Series 63 Ch 5
While discussing traditional prudent investor rules with the trustee of a new trus account, the trustee indicates to you, his broker, that he will need to invest a sm portion of the trust assets in such a way that the principal will be readily availab not subject to loss of principal over the short- term. Under the Uniform Prudent Investor Act, you should recommend:
A U.S. Treasury bills**** [B] U.S. Treasury notes [c] U.S. Treasury bonds [D] Equity securities
Which of the following statements is TRUE of a no-load mutual fund?
[A It charges a sales charge up-front. B It has an expense ratio of approximately 50 basis points.**** [c] It charges a deferred sales charge. [D] It cannot charge 12b-1 fees.
Which of the following transactions would require the filing of a Suspicious Activi Report by a member firm?
[A Several wire transfers inconsistent with a customer's normal pattern of activity**** [B] Several routine wire transfers from a foreign bank to an established U.S. customer [c] A large wire transfer to a foreign customer who is currently unavailable for contact [D] A wire transfer from an established U.S. customer who is an art collector fol an antiques company
Which of the following advertisements used by an Investment Adviser to the general public would be acceptable?
[A] "Good Guy Advisers has outperformed all other investment advisers for the past two years as measured by its investments in ABC and DEF common stock. So, come invest with us!" [B] "Good Guy Advisers has outperformed other investment advisors in the family planning sector for the last year and your family should invest with us. We are offering you a free evaluation of your financial condition if you deposit at least $100,000 in a new account" Disclosure: Past performance is not indicative of future results. [c] "Good Guy Advisers is a fee-only adviser and bases its fee on performance only." [D] "Good Guy Advisers offers investment advisory services catered to each individual investor, so come in for a consultation. Disclosure: Any past performance figures shown are not indicative of future results.****
Under the Uniform Prudent Investor Act, which of the following are considerations that a trustee must include when making decisions for the trust? I. General economic conditions I. The effects of inflation or deflation Ill. Expected total return from income and capital appreciation IV. An asset's sentimental value, if any, with regard to the beneficiaries
[A] 1 & ll only [B] Il & IV only [c] I, ll & Ill only [D] 1, HI, Ill, IV****
Under the Bank Secrecy Act anti-money laundering rules, if a firm becomes aware of a suspicious transaction, it must file a Suspicious Activity Report within
[A] 10 days [B] 30 days**** [c] 90 days [D] 180 days
When an investor buys mutual fund shares and later redeems the shares to the fu without having to pay a Sales Load, the fund is known as which of the following?
[A] A Front-end Load Fund [B] A No-Load Fund**** [c] A 12b-1 Fee Fund [D] Afee free fund
Susan is concerned about our planet and wants to direct some of her investments in companies that work toward clean energy, and water conservation. She does not have enough money to invest in all of the independent companies she likes so she asks her Agent what a good recommendation would be. Based on this information which of the following would be the best recommendation to Susan?
[A] ABC Fund which maintains a portfolio in common stocks of water efficient appliances, water recovery technology and other clean energy companies and is identified as an ESG Fund.**** [B] XYZ Fund which maintains a portfolio in common stocks and bonds of water efficient appliances, water recovery technology and other clean energy companies and is listed as a Balanced Fund [C] LMN Fund which maintains a portfolio in common stocks fair labor standards, better working conditions and human rights companies and is identified as an ESG Fund. [D] LMN Fund which maintains a portfolio in common stocks fair labor standards, better working conditions and human rights companies and is identified as a Balanced Fund.
Under the Uniform Prudent Investor Act, a trustee has been entrusted to oversee th real estate, securities investments, and tax situation of a sizable Trust. The truste is experienced in real estate and securities investments but did not analyze the tax situation of the trust since the trustee thinks that owner of the trust has a tax attorney. This trustee has
[A] Acted prudently by only handling the parts of the trust that he has experience in. [B] Acted imprudently because the job of a trustee is to manage the trust from an overall strategy. [c] Acted prudently since the owner of the trust bears some responsibility for oversight of the trust. [D] Acted prudently as long as the owner of the trust is consulted with regard to the tax attorney.
Which of the following is NOT a consideration that a trustee must make when investing and managing trust assets?
[A] An investment strategy's expected tax consequences [B] The beneficiary's other resources [C] The trust's expected income return [D The beneficiary's heir's monetary expectations****
All of the following transactions could be executed in a customers Cash Account except?
[A] Buy common stock [B] Sell Corporate Bonds [c] Sell uncovered call options**** [D] Buy Put options
All of the following represent fees which could be charged by a mutual fund except?
[A] Commission**** [B] Sales Load [C] 12b-1 Fee [D] Sales Charges
One of your customer accounts is a trust account. The trustee of the trust is discussing trust investments with you, his broker. During this discussion, the question arises as to suitability of the investments. You should explain to the trustee, that under the Uniform Prudent Investor Act, the trustee owes a duty of suitability based on the profile of:
[A] The trustee [B] The beneficiaries of the trust**** [C] The heirs of the beneficiaries [D] Both the beneficiaries and their heirs
Under the Uniform Prudent Investor Act the standard of care that must be employed by a trustee would include which of the following: I. A trustee may invest in any kind of property or type of investment consistent with the standards of the Act. I. If a trustee has special skills such as being a tax attorney they must use those skills Ill. A trustee must make decisions based impartially in the context of the trust portfolio as a whole and as a part of an overall investment strategy IV. The trustee has a duty to monitor and investigate the suitability of any delegation of investment and management functions
[A] I& Ill [B] I& IV [C] 1, I & Ill [D] I, I, III, IV****
All of the following are TRUE about the new Retail Communication category of communications with the public EXCEPT
[A] It is defined as any written communication that is sent to more than 25 retail investors within any 30 calendar day period. [B] They must generally be reviewed and approved by a principal of the firm. [c] Sales literature, advertisements, and independently prepared reprints are in this category [D] Electronic communications are not considered to be Retail Communications.****
All of the following are TRUE about the Correspondence category of communications with the public except
[A] It requires internal approval by a principal or supervisor of the firm before its use.**** [B] It is defined to be any written communication that is sent to 25 or fewer investors within any 30 calendar day period. [c] A retail investor includes retail customers and prospective customers, other than institutional investors. [D] Written procedures must provide for the supervision and review of correspondence by the broker-dealer firm.
