends on the stop price being triggered first.
A sector rotation strategy would include investing in which of the following? a. Industrial stocks in an expanding economy b. Precious metals at the peak of the economy c. Consumer goods stocks in an expanding economy d. Technology stocks in a contracting economy
a. Industrial stocks in an expanding economy. A sector rotation strategy involves investing in businesses that will grow along with the economy. Industrial stocks are cyclical and will rise and fall with the economy. The best time to buy technology stocks is right before an expansion, not during a contraction. Commodities help protect against inflation, but inflation is generally not anticipated if the market is peaking. Consumer goods companies make staples (e.g., groceries and household products) and would generally perform well during a recession.
Which of the following types of risk would have the greatest impact on a 20-year corporate bond during the first year of the investment? a. Interest-rate risk b. Liquidity risk c. Market risk d. Inflation risk
a. Interest-rate risk A change in interest rates would most likely have the greatest impact on the bond in the first year of the investment. If interest rates were to go up or down, that could dramatically change the bond's price. The risk presented by inflation would be significant over a longer term. Liquidity risk is the risk that a security cannot be traded quickly enough in the market to prevent a loss (or make the required profit). Market (systematic) risk is the risk that a security's value may decline over a given period due to economic changes or other events that impact large portions of the market.
After analyzing the financial sector, an analyst writes a report indicating that he expects a downturn in that sector. This could BEST be described as: a. Market risk b. Interest-rate risk c. Liquidity risk d. Business risk
a. Market risk A downturn in the prices for an entire sector of the economy is a form of market risk. Business risk is the risk that one company, not an entire sector, will perform poorly
A client requests that her agent display a quote in a thinly traded security. The client is the majority shareholder in this security and the broker-dealer honors the request and displays the quote. Which of the following statements is TRUE? a. This would be permissible if the broker-dealer believed the quote was bona fide b. This would be considered an unethical business practice c. A broker-dealer may always enter a quote on behalf of a client d. A broker-dealer is not permitted to enter quotes on behalf of its clients
a. This would be permissible if the broker-dealer believed the quote was bona fide. A broker-dealer is permitted to publish quotes (bid and ask prices) on behalf of its clients or for its own account. The broker-dealer must believe the quotes are bona fide and not intended to manipulate the market price of a security. If the quotes are not bona fide and the broker-dealer publishes them, they would have engaged in an unethical business practice.
All of the following maturities are offered for TIPS, EXCEPT: a.1 year b.5 years c.10 years d.30 years
a.1 year
Which of the following investment advisers is subject to registration with the SEC? a.An Internet investment adviser b.An adviser that has retail clients in fewer than 15 states c.A hedge fund adviser that manages $100 million in assets d.An adviser that expects to be eligible for SEC registration within 120 days of its second anniversary
a.An Internet investment adviser
When recommending a leveraged ETF to a client, an agent should disclose that: a.Due to the daily resetting of the portfolio, a leveraged ETF's performance does not provide true tracking of the underlying index over long periods b.A leveraged ETF's performance will improve as the underlying index increases in value over time c.Since leveraged ETFs may only be purchased on margin, the leveraging factor is reduced d.Since leveraged ETFs are considered long-term investments, short-term strategies are unsuitable
a.Due to the daily resetting of the portfolio, a leveraged ETF's performance does not provide true tracking of the underlying index over long periods. Since an ETF's underlying portfolio is reset daily, price changes are based on a percentage value for one day only. Therefore, a leveraged ETF's performance does not provide true tracking of the underlying index over longer periods. As for choice (c), purchasing a leveraged ETF on margin increases leveraging; it does not decrease it. As for choice (d), due to the daily resetting, leveraged ETFs are not considered to be suitable long-term investments.
