Series 66
in november a customer sells 1 ABC Jan 70 Call @ $4 when the market price of ABC is 71. the customers maximum potential gain is
$400
a hedge fund limited partnership must have at least
1 general partner and 1 limited partner
upon filing withdrawal of reg with teh state, teh admin can commence a revocation or susepnsion proceeding for u pto
1 year from effective date of withdrwaa
TIPS
1.5% a year 3 years so = 1,0461000 * 1.015* 1.015 *1.015
for the year of 2020 the max annual contributino to an indiv retirement account for a single person is
100% of income or 6k whichever is less
criminal violations of the investment advisers act of 1940 are punishable by
10k fine and 5 years in jail
the max tax rate on cash dividends received for an indiv who is not in the max tax bracket is
15%. for those in the max tax bracket of 37% the rate increases to 20%.
contributinos to coverdell must cease when beenficiary is
18
mid cap
1B to 5B
asa general rule an agent cannot be resgieted with
2 differen tBDs at the sme time under unfirom securities act (some sates have dual registration but this is thee xception0 mutual fund dealer is fedeineda s a BD
under uniform state law violations are punishable for
3 years in jail and 5k fine
a 4.5% 1000 par bond is selling for 900 what is curent yield
4.5% * 1000 par =45 so 45/900= 5%
suits alleging criminal violations of uniform securities act must be brought within
5 years of the alleged violation
under the investement adcisers act of 1940 if the SEC suspends f an invesetmetn adviser registered, an appeal may be filed in federal court within how many days o
60
perpetual payment
600k * .05 = 30k a year /12 = 2500 a month
Moodys rating
AAA is highest, C is lowest. in between ratings are Caā, Caá, Caǎ with Caā being the best rating within Caa
highest credit rating for a high yield bond
BB
surety bond coverage can be req as a condition of regsiteration for teh state registration of
BDS, their agents, and investement advisers who taxke custody . there is NO req for issuers to register their securities in a state
which statement is true about re-registration of BD in the state?
BDs must re-register in the state annually at calendar year end
state blue sky laws provide for registration for
BDs, agents, investement advisers, investemnet adviser reps
state blue sky laws provide for registration of all of the following
BDs, agents, investment advisers and investment adviser reps, and registration of securities issues. NOT issuers
what formula finds the expected return
CAPM
when comparing ETN to ETF which is true
ETNS have credit risk, ETNs have market risk, ETFs have market risk
qualified custodians under NASAA's custody rule are
FDIC insured depoist taking insitutions, registered BDs holding customer assets, registered futures commission merchants holding customer assets and foreign financial isnistutinos holding finnacial assets for customers
only BDS regsiter with and are regulated by
FINRA
the SEC is permitted to pursue persons for violations of
FINRA rules and MSRB rules
in order to register as a BD in the state, the admin can require filing of a
Form BD. the BD application that is used for both federal and state registration
when comparing general partnership to limited liability company which are true
GP: flow through taxation and NO limited liability. LLC: flow thourgh taxation and limited liability
the federal law req that the registration with the SEC of management companies is the
Investment Company Act of 1940 ( mgmt companies, unit investment trusts andface amount certificate companies)
which legislation has authority over unit investment trusts
Investmetn Company Act of 1940 defines 3 investment companies, one of which is a UIT. it then goes on to set the rules for forming and operating such a UIT.
a partner in an investment advisory firm that has been accredited as a CFA may use which terms on business card
Managing Partner, Investment Counsel, CFA. NOT ALLOWED TO USE RIA because that is the firm not the indiv
federal covered security
NYSE, AMEX, issued by registrered investemnt company, sold only to qualified investors (investment managers with at least 25M under management essentially these are federal covered advisors), sold in exempt transactions specified under the securities act if 1933 such as reg D private placements
under the Securities Exchange Act of 1934, the SEC can suspend trading in the securities markets if it gives prior notice to the
President of the US and if the president does not disagree with it
whcih are accredited investors under Regulation D of the Securities Act of 1933
REgistered investment company, state regulated insurance company, state regulated banking institution. private placements may be sold to an unlimited number of accreditied investors and to only 35 non accredited investors. institutional investors are accredited as long as they have $5M of assets to invest. included are banks, insurance companies and investment companies
small dollar offerings are given an exemption from registration under the Securities Act of 1933 under the provisions of
Regulation A, an issuer can sell up to 50M of securities within a 12 month period under an exemption from registration
which statements are true regarding registration of agents
agents can only be registered in a state if they are affiliated with a BD, agents must be registered in any state into which they direct offers of securities
to register as an agent or investment adviser in a state, the admin can require which of the following
agents may have to post a surety bond, investment advisers may have to post a surety bond, investment advisers may have to have a minimum amount of net worth or net capital
req for investemnet adviser rep to register in a state
agents work history (past 10 years) and residence history (last 5 years) listing of any convictions during past 10 years for securtieis or money related misdemeanors or any felony is also req since these will cause denial or registration.
surety bonds may be required by the state administrator for the licensing of
agents, bds, investment advisers
403b
all contributinos were tax dedcutible so all 16k will be taable as orderinary income when teacher receivedsdistributino at retirement
limited partnerships
all items of income and loss flow through onto each limited partners tax return so net income is only taxed at the limited partner level there are no taxes paid by the partnership . each limited partner shares in income and loss based on the size of his or her investement . real estate is a depreciable asset and the non cash depreciation decutions flow through to limited parterns reducing reported income. earnings cannot be retained in the partenrship each year the partnership must distribute earnings and losses incurred to the partners tax retursn
which would be included in adjsuted gross income
all sources of taxable income, wages, commission, royalities, socila security,pension plan payments execept for non qual plans, investment income and cap gains
adjusted gross income on taxreturn includes
all sources of taxable income. NOT muni interest and retirement plan distrbutino from non wual plans
an investment adviser and an investment adviser rep file for initial registration in a state on oct 31st. when do the registrations lapse, unless they are renewed?
all state registrations expire on dec 31st- it makes no difference when the IA or IAR was first registered in the state
Russell 2000 index includes stocks traded in which markets
all us companies listed on NYSE< AMEX or NASDAQ are considered for inclusion with a few exceptoins including min price of $1. trading volumes and other various factors
which is true abou retention of internet advertising by BDs
all web pages that have ever been created and displayed must be archived
the sharing of commissions between a state licensed indiv and anothe person the sharing of commissions is
allowed between indiv as long as both are licensed at the same BD
which are true alpha and beta
alpha measures a stocks price volatility relative to stock specific nonmarket factors, beta measures a stocks price volatility relative to the market as a whole
403B taxation
an early withdrawal based on life expectancy is not subject to prenalty tax when the employee terminated employment after age 55, employee contributinos reduce the employees taxable income
an investment adviser is a private fund adviser that is not req to register with the SEC. all of the folowning would be permitted investors in order to retain its exempt pool status EXCEPT
an indiv who is an accredited investor under Reg D.
an odder or offer to sell is
an offer of a security, an offer of an interest in a security and the solicitation of an offer to buy a security
what is NOT a federal covered security
an offering of 250M of GO bonds by city of New orleans to resigdens tof louisianna. not req to be registrered in each state where offered if it is a federal covered security. thuogh each state can req a notice filing and payment of a filing fee. Muni bond are an exempt security
the admin may not deny effectiveness to a securities registration if
an officer of the issuer has previously filed for bankruptcy or the issuers liabilities exceed assets
as a condition of registration as an agent or principal of a BD, all of the statements are true
an oral exam may be req, a written exam may be req, both an oral and written exam may be req
amortixation
annual loss of a bond premium as the bonds value approaces par at maturity
Investemetn ADvisers ACt of 1940
applies to federal covered advisers
an unmarried couple wishes to open a new account as JTWROS what should the reg rep do
ask why they wish to open this tpye of account
under investement advisers act of 1940 to satisfy req of the borhcure rule customers who wish to buy advisory services must receive a copy of the brochure
at or proior to enetering an advisory contract
the sale of an at the money call is a
bear/neutral strategy
the brochure rule applies to
both oral and written adivosry contracts
all are settlor functions in a pension plan established under ERISA
choosing type of plan, emednign or changing plan options, te
which is earned income under IRS guidelines
commissions
for estate tax pyrposes securities are valued at the
current market value at the date of death
if market interest rates increase which is true
current yields will increase
an invesement adviser has determined that it can register has a fed covered adviser this means that the adviser
currently operates in at least 15 states and has at least 25M of assets under management . 25M and above with business in 15 or more states can choose to registre with the SEC rather than having to register with and be regulated by 15 or more states
investement policy statement wuold inlcude the
customer invesemtnt objective and goals . documents the asset allocation plan that has been created for the client.
which are part of cash flow analysis currenty financial status
dividends received by the customer
403b taxation
employee salary deferral reduce the employees taable income
a va;uation model used to predict portfolio performance is
expected return
an indiv wishes to form a BD as a sole proprietorship. Which of the following can the state require?
filing of a form BD, consent to service of process, surety bond, posting of min net capital
a value fund manager has decided that her position in ABCD stock should be liquidated. this decision was determined by the manager using
fundamental analysis
for initial registration as an agent in a state, all of the following are req except
gov issued photo id
ina decesed gross estate if the oolcu is owned by them
insurance is included
the purpose of uniform securities act is to protect investors from
investment fraud
TIPS coupon
is adjusted by the neq prinicpal with inflation
a c copration is NOT permited to
issue tax exempt dividends. C corp CAN issue stock common or preferred, can split their common stock and can sell bonds
which is true regarding piblic acail of issuer filing made with the sEC
issuer filings qwith the sEC are made avail to public immediately upon receipt (10K 10Q and 8k reports. there is a website and a reading room
pesrons as defined under the uniform securities act, include which of the following
joint ventures, indiv, unicorporatedbusinesses, municipalities
under the provisions of uniform securities act, a person includes
just about anyone who has legal authority to issue or trade securities.
an ETN offers an investor all of the following benefits
lack of liquidiyu risk, tax efficiency, access to returns of foreign investments
bonds with low coupons or long maturities have
large duration numbers
a registered rep is appointed as a trustee to manage the assets on behalf of a beneficiary. the state where the trust is established only permits investments in gov guaranteed bonds or investment grade corp bonds. the limitations placed on the investments made by the trustee are established by the
legal list of permitted investments for fidcuaries. typically has ultra safe securities
investments made prior to annuitization of a variable are
legally owned by the purchaser of the contract, held in the separate account
primary concern when investing in a muni bond
legislative risk
micro cap
less than 300M
the person named as the executor over an estate would be found in the
letters testamentary (last will and testament)
investment policy statement for a qulified plan under ERISA will cover
licensing requirements for plan trustees and plan managers
all would be included in evaluation of amount an investor would pay for a viatical or life settlement
life expectancy f the viator, amount of discount from policy face amount, availaibilty of invsetors . viatical settlement is a contract between a life insurance policu holder (the viator) and a vitaical settlement provider.
which of the following would be included in evaluation of the amount an investor would pay for a viatical or life settlement
life expectancy of the viator, amount of discount from policy face amount, availability of investors
what would be included in evaluation of a viatical or life settelement
life expectancy, amount of discount, availability of investors
which is included in evaluation of a viatical or life setlement
life expectancy, amount of discount, aviability of investors
hedge funds are set up as
limited partenrships
hedge funds are generally set up as
limited partnerships, where the fund manager is the generl partner and the investors are the limited partners. is it a partnership to allow for flow through of gaina nd loss ot partners. 1 general partner
S corp
limited to 100 investors o less they are not taxable entitities income and loss flows through to sharehodlers and any net income is only taxed at the shareholder level not the copr level
S crop
limted libality and flow thorugh of gain and loss
client is complaining he is not earning enough from his portfolio to meet monthly living expenses
liquidate half of the money market fund and invest it is 5 year corp debentures yielding 2.7%
the current ratio measures
liquidity
if a BD net capital falls below the min req for registration in a state the admin has the power to
make a proper showing to a court of law to appoint a receiver over the firm's assets
under IA -1092 an ivnestement adviser is defined as a person who
makes advice about securities his regular activiity and is compensated directly or indirectly for services rendered
setllor functinos in a pension plan established under ERISA
makes business decisions for the plan: choosing type of plan or plan options, amending the plan or changing plan options, requiring employee contributinos, terminating a plan
civil liability may arise if an agent
makes deceptive statements about a securities offering, sells a non exempt new issue of securities prior to the filing of a registration statement in that state
an investment adviser is set up as a sole proprietorship. the owner has hired an investment adviser rep to market the firm to potential clients. the most important consideration in the firms business continuity and succession plan would be
making provisions for the IAR to contact clients to get their permission to assign advisory contracts to a 3rd party in the event that the owner dies or is unexepectedly unavailable
an IAR has constructed a buy and hold bond portfolio. the major factors to consider are
making sure all of the bonds havea high credit rating and choosing bonds that are not callable
the investment company act of 1940 requires that which of the following register with the SEC as an investment company
management companies, unit investment trusts and face amount certificate companies register with the SEC.
money purchase retriement plans have
mandarory employer contributinos
featrures of safe harbor 401k plan
mandatory annual employer matching contributinos, no annual top heaby beenfits testing, immediate 100% vesting of employer paid benefits
which is permitted in defined contribution
mandtory epmloyer contributinos, colantary employee and employer contributinos
floot blrokers
manually handle the larger orders or special instruction orderss on the exchange floor that cannot be routed through automated trading systems
a ustomer signature is needed to open a
margin account . htere is no customer signature regquied on a new account form this allows cash accounts to be opened ove the phone
a customer sginature is needed to open
margin account. NOT cash accounts.
the tax rate on the last dollar of income earned is called the
maringal tax rate. defined as the rate ipmosed onthe lat dollar of eincome earnerd. the higher ones income the higher the marginal rate
which is needed to determine tax filing stauts
marital status as of last day of the year and home address
which are needed to determine tax filing status
marital status on the last day of the year and cost of home upkeep
al l areneeded to determine tax filing status
marital status on the last day of the year, whether the filer has a dependent child and cost of home upkeep
a customer sells short 100 shares of ABC at 50 and sells a put at 50 this poistion results in a profit when the
market galls and market is stable
a securities firm that stands ready to buy and sell a securitiy for its own account is a
market maker
which is req to be retained as a record by a BD
market not held order, unexecuted order that is subsequently canceled, market order that is immediately filled
an investment would be made in a variable annuity in order to get
market participation and tax deferred growth
beta is a measure of
market risk
primary risk of investing in an index fund is
market risk
during the payout period of a variabel annuity contract the annuitant assumes
market risk and investmetn risk
the NEt Asset Value of a miutual funds is the
market value of all securities holding calculated as of market clsoe minus liabilities of the fund divided by the number of outstanding shares
a customer has placed an order to buy 1k shares of stock at closing in order to get lower executino price agent places orrder to s sell 100k of stock at tenf of day this is
marking the close
an employer would set up a defined benefit plan for 15 or more employees in order to
maximize plan participation
managemetn companies
may borrow 1/3 of their total net assets from a bank. but they CANNOT buy on margin, lend monies to shareholders or sell securities shorst
exempt transaction
means the security involved is not req to be registered in teh state. it does NOT exempt the BD and agent invovled from having to register in the stae. the BD and agent must be resgieter in the state unless they can get an exclusino or exemptino
a mutual fund would use beta as part of the analysis of the funds performance in order to
measure the volatility of the funds share price relative to the Standard and Poors 500 index
which deduction is in AMT and regular income tx
medical expense deduction
tenants by entireties
method of joint ownership that is only available to a married couple and which is only avail in a limited number of states. treats the ownership of the account as one entity. if one of the spouses is sues the assets can't be seized. transfer of ownership upon death bypasses the will and probate
medica that can be used to store data under unfirom state law
microfiche, digital storage, CD-ROM, computer disk ,computer tapes, or any other digital storage medium, paper roecrods and microfilms or microfiches are permitted
under unifrom securities act which methods of storage are permitted to retain req records
microfilms, microfiches, paper recrods, digital storage, computer tapes, disks or any other digital storage medium
which of the following can be req by the admin to register as a BD
min dollar amount of net capital, min dollar amount of surety bond coverage, passing a written examination by the firm's officers
net capital rules for BDs under the securities exchange act of 1934 set
minimum liquid net worth amounts and maximum leverage ratios of debt to liquid net worth
to be registered as an agent in a state, the admin can require
minimum surety bond coverage, min grade ona qualification exam, payment of filing fees
when the securiti esmarkets have reached equilibrium transaction costs are
minimzed
tactical allocation requires
mire frequent trading be used to rebalance theportfolio
a fund that invests in treasury bills, commercial paper and guaranteed repo agreements is a
money market fund
under NASAA recordkeeping rules for investment advisers, a communication to a client must be retained if it is circulated to more than
more than 1 person. ads, circulars, bulletins or other communicatinos circulated by the advivesr to 2 or more persons must be retained for 5 years. NASAA does NOT set recordkeeping rules for BDs and for fed covered advisers because these are under federal law. . NASAA does set recordkeeping rules for state registered advisers.
a viatical settlement will typically give the policyholder an immdeiate cash payment that is
more than 100% of cash surrender value and less than 100% of policy face value
during the payout period of a variable annuity, which risks does invsurance company assume
mortality risk and expense r
during the annuity period ofa fixed annuity, the insurane company ssumes which risks
mortality, exoense, investment
during the annuity period of a fixed annuity, the insurance company assumes which risks
mortality, expense, investement risk . with a fixed annuity it is the purchaser that assumes pruchasgin power risk(risk of inflation)
in corp liquidation the priority of claim to corp asstes
mortgage bondhodlers, unpaid wages, trade creditors, debenture holders ( unsecured bond) , preferred stockholders
which securities can be registered by qualification in a state
most difficult method and can be used for ANY security/ typically used for a company's IPO where there is no Federal SEC registration so the state has no other info about the issuer and they must qualify to have securities registered in the state. examples: direct participation program, fractional interest in an oil and gas program, voting trust certificates
modern portfolio theorists use CAPM to find the
most efficient investments
muni /taxable yeild
muni yeld * whatever percent keeping. number/percentage keeping ofr taxable bond
in march an ivnestment adviser wishes to increase its annual mgmt fee from 1% to 1.25 starting july 1st in order to do this
must amend Form ADV filed with state within 30 days, advisors customers must approve of thecharge by july 1st
a representation by an investment adviser that a perfromance chartin and of itself can be used to determine which securities to buy or sell
must be accompanied by a statement that there are lmiitations and difficulties in using perfromance charts alone to judge results
under uniform state law, advisory contracts
must be in writing
under NASAA recordkeeping rules for investment advisers, any advertisement, circular or other communication
must be retained if it is circulated to 2 or more persons, can recommend the purchase or sale of a specific security and if it does not state the reasons for the recommendation, a memo must be retained indicating the reasons for the recommendation
corporation
must compute net income or loss at cop level and must pay tax on any income. the only way for a shareholder to receive portion of net income is for the corp to pay a dividned which must be on shareholders tax return and is taxed again. any net losses remain at corp level and cannot be distrbutinoto shareholders
the IA does not keep record of actual execution of the order this is responsibility of the executing BD
must contain name of person at the IA who recommended the transaction, name of person who placed the order, date of order entryy, name of account for which order was entered, name of BD or bank to which order was sent for execution and whether the order was discretionary
under SEC advertising interpretations for investement advisers, advertising that shows past performance
must make reference to market conditions during the period shown, cannot be seelctive in determining which cleints reslutls are shown. cannot use the names of specific clients unless client approved
in order for a church bond issue to be exempt the admin
must not disallow the exemption iwthin a stated time period after a notice filing is made. admin can req issuer to file a notice specifying material terms and file copies of proposed ads and lit. can provide the exemption becomes effectiev only if the admin does not disallow it within state d period typically 10 business days. can disallow the exemption providing grounds for denial or suspension, can req the issuer to register in the state . not for profit issuers are exempt securtiies under federal laq so there is no federal registration filing that could be coordinated with a state registration.
an investment adviser that has a 35k net worth req finds that its net worth is 33500. the adviser:
must notify the State Administrator by the close of business on the next business day and file a report of the adviser's financial condition the next day
IRA distributions
must start at age 72 and are 100% taxable at ordinary income tax rates only if the orginial contribution was deductible
a market maker in ABCD stock is quoting the stock in the OTCBB at 42 Bid 500 hares; 43 ask (1000 shares) . if the market maker receiveds a customer order to sell 800 shares of ABCD at 42.50 the market
must update its quote to 42 Bid (500 and 42.50 ask (800). the customer is willing to accept less to sell . if im willing to sell my shares its at the ask. im asking for money. if im looking to buy shares im buying the bid.
buy and hold is an appropriate strategy when
mutual funds
mutual funds and etfs
mutual funds must be paid in fill when purchased but become marginable after being held for 30 days and ETF shares can be bought on 50% margin
NASAA states that invesement advicer order tickets must contain
name of person at the IA who recommended the transaction, name of person who placed the order (IAR), date of order entry, name of account for which order was entered, name of BD or bank to which order was sent for execution, whterhter the oder was discretionary
trusts must be established as legal entities ina state simliar to establishing a corp or partnership in a state
need to refer lient to an attorney that can set up the trust
an indiv acts as a finder, facilitating M&A of companies that are both publicly and privately held. the indiv searches for comp that appear to be compatible and that will either enjoy a revenue enhancement or cost reduction benefit from the transaction. the indiv just introduces the parties to the proposed transaction, but has no involvement in the agreements or valuation. upon the closing of the deal, the indiv is paid a percentage of the transaction. under NASAA rules this indiv
needs to register as a BD in the state because they are receiving transaction based compensation
Canadian bd has some clients who move to florida for the winter. the agent who services their accounts wants to be able to contact them when they are in florida. which is true
neither the Canadian BD nor agent are req to register in florida. a NASAA interpretation that only applies to Canadian BD says that Canadian BDs can contact existing customers who are temporarily residing in US without having to register in the state as long as client is in the US for less than 1/2 year nd intends to return to canada
book vlaue is best decsribed as
net accounting value
compute the non compounded annualized inflation adjusted rate of return for investment held for 4 years. initial: 4k ending: 3600 div received: 800 inflation rate 4%
net return of 400/4 years - 100/4000= 2.5% - 1% for inflation each year = 1.5%
which are factors to condiser when completing a profile for a new clients
net worth, tax status, salary and other income
a fee payment is NOT req to be made when a
new bd files as a successor to a firm that has ceased operations
delivery of a prospectus is req if a
new issue of corp bonds is being offered to public . no propsectus req for exempt securities (gov, agencies and munis)
prospectus delivery is only req for
new issues bening sold in the peirmary market. once a company is trading in secondary market it is reporting its results to SEC and this info is publicly avialbal
which of the following persons must register as an investment adviser
newsletter publichser that makes specific securities recommendations to customers
if an investemnt adviser buys out another investment advisory firm which is true about filing feees paid to the state
no addiontal filing fee req
the prudent investor rule prohibits investments in
no security
class b
no up front sales charge. they charge a redemption fee if they are redeemed within the first 7 years with fee declining each year. once fee is 0 they typically convert to class A shares. this is a beenfit because they charge an annual 12b-1 of .50% once they convert to class a shares no more annual 12b-1 fees are charged
which is true when a bond sells at a premium
nominal yield is MORE than yield to maturity, current yield is MORE than yield to maturity. highest to lowest Nominal, Currenty Yield, Yield to maturity
for bonds trading at a discount rank the yield measures from lowest to highest
nominal, current, basis(yield to maturity), yield to call basis
for bonds trading at a discount rank the yield measures from lowest to highest
nominal, current, yield to maturity, yield to call
suecrties act of 1933
non exempt new issues must be registered with the SEC and sold to investors who are given full and fair discloure througha propsectus. it is a afederal laq and dows not cover state securtiies registration req. those are covered by uniform secrutieis act in each state
a person who renders advice on fixed annuities for a fee, and who then sells the annuities, charging a commission, must register as an
none of the above
NASAA has the power to set record retention rules for a fed covered adviser that cover which records
none of the above, NASAA does NOT set rules for fed covered advisers. only the investment advisers act of 1940 applies. NASAA rules for IAs only apply to state registered advisers ( those with less than 100M under mgmt.)
Under the NASAA rules , which records must be retained for 5 years by a federal covered adviser
none of the above. NASAA does not set rules for fed covered advisers.
an indiv who represents an in issuer in selling securities of that issuer to the issuers empllyees and who does not earn a commission for this work, is defined under the ufnirom securties act as an
none of the above. the gent is an indiv who represetns a bd selling any type of security whether it is exempt or non exempt. idniv who repretent issuers in trading exempt securities or in exempt transactions are not defined as agents. an indiv who represents and inssuer in a tresnactaino with existing employees without taking a comissino is engaging in an exempt transaction since no commission is taken and ks therefore excluded from definiton of agent
a person who is intrested ina long term bond ivnesetment strategy would
not be concerned with volaitility
a person who is interested in a long term bond investment strategy would
not be concerned with volatility
the admin can deny an exemption to
not for profit issues. they CAN't deny us gov bonds, muni bonds and agency issues
if a non working spouse claims social seucrity benefits this will
not reduce the benefitthat will be paid to the working spouse. etitled to beenfit of 50% of amount paid to working spouse
which are allowed prior to filing of a registration statement
nothing can be done
the admin can require which regarding federal covered securities offered ina state
notice filing for the issue in the state, filing of documents relating to the issue in the state, payment of a filing fee in the state
an admin can req qhich of the following regarding fed covered sevurities offered in a state
notice filing for the issue in the state, filing of documents relating to the issue in the state, payment of filing fee in the state
if a rep that transacts business in a state terminated employement with a fed covered adviser
notice must be given to the admin by rep only
an agent received compalaint they should
notify supervisor or receipt of complaint
under employee retirement income security act of 1974, any plan that complies with Rule 404c MUST
offer employees the ability to change their investments, offer employees the ability to diversify their investemtns, offer a min of 3 different investment strategies with different risk and return characteristsics
whole life
offers a fixed death beenfit that is guaranteed for the insureds entire life.
private placement exemption under unifrom state law
offers can be made to no more than 10 persons ina 12 mo period to qualify for the exemption. all purchases must be made for long term investement , no commissions may e paid to anoynoe other than for transactions with financial and institutional investors. the issuer or BD handling offer is allowed to aceept monies from buyers of issue and may deposit the monies to thei r own accounts
which are defined as affiliated persons under investment company act of 1940
officer of the management company, employee of the management company, a 5% holder of the management company's shares
all are included in the Form ADV with the SEC under investment advisers act of 1940
officers of the advisory firm, shareolders of the advisory firm, states in which the advisory firm is registered
under the securities of 1933m which of the following sign a registration statement for a new issue
officers of the issuer, board of directors of the issuer, and the accountants and lawyers for the issue sign their opinions
under ivnestemnt advisers act of 1940 req ifo in the registration application for an investement adviser includes
officers, directors and non partiicapting shareholders of investment adviser
under the securities actof 1933, omissions or misstatements of material fact in a registration statement can be considered to be fraudulent for the
officers, lawyers, accountants and board of directors of the issuer
registration by qualification becomes effective
on a date set by the admin
the amount of commission charged to a customer to effect a securities transactino must be disclosued
on the trade confirmation (unless unusually high fees)
tax qualiftied variable annuities are only ofered to
people who are in 403b plans
it is unethical for an ivnestemnet adviser to borrow money from a
pesnion fund that is the advisers clients. the only time they are allowed to borrow from customers is if the custoemr is a bnk or borker dealer
cash value of a universal life insurance policu is
premium payments minus cost of insruance plus interest
what hapepns to the rate of return calculation ona non callable bond if the rate of interest stays the same and interval le
rate oretruns decilnes
the financial leerage of a BD would be measured by its
ratio of loans to net capital
a new customer is opening an account with a BD. the customer tells the agent to decide which investments are best prior to opening the account the agent MUST
receive a written power of attorney from the customer . if an agent chooses more than price and time of execution for a custome
the alternative min tax computation is less than the regular income t
regular amount is
the SEC administers
securtiies act of 1933, investment advisers act of 1940, investment company act
which of the following would be defined as being in the business of vgiving investmenet avice
soecuakuze in offering market timing services gives cutomers buy and sell signals
waht best descrie\bes an ETF
stock
which are asset classes
stocks and real estate
a person who is in business of giving adviser about which is an investemenet adviser under SEC release IA-770
stocks, copr bonds, optoins
X= Muni yield %/ 1-tax brack % is
taxable equiv yeild
fixed annual fee and commission
the account may be charged both on each trade, this is not unethical
under the unfirom securties act the registration application of an investemetn adviser must include
the advisers financial condition and business history
clseod end company price
the ask price is lower than the net asset value because ellers exceed buyeers on the exchange floor
which is true about variable life insurance policy
the cash value increases based on equity investments
clients can be charged separatedly for options trading if
the clients got full disclousre of all strategies and fees and agreed to such in writing
under the investment advisers act of 1940, all of the following are req for a family office to be excluded from definition of investment adviser except
the family office must have less than 100M of assets under mgmt
the inside market is
the high bid and low ask.
the yield to matruity on the bond is the same as
the internal rate of return because it is the interest rate that will discount the bonds cash flows to pthe purchase price of the bond
if a rep that transacts business in a state terminated employment with an inv adviser
the investment adviser must notify the admin promptly. for BDs and agents they both need to let admin know. for federal covered adviser, only investment adviser rep must notify
which are true about variable annuity contracts
the issuer assumes the mortality risk and the purchaser assumes the investmet risk
a customer selels short 100 shares of PDQ at 61 and buys 1 PDQ Jul 60 Call @ 3. the max potential loss is
the logn call allows customer to buy in the stock position at $60. since the stock was sold at $61 exercise results ina net gain of $1 on teh stock . customer paid $3 for call so net loss of $200
upon entry of a stop order denying a security's exemption the admin must notify those affected by the order that
the order has been entered and the reasons therefor, within 15 days of writte request the matter will be set down for a hearing
the state admin is supervised by
the state secretary
the definition of net present value is
the sum of annual cash flows discounted by the cost of capital minus initial investment
what is a non issuer transaction
the trade of 100 shares of stock on an exchange floor. a non issuer transaction is where the proceeds do not go to the issuer.
what is true about trust taxation
the trust is a taxable etntity and a form 1041 is req with reporting income gain and loss. (1040 is personal incoem taax return) (1065 is partnership tax return)
family limited partnerships
the venture must have a lefit business purpose other than tax acoidance , the partnership must have at least 1 genral partner and 1 limted partner, only general partners canassume a managament role, any asset can be held in the partnership. limited partenrs remain as passive investor
family limited partnerships
the venture must have a legitimate business purpose other than tax avoidance, the partnership must have at least 1 general partner and 1 limited partner, only general partners can assume a management role
if a callable bond is purchased at a premium, and is then called at par which of the following is true
the yield to call is lower than the nominal yield. yield to call witll be lower than yield to maturity if bond was purchased at a premium. since the bond was purchased at a premium both yield to call and yield to maturity must be lower than the nominal yield
the securitie exchange act of 1934 req that
there are 5 SEC commisioners, no more than 3 from one political party.and SEC commissioners have no outside work and cannot trade their own accounts
62 year old with 200k 401k plan balance consists of 140k contributinos and 60k earnings. they withdraw 100k
there is an income tax liability but no 10% penalty since withdrawal occurs after age 59.5
BDs and registered reps are ecluded from definition of ainvestement advisers as long as
they do not charge separately for advisory services. thus a BD canc harge a commission on each recommended trade and not be defined as an invesetment adviser that must regisere in the state
what is the trading characteristic of a closed end funds
they trade on exchanges like any other stock
adviser that renders advisce soleyl about US gov securities is exempt
under the investement advisers act of 1940, and is defined as a federal covered adviser that is not req to register in the state as well
which of the following is NOT a derivative
unit investment trust
filing advertising is not req for
us gov securities, muni securities, investment company securities, NYSE listed securities
offer tax ebenfits
variable annuities, muni bond. real eatste
must be included on customer confirmation
whether a payment for order flow was made, the customer name and account number, price of execution
close endfunds
which are etfs trade in the market
admin can be under the obligation to fie a U-6 form if a
written complaint about an investement adviser rep is received from a customer that alleges a felony
lending money to customer
a BD cn lend money to a customer as long as it complies with provisions of reg T (securities are collateral) , an investement adviser cannot lend money to a customer
a BD tells a customer that it is wiling to buy a stock at 20 and sell it at 21. thsis is
a bid ask quote
a market makers comp can be descirbd as
a difference between the bid and ask quote
which are included in Form ADV Part 1 Filed with the SEC
a list of the officers of the advisory firm, a list of the shareholers of the advisory firm, the states in which the advisory firm is registered. if the firm is a stock company (privately held) a schedule of the shareholders is included
prior to filing of a registration statement which of the following are permitted
a member firm signing a sydnidacate agreement to become part of the underwriting group for the issuer
the investment advisers act of 1940 exempts from registration
a pesrons who gives advice solely to insurance companies
what is true regarding the comp of an unlicensed solicitor for referring a customer to an investment adviser
a referral fee cannot be paid to an unlicensed solicitor
to exercise discretion in a customer account the agent must first obtain
a written power of attorney from the customer
if the admin prohibits investment advisers in that state from taking custody of customer funds or securities then the investment adviser would NOT be permitted to
accept securities from a customer that are registered in customer name
dollar weighted average return
accounts for all cash flows into the fund and all cacsh redemptions it is the same as Inetrnal Rate of REturn
a portoflio managedment style
active or passive management
a portfolio invested in actively managed funds that is rebalanced monthylis considered to be
active/active
a passively managed index fund to compensate for a negative tracking error would
actively manage a portion of its portfolio
trustee
administers atrust for the benefit of a beneficiary.
