series 6
Under FINRA rules, the carrying member, after receiving account transfer instructions from the receiving member must validate the positions in the account within how many business days of receipt?
1 day
if a customer demands to sgn an arbitration agreement how long sdo you have to show him
10 business days
There are retention requirements for certain records of a broker-dealer. One of those is the firm's retail communications files. Under FINRA rules, copies of retail communications must be retained for:
3 years after last use.
verify client information
30 days after account open and every 3 years since
A registered representative would most likely recommend which of the following retirement programs to be installed for the employees of a charitable nonprofit organization?
403(b) plans are specifically designed for nonprofit organizations (school systems or charitable or religious organizations) to permit their employees to make untaxed contributions for their retirement through salary reductions. The other plans listed would be used by for-profit entities.
required minimum distribution ages
59.5 70.5 under 59.5 you get 10% surrender charge
To be in compliance with the Investment Company Act of 1940, every registered investment company must report to shareholders no less frequently than every:
6 months.
If a member firm is notified by FINRA that it must begin tape-recording the phone calls of its assistant representatives and registered representatives to existing and potential customers, it must do so within how many days of notification?
60
A policy loan provision must be offered by the insurer after THREE YEARS, allowing the variable life policy contract holder to borrow at least what percentage of cash value?
75% 3 YEARS
large cap`
>10b in marker capitalization
As written in the Investment Company Act of 1940
A company must have commitments for at least $100,000 in net assets
Open-end investment company shares normally go ex-dividend on what date?
A date determined by the investment company board of directors.
Which of the following securities is NOT exempt from the registration provisions of the Securities Act of 1933?
A new stock being offered in 3 states. Government securities, debt offerings with a maturity not exceeding 270 days, and intrastate offerings are exempt from the registration provisions of the 1933 Act. A stock being offered in three states would have to register with the SEC and with those states unless qualifying for an exemption as a federal covered security.
Which of the following pieces of sales material is exempt from routine spot-checking by FINRA?
A public communication that simply offers a specific security at a specific price.. Material that makes no claims for a security, but simply states its price, is exempt from spot-checking.
code of procedure
complaints, investigation of trade practice violations, Department of enforcement(finra) once claim has been sent, 25 days to respond, if no response, a second notice will be sent, 14 days to reply, if STILL no response a hearing will be held within 21 days CAN APEAL to NAC then SEC then Federal courts.. if an AWC (acccptance waiver consent) was signed no appeals
opening a cash account
customer does not have to sign, they DO ON MARGIN
net investment income
dividents+intrests-expenses DIE
A formula timing plan that consists of periodic purchases of a fixed dollar amount of stock regardless of price is known as:
dollar cost averaging.
Once a variable annuity has been annuitized:
each annuity unit's value varies with time, but the number of annuity units is fixed.
our client, working for a local municipality, tells you that he has the opportunity to participate in a Section 457 plan. Explaining some of the characteristics and features of this type of plan, you could tell him all of the following EXCEPT:
earnings on plan assets are taxable on an annual basis. Even though technically 457 plans are nonqualified, all earnings within the plan are tax-deferred like any other retirement plan.
The exchange privilege offered by open-end investment companies allows investors to:
exchange shares of one open-end fund for another in the same fund family at a net asset value basis.
Alpha
expected returns, if its above or below based on beta "are you taking more risk han you should be" "is your position retuning or losing the right relative amounts" conservative investor wants high alpha and low beta... aggressive want high alpha and high beta.
If your firm is in the process of underwriting a new issue, sales literature, including a record of past performance, may be included in a mailing of the:
final prospectus.
voter approval and feasibility
for a GO(gen obligation) bond voter approval is required, feasibility is required for a revenue bond.
global funds vs foreign
foreign is all outside US global is all securities.
asset allocation
fun has a fixed amount in different types of securities(debt equity cash) fund manager decides
balanced/hybrid
has equity and debt securities, usually in set proportion
duration
how much a debt insturemenbt fluctuates with a change in rates
customer account transfer FINRA rule 2273
if customer requests, they must sign a TIF transfer initiation form, it is sent to ACATS (automated customer account transfer service) once they receive it they send it to the carrying firm, then they have 1 business to validate and if its ok they will complete it within 3 days.
discretionary income
income remaining after deduction of taxes, other mandatory charges, and expenditure on necessary items.Compare with disposable income.
rule 147`
interstate offerings, 80,80,80% rule.. assets in state, proceeds used in state, revenue generated in state, majority of employees are in state. first 6 months of resale purchases must stay in state
index annuity
meant to track an index to protect against purchase power risk
Transactions in all of the following are affected in the money market, as opposed to the capital market, EXCEPT
municipal revenue bonds
Your open-end investment company customer has decided to take automatic reinvestment of dividends and capital gains distributions. This choice will:
not alter the tax due on the distributions.
