S66 Exam 2

A bond is convertible at $20 and is purchased for $1,100. If the common stock of the issuer appreciates and is currently selling for $25 per share, what is the conversion value of the common stock?

$1,250

A company issued $50 million of common stock in a private placement under Regulation D. In order to sell the stock initially in any state, the Administrator requires the filing of:

A Notice Filing

Which of the following employees of an investment adviser are not considered a registered investment adviser representative?

A senior partner

Which of the following choices is NOT a broker-dealer in State B? An agent in State A who contacts a client in State B A corporation that sells commercial paper every other week in State B A broker-dealer registered in State A, where its only office is located, which has only insurance companies as clients in State B A bank trust department that buys and sells securities for its customers

An agent in State A who contacts a client in State B A corporation that sells commercial paper every other week in State B A broker-dealer registered in State A, where its only office is located, which has only insurance companies as clients in State B A bank trust department that buys and sells securities for its customers

Which of the following elements are required for an investment contract to be considered a security? An investment of money An expectation of profits A common enterprise Efforts made by a third party

An investment of money An expectation of profits A common enterprise Efforts made by a third party

Under the USA, which of the following transactions is NOT considered exempt?

An unsolicited issuer transaction that is executed through a registered broker-dealer

Your client John has a portfolio of large-cap stocks representing companies in many different industries. You want to help him reduce his exposure to market risk by recommending investments that are negatively correlated with his current holdings. Of the following investments, you would most likely recommend a(n):

Bond index fund

Kevin is an agent of CMP Broker-Dealers which is registered in 10 states. Kevin is currently registered in five states, but only transacts business with institutional clients. Due to recent mergers, some of Kevin's clients will be relocating to North Carolina and CMP now wants to open a new office there. Kevin will not be moving from his current office in Missouri, a state in which both Kevin and CMP are registered. Under the USA:

Both Kevin and CMP are required to be registered in North Carolina

During the course of an investigation under the Uniform Securities Act, the Administrator finds that an investment adviser representative has engaged in fraudulent activities. The representative says that he is unaware of any fraud and was only following the directions of his firm. He produces a written recommendation list issued by his firm upon which he based his recommendations. What action would the Administrator most likely take in this situation?

Bring an action in court to impose a fine but not a prison sentence

Jerry is a partner of an investment advisory firm and also an agent of an affiliated broker-dealer. When a recommendation is made for an advisory client to trade a security, Jerry earns a commission and the IA collects an advisory fee. The firm's fiduciary duty is satisfied if:

Clients are provided with a disclosure of Jerry's total compensation

Under the Capital Asset Pricing Model, risk is defined as:

Deviation in returns

If an investment adviser uses a social media site as a form of advertising, all records of its use must be maintained for at least:

Five years

Which of the following is TRUE concerning the private placement of securities being distributed under Rule 506(c) of Regulation D?

General advertising is permitted, but all investors must be accredited.

An 81-year-old father is establishing a bypass trust for his two adult children who are both in their 40s. His investment adviser is evaluating the risks and benefits of numerous investment vehicles. Which of the following choices is MOST appropriate investment in a bypass trust?

Growth stocks, since the beneficiaries will not need the funds for several years

When investing in a variable annuity, investors would be MOST concerned with which of the following risks?

Investment risk

Which of the following statements are TRUE regarding a dollar-weighted rate of return? It may be used to compare the performance of two money managers. It is a way of calculating an investor's internal rate of return. It takes into consideration the inflows and outflows of cash. It measures the average return that the client's investment earned.

It is a way of calculating an investor's internal rate of return. It takes into consideration the inflows and outflows of cash. It measures the average return that the client's investment earned.

In order to determine the lump-sum amount that a person will need at retirement, what elements are required for an investment adviser to make the projection? Life expectancy Inflation rate Current cash flow Investment return

Life expectancy Inflation rate Investment return

The expenditures section of a personal income statement should include all of the following information, EXCEPT:

Life insurance policy dividends

The following two funds are listed in a mutual fund's prospectus: —Short-term Global A—Short-term Global B The difference between these two funds is likely the:

Manner in which the sales charges are collected

An advantage of a Coverdell ESA over a 529 plan is:

More investment options

If Jane Brown annuitizes her nonqualified variable annuity, how will the series of payments be taxed?

Part of each payment is taxable earnings and part is a tax-free cost basis

The biggest disadvantage of investing in a growth mutual fund is the potential loss of:

Principal

Those investors, who believe markets are not perfectly efficient, may use an active strategy in which the asset mix of a portfolio is altered in anticipation of economic events. This market timing approach is known as:

Tactical Asset Allocation

Under what form of ownership may a husband and wife ensure that their property is not able to be attached by the creditors of either spouse?

Tenancy by the entirety

Under the Uniform Securities Act, in order for an issuer to be eligible to use registration by coordination, the issuer must also register with the SEC under:

The Securities Act of 1933

If an agent of a broker-dealer is advertising on the Internet, which TWO of the following statements are TRUE? The agent must disclose the name of her affiliated broker-dealer. The broker-dealer that creates the advertisement is responsible for review and approval of the content. The agent is working outside of the scope granted by the broker-dealer. A legend must be included which states that the agent is exempt from the anti-fraud provisions of applicable state laws.

The agent must disclose the name of her affiliated broker-dealer. The broker-dealer that creates the advertisement is responsible for review and approval of the content.

A broker-dealer located in State A, in business for three years, goes out of business in July. Some of the principals at the firm start a new broker-dealer in August of that year. Which of the following statements is TRUE concerning the broker-dealer's registration fee?

The appropriate registration fee must be paid

When sharing in the profits of a customer's account, whose approval is required?

The client's

An agent of a broker-dealer has written an electronic marketing piece that recommends the purchase of a new investment company which is being offered by his firm. He wants to send it by e-mail to 40 non-institutional clients. If the product is suitable for each client who's on the agent's distribution list, which of the following statements is TRUE?

The content of the e-mail is not required to be filed with the Administrator because the securities are federal covered.

Rancho Rio Investments is a single-office investment advisory firm that is based in New Mexico and plans to expand its business to New Jersey. Under the Uniform Securities Act, in which TWO of the following situations is Rancho Rio NOT considered to be an IA in New Jersey? The firm transacts business only with New Jersey broker-dealers The firm transacts business in New Jersey, but only with a few employee benefit plans that contain assets under $500,000 The firm's only business in New Jersey is with 10 or fewer non-institutional customers within a 12-month period The firm's only business in New Jersey is with a limited number of federal covered advisers

The firm transacts business only with New Jersey broker-dealers The firm's only business in New Jersey is with a limited number of federal covered advisers

Related to a transaction, which of the following actions would cause it to be subject to the laws of State Z? The offer and acceptance occur in State Z. The offer originates over the phone from State Z and is directed to State A. The offer is mailed from State A, directed to State Y, and accepted in State Z. The offer originates over the phone from State Y and the sale occurs in State A.

The offer and acceptance occur in State Z. The offer originates over the phone from State Z and is directed to State A. The offer is mailed from State A, directed to State Y, and accepted in State Z.

Under IRS rules, which of the following items are exempt from the definition of earned income? Unemployment benefits Alimony Child support Income received from investments in property Net earnings from self-employment

Unemployment benefits Alimony Child support Income received from investments in property

Modern Portfolio Theory (MPT) defines risk as the:

Variability of expected returns about the mean