Series 65 Exam 1

Which of the following statements regarding US government agency obligations are NOT true? I. They are all direct obligations of the US government II. They generally ave higher yields than direct US obligations III. The federal National Mortgage Associations is a publicly traded corporation IV. Interest received on the securities issued by GNMA is exempt form state and local taxation A) II and IV B) II and III C) I and II D) I and IV

A) II and IV

A general partner is bound by a fiduciary duty to the partnership. Which of the following activities would NOT be considered a conflict of interest for a general partner? A) selling an office building that is owned by his wife to the partnership B) determining which accounting firm will prepare the partnership's annual tax filings C) accepting a short-term loan from the partnership D) acting as an agent for a competing limited partnership

B) determining which accounting firm will prepare the partnership's annual tax filings

The NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker/Dealers and Agents deals with the topic of commission sharing. Under that Policy, in order for two agents to be able to share in commissions, which of the following are TRUE? I. the client must give consent to the sharing II. both agents must be licensed with the same or affiliated broker/dealers III. the Administrator must approve of the sharing arrangement IV. the broker/dealer must agree to permit the sharing A) I, II, and III B) I and III C) II and IV D) I, II, III, and IV

C) II and IV

Under the IRS guidelines, which of the following is most likely eligible to contribute to a Keogh plan? A) a corporate executive who receives a cash bonus B) a public school teacher who donates time as a motivational speaker to a nonprofit charity C) a dentist in private practice with three other dentists organized as a partnership D) the administrator of an organized charity

C) a dentist in private practice with three other dentists organized as a partnership

An investor close to retirement age considering the purchase of a variable annuity should be advised by her agent that: A) a guarantee rate of return is available B) it has a high degree of liquidity C) the different investment options (known as sub accounts) are subject to market risk D) it has fixed payments once it has been annuitized

C) the different investment options (known as sub accounts) are subject to market risk

As a result of the Dodd-Frank Act of 2010, which of the following firms or individuals would be required to register with the federal regulatory authorities? A) J. Haines Investment Consultant, a sold proprietor with $75M in AUM B) Retirement Specialists, Inc., a firm offering consulting services to qualified plans with aggregate assets of $150M C) Westlake Fund Managers, Inc., the manager of venture capital fund with $200 million under management D) Riverbend Partners, money mangers with $110M in AUM

D) Riverbend Partners, money mangers with $110M in AUM

A bond's duration is: A) equal to maturity of the bond in most cases B) a time-weighted measure of a bond's sensitivity to credit and default risk C) an explicit measure of the number of years to maturity D) a measure of a bond's price sensitivity to a change in interest rates

D) a measure of a bond's price sensitivity to a change in interest rates

Federal covered investment adviser registration will be granted or proceedings to determine whether registration should be denied will begin within how many days of filing an application? A) 60 days B) 45 days C) 15 days D) 30 days

B) 45 days

Which of the following quantitative measurements would probably be the most important to an investor in high-quality fixed income investments? A) expected return B) inflation-adjusted return C) annualized return D) risk-adjusted return

B) inflation-adjusted return

A 57-year-old investor who earns $26,000 contributes $6,000 to his IRA for the year 2014. What amount of the contribution will be subject to the 6% penalty levied on excess contributions? A) $1,000 B) $0 C) $6,000 D) $500

C) $6,000

The school of economic thought that believes that government intervention in the form of taxes and spending is the best method to control the economy is called: A) Laissez-faire B) Monetarist C) Keynesian D) Supply-side

C) Keynesian

Which of the following are NOT ERISA-covered plans? I. 401(k) II. Roth IRA III. Deferred compensation IV. Defined benefit pension A) I, III, and IV B) I, II, and III C) III and IV D) II and III

D) II and III

The Investment Advisers Act of 1940 as further modified by SEC Release IA-1092, excludes which of the following from the definition of an investment adviser? A) a financial representative for a professional athlete B) a pension consultant offering advisory services to employee benefit plans C) a financial representative for a celebrity D) an adviser who only gives advice on US government securities

D) an adviser who only gives advice on US government securities

An individual who is licensed with the Administrator as an agent of a broker-dealer wants to offer wrap fee programs sponsored by the firm. In order to do so, it would be necessary to A) maintain his current agent registration only B) register with the SEC as an investment adviser representative C) register with the state as an investment adviser D) register with the state as an investment adviser representative