cruber securi
administrative action.
under the uniform securities act, consent to service of process means that the
administrator is authorized to receive suits on behalf of an agent or BD
the admin can req the filing of
advertising, sales literauter, circulars, pamphlets, prospectuses, form letters
which must notify the admin if an agent of a BD is terminated
agent and ex employer
under the uniform of securities act, a natural person includes an
agent. agents are humans
a customer sells short 100 shares of DEF stock at 62 and sells 1 DEF Oct 60 Put @ 6 the max gain while both positions are in place is
$800
under ERISA rules, the IPS for a qualified retirement plan does
(invsetement policy statement) establishes the plans ivnestemnet objectives, asset allocations , perfromance projections and risk limitations
private fund advisers must register with SEC if their assets under management are at least
(only advise pooled investment vehicles like hedge funds) 150M
a stock whose price moves down 5% when the market movesup 10% has a beta coefficent of
-.50
upon filing a withdrawal of registration with the state, the admin can commence a revocation or suspension proceeding for up to
1 year from effective date of the withdrawal
payments received by the owner of a tax qualified variable annuity are
100% taxable as investmetn income
a block trade is a trade of at least
10k shares.
cusomter has 2 children age 6 and 8, what tim horizon for college savings
15 years, is when the youngest child will finish coll
What is is ADV Part 2
2A is the brochure that must be delivered to customers that describes the investment advisers policies, fees, education, types of investments, types of clients, method of analysis used, conflicts of interest, etc. Part 2B is brochure supplement which details the educational and work background of the key personnel who make investment decisions or manage accounts
max annual contribtuion to coverdell educatino account for a single beneficiary is
2k in any number of accounts
if an agent withdraws his reg the withdrawl does not ebcome effective for how any days
30
a customer buys 1 abc JUL 40 PUT AT $6 WHEN MARKET PRICE OF abc IS 38. THE CUSTOMERS MAX potential gain is
3400
a customer owns a perpetuity that pays $500 per month. assuming that the market rate of return is 5% the value of the contract is
500 *12= 6000 peryear/.05= 120k
first age where an indiv can claim full social security benefits
67
a QDRO qualified domestic relations order a court order ina divorce or separaton agreement that divdes assets applies to
ERISA pensino plans
true about ETF
ETFs are registered uder the investement fopmany act of 1940, etfs are typically structured as open end managament companies, etfs hold the underlying shares of companies included ina s tock index . they alows for creation of additonal shares like an open end fund but they are listed and trade like a closed end fun. they are structuered technically as open end investement companeis only institutinoal investors can buy creation units since ETFs are securities
the prudent investor act req that fiduciaries manage the assets of their benefiiciaries based upon
modern portfolio theory
a 403b plan can invest in
money market fund shares, mutual fund shares, variable annuities, fixed annuities... NO CD or common stock
the risk premium is the rate of return on an investmetn over the
money market return
suitable for 6 mo investements
money market, bank cds, commerical paper
a BD MUST maintain physical possession of
mortgage backed bonds from which CMO derivatives are cereated , securities held as collateral for derivative trading components
TIPS
multiple the par by inflation each year compouned to get how much it will be worth
excluded from adjusted gross income is
muni bond interest ( whichi s not gederally taxable) and reiterment plan distrbution amounts from non qualified plans attributable to the cost basis (non deductible investemnet dollars) in the plan
the admin by order can deny any exemption from registration for all of the following except an
muni bond. cannot change the exemption from registration given to securities specified as exempt under the act, such as us gov or muni bonds
under the unfirom securities act a person could gvie advice about all of the following securities without having to register in the state as an investemnt adviser eEXCEPT
muni bonds or state general obligation bonds must register in the state . NOT treasury bomds or agency securities like ginnia mae and fannie mae
a BD uses summer interns who answer the telephone, give stock quotes, and take orders from clients. the summer interns:
must be registered in the state because they are transacting securities business with the public
a CPA who acts as a solicitor for an investment adviser, referring clients to that adviser for a fee:
must be registered in the state. investment adviser solicitors are not registered with the SEC, the SEC only requires registration of Fed Covered Advisers. however, these solicitors are contacting potential customers in a given state. the state req the solicitor be registered as an investment adviser or can affiliate with an advisory firm and register through that firm as investment adviser rep.
to be a federal covered adviser
must do business in 15 or more states and must also have at least 15M of assets under management
an exempt reporting adviser
must file Form ADV with the SEC
an indiv holding a CGP license wishes to register in a state as an investment adviser rep. to do so, this indiv
must file a Form U-4. if the indiv holds CFP designation they are waived from take the Series 65 exam in the state. however, they must file a Form U-4 securities industry application which req fingerprints and background check. surety bond req does not apply to IAR reg but it does apply to BD, agent and investment adviser registration.
if an adviser is suspicious about a customers account activity and belives that there mauy be illegal activity, then the adviser
must file an SAR report with FInCEN in 30 days. customer cannot e told that the report is being filed
taking custody for the first time
must file an audited balance sheet promptly with SEC through FORm ADV Part 2A
a private fund adviser
must file both form PF and Form ADV with the SEC. PF is private fund adviser. they must update Form ADV Parts 1 and 2 annually these are all public documents
a customer has placed an indication of interest to buy a non exempt new issue security that is currently in the quiet period. the customer has been delivered a prelim prospectus. once registration is effective to be confirmed as purchasing the issue the customer
must receive a cop of the final propspectus. during quiet period the security can't be sold or promoted. the customer can receive a copy of prelim prospectus called red herring. usually doesn't have offering price, determined just prior to effective date of registration. once registration sis effective, it will be priced and final propsectueses with the offering price are prepared. any purchaser must be delivered the fial propsectus at or prior to confirmation of sale
an indiv who represents an issuer selling federally covered investment company securities
must register as an agent in the state if compensation is being paid for this activity. both "nationally traded securities" an investment company securities are "federal covered" but because they are non exempt and are SEC registered, this indiv must be registered in the state to sell them. if the indiv were representing the issuer selling exempt securities such as treasuries, agencies and munis then the indiv is not defined as an agent. the exclusion from registration given to an indiv who represents an issuer in tranactions in specified covered securities only applies to private placements and to sales to qualified investors
during a vien period of time the omarket has a beta of 1 is up 8% in value. XYZ has beta of 1.25 and is up 11%. risk free rate is 0
1.25* 8 = 10 so the alpha on the return of the stock = 1
DEF stock has beta of 1.5. the exepceted market rate of return is 8% and the risk free rate is 2%. the standard deviation of returns is 3%. using CAPM what is the expected rate of return for DEF stock
1.5 (8-2) = 9% so 9%+2% risk free rate= 11%
if a 13d filing is requiterd, notice must be filed wth the Securities Exchange COmmission within
10 business days . if a person accumulates a 5% or greater holding ina publicly held company a 13d filing must be made within 10 business days. a copy is sent to the SEC, the exchange where the securitiy trades and board of directors of the company
under the NASAA rules for state registered advisers, transactions must be recorded in customer account records no later than
10 business days following the end of the quarter when the transaction was effected. this is very different than req of fed securities law tat applies to BDs and fed covered advisers
under NASAA rules for state reg advisers transactions must be recorded in custoemr account records no alte than
10 business days folowing the end of the waurter in which the transaction was effected
member firms dfoing underwtiitngs are porhibited from issueing research reports for
10 days following effective date for IPOs and 3 days following effective date for
a research report on an issuer CANNOT be published by the underwriter of that issuer's securities for the time period encompassing
10 days following the effective date for an IPO, 3 days following effective date for a secondary offering
pasive losses are 10k passive incoem is 10k hwhat can the customer deduct
10 kcan be dudectued in full since there is 10k of passive income
for offers of preorg certificates to be exempt under the uniform securities act, the number of subscribers is limited to how many people?
10 people and no payment is made by any subscriber. this paralells the priv placement exemption under state law except that ads are allowed for pre org certificates but not priv pplacements
a stockis quotes as 52.43 52.45 10 x 10 the spread for a round turn trade is
10 round lotds of 100 shares = 1000 shares both bid and offeered if the dealer sells 1000 at 52.45 and buys 1000 the dealer makes a spread of .02 on 1000 = $20.
the penaulty for a premature distribution from an IRA is
10%
investement copmanies that are required to be registered with the SEC uder investement company act of 1940 have at least
100 share holders and 100k of net assets
regulation t allows a customer to pay for a securities purchase with
100% cash, half cash half credit, fully paid securities deposit. IF a customer buys on margin, the customer can deposit 50% (reg T req) and can borrow the other 50% from the broekr. or the customer can make a 100% fully paid securities deposit and use the loan value of these securities 50% as the depoist on an additional securities purchase.
if a distributino is taken from an IRA after age 59.5
100% of teh dsitributino is taxed at the ordinary incoem tax rate . however if a high earning person who is covered by another qualified retirement plan makes a cotrnibutino they cannot take a tax deductino for theirr contributino therefore any discibutinos taaken after age 59.5 are taxable as ordinary income only
the max percentage of net assets that a hedge fund can allocate to a signle investemnet is
100%. they are priate investement pools that are not subject to investemtn company act of 1940. not subject to allocation maximums
a 1000 par bond is issued with 5 years to maturity. the coupon rate on the bond is 3.5%. the inflation rate for the next 5 years is 2.5%. the bond will be worth how much in 5 years
1000. the coupon is paid annualy divided into semi annual payments. the inlfation rate has nothing to do with the question
an elderly customer needs income
100k of div paying blue chpo stocks against which calls are sold or 100k of treasury bonds
a husband and wife with 3 adult childern have established a revocable trust to remove assets from their taxable estate. after doing so they find that they are 300k over the estate tax eclusion that qualifies for the max unified tax credit of 4577800 in 2020. in order to reduce the size of their taxable estate by 300k they can donate
100k to one charity, 100k to another and 100k to another
a married couple buys a house for 150k. after living in the house for 10 years they sell it for 750k. the taxable gain is
100k. the first 500k of gain for a married couple is excluded from tax (250k is excluded fir an indiv)
100k in account that earns 5% annually. the vinvestor wasts to withdraw 12k per year. if the investors withdaraws 12k annually the account iwll be fully depeleted in
100k/12k= 8.33 years avg balance is 100/2= 50k. so 50k * .05 (interest earned) = 2500 annual interest * 8 years = 20k in interest 120k/12k = around 10 years
a customer has purchased 1000 shares of ABC stock at 30 per share paying a commission of 1 per share for transaction. abc stock declares a 5% stock dividend when the dividend is paid the tax status of the investmtn is
1050 shares held at a cost basis of 29.52 per share. there is no tax due when a stock dividend is paid, instead the ivnestor gets more shares. customer will have 1000 shares * 1.05= 1050 shares after the dividend. cost basis is adjusted to 31/1.05= 29.52
the amount of typical surtry bond cobereage posted for a broker dealer for intial registration in a state is
10k
crimimnal violations of the investement advisers act of 1940 federal securities law are punishable by
10k and 5 years in jail (under unfirom state law the fine is up to 5k and 3 years in jail_
the amuont of surety bond coverage that is typically posted by a BD for intial registration in a state i s]]s
10k for a BD or agent to be registered in a state
to be registered as a BD, the admin typically requires the posting of a surety bond in the amount of
10k surety bond to be registered as a BD. (though each state admin can set this amount)
to be registered as a BD, the administrator typically requires the posting of a surety bond in the amount of
10k to be registered as BD ( though each state admin can set this amount)
reports of cash transactions must be made to department of treausry if the amount of cash received or paid exceeds
10k, must be reported to FinCEN
under the ivnesetment cmopany act of 1940 violations are punishable by fines per event of
10k. this is different from unifrom state laq the max fine for them is 5k.
an adviser that takes custody must file a copy of its suprise audit results with the state admin
120 days of completion of the exam
1000 shares of ABC stock at 44 per share commission of 1 per share. 20% stock dividend
1200 shares held at a cost basis of 37.50 per share = 1000* 1.20= 1200 and cost basis 45/1.20= 37.5
what mutual fund fee is based on an annual percentage of net asset value
12b-1
in order for MM to be called no load it can't charge any of the following except
12b-1 fees
in order for a money market fund to be no load it can only charge
12b-1 fees of no more than .25
if market interest rates rise from 6%to 7% which security price would be MSOT adversely affected
15 year treasury STRIP
an employee of a company is being paid to assist in the sale of stock options to the company's employees and will receive a bonus based on sales results. this company employee
must register as an agent in the state. an employee of an issuer who is compensated for selling that company's securities to its employees is defined as an agent. if the employee were not receiving pay based on sales results, then they would not be an agent and would not have to register. they are not an investment adviser rep because they are not permitted to receive sales based compensation
a BD is registered in NY and Florida. A client that lives in New York is going to retire to Florida. Her agent, who is located and registered in NY wishes to keep servicing her account. in order to do so, the agent
must register in Florida
an investment adviser is registered in state A and State B. an investment adviser rep of that firm
must register in any state where the rep solicits customers to buy investment advice
under investemnt company act of 1940 an investemnet advisers contract is initialiyy set for
2 years and is subject to renewal every year thereafter. the contract renewal is approved either by the baord of directors of the fund or a mojirty vot of the outstanding sthares
geometric mean of 20, -10, 20
20-10+20 = 30/3= 10%
the regulation T req to buy a long term equity option is 75%. the loan value of the long term option is
25%
the tax code permits the first
250k of a cap gain from sale of personal residernce to be exlcuded frm ax for an indiv. (500k exclusion for a married couple) to qaulify the residence cannot have been rented out for more than 3 of the preceding 5 years so it must be lived in for 2 of the 5 years. tjis proprety was sold for a 300k gain which is excluded from cap gains tax
presrevation of capital
needs to preserve, has no option but to preserve
the quantitative method of evaluating investemnts that uses periodic cash inflows and outflows is
net present value
the quantitative method of evaluating investments that use periodic cash inflows and otuflows is
net present value
the dividend discount model values common stock based on the
net present value of anticipated future dividend payments
investment advisory contracts must include a
no assignment clause that is the contract cannot be assigned to another investment adviser unles the customer consents in writing
ina secondary offering a memebr who acted as manager or co manager CANNOT issue a research report on theat company within how many das following the effective date
3 calendar days
a company has a quarterly earnings of $3 per share. at the end of the year it retained 9 per share the dividend payout ratio is
3(gave to shareholders)/12 (total) =25%
a customer in the 35% tax bracket purchases a 5% 10 year corp bond. the after tax yield is
3.250% 5%( 100%-35%)
TIPS
3.5% couopn + 4% inflation the total return is 7.5%.
a customer buys a TIPS at par with a 3 1/2% coupon. inflation stays at 4% over the life of teh security what is the inflation adjsuted yield
3.5%, fixed coupon rate and adjust princiapl value of bond up each year for inflation. at maturity the investor gets inflated principal amount the ttoal return woul dbe 3.5% annual income + 4% annual gain = 7.5% however this is asking for inflation adjsuted rate of return which subtracted out inflation. the coupon on TIPS will always be the real rate of return
unless the admin allows an earlier date, when an agent withdraws their registration the withdrawal does not become effective for
30 days
if an offerer offers to buy back a securities issue that was inadvertently sold in the state, buyers of th eissue have how many days to accept the offer
30 days they would buy it back at orginal cost plus interest paid at the legal rate i the state 6% plus attonreys or court costs net any dividends or interest it is their reight of rescission to acept within 30days written notice by the offerer
small cap
300M to 1B
cost basis of 30 per share 1 commission and 1 dividend is
31 , the dividend is not part of the stocks cost bsis ist is taxable income
a ustomer has 20k in passive losses from a limited partnership investment. if customers as 3k of passive income for that tax year the customer may deuct
3k. the unused 17k of passive losses are carried forward and can be offset in later years afainst passive income
offers of pre organication certificates are exmpt under the unfirom securities act if
no cimmisions are paid for solicitin g ptoential subsecribers, the number of subscribers is limited to 10 persons and no payment is made by any subscriber. the different between pre org cetticates and priv placement is that advertising is allowed for pre org certificates but not for priv placements
difference between buying a call and stock
no eroision of value as the position is held (the option erodes in value and the stock does not)
the sale of a call has all of the same characteristics as selling stock short EXCEPT
no erosion of value as the position is held
under the uniform securities act, which is true regarding a BD that has its sole office in one state and wishes to conduct business in another?
no registration is necessary if the firm deals solely with insurance companies in the neighboring state. a firm that has no office in the state that deals solely with issuers, other BDs, or financial institutions does not have to register. otherwise the firm must register if it directs offers of securities into any state where it does not have an office. it makes no difference whether the securities involved are exempt ( such as munis_ or non exempt (such as corporates)
forward contracts are
non standardized and OTC traded, cannot be easily offset with a closing trade
an agent of a BD may
not charge a fee for investment advice in addition to any commission charged if a recommendation performs well and charge for clerical services where the charge is not based on performance
a customer buys 10 aBC Jan 50 Calls @ 4.75 when the market price of ABC is $51 per share. the max loss potential is
4,750. (4.75*10 contracts*100 shares)
a customer owns a perpetuity that pays $400 prer month. assuming that the market rate of return is 6% the value of the contract is
400*12 = 4800/.06= 80k
retirement plasn will the same maxiu salary reduction contribution
401k, 403b, 457
an epmmoyee of a not for profit organization would be permitted to participate in a
403b plan
maximum amount a married couple can earn before 85% of social security benefits will be taxed
44k
after receiving an investemetn adviser applciation the SEC must grant a regsitration to an investement adviser or start a proceeding denying registration within how many days
45 days
under invesetment advisers act of 1940 after receinvg an investement advisers applicatino the SEC must grant a regsitration to an investement adviser or start a proceeding denying registration within how many days
45 days
under the investment advisers act of 1940 an SEC registration application as an investment adviser must be granted or a proceeding must be initiated denying registration within
45 days
under the investment advisers act of 1940 after receiving an investment advisers app, the SEC must grant a registration t oan investment adviser, or start a proceeding denying registration, within how many days?
45 days the SEC mustgrant the registration application or a proceeding started to deny registration
a NONqualified retireemnt plan that is established by a non profit organization is a
457 plan. this is not a qualified plan bc it is discrimnartory.
registration of securities in a state by filing becomes effective
5 business days after the filing with the state is completed
an investment adviser is exempted from registering in the state if the firm has no place of bus in the state and has no more than
5 clients in that state other than financial or institutional investors within a 12 mo period. this is de minimis exemption
the statute of limiteations for criminal violations of the unifrom securtiies act is
5 years
under investment advisers act of 1940 recordsMUST be retained for
5 years
unde rinvestment company act of 1940, violations are punishable for how many years in jail
5 years anda 10k fine
under NASAA rules, investemnet adviser must retain copies of all advertising for
5 years in an easily accessible place with the frist 2 years records kept in the principal office of the adviser . permanent recrods must be reatined at the principal office of adviser and be preserved for at least 3 years after termination of enterpirse
distributions from roth IRAS are subject to a penalty if withdrawals are made within
5 years of orginal contribution. if they are in IRA for at least 5 uears they can be withdrawn with no tax due if the beneficiary is at least age 59.5
suits alleging criminal violations of the unifrom secrutuies act must be brought within
5 years of the occurrence of alleged violation
under NASAA recordkeeping rules advisers must retian records for no less than
5 years with the first 2 years being kept in princiapl office of adviser
statute of limitations for fimling a claim alleging a criminal violation of the unifrom securities act is
5 years, (in contrast, federal law is 3 years)
under NASAA recordkeeping rules, advisers must retain records for no less than
5 years, with the first 2 years records kept int he principal office of adviser
to be defined as a diversified management company the max percentage of portfolios assets that can be invested in a single issuer is
5%, must have 7% of assets invested in securities, no holding representing more than 10% of the voting stock of that issuer
a customer buys a 3 year maturity, 6% coupon bond at par. i market interest rates rise to 8%/ the the bond price will fall by
5%. year 1: 60/1.08= 55.55 year 2: 60/(1.08)squared year 3: 1060/(1.08)power of 3
a corp buys the stock of another company. which percentage of div receiedd from the investment in teh acquired companys shares are excluded from tax to the corp pruchaser of those shares
50%, meaning that the other 50% od the div received are taxable. if the coprorate investor owns 20% or more of the stock of the other company, this exclusion increases to 65%.
under the uniform securities act, the threshold where a state reg adviser is considered tohave taken custody of client funds if it charges prepaid advisory fees is
500 or 6 months or more in advance of rendering services for state reg advisers. (investment advisoers act of 1940 sets this at 1200 for fed covered advisors but is not the rule for state covered)
Regilation A under SEcurities ACt of 1933 gives an exemptino from registrtion method to issues of no more than
50M within a 12 mo period
a BD headquartered in florida has net capital req of 50k the firm has office in George net capital is 25k and office in Tennessee 35k what is the net capital req for this BD
50k it is based on the bds principal state where it operates
the max permitted dollar amount that can be raised in a private placement under Rule 504 of REg D is
5M , 504 is for very small offerings, the rule does not specify req investor disclosures and does not place any limit on the number of investors, no aidot req for issuers for financial statements, there is no fed registration req, the state where is isoffered can still req state reg. 505 was rescinded 506: covers offerings of more than 5M+. requires disclosures to investors similar to that req in a propsectus. the offer can be made to a max of 35 non accredited investors anad unlimited number of accredited investors , the state can;t req registration at the state level,
a 60 year ocustomer has a fixed annuity with a value of 16k. the cost basis in the contract is 10k. if the customer withdraws 5k and the IRS taxes distributions on a LIFO basis, the tax consequence of a withdrawal will be
5k taxable, $0 penalty. the original contributino represents dollars that were already taxed. any earning build tax deferred since the person is over 59 1/2 there are no penalty tax
max fine that can be imposed for criminal violations of uniform securities act
5k, restitution to persons affected and imprisonment up to 3 years
under rule 147 intrsatate offerings cannot be resold out of state for how long after the sale date
6 months / the resale of eurities sold under intrastate exemption be restrctied to intrsastate only for 6 months following first sale. then they can be resold interstate
excess contributinos to an IRA are subject to a
6% penalty tax, regardless of the age of the account
the pnealty for making an excess contribution to an IRA is
6%. for premature distibrtinos before 59.5 it is a 10% penalty
under the investment advisers act of 1940, if the SEC suspends or revokes the registration of an investment adviser registered, an appeal may be filed in Federal Court within how many days
60 days
a maangement companys boards of directors CANNOT consist of more than what percentage of affiliated persons
60%. an affiliated person is an officer, employee or 5% shareholder of invesetment company . people like accountant are termed interested prsone
mac contribution for IRA
6k
deducting cap losses
6k cap gain 9k loss deduct 3k this year which is the max and carry forward 0 9-6 = 3
customer investes 50k . 10 yeras later it is worth 100k. the annual compounded rate of return is
7.20% rhe tule of 72 is to find the number of years that it takes to double an investements value divide the yield into 72. 72/7.20= 10 years to duble value 72/percentage = years it takes to double in value
a customer buys 100 shares of ABC stock at 40 and sells1 ABC JAn 45 CAll @ 2 on same day. customers max potential gain until option expries is
700
to be defiend as a diversisief manadgement company a fund must have at least what percentage of its assets invested ins ecurtiies
75% of assets invested ins ecurities with no more than 5% of assets invested in a single issuer with no holding representing more than 10% of the voting stock of that sisuer
a company has quarterly earnings of 2.00 per share. at the end of the year it retained 2.00 per share. the company's dividend payout ratio is
75%. if quarterly earnings were $2 per share then annual earnings = $8. since $2 was retained then $6 wa paid as dividends 6/8= 75%
max amount an indiv can contrbute to 529 without gift tax consequences in 2020
75k 1 times gift of 5 times exclusino amount
taxatino of scoail security benefits for a married couple
85% of social security benefits are taxable if a married couple has a combined income of more than 44k. if a married couple has income between 32-44k then 50% of benefit is taxable. for an indiv if that person income is between 25-34 50% is taxble and if it is more than 34k 85% is taxable
what is the inside market
88-89. the isnide market is best prices in the market. from customers standpoint selling to the dealer at the bg so 88 on left is best and buying at the ask so 89 is best . lowest on left highest on right
which must be closed end
9.00 NAV, 8.50 POP, only closed end funds can trade at a discount to NAV. this occurs when investors are bearish on the fund.
when making an investment decision using CAPM the interest rate that would be used as minimum hurdle rate is the
90 day treasury bill rate
states are permitted to req
notice filings, reg of bds and their agents, advisers less than 100M of assets under mgmt., req registration of all investment adviser reps ( whether the investment adviser is fed covered of not_ and to investigate and bring action with fraud or unlawful conduct in regards to securities or securities transactions
if a rep that transacts business in a state terminates employment with an ivnestement adviser
notice must be given to the admin by the investement adviser only
which is true about taking custody
the custodian must be qualified, the customer must be notified promptly in writing of custodians name, address and the manner in which the securities are held, customer must be sent at least quarteryl an acct statement identifying positions held and all transactions in acct during the eriod, all client fund and securitiesmust be verified at least annually by a CPA on a surprise basis.
a BD registered in States A and B has an agent that is registered in State A. the agent takes an uncolicited order from customer in State B. the agent will have to register in state B if:
the customer is an accredited investor
selling shares
the customer may specify which shares are sold so that the highest cost shares are sold first. if specific identification is not used then the IRS req FIFO
a csutomer has an indiv acct upon written equest the customers account statements may be received by
the customers home address or a post office box designated by customer , no one else
a customer holds 52% of ABCD corp common stock, thinly traded stock listed in OTCBB. the customer wishes to sell 1% of her holding and requests that the Broker display her offering quote. which is true
the dealer can enter the quote only if it is bona-fide. as long as the customer is making a bona-fide offering of the shares, the quote can be displayed
a 50 year old man is disabled and wants ot take a lump sum distrbution from IRA to pay for medical and living expenses
the distribution is subject solely to regular income tax
a husabdna nd wife wish to form a company as a subchpater S corp, along with their 2 married adult children who will be oweners along with their spouses.
the entire family group will count as 1 owner against the limit of 100 shareholders in a subchapter S corp
a customer that buys NYSE listedstocks places an order to buy a very thinly traded stock that is quoted only in pink sheets. extra charge of 150 in addition to regular commission which is true
the extra charge must be disclosed to the customer at the time that the order is placed.
which must be included in investment advisory contract under NASAA rules
the fact that prepaid fees will not be returned if the contract is terminated early, the fact that assignment of the contract is only permitted with customer consent, whether the contract grants discretionary authority to the adviser
a father gives a 5k gift of securities to his son and a 22k gift of securities to his daughter. which statement is TRUE
the father has gift tax liability on the gift to the daughter. the first 15k of a gift other than to a spouse is excluded from taax in 2020. any amount above this is subject to gift tax to be paid by the donor.
which is true about acceptance of prepaid advisory fees by an investment advisor
the fees must be detailed in writing in the advisory contract, prepaid fees in excess of 1200 req that the advisers balance sheet be included in the brochure, there is no restirction on the amount of prepaid fees that can be effected, a refund of prepaid fees must be given if the contract is cancelled prematurely
an investemetn adviser enters contract iwht a finder promising to give finder 20% of the amount invested in each issue. finder is not an employee of the adviser and is ot registered with the SEC or in any state which is true
the finder, by locating potential sellers of securities for the adviser for a fee, is considered to be a solicitor and this must be disclosed on Form ADV Part 2A.
an investment adviser is considered to be in the business of rednering investemtn advice under SEC RElease IA-1092 if
the firm advertises its services as an investmetn adviser . it doesnt matter if the advice is on exempt or non exempt securities wit the 1 exception that an adviser who solely gives advice about us gov secrutiies is excluded frrom definition of an adviser under the invesetmtn advisers act of 1940 but NOT under unifrom securtiies act
registration as an investment adviser allows one to say that
the firm is a registered investment adviser
an investment adviser is registered in 5 states. the firm develops a relationship with 4 customers in a state in which it is not registered and where it does not have an office. which is true
the firm is not req to register in the new state because it qualifies for the de minimis exemption. because the firm does not have an office in the state and it is dealing with 5 or fewer clients (this applies to retail, they can deal with as many institutional clients as it wants) it qualifies for de minimis. If the firm had 6 or more retail clients in the new state or an office in the new state, it would have to register. an adviser with 35M or more of assets could become fed covered adviser if it is already req to be registered in 15 or more states.
taking distributinos from non tax qual variable annuity
the first money out of the plan is LIFO so it is the build up which was not taxed and is now taxed at 5k taxable ordinary income . the remaining starting investement is a non taxable return of capital.
which would be defined as either an "offer to sell" or a sale of a security
the gift of an assessable security and the giving of a security as a bonus in consideration for the purchase of securities
which is true about duration
the higher a bonds coupon rate the lower the bond duration and the shorter a bonds maturity the lower the bonds duration
which is true regarding indication of interest received during the cooling off period for a registered initial public offering
the indication is not binding on the customer, the indication is not binding on the underwriter
under investment advisers act of 1940, to determine if a person is in the business of giving investment advice which is ture
the indiv regularly gives advice on securities, the advice is rendered about securities and the indic receives comp for giving advice on seccurities
to etermine if a person is in the business of giving advice under the investment adviserse act of 1940 which are considered
the infic regularly gives advice on securities, that the indiv receives comp for giving advice on securities
a customer buys an annuity requiring inital pmt of 1ook. the annuity oofers a 4% bonus credit. this means that
the insurance company will pay an extra 4k into the cintract on tio if custinsdz 100k payment
which is true about closed end management companies
the intial offering of shares is made under a prospectus and shares trade in secondary market at prevailing market prices. shares are not redeemable, they are negotiable. the portfolio is managed
buying for both accuonts
the investement adviser should first buy shares for its cueomer accounts and then place the order necessary to buy the shares for it proprietary accout
which req consent of the advisers existingcustomers
the investment adviser and its accounts are acquired by a larger more prestigious firm, the investment adviser wishes to retire and transfer its accounts to another investmentadviser
if an investment adviser wishes totake custody of client funds or securities
the investment adviser must be audited on a surprise basis at least annually, the customers must receive account statements at least quarterly
under investment advisers act of 1940 if an investment adviser wishes to renew an advisory contract which will allow it to start taking prepaid advisory fees of 1200 or more, 6 mo in advance of rendering services, which is true
the investment adviser must file a Form ADV 2A and balance sheet with the SEC promptly and must make the
an investment advier rep has a customer telling all his friends my adviser has made my portfolio grow by 20% the last 3 years what is true
the investment adviser rep can ask customer for names of those friends and solici
who is responsible for filling a U-5 form with IARD when an investment adviser rep is terminated and associates with another advisory firm
the investment adviser that is the former employer is responsible. new employer reactivated registration by filing a U-4 with IARD.