An experienced options customer has been approved for options trading at a broker-dealer. The customer wants to write an uncovered straddle position in the account. Given this transaction, the options trading suitability level approved for this account is
[A] Level 1. [B] Level 2. [c] Level 3. [D] Level 4.****
An experienced options customer has been approved for options trading at a broker-dealer. Thy customer wants writes an uncovered straddle position in the account. Given this transaction, the options trading suitability level approved for this account is
[A] Level 1. [B] Level 2. [c] Level 3. [D] Level 4.****
Ludo Bagman is an attorney and manages the trust account for a client. Ludo allocates about 80% of the portfolio in equities, which is consistent with the trust's objectives. However, the market suffers a significant downturn of 20%. The trust account loses about 25%. According to the Prudent Investor Act, which of the following statements is correct?
[A] Lude is liable for any losses that exceed the overall percentage decline in the market. [B] Ludo is not liable for the investment losses if he acted in reasonable reliance on the provisions of the Act.**** [c] Ludo put the trust at risk by overweighting the portfolio in equities. [D] Ludo is not liable because the beneficiary should have rejected the investment decisions.
A fee charged to a customer who buys shares of some mutual funds and is normally paid "up-front" describes which of the following?
[A] No-load fund [B] Sales Load**** [C] 12b-1 Fee [D] Mark-up
An investment advisor wants to advertise that new clients will not be required to pay the fee for their initial consultation but in fact has increased his annual management fee to include the fee for the initial consultation in the first year's charges. The lA then plans to reduce the fee after the first year to what it would have been if the client had paid the consultation fee separately and tell the client that he is giving them a discount. This action is:
[A] Not allowed since a first visit charge is a mandatory charge. [B Allowed since the client will end up paying the normal amount. [C] Not allowed since the IA is advertising a service as being free when, in fact, it is not.**** [D] Allowed as long as the IA's cumulative fees are within normal range.
In order for a firm to effectively enforce an anti-money laundering program, which of the following would be most important
[A] Not allowing cash deposits [B] Filing a SAR report on time [c] Knowing its customers**** [D] Reviewing accounts for churning
An ESG mutual fund invests in companies that offer which of the following?
[A] Potential blockbuster drugs in development [B] Groundbreaking Internet technologies [C] Global distribution channels [D] Clean energy technologies****
Which of the following transactions can be executed in a cash account?
[A] Sell uncovered calls [B] Sell uncovered puts [c] Sell covered calls*** [D] Establish a short straddle
As a registered representative, one of your clients is a trust account. The trust account is held in the name of the trustee of the family trust. The trustee would like to invest some of the trust assets in writing covered call options. Under the Uniform Prudent Investor Act, you should advise the trustee:
[A] That such an investment is permitted if the trust document explicitly**** authorizes such an investment [B] That such an investment is generally permitted [C That such an investment is not permitted under any circumstances. [D] That such an investment is generally not permitted unless approved by the beneficiaries of the trust.
Which of the following should NOT be a major consideration by an investment adviser giving advice in accordance with the regulations of the Prudent Invest Act?
[A] The adviser should consider how inflation might affect investments held in the customers account prior to purchasing such investments. [B] The adviser should consider the fees collected and amount of time remaining in the contract held between the client and adviser when making investment decisions and creating investment strategies for the client.**** [C The adviser should consider the overall market conditions and state of the economy when advice is being rendered. [D] The adviser should consider the tax implications of certain investment recommendations and strategies when dealing with clients.
Under the Uniform Prudent Investors Act a trustee shall act impartially in investing and managing the trust assets, taking into consideration
[A] The interests of the eldest beneficiary of the trust first [B] Any differing interests of the beneficiaries of the trust when there are multiple beneficiaries**** [c] The interests of the trustee of the trust prior to interests of the beneficiaries [D] The interests of the youngest beneficiary of the trust first
Currency Transaction Reports mandated by Anti-Money Laundering rules require a report to be filed in which of the following situations?
[A] Throughout the course of the trading day, an investor performs several cash**** transactions in his account which total $12,000. [B] Activities in a customer's account involve a cashier's check in the amount of $3,000 and cash transactions in the account of $8,000. [c] Activities in a customer's account involve a personal check in the amount of $1,500 and cash transactions in the account of $7,000. [D] In one transaction, a customer performs a cash transaction totaling over $9.000.
An order ticket for a securities transaction would contain all of the following items EXCEPT the
[A] terms and conditions of the order. [B] agent on the account. [c] the exchange on which the security trades.**** [D] time the order is received.
Under the Investment Advisers Act of 1940, if an investment advisory firm decides that it would like to disclose its registration status, which of the following is true with regard to this disclosure? I. Such disclosure may be made in the company's advertising if it states that the company is registered in accordance with the Investment Advisers Act of 1940. I. Such disclosure may be made in the company's advertising if the company discloses that such registration means that the IA has been federally approved and verified. Ill. Such disclosure means that the IA is registered in accordance with the Investment Advisers Act of 1940 but does not imply approval or verification. IV. Such disclosure means that the IA's registration has been sanctioned by the SEC.
[Al I& Il only [B I & Ill only [c 1, & Ill only**** [D] 1, I, I, IV