D) register with the state as an investment adviser representative

When an investment adviser representative terminates employment with a federal covered investment adviser and then registers with a state registered investment adviser in the state where the individual maintains a place of business: A) only the state registered investment adviser must notify the administrator B) the IAR and the federal covered adviser must notify the Administrator promptly C) only the investment IAR must notify the administrator promptly D) the IAR must give notification of the termination, and the state registered adviser must give notification of the employment, to the administrator promptly

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What type of risk prevents and investor from being able to convert an investment into cash without delay? A) currency B) liquidity C) market D) reinvestment

B) liquidity

Providing liquidity in the over-the-counter (OTC) market is the primary function of: A) the specialist B) floor brokers C) two-dollar brokers D) market makers

D) Market maker

An investment adviser with custody of customer funds and securities discovers that this net worth has dropped below the required minimum under the rules of the state Administrator. Under NASAA rules, the adviser must: I. notify the administrator by the close of business the day after discovery II. must file a report of its financial condition with the Administrator no later than the close of business one day after notification III. cease doing business IV. notify all clients and make plans for the return of the funds and securities. A) I, II, and III only B) I and II only C) I, II, III and IV D) I, II, and IV only

B) I and II only

Which of the following portfolio management styles would probably result in the greatest commission expense? A) Strategic allocations measures B) Buy and hold C) Tactical allocation measures D) Indexing and rebalancing

C) Tactical allocation measures

In the Howey decision, the US Supreme Court held that a security must represent: A) an investment of money in a common enterprise with the exception of profit from the efforts of the investor B) an investment of money in a common enterprise with the expectation of profits from the managerial efforts of others C) an investment of money in a common enterprise with the hope that dividends will increase over time based on increased corporate profits D) debt in a publicly traded corporation whose managers are engaged in commercial activity

B) an investment of money in a common enterprise with the expectation of profits from the managerial efforts of others

The definition of a federal covered security excludes which of the following securities? A) PMT Manufacturing common stock, traded on the NASDAQ B) Jonesy Gold Stock, a non-NASDAQ common stock traded OTC C) Arctic Blue preferred stock traded on the American Stock Exchange D) US Government Treasury notes sold at auction

B) Jonesy Gold Stock, a non-NASDAQ common stock traded OTC

Which of the following investment vehicles is/are not considered a security under the Securities Act of 1933? I. US Government Bond II. Annuities with fixed rates of returns III. Commercial paper maturing in fewer than 270 days IV. Common stock issued and sold intrastate A) I, II, and III only B) II only C) I and II only D) I, II, III, and IV

B) II only

According to industry ethical standards, which of the following is the most suitable action? A) Encouraging an investor in his early 30s who earns $24,000 per year as a graphic designer to invest in a municipal bond mutual fund B) Encouraging an investor to take advantage of IRS Code Section 1035 by switching variable annuity companies every several years on a tax-free basis C) discouraging a mutual fund shareholder from switching from one fund family to another while a deferred load is in existence D) encouraging a retired 65-year-old investor to invest the majority of his savings in a small-cap common stock growth fund

C) discouraging a mutual fund shareholder from switching from one fund family to another while a deferred load is in existence

An investor has 1,000 shares of a JNS Inc., a large cap value stock purchased five years ago at $40 per share. It is currently trading at $52 per share. The investor believes that the current market for this stock is going to remain stable for the next 9 to 12 months. To increase his return on this investment, the representative should recommend that the customer: A) sell 10 JNS 55 calls B) buy 10 JNS 40 puts C) buy 10 JNS 55 calls D) sell 10 JNS 40 puts

D) sell 10 JNS 40 puts

The Securities Exchange Act of 1934 contains provisions that regulate the: I. ethical responsibilities in the sale of securities II. form and content of the prospectus that must be given to all prospective purchasers of security III. trading activities such a short sales, stabilizing, and registering over-the-counters B/Ds IV. registration of person engaged in the business of advising others about investment company transactions A) I and III only B) I and II only C) I, II, III, and IV D) I, III, and IV only

B) I and II only