an investor buys a 25k 8% corporate bond maturing in 2045 for 20k. the bond is callable starting in the year 2020. what is the most appropriate measure for calculating yield
the investor is paying 20k for an 8% bond with a face value of 25k. thus is paying a discount. this bond will probably remain outstnading until maturity so yield to maturity
an investor buys a 100k 10% corp bond maturing in 2030 for 125k. the bond is callable starting in year 2020. what is the most appropriate measure for calculating yield
the investor is paying a 25% premium for the bond. if the bond is called prior to maturtiy which is very likely since current market interest rates must be lower than the coupon rate, otherwise the bond would not be trading at apremium and the issuer by calling thebond can refinace the issue at lower cucrent market rates.thus this bonds yield to call will be lower than yield to maturity so using the call yeild is appropriat
Issuer for equipment trusts
the issuer is the person whom the equipment is to be leased or conditionally sold- which is the corporation. in an equipment trust, the trustee holds the title to the equipment until the loan is fully repaid.
if a registration is found to be incomplete, which of the following statements are true
the issuer must send the admin an admendment to the orginal filing and a new consent to service of process is not required
the marginl tax rate is the rate applied to
the last dollar of income earned. the rate increases as income increases
an investment adviser set up an investment plan for a client whichincluded enough insurance held in an irrevocable trust to fund the remainder of the plan if the client were to die prematureky. the client dies before fulfilling the investment plan. which statement are true
the life insuracnce proceeds are not included in the cleints taxable estate, the amount of insurance needed to fulfillt he investment plan doesn't need to be increased to cover any tax liability.
which are true about Rot hIRAS
the max permitted contribution for an indiv is 6k, if an indiv contributes 6k to a traditional IRA in that year, no additional contribution to a Roth IRA is permitted
when looking at the price/bok value ratio of a corporation which is true
the numerator on the equation is based on market value, the denominator in the equation is based on accounting value
an agent sells unreguistered non exempt securities and signs waiver satating that customer is aware the securtiies are being sold without registration and the customer absolves both BD and agent of legal oblidation. this is
null and void. sale of unregistered non eempt securities is a violation of the act which incures civil liabilitys only not criminal penalties. the transaction is null and void and the seller is obligated to buy back the sercurity at the orginal co
when evaluating an investemnet ina direct partiipcation program which are relevant
objectives of the program, economic viability of the business venture, experience of the geenral partners
trustee
obligated to follow the instructinos of the trust document cand cannot make the 400k principal distrbutino until the beenficiary reached the age of 30
the purchaser of a futures contract has the
obligation to buy a specific commodity at a certain price and grade at a specific date and location thorugh an organized futures exchange
an adviser is permitted toe xercise discretion over a customer account when such trades
occur under a written power of attorny to select security or amount to be traded
an agent of a BD is opening a new client acct. the agent has completed the new acct app and suitability. the customer has investment objective of safety of principal and income. the agent makes recommendation of conservative blue chip stock with track record of paying a consistent cash dividednd. the customer accepts recommendation. when must commission chaged on transaction be disclosed
on the confirmation of the transaction
when preparing a financial plan for aclient, you should inquire whether the cilent has cnsidered the purchase of disability insurance if the customer tells you that
on weekends she stays in shape by rock climbing in the nearby moutains.
under the securities act of 1933, a registered rep is permitted tosell shares of a registered offering
once the registration statement is effective
federal covered security
one of a substantial company or an investment cmopany tht must be registreted with the SEC. exchange and NASDAQ listed issues, any senior securities of those issuers are fed covered
seasoned securtiy
one that has substantial trading activtty across a wide diversity of shareholdesr and publi infic
a customer in the 35% tax bracket has 6k captial gains and 10k of capital losses. how much loss is deductible from this years tax return
only 3k of net capital losses can be dedcuted in a tax year so 1k of the loss is carried forward to the next tax year
a new client wishes to open an account but refuses to divulge any info regarding investment objectives, income, net worth or other investment holdings. under provisions of unfirom securities act the agent should
only accept unsolicited orders orders from the customer. no recommendations can be made to the cusomter
which is true about filing of the annual surprise audit results with the admin by investment advisers
only advisers that take custody must be audited and audit results must be filed with the admin within 120 days of completion of the audit
filing of annual suprise audit results with the admin by investement advisers
only advisers that take custody must be audited, audit resutls must be field with the admin within 120 days of copmletion of the aduit
under the investment advisers act of 1940 if an investment adviser has an impaired financial condition this must be disclosed to customers
only by investment advisers that take custody of customer funds, or those that accept prepaid advisory fees of 1200 or more
bid and ask quotes ina dark pools are
only shown to subscribing insitutional investors
if an investment adviser rep quites qith a state regsitered adviser
only tthe investment adviser is req to notify the admin, but if the IAR learns that the adviser has not given notice, the rep must. for a federal covered adviser: only investment adviser REPm ust notify the state admin
client informs RIA that he is secretly getting ad viocrce from his spouse and wishes to keep using RIA. the RIA should
open an indiv account for a client
priced at nav rather than market value
open end fund issue their shares at NAV (plus sales charge if a load fund) and redeeem shares at NAV. the share do not trade so there is no market price
which of the following are affected by 12b-1 fees and sales loads
open end fund shares
when comparing options to futures ccontracts which is true
options are securities that are regulated and exchange traded and futures are contracts that are regulated and exchange traded
filing of advertising with the state admin is req for
options clearing corp securities. NOT ré for us gov and munis, NYSE listed, NASDAW listed, investment copany securiies
under investement advisers act of 1940 a person would have to resgier as an ivnestement adviser if she gave investement adviser for a dfee about
options. they are defined as a security . if a person gived advise about ivnesting in something other than a security for a fee this person is not defiend as an invesement adviser. if aperson gives advice about securtiies but does not charge a gee than this person is not an ivnestement advis
al of the following are impersonal advisory services under investment advisers actof 1940
oral advice that is not based upon specific customer situations, written advice that is not absed upon specific customer situations, statistical info prepared using program about performance of securitiyes
a BD has a marketing agreement with a local bank and has located offices in each of the banks branches. if a bank customer makes an inquiry about mutual funds aoffered by the BD in the branch, which is true
orally and in writing that securities products are not FDIC insured, are not deporits and are subject to risk of loss of principal. NASAA req that the member make reasonable efforts to get customers writtena cknowledgement of receipt of these disclosures
an admin may deny or revoke a securities registration by
order
a write of mandamus
order from a superior court ordering a lower court to take some action
a BD that has no place of business in a state does NOT have to register if the firm
has a few clients in a state with a BD "de minimis" rule in the preceding 12 months
under the NASAA statement of policy on unethical practices, all of the following investment advisers would be able to loan monies where securities are collateral for the loan
has a registered BD that lends money to a customer through the BD affiliate, is a subsidiary of a parent bank that lends money to a customer through the bank affiliate, is a corp that lends money to its officers , an affialted bd is regulated under reg t and can lend money to a customer as can an affiliated bank. an adviser can lend monies to its officer or employees because they aren't customers
an investment adviser has determined that it MUST register as a federal covered adviser. this means that the adviser
has at least 110M of assets under management
a sales rep selling unregistered securities in non exempt transactions
has committed a misleading act, is subject to buying back the security at the purchase price plus interest at the legal rate in that state less any dividend or interest income received on that security
registration by qualification would be used by an issuer that
has never issued securities previously in that state nor has it registered securities with the securities and exchange commission
NASAA
has no registration or enforcement capability but is making me take 66
the investement company act of 1940 req the registration of ivnestement companies that
have 100 ore more shareholders and 100k or more initial capital
they now own 50% interest the RIA must
have it esxisting clients sign an acknowledgement of the change of ownership. if there is any change in composition of partnership itmust bne told to customers and if there is a change in the majority of the parneres since a majority change is deemed tocreate new bus
all of the following persons with no place of business in the state are EXEMPT from registration as an investment adviser except advisers that
have more than 5 clients in the state in the preceding 12 months
in order to be eligible for social security benefits an indiv must
have worked for 40 calnedar questers and earn at least 1410 in a calendar quarter for it to count
a divorced father with 2 young children would be best off choosing which tax filing status
head of hosuehold permits a higher standard decution and lower tax rates than for single tax payers the other tax choices are married filing jointly, marreid filing separately and qualifying widow(er) with dependent children
a custmomer has heard from a relatiev that he should invest money in a hedge fund. the custoemr asks you to tell him about this investemnt
hedge funds are only suitable for wealthy investors that meet the accreditied ivnestor definition, hedge fund typically allow withdrwawal of funds once per year, hedge funds use aggressive invesetemtn strategises that entail a high levl or risk
which are true regarding hedge funds
hedge funds are subject to little regulatory oversight and hedge fund managers are compensated abased on a percentage of capital apprecaition in the fund
which of the following are reasons to trade options
hedging and speculation
insideie market is
high bid low ask. sell at the bid on the left and buy at the ask on the right
the term marriage penalty refers to the
higher tax rates applied to higher joint reported income
the size of the market is first the
highest bid first number of the size, and then the lowest ask second number of the size
annual audited reports are req to be sent by investment advisers to their clients if the adviser
holds customer funds, ahs discretionary control under a full power of attorney over customer accounts
the tax basis for an ivnestor ina limited partnership that establishes the max loss deudction is
original investment plus partnership debt assumed plus partnership gains or minus parntership losses. for example if an investor puts down 10k and signs a reoucrse note for 40k the investors beginning tax basis is 50k.
under investement advisers act of 1940 NOT exempt or excluded from registration as investemnt advisers are those who give advice to
other investement advisers (investmenet copmanies) for SEC rules this is not excluded but for the state laq it is exempt. for sEC to have jurisdiction over an adviser the adviser must operate interstate
small cap
over 300M to 1B, mid cap 1-5B large any over 5B
large cap
over 5B
amendments to filings made with the admin to make changes or to correct misstatements or omissions must be made
p'romptly
a value investor would consider a companys
p/e ratio, p/book ratio, market share.
income from partnership interests
paassive income
attributes of equity indexed annuities
pariticiaption rate and floor
thre registratino of a BD automatically constitutes the registration of any agent who is a
partner of the firm
if an investment adviser puts its records on microfiche or electronic storage media, all of the following are true
the paper or hard copy form, as those records kept in their original form, must be preserved and maintained for 5 years, the duplicate copy of the record may be immediately reproduced in medium chosen and must be maintained for 5 years the original and duplicate copy of the record must be stored in separate locations for 5 years
registration of an investment adviser in a state automatically registers any investment adviser rep that is a
partner of the investment adviser. named in the registration statement for an investment adviser are the partners, officers and directors of the adviser. these persons do not have to make a separate investment adviser rep filing in the state. any persons who sells advisory services, or who solicits the purchase of advisory business, must register as an IA rep.
which is an advantage of investing ina real estate limited partnership
partnership earnings fcan be softened by depreciation deductions when they flow through to the limited partners
1065
partnership tax return
an investor in a limited partnership gnerating passive losses can offset these against
passive income generated from other limited partnership investments, and income generated from direct investemnts in real estate
which is true about paying a referral fee for investment advisory business to an unlicensed individual
the payment of referral fees to unlicensed indiv is prohibited
passive losses from an ivnestement in a limited partnership can be offset by
passive income. incoe received from direct investements in real estate and limited partnership investements is characterzed under the tax code as passive income. passive losses( like investement in limited partnership losses can only beffset against passive income
real estate limited partnershi
passive investements, illiuquid, tax deductible lossses are obtained trhough depreciation deudctinos while positive cash flow is geernatied , when real estate is sold capital gains may be generatined
a portfolio invested in actively managed funds that is rebalanced anually is cnosiered to be
passive/active (rebalancing annually is passive) the rebalance comesfirst
a portfolio that is invested in index funds that is realanced annually is
passive/passive
index funds are
passively managed and nefotiable
index ETFS are
passively managed and negotiable . almost all etfs are passively managed and they trade like any other stock and are negotiable
weak form
past prices haev no correlation to future prices, technical analysis cannot be used to improve results
cpaital need
paying for college, maturing of residents balloon loan, having funds 20 years from now for retirement. NOT a capital need: borrowing money
a customer owns a cash value life insurance policy any of the following can results in a taxable event
payment of a death benefit, taking a partial withdrawl from the policy, surrender of the policy
under SEC Release IA-1092 which of the following are specifically included under definition of an invesetmnt adviser
pension consultants, advisers to entertainers, advisers to athletes. advisers to issuers are not specifically included but they would be req to register with the SEC if they meet the 3 prong test.
an investment adviser that claims it is a fee only adviser could be compensated based on
percentage of assets under mgmt, flat anual or hourly fee for all work performed
Internal REvenue Code SEction 1031
permits a like kind exchange of appreciated real estate for another investmnt property to defer capital gains tax due
an indiv account transder on death
permits transfer of assets directly to the named beneficiary upon death of the account owner bypassing the estate and probate
the use of custoemr names by an invesetment adviser to pormote the sale of firms advisory services is
permitted if adviser notifies each client of its intentions and the client consents to such disclosure
an ivnestement adviser wishes to charge a "2 and 20" management fee consisiting of 2% annual average net assets and performance fee of 20% of asset apprceation this is
permitted only if the celints invest at least $1M or habve a net worth, exclusive of residence of 2.1M because of "federal supremacy' NASAA can't override this exemption
discounted fees
permitted only if they are disclosed in the Form ADV Part 2A (IA brochure)
an unannouced audit of a federal covered adviser by the state admin is
permitted only in the event the admin suspects fruad
NASAA ,argom
permitted to trade a margina ccount prior to signing if they sign promptyl
copies of order memoranda maintained by investment advisers must contain all of the following
person connected with investment adviser who recommended teh transaction to the client, person who placed the order, date or order entry, terms of the order, name of account for which order wasentered, name or BD or bank to whcih order was sent for execution, whether the rder was discretionary
copies of order memoranda maintained by investment advisers must contain all info
person who placed the order, name of account for which order was entered, person connected with investment adviser who recommended the transaction to the client
when comparing the alternative min tax calucation to the regular income tax calucation which deducions are ONLY permitted in the regular income tax calcuculation
personal exemption, state and local tax (including property taxes) deduction, miscellaneous itemixed dedcutions. in both is edical expense deduction if it exceeds 7.5% of adjustemed gross income for regular income tax and if it exceeds 10% of adjusted gross income for AMT
when comparing the alternative min tax calculation to the regular income tax calculation which deductions are ONLY premitted in regular income tax calculation
personal exemption, state and local tax deduction and miscellaneous itemized dudction
regular income tax calculation deductions
personal exemption, state and local taxes paid (includeing proprett taxes paid), no miscellaneous items such as tax preparation fees and no standard deduction
req for copies of order memoranda maintained by investment advisers must contain
pesron who placed the order, name of accuont for which order was entered, name of BD to which the order was sent, conditions of order, name who recommedned the transaction, date of order entry, name of account, whether it was discrtetionary
the term issuer applies to a
pesron who proposes to sell a security or who issues a security
burden ofproff is with the
plaintiff
the portfolio construction most suitable for a pension fund seeking current income and safety of prciniapl is
pnesino plan is tax deferred so NOT type of muni is appropriate such as GO bonds. the appropriate in a pesnsion is treasury bonds, corp onds, covered cal writing
an insuracnce company that sells an equity indexed annuity would use which method to credit the change in investment value
point to point
universal life insuracne
policu owner can skip some premium payents after cash value builds, cash value is invested in insureres general account, policyu owenr can use cash value to increasethe death ebenfit.
universal life
policy owner can change premium payments and amount of death benefit. the cash value is invested in the insurers general account, so policy owner does not have a choice of investements and rate of return is not fixed. it will vary with the return of the general account
the gov of a foregin country has been overthrown and the new gov renounces the old gov debt. any existing bondholder has just experienced
political risk
a bond investment strategy that minimzes interest rate risk by adjusting the portfolio duration to match the cleints investment time horizon is called
porttfolio immunization
which is true regarding post registration req
post registration req cover maintaining books and records, req filings, giving reports. these are req for BDs and investment advisers NOT their agents.
to register as an investment adviser under the investment advisers act of 1940, all of the following are req EXCEPT
posting of surety bond- you don't need to do that as an investmnet adviser under investment advisers act of 1940
a 62 yr ikd iwns non qual variable annuity contract. he makes a withdrawl . tje amount of the withdrawal is
potentially subjet to taxation at ordinary income tax rates
what investment would be subject to the greatest negative impact from an increase in market interest rates
preferred stock
which security is most affected by interst rate risk
preferred stock. is a fixed income security witha perperutal life there is no stated maturity this is thelongest term fixed income security avialable and its price is greatly affected by interst rate risk
an issuer has filed a registration statement with the sEC but the reg is not yet effective. the issuer subsequently files additional documentation with the SEC to meet is full and fair disclosure, obligation. any agent that is contacting a potential customer to buy the issue must provide the customer with the
preliminary prospectus and prospectus supplement
variable universal life
premium and coverage amounts can vary
which statement concerning variable universal life policies is correct
premium and coverage amounts can vary
all of the following concerning variable life insurance are correct
premium payments are level and fixed for insured lifetime, the cash value increases based on equity investments, policy loans will reduce the amount paid at death. a level annual premium is inveted in a separate account, typically in equities. better performance of securities in separate account will increase death benefit so the death beenfit isnot fixed. part of this can be borrowed
which of the following is true regarding payouts from ariable annuity contracts
the payout is determined by number of annuity unitys, when payout commences unit value varies while the number of units is fixed
delivery of thebrochure under brochure rule is required for
prepaid advisory fees requiring payment in advance of 1k or more, advisory contracts with pension plans. the brochure is not req for sale of impersonal advisory services calilng for no more than 500 annual fee or sale of advisory service to investment companies.
which is req to be recorded on executed order tickets
price of execution, time of order recipt time of order execution, price at which the order was executed
duration is a measure of a bonds
price volatility
the efficient market theory states that securities markets are efficient if
prices instantaneously and fully reflect all relevant available informatin
semi strong form
prices respons rapidly to publciy avail infoso that no potential gains can be made by traiding on it. implies anyone with inside info has advantage
under the Investment Advisers Act of 1940, the term investment counsel may only be used by an investment adviser if the
primary business of the adviser is the rendering of investment advice
registration by qualification would most likely be used for a
primary offering from a new company.
under regulation SP, customers must be given a privacy notice
prior to the first transaction, at or prior t oaccount opening. and then at least annually therafter
which is covered by ERISA
private employee pension plans
a hedge fund is a
private investmetn fund for sophisticated, accredited, investors. typically limited to 99 investors so they do not have to resiter as investment companies under investment company act of 1940
monte carlo simulation is used to assess a portfolios
probability of achieving investment returns under varying conditions
issuer transaction
proceeds go to the issuer a non issuer is where proceeds fo to someone other than issuer like shareholders or officers
a registered securities agent solicits a customer to buy shares of stockthat the agent personally owns. the customer buys 100 shares of the stocka nd senda cehck made out to the agent. the agent does not record the trade on the books of he BD . this is
prohbiited private securities transaction
which is true regarding payouts from variable annuity
the payout is determined by the number of annuity unitys and when the payout commences unit value varies while the number of units is fixed
universal life
the policu owner can change schedule of premium payments. after cash value increases, the owner can skip a premium payment or policy owner can use cash value to buy additonal insurance. the cash value is not invested in equities but it invested in insurers general account. any cash value policy is permanent insurance the insurer can not choose to non renew the policy as long as premiums are paid
which of the following would cause payment of a term life policy death benefit to be deinied
the policy has lapsed because of non payment of premiums
under which of the following would a universal life insurance policy oerate as term insurance
the policy owner pays a cash premium equal to the required mortality and expense charges and has no cash value
which can be effected ina cash account
the purchase of marginable securities, the pruchase of non marginable securities the long sale of marginable securities. nooly lon sales are permitted in a cash account but you can do both purchase of non marginable and marginable and sales long of marginable securtiies
which of the following are major tax benefits of real estate limited partnerships
the real estate can be depreciated even if its market value is increasing, non recourse financing is included in the basis, interest on loans is fully deductible, long term capital gains may be acheived when the real estate is sold
an issuer has filed in a state to register a new issue by coordination. the registration has been stopped by the admin. now the admin has vacated the stop order. this situation could occur if
the registrant has failed to pay req filing fees but the registrant has remedied the situation
which of the following statements may be made by an agent about a new securities issue that is being registered by filing
the securitiy is being registered in the state
under securities act of 1933, commercial paper is an exempt security if
the security represents the non convertible debt obligation of the issuer and the security is issued with a max maturity of 9 months. it is exempt if it is non covnertible corp debt with a max maturity of 270 days
which of the following statements concernign a distributino reported by a mutual fund as a capital gain on form 1099-DIV is correct
the sharehodler generally pays long term cap gains tax regardless of when the shareholder purchased the mutual fund
which is true about life annuity
the shoretr the expected annuity period the larger the monthly payment, a life annuity usually pays the largest amount of alof the annuity paym
a registered securities agent solicits a customer to buy mutual fund shares. the customer buys 200 shares, sending a check made out to the funds custodian bank to the agent. the agent does not record the trade on the books of the BD. this action is
prohbited, private securities transactions are a prohibited business practice under the act. all trades effected by an agent must be recroded on the books of the BD
customer wants to tie amount paid to his BROKER to performance of recommendations this si
prohibited bc the commission cannot be based on account perfromance. it can only be the sizeof trade, dfollar amount ivnloved, fdificuly of trade
an investment adviser charges a 1% annual mgmt fee to all clients the advisory also says that if he does not produce a 20% annual return he wil refund the mgmt fee this is
prohibited because the adviser cannot make fee charges contingent on performance
an investment adviser rep recommends the purchase of DEFF stock to her client. DEFF is currently trading at $50 per share. the client is not terribly eager to make the investment, so the IAR tells the client that over the next 12 months, the adviser will repurchase the stock from the client at no less than $45 per share. this action is:
prohibited performance guarantee
an elderly customer in florida wishes to open a securities account with an agent that is located and registered only in the state of NY. the customers adult children have primary residence in NY. the agent tells the customer that he can only open the acct if the customer uses his NY address. this is
prohibited the agent is aware the customer is not a NY resident and must be registered in Florida for account to be opened
customer testimonial s in advertising
prohibited under investment advisers act of 1940. bea use of federal supremacy this prohibition applies at the state level
an investment adviser rep wants to share in the gain and loss of a customer account. under NASAA rules this is
prohibited. investment advisers and reps are held to fiduciary standard, if they are making investments personally they are already investing alongside their clients. IAs and IARs can't share in gain and loss of a customer acct. if they are making personal investments they must be the same as those made for clients, and all will experience the same gain or los anyway. this completely differs than the rule for BDs and their agents who are not held to fiduciary standard
an investmetn adviser rep wants to share in gain and loss of a customer account. unde rNASAA rules this is
prohibited. this compeltely differs than rule for BDS and their agents who are not held to a dfiduciary standard
all of the folowing are req to find future value of an invesmtmnet
projected growth rate, investment time horizon, present value of the investment
an investment adviser that is registered with the SEC under the investment advisers act of 1940 moves to a new location. an amendment to ford ADV must be filed with the SEC
promptly
NASAA rules customer must sign and return margin agreement
promptly after the initial transaction in the account
under NASAA rules a customer MUST sign and return the margin agreement
promptly agter the intial transaction in the account
the admin defines the completion of the registration application process as the receipt of the
proper documents and the filing fee
a state admin can require that a new investment adviser who files a registration application in the state file
proposed ads, announcement of the application in 1 or more newspapers, standardized form letters to be used for prospecting
whole life insurance
protects the purchaser from increasing premiums as that person ages and there are no renewals the annual premium is level and will start out higher than a term life policy. part of the premium is invested in insurnce companys general account and is guaranteed to grow at a fixed rate. as general account investement portfion grows the policu builds cash value that can be borrowed. any borrowed funds reduce the benefit payment upon death
an admin alleges that an agent of an out of state BD solicited the sale of an unregistered security within the state. the BD must
provide evidence that the security was exempt from registration
the securities act of 1933 was enacted to
provide full and fair disclousre in new issue offerings. regulated the issueance of new securities.
spread
purhcase and sale of a call or put at different strike prices or expirations
an investor buys 30k 10% copr bond maturing in 2045 for 2k. the bond is callable in year 2020. what is the most approporiate measure for caluculating yield
pying 24k for 30k bond so at a discount. 20% LESS SO 100 ANNUAL INTEREST RECEVIED/ 800 purchase price = 12.5% the issuer would have to sell new bodns and pay 12.%% therefore this is not likely to be called so use yield to maturity on dicount bonds
the admin will give a specific response before the effective date for issues that are registered by
qualification
the admin will give a specific response before the effective date for issues that are registrered by
qualification, registration becomes effective ona date set by the admin.
an offering of fractional interests in oil and gas programs would be registered in a state by
qualification. fractional interests in oil and gas programs have no sieeur.
an investment adviser is a private fund adviser that is not req to register with the SEC. in order to maintain its exempt adviser status, it can only solicit investors who are
qualified. private fund advisers with less than 150M of assets under mgmt are exempt from registering with the SEC. a qualified purchaser it is an indiv or trust with at least 5< of assets avail for investment or investment mger or company with at least 25M of assets available for investment.
whcih is the best measure of a company's solvency
quick ratio
NPV
rate of return from the investement is greater than the discount rate used in the computation
sharpe ratio
rate of return- risk free rate/standard deviation
INernal REvenue ccode section 1031 permits the like kind exchange of
real assets, the property must be purchased within 6 mo of the sale date of the appreciated porperty its not for personal use of real property itt is only avialable for investemnt propretrty
which recommendation is suitable for an ivnestor who beelives that the economy will experience an extended period of inertial inflation
real estate
whcih investemnte offers the gratest pteoction against puchrasing power risk
real estate investemntes (purchasign power risk is inlfation risk)
what rate would be used to find present value of a TIPS
real rate of return at the time the bodn was issued, nominal rate of the bond, coupon rate of the bond
what rate would be used to find the present value of a TIPS
real rate of return at the time the bond was issued
whatrate would be used to find the presetn value of a TIPS
real rate of return at the time the bond was issued
whena manager liquidates securities out of one asset class and investes proceeds in another to maintain desired asset allocation percentages as market prices move the manager is
rebalancing the portfolio
under brochure rule existing customers of an investment adviser must
receive a borchure at least annually only if there are material changes within 120 days of fiscal year end
under the investment company act of 1940, a customer wishing to sell mutual fund shares held for over 3 years
receives the next computed net asset value
under investment advisers act of 1940 a person is in the business of giving investment advice if he or she is compensated for which
recommendations of securities, analyses of securities, reports about specific securities
an investement policy statemetn would include
recommended allocations among differing asset classes, expected returns of reommenede starategy and exepcted range of these r
unit investemetn trusts
redeemable securities and do not trade
exchange traded funds can NOT be
redeemed with the sponsor
a 20 year 5% bond is quoted by a dealer on a 6% basis. the bond is acllable in 10 years at par. to calculate the dollarprice for the bond the dealer would use the
redemption date to find the number of years over which the discount would be earned. to approximate the price for a long term bond divide coupon by basis= 5/6 * 1000 par = 833. a discount bondis one that the issuer would not call because market interest rates have risen. to bring a 5% coupon up to a 6% yield implies that 1% will be earned each year. the worst case scenario is the bond being held to maturity. dealers must use yield to worst pricing. for discount bonds this is if bond held to maturity
under the uniform securities act, which of the following is an issuer transaction
redemption of a mutual fund, purchase of limited partnership interest from sponsor, purchase of an IPO from underwrite. NOT trade of a NASDAQ listed security. (this is a regular secondary market transaction not an issuer transaction)
an investor has a boradly diversfied portfolio of blue chip stocks. the use of index potions to hedge the portfolio
reduced systemativ risk. index puts.
an investment adviser wishes to use a paid solicitor under investment advisers act if 1940, which is true
the solicitor must provide customer with a copy of investment advisers brochure, the solicitor cannot be subject to stautory disqualification under the securities acts, the solicitor must disclose to the customer any additional costs of providing advisory services due to relationship ebetween solicitor and adviser.
what is the trading characateristic of a fixed UIT
the sponsor makes an OTC market in trust units
as a condition of registration, req that BDs records be kept on file for
the time period prescribed by federal law. for those advisers that are not federal covered the records must be maintained for a period of time specified by order of the admin. the admin can lengthen or shorten record retention req.
what is the befnit of forming a business venture as a genral partenership
reduced tax liability. gerenal partnerships are not taxable entitiies. tiems of income and loss flow through onto the general spartners tax returns and are not taxed at the partnership level. singel level taxation is a benfit for this businesss structure each general partner has unlimited liability , each partner can have different ownership percetnage , dissolution only occurs if compoisiotn of the partnership changes new admitted or exting leave and a new partnership is formed
fees
referral fees cannot be paid by an investmtn adviser to an unlicensed indiv, commissions cannot be shared by an agent of a BD with an unlicensed indiv
under the unfirom securities act the financial records of a BD must be retained for
the time period specfiied by the securities exchange act of 1934 and if the record is not specified in the 1934 act then the time period specified by the admin. if there is a retiention period for the same record set by both regulators than federal supremacy dictates that the record be maintained under the 1934 act req even if this is longer tan the admins rule
a firm holds a joint cash acct for a husband and wife. the wife calls the investment adviser and says sell 500 shares and send a check to my name. the rep should inform the wife that
the trade can be perfromed but the check must be made out to both names on the ac
a person who renders advice on variable annuities for a fee and who then sells the annuities charging a commission must
register as an investment adviser in that state, register as a BD in that state. variable annuity is a NON exempt security under uniform securities act. if advice is registered for a fee about variable annuities then reg as investment adviser would be required. if variable annuity is sold for a commission then the firm must be a registered BD as well
under SEC act of 1934 national securities exchanges must
register with the SEC, have their rules approved by the SEC, enforce their own rules under SEC oversig
if a BD with no office in that state effects an isolated non recurring trade in that state in a 12 mo period
the transaction is exempt and security is not req to be registered in that state. the BD still must be registered in that state unles there is a de minimim exemption.
ETFs are
registere etfs are structered as open end investemnet companies since they allow for creatino of addional share d under the invesetment company act of 1940 as open end management companies and are regulated by SEC and FINRA. they allow fror the creation of addional shares like an open end fund but they are listed and trade like a closed end fund. mos
exchange traded funds are
registered under investmetn company act of 1940 and open end management companies
the term blue skying a new issue refers to
registering the issue in each state where the securities will be offered to customers
under SEC act of 1934 member firms are rseponsible for
registering with the SEC, maintaining min net capital req and reporting net capital to the SEC, sending the member firm's financial statements to customers twice a year, being audited at least once a year
all can be files electronically with the state
registration application info, signature req, payment of fees
an officer of a company that wishes to register shares in a state in a "non issuer" distribution would rely on which registration procedure
registration by filing
which is true regarding registration of a security in a state
registration is effective for a time period of one year, a registration statement can be filed in a state by a person other than an issuer
the bluesky state laws provide for
registration of BDs and agents, registration of investemtn advisers and investemnt adviser reps and regsitration of securities issues. however the issuer itself is NOT registered in the state under uniform
ADAP ADvisors is a state registered adviser with 7 IARs. one of the IARs, mark, leaves the employ of ADAP to join another advisory firm. his accounts are assigned by ADAP to the remianing 6 IARS at ADAP. by taking this action,
ADAP is not req to take any further actinon, the customers contract is with the advisory firm not the IAR/ the firm can reassign customer accounts to any IAR at the same firm without notifying the customer
under the provisions of uniform sec act, the admin is prohibited from revoking a
registration retroactively. can't revoke a registration in the future or retroactively based upon facts known at the time that the registration was granted. the admin can revoke a registration as long as an opp for a hearing is provided within 15 days. the admin can modify the definition of an exempt transaction or can deny an exempt transaction. they cannot deny registration in a state of an exempt security sucha s us gov bond or muni bond however admin can req person selling the securities in the state to be registered
an indiv buys a multiple dwelling apartment house for investment purposes he is hoping that real estate will increase in value however real estate prices decline by 20% due to an unfavorable tax ruling. this is an example of
regulatory risk
primary risk with muni bonds
regulatory risk, the risk of law changes primarily tax law changes
an investmetnt adviser that has filed a form ADV with the SEC may say that he is
reigstered with the SEC
an etn does NOT have which risk
reinvestment risk because it is a sturcuterd product offered by banks that gives return tied to a benchmark index. backed by the faith and credit of the issuing bank thus if banks credit rating is lowereed there is credit risk. ETNS make no interest or div payments so no reinvestement risk any gain at sale or redemption currently taxed at capital gains rates
all are considered comp to an investemnt adviser
related to giving of advice, commissiones earned on receommended trades, markeups earned on rec trades, commissiones earned on life insurance sales
seelling a put against a stock poistion sold short is sutiable when market is expected to
remain stable
the pircniapal benefit of establihsing a living trust is
removal of assets held in the trust from the decendts estate, avoiding probate.there is no will that can be contested. trusts are federally taxable entitities so there is no tasx defered build up of earnings in trust . they do not limitate estate taxes
a money manager that employs momentum investing makes investment decisions based on the
reported earnings of the company as compared to the whisper number(markets expectation for reported earnings of the company)
under the inv advisers act of 1940, all of the following are defined as investment advisers except a firm that prepares
reports on the outlook for the US economy
which wuold be defined as an agent
represents a BD or isser in effecting securities transactions. an insurance person who sells variable annuities to customers, a sales asssitant at a BD who only acepts uncoliscted orders . it doesn't matter if the orders are solicited or not.
the admin may under unfirom securities act during an ivnestigation
req an affidavit frmo agnet of a BD, subpoena boks, records and witnesses, req testimony that might tend to incrimainte te giver
the filing of an udpated FOrm ADV with the SEC by a federal covered adviser at fiscal year end is
req for each federal covered adviser without exception
safe harbor
req mandatory annual employer matching contributinos andreq 100% vesting of employer paid benefits
an agent is agrieved by an action of admin summarily suspending that persons registrtion. the agent can
request that the matter be set down for a hearing
ERISA rule 404c a qualified retirement plan that offers partiipcant directed investments is
required to offer at least 3 diversisifed investment alternatives that have amterially different returna nd risk chractersitics, permitted to offer an investemetn option that consists only of the publicly traded stock of the company as long as the stock is publicly traded and the partiicapnt gets the voting rights
a chinese wall must be retained between all the following
research adn trading, research and sales, invsetmtn ba
a chinese wall must be maintained by a BD between investment banking and which departments
research, trading, sales
an agent of a BD wishes to withdraw his registration. if there is a customer complaint the admin
retains jurisdiction over the resigned agent for 1 year from withdrawal date
member firm complaint resolution
retin original compmlaint along with its resolution in agents file and send customer a photocopy of copmlaint, send the customer written apology letter and retian a copy in the agent file
receives check of 10k made payable to adviser instead of custodian the adviser should
return the check to customer and ask for new check be made payable to fund custodian. as long as eturned within 3 business days the adviser is not deemed to have taken custody
IRR
return which discounts the net cash flows to a perefestn value of 0
under NASAA rules, within 120 days of fiscal year end each cutomer must be sent an
revised brochure Form ADV Part 2 A and borchure supplement Form ADV Part 2B. if there are material changes. instead of sending entire brochure the adviser can send summary of amteiral changes section to the borchure along with an offer of the revised brochure. this annual procedure is not req if there are no material changes to the brochure
unde rthe provisions of the unifrom seurities act the admin has the power to
revoke the registration of a BD, investement adviser, or agent . the admin can suspend or revoke and can issue a cease and desist order.
if congresss decides to lower income tax rates the muni bondyields will
rise. if congress lowersfed rax rates then muni yields must risesincethe vslue of the fed tax exemption is diminished
sharpe ratio
risk adjusted rate of return relative to portfolio volatility
the sharpe ratio is
risk adjusted rate of return/standard deviation (rate of return- risk free rate of return/standard deviation)
all of the following are components of the capital asset pricing model
risk free rate of return, beta, expected market rate of return
which of the following are needed to calculate the sharpe ratio
risk measured by variability of terun, actual rate of return on an investment, rate of return on an investmetn with zero risk
a corp listed on the american stock exchange (NYSE american) wishes to distribute a stock dividend to its shareholders. which is true
the transaction is exempt and the shares do not have to be registered in the state. this has 2 exemptions- because it is AMEX listed its shares are exempt from registration in the staet (blue chip exemption) because no commissions or other remuneration are paid whena stock dividend is distributed to shareholders, the issuer could rely on this as well.
an investment adviser manages portfolio of a client on a discretionary basis. the cutosmers objective is conservation of pincipal and income. under prudent investor standards which is true about use of options in the portfolio
the use of options strategies is only suitable if the strategies are limited to the sale of covered options
if an investor has 5% of greater holding in a publicly held company and the purchaser does NOT intend to exercise control over that company (they will be a pssive investor)
then a 13g report will be filed with the SEC
Roth IRas
there is no tax liability upon withdrawl of funds after age 59.5. no req for distributions to start at age 72 (the gov doesn't care bc it does not get to tax these distributions) . all retirement plans effective jan 2020 permit
if an investment adviser maintains an acct that will hold customer securities positions at a broker dealer but the broker dealer does not know the identity of the indiv customers
this is known as an omnibus acount and trade confirmations and staetments are sent by the IA to its customers
a customer telepohnes a BD to complain that an agent forged her signature. which is true
this is only defined as a a complaint that the BD must document and rresolve if it is put in writing and filed with the BD(emails count as well)
63 year old man tha ti sstill employed earnings 30k who has a roth IRA
this person can continue to make non tax deductible contributinos
a customer buys 500 shares in a cash account and pays for securities in full on settlement. requests that the BD transfer the securities into the customers name and ship them to his home address. which is true?
this request should be honored as given. fully paid customer securities can either be held in custpdy of the firm where they must be segregated and kept in safekeeping or the custoemr may request that the securtiies be transferred into his or her name and shipped to the customer. securities in margin accounts can't be transferred and shipped
exempt transactions under uniform securities act
toronoto stock exchange, pacific stock exchange(san fran), mexico stock exchange, NYSE, NASDAQ. but not any other foreign exchange
avoid probate upon death of owner
totten trust(bank account with a beneficiary to whom funds go upon death), JTWROS, payable on death same as TOD
which accounts avoid probate upon death of an owner
totten trust, joint tenants with rights of survivorship and transfer on death
if a passively managed fund either underperforms or overperforms the benchmark index, this is called the
tracking error
the risk that a portfolios return will underperform the benchmark return is called the
tracking error
under provisions of unifrom securities act, NAFTA and GATS the state admin has the power to designate all of the following as exempt
trades on toronto exchange, american stock exchange, merxico stock exchange. NOT exempt is london stock exchange
statuutory broker dealer
trading a large volume of stock must register as staturtory BD
specialist buys the stock from the floor broker who wants to sell and then sells that stock for a penny more to the floor broker who wants to buy this is
trading ahead, this is a NYSE violation
a customer who is retired wants to select an investment that is liquid, marketable and that provides regular income. the best choice would be to recommend
treasury notes , pay interest semi annually while treasury bills do not provide a regular income stream
which are included in computation of stockholders equity
treasury stock, retained earnings, addiotnal paid in capital. common stockohlders equity consists of: common at par + capital in excess of par + retained earnings redueced by any buy backs of that company stock for its treasury
if an advisers registration filing is made electronically with teh state teh req to affix a signature to an app is met by
typing name in apprpraite fields and submitting filing electronically to IARD
which standard and pooorsrating is a bond first considered to be speculative junk bond
BB
EXEMPT
BD de minimims exemption applies to out of state BDS who only have 3 or fewer clients in that state . the investment adviser de minimims is 5 or fewer clients
activities that state law can't preempt
BD net capital requirements, custody rules, margin rules, financial responsibility rules and recordkeeping rules (all set by the SEC or FRB) can't be preempted by state rules
misstatements of material fact in a securities registration are violations of the act for
BD underwriting the securities, issuer of the securities and directors of the issuer of the securities
advertising and filing provisions of uniform state laq do not apply to exempt securities or to exempt transactions . they do apply to
BDs, investement adviesrs, adn their agents regardless of whether they are regiestered or exempt from registeration
administrators can req min Net Capital and Net Worth for
BDs. set by admin to register BDs and investment advisers. there is no such req for agents or investment adviser reps. issuers do not register under the act, only the non exempt securities that they issue must be registered.
when comparing an ETN to a structured product which is true
ETNS can be traded at any time while structured products cannot, ETN income is taxable at lower rates than income from structured products
ETN and structured product
ETNS can be traded at any time while structured products cannot, ETN income is tazxable at lower rates than income from structured products a structured product is non negotiable and if redeemed prior to maturity imposes an early redemption penalty . ETNS make no interest or div payments their value grows as they are held with any gain at sale or redemption currently taxed at cap gains rates thus they are tax advatnages compared to other structured debt products
to be registered with the SEC as an investment adviser, which are req
Filing of Form ADV Part 1, Filing of Form ADV Part 2 and payment of a filing fee. NOT req is a consent of service which is only for state reg
within 120 days of fiscal year end the customer must be given a copy of the
Form ADV Part 2 only if there are material changes , instead of whole brochure they can send summary of material changes along with an offer of revised brochure. this is not req if there are no material changes to the brochure
a private fund adviser (such as a hedge fund) with at least 150M of AUM is regsitered to the SEC. this is accomplished by filing
Form PF and Form ADV Parts 1 and 2 with the SEC and update these annually these are public document
an investor has a long term investimetime horizon no liquidity needs and is very risk averse. your main concern is
safety of principal
which is included on adjusted gross income on a tax return
salary and commission income, social security payments received, muni bond interst income. adjusted growss income is all sources of taxable income, including wages, commissions, roylaties, social securites,pension plans, invesmtn income and cap gians.
which ites are included ina clients incmoe statement
salary, interest from muni bond ivnestements, property taxes, interest paid on loans, insureance expenses,
the gift of an assessable security is defined under the uniform securities act as a
sale of a security
under unifrom securities act these transactions are EXEMPT
sale of securities by fiduciaries such as executors of estates or trustees in a bankruptcy proceedingare exempt. sales to financial institutions are also exempt since general public is not involved. unsolicited transactions are exempt from state registration req. these exemptions only apply to registration of securtiies involved. the agent must be registeresed unless they qualify for exemption of excluision
which are exempt under uniform securities act
savings and loan association stock, muni industrial revenue bonds, bonds issued by a company listed on the midwest chicago stock exchange. exempt securities include: securities issued by savings and loans, muni bonds, inclding industrial rev bonds and securtiies of companies listed on stock exchanges
premiums deoisted to a virable annuity contract are invested
seaprate account, primairly equit y
broker dealer registration is required under
section 15 of the securities exchange act of 1934
in a copr liquidation the first to get paid
secured bondholders, then unpaid wages and taxes, trade creditors, unesecured bondholders
prioirity of claim in a coprate liquidation
secured bondholders, unpaid wages, debenture bonds, subordinated bondholders , preferred stock and common stock
a BD is registering a security in a state by coordination. In doing so, the BD files the necessary paperwork with the SEC and is compliant with the
securities Act of 1933
the federal law that req the registration with the SEC of non exempt new issues is
securities act of 1933
which act can be used to coorindate a seucrities registration filing under the provisions of the uniform securities act
securities act of 1933
to use registration by coordination an issuer must file a registration statement with the
securities and exchange commission and admin of that state
regulation D
securities private placements cannot be sold to mre than 35 non accredited investors and may be sold to an unlimited number fo accredited investrors. no adevertising is permitted since that wuold bea public offer of these securties which would then require registration with the SECthere is advertising allowed if the offering is only made to acredited investors this le. the state laq parivate placement exemption under uniform securities act is an exemption if the securities are offered to no more than 10 investors and no commissions or other ocomp may b recieved in connection with the ofering
what disclosures are req to be made about securities account
securities products are not insured by the def deposit insurance corp, securities products are not deposits or other obligations of the financial institution and securities products are subject to investment risks, including possible loss of principal
federal covered securities
securities registered with the SEC that can't be required to register with the State ( but the state can req a notice filing) essentially these are exchange and NASDAQ listed issues
it is unlawful for nay person to offer or sell any security in a state unless the
security is registered in the state, security is a fed covered security in which case no registration is req, security is exempt from registration in the state, transaction is exempt in the state
under the ufirom securities act, the state admon has the power to deny registration to a
security issued by a not for profit organization
a farmer who is worried about declining corn prices should
sell a futures contracct. because he is a producer of the cop and is long the physical commodity. if he sells a futures contract he has a contract that proetects him from a price declien since the future sale price is established in the cnotract. he can close thecontract at a porfit if the price of commodity declines or can deliver the commodity for the higher contract price. buying a put on a futures contract would also act as a hedge since it establishes a fixwed price at whic
sell llimit and sell stop
sell limit are placed above current market and are filed if the price rises, sell stop are below and filled if the market price falls
a customer has a gain on a long stock position he wishes to protect the paporpirate order is
sell stop
80 year old customer not insurable so no anunities
sell that specualtive fund and buy another fund in same fund family. the customer will then not be hit with a new sdales charge on the purchase
a customer places an order to sell 100 shares of ABC stock that he cannot deliver by settlement date. the oreder ticke should be marked
sell- short. a short sale is the sale of shares which the customer does not own. therefore in order to effect delivery on settlement date the short seller must borrow the shares.
a customer could be obligated to sell stock at a future date if the customer is the
seller of a call
the president of a small company owns 100% of the company's stock. the president sells some of the company's stock to four employees and officers of that company without taking a commission. the president is
selling securities in an exempt transaction so no registration is required. common stock of a corp is a non exempt security that must be registered unless it is sold in an aexempt transaction. this transaction qualifies as a priv plae ment since the offer is made to less than 10 people and no commission is being taken. private palcements are exempt transactions meaning that the security involved is exempt from registration in the state
what is prohibited ina margin acct
selling short secruties that can't be borrowed by settlement
pension funds are prohibited from using
selling short securities
investmetn companies are obligated to send their financial statement to sharehodlers
semi annually
mutual funds must send their financial statements to shareholders
semiannually
funds for variable life policies are invested in
serparate account
the AIR (assumed interest rate) of a variable annuity contract is
set when the contract is annuitized
a debt/equity ratio of 1 means
shareholders and crediteors have an equal stake in the companys assets
which strategy provides a gain equal to the premium ina bear market
short call
which is used to generate additional income against a long stock positiino
short call . to generate extra income when stock market is exepceted to be stable.
bonds with high coupons or short maturities have
short duration numbers
which option position is used to generate additional income against a short stock position
short put, if customer thinks the market will remain flat to sell a covered put against his stock poistion earns extra income during that time period
which can only be done in a margin account
short sale of stock bc they req a substantial margin deposit due to risk of unlimited los
a new customer calls a rep and says I own 1k share of DEF stoc, which is currently held at another BD. i want to sell thse shares at the market the rep accepts the order from the customer the order ticket should be marked
short sale, because the shares are sitting at another BD they can't be delivetred to this firm by settlement. the account transfer process takes at least 4 busienss days and tpyicall longer, thus short. there is no such thing as long exempt and short exempt.
the difuciary engaged in the admin of a trust finds that under the directions of the trust document there is a conflict of interest relating to a prosed inevstment. under the provisions of the prudent investor act the fiduciary
should ask the setllor of the trust to amend the trust document by express provision, expanding or restricting the provisions f the trust documnnet for this ivestmetn
an investment adviser whose principal business is rendering advice to customers about securities wishes to prepare an ad which are allowed
showing past performance, using illustrative performance charts, using the term investment counsel . PROHIBITED: testimonials
403b
sll contributinos to 403b reduce taxable income so they are made with before tax dollars. the customer has no cost basis in the account . therefore all distrbutinos are 100% taxable at ordinary income tax rates plus a 10% penalty tax if custmoer is under age 59.5
an institutional buyer is defined under the uniform securities act as any person
so designated by the administrator by rule or order. uniform securities act exempts from registration in a state, any BD or investment adviser that does not have an office in the State and that only deals with institutional buyers.
which would be included in adjusted gross income on a tax return
social security payments, and distributinos from mutual funds subject to subchapter M, wages, commissions, royalties , social esecurity, pension plan payments, investement income and cap gains.
which one of the following items would be included in the computation of an investment adviser's net capital
sofa and chair owned by the advisor
an investment adviser agrees to direct ts portfolio trades to specific borker dealers at full commission rates in return for the bd providing the adviser with a elased new car paid by the BD
soft dollar arrangement, prohibited under unifrom securities act
a pesron who maintains an orderly market in a given security on a stock exchange floor is an
specialist/DMM
IAR has contract form but not brochure
IAR cannot have customer sign the contract unless a borchure is delvivered at the same time
what is true regarding use of social media by investment adviser rep who wishes to advertise services
IARs can place ads in social media as long as they disclose their affiliation with an investment adviser and their credentials
a futures contract contains
specific amount and quality of a commodity with a specific delivery time and location: contract amount, delivery date, delivery time and location, acceptable grades of the commodity for delivery
per capita
split by everyne names unless someone dies then it is split y the remaining people named
long the stock and short the call is an appropriate strategy in a
stable market
covered call writing is an appropriate strategy in a
stable market, covered call writer owens the underlying stock. he sells the calcontract to generate extra income from the stock during periods when the market is expected to be stable.
futures contracts
standardized exchange traded contracts. they are reguilatied by the CFTC, commodities futures trading commission. ebcause they are actively traded, it is eas to do an offsetting trade before the delivery date.
an investment adviser rep of a fed covered adviser with no office in the state only has non institutional clients. where must the investment advisor rep register
state
licensing of investment adviser representatives occurs at the
state level only
NASAA rulefor investement advisor contracts covers
state reg advsiers
state blue sky laws
state reg laws (also req registration of securities in the state) pre date the adoption of the fed securities acts in 1933 and 1934. at that point in time, the larger states passed their own laws to protect their citizens from stock swindlers who were selling a "piece of the big blue sky"
NASAA Model Rule 502 c applies to
state registered advisers and fed covered advisers only to te extent that the conduct is fraudulent or deceptive. NASAA rule 502 c sets the rules for investment advisory contracts. it only covers state registered advisers, fed covered advisers are subject to the rules of the investment advisers act of 1940, however the rule says that it applies to fed covered to the extent that the conduct is fraudulent or deceptive
a RIA that trades securities on behalf of customers is req to keep a record of the transaction that includes all of the following info
Investment ADviser Rep who placed the order, BD to which the order was sent for execution, person at the Investment ADviser who recommended the transaction
an investemnt adviser providing advice solely about muni securities is subject to
state registration, federal registration . depending on the amount of assets the adviser has . if an adviser gives advice only about us gov securities they are exempt from fed registration but not from state registration. there are no ad filing req in a state for securities or transactions that are exempt or for federal covered secrutiies. since munis are exempt securities the admin cannot impose an ad filing req.
any final order of an admin may be appealed to the
state superior court . final orders of the state admin can be appealed to the states court system the state superior court
an investment adviser rep of a federal covered adviser with an office in the state only has insurance companies as clients. where must the investment adviser rep register
state. investemnt adviser reps are not registered with the SEC only with the state they are physically located in and states where htey solicit advisory business
to calculate a companys debt/equity ratio the neede info is found on the
statement of financial conditino
a broker that is located in state A ,mails offer of securities to customer in State B. transaction is completed in State C the broker must be registered in
states A, B and C
which of the following is disclosed in Form ADV Part 1
states in which the adviser is registered, name of firm, address, phone number, officers and shareholders.
weak form
states that prices reflect all past publicly avail info but this has no validity for prefitcted furute price movements. price movements are random. techical analysis is basically useless to improve returns but fundamental analysis still has potential value
what is the most tax adavnataged investmtn return
stock dividned. no tax is due. stock dividends and stock splits are not taxable. the tax basis per share is reducded and number of shares is increased
the securities and exchange commission ajhs jurisdiction over
stock exchanges, transfer agents, bds, investemetn advisers snd MSRB, FINRA
all of the following are exempt securities under the uniform securities act
stock issued by a railroad subject to interstate commerce commission regulation, bonds issued by federal credit union, bonds issued by candian gov. EXEMPT Securities list: issues of companies subject to regulation by the interstate commerce commission, issues of banks and other depoistory institutions, and foreign gov obligations. corporate issues are non exempt (except for commercial paper and blue chip issues) and must be registered in that state.
semistrong
stock prices instantaneously relfect all publicly avail info, insiders have an inherent advantage when making investment decisions
included ina gross estate
stocks and bonds held in a joint account, roth IRAS, 403b proceeds, real property . NOT life insurance policy
what derivatives are defined as a security
LEAP and futures options while futures are deriviates andnot securities options contracts on futures are defiendd as a security. LEAPS are long term options on single stocks or indexes that are exchagne traded and are defined as securities . OPTIONS ARE SECURITIES, FUTURES ARE NOT SECURITES real estate options are not securities
to deny or revoke a securities registration the admin may issue a
stop order
the setting of specific goals for an investment plan to be created is known as
strategic asset management
a put option is out the money when the
strike price of the option contract is below the current market value of the stock
what is true about structured products
structured products offer an index linked return and a fixed maturity, structured products are principal protected and structured products have a credit rating based on that of the issuing bank
giving fictioius quotes and trading based on erroneous info is manipulative practice
subject to civil action
an investement adviser that solely follows and recommends listed securities is
subject to eiher state or federal registration
the sale of new issue of bonds by an insurance company is
subject to registratino with the SEC, exempt from registration in the state
which of the following issues MUST be registered in a state
subordinated debentures of a bank holding company listed in the pink sheets and common shares of an industrial company listed in the OTCBB. securtiies issued by public utilities are exempt. bank, savings and loans are exempt by securities issued by bank holdings companies are not. must be registered in a state unless the security is listed on a major exchange ( NYSE, AMEX (NYSE american), NASDAQ). Investment company securities are federal covered securities and can't be req to register in the state
a parentt who is a custodian in a UTMA acount can use custodial funds to pay for
summertime linguistics training for the minorthe parent is not supposed to use cudodial funds to pay for a childs basic living needs such as
to register as an agent in a state, the admin can req whi hc of the following
surety bond and qualifying written or oral exams. the surtey bond can be req if the agent will be handling discretinoary accounts or taking custody of customer funds.
if a corporation issues new stock at a price above par value, the excess above par is termed
surplus capital
an admin can issue all the following orders
suspending, denying, cease and desist
which derivatieves are NOT defined as a security
swap and real estate option
an investor has a boradly diversified portfolio of blue chip stocks the use of index options to hedge the portfolio reduces
systematic risk
to form a trust
tax identifcation number and anual tax filing on form 1041 must be done
divideens paid that are reinvested in the purchase of additional shares are
taxable at cap gains rates
attributed of a living trust
taxable build up of earnings in the trust, upon death, the decendednt's estate avoids probate. trusts do not eliminate estate taxes
funds withdrawn from an IRA after age 59.5 are
taxed at ordinary income tax rates and maintain tax free status if rollver to another IRA within 60 days
an officer of publicly traded company receives stock option grant
taxed if the options are exercised ands tock is subsequently sold
a 62 year old man takes a distrbiution from a non tax qualifed variable annuity. the distribution is
taxed in accordance with federal tax law. contributions to non tax qualified annuitioes are not deductible. dividends earned during the accumulation phase must be reinvested and build tx deferred. when distributinos commence at retirement age 59.5 or later the portion attributanle to the never taxed build up is taxed at ordinary income tax rates while the portion attributable to the already taxed contributino amounts is returned without tax due.
an investment adviser makes an offer to send, by mail, a free analysis covering top 50 stock picks in ana ad. in order for an indiv to get the report the adviser could req that indiv to
telephone the adviser and listen to oa brief sales pitch before taking the mailing info
uniform securities act is administered by
NASAA, North American Securities Administrators Association
under NASAA rules a customer MUST sign and return the margin agreement
NASAA- promptly after the intial transaction in the account. in contrast FINRA req the margin afreement be signed and returned prior to settlement of first transaction
which can be purchased on margin
NASDAQ issues and futures.
which securities can be purchased on margin
NASDAQ issues, NYSE, AMEX. new issues are not marginable for 30 days and every share of a mutual fund (open end fund) is a newly issued share. the purchase of listed options cannot be done on margin, full payment is req because these have a max life of 9 months. OTCBB and pink sheet issues are not marginable because they are thinly traded issues
as long as the adviser inadvertendly receives a check made out to a third party as long as the adviser mails the check out to the third party withing 3 business days then the adviser has
NOT taken custody, recgardless adviser muust keep a reocrd of the receipt of the check
federal law supersedes state law in most cases
NSMIA made clear that fed law will supersede state law regarding net capital rules, custody rules, margin rules, financial responsibility rules and recordkeeping rules (all set by SEC or FRB)
all of the following under securities exchange act of 1934 are defined as securities info processors
NYSE TRF, NASDAQ TRF (trade reporting facility), Pink Sheets (distributed bid and ask quotes for otc stock issues as does OTCBB
federal covered securities include
NYSE listed, AMEX listed and NASDAQ listed securities of an issuer and any senior securities (preferred stock and bonds) of that issuer
an investment adviser can give advice on
NYSE securities, options, variable annuities. they give advice about securities NOT commodities or futures contracts.
which is true regarding mutual funds
that days closing price is the basis for fund purchase price and redemption computations
a complaint
that must be recoreded and resolved is defined as one received by the BD in writing (email counts here), a verbal complaint does not count
each state admin administers uniform securities act the state blue sky laws
that req reg of bds, agents, non federal covered advisers and investmenet adviser reps
for investment adviser to be compedwith a performance fee all must be disclosed in writing
that the fee arrangement may create incentive for the adviser to make riskier investments, that the fee is based on both unrealized appreciate and realized cap gains, the nature and significance of any idex used as comparative measure and reason why is appropriate
as long as the client is in the US for less than 1/2 the year ad intends to return to canada
the BD can effect securities transactions in state Z for existing customers who are temporarily residing in the state
an existing customer of a BD registered in State A is vacationing in State B. which statement is true
the BD may solicit the customer in state B without registering in the State B
an agent of a BD wishes to create a website to solicit securities bus from customers. based on each customers responses to questions asked, appropriate investment recommendations will be made. what is true
the BD must review and approve the content of the website, the BD must be registered in each staet where a customer responds and so must the agent
an investment adviser rep quits her employment with a state registered adviser so that she can move to another state. she learns that the advisory firm with which she was employed did not notify the admin of her termination. which is true?
the IARs req to notify the admin of the termination
which is strue regarding the ability of the SEC to suspend trading on a national securities exchange
the SEC can suspend trading with prior notification to the President
if a defined beenfit plan is terminated due to the bankruptcy of a company and it has an unfunded pension liabioilty the shortfall wil be ocvered by
PBGX pension benefit guaranty corp
a BD is req to register with
the SEC federally initially they use FOrm BD ot do this. then te BD registers with self regulatory org such as FINRA. to register in thes taet the form BD has BD checkoff states in which it wants to register. the state uses the SEC approved BD app as basis for egisteringBD in the state fiven the appropriate reg fee is paid
an offering of securities in an amount that does not exceed 50M is given ane xemption from registration under the SEcurtiies Act of 1933's
REgulation A under Securities Act of 1933 gives an exemtion from registration to issues of no more than 50M.
a RIA headquartered and registered in State X gives advice only to insurance companies, pension plans and investment companies. the RIA has no office in any other state. the adviser does business in state Y and receives a letter from securities commissioner of state Y which explains that State Y believes that the advisor is req to register there along with a questionnaire to be completed and returned to State Y. which is true
RIA will not be req to be registered in State Y because it has no office there and it only deals with professional investors
private placements are exempt transasctions under securities act of 1933 under the provisions of
Regulation D, allows priate placement exemption if an issue is sold to a max of 35 non accredited investors. the issue can be sold to an unlimited number of accredited investors under this exemption and still be considered a private placement
management company open end
hsa a board or directors, type of invesemtn company under investemtn cmopanies 1940 act
intrastate offerings are exempt transactions under the securities act of 1933 under the provisions of
Rule 147, intrastate offerings, if all activity takes place within 1 state only state law applies to be exempt from fed registration, 100% of the issue must be offered and sold to residents of that state, the issuer must have its principal place of business in that tstae, and for a 6 month period after purchasing the issue, resale is only permitted to residents of that state
the buseinss formthat has a limit on the number of owners is a
S corp, limited to 100 shareholders
a business entity that has the legal protections of a corp and the tax benefits of a partnership is a
S corporation
when consideringinvesting in a DRIP div reinvestment plan the benchmark rate of return that should be used is
S&P 500 INdex
which is defined as an ivnestement adviser under the ivnestement advicers act of 1940
SEC includes pension consultants and advisers to professional atheltes and entertainers as investement adviser that must register with the SEC.
which statements are TRUE about the applicability of recordkeeping rules to investment advisers
SEC recordkeeping rules apply to fed covered advisers and NASAA recordkeeping rules apply to state registered advisers
federal covered securities are subject to
SEC registration requirements, SEC anti fraud statutes, state anti fraud statutes
13G reports are filed with
SEC, company that is the subject of the report, exchangge where copmny trades. 13G reports are filed by passive investors that pruchase 5% of more of a companys stock without intention to exercise control. (13d is filed if they intend to exreccise control). 13G is filed within 45 calendar days of year end. a copy of form is filed with SEC, the exchange and issuing corporation.
administration of the investment advisers act of 1940 is done by
SEC. FINRA only regulated BDs not investment advisers. CFTC regulates commodities and futures. NASAA regulates securitie administrators, each state admin administers the uniform securities act- the state blue sky laws
Rule 147
SECs intrastate exemption
under the provisions of the uniform securities act, net capital req for BDs must be kept in accordance with the provisions of the
Securities Exchange Act of 1934
which is tureabout BDs and admin
if a BD registratino is susepdned, the agents license is suspended, BDs but not agents, may have thir registration revoked for failing to supervise subordinates
state admin can req an investment adviser to retain certain records and can mandate the form in which these records are to be maintained. which is true
the admin can req any record to be maintained that it believes is in the publics best interest but cannot req records to be maintained that contravene federal rules
which is true about unsolicited customer transactions effected through a BD
the admin may req that the customer acknoledge the transaction with a written statement, the transaction is exempt under state law, the transaction is defined as a non issuer transaction
if the admin summarily suspends a registration of an agent, which is true
the admin must notify the agent promptly that the order has been entered, an oppfor a hearing must be given within 15 days of writenten request, the indiv is prohibited from acting as an agent in that state
an admin wil revoke the registration of an ivnestement adviser if
the adviser ecomes insolvent meaning theatthe firm cannot py its bill as they come due
which is true regarding an investment adviser that solely follows and recommend NYSE listed securities
the adviser is subject to either state or federal registration depending upon the amound of assets under mgmt
an adviser with 13M of assets under mgmt. has its main offices in Illinois and branch offices in Wisconsin, Indiana and Missouri. Which statement is true regarding registration of the adviser?
the adviser must register in Illinois, Wisconsin, Indiana, and Missouri
an adviser with 133M of assets under management has its main offices in Illinois and branch offices in Wisconsin, Indiana and Missouri. Which statement is TRUE regarding registration of the adviser
the adviser must register with the SEC. any adviser with 100M or more of assets under mgmt. is a fed covered adviser that is only req to register with the SEC.
when is a bank considered to be a BD
if a teller of the bank, when assisting a customer that is making a deposit of a payroll check, offers the customer a money market mutual fund that is primarily invested in treasury bills. banks are excluded from definition of BD and their employees excluded from definition of agent when selling bank products, but this is NOT the case when the bank and agents are offering securities. mutual funds holding money market instruments are securities BUT a mortgage and CD are bank products that wouldn't require BD registration
inside info
the agent can discuss the phone convo with his branch manager they would discuss withc ompliance dept which would in turn notify regulator
under ERIS rule 404(c) a 401k plan fiducoary would be relieved from liability resulting from the plan particapnts ivnestment directions
if each plan partiicapnt is notifed that liability for directed ivnestments is being trasnfe from the plan fidcuary to the plan partiicpant, if the plan offers investment options consisting of fixed income fund, growth funds anda a capital preservation fund
the admin is empowered to conduct an investigation
if it appears that a violation will occur or has occurred
under NASAA recordkeeping rules for investment advisers, any ad, circular or other communication must be retained
if it is circulated to 2 or more persons for a minimum of 5 years
2 layers of management fees
if it is the same type of service it is not ethical
aggent is registered with BD in that sttate
the agent can recommend securities suscch as mutual funds in capacity as an agent of the BD tehre is no separate registration req as an inv adviser rep to do so
a firm is retained by a company that wishes to make acquisitions of other companies to act as a finder. the finder can be considered to be a broker dealer:
if it receives compensation contingent on closing of the deal. finders may or may not require registration as a BD. if the transaction only involves sale of assets instead of securities then there is no req to be registered as BD. if finder receives retainer or flat comp then the finder is not BD. if they receive transaction based comp they can be considered statutory BD that must register.
when compring dollar weighted average return to time wreighted average return for a mutual fund investor, the returns will be the same
if no withdrawals are made and dividens are reinvested
a customer may be charged a higher than normal commission in a transaction that is difficult for the broker to execute
if the additional charge is disclosed to the customer prior to the placement of the order
there is no isnide info here if the analyst hinkt shte stock isnt a good investement
if the adviser and analyst were at the same parent company then it would be restricted to trade ahead of research. but the adviser can change mind about buying stock because they are at different firms
securities transactions efected by agents of BDs must be known to the firm and sueprvised by that firm
if the agent sells the private placements to his customers he has commited a violation by selling away forom his firm. thea ction cannot be taken unless the brother obtains written permission of the BD
agents and securities distribution unde rNASSAA rules
if the agent solicits transactions ina state where the agent is not registered the issuer can be held liable
if an agent of a BD is also an agent of an affiliated investment adviser disclosure must be made to any customer
if the agent will receive a commission for executing trades for that customer that are directed to it by the addiliated advisory firm
a custmer buys a premium bond with 20 years to maturity that is callable at par at any time during its life. in which situtation will the customer earn the lowest yield on the bond
if the bond is called in 5 years
an investment adviser headquartered in State A wishes to solicit customers in State B. Which statements are TRUE?
if the investment adviser has an office in State B, it must register in State B. if the investment adviser has no office in State B, it must register in State B.
when can a divorced wife receive social security beenfits based on ex husbands earnings record
if the marriage lasted at least 10 years, if the ex wife is single, if the ex wife is at least age 62
if an investment adviser acquires a 5% of greater holding in a publicly held company, it MUST file a 13g report
if the purchases were for either its proprietary account or its customer accounts and it intends to remain a passive investor. the filingmust be made within 45 calendar days of year end.
an investment adviser is permitted to use a soliciot to sell that advisers services to customers
if there is an agreement in writing between the soloictor and the adviser
must register as a BD
if there is an office in the state that effects exclusively with other BDs because there is an office in the state and effects securities trades
under uniform secrutieis act the ability to make a civial claim is lost
if three years have elapsed since security was purchased
limited partnerships
illquid, they do not trade because the partnership units are not transferable unless general partner approves most hedge funds are set up as limited partenrships
if an agent changes his place of employment from one BD to another, the registration must be transferred
immediately
reports filed by issuers with the SEC under Securities Exchange act of 1934 are made avail to the public
immediately (10k, 10Q, 8K reports
delivery of the brochure under the BRochure Rule is NOT required for
impersonal advisory services requiriing payment of less than 500 annually and advisory contracts with investmnt o
delivery fo the borchure under the borchure rule is NOT required for
impersonal advisory services requiring payment of less than $500 nnaully and advisory contracts with investement companies
IRR
implicit yield of a companys or invsement acsh flwos
the admin in regards to registration of securitiyes may
impound the proceeds from the sale of the securities until the issuer recevies a specified dollar amount, req the filing of original copies of confirmed subscription agreeemtns, require delivery of a propsectus
equity indexed annuities nd variable annuity a
in a year of sharply rising stock prices variable annuities will outperform equity indexed annuities, in a year of sharply faling stock prices, equity indexed anuities will outperform variabelannuities
to register an issue by filing the issuer must be
in business for the past 3 years, profitable for 2 of the past 3 years
under investment advisers act of 1940 if the SEC suspends or revokes the reg of an invesetment adviser an appeal may be filed
in federal court within 60 days
which statements are TRUE about surety bond coverage req for a registration application under the uniform securities act?
in lieu of posting a surety bond, the administrator must accept a deposit of cash in the appropriate amount, in lieu of posting a surety bond, the admin must accept a deposit of securities in the appropriate amount, the administrator is permitted to waive the surety bond req for registrants whose net capital or net worth exceeds a stated dollar amount
a federal covered adviser can be audited by the state admin
in the event the admin suspects fraud
balance sheet
inclued is cash value of whole or universal life insurnce
revocable trusts
income is taxed at the rate schedueld for teh grantor, the grantor has control over the assets contributinos can be taeken out of the trust by the grantor (the gifts were reovable) .on the other hand income in a non revocable trsut is taxed at rates of trusts these are same as rates for indiv but brackets ratchet up faster to a max rate of 40%
which are provided to shareholders in the annual reports of registered corporations
income statement, balance sheet, statement of changes in stockholder's equity and sources and use of cash statement, statement of chagnes to retained earnings
a portfolio manager would sell calls against the securities in the managed portfolio in order to
increase income and cash fl
the state admin ahs the power to do what to a gfederal covered adviser
increase the number of audit s that the admin makes of the adviser
a 5% coupon bond is being offered on a 6% basis. if interest rates for similar bonds rise above 6%, the basis for this bond will
increase. a basis quote is a yield to maturity quote. if market yields are rising the basis quote will rise, forcing the bonds price down. if market yields are falling, the basis quote will fall, forcing the bonds price up
an agent of a BD works on weekends building cars. the bus is so successful that the agents customers want to invest in venture. he sells each of his racing car buyers a 1% interest what is true
the agent has violated state law because securities sales must be approved in writing, in advance by the BD
prior to licensing an agent in a state, the admin may require the agent to do all of the following
indiv are NOT req to maintain a minimum net worth req to be registered in the state- this req is imposed only on BDs and investment advisers. the state can req a qualifying exam, to certify that they understand the state's blue sky laws and certify they understand responsibilities and post a surety bond
allowed to effect transactions in the account of a custoemr who is metnally incapacitated
indiv given a durable power of attorney, conservator appointed by court of law, joint tenant that owns the account with the customer. a living will appoints an indiv to make only endof life medical decisions not financial decisions.
a sole priorietor applied for and acts under DBA. under fed laq the tax return that must be filed is an
indiv return form 1040 with sched c attached
when an investment adviser files a registration application in a state, which of the following is automatically registered at the same time
indiv who are officers or partners of the inv adviser that will act as reps
which are excluded from definition of agent
indiv who represents an issuer in an exempt transaction. indiv who represents an issuer in transaction with existing employees without accepting commission
PERSONs are defined as
individuals, corporations, partnerships, business trusts, estates, trusts, associations, joint stock companies or joint ventures, gov and political subdivisions of gov (for example a township), unincorporated organizations and any other legal or commercial entity
definitino ofa person
individuals, joint stock companies, unicropated organizations and trust wwhere the interests of the beenficiaries are evidenced by a security. these enttites may then be further defin as agents which can only be indiv . broker dealers can be incorprated or unincorporated businesses or issuers which can be incoroparted or uniccoprated businesses, joint ventures, municipalities etcc
securities that are EXEMPt under unifrom securities act
industrial loan association issues, insurance company issuers, federal credit union issues and bank and savings and loan
when prices in an economy are adjusted with relation to a price index by force of contract this is
inertial inflation. contractually embeded in economy. COLAs in union and gov employment contracts are tied to icnreases in the inflation rate. as wages rise due to COLAS it creates inflatinoary pressure on prices og goods so their prices rise which trigers another COLA increas
the real interest rate is the incremental interest earned by an investor above the
inflation rate
an investment adviser is selling a wrap acount where the assets are held in custody of the advisory firm. the wrap fee brochure must include
info on investement advisory fees, info on participation or interest in client transactinos and balance sheet of the investment adviser
registration by coordination would most likely be used for
initial public offering of an issue that will be listed in the OTCBB
dark pools are operated by
institutional broker dealers
EIAs euquity indexed annuities are regulated as
insurance by the state insurance commission. they do give a min guaranteed rate of return but this adds to the expenses fo the product. in a bull market they are capped to a mx return of around 9% so a variable annuity equity seaparate account wi
which of the following is NOT EXCLUDED from definition of investment adviser
insurance company. who is excluded: investment adviser reps, BDs, depository institutions (bank, trust, savings and loans) professionals (lawyer, teacher accountant, engineers) and newsletters that aren't about specific clients
what best decsribes equity indexed annuities
insurance product and principal protected
457 plans
intended for gov employees and some tax exempt organixations. cover only management and highly compensated emplyees usually, they are non qualified salary reductino plan, subject to same salary contributino limits as 401k and 403bwhen ditriebutions are taken they are 100% taxable. the big didffeernec is that there is NO 10% oenalty for early withdrwaawal bc fireman and policment
which are included in cash flow analysis performed when determining the current financial status of a customer
interest income, earned income, dividends
an agent of a BD is effecting non exempt transactions through a private investement firm. the arrangement has eben approved by the BD. who is not recording transactions bc they are on the books of the priv investement firm
the agent is permitted to do this bc the BD gave approval. the agent would also be req to register as an agent of the private investement firm as dual registration
a ustomer buys a new issue inflation adjusted gov bond with a 4% coupon at par. after the first year the inflation rate as measured by CPI has increased by 5%. for second year of holding the security the customer will receives]
interest of $42. TIPs have a fixed coupon that does nto cahnge. in the firs tyear bond will pay 4% of 1k par = $40. at end of year 1 because inflation was 5% the principal of the bond is adjusted to 1,050 and the investor will receive 4% of 1050 = $42 of interset
an unregistered agent effects transactions for a registered BD. under the uniform securities act, which statement is true?
the agent may be subject to disciplinary action
which are included in deductible passive losses on income tax returns of limited partnership investors
interest payments on secured debt, intanglible drilling costs, depletion allowances, the recovery of monies paid to buy oil or gas reserve are tax deductible since they are ordinary and necessary busienss sexpsense. HOWEVER repayment of principal on a loan is not tax dedcutble
a blue chip corp is making a bond ofering that is rated AAA during the issues first year of trading what is the greatest potential risk that a bondholder assumes
interest rate risk
bond portfolio immunization protects the portfolio against
interest rate risk
which are derivatives
interest rate swap, interest rate option, credit default swap. any swap is a derivative but not defined as a security. futures are not a security but options are defined as a seucrity.
to determine th epresent value
interest rate to be used to discount annual payments received, amount of cashexpected to be gerenrated each year by the investment, the time horizon of exepcted investement returns
dollar weighted average return is the same as
internal rate of return
the internal rate of return computatino assumes that cash flows will be reinvested ast the
internal rate of return
the rate of return implicit in teh cash outflows and cash inflows from an investemnt is the
internal rate of return (the yield that discounts all cash flows (inflows and outflows) to a present value of 0 . same as the true yield to maturity of the investement
cost of moeny is
interst rate
state law req the registration of all of the following EXCEPT
inv adviser reps with no place of bus in the state who do not solicit advisory business in the state and who are associated with fed covered advisors
found in the footnotes to a companys financial statements
inventory valuation method, potential legal liabilities, schedule of maturing debt , companys accounting policies (how inventories are valued, when revenue is "booked" lease payment obligations. details of schedueld maturitieis of long term debt and estmiate potential legal libaility
the offer of advisory services to 5 or fewer investors ina state is an exemption from
investement adviser or BD registration NOT agent registration.
which iis excluded in definition of ivnestment adviser
investement adviser reps, BDs, depoistory instittuions , professionals (lawyers, accountants, teachers, engineers) and newsleterts that do not render advice based on a specific client situation
federal covered advisers are subject to rules of the
investement advisers act of 1940
which is included in definiton of an investement adviser
investemnt company and insurance company
federal securities law supersede the provisions of the uniform securities in all areas except
investigation and bringing to enforcement actions with respect to unlawful bd conduct. national securities markets improvement act 1996 was passed to reduce overlap of fed and state securities regulation, as a general rule states have jurisdiction over securities transactions in the state while fed applies to interstate transactions. if any state law impedes fed legislation the fed law prevails
the following issuer must report to SEC under securities exchange act of 1934
investmeent companyies. only publicly traded corporatiens, limited partnerships and investemnt companies file annual audited 10k and quarterly unadited 10Q reports with the SEC. Muni and Federal isuers are exempt from the Act of 1934
if a rep that transacts business in a state terminates employment with an investment adviser, notice must be given to the admin by the
investment adviser
which is true
investment adviser offering its services in a state must either be registered in that state or must be registered with the SEC as a fed covered adviser, a third party solicitor for an investment adviser offering that advisers services in a state must be registered as either an investment adviser or an adviser rep in that state
excluded from definition of an investment adviser
investment adviser reps, depository institutinos (banks_, BDs, professional swho give incidental advice, publishers of general circulation periodicals and federal covered advisers.
which of the following with a palce of busines in the state are req to register in a state
investment adviser reps, federal covered adviser reps, , broker dealer reps
under the NASAA statement of policy on unethical practices, which of the following investment advisers would be able to loan monies where securities are collateral for the loan
investment adviser that has a registered BD that lends money to a customer through the BD affiliate, investment adviser that is a subsidiary of a parent bank that lends money to a customer through the bank affiliate, an investment adviser that is a corp lends money to its officers
exempt
investment adviser with no place of business in the state whose clients are other advisers, fed covered advisrs, BDS, depoisted taking insitutinos, insurance companies, investment companies, employe beenfit plans with assets of at least $1M, , any person with no place of business in the state that has 5 or ferewer cleitns in state in past 12 months. governmental agencies
which terms are defined under the uniform securities act
investment adviser, investment adviser rep, broker dealer. agent of BD (the fed name)
post registration req unde runifrom securtiies act
investment advisers are subject to post registration req, agents of investmtn advsers are not subject to post registration req. BDs and investmnt advisers post registration have to maintain books and records, make req filing with the admin, give customer reports, file ads and sales lit with the state. this does not apply to their agents ttough
under NASAA rules, each registered investment adviser must establish, implement and maintain a business continuity and succession plan that is based on the
investment advisers business model including the size of the firm, types of services provided and number of business locations
an agent living in one state wishes to solicit business in another state. which statement are true
the agent must be registered in the other state, the BD must be registered in the other state, if the agent is a partner of the BD, the agent does not have to register separately from the BD in that state
which are defined as federal covered investment advisers
investment advisers managing assets of 100M or more, investment advisers to investment companies registered under the Investment Company Act of 1940 (federal law). NOT defined as federal covered advisors are investment advisers to insurance companies. Federal covered advisors need only register with the SEC, they are not required to register with the state, though they may be required to file notice with the state
federal covered advisers
investment advisers that are registered with the SEC that can't be req to register with the state ( but state can req a notice filing) these are investment advisers to investment companies and advisers with 100M or more of assets under mgmt.
which of the following persons can use the term investment counsel
investment advisers whose primary business is the rendering of investment advice
which is true
investment advisers with assets of less than 100M are req to register in each state, investment advisers witha ssets of 100M are req to be registered with the SEC, investment adviser reps associated with advisers with assets of less than 100M can be req to be registered in each state
under the uniform securities act, an investment adviser is any person who is compensated for rendering advice about
investment contracts ( securities)
security
investment in a common enterprise for profit with mgmt. by a third party
a RIA uses past perfoormance in an ad. the results shown must be based on
investment income after deduction of mgmt fees and expenses
when analyzing cash flow all of the following are considered
investment income, taxes, earned income
an agent receives physical certificates from a customer that the customer wishes to deposit to his brokerage acct. which is true
the agent must forward the certificates to the BD immediately
what si true under securtiies exchange act 1934 about investment manager that has discretion over customer assets
investment managers who have discretion over 100M of customer assets must file Form 13. 13F is filed 45 days after the quarter ending where the adviser at the end of any month in that quarter, had 100M or more of customer assets with discretionary authority
which are ALWAYS resasons why an agent would be denied registration in a state
the agent was convicted of a drug felony 7 years ago and the agent was convicted of a securities misdemeanor 8 eyears ago. drunk driving is a misdeameanor in some states and felony in others. pending litigation that is not settled is not a cause for denial
variable life
invests a portion of the permium in a separtate account erather than the general account. the investement return of the separate account will determine the amoun tof insurance coverage hich can vary. variable life is similar to whole life except there is no guarantee of investement return, both have a fixed annual premium, are permanent insurance and build cash value
in an OTC agency trade, the member firm executing the order
is a broker and charges a commission
401k plans
is a cash or deferred arrangement or CODA, employee is usually given several investemtn options, employee elects to have part of his or her wages contributed to the plan instead of receivng that amount incash
an agent acepts an unsolicited trade from a new customer to by shares of a NYSE stock at current mkaret price the salesman executesorder and then forwards new account form to manager for managers signature what is treu
the agents actions are prohibited because the manager has to approve the opening of the account prior to the first trade
agent accepts unsolicited telephone order from new customer to buy 200 shares of common stock. execurted order then forwards new acct form to mgmer.
the agents actions are prohibited since the act must be approved by mger prior to opening
treasury notes or bonds
the agents has acted unethically because treasiru securities that are not a short term maturity have interest rate risk
if the alternative minimum tax computation is greater than the regular income tax computation which is true
the alternative amount is
estate or gift tax
the amount of tax due is based on the size of the gift or estate and a lifetime unified credit is applied against any tax due
structures products
is a reviative security that is structuerde to have the characteristics of a debt but give higher returns typically associates with equtiy securtiies, gives a rate of return linked to an equity index such as the S&P 500 index, structure products have fixed matrutiy at par in around 7 years based on embedded option in teh security. they generally consist of a bond portfion which pays interest based on perofrmnace of an index. the deivative component that qallows holder to sell security back to issuer at maturity. they are not standardized and are fairly illiquid
to register as an investment adviser rep in a state which form is filed
U-4 for fed and state reg of agents and state reg of inv adviser reps
which is permitted investemnts in an IRA
US minted gold coins and gold bullion, partnership units and REITS, ETFS annuities, real estate
under securities act of 1933 whcih is true regarding private placements of securities
Under UNIFORM SECURTIIES ACT private placement is offered to no morethan 10 persons where no commissions are paid. HWOEVER SEcrutiities ACT of 1933 REg D is different, priv placement if an offering to max 35 non accredited investors and unlimited number of accredited investors, no prhibition about commissions under 1933 act, ads can be made if it is only accredited invest
contingent bond portfolio immunization
is an investment approach where an active fund manager will switch to a defensive strategy if the portfolio falls below a predetermined point
an inv adviser opening that days mail reecieves a check from customer/ the checkwas mailed in error. 5 bus days later the inv adviser mails check back, the inv adviser
is deemed to have taken custody of customer funds, must keep a record of the check received
a customer wishes to place a buy order for a security that has not been registed with the SEC. the security may be purchased if the security
is exempt from SEC registration
inertial inflation
is inflation that is contractually embedded in the economy. for example COLA cost of living adjustments in union and gov employment contracts are tied to increases in the inflation rate.
an order ticket will be long in all of the following
is long a call on that stock that has been exercised, is short a put on that stock that has been exercised, holds fully paid convertible preferred stock of that issuer and has given instructions to convert
the amount of commission chargest to a customer to effect a securities transaction
is not req to be disclosed prior to executing the transaction, must be disclosed on the trade confirmation
an indiv is employed by a BD on a salary basis, soley to give info relating to trades of securities such as last sale price and size. this indiv
is not req to be registered in the state. an agent is defined as an indiv who represents a BD or issuer in effecting, or attempting to effect purchases or sales of securities. it EXCLUDES employees that do not solicit trades or who solely perform clerical functions. thus a person who solely gives out quotes to customers does not have to be registered since this is a clerical function.
a person who renders advice on fixed annuities for a fee, and who then sells the annuities, charging a commission
is not req to register as a broker dealer, investment adviser or agent. since a fixed annuity is not defined as a security( defined as insurance product_ state securities laws don't apply.
an agent registered in state A has a customer who lives in his parent's home in State A. the customer will be going to college in State B, where the agent is not registered. the agent would like to continue to do business with customer while he is in college in state B. the agent
is not required to take any further action because college students are considered residents of where their home is, not the state where they are going to college. since it is already an existing customer of the agent they aren't soliciting new business.
the use of a third party solicitor by an investment adviser
is permitted if there is a written agreement between the solicitor and investment adviser, is not permitted if the solicitor is subject to statutory disqaulification as defined under investment advisers act of 1940, requires that the solicitor be registered as either an investment adviser or an investment adviser rep in that tstate
a broadly diversified portfolio
is subject to market risk, can have its systematic risk reduced by the purchase of index puts
an indiv sels the securities of a federal charteded bank. this indiv will be EXCLUDED from definition of an agent if the indiv
is the employee of tha bank. employee of ISSUERS that sell sepcificed exempt securities are excluded from definition of an agent.these include employees of US gov selling treasury securities, employees of banks, savings insistutions adn trsut companies, selling that depository insistutinos securities. for example, employee of a bank seling that banks CDs is excluded
if an indiv aged 69 takes a withdrawal from his IRA which statement is TRUE
the amount withdrawn is subject to regular income tax only
a person makes an initial application for state registration on March 31st. which statement is TRUE regarding the filing fee?
the annual fee is not pro-rated and the full year filing fee must be paid
variable annuities during the annuity phase
the annuity unit value fuctuates, the annuity check received may be for a different amount at each paymetn . once the separate accout interest is annuitized the accunulation units are turned into a fixed number of annuity units. since the earnings in teh account vary each paymenyt based ona fixed number of annuityy units also varies
which can cause the admin to deny an application for registration
the applicant is the subject of an order from Canadian court suspending registration as securities representative
under investment advisers act of 1940 which of the following are disclosed in an investment adviser registration
the approvimate number of advisory clients, the approx market value of the portfolios managed and the compensation basis to the adviser
bonds issued by a church in Indiana are being offered to affiliated churches in illinois which is true
the bonds are only exempt securities in either indiana or illinois as long as a notice filing specifying the material terms of the offer is made in the state. the admin can rew the issuer to file a notice specifying material terms of the offer in the state and file copies of proposed ads and sales lit. can provide that the exemption becomes effective only if the admin does not disallow it within stated period usually 10 bus days, can disallow the exemption, can req the issuer to register in the state if the admin believes it is a commerical offering
time weighted average return
is the return measure used for mutual fund performance charts, assmes investment of a fixed amout, ignoring additional depoists or withdrawals of casha t different points in time, allows for accurate compairson of one funds performance to that of other funds
example of purchasing power risk
is the risk of inflation. inflation icnreases at a greater rate than expected, causing bond yield to rise and stock prices to fall.
the admin by order can deny any exemption from registration for which of the following
isolated non issuer transaction, sale of securities to a bank trust dept, a private placement. can change any exempt transaction but CANNOT change exemption from registration given to the securities specified as exempt under the act, such as US gov or muni bonds
a security is exempt from registration in a state if it is sold in an
isolated non issuer transaction. if a BD with no office in that state effects an isolated non recurring trade in that state, the transaction is exempt and the security is not req to be registered in that state. this is an isolated non issuer transaction but the BD still must be registered in the state
if an invesetment advisesr is found to be insolvent the admin has the power to
issue a cease and desist order, with or without a prior hering, directing the investement adviser stop dealing with cilents, petition the court to isue a pemanat injunction against a person from engaging in the investement advisory business, make the showing rēq to appoint a receiver to porotect the assets of customers held in custody of the invesetment adviser
no civil liability exists under the unifrom securities act if an
issuer offers to sell a security in violation of the act but no sale occurs . if no sale occurs then there is no civil liability
primary market offerings are
issuer transactions
misstatements of material fact in a securities registration are violations of the act for which people
issuer, director of the issuer, underwriter
the uniform securities act excludes from the definition of a BD any person who has no place of business in the state and who transacts business exclusively with
issuers of securities involved in transaction, other BDs or banks, savings institutions, trust companies, insurance companies, investment companies or pension plans. basically an out of state BD not dealing with the public will not have to register in the state.
all are registered with SEC under securities exchange act
issuers of securities listed on exchanges, the exchanges, transfer agents, clearing agencies, securities info processors, and issuers of publicly traded securities.
misstatements of material fact in a securities regiatsration are violations of the act for
issuers, directors of issuers, underwriters. NOT involved in securities regiatraion are agents
the advantage of buying a foreign index fund compared to direct investing in foreign stocks it
it is easier than individually investing in foreign stock
the admin may be order cancel the registration of a BD, agent, investment adviser or investment adviser rep if
it is found that the registrant is no longer in existence or has ceased to do business, the registrant cannot be located after a reasonable search, the registrant is teh subject of an adjudication of mental incompetence
what is true about solicitors brochure
it must disclose the specific dollar fee or percentage of advisory fee paid by the customer, that the solicitor will earn for referring the customer, it must disclose that the solicitor will be compensated for referring client to adviser and the customer must sign that they received brochure
if an ivnestement adviser wishes to take custody of client funds or securities
it must notify the admin in wrtiing on Form ADV that is has, or may have custody (they dont need the "approval of the admin. custody must be kept by a qualified custodian ina separate acct under each client name or in accts tha tonly contain client funds and securities held in investemtn adviser name as trustee for lcients, prompt notice given to cleitns in writing of qualified custodians name, address and manner in which funds or securities are maintained, acct statements must be sent quartelry and the IA must be auidted annually on a suprise basis
under the NASAA statement of policy, discretion may be exercised ina customer acct without first receiving a written power of attorney if
it relates only to the price of the trade or the time of the trade. the client can say buy me 100 shares of ABC when you think the time is right and the agent can choose the price and time without needing a written power of attorney
BothNASAA and SEC req that solicitors for investement advisers be registered as
ivnsetment adviser reps. occurs in teh state for both IARs of state registered adn fed covered advisers. it doesnt matter if they are an employee or independent contractor. solicitor must five potenetial client copy of IA brochure and solicitors brochure detialing relationship and fees that will be paid, ckent must sign and acknowledgement of recipt of both rbochures
a couple wants to leave assets in a brokerage account for each of their separate kids
joint account with tenants in common, percentage ownership being split up between husabnd and wife and each leaving their own will leavering their share to natrual children
defineid as persons under the unfirom securities act
joint stock companies, partnerships, estates and unincorporated busiensses
dividned yield
latest annual dividend/curreny market price
persons definition
legal entities. under the act may issue securities or can trade securities. legal terminology allows "persons" to be either human or non human- under the act a corp is considered to be a person
true for both limited partnerships and corporations
limit liability for the business owners, have centralized management, are formed with business intent
a trader who places order to uy shares at 64 when market prce is 68 placed
limit order
the purchaser of an immediate 15 year period certain annuty will receive payments for
a 15 year time frame following annuitization even if the purchaser dies before the end of the 15 year term
which persons is required to register an an investment adviser under the uniform securities act
a BD that charges an annual flat fee to customers for both investment advice and portfolio trade executions
the major differences between an open end fund and a unit investemnt trust are
a UIT portfolio is fixed while an open end fund portfolio changes, a UIT has a board of trustees while a management company does not
an investment adviser obtains a list of the 30 members of the local rotary clu and sends each a letter that includes a coupon that gives a 20% discount to club members if they purchase the adviesrs services. which is true
a adviser must keep a record of the letter and a memorandum describing the mailing list
which of the following persons with no place of business in a State, is EXCLUDED from the definition of an Investment Adviser
a bank that receives special comp for rendering advice about securities
if market interest rates risewhich statement is true
a bonds current yield and yield to maturity will icnrease. the nominal yield (coupon) is unaffected
calls and puts
a call option is in the money when the strike price of the option is below the currentmarket value, a put option is in the money when current market value of stock is less than option contract strike price
all of the following business forms have an unlimited life
limited liability company, S corp, C corp. NOT general partnership. the life of the partnership ends when the partnership composition changes
taxation of capital gains
a capital gain is considered tobe short term if a position is liwuidated at a profit after being held for 1 year or less, for investors in the maximum tax bracket any short term capital gains qill be taxed at the same tax rate as that brakcet. short term cap gains are taxed at ordinary income rates with a max of 37 if the poisiton is held for over 1 year ( 1 year and 1 day then any gain or loss is long term. the gain is 20% for indiv in highest and 15% for lower tax bracket
major risks of REal estate limipted partenrship
liquidity risk and regulatiory risk
which would be defined as sales reps
a clerical employee of a BD who effects securities trades and receives commissinos and a partner of aBD who effects securities trades and who does not receive commission to be an agent an indiv must tak, or solicit orders from public
a value fund manager has decided that she needs to increase cash holding by liquidating some poistions to sell and the best time to do this the manager would use
a combination of both funamental and technical analysis
in an agency transaction
a commission is charfed. in a principal transaction a mark up or down is charged
joint tenancy account
a contributino of more than 50% by one of the aprties is essentialyl a gift to the other. each person owns 100% of the assets. if one dies the other automatically 100% owns the oassets it bypasses oribate and does not go through the deceased estate. the
a s3ll order is long if the customer is long
a convertble bond that has been converted in the stock being sold for deliveryu ons ettlement
the principal difference between a structured product an an ETN is
liquidity risk structured products are buy and hold securities and there are penalties of redeeming early
on an annual basis, an investement adviser must give which to his cleint
a copy of the ADV Part 2, also called the brochure or disclosure document, if there are material changes. the only advisers that must provide an audited balance sheet to clints annually are those that take custody . federal law SEC is in charge of investement advisers act of 1940
which of the following orders would be performed in a discretionary account
a customer places an order to buy as much GE at 40 as possible during thsi trading day. if an agent chooses more than price and time this is sicretioary. the agent is chooses any more than price or time that is the size of a trade or the security being traded a power of attoney is req
which customer could be charged an advisry fee based on account performance
a customer with net worth over 2.1M or 1M invested. performance fees for these qualified customers
dollar cost averaging will result in a lower cost per share when
a fixed dollar amount is invested periodically and the price of the investment i volatile
to create a collar on XYZ stock when stock is at 68 which options would be taken
long 1 XYZ Jan 65 Put/Short 1 XYZ Jan 70 call. if the stock drops the 65 put would be exercised protecting position. on other hand if the stock rises above 70 the short call would be exercises obligating custmer to deliver stock at 70 with no f
which is an investment adviser
a lawyer that offers advice about investments in corporate stocks and bonds for an additional charge. for lawyer or accountant to be excluded they must only give incidental advice about investing in securities and can not charge separately. if they are giving advice about insurance products they don't have to register as investment adviser.
which of the following is true about a life annuity
a life annuity will cease when the person dies and the periodic payment for a life annuity will be higher than periodic payment for a period certain ann
which would be defined as being in the business of giving investment advice
a market timing service that does not recommedn seucrities but which gives customers buy and sell signals on heavily traded
a new BD has filed a registration application in the state. one of the officers listed in the application suddenly dies and another officer is appointed. this is:
a material event that requires a prompt amendment filing with the admin
what position can an investor take to hedge a short stock position
long call
which would be defined as portfolio income under IRS regulations
long term capital gains
the use of dollar cost averageing would result in
lower average cost per shaer
under the uniform securities act which is a NON exempt transaction
a non issuer transaction of common stock effected through a BD .EXEMPT are: the sale of common stock to a financial or institutional investor, the sale of common stock by a fiduciary such as a trustee in bankruptcy and the private placement of common stock
a NASDAW lsisted issuer plans on offering 5M new shares in an add on offering that will be sold by its underwriters in all 50 states. which is true
a notice filing and filing fee are req in each sate, a consent to service of process must be filed in each state
which of the following is defined as a BD under the uniform securities act
a person who effects securities transactions for its own account, a person who effects securities transactions for the accounts of others, an agent of a BD who effects securities transactions that are not recorded on the books of the BD
under uniform securtiies act, which of the following indiv must file a registration appliaction as an agent of a BD
a person who only accepts orders from customers, person who only trades securities for the firms trading account. any pesron who accepts customer orders or who trades must register as an agent
which of the following persons is excluded from registration as an investment adviser under the investment advisers act of 1940
a person who renders advice only on US gov securities. exludes any adviser that only gives advice on US gov guaranteed securities
which person would be required to register as a BD in a state?
a person with no place of business in the state who represents an issuer in the sale of exempt securities to non institutional customers for compensation
a customer buys shares of a stock that had its initial public offering 5 years ago. which is true about prospectus delivery
a prospectus is not rew because the initial public offering happened 5 years ago. prospectus delivery is only req for new issues being sold in the primary market. once a company is trading in secondary market, it is reporting results to SEC and this info is publicly avail. thus an investment decision can be made from this info and there is no longer a propsectu
an IAR assoc wit a state registered adviser received correspondence from his uncle about the uncles securities account that the IAR handles. this letter is considered
a record of the investment adviser, subject to examination by the admin
recordkeeping req tof rocmmunciatinos sent to potential clients under provisions of investement advisers act of 1940 (rule 204-2)
a record of the name and address of each person to whom communication is sent must be tetained, a record of the name and address of each person to whom the commomunication is sent is not req for communications sent to more than 10 persons, for communcatiosn sent to a list of indiv, a memorandum describing the list and its source must be retained
an issuer has filed a registration statement in a state for a new issue of securities that is effective and sale of the issue has started. there is great demand for the offering and wishes to increase the offering size. what can they do
a registration amendment must be filed with the state, if it is within 6 mo of date of sale, an additional filing fee must be paid, a late registration fee must be paid
which is NOT an issuer transaction
RJR corp public company proposing to go private in a leveraged buyout. the shareholders are bought out and proceeds go to shareholders not the issuer
true stratemetns about securities information processors (ex. TRF, bloomberg and reuters)
a registration with SEC is rew under the provisions of the securities exchnge act of 1934, no registration with the SEC is req if the processor solely disseminates quotes or transaction info relating to exempt securities, no registration with SEC is req if solely disseminates the quotes or transaction info relating to exempt securities, no registration with SEC is req if the quotes or transactions are solely published in a general circulation newpaper
Inv Adviser Reps ( NASAA) can borrow from
a relative that is not a customer, they cannot borrow money personally from customers
which indiv would most likely be req to be registered as a rep of a BD
a sales assistant taking an order for a limited partnership unit
which of the following would be defined as an agent
a sales associate who accepts orders for limited partnership units being offered in a private placement. agent is an indiv that represents a BD or issuer effecting securities transactions. if not selling to the public then they are not an agent.
under the uniform securtieis act, which indiv is defined as an agent
a secretary who takes customer orders. an agent is any indiv who represents an issuer or BD in effecting securities transactinos. a sales rep wo makes recommendatino sor who writes customer orders falls under the definition. the definition excludes principals of BDs clerical employees who do not take customer orders and silent partners
an investment adviser directs its trades to a BD paying non discounted rates, inreturn the BD provides the adviser with proprietary investment analyssi software that it has developed this is
a soft dollar arrangement and permitted under uniform securities act
each sole propriertors that applies for inital registration in a state as either a BD or investment adviser must file
a statement of financial condition
a portfolio of securities with a beta of 1.2 has produced an avg annual return of 12%. which investmet should PM consider adding
a stock with a 10% growth rate and beta of .8. divide return by beta any amount that exceeds 10% risk adjusted return is a good one for the portfolio 10%/.8= 12.5 risk adjusted return
which of the following indiv would NOT be defined as an investment adviser rep
a supervising financial officer of the investment adviser that is responsible for supervising the preparation of the firm's financial statements and the firm's customer account statements. an investment advisor rep is any partner, officer, director or other indiv employed by an investment adviser who: 1. makes recommendations or renders advice regarding securities, 2. manages accounts or portfolios of clients, 3. determines which recommendations or advice regarding securities should be given, 4. solicits, offers, or negotiates for the sale of investment advisory services or 5. supervises employees who perform any function above. it makes no difference if it is an employee or independent contractor.
an offering of a limited partnership made to a bank trust dept is
a transaction that is exempt from registration and exempt from the advertisting filing rules.
trust vs foudnation
a trust allows the donor to maintain complete control over the assets contributed while a foundation does not
which of the following persons with no place of business in a state is excluded from the definition of investment adviser
a trust that receives special compensation for rendering advice about securities
an elderly widow is seeking to supplement retirement income with an investment that will provide income that will grow with inflation. which statement about variable annuities could be made to this client
a variable annuity will give a rate of return that closely matches the performance of the mutual fund that you sele
what is true about variable annuity contracts
a varibale annuity contract is defined as a security product that is regulated under both federal securities laws and state insurance laws, the purchaser of a variable annuity contract bears the investment risk
benefit of real estate direct participatipn prgoam is
ability of program to gerenate losses for tax purposes but porvide positive cash flow
a customer that wishes to open a new account with an investment adviser gives the sales agent 6k in cash and tells the agent to buy securities that meet my investment objective. which is true
accepting cash from a customer is considered to be taking custody, a written power of attorney is needed giving the agent discretion over the account, a statement of any free credit balance must be sent to the customer at least quarterly, if cash is over 10k then the receipt must be reported to FinCEN. all accounts must receive statements at least quarterly
all of the following must file annual audited financial statement within 120 days of compelteion of surpris audit
accepts 500 or roe of prepaid fees 6 mo or more in advance of services, uses a qualified custodian to hold customer assets, maintains custody of customer assets. NOT exercies
if an investment adviser is an indiv, which of the following items would be included in the computation of adviser's net capital
accounts receivable
an investment adviser charges a fee equal to the greater of 1% of assets annually of 1k. when examining the investment adviser, the admin would review this policy in relation to
accounts with balances under 20k
specialists DMMs designated market makers on the NYSE can perform all of the following functions
act as a market maker, act as a borokers broker, handle odd lot transactions. they CANNOT deal with the public
a BD participates in the distribution of a new issue on a firm commitment basis, receiving a spread for selling the issue. the BD is
acting as a principal for the issuer and as an underwriter of the securities
a BD participates in the distribution of a new issue on a best efforts basis, receiving an underwriting fee from the issuer, the bd is
acting as an agent for the issuer and as an underwriter of the securities
advatanges of DRIPs
addiontal shares of the isseur are purchases with no commission charges, the investor can add to an existing position in that issuer without having theplace an order through a broker, the process of buying addtional shares via a DRIP allows for dollar cost averaging fractional shares can be purchased . the disadvantage is the investor canot determine the timing of purchases
the benefit of selling covered calls is
additional income for the customer if the arket price of the underlying stock should decline
udner the uniform securities act consent to service of proces means that the
admin is authorized to receive suits on behalf of the agent of broker dealer
Which of the following info MUST be included on an investment advisers registration app
admin orders entered against persons associated with the inv adviser, misdemeanor securities convictions of persons assoc with the inv adviser, felony securities convictions of persons assoc with inv adviser
regulaton D
SECs private placement exemption
under uniform securities act an investment adviser is prohibited from taking custody of a clients funds if that
admin prohibits this by rule and firm fails to notify the admin that is has custody or may take custody
during an investeigation undertaken under the provisions of the uniform securities act, the admin has the power to
administer oaths and affirmations, subpoena witnesses and compel their attendance, req the production of books and records, publish info concerning any violation of a rule or an order
the admin designates an officer to conduct a hearing, the officer may
administer oaths to witnesses and take evidence, subpoena witnesses and compel their attendance, req the production of books and records
the state admin is empowered to
administer oaths, subpoena witnesses, conduct investigations, require the production of documents
administrator rules
administrative rules are a meatter of public record, rules are not written as part of unifrom securities acact but carry the weight of law, rules are issued by admin to provide interpretation of uniform securtiies act, rules issued by admin cannot contravene provision fo uniform securities act
all of the following are defined as persons except
administrator of the state. person can be anyone who has legal authority to issue or trade securities.
which may be req to be filed with the admin
adverstising, sales lit, circulars
under SEC release IA-1092 a person is in the busienss of rednering ivnestement advice if that person
advertisies that it gives advice, is compensated for giving advice about securities, regularly gives advice about securities they all must resigete with the SEC as an invesetment adviser
the admin can req filing of
advertising, sales lit, pamphlets, propsecuteses, form letters
state registered investmenet advisers recordkeepign obligations
adviers are req to retain recrods for at least 5 years from end of the fiscal year during which the last entry of record was made NASAA is 5 yers this differes from SEC BD records which must be 3 years
an investement adviser sends quarely account statements instead of the custodian this is permitted as long as
adviser is subject to annual surprise audit by independent public accountant ( under investement advidrs act of 1940_
an investement adviser can call itself an investement counsel if the
adviser principal business is rendering investemetn superv
which of the following persons is defined as an adviser in the state that is EXEMPT from registration in the state?
adviser with no place of business in the state that deals solely with insurance companies, other advisors, fed covered advisers, BDs, deposit insititions, inv companies, employee benefit plans with assets of at least 1M and gov agencies. also exempt from reg is any person with no place of bus in state and 5 or fewer clients in past 12 mo
all of the following are excluded from the definition of an investment adviser under the uniform securities act except an
adviser with no place of business in the state whose only clients are broker dealers. that is an investment adviser, but it exempt from registration in the state.
Form ADV Part 2A is
advisers business, analystic nmethods, type of clients, assets unde rmanagement, fees , conflicts of interest. balance sheet of the firm if it will take custody. this is the borchure .
all of the persons are defined as federal covered advisers
advisers not subject to state regulation advisers with 100M or more of assets unde rmanagement, advisers to inv
investement adviser will not req to resgier with sec if
advisers only clidnts are insurance companies or adviser is only in 1 state and all advisers clients are in that state main intent of investement advisers act of 1940 was to register advisers to ivnestement companie
which are excluded from registration in a state
advisers that manage 100M or more of assets or that render advice to investment companies or that are not regulated at the state level, must register with the SEC only.
which are federal covered advisers
advisers that manage 100M or more or ar investment advisers to an investmet company regardless of dollar amount
which is defined as giving adviser about securities a person who
advises on the selection of an investement adviser, prepares a list of securities that ,ay e purchased without making specific recommendations and prepares an asset allocation plan tha tspecifies percentage investements in stocks bonds real estate and insurance
under IA-1092, which is defined as giving advice about securities a person who
advises on the selection of an investment adviser, prepares a list of securities that may be pruchased withuot makeing specific recommendations, prepares an asset allocation plan that specifies percentage investments in stocks, bonds, real estaet
which is true regarding advisory contracts undr investmetn cmopany act of 1940
advisoery contracts must be in writing, must be approved by majority vote of oustanding shares, can be terminated by majority vote of board of directors, can be terminated by majority vote of outstanding share
under the investment adviser act of 1940 which statements are true regarding advisory contracts
advisory fees can't be based upon cap gains in the account, advisory fees for clients with 1M of assets under mgmt at least or 2.1M of net worth can have a fee that is partyl based upon cap gains, advisory contracts can't contain provisions that violate federal law., if an advisor accepts 1,200 or moer of prepaid fees, 6 mo or more in advance of services rendered, it must include a balance sheet in the brochure provided to customers
after successfully completing the uniform state law exam, an agent can solicit
after registration has been granted by the admin, if the indiv is affiliated with a BD
all of the following are considered when evaluating a customers tax status
age, residency, total earnings as of the last day of the tax period
under investment advisers act of 1940, if an investment adviser wishes to effect an agency cross transaction for a customer, which is true
agency cross transactions cannot have been recommended to both the buyer and seller by the investemnt adviser, each client must be sent an annual statement identifying the ttoal number of agency cross transactions effected and the remuneration received by the adviser for these trasnactions, to effect an agency c
who must notify the state admin when an agent disassociates from his or her ?BD
agent and BD
an agent has an indiv acct for a husband, hubsnad calls and wants to open acct in wifes name and buy 500 shares of stock what is true
agent can open the account only if the wife gives written authorization, wife must sign a third party trading authorization giving husband power of attonery over the account to allow husband to trade
admin may revoke or deny agents license for which reasons
agent filed app that is materially incomplete, agent made misrepresentation and failed to post surety bond
under NASAA rules an
agent is permitted to share in gain and loss of a customer acct if a joint acct is opened with the customer and sharing is proportional to capital contributed, investment adviser rep is not permitted to share in the gain and loss of a customer acct if a joint acct is opened with the customer and sharing is proportional to capital contributed
a consent to service of process is filed for each initial
agent registration, BD registration, investment adviser reg, securities reg
a consent to service of process must accompany which of the following
agent's initial registration application and investment advisers initial registration application
all are snonymous
agent, broker, middleman . a dealer is a market maker who is a principal ina transaction
which of the following notifies the admin if an agent changes employment from one BD to another BD
agent, former employer and new employer.
when an agent moved from one BD to another notification of ahcenm must be made by
agent, old BD and new BD
which come under jurisdcition of the state admin
mail of sales lit to cutsomter in that state, mail of sales lit to customer ina enighboring state, TV broadcast from within that state received int ahtstate
the securities act of 1933 req that new issues of securities be registered with the SEC if
mails or other means of intersetate commerce are used to sell the securities unless an exemption is avialble . 1933 and 1934 acts are federal laq and the federal gov only has jurisdiction over offers and transactions that cross state lines
the registration of a BD may be revoked under unifrom securities act if the firm does not
maintain req records, file financial reports with the admin, file advertising with the admin . NOT filed with the admin are customer copmlaints
stock psition accumulated signatifuacant ly in a trust
maintain the stock positino if appropriate according to the t rust document
executor of an estate fiduciary obligations
maintenance of records of transactions involving estate assets, filing of the will in probate court and filing of tax returns for the estate, payment of taxes due to state and federal governments
closed end companies
make a one time public fofering of a fixed amount of their shares and trade on exchanges or OTC
hedge funds are
managed and non registered . typically limited to 99 investors so they do not have to register as investement companies under investement company act of 1940
the very first option style used was
american, options could be exercised at any time
the specialist DMM can handle all ofthe following orders ont he NYSE floor
market order, limit order, marketable order. a DMM cannotexercise discretion over price or time of executinoa dn tehrefor cannot accept a not held order
a BD buys a security in the market, places it into investory, changes the price and resells in the market thi is
marking up
the best income tax filing for a married couple where one spouse earns substantially of the income is
married filing jintly
the dividend discount model can be used to value
mature companies
statements about an admin order denying or revoking registration that are true
the burden of proof of showing that a security is exempt is on the person claiming the exemption if the issue is registered by qualification, an order revoking registration usually can't be made retroactive by the admin, a person can't be found in violation of a summary order if he did not know and in the exercise of reasonable care, could not have known about the order.
an issuer has filed a registrations tatement ina state for a new issue of securities that is effective and sale of the ssue has started. the issuer find there is great demand and wants to increase number of shares being issues they must
amndment must be filed as long as it is within 6 months of the date of sales along with the apyment of an addional filing fee and a late registration fee the offering price and underwtiters comp cannot be changes. must be within 6 mo of the oringal sale date (the effective date) and both a filing fee for the additinoal securtities and a late reg fee must be paid to the state. the amdnement becomes effective
totten trust
an account that can be opened at a depoist taking institution where beneiciary is named on the account. same idea as transfer on death. owner controls account, can use the funds, can close the account and can change beneficiary at any time.
registration by filing would NOT be permitted for which reasons
an admin in another state has issued a stop order relating to this issue, the issue is only going to be offered in one state, the securities and exchange commission denise effectiveness to the federal regsitration statement, the admin has not received a copy of the latest prospectus . no federal registration if it is sold in one state only
which state registered investmnet adviser MUST report that it takes custody on form adv
an adviser that directly deducts mgmt fees each quarter from accounts or has full power of attorney
a dealer is a principal in a trasnaction
an agent is always a middlema, or a boker ina trasnaction . synnonmous terms: agent, salesman and broker
which is true regarding the conduct of customer accounts
an agent may not personally guarantee a customers acct against loss and agents may not share in the gain or loss in a customers account unless very specific req are met. there is no prohibition on agents recommending the use of options to hedge a customer's account, since this is valid and popoular reason for using options
what is a 10 year period certain annuity
an annuity that will pay for a stated period of time, regardless of when the purchaser diesthis is only an annuity option with fixed annuity. NOT variable.
who would be defined as an investment adviser under the investment advisers act of 1940
an attorney who gives advice to clients about investments for an additional fee
a bank in a state is making an offering of its own securities, which are exempt, to the public. which of the following would NOT be req to register as an agent in the state
an employee of the bank who is offering the securities to the public. an employee of the issuer is exempt from registration if the employee is selling specified exempt securities which include bank securitites.
as a condition of registration as an agent or principal of a BD or investment adviser which statements are true
an exam may have to be taken by the agent, an exam may have to be taken by the principal, higher passing grades can be req for principals than for agents
which of the following indiv are defined as an agent under the uniform securities act
an indiv who represents a BD in selling any type of security whether exempt or non exempt. Indiv who represent issuers in trading NON exempt securities are agents that must be registered as well
which is EXCLUDED from the definiion of an agent under UNFIROM SEcurties act
an indiv who represents an ISSUER in teh sale of anEXEMPT security is EXCLUDED from the definitino. any gov secruity US or foerign is exempt. so an indiv who represents and ISSUER in the sale of canadian gov debt or who reprents an issuer in a transcactino with an underwiters. if an indiv represetns a BD in selling aexempt securites the indiv is NOT Excluded from registration. commerical paper is an exempt security only if its maturity does not exceed 270 days ( mo)
which of the following is NOT EXCLUSED from definition of sales rep under uniform securities act
an indiv who represents an issuer in transactions with investors
which is an accredited investor under REg D
an indiv with a $3M net worth, an employee benefit plan wth 7< to invest, a coupole that has 400k per year of annual income. as long as a couple earns at least 300k per year they are accredited. net worth of indiv has to be 1M or more to be accredited
which is in the business of giving advice
an insurance agent that advertises no fee financial planning but who sells insurance for a commission to advisory clients. SEC views financial plans as iving advice about seucrities and is compensated. BDs who do NOT charge separately for advice are excluded, real estate agensts appracising real estate are not dealing in securities and accountants who do not harge sep
closend end
an intial offering must be made with a propsectus and once issued shares trade on secondary market at prevailing market pr
what could result in civil liability
an investment adviser recommends the purchase of a non exempt security that was unregistered even though an exemption is not available and an investment adviser recommends a non exempt security that is unregistered to a customer after being informed by his mgmer that the security was registered
under the investment advisers act of 1940, which of the following persons is exempt from registration with the SEC
an investment adviser whose only clients are insurance companies. this exemption DOES NOT extend to investment companies or pension plans (under state law the adviser to pension plans would be exempt if it has no office in the sate and investment adviser to investment companies would be excluded from state registration since it is a federal covered adviser)
which is a federal covered adviser
an investment adviser with 100M of international assets. only has to register with the SEC, not the state. include any adviser to an investment company and any adviser with 100M or more of assets under management.
which are EXCLUDED from defintion of a BD
an issuer of securities, an agent of an issuer of securities, an agent of a broker dealer
primary transaction
an issuer transaction that involves a sale of securities is known as primary transaction because it takes place in primary or new issue market
which is permitted for investment advisers advertising under SEC rules
an offer of a list of the investment advisers prior recommendations with their performance over the last year
which is an offer to sell
an offer of a security that will be given as consideration for purchase of another security, an offer of the gift of an assessable security and the offer of rights to purchase an underlying security
who must register in a state as an investment adviser
an online broker dealer who offers a "no max number of trades" program for a 90 days period for a set dollar amount. any flat fee product offered by a BD is considered advisory and requires that the firm and each agent register as an Investment Adviser and Investment Adviser rep respectively to sell these.
the state admin, as a condition of registration in the state as an investment adviser can require
an oral or written exam by the officer of the advisory firm, publication of an opening announcement in a local newspaper, posting of a surety bond, filing of advertising (unless the security or transaction is exempt)
joint accounts
an order to by or sell may be accepted from any signle acount owner, an order to draw a check on the account can be made by any single account owner
under the prudent investor rule investment decisions must be made based primarily on
an overall investment strategy that balances risk and return objectives
which of the following would NOT be considered to be fraudulent under uniform securities act
an uninterested third party in connection with sale of security misstates material fact to buyer but trade doesn't result. if there is a misttatement from the seller it is fraud regardless of buying or not.
a registration application is considered complete when the proper documents
and the filing fee are received by the administrator
defined contributino plans
annual contributino amounts a re a fixed percentage of income. the annual beenfit variesdependaent on the number of years that the employee is included .if a corp has an unporfitbal year it must still make teh contributino. such plans are subject to ERISA requitrements
accretion
annual gain of a bond discount as the bonds value approaces par at maturity
a customer is told that his investment will pay interest at the rate of .3% per month. this would e the same as telling the customer
annual percentage rate is 3.6%. the annual percentage yield would be somewhat higher due to the fact the compound interst earned on the monthly interest payments received would increase the annual yield slightly
an insurance company that sells an equity indexed annuity could use which method to credit change in invvestmetn value
annual reset, point to point, or high water mark
under NASAA rules, the Form ADV filed with the state must be updated
annually within 90 days of fiscal year end
which is true about variable annuity contracts
annuity payments continue for life of purchaser, variable annuity is defined as a security and annuity payments are affected by market fluctuations
an investment adviser has adopted an internal business succession plan, who is responsible for servicing the IAs client accts if the managing director of investmnet adviser suddenly dies?
another investmnet adviser rep currently in the firm
an indiv that has not yet passed the appropriate state licensing exam for agent registration in a state would be premitted to
answer a phone call from a client
if a private fund adviser has less than 150M of AUM it is an exempt reporting adviser it must still report to the SEC by filing parts of Form ADV annually but does not have to register by filing Form P
answer in term
an agent of a BD in state A has filed a registration application with State A that is not yet effective. during this time period, the agent may
answer questions from customers about information included on customer account statements and confirmations
what can not be filed electronically with the state
answer to a subpoena which must be answered by a personal appearance in court
provisions of securities act include
anti fraud, common law deceit, registration of securities and registration of BDs, investment advisers and their agents
collecting and verifying info provided by a customer at acct opening is part of the companys policies and procedures covering
anti money laundering
obtaining the 4 cirtical prieces of info from a customer at account opening is part of the companys policies and procedrures covering
anti money laundering
strong know your customer req are part of a firms policies and procedures covering
anti money laundering
EXCLUEDED from defintion of BD
any firm that has no place of business in the state that does not have clients in the state or that deals solely with issuers, BDs, or financial insistutinos
Issuer
any person under person definition who issues or proposes to issue a security. for ex if ACME corp sells or proposes to sell a new issue of bonds, it is considered tobe an issuer under the act
denied as federal registratino as an investement adviser
any person who has a criminal record and who has been imprisoned for 1 year or more.
which are EXCLUDED from definition of a BD
any person with no place of business in the state who only deals with financial institutions and issuers of securities
to qualify for the private placement exemption, all of the following are req
any purchases must be made with investment intent, no more than 10 persons can purchase the issue during a 12 month period, no comissions can be paid for soliciting indiv to purchase the issue
an agent is an indiv who represents a BD selling
any type of security whether it is exempt or non exempt
the earliest that an american stlye option can be exercied is
anytime before expierationd ate of the contrac
registration by qualification can be stopped by the admin if it is in the public interest and the
appliacnt cannot show that the registrtion is not incompelete in any material respect
which of the following are generally req to be included in state registration application of a BD or investment adviser
applicants form and place of organization, applicants method of business, qualifications and bus history, any injuction or felony, applicant's financial ondition and history, any info to be furnished to a client if the applicant is an investment adviser, consent to service of process, fingerprints of officers
AMT
applies a minimum flat tax rate under an alternative caluclated income if an indiv relies on too many tax preferences in the tax code to reduce regular taxable income. these tax preferences are added back to regular taxable income to arrive at AMT income, which is taxed at a flat 26-28% rate. among the items added back:
email req to be retained by an investment adviser
applies to any electronic communication sent from, or received by the investment adviser regardless of whether the email is personal in nature or business related
internal revenue code section 1031
applies to real estate held for investment and defers capital gains tax due on appreciated property sold if the proceeds are invested in another property
ETNs
are a structured procut and are suitable for investors seeking long term capital gains offered by a bnank that gives a reutrn tied to a benchmark index. the note is a debt of the bank and i backed by the issuing bank. ETNs make no interest or dividend payments so they are not suitable for income. their value grows as they are held based on the growth of the benchmark index with any gain at alsae taxed at capital gains rates
federally chartered credit union shares
are ecxempt frmo state registratino but the agent must still be registered
structured poructs
are not standardized and have a fixed matruity date similar to a debt seurity
DRIPS
are offered by issuers allow for investment in an issuers securities with no commission charges
buy tstop orders
are placed at a price that is higher than the current market and are filled in rising markets
excluded from definition of an investment adviser
are porofesionals who only give advice about serucrities that is incidental to their regulat practice and who do not charge separately for giving advice: lawyers, accountants, teacehrs, engineers (NOT geologists or doctors)
money purchase plans
are qual plans under ERISA, must be funded annually by the employer
limited liability companies
are unlimited as to the number of investors and give limited liability to investors
subscription order
arises from a rights offering, where a corp is attempting to raise additional funds from its existing shareholders by offering them subscription rights to new shares at a discount from the current market price. these orders happen directly between the issuer and shareholder so there is no BD record of there
whenc omputing standard deviation of returns against the mean, the measure used for the mean is
arithmetic mean
UIT
assembles a fixed portfolio, usually of bonds, transfers them into trust and then sells them to investors in 1k units with a prospectus. once portfolio is assemble it is fixed there is no management and management fee. a UIT has a board of trsustees. this is a type of investemnt company under 1940 act
investment advisers are prohibited from
assigning a customers contract wihout permission, charging commissions on trades effected for the client, changing partnership management without notifying clients
what is included when calculating the beenfit on a variable annuity contract
assumed interes trate, actual investemnet return ad expected mortality
coverdell education if beenfiicary does not use it
at age 30 the account must be distributed to beenfiicary and then dsiditrbutinos will be taxed to the beenficiary and 10% penalty tax will be applied
to atiscfy req of NASAA brochure delivery rule customers who wish to buy advisory services must receive a copy of the borchure
at least 48 hours prior to entering into an adviosr contract
a registration application in a state filed by an investment adviser becomes effective
at noon, the 30th day after the application is filed. the admin may by rule or order specify an earlier effective date and may by order defer the effective date until noon of the thirtieth day after the filing of any amendment
under uniform securities act, which of the following could be considered to be a BD
attorney, investment adviser and market maker. NOT a credit union because it is a savings institution
to protect against identity theft and theft of funds, client instructions received elctronically must be
authenticated
fomrula for return on investment is
average annual cash flow/ initial investment outlay
rOI
average annual cash flow/intial investemnet outlay
high water mark
avoid bad timing risk with annual reset method instead of basing annual interest credit on year beginngin and year end index value it based credit on year befinning index and highest value it had in that year
which would be evaluated to measure a companys liquidity
balance sheet
which securities are exempt under uniform state law
bank stock, NYSE listed stocks and NASDAQ listed stocks. include bank stocks but NOT bank holding companies. example: stock in small local bank is exempt, stock in Citibank, is non exempt unless it falls under another exemption like blue chip trades on NYSE.
under reguation D which are accredited investors
bank, indiv with 1M net worth exclusive of residence and investment company. , person who earns at least 200k per year, or an institution, or an officer or director of the issuer. private placement under reg D may be sold to unlimited number of accredited investors under gederal laq but only 35 non accredited investors. (this is differendt than state)
a couple owns a home togehter and they file for bankruptcy. if there is an excess of funds from the sale of the home, where does the extr amoney go
bankruptcy etate, to the state trusetee and the additinoal creditors. (secured creditors only eget the asset pledged as collateral)
defined as institutional buyers under uniform securities act
banks, insurance companies, investment companies
unifrom securtiies act EXEMPTs from registration an aadviser with no office in the state whose only clients are investement profseessinoaslsuch as
banks, insurance companies, other investeent aviser
a state admin is permitted to
bar any registrant from employment with a registered BD, restrict or limit a registrant as to any function or activity of the business for which registration is req in the state, summarily postpone or suspend registration pending final determination of proceeding
investment advisers may be compensated
based on a percentage of the value of all assets under mgmt
Form ADV Part 1
basic registration info filed with SEC such as name of firm, address, phone number, officers, sharehodlers, states where adviser is registeresd
for an acct to be considered by the admin to be institutional it must
be designated as such by rule or order of the admin.
states in which an investemnt adviser is registered would
be found in Form ADV PArt 1
third party research reports under NASAA may
be given to customers if the adviser discloses that the report was not prepared by the advisory firm
uniform state law investment advisory contracts must
be in writing, can't allow for payment to the adviser based upon capital gains in the account, cannot be assigned to another investment adviser without customer approvla
investment advisory contracts, under the ivnestemtn advisers act of 1940 MUST
be in writing, detail the advisory fee, provide for customer approval if the contract is to be assigned to someone else
a trainee that has not yet been registered as an agent of a BD would
be permitted to report completed trades to customers
a security that is pricesd at equilibrium would tend to
be stable in price and have lower transsactions costs
an indiv who works is terminated at 56, he can't get a job and wants to use funds in 401k for living expenses.. any distribiutioon from the 401k qill
be subject ot ordinary income tax only if installments are taken over individuals life expectancy. if an employee quits or is terminated betweeen 55-59.5 the rule of 55 applies. this IRS rule allows the terminated employee to take payments in equal installments over life and avoid 10% penalty tax. the regular income tamust still be paid
a speculator that initiates a long futures position in euros
believes that the euro will increase, will need to sell euro futures to close his position if he wants to acoid taking delivery in the future. if the contract is not closed with an offsetting sale, then the buyer is req to take delivery and pay for the euros on the delivery date
taxable estates are reduced by any amounts
bequeathed to charity the taxable estate aomunt has to be 11,580,000 or less to be excluded from tax
CAPM formula
beta * (expected market return-risk free rate)
a customer who wishes to sell securities in the market will receive the
bid price
synonymous investment terms
bid, redemption price, net asset value
an agent places an order to sell 10k shares at the market close this is known as
block trading
state registration of non exempt securities is a req of the
blue sky laws, pre-date the federal securities acts and req registration of securities offered in each state and req registration of BDs, investment advisers and their agents in each state
under investemetn copmany act of 1940 the ivnestemetn advisers contract must be renewed by a majority gvote of the funds
board of disrectors or the outstanding shares
under the SEcurties exchange act of 1934, credit extended to customers for the purchase of securities is controlled by the
board of governors of the federal reserve
under the privisions of the securities echange act of 1934, margin on securities is set by the
board of governors of the federal reserve syuystem the power to set margins on non exempt securities
structured proucts
bond component pays interest based on an idnex rate such as NASDAQ, the interest rate paid is typically capped to an annual maximum rate, the derivative component estbablishes the paymeny at marutiy and protects proinciapl, maybe on exchange
if market interest rates decline which is true
bonds yield to maturity will fall. when market interest rates fall this reduces the bonds current yield and yield to maturtiy brinigng them in line with current lower interest rate environment. the bonds nominal yield is unnaffected
under the investment advisers act of 1940, a person would have to register as an investment adviser if she gave investment adviser about
bonds.
a corporation is simliar to a partnership in that
both entities have no limit to the number of owners. partnerships allow for flow thourgh gaina nd loss to owners with income only taxed at the parnter level. a corp must compute net income and pay tax on it before it distributes income to shareholders as a dividend. corporate shareholders have limited liability, general partners have unlimited liability
which is true regarding anti fraud provisions for exempt and non exempt sec, the anti fraud provisions apply to
both exempt and non exempt securities
UTMA adn 529
both have contributions that are made with after tax dollars no tax dudecutinofor either. UTMA accounts earnings are taxed each year. if earnings ina UTMA are used to pay for qualified educationexpensestey are stil taxed. 529 plan earnings are usually not taxed at teh statelevel, UTMA account earnings on t he other hand are taxable at the sttate level.
exams given by the admin can be
both oral and written. higher passing grades can e req for princiapls athan for agents.
which transcation is allowed for exempt unregistered securities
both primary and secondary offerings
when an agent is terminated,
both the agent and the firm (BD or investement adviser) are obligated to notify the state under unfirom securities act
method of allocating shares
breached duty because it has not disclosed its method of allocating shares to its custoers
an application to register securities may be filed by the
broekr dealer and issuer. or the person on whose behalf the offering is benig made for example an officer of a company effecting a secondary distribtuion of a large block of shares that they hold can file a registration application
under securities exchange act of 1934 which MUST register with the securities and exchange commission
broker Dealers (their officers and sales personnel), national securtiies exchanges and securities information processors. the securities exchange act of 1934 does NOT req registration of investment advisers this is under investment advisers act of 1940
an investment adviser can borrow money from which customer
broker dealer , can only borrow money from acustomer that is an affiliate or a customer that is a financial institution that is in business of making loans such as a bank or BD.
an application to register securities may be filed by
broker dealer, issuer, officer of the company who is selling shares that are personally owned . applications to register a security in a state CANNOT be filed by agents or investment advisers.ONLY BD, bd acting for issuer or person on whose behalf the offering is being made
an application to register securities may be filed by
broker dealer, issuer, person on whose behalf the offering is to be made. CAN NOT be filed by agents or investment advisers.
Finra only regulates
broker dealers
regulation T controls ctredit on securities from
broker to customer
rehypothecation
brokerage firm takes customers pledged securtiies and goes to the bank to secure a loan which is essentially for customers benefit
civil suits arising from alleged violations is:
brought within 2 years of discovery but no later than 3 years after actual violation
which of the following info is included on an applicant's registration application
business history of applicant, financial condition, conviction record
which of the following info is included on an applicants registration application
business history of applicant, financial condtion of applicant, conviction record of applicant
what type of real estate can be held in an IRA
business properry invesetement only
which of the following are risks of investing ina REal eState limited partnership
business risk, liquidity risk, regulatory risk
risk of investing in a real estate limited partnership
business risk, liquidity risk, regulatory risk . there are no dividneds or interst apyments received tha tmust eb reinvested so there is no reinvestement risk
a customer bought 100 shares of DEF stock at $23 per share. the stock has appreciated to $41 per share, and the customer would like to protect the gain at minimal cost. which of the followig would collar the poistion at the lowest cost
buy 1 DEF Jan 40 Put and Sell 1 DEF Jan 45 Call
an investor owns a portfolio of large cap blue chip stocks, each in dow jones. he wishes to protect his portfolio from a market downturn without selling the positions.the best recommendation is to
buy a broad based index put
if it is exepcted that the price of an asset will rise in the future, which strategy is profitable
buy a future
collared
buy a put and sell a call against a long standing stock position if price falls the put it exerciesd and teh stock is sold at the strike price and if the price rises the call is exercises and stock is sold at the strike price
an example of a passive long term bond ivnestment strategy is
buy and hold
one of the oldest portfolio strategies that is used in a stable interest rate environment is
buy and hold. NOT strategies: swaps and options, they are derivatives
an investor wishes to be able to buy stock at a specified price up until a specified time in the future. to be able to do this, the investor would
buy calls on that stock
buy limit vs buy stop
buy limit orders are placed below the current market and filled if the market price falls. buy stop are placed above the current market and are filled if the market price rises.
an investor wishes to be able to sell stock at a specified price up until a specified time in the future. to be able to do this the investor would
buy puts on that stock
under unfirom sercurities act if the admin prohibits an investemnt adviser from taking cutody of customer funds or securities the investement adviser would be permitted to
buy securities fro a secutomser who has given a limited power of attonrye to the adviser using monies deposited by that customer to an account established by the adviser specifically for that purpose
an equity put writer is exercised the writer has the obligatino to
buy stock in the amount of the contract multiplier times the strike price must pay the strike price a 100 share stock position ( the contrac tmuliptlier) 2 business days agfter trade date (a regular way stock trade_)
a ccustomer has a gain on a short stock position that she wishes to protect. the approporiate order is
buy stop (placed above the market) to buy in a short poistion ina falling market the order would be a buy limit
a customer has a term loan maturing in 3 years for 100k what investment hshould they make for next 3 years until payment is due
buy treasuy notes maturing in 3 years
under the uniform sec act, in a civil suit brought by a purchaser against a seller that is alleged to have violated the uniform securities act, the burden of proof rests with the
buyer of the securities and plaintiff in the lawsuit
churning example
buying and selling ABC stock on the ame dayin a discretinoary account that hasa long term growth objective
capital need
buynig medical imaging equip 5 years from now
distributions from an IRA must begin (commence)
by april 1st of the year following that person reaching 72
provisions of unfiomr securities act apply to solicitation of public to buy or sell securities or advisory services that are made
by mail or telephone either inside or outside that state and received in that stat
a group of investors is capitalizing a business that is expected to show operating losses for the first 3 years. which business form is LEAST advantageous from a tax standpoint
c corporations would be the worst because do not allow for flow through of income and loss. general partnerships, lmited liabliity companies and S corp are not taxable , net income or net loss flows thorugh onto the owners tax returns/
state under the uniform securtiies act
califrnia, district of columbia and puerto rico are all part of the united states.
an indiv that has not yet passed state licensing exam for agent registration in a state would be permitted to
call existing customers of the firm to invite them to seminars and call other agents of the firm
synonomous terms relating to mortage backed securities
call risk, contraction risk, prepayment risk
aUS investor purchasing foreign securities trading on the LSE will benefit when the
US dollar weakes and british pound strengthens
which persons are EXCLUDED from the definition of an investment adviser? a person who gives advice about
US gov bonds and agency bonds
a money market fund that charges .10% of annual management fees and .2% of annual 12b=1 fees
can be called "no load" if it ccharges 25% or less annually
under unfirom state laq advisory contracts
can be executed in writing
offer of rescission
can be made by a person who sold securities in violation of state law , they can rescind the sale refund the money to buyer plus court costs and itnerest
the national securities markets improvement act req that bds net capital standards
can be set by the state admin at the same level as that set under the federal requirement
which would be defined as a BD in state A
a BD located in state B who has an existing active customer who moves to state A.
under the provisions of the Uniform Securities Act which statements are true
a BD with no place of business in the state, need not register in that state if it is only dealing with insurance companies and if a BD has its registration revoked then the registeration of its agents will also be revoked
to claim a private palcement exemption
a Form D must be filed with the sEC
the major difference between open end fund and unit investment trust is
a UIT portfolio is fixed while an open end fund portfolio changes
if amrket interes rates rise
a bond yield to matrutiy will rise and current yield will rise
who does NOT have to be registered in the state as an agent of a BD
a director of the company that is not involved in sales
national securities markets improvement act
a federal law, national securities markets improvement act of 1996, was enacted to eliminate duplicate regulations that required registrations at both the fed and state level
client info cannot be realeased without written consent of the customer to
a finra member firm. it CAN be reaelaesd if there is a divorce proceedings, by the
which is true about fixed annuity contracts
a fixed annuity contract is regulated by each state as an insurance product and investment risk is borne by insurance company that issues the contract
which is used when computing a corps current ratio
accounts receivable
ETNS
can be traded in market like any other stock, offer an ivnestement return tied to a benchmark index, a
a surety bond req for registration of a BD
can be used by any person who has an eforceable legal claim against the BD
under the proviions of the Unifrom Prudent Investor Act a trust
can customize its investments based on suitability as determined by the needs of the beneficiaries
an investment adviser with investment brochure
can deliver a brochure that includes all of the ADV Part 2 info and has to be delivered 48 hors prior to entering into a verbal or written contract wiht the customer to provide advisory services or if the brochure is delivered a tthe time the contract is signed the customer has 5 business days to terminate the agreement without penalty
a sole proprieotr
can do business as a DBA and must file an indiv return form 1040 with a schedule C attached (schedule C is profit or loss from a business) (schedule E is report passive income and loss from real estate and partnership)
in order for an agent to share in the gains and lsoses of a customer's acct, all of the following statements are true
agents are prohibited from sharing in the gains and losses of a customer's acct unless there is a written agreement between the customer and the agent which has been approvedby the BD, the agreement specifies that sharing in gain and loss is proportionate to the capital contribution of each particiapnt in the acount
what consitutes taking custody
an employee of an advisory firm acting as a trustee for a firm. it means they are maanging assets for the beenficiary and in doing so has taken custody this is only for investemnet advisers
under investement advisers act of 1940 which is exempt from rwgistration with teh SEC
an investement adviser whose only clients are insurance companies . this exemption DOES NOT extnd to person giving advice to investement companies or epensions plans (under state laq the adviser to pension plans would be exempt from state retgistration and the investement adviser to investement companies would be exluded from state regirsteration since it is a federal covered adviser )
which would consistute an involuntary assignment of an investment advisory contract under the uniform securities act
an investment adviser formed as a corp sells all of its stock to an acquiring BD an investment adviser formed as a partnership has 1 partner leave and take the contract to a new advisory firm
adviser offering discounted rates
an investment adviser is permitted to offer a discount from standard rates to selected categories of customers, the investment adviser can offer the discount as long
c coropaorations
can have differeing classes of stock both common and prefered they canhave unlimited number of shareholders, they are taxable entities. the comomn shareholder have the right to vote but not on dividends that is made by board of directors
the formula for divided yield on a common stock is
annual dividend/current share price
an institutional buyer is defined under uniform securities act as
any person defined by the Administrator by rule or order. these include banks, savings and loans, trust companies, insurance companies, investment companies, pension and profit sharing plans and other financial institutions and anyone defined by state admin by rule or order
a customer that is long crude oil a physical commodity
can hendge by selling an oil futures contract and typically plans on selling the crude oil at a future date in the cash market
HYIP (High yield investment programs )
are unregistered investments sold by unlicensed indiv promising incredible returns
totten trust
bank account NOT a securities account. it allows depoistor to name beenficiary to whom the funds go upon death bypassing estate and prbobate
an investement adviser registrered in state Y effects all of its proftiolio transactions through a BD registered with SEC and STate Y. regarding req filing from the BD in STate Y, the admin or state Y
can only req the filing of the BD's reports that are filed with the sEC
an agent of BD A receives a job offer from BD B. if the agent accepts the job at BD B his state registration with BD A will
be terminated by BD A. the agents registration will be reinstated by BD B when the agent starts employment there
an investment amount in an inverse ETF would be profitable in a
bear market
a company whose profits have increaed at a rate greater than the rate of interest charged on the borrowed funds that produced those profits has
been successful in applying leverag
if an investment adviser is appointed by a trustee to manage the assets of the trust the adviser has a fiduciary responsibility to the
beenficiary of the trust
under NASAA statement of policu on dishonest and unethical business practices, prohibited business practices include
being deliberately selective in info told to a customer, giving inaccurate statemens about an issuers projected earnings and telling a customer that a company is about to be listed on NYSE without knowing truth of the statement
an agent of a BD
can only take a second job if they give written notice to employer
under the SEcurities exchange act of 1934 the sEC
can suspecnd trading in any or all securitites markets in the US if it gives prior notice to the president of the US and the president does not dsiagree
title
can use investement adviser representive on her business card
true statements about C corp and S corp
both C corp and S corp give sharehodlesr limited liability, income in a C corp is taxable to corp, while income in an S corp is not taxable to the corp. C copr shares can be publicly traded, S corp shares cannot be publicly traded. S corp are flow through vehicles similar to partnerships any net incoem or loss flows directly on to shareholdesr tax returns and not taxed at corp level
totten trust
can;t be used for brokerage accounts it is only for bank accounts
investments to fund a fixed annuity contract are held
by the issuer of the contract in the general account
the IRR of an investment assumes that
cash flows generated by the investment are reinvested at the internal rate of return
on a clients personal balance sheet
cash in savings accounts, equity ina brokerage firm account, mortgage loan payable (secured liability)
which records of an investemnt adviser that take custody of custoemr funds is req to be retianed under privions of investement advisers act of 1940
cash receipts and disbursements , securtiies received and delivered, purchase and sales, trades, securities redcord,, confiramtion copies of customer trades, customer account statements , statement of financial posiotion
which record of an investmeent adviser that takes custody of customer funds are req to be retained under provisions of investment advisers act of 1940
cash receipts and disbursements ledger and general ledger, securities received and delivered ledger, purchase and sales ledger, securities record, confirmation copies of all customer trades, customer accoutn statements showing all purchases, sales, seucrities positions and cash debit and credits to the
under NASAA rules these records must be retained for at least 5 years by a RIA
cash receipts and disbursements, order tickets, written communications
there is no licenseing requirement to offer
cds issued by a federally chartered bank bc it is excluded from being a security it is a bank product
durable power of attorney
ceases upon customers death, continues upon customers incapacitation
the artihmetic mean of portfolio retuns is a measure of
central tendency
the arithmetic mean of portfolio returns is a measure of
central tendency arithmetic mean falls toward the center fo certral tendency
a business would be formed as an LLC [rimarily because of the
characteristic of limited liabliity
which investement trades in market indepednednt of NAV
closed end fund
high risk investmnet= high return is a example of
correlation
statistical measure
correlation coefficient, arithmetic average, sharpe ratio
the agent has contacted existing client to see if thery are interested in buying shares that his new customer wishes to sell
cosnidered to be an offer to sell made by the agent
the interest rate applied to a loan represents the
cost of money
the differnce between the securitys bid and ask prices represnts the
cost of trading
what rate would be used to find the present value of a TIPS
coupon rate of TIP
under NASAA rules ads by investment advisers
cannot contain testimonials and can unconditionally make an offer of free services
tax equiv yield GO bond 4.5% coupon at par, customer is in 30% fed bracket and 5% minnesota state taxbracket what is customers equiv taxable yield
customer must pay 5% on 4.5% yield so .95*4.5= 4.275 if the customer bought a taxable bond 35% would to go to tax. take muni yield after taxes and divde by 4.275/ .65 = 6.577
investement adviser forgot to give cutosmer part 2 form afv
customer must received the form ADV part 2 and then has 2 days to sign the agreement . muist receive at least 2 days prior to completion of oral or writeen corntract and then have right to rescind contract within next 5 days
what is req to be on an order ticker prior to entry of the order
customer name or account number and registered rep name or number
all must be placed on an order ticker
customer name or acct number,execution price and order size
which ust be included ona cusomter confriamtion
customer name, account number, size of trade, price of ececution and any commision charged
if tax rates fall the vlaue of tax freee muni bonds will descrease. lower tax rates make tax free interest income less valuable
decrease
if the writer of an equity put contract is exercised the write MUST
deliver cash in 2 business days
401k plan
distributinos are fully taxable in year they ar recevied, employee salary deferrals avoid income tax in the year contributed
which is passive income
distriutive share of income froma real estte parntership investment. a gain on sales of any security includnig partnership units is cap gain and all cap gain is portfolio income
an order ticket is marked sell short 100 ABC @ 50. this means the customer
does not own the shares and will borrow shares to deliver on settlement
the admin
cannot issue stop orders retroactively but can vacate them retroactively. the admin can't issue an order stopping the sale of a security or denying or revoking a registration retroactively. if the admin were to issue a stop order bc of something trivial then once the fee is paid the stop order would be vacated, this is done retroactively.
during the period when an underwtiter is negotiating with an issuer to do an underwriting the firm
cannot isue research reports under contrac tis resolved. unless they have always reported them and the report will be the same
what is true about education of investment adviser key employees who establish investment strategy or manage client accounts
education and work background are disclosed on form ADV Part 2B
which can only be taken in a court of law
enjoining a person from engaging in the securities busienss
a customer buys stock and wants to buy call options on the stock. the customer would do this to
enjoy the certainty of a fixed price for a future purchase
in order to establish a retirement financial plan to meet a customers goals the most important consideration is
capital needs
if a firm effects trades solely on a principal basis the firm
carries inventory and is a market maker
which item is used when computing a corp's current ratio
cash
the investment company act of 1940 permits an open end manamgent company to
change its investment objective if shareholders approve. the board of directors must be composed of no more than 60% affiliated persons, they can't buy on margin or sell short in mutual funds
SEC Rule 12b-1 allows open end investment companies to
charge distribution fees against net assets. an annual fee for the cost of soliciting new investors to the fund
fee only
charged for hour of work, asset perofmrance for wealthy clients, and based on asset sunder management
investment advisers are prohibited from doing all of the following EXCEPT
charging a retainer fee, they are allowed to do that. they can;t charge commissions unless the adviser has a separate BD the BD can handle the trades and earn the commissions as long as this conflict of interest is cisclosed to the client when the contract is signed
which are investement companies unde rinvestement company act of 1940
face amount certificate company, unit investemetn trust and management companies
the uniform securities act subjects agents and bds who violate the acts provisions to which
civil liability, criminal liability and criminal penalties
investment companies as defined under the invesetmetn company act of 1940 are
face amount certificate company, unit investment trust and management company, management companies are futher categorized as open end or closed end and diversisiefd or non diversisfied
if appreciated securtiies are inherited the tax basis to beneficiary is
fair market value at date of death or fair market value 6 mo after death if values have fallen
bonds and prefered stocks
fixed income securities
the difference between C corp and S corp
flow thruogh tax status
under NASAA model rule covering investment adviser records, the adviser's articles of incorporation must be retained for
for the life of the firm plus an additional three years. at least 3 years after termination of enterprise
exchange rate risk exists when making an investment ina
foreign security when the US dollar strengthens
cash res
funds companies set aside for use in emergenc
deductible from the taxable estate
funeral and admin expenses, claims against the estate and mortgages against real property owned by the estate, state death taxes
which is NOT a security
futures contract
which business form has a limited life
general partnership . any partnership has a liited life, if there is not a fixed life stated in the parntesrhip agreement hen the life of the parntesrhip ends when the partenrship composition change. if a partner leaves or anew partner is added . ilimited liabliity companies hae an unlimited life
which of the following is the easiest business to form
general partnership and sole proprietorship usually do not req state formation filing
statement about Securities Exchange Ac tof 1934 are true
general provisions of the Act apply to non exempt securities, anti fraud applies to non exempt and exempt
the rate of return that considers compounding of returns of the time horizon of invesemtne is
geometric rate of return
any power of attorney dies with client and is void
get a copy of clients will to see what is allowed if the attorney is the excecutor
which of the follwing statements areTRUE regarding gift and estate taxes
gift and estate taxes are progressive taxes (the rates increase tiwht the size of the gift or estate) regressive taxes are flat taxes. gifts of up to 15k in 2020 are excluded from tax. the first 11,580,000 of an estate in 2020 is excluded from tax, tax liability rests with teh donor or estate
there is NO exemption frmo registration under state laq for investemnt advisers that solely
give advice on minui securities , this adviser must register in the state. HOWEVER if it is only advice about us gov securties it is exempted from registration under both federal and state law. investement advisers must regiser in the state unless an exemption is avialbe
under investement advisers act of 1940 which managing assets of at least 100M must be registered with SEC
gives advise solely about listed securirty or gives advice solely about muni securities
investement advisers act (SEC) exempts from registratino an adviser that
gives advise tyo isnurance companies, only gives advice on us gov securities and wholly operate in one state trading securities only in that state because an intrastate adviser does not conduct business across state
under the NASAA statement of policon unethical parcaticesm, written discretinoary authority need not be obtained by an ivnestement adviser if the customer
gives verbal discretinoary authority and a written power of attonery from customer obtained within 10 days
what is the difference between class A and Class B stock in a pooled investment vehicle
class a stock offers breakpoints while class b stock does not. class a has an up front sales charge reduced by breakpoints for larger purchases and no or very low 12b-1 fees. class be has no up fron charges instead a CDSC that declines towards 0 over 6-7 years and 12b-1 averaging .5%. , class c has highest 12b-1 at .75
the securities exchange act of 1934 req the registration of all of folowing
clearing agencies, securities info processors, national securities exchanges
which is not defined as an investment adviser rep
clerical or ministerial employee of the advisory firm
which of the following investments tradein the market
closed end fund and listed optio
the term discount fund analysis wuld applyto
closed end management company. discount fund analsyis applies to investors who belive that closed end funds trading at a discount to NAV are undervalued and wille ventually move back up to NAV
sequence with opening a new account for a customer
cmopleting the new account form, completing the order ticket for first order, the manager signing the new account form executing the first transaction
under the uniform securities act, which securities are considered to have an issuer?
collateral trust certificate (person performing function of manager) and equipment trust certificate (person to whom the equipment is to be leased)
universal life
combines elements of term life and whole life policies. premium is broken down into an insurance element (term component) and a savings element that is invested in insurance companys general account (savings component) this cash value is invested in the insureres general account and policy owners account is credited for the interest income earned on the general account rate of return can vary year to year. policy owner can use cash value to increase the death benefit or to skip some premium payments
compensation to an investment adviser under investment advisers act of 1940
commision received on sale of life insurance, fee for creating finnaical plan that is refundable if client buys annuity, shares of stock received from a client for creating an asset allocation paln
earned income
commission, royalty payments, bonus payments
whcih of the folowing taxfiling result in a lower tax rate
head of household and qualifying widow(er) with dependent child
under investment advisers act of 1940, copies of all ads, notices and ciruculars must be retained
if distributed to at least 10 people and for a min of 5 years
short term cap gain
if liquidated after being held one year or less
when can an investment adviser borrow from a client
if the client is a BD
investment advisers that have a BD entity are permitted to accept which of the following compensation items
commissions on trades effected for clients, annual fees based on a percentage of assets under mgmt, annual fees based on a fixed dollar amount
which are compoent of common stockholders equity
common at par, cpapital in excess of par, retained earnings
a contract to purchase or sell a specified commodity at a specified price and grade to a specified location on a specified date entered into through an organized exchange
is a futures contract and reflects the characteristic of standardization
a BD offers 4 summer passes to an amusement park to each of its agents who sell at least 10k of bonds during the month of june. this action
is allowed.
under NASAA rules, each RIA must establish ipmelment and maintain a business continuitty and scucession plan that
is based on the investement advisers busienss model including the sixe of the firm, types of secrices provifed and number of business locations
a registration statement which has been filed for a security
is effective for 1 year and is void if the issuer cancels or ceases to be effective if a stop issue is administered by the admin
Form ADV Part 2B
is the borchure supplement that must be delivered to new customers at the same time as PArt 2A. Part 2B deatails educational and work background of key personnel
all of the following income received by a corp investor is partially excluded from income tax
common dividneds received, prefferred div received, convertible preef dividends received . ma y exclude 50% of div received from taxation . however interest income is 100% taxable unless it is tax free muni interest income
actions that are violations of the niform securities act could cause that indiv to be subject to
common law deciet provisions ( everyone is subject to these sucha s contracts and liability) fed and state anti fruad
a BD with 4 summer passes for winners
isa llowed, and not considered to be soft dollar compenssation
all are excluded from definition of investment adviser except
issuers
when a BD does a new issue offering
it must make a bona fide sale to the investing public and can't retain part of the issue for itself or employees. there is nothing stopping the employees and officers of the issuer from buying the issue
the best income tax filing status for a married couple where both are high earners and at least one has large personal deductions is
married filing separately
which are exempt securities
muni bonds, listed stocks, bonds of a company listed on NYSE
investment adviser who renders advice solely to invesetmnt companies
must register with the SEC only. advisers that render advice to invesetmtn cmopanies or manage 100M or more of assets are not regulated at state level and must register with SEC only
a private fund adviser with less than 150M of assets under management
must report to the SEC. if a private fund adviser has less than 150M of AUM, it is an exempt reporting adviser. it must still report to the SEC by filing parts of Form ADV annually, but does not have to register with SEC by filing form PF.
investment advisers act of 1940 and NASAA state registered advisers
must retina records for 5 years. HWOEVER BD recrod rules under securities exchange act of 1934 are 3 years with exxception of customer account statements which atre 6 years
a customer opens an account at barokerage firm to purchase securities in an offering. the custmoer must receive the disclosure document/propsectus
no later han the confirmation of the sale
under the uniform sec act, an investment adviser with no place of bus in a staet only does 1 trade in a non exempt sec in the state within 12 mo period. what is true
no registration of security is req because the transaction is exempt, exempt under isolated non issuer transaction. because the inv adv has no office in state and doing 1 transaction it qualified for de minimis exemption
an investment in treasury bills has
no risk
contrarian economic indicators
odd lot sales and purchases, short interest level aand put/call ratio
which are NOT req to register as an investment adviser under investment advisers act of 1940, persons who give advice
on US gov securities, solely to insurance companies, to customers within one state where the investment adviser is a resident of that state
under the unfirom securtiies act all of the pwerson with no office in the state are exempt from registration as an investement advicser EXEPT an indiv advising
on muni securitites.
modern portfolio theorists ould make investments that lie
on or above the efficiecy frotnier
which investment adviser MUST register with the SEC an invesment adviser with assets of:
once assets hit 110M or more the adviser has to register with the SEC
robert is an agent in NY most clients in NY> has a client who inherited stock of a canadian bank listed on toronto stock exchange and client wishes to sell these to a relative in toronoto which is ture
only US bank securities are exempt. but secondary market trades of secrutieis listed on Toronoto stock excahgne are given exemption. there is no req for the securities involved to be registered in the state because the transaction is exempt
vacationing customer exemption
only applies to customers temporarily in another state, which is generally viewed as a stay of less than 30 days
register with SEC
only investment advisers register with the SEC, their reps do not register with the SEC.
annual reset method
measures the return achieved each year over a 7 year life and add interest to annuity based on the annual reset, the annual intrerest credit is based on difference between year begining index value and year ending index vvalue the risk is that the market dumps at year end so that the credit only equals the floor amount.
under the investment advisers act of 1940, all of the following are exempt or excluded from registration as investment advisers EXCEPT persons who give advice to
other investment adivsers
investment advisers may be formed as
partnerships, corporations, associations. an investement adviser is a person which is any legal operating entity.
1040 Form
pesron income tax return
time value of money
potential to earn intesrt on money which affects its relateive value
safety of principal
preferres safer risk tolerance but doesn't nee it
if an ivnesetment adviser is recommending that a customer buy a seucrity that the adviser will sell to the ustomer out of its own invesntory which is true
princiapl transaction, this transaction is permitted only if the cusomter is informed of the circumstances and consents to transaction
all of the following are accetpable investements in an IRA
minted gold coins, real estate and mortgages. gold and silver buillion, stock options, all securities, real estatethat is not personally used and mortgage ivestements are permited. the pruchase of a tax exempt or tax deferred security is inappropriate bc of their tax benefit they offer a lower return than taxable investements. and the IRA is already tax deferred
a BD is offering an IPO to the public. the BD is permitted to sell the shares to
prospective customers and its existing customers
the state admin as a condition of registration in the state as an investment adviser can require
publication of an opening announcement in a local newspaper
the term investment adviser includes
publishers of reports on securities tailored to client situations. people who take fees for advising clients about investments, newsletter that give advice based on specific investment situation of clients, are defined as investment advisers. EXCLUDED from the State definition are investment adviser reps, professionals such as lawyers and accountants who give advice without taking a fee, BDs, publications not specific, depository institutions such as banks, and savings and loans.
a customer looking for investment that will provide life long income at retirement shou
purchase a variable annuity and annuitize the separate account at retirement
which can be effected on margin
purchase of a closend end fund, olng sale of stock, short sale of stock
transactions that violate unifrom securities act are voidable at the option of the
purchaser
a retiree who receives fixed annuity payments is subjected to
purchasgin power risk
which of the following is MOST likely to fluctuate for an annuitant during the payout period of a fixed annuity
purchasing power
an investor that purchaseszero coupon treasury bonds with intention of holding them to maturty should be msot concerend with
purchasing power risk
term life
pure insurance with no investment element. purchaser is buying life insurance for a fixed time period. at the end of that time period th e policy must be reneqed to maintain covereagemtypucally at a higher premium as the insured ages.
NASAA
recordkeeping rules apply to state regsitered advisers
which of the following are covered under the Securities exchange Act of 1934
registration of Brokerdealers, registration of insiders, registration of securities information procesors
federal secruities laws suoersede provisions of unifrom securties act in
registrations req pplicable to securities offerigngs, investement advisers, BD capital, cudtody finanical responsibility and recorkdeepingreq
sharpe ratio is a measure of
risk adjusted return
investing on a calendar schedule using sectors
rotational investeing strategy
income limited that reduce permitted contributinos apply to
roth IRA and coverdell
high earning invidv are prohibited from contributing to
roth IRAS and coverdell ESAs
which are true regarding rules and orders of the admin
rules are general in applicability, orders apply to specific cases, the admin may enter an order prior to conducting a hearing, the admin may make any rule or order relating to the act
which are true about rules created by admin
rules are not written as part of uniform securities act but carry weight of law, rules issued by admin provide interpretation of uniform securities act, rules issued by admin can't contravene the provisions of uniform securities act, rules issued by admin are req to be published as a matter of public record
the dividedn discount model values common stock by discounting future dividednsd by the
rwq rate of return
under the provisions of the uniform securities act, if an investment adviser wishes to take custody of the client funds, the RIA must
take out a surety bond. if the adviser will take custody it must have a minimum net worth or minimum surety bond coverage of 35k
A CFA wishing to register in a state as an investment adviser is exempt from
taking a proficiency exam in the state
if an investor believes thatinflation rates will be rising in the foreseeable future, he might rebelance his portfolio to include
tangible assets
which investment offers the best protection against inflation risks
tangible assets
a customer wishes to purchase a direct partiipcation program offering. the rep should know what to give advice
tax bracekt, ability of investor to commit funds for long periods, ability of investor to contribute addiontal funds if assessed by general partner
dept of treausry rwquires
that any deposits of cash made by a customer or withdrawals of cash in amount of mrore than 10k must be reported to finCEN
tenants and common and one person dies
the 2 surivors continue as co teneants along with estate of the decedent
which statements are true about enforcement of Investment Advisers Act of 1940
the SEC has the power to collect evidence, subpoena witnesses and to take oaths and affirmations, the SEC can issue orders denying or revoking registration of an investment adviser, orders of the SEC may be appealed by filing a motion in the US court of appeals
broker dealer is required to initially register with
the SEC, they use Form BD for this, which is a bd registration form. then the BD registers with an SRO such as FINRA.
the most serious flaw of a non qualified deferred comensation plan is
the account assets are not protected in the event of a coprate bankruptcy
cicivl liabililty and cil penalties for unknowing violations of uniform securities act
the act provides for civil labiilities the civil court system can omposecvili damanges
regarding the admin ability to inspect the books and records of a BD doing business in its state which is true
the admin can conduct an inspection of a BDs books and records in any state and at any time
which is true
the admin can erquire the filing of internet communications in either electronic or printed form
Which statement is TRUE regarding the state admins authority to establish net capital standards for BDs?
the admin can only establish net capital standards that are the same as those set by the SEC
which is true regarding the state admins authority to establish recordkeeping rules for BDs
the admin can only establish recordkeeping rules that are the same as those set by the SEC
FINRA BD agents cannot borrow from a customer unless
the customer is an immediate family member
a customer would buy put contracts because
the customer is bearish on the underlying security
customer wants to sell 1% of her holding request bd display offering quotes
the dealer can enter the quore only if it is bona fi
if a customer purchases in a 200% leveraged ETF the custmoer can lose
the investment amoun
if an ivnestement advisers net worth or net capital falls below the min level set by the state notice must be given to the admin by
the lsose of usiness the next day of net worth deficiency and the investement adviser must file by the close of bus on the next bus day a report on financial conditino including trail balance of all ledger accts, statement of all client funds securitites or assets which are not segregated, computatino of the aggregate amount of client ledger debit balances and statement as to the number of client acounts
a state registered investment adviser finds that it has fallen below the min net worth req established by that state. A report must be made to the state admin that the RIA is not in compliance with the states min net worth standards
the next business day
which is true when a bond sells at a discount
the nominal yield is LESS than the yield to maturity and the currentyield is LESS than the yield to maturity. highest to lowest yields for discount bonds: yield to maturity (highest), current yield, nominal yield
an agent of a BD recommends a specific stock to a customerand says tht the stock will msot likely increase in value within the next couple of months. the customer invests in the stock and its market price increases subtantially.
the only accpetable commission is that which was oringally received
upon entry of a stop order denying a security's exemption, the admin must notify those affected by the order that:
the order has been entered and the reasons therefor and within 15 days of written request the matter will be set down for a hearing
a customer placed an order Buy 5M ABC 9s M'42 @ 90 GTC
the order must be executed at a price of 90 or better. good til canceled wants to buy for 90% of par or less so 4500 or less
if a customer has a gian on a long stock they wish
the oreder wil be placed below the current market price and a sell stop order will be entered
to register a successor firm with the state admin for the unexpired portion of the current license year, which statements are true
the predecessor firm must have ceased business operations and can only conduct winding down transcations, the successor firm must file a form BD or ADV amendment with the admin, the filing becomes effective on the date designated by the licensee
wich about term life insurance is true
the premium is much lower than for whole life while the insured is youong. term life insurance is pure insurance with no invesemtnt element. whole life doesn't have renewals the policu is good for that persons life. part of whole life premium is invested in insurance company greneral account and is guaranteed to grow at a fixed rate. this builds cash value
which will equal the face value of a bond
the present value of the payments to be received from the issuer discounted by the bond coupon rate
bond A and bond b both have an 8% coupon bond a matures in 2 years while bond b matures in 10 years if market interst rates fall
the price of bond b will rise faster than price of bond a
under partnership democracy provisions the partnership agreement must give detailed disclosure of all of the following
the procedures for allocating profits from investments to the limited partners, the gernal partners compensation arrangement, the limited partners claim to assets upon dissolution
a rep at a member firm is approached by person outside that firm to sell promissory notes through tha tmembers branch office waht is true
the rep mayonly sell promissory notes after receiving written permission of member firm
if a rep that transacts business in a state terminates employment with a fed covered adviser
the rep must notify the admin promptly
a customer has a fere credit balance at a BD. the customer makes a verbal request over the phone that the BD pat the amount of the balance immediately in check form. which is true
the request should be honored as given, a ffree credit balance is an uninvestedd cash balance there is no need for a writteen request
what represents business risk
the risk of buying a single stock
two indiv own a joint account as tenants in common. one dies without a will. what happens
the rules of intestate succession are followed. this is established by each state and the estates assets are distributed to closest living relatives with a surviving spouse being first in line to get the assets then the children then the siblings etc
a client at your firm has an indiv account she dies without a will what happens
the rules of intestate succession are folowed
payments made on fixed annuities are
the same after annuitization occurs
when comparing ETF to UIT
the secondary market for UITs is limited while ETFS are activey
section 529 plans are established by
the state
AN sec deficiency letter indicates
there is not adequate disclosure in the registration documents filed under securities act of 1933
which are true regarding equity indexed annuities
they are an insurance product and are currently not defined as a security.t they give a return tied to performance of S&P 500 but this is subject to annual cap of 7-9%. guarantee a min yearly return of 1-3%
an exempt reporting adviser (is a private fund adviser) with less than 150M of AUM
they are not required to register with the SEC (which is accomplished with From PF) however they must still report to the SEC on Form ADV Parts 1 and 2 annually and this info is made public
5 brothers wish to form a company as asubchapter S corp, with outside shareholedrs
they are permitted to be owners of subchapter S corp and count as 1 shareholder against the limit of 100 shareholdesr in a subchapter S corp
open end fund
they are securities which are redeemable with the sponsor at any time
which is true about sole proprietorships
they are the easiest business type to form. there can only be one owner. there are no state fililng papers neededd. they can not issue securities and the sole proprietor has unlimited liability for business debts
if an employee quits their job and has a 401k or 403b
they can distribute without a tax penaulty between agres of 55-59.5
inw aht way are C shares unique
they charge a level annual load regardless of how long the shares are held
appointment of SEC commissioners
theya re not permitted to enaage ina ny other business or em[lloyement each term is 5 years. no more than 3 commissioners can be from 1 political parter. there are 5 commissioners. each commissioner cannot effect securities transactions wehther disclosed or not
a hedge fund offers to provide a min level of trades to a BD in return for receiving below market office space from the BD which is true
thi is an unethical practice unless it is dicslosed on Form ADV Part 2A (Brochure) filling with the admin
an investment adviser rep wishes to set up a blog on the internet to provide info to intersted persons about current fed and state regulatory events related ot investemtn advisers
this action is permitted only if the investment adviser rep obtains permission of the ivnestemtn adviser firm. must disclose affilation withBD or investemnt advisory firm, BD or investemnt adviser must approve and authorize. agent or IAR must act within scope of authority granted by BD or invest adviser
a company is formed with 120 shareholders and 20M of capital with the purpose of investing in securities. which is true
this company must be reistered as an investment company udner the 1940 act. any investment companies that have 100 or more shareholders and 100k or more inital capital
a federal covered investment adviser makes a loan to one of her cilents for the purpose of buying a residence for personal use. the loan is secured by a lien on the house .which is true
this is NOT permitted because an adviser can not make a loan to a client
the directors of a company decide to offer shares of the company from companys unissued stock directly oto copmany employees the proceedsof sale for to the company but directors take a commission from employees on these sales. which is true
this is an issuer transaction bc proceeds are going to issuer, the directors are defined as agents of the issuers, the directors must be registered, the securties must be registered
a RIA who is a reg rep manages a clients account charging the client both commissions on trades and an advisory fee which is true
this is not unethical as long as disclosure is made to the client
liquidated damanages provision
this would state the adviser is responsible for a loss and is not permitted
weak form of effiencet market theory
those who beleive that future prices cannot be predicted by past performance. they believe all past publicly avail info has no validity for future price. technicaly analysis they think is useless but fundamental analysis has potential value
strong form
those who believe stock prices reflect both piblic and non public ifno
for an adviser to charge a [erfpr,amce fee tje omveste,met advosers act pf 1940 req
those with either 1M investedf or net worth of 2.1M (qualified icustomers) NASAA can not prohbit the charging of a perfoamnce fee for these custoemrs.
what must be recorded on anexecuted ticket
time of execution, time of receipt, account number, solicited or unsolicited
must be reco\lrded on an order ticker
time of order receipt, customer account name/numebr, name of person entering the order
which must be recorded on an unexecuted order ticket where the trade has been cancelled
time of receipt, time of cancellation, solicited or non solicited
which must be recorded on an unexcuted order ticket where the trade has been canaceled
time of receipt, time of cancellation, solicited or unsolicited , accpimt mam and or number
a womena wins a 500k prize she has choice of taking 50k per year for each of the next 10 years or a lump sum of 300k today. the difference in amounts is explained by the
time value of money
an indiv is considering leasgin a new automobile which quantitative method is used to caluculate the monthly paymeny
time value of money
the potential to earn interset on money which affeetcts its relative value is known as the
time value of money
the method for computing return as shown ina mutual fund performance chart is
time weighted average return (total return which shows dividends and cap gains as continually reinvested
sector totation is a
timimg strategy
ad ad published by an investement adviser may contain a
tleephone number to call to get a list of all recommendations made by the adviser over hte past two years
customer privacy rules allow the disclosure of a specific customers account information
to a third party as necessary to complete a transaction requested by that customer
state
to be any state, territory, posession of the US. Distribct of columbia, puerto rico, state of florida, hawaii, virgin islands
when must a REI send a notice of change of owenserhip
to each cleint whent he RIA changes it business form from a partenrship to sole prioprioership this rule is just for investemnet advisers organized as partnerships. if there is a change to sole prioeptorship then each client has to be notitied
why would an indiv purchasing life insuracne establish an ILIT
to exlude the death ebenfit from the decedents estate
a customer that is short ABC stock in his portfolio buys put options on that stock. why would they do this
to lock in a price at which the short position can be increased in the portfolio. gove tje customer the ability to sell more shares at the strike price if the market price of the stock should
under investement adivers act of 1940 (SEC) pesron who gives advice to who is NOT EXEMPT or EXCLUDED
to oother invesetment advisers (under state is is exempt to investemnet cmopanies)
a cuple owns a home together and they file for bankruptcy f there is an excess of funds from the sale of the home where does the extra money go
to the additional creditors
a plan trustee is considering making an investment in XYZ stock for a trust that has multiple beneficiaries. under prudent investor act, this investment decision must give consideration to the role that this investment plays
to the overall portfolio strategy
an investment adviser prepares an ad that will be used in newspapers in a large city. under NASAA rules, the ad would be permitted to contain a
toll free number to call for more information
retirement plan that favroshighly compensated employees compared to rank and file employees is a
top heavy and non qualifi
when comparing Roth IRAS to TRasiitonal IRas
traditional IRA contributions can be dudectible, Roth IRA contributinos are never deductible. after age 59.5 distributinos from TRastional IRAs can be taxable, qualified distributinos from Roth IRAS are never taxable given that the account has been in existence for at least 5 years
there is no earnings limit on those who can convert their
traditional IRAs to Roth IRAs
the admin can rew filing of sales literauter unless the securtiy otr transaction is exempt
transactinos between an underwriter and an issuer are exempt, secondary market trasactions of listed seucrities are exempt, muni securities are exempt.
which is the most appropriate investement for an estate account
treasirubills the obejctive is to preserve principal and to effect timey distribution of estate assets. they are liquid and have little market riks
a customer wishes for liquidity, marketability and current income the best recommendation is
treasiry note
which investment has a known long term internal rate of return
treasury STRIP
a customer as just received 100k wants to know what tod o bc he needs it in 3 mo
treasury bills
which has a long term internal rate of return
treaury STRIP. the implicit yield of investment is locked in at purcahse and is not affected by reinvestement risk since perioidic interest apayments are not being made
person who prepares teh trsut aggreement
trsut attorney
a violation of the uniform securities act will NOT occure if statements made about a security are
true but omit non material facts
income ina non revocable trust is taxed at the
trust rate. these are the similar to the rates for indiv but the brackets rachet up faster . income in a revocable trust is taxed at the grantors tax bracket
the person that administers a trust is the
trusutee for the beenfit of a beneficiary. the person who donates the assets into the trust it eh grantor
index fund managers
try to beat the return of the becnamrk index, can aleter the weighting of stocks to those that the manager think may outperform overall index
true statements about ETFs
typically have same or lower expense than mutual funds, can be traded anyime during exchange trading
deferred comp plans are
typically suitable for high level employees and non ERISA qualified plans where employee assets are held by the coporate employer
which securitities qualifiy for ablue chip exemption under the uniform securities act
common stock listed on the American stock exchange (NYSE american), common stock listed on NASDAQ, unlisted mortgage bonds of a company whose common stock is listed on the American Stock Exchange (NYSE American). exempts: issues listed on recognized exchanges as well as any senior securities of those issuers bonds and preferred stock and any warrants and rights of those issuers. a limited partnership security where an exchange listed company acts as a general partner is technically a different issuer, an isssue of the partnership not of the corp general partner that is listed on the exchange
which are exempt securities or are excluded fromthe definition of security under uniform securities act
common stock of a NYSE listed issuer, contracts requiring periodic payments of fixed amounts into fixed annuities, endowment contracts. both fixed annuities and endowment contracts are excluded from definition
the state admin is empowered to req the filing of ads and sales lit relating to offers of which of the following
common stock offered to 25 investors
insurers generally give a variable life insurance owener investement choices including
common stock, bond, and money markets
total return is an appropriate measure of performance for
common stocks, preferred stocks, bonds
NASAA has the power to set record retention rules for a state reg adviser that cover which of the following records
communications to 2 or more persons, emails to clients, trial balances, general ledger
point to point method
compares index value at purchase date to value at the end date, 7 years later
hedge funds with soft dollar copm that is rent
unethical unless it is dicslosed on the Form ADV filing with the admin
a customer buys 10 ABD JAn 50 calls @ 475 when market price of ABC is $51 per share. max gain potential is
unlimited
NASAA rule for investement advisers
verbal discretion can be exercised as long as weitten power of atorney is obtained in 10 day
registration by coordination becomes effective
when SEC registration becomes effective
which is true about req notice to admins
when an agent begins or terminates a connection with a BD, the agent and BD must notify the admin prompty, when an agent begins or terminates those activities which make him or her and agent, the BD must notify admin promptly
Issuer transaction
when an issuer sells or redeems securities, this is an issuer transaction. the sale of securities is for benefit of the issuer
the securieis ac tof 1933
concerns the primary market ir req that non exempt new issues be registered with teh SEC and sold witha propspecuts that gives full and fair disclosure t
an investor buys a 100k 7% corp bond maturing in 2043 for 70k. the bond is callable starting in 2023. what is the most appropriate meausre for calculating yield
yield to maturity
a married couple has a joint net worth of 15M. if one dies in 2020, the taxable amount of the estate is
$0. an unlimited marital exclusion applies to spouses when 1 party dies. thus if a husband dies no estate taxes are paid a tthat point by the survinvg spouse. when that person dies, the estate is subject to tax with an estate tax exclusion on teh first 11,580,000 in 2020
an invesement adviser with no place of business in the state is exempt from registration if it renders advice solely to employee benefit plans with assets of at least
$1M
if a company goes out of business which claim would be paid first
$1k to secured creditors, then unsecured creditors are paid such as wages and taxes and trade creditors, then unsecured bondholders then preferred stockholdesr and then common stockholders
a customer sells shor 100 shares of PDQ at 58 and buys 1 PDQ Jul 60 call @ $3. the customers max potential loss is
$500
a hedge fund wishes to make a seed capital invesetmtn ina start up company under rule 504 of reg d. the max permitted invesetmtn by the hedge fund is
$5M (rule 504 is for small offerings) Rule 506 can be used to raise any dollar amount . for the RUle 504 rule doesn't specify req investor disclosures and does not place any limit on number of investors, there is no audit req for issuers financial statement.s while there is no fede registration req the states where the issue is offered can stil
the investment advisers act of 1940 req that an independent public accountant
conduct an annual suprise audit of registered investment advisers that take custody of customer funds and that send out account statement and file a form ADV-E with SEC within 120 days after completeing the exam
the investement advisers act of 1940 requites that an independednt public accountant
conduct an annual surprise audit of registered investement advisers that take custofy of customer accountfunds and send out account statements and filed a Form ADV - E with the SEC within 120 adys of completing the exam
the admin can
conduct public investigations, private investigateions, in state investigations and out of state investigations
regulatory risk for a muni bond would be characterized by
congress pursuing an ecnomic stimulus policy of lowering tax rates (this is also called legislative risk)
the instrument that permits aggrieved parties to serve legal documents to administrator in lieu of serving them directly to the party that is the object of the lawsuit is called a
consent to service of process
which of the following is typically req to be included in the state registration application of a BD or investment adviser?
consent to service of process, business history of applicant, fingerprints of the officers
for initial reg as an agent in a state, which can be req
consent to service of process, filing fee, registration app
for initial registration as an agent in a state, all of the following are req
consent to service of process, filing fee, registration application
geometric mean
considers compounding of annual returns
inertial inflation is
contactualy bases
all of the following apply to mutual funds
continuously issued, redeemable, non-negotiable
uniqye risks to mrotgae backed securities
contractiona dn extension risk
coverdell
contributinos are not tax dedcutible and distrbutinos are not tazable. earnings grow tax deferred and funds can be withdrawn with no tax due to pay qualified education exp
403B plans
contributinos are tax deductible to the employee, emplotees make voluntary contributions thtough their employers and earnings on contributinos by employees are tax deferred
roth IRAS
contributinos can continue after age 72, distributinos are not req to start after age 72
IRA
contributions are allowed based solely upon personal service income, contibutions may be made if the indiv is covered by another tpye of retirement plan, to remain tax deferred, distributions from other retirement plans must be rolled over within 6o days
defined beenfit plans
contributions made to the plan can vary from year to year, employees with the highest salaries and fewest years to retirement beenfit the most, actuarial tables are used to determine contributinorates for eac hemployee, contributions are tax dudctible and earnings build up tax degferred, qualified planwhen distiburions start the amounts are 100% taxable
REgulation U
controls extenstion of credit on securtiies by banks
regualtion U of fedeeral res
controls redit on securities to cutosmers by banks
a company that has never previously issued securities registered with the securities and exchange commission can register in a state by
coordination and qualification, filing is only available to companies that have previously registered securities with SEC.
the type of state securities registration for an initial public offering that relies on the prospectus info filed with the SEC under federal law is registration by
coordination. same info that is filed with the SEC is filed with the state. when SEC registration becomes effective the state registration becomes effective.
the investment advisers act of 1940 requires that
copies of advertising, notices and circulars be retained as a reocrd for 5 years if disftributed to 10 or more people
in connection with a new issue offering, a BD would be permitted to send which to a customer if it were accompanied by a copy of the final prospectus
copies of the issuer's audited financial statements showing performance over the prior year
Under Uniform Securities Act, an investment adviser may be formed as any of the following
corporation, partnership, association. NOT a broker dealer
which must report to the SEC udner the Securities Exchange ACt of 1934
corporations and investment companies
the footnotes to a companys financial statements give detail on
corporations significant accounting policies, estimates pension obligations of the cop,estimated legal obligations of the corp
must report to SECunder securtieis exchange act of 1934
corporations, limited partnerships, invesetmenet companies . EXEMPT from the act and do not report: muni and federal issuers
uniform securities act covers
covers registration of BDs and their agents, investment advisers and their agents and securities that are sold in the state
stock options granted to an oficer of a publcily ttraded company
create a tax event if the options are exercised and the stock is subsequently sold at a profit, are subject to taxatino as capital gains
which would be included in short term emergency sources of cash
credit card advances, margin loans from a BD, cash value of whole life insurance, home equity line of credit
when making a reccomendation of coprate commercial paper to a customer which risk is most important consideration
credit risk
what risk should an invstor in an ETN consider that would not be associated with an ETF
credit risk . an etn is an exchange traded note. it is s atype of structured procut offered by banks that gived a return tied to a bencharmk .the note is a debt of the bank and is backed by the faith and credit of the issuing ban. it is listed and trades like a stock so it has little marketability risk, repayment is based on the credit of the issuing bank. this is the credit risk. any generatl decline in stock prices will reult ina price decline of the ETN . ETFs rare based on physical underlying securties there is no credt risk. and ETF are exchange traded. both have market risk f. the market risk for ETN is risk of an interest rate rise, for ETFs it is a . vo;atility risk is an issue for leveraged ETFs but not as much of an issue for an ETN which will exhibit volaitlity due to market interest rate changes
the primary risk of investing in an ETN is
credit risk. they are an equity index linked structure product that is listed and trades on an exchange. these products are only as good as the guarantee of the issuing bank and typically have a 7 year life
the intentional omission of material facts when offering or selling a eucirty can result in
criminal liability and criminal penaltyies
found in a regisstration statement for a securit yregistered by qualification in a state
crrent balance sheet and income statement, business description use of proceeds or offering, offering terms, price of security being offered, legal opinoin, accountants opinoin. NO projections
formula for net working capital
current assets- current liabilities
quick ratio
current assets- invesntories and prepaid expenses/current liabilities
quick ratio
current assets- investories and prepaid expenses / current liabilities
networking capital is
current assets- liabilities net worth is all assets- all liabilitiies
any registration statement for a securities offering includes
current balance sheet and income statement, business description, use of proceeds of offering, offering terms, legal opinion, accountant's opinion
what is an advantage of investing in real estate
current cash flow because real estate returns tend to be stable over time
which WOULD be found in a registrations tatement for a security that is going to be registered b qulaification in a state
current equity and debt capital of the sisuer, descirption of issuers business, product lines and competitive environemnt, use of proceeds of the offering , current alancce sheet, offering terms legal opinion, accountants opinoin
a call option is out the money when the
current market value of the stock is less than the option contract strike price
$30 long term cap gin earned over 13 mo. since 20% of teh gain is paid in tax 80% of $30 = 24. to annualize the gain over the 3 mo 12/13 of $24= 22.15. cash div = 2. 2-% goes to tax and 80% is kept. 2 * .80= 1.60 so 22.15=1.6= 23.75 /100 invested = 23.75
current tax law taxes long term cap gains and cash div at 15% for lower earnings and 20% for highest earneres and the 37% tax bracket is the highest bracket
which are permitted in advisory contract unde rNASAA laws
custody proivision, non-assignment provision, discretionary authority provision.
forward contracts
custom contracts that are negotiated between buyer and seler. they are issued OTC and there is very limited trading. it may not be possible to do an sffsetting trade with a froward contract. forward contracts are not subject ot federal regulation
under NASAA rules which record is NOT req to be retained by an inv adviser
customer account statements prepared 6 year ago. advisers must retain recrods for 5 years under NASAA rules (SEC rules are three years). the first 2 years of records must be kept at the advisers principal office avail for inspection
which transaction is subject to regulation T
customer borrowing from a broker using securities as collateral. regulation T of the fed reserve board controls the extnesion of credit on securtiies from broker to custoemr.
a stock ina customer acct has been dropping rapidly, can't reach customer. the inv adviser is prohibited from placing sell unless
customer had placed an existing sell order 1 year ago
relevant consideratins when determining if a customer account has been churned
customer investment objective, chraacter of customers account, fianncial condition of agent
investement advisers CAN charge performance fee if
customer is investing 1M of assets or 2.1M of net worth the fee arrangement must be disclosed in advisory contract with client and all fees must be fair and reasonable. the disclosure that the fee arrandgement may create incentive for riskier investement and that the ivnestement adviser will get cmopensation based on both unrealized appreciation and cap gains
compte the non compounded annualized inflation adjsuted rate of return for following investment held for 2 years. initial: 10k ending: 9,800 div received: $600 inflation rate: 6%
customer lost 200 and received 600 in div for net return of 400 earned over 2 years. so 200 per year on 10k = 2%. the rate of inflation was 6% or 3% per year so 2-3% - -1%
pieces of info needed to open a new account
customer name, address, date of birth, social security number
to open a new account
customer name, address, date of birth, social security numebr
hypothecation
customer opens a margin acct and pledges securities to brokerage firm, in return brokerage firm loans the customer a portion of the purchase price.
which records MUST be retained in a state registrered investmetn advisers principal office
customer purchases and sals and customer securities poisionts (Account statemtns) kept for 5 years with prior 2 years immediately accessible. the SEC rule for these records which applies to BDS and fed covered advisers is 6 eyaers
what must be retained in a state registered investment advisers principal office
customer securities positions and records of customer purchases and sales orders
a BD must maintain physical posession of which
customer securities that are collateral for a margin loan and seucrities held as collateral for derivative trading components
which statements are true about retention of customer account records for BDs under unfirom state law
customer trade confirmations must be retained for 3 years, customer account statements must be retained for 6 years
rebalanced monthly and investeed in index funds
(rebalance go first so active/passive
a statement of investment policu prepared for distribution to a client that purchases asset allocation services covers
customers investment objcetives financial needs and financial goals, guidelines regarding investments that are premitted and those that are not, guidelines regarding investment diversification or concentration
under SEC rules regarding taking custody of client funds
customers must be notified of the locationw here the funds are being held. they may be commingled with other customers if it is an omnibus account at a BD. maintain any account holding customer funds or securtiies in name of the investement adviser as trusee for teh cusomers notify the customer in writing of the place and manner in which funds and securities will be maintained. any change in this requires written notice to customer. send to each quarterly
bid/ask
customers who want to buy do so at the dealers ask, customers who wish to sell do so at the dealers bid
a trade confirmation for an OTC bulletin board stock shows we sold you 100 share of XXX @ $7 net in this transaction teh memebr firm acted as an
dealer, and charges a mark up included in the net price. in an OTC prinicpal transaction the member firm sells a security out of its inventory to a customer who wishes to buy; or buys a seucrity into its inventory from a customer who wishes to sell. in this transaction the firm acts as the dealer. and market up the stock to customer who wishes to buy or markes down the stock from the customer that wishes to sell
which represents leverage
debt/equity
a pension consultant has been hired by an employee benefit fund to render advice for comp. the adviser is EXEMPT from the registration req of the investment advisers act of 1940 if it takes any of the following actions except
deciding the proportion of plan assets to be invested in securities has to register as an adviser under inv advisers act of 1940
a 7% coupon is being offered on a 8% basis. if interest rates for similar bonds fall below 8% the basis for this bond will
decrease. if market yields are rising the basis quote will rise forcing the bonds price down. if market ields are falling, the basis quote will fll(decrease)
a socially responsible customer would NOT ivnest in a
defense copmany bc weaons.military famlbing tabocco and alcohol
an officer of an issuer is engaged in the sale of that issuer's securities to the public. the issuer's securities are federal covered. the officer is
defined as an agent who must register in state. indiv representing issuers in sale of certain specified securities are excluded from definition of agent= indiv who represent indiv selling treasury, agency, and muni securities, bank issues, money market instruments, contracts in connection with pension plans, to employees of that issuer if no comp is paid and to qualified wealthy purchasers. the security being sold Is extremely safe or the sale is not being made to the general public. NO exclusion for sale of fed covered securities by an indiv.
a peerson who renders investment advice relating solely about muni securities is
defined as an investment adviser and must register under the act under state law. however the person qwho gives advice solely about US gov guaranteed securtiies is excluded from the definition of an investment adviser under investment advisers act of 1940
social security payemnts
defined as transfer payemtns that are taxed at same rate as earned income but aren't defined as such
pension benefit guaranty corp covers
defined benefit plans and corp pension plans . provides insurance for defined benefit plans formed under ERISA that are terminated that have unfunded pension liability. it does NOT cover defined contributino plans. or gov
retirement plans that must comply with ERISA are
deinfed benefit plans, profit sharing plans. payroll deduction savi
an executor or trusee is permitted to
delegate investment and management functinos as long as the trust or will permits such and the agent actions are consistent with the purposes and terms of the trust or will. the contract is valid as long as the adviesrexercises reasonable care to compy with the terms of the delegation
the writer of a put on a listed stock is exercised the writer MUST
deliver cash and take delivery of stock
the holer of a put ona listed stock exercises. the holde rMUST
deliver stock and take delivery of cash
the writer of a call on a listed stock is exercised. the writer MUST
deliver stock and take delivery of cash
if an equity put holder exercises a contract the holder must
deliver stock in 2 days
variable annuity contracts
deposits made into the separate account equals the owners cost basis and any withdrawals made prior to age 59.5 are subject otpanlty ta
forward contracts and futures contracts are
derivatives
disclosure of which of the following is made in a Form ADV Part 2 that is filled with the SEC under the investment advisers act of 1940
description of how fees are assessed, method of analyisus used, educational background of applicant, balance sheet of applicant if the firm takes cuody of client funds or accepts 1200 or more of prepaid advisory fees . Form ADV Part 2 is broken down into Part 2A which is advisers business, anlaytic method, types of clients, assets under management, fees, conflicts of interst etc. Part 2A must include a balance hseet of the firm if it will take cutody of customer funds or securities; or wil acecept 1200 or more of prepaid fees, 6 months or more in advance of services rendered. this is the borchure that must be given to customers at or piro to entering into an adviosry contract. Part 2B is borchure supplement that must be delivered to new customers at the same time as Part 2A. Part 2B details the educationla nad work background of the key personnel who set investemnet strategy or maange accounts
a stock is quoted as follwos bid 18.95 ask 19.00 10 x 10 the spreqad for a round turn trade is
.05 and 50, 10 round lots of 100 shares is 1000 hshares in both bid and offered if the dealer sells 1000 shares at 19 and buys 1000 sares at 19.95 the dealer makes a spread of .05 on 1000 shares = 50
buys 1000 shares of stock at 50 per share sells after 3rd year when stockis 70 per share. 15% tax bracket for long term gains. the after tax annualized rate of return is
.85 * $20 = $17 fter tax gain/ 3 year 5.66 annualized after tax gain / $50 original investment = 11.33%
a customer has 10k in passive losses from a limited partnership investmnt/ if the customer has no other passive income fro that tax year, the customer may deduct
0. passive losses can only be offset against other passive income. there cannot be losses gerenated without passive income
disclosure of which of the following is made in a form ADV part 2 that is filed with the SEC under investment advisers act of 1940
description of how fees are assessed, method of analysis used, educational background of applicant, balance sheet of applicant if the firm takes custody of client funds or accepts 1200 or more of prepaid advisory fees 6 mo or more in advance of services rendered
the advisory contract unde rNASAA rules must include
description of services provided, term of contract, formula for computing fees, amount of prepaid fees to be returned if contract is terminated early, assignment of contract is not permitted unless customer approves, whether the contract grants discetinoar athority to the adviser and fee for maanging equity may be higher than debt
capital needs anlaysi
determine amount of life insurance that should be pruchases to meet a future financla goal if the client should die prematurely
the maxum amount that can be given to a child in a 529 plan is
determined by the limitations established by the state
net present value
determining value of investmeents cash flows
an investment adviser has entered into a soft dollar agreement with a full service BD where the BD will provide the adviser with asset allocation softeare for free in return for adviser directing its order flow to the BD for trade execution at non discounted commission rates. a customer of the advier objects to this and reicts adviser to send trades to electronic discount broker- the investment adviser should
direct the customers trades to electronic broker for execution
which of the following are registered as agents of a BD in the states
director and sales employee
when a BD application becomes effective in a state, who is NOT req to separately register?
directors of the BD
if the SEC sends a deficiency letter to the issuer regarding an issue in registration , which are true
disclosure in the reg documents is not complete, the issuer must file an amendment with the SEC to cure the deficiency, the 20 day cooling off period starts again once the amendment is filed, the SEC can issue subsequent deficiency letters after amendments are reviewed
a RIA pays a flat fee to CPA for regerrals. RIA charges clients a fee based on percentage of assets which disclosures need to be made
disclosure of fees paid by adviser to CPA and disclosure of mgmt fees to be paid by customer
market manipulation
dissmentinating rumors, painting the tape, wash trades NOT churning that is just to generate commission for the agent
a customer has chosen div and cap gains automatically reinvested
distrbutions are reinvested at NAV, a customers NAV will apprecicate faster than if automatic reinvestemtn were not chosen, customer will receive a form 1099=-DIV each year from the fund for tax reporting purporses
which is true about an IRA funded with non deductible contributions
distrbutions can start at age 59.5 wihtout penatly and distributions are paritally taxable and partially non taxable.
if the benefificary of a coverdell recevies a full scholarship fotr education expesnes which statement is true
distrbutions to the benefiticary are subject to income tax but no penalty tax
a customer that is willing to assume market risk should
diversify the portfolio sufficiently to elimnate non systematic risk
which is true about mutua lfund distributinos that are automatically reinvested
dividend distributinos that are automatically reinvested are taxable in the year the distributino is made, capital gains that are automatically reinvested atre taxable in the year the distributino is made
total return
dividend(for one year divide if multiple years) + cap gain(for one year divide if multiple year_/ price per share originally
an investment in common stock provides dividends equal to 4% per year and expected long term cap gains equal to 8% per year. for a lower earninginvestor in the 30% tax bracket the after tax rate of return is
dividends and long term cap gains are taxed at a max rate of 15% for lower earners and 20% for the highest earners. so dividends is 4% (100%-15%)= 3.4 and cap gains is 8% (100%-15%) =6.8
portfolio income
dividends received from common stock holdings, interst income received from bond holdings, proceeds from sale of securities in excess of the tax basis of those securities
a corporate investor may exclude from taxation part of
dividends received from common stock, dividends received from preferred stock dividednsd recvied