An investor in the 35% tax bracket is considering investing in a corporate bond, which has a 6% coupon. In order to earn an amount equal to her after-tax return from the corporate bond, she would need to invest in a tax-free bond that is yielding: a. 2.1% b. 3.9% c. 2.5% d. 6%
b. 3.9% To determine the after-tax return, multiply the yield on the corporate bond by (1 - Tax Bracket). .06 x (1 - .35) = .039 3.9% is also known as the net yield, or the after-tax return. If the investor bought a tax-free bond (e.g., a municipal bond) yielding 3.9%, divide by (1 - .35) to obtain the taxable-equivalent yield, or 6% in this example.
When comparing value stocks to growth stocks, one difference is that value stocks have which of the following characteristics? a. A low dividend payout ratio b. A low price-to-book value c. A higher P/E ratio than growth stocks d. A low equity-to-debt ratio
b. A low price-to-book value Value stocks are those that are considered undervalued in relation to their book value. Compared to growth stocks, value stocks often have a low P/E ratio and a higher dividend yield.
Which of the following factors is a disadvantage of a buy/hold strategy? a. Low transaction costs b. Changing portfolio risk levels c. Higher management fees d. Increased tax risk
b. Changing portfolio risk levels While a buy/hold strategy has the advantage of minimizing capital gains taxes and transaction costs, the mix of assets can drift substantially from the original asset allocation, changing the risk levels of the portfolio. The risk level may eventually be outside the client's risk tolerance.
Which TWO of the following statements are TRUE regarding Subchapter S Corporations? I. Their status is terminated if there are more than 100 shareholders. II. They have a federal charter. III. Shareholders have unlimited liability. IV. Income and losses flow through to shareholders. a. I and III b. I and IV c. II and III d. II and IV
b. I and IV Subchapter S status is revoked if there are more than 100 shareholders. As with limited partners, shareholders have limited liability, and income and losses flow through to shareholders. Subchapter S Corporations have state charters.
A registered representative planning to supplement her income by selling securities away from her firm must first: I. Notify her supervisor either orally or in writing II. Notify her firm in writing III. Receive her firm's written permission IV. Notify the state securities Administrator or the SEC a. I only b. II and III only c, I and III only d. I, III, and IV only
b. II and III only A registered representative who wants to sell securities outside of her normal course of employment must first notify her firm in writing about the proposed transactions and must receive her firm's written permission. The notice must describe the proposed private securities transactions in detail. If the firm approves the representative's activities, then it is responsible for supervising the transactions and must record them in its books and records.
Writing covered call options provides a client with: I. The potential for unlimited gains II. The potential for unlimited losses III. More potential income IV. The potential to increase return a. I only b. II and III only c. III and IV only d. II, III, and IV only
b. II and III only When an investor owns the underlying stock and sells a call option on the same stock, the position is referred to as a covered call. Covered call writing generates income for investors. They receive the proceeds from the sale of the option and increase their potential return. Covered call writing is considered a conservative option trading strategy that generates current income and hedges the stock position to the extent of the premium received.
Sally is self-employed and has established a Keogh plan for her retirement. She has one full-time employee, Tom, who is 25 and has worked for her for 7 months. When is Tom eligible to participate in the Keogh plan? a. Immediately b. In 5 months c. In 17 months d. Never, since he is not self-employed
b. In 5 months Employees of self-employed persons with a Keogh plan must be covered by the plan if they have worked for the employer for one year and are at least 21.
Which of the following asset management techniques would NOT be used to identify a security that is either undervalued or overvalued? a. Fundamental analysis b. Indexing c. Technical analysis d. Tactical management
b. Indexing When a portfolio is indexed, the manager is attempting to match the performance of the market. An indexed portfolio is one with a composition that mirrors a benchmark index. Fundamental, technical, and tactical approaches all attempt to identify securities that are either overvalued or undervalued and use this information in an attempt to outperform the market.
A company is issuing stock through an underwriting syndicate. As a part of the syndicate's compensation, it will be given warrants which are able to be exercised at any time over the next two years. Under the Uniform Securities Act, which TWO of the following statements is TRUE regarding the issuer of the stock? I. The issuer must register the stock or distribute it under an exemption before the warrants can be issued II. The issuer may distribute the warrants when the registration statement for the stock is filed III. The issuer is subject to state reporting requirements until the warrants expire IV. The issuer is subject to state reporting requirements only until the stock distribution is completed a.I and II b.I and III c.II and III d.II and IV
b.I and III According to the Uniform Securities Act, in order for the warrants to be exercised/converted, the underlying stock must be registered or sold under an exemption prior to the warrants being issued. Under the Uniform Securities Act, the conversion/exercise privilege being offered by the warrants constitutes an offer/offer to sell for the term of the warrant. In this example, since the warrants do not expire for two years the issuer is subject to state reporting requirements for that period.
A client of a broker-dealer calls his agent and informs him that he is interested in buying a specific stock when the price is right. The client has just left town on vacation and cannot be reached when news breaks that the agent believes will drive the price of the stock significantly higher. What should the agent do in this situation? a. Ask his supervisor for discretionary authority and, if granted, execute the trade b. Buy the security in his own account and then sell it to the client at the same price when he returns c. Do nothing since he is unable to reach the client d. Execute the trade since the current price is the best price
c. Do nothing since he is unable to reach the client Trading in a customer's account without his prior written authorization is considered unethical. In this situation, since the client did not consent to the trade by granting written authorization, the agent may do nothing. The compliance department may not approve an unauthorized trade. It is also unethical and a violation of securities regulations to place the trade in one brokerage account, with the intent to subsequently transfer the shares into the client's account upon his return.
Triangle Advisers is a very small investment adviser that is planning to register in three states. Which parts of Form ADV must Triangle file? I. Part 1A II. Part 1B III. Part 2 a. I and III only b. II and III only c. I, II, and III d. Triangle is not required to file any part of Form ADV since it does not fall under federal jurisdiction.
c. I, II, and III A firm must file Form ADV to register as an investment adviser. Generally, this is done electronically through the Investment Adviser Registration Depository (IARD), which forwards the forms to the appropriate regulator(s). The first section of the form consists of Parts 1A and 1B. Part 1A is completed by all firms regardless of their status as a state or federal adviser. Part 1B is completed only by firms that are registering at the state level. Form ADV also contains a separate section (Part 2), which is filed by both federal and state advisers. Part 2 contains the information about the investment adviser's business. Information contained in this section may be copied directly to, or used as, the basis for investor disclosure information found in the investment adviser's investor brochure.
Ted set up a 529 plan for his daughter Nicky in 2004. Performance in the account has been mediocre. Which TWO of the following options does Ted have with respect to making changes in the account? I. Roll over the funds into a Coverdell Education Savings Account II. Set up a new and separate 529 plan III. Roll over the funds into another 529 plan IV. Maintain the same 529 plan as required a. I and II b. I and IV c. II and III d. II and IV
c. II and III A rollover of a 529 plan is permitted every 12 months. In rolling over funds from this type of plan an investor would be moving the funds to another state's plan. Generally, there are no residency requirements for a 529 plan. A 529 plan may not be rolled over to a Coverdell Education Savings Account.
May an investment adviser (IA) share in the profits and losses in a customer's account? a. Only if the Administrator is notified and approves of the arrangement b. Only if the IA is paid on realized capital gains c. Only if the client agrees and signs a written contract d. Only when the IA is deducting its flat fee from already realized gains
c. Only if the client agrees and signs a written contract
Which of the following is an example of an exempt transaction under the Securities Act of 1933? a. U.S. Treasury securities b. Municipal securities c. Reg. D d. Railroad equipment trusts
c. Reg. D Since this question is asking about an exempt transaction, answer (c) is the only appropriate choice. A Regulation D offering is also considered private placement and represents a federal exempt transaction. Under the Securities Act of 1933, U.S. Treasuries, municipal securities, and railroad equipment trusts are all exempt securities (not transactions).
According to the Securities Act of 1933, a pooled investment fund is considered a federal covered security when it: a. Registers as a hedge fund b. Is managed by a federal covered adviser c. Registers with the SEC under the Investment Company Act of 1940 d. Files an application with an Administrator seeking an exemption
c. Registers with the SEC under the Investment Company Act of 1940 An investment pool is considered a federal covered security when recognized as an investment company under the Investment Company Act of 1940 and when its offering is registered with the SEC. Requesting an exemption or employing a federal covered adviser does not make an investment pool an investment company.
An IAR of a state-registered adviser is registered in State X, but gives seminars to potential clients in State C. The IAR is: a. Required to register in State X only b. Exempt from registration in State C c. Required to register in State C if he directs solicitations to more than five noninstitutional clients d. Exempt from registration in State C since he has no place of business there
c. Required to register in State C if he directs solicitations to more than five noninstitutional clients An IAR of a state-registered adviser is subject to registration in any state where he has a place of business and or directs communication to more than five noninstitutional clients.`
All of the following are examples of derivatives, EXCEPT: a. CBOE call options b. Interest-rate swaps c. UIT municipal bond units d. XYZ common stock warrants
c. UIT municipal bond units Unit investment trusts (UITs) are a type of investment company. UIT units represent a direct investment in a fixed portfolio of securities and are not considered derivatives. All of the other choices are considered derivatives.
If an investment advisory firm decides to increase its fees for all new business, which of the following steps must it take to properly disclose its new fees? I. Change its brochure to reflect the new fee schedule II. Deliver a copy of its brochure with the new fee schedule to all current clients III. Deliver a copy of its brochure with the new fee schedule to all new clients IV. Continue to use the current brochure while it awaits the Administrator's approval a.I only b.I and II only c.I and III only d.IV only
c.I and III only If an investment adviser changes its fee schedule, it is considered a material change and it must update its Form ADV Part 2 to reflect the new fees. Many IAs use Form ADV Part 2 as the disclosure document that they provide to their clients. After the update is made, the revised brochure must be provided to all new clients; however, the firm is not required to deliver the brochure to current clients. (Note: investment advisers must offer to deliver their disclosure brochures to all of their clients annually.) If an IA changes its fee schedule, it is considered a material change and the firm must amend its Form ADV Part 2.
Which of the following is a characteristic of a Subchapter S corporation, but is not a characteristic of a limited partnership? a.Earnings are not subject to double taxation. b.Management is centralized. c.The number of potential investors is limited. d.Losses are passed through to investors.
c.The number of potential investors is limited. Neither organization is responsible for paying taxes on its earnings; instead, their earnings are distributed to the owners for tax reporting purposes. Additionally, both S Corporations and limited partnerships have centralized management. However, unlike limited partnerships, S Corporations are limited to 100 shareholders
A sole proprietor desires to set up their business as a separate entity, but retain the same flow-through tax treatment with full ownership. Which of the following business entities would be BEST? a. A limited partnership b. A general partnership c. A C Corporation d. A Subchapter S Corporation
d. A Subchapter S Corporation By establishing a Subchapter S Corporation, the business is not taxed. Instead, income and losses flow through to the shareholders, which in this case is one person. While partnerships also provide flow-through of tax treatment, they require more than one owner or investor. A C Corporation is a taxable entity that lacks flow-through tax treatment.
Which of the following would most likely be registered with the state Administrator? a. A municipal revenue bond b. A mutual fund c. An NYSE-listed company's common stock d. A distribution of an interest in a mining or real estate venture
d. A distribution of an interest in a mining or real estate venture. Interests in mining or real estate ventures are examples of partnership offerings. General and limited partnerships are often registered with the Administrator in the state in which they are offered. Municipal bonds are not subject to registration requirements since they are categorized as exempt securities under the Uniform Securities Act. Also, mutual fund shares and securities listed on the NYSE are federal covered securities, since these issues are only required to be registered with the SEC
A client has invested $20,000 in a variable annuity. After 10 years, the annuity is valued at $45,000. If the client withdrew $20,000 at age 59, he is subject to: a. A 10% penalty on the amount withdrawn b. Being taxed on the distribution as a capital gain c. Being taxed on the distribution as ordinary income d. Being taxed on the distribution as ordinary income, plus a 10% penalty on the amount withdrawn
d. Being taxed on the distribution as ordinary income, plus a 10% penalty on the amount withdrawn. If an individual purchases a variable annuity, it is not considered a tax-qualified plan. The contribution is not taxed upon withdrawal; however, any earnings withdrawn prior to age 59 1/2 are subject to a 10% penalty and ordinary income tax.
Which of the following items is not included in an income statement? a. Sales b. Interest c. Taxes d. Dividends
d. Dividends The income statement for a business will disclose its sales (revenues) less its operating expenses, less interest paid on its debt, which equals earnings before taxes. Then taxes are deducted, to determine net income, from which dividends may be declared. Once declared, the balance sheet will reflect the reduction in retained earnings, and an increase in current liabilities, and a decline in working capital. A word of caution: when constructing an income statement for a client, dividends received from owning investments are included on the client's income statement.
An investment adviser is also registered as a broker-dealer. According to the Investment Advisers Act of 1940, which of the following statements regarding contracts for impersonal advisory services is/are TRUE? I. These services may be provided orally. II. These services may contain statistical information as long as the IA expresses no opinions about the statistics. III. These services may be distributed in writing. IV. These services cannot claim to meet any specific investment goals of any particular investor. a. I only b. I and II only c. I, II, and IV only d. I, II, III, and IV
d. I, II, III, and IV If an investment adviser offers an impersonal advisory service, it may be offered verbally or in written form and may contain statistics. Impersonal advisory service is defined as service that does not purport to meet the objectives or needs of specific individuals or accounts. When an investment adviser also acts in the capacity of a broker-dealer, it must provide its advisory clients with written disclosure.
Under the Investment Advisers Act, records that MUST be maintained by an investment adviser include: I. All checkbooks, bank statements, and cancelled checks II. A record of the personal securities transactions of the adviser and its employees III. Copies of all circulars, advertisements, and newspaper articles sent to ten or more persons a. I and II only b. I and III only c. II and III only d. I, II, and III
d. I, II, and III
All of the following statements are TRUE about zero-coupon bonds, EXCEPT: a. It has no reinvestment risk b. The bondholder receives all interest at maturity c. The bondholder pays tax each year on the accretion d. It would be a suitable investment for a customer who needs cash flow
d. It would be a suitable investment for a customer who needs cash flow A zero-coupon bond is purchased at a discount and does not pay periodic interest. All interest is paid at maturity (the difference between cost and par value). The discount must be accreted each year and is treated as ordinary income even though it was not actually received. Since interest is not paid each year, a zero-coupon bond would not satisfy an investor's need for cash flow.
All of the following items should be included on a customer's order ticket, EXCEPT: a. Any conditions or terms dictated by the client b. The time the order was entered or received c. The registered representative's ID number d. The client's home address
d. The client's home address
Which of the following statements is TRUE according to ERISA section 404(b)? a. The fiduciary may maintain plan assets in any foreign jurisdiction b. Any plan participant may be considered a fiduciary c. The fiduciary may not maintain the indicia of ownership of assets of the plan outside the jurisdiction of the district courts of the U.S. d. The fiduciary may maintain the indicia of ownership of assets of the plan outside the jurisdiction of the district courts of the U.S. if authorized by the Secretary of the Department of Labor
d. The fiduciary may maintain the indicia of ownership of assets of the plan outside the jurisdiction of the district courts of the U.S. if authorized by the Secretary of the Department of Labor. The rules according to ERISA section 404(b) prohibits fiduciaries from maintaining the indicia or evidence, of ownership of plan assets outside the jurisdiction of U.S. courts, unless allowed by the Secretary of the Department of Labor.
Broker-Dealer A is a publicly traded company listed on the New York Stock Exchange. Which of the following statements is TRUE regarding an agent of Broker-Dealer A who wants to sell securities of his company to a client? a. This would be considered an unethical business practice b. This is acceptable only if the agent discloses the relationship in writing prior to the transaction c. This is acceptable if the agent discloses the relationship verbally prior to the transaction since no written disclosure is necessary d. This is acceptable if the agent discloses the relationship verbally prior to the transaction and in writing before the settlement date
d. This is acceptable if the agent discloses the relationship verbally prior to the transaction and in writing before the settlement date Failing to disclose that a broker-dealer is affiliated with or controlled by an issuer of securities is considered a dishonest and/or unethical business practice. The agent would need to disclose the affiliation before entering into any contract with a customer to buy or sell securities. The disclosure may be made verbally prior to the trade if written disclosure is made at or before the completion of the transaction (usually the settlement date). The disclosure would need to be made to any account of a broker-dealer.
Maxman Investment Advisers has been in business for 17 years. The firm has not placed advertisements in the past to attract new clients but would like now to expand its business. The firm specializes in asset management and most of its clients are executives from video gaming companies. Maxman would like to include in the advertising quotes from some of the executives on how their returns have beaten the market over the last few years. This would be acceptable: a. If the executives signed a written statement with the wording of the advertisement in the agreement b. If the advertisement was filed with both the SEC and the state Administrator(s) where the publication is being circulated c. If the investment adviser disclosed whether the executives' returns included any fees that the firm charged and stated that past performance does not guarantee future results d. Under no circumstances
d. Under no circumstances Regarding specific standards, investment adviser advertising may not refer, directly or indirectly, to any testimonials about the adviser or its services.
An investor owns a TIPS worth $1,000 that has a coupon of 3.5%. Over a three-year period, the annual inflation rate is 4%. What is the total return after three years? a.3.50% b.4.00% c.11.36% d.23.85%
d.23.85% The formula for calculating total return is an investment's ending value minus its beginning value plus any income received (interest and/or dividends) divided by the beginning value. Since this question involves TIPS, part of the challenge is calculating the ending value. To calculate the ending value, the principal amount is upwardly adjusted each year based on the rate of inflation and this amount is then multiplied by the fixed coupon rate to determine the annual interest. To solve this problem, the following method may be used: Ending Value: $1,124.86 Beginning Value: - $1,000.00 Total Appreciation: $124.86 Interest Income: + $113.63 Sum of Appreciation & Income: $238.49 Total Return = $238.49 / $1,000 = 23.85%
According to the NASAA Recordkeeping Requirements for Investment Advisers Model Rule, a federal covered adviser is required to maintain which of the following records for five years? a.All order memoranda b.Financial statements c.The originals of all written communications received by the adviser d.None of the above
d.None of the above For this question, the trick is to recognize that there are conflicting details in the setup. The question makes reference to NASAA (which is indicative of state law), but it also makes reference to a federal covered adviser (one that is subject to SEC regulation). The NASAA Recordkeeping Requirements apply to state registered advisers, NOT federal covered advisers. For that reason, the records indicated by choices (a), (b), and (c) apply to state-registered advisers only
Which of the following is NOT an option exercise style? a.American b.Capped c.European d.Uncovered
d.Uncovered Choices (a), (b), and (c) represent option exercise styles. American style options allow the owners to exercise their contracts any time prior to expiration. European style options allow the owners to exercise their contracts only during a specified period, typically the business day of expiration. Capped style options will be exercised automatically if the value of the underlying security hits or exceeds a specified capped price. On the other hand, uncovered is a term that relates to an option position or strategy that investors may employ.