When referring to employee retirement plans, the term nonqualified refers to plans:
not approved by the IRS.... under which employers may discriminate as to the inclusion of employees in the plan.
A 51 year old customer of a FINRA member firm has made periodic contributions to a variable annuity with a contingent deferred sales charge for the past two years. A registered representative recommends that the customer do a 1035 exchange and switch to a new annuity that offers more attractive separate account returns and a deferred sales charge. The exchange would:
not be taxable. probably not be considered a suitable recommendation.
The disclaimer stating that the SEC does not approve or disapprove of a securities issue must appear
on the cover of the prospectus
securities exchange act of 1934
people act, created SEC, demands registration of BD RR and SRO fingerprint, antifraud provisions, it is meant to protec the people
pricing in mutual funds
priced buy NAV.. NAV= (A-L)/share outstanding BUT you buy at the POP (sales charge included) puboffering price. POP= NAV/ (100%-sales charge%) to calculate the sales charge take the difference between NAV and POP and divide by POP
regulation d
private placements-exempt form registration w sec, (private placements, certain MM's, municipal and gov securities, religious and non profit)
When comparing stock market and mutual fund definitions, the bid price is analogous to the NAV, and the ask price is analogous to the:
public offering price. Bid, or NAV, represents the price at which the customer redeems (sells) shares. The ask price is similar to the public offering price (POP) because this is the price the customer pays for the purchase of shares.
A holder of mutual fund shares:
receives regular reports on the fund's expenses no less frequently than semi-annually.has the right to vote for a vacancy on the board of directors.
rollover vs transfer in iras
rollover: when you take possession of IRA in lump sum you have 60 days to put it into another ira or you get 10% early w/d penalty cannot be rolled over again till 12 months have ppassed... TRANSFER is as many times as you wish w/out a penalty
If a customer fails to pay for XYZ mutual fund shares within the required amount of time, the broker-dealer may:
sell the securities and charge the customer for any loss.
conduit theory
since mutual funds don't wanna be triple taxed, they will distribute at least 90% of NII net investment income acting as a conduit and will only be taxed twice.
To register new securities, an investment company must
supply detailed information about itself to the SEC. supply detailed information about the new securities to the SEC.
fee based account
there are transactional based fees, (when you buy and sell stock) if theres a lot of trading this is better
In general, the Conduct Rules permit selling concessions and discounts:
to FINRA member firms engaged in the investment banking or securities business...The Conduct Rules permit FINRA member broker-dealers to allow concessions and discounts only to other members.
1035 exchange
transferring a variable annuity without any adverse tax consequences has to be similar product.
index funds
trying to mirrior indexs
annuity units and values
units are fixed and value can change.
dividents
when dividends are paid, corporation is taxed on earnings then dividends are taxts when distributed to consumers( double taxation)
blend core
when there are differernt classes of stocks, blue chips and high risk.
value fund
where advisors find funds that are undervalued and therefore overperform,
Which of the following must be registered as investment companies under the Investment Company Act of 1940?
Closed-end investment companies. Separate accounts of insurance companies offering variable products.
combination annuity
Combo of fixed and variable annuities
inherited or gifted shares
Cost basis if INHERATED is the Fair Market Value of shares on decedents death.... if GIFTED the CB will transfer(whatever the friend paid)
Which of the following statements describing Section 529 plans is TRUE?
The maximum annual contribution varies from state to state.
Which of the following would affect the net asset value per share of a mutual fund?
The portfolio changes in value. The fund pays a dividend.
Which of the following statements regarding 12b-1 charges are CORRECT:
There is a maximum allowable charge of .75% for marketing and promotion An additional .25% may be charged as a shareholder servicing fee.
A copy of trade confirmations must be maintained by the firm for:
Three years.
A contractual plan company is what type of investment company?
Unit investment trust.
special situation funds
When a company is going into a merger or aquisiton. oor if simply interest rates might go up. speculative.
Regulation D
When a sock is sold privately to keep issuer cost low. generally restricted.
In a variable life annuity with ten-year period certain, a contract holder receives:
a minimum of ten years of variable payments, followed by additional variable payments for life.
code of arbitration
after claim has been made the respondand has 45 days, at the end of arbitration, the award mus be paid within 30 days. NO APPEAL FROM ARBITRATION 6 year statye
Asset-based distribution fees, also known as 12(b)-1 fees:
are based on the fund's annual average daily net assets. must be reviewed at least quarterly by the fund's board of directors.
when you use dollar cost averaging
average cost will always be less then average price
if an annuitant dies during accumul;ation period
beneficiary gets total value or the total amount invested whichever is greater. they will be liable for income tax
Ad valorum tax
An ad valorem tax is a tax whose amount is based on the value of a transaction or of property. It is typically imposed at the time of a transaction, as in the case of a sales tax or value-added tax
If a client invests the same amount of money into a mutual fund at regular intervals over a long period of time, the result is a lower:
By investing a predetermined amount of money periodically for a long period of time, the investor uses the concept of DOLLAR COST AVERAGING. The result is a reduced cost per share compared to the average market price.
In connection with an investigation of a customer complaint, the association may require an associated person to agree to all the following EXCEPT:
FINRA does not require an associated person to be represented by council.
The Department of Enforcement is an arm of:
FINRA.
What are the consequences of Grandpa giving $50,000 of stock to his granddaughter?
Grandpa is responsible for any gift tax due...The granddaughter's cost basis in the stock remains the same as grandpa's cost basis.
variable annuity
IS A SECURITY need both insurance and securities licence. fund wiith cash, don't liquidate to fund.
Several customers have failed to make payment for their trades within the time period required under Regulation T, and the broker-dealer is faced with selling out their securities. Which of the following customers need NOT have their positions closed out?
If a customer has not made payment in accordance with Regulation T (2 business days after settlement date), his broker-dealer need not close out his positions or freeze his account if the amount owed does not exceed $1,000.
equity income
Income from equity securities Dividends many utility co. or blue chip stocks are good
An open-end investment company that does not distribute at least 90% of its net income:
Investment companies that do not distribute at least 90% of their net investment income become liable for federal income taxes on all the net investment income. Shareholders would also be responsible for taxes on any distributions received. By distributing 90% of investment income, open-end companies can avoid double taxation.
beta coefficient
Measures the volatility of security relative to the market as a whole. Market is rated at 1.0... if a security is>1 its more volatile...... <1, less volatile
fixed annuity
NOT considered a security,(Only need insurance licence) issued by insurance companies. PURCHASING POWER (INFLATION) RISK
SEC regulations for securities issued by investment companies prohibit which of the following?
Open-end funds from issuing preferred stock.Open-end funds from issuing bonds.
12b-1 fees may be allocated for payment of which of the following?
Printing the annual prospectus. Television advertisement about a mutual fund.
The XYZ Growth Fund has an NAV of $19. Its sales charge, calculated by the usual industry method, is 5%. What is the public offering price of a single share?
Public offering price is equal to NAV divided by (1 − sales charge). Thus, $19 / .95 = $20.00.
Which of the following is a debt instrument that pays no periodic interest?
STRIPS.
Customers could pay a commission, rather than a sales charge, for shares of a(n):
Sales charges could be paid on all types of open-end funds. Commissions are paid on securities traded in the secondary market, such as closed-end investment company shares.
Mutual funds are subject to which of the following federal securities regulations?
Securities Act of 1933. Investment Company Act of 1940.
Where would an investor find a complete list of holdings for a particular mutual fund?
Semi-annual or annual report
when redeeming fund shares
Shares are redeemed at NAV.
simplified industry arbitration.
Simplified industry arbitration is used in disputes between member firms or their associated persons when the amount in dispute does not exceed $50,000. If the dispute involves a customer, then it goes to simplified arbitration. MRV and AWC are used for Code of Procedure violations, not disputes.
Upon annuitization of variable annuities, holders receive the largest monthly payments under which of the following payout options?
Straight life.
34@33 acts/ markets
The Securities Exchange Act of 1934 (the people and places act) regulates the secondary market. The Securities Act of 1933 (the paper act) regulates the primary market. Reference: 4.1 in the License Exam Manual
According to the Conduct Rules, a FINRA member must do which of the following?
Authorize a registered representative to share in a client's profits or losses only in writing.
Would not be suitable for traditional IRA
AAA municipal bonds.
deffered compensation plans
Deferred compensation plans are not qualified plans. They may discriminate among employees, and no reporting is necessary. The benefits of the deferral will be best realized if the employee's tax rates are lower upon receipt of the money. Since the benefits are scheduled to be paid out of the corporation's cash flow at the time of the employee's retirement, corporate financial difficulties may preclude any payout
Which of the following are types of corporate retirement plans?
Defined benefit plans. Profit-sharing plans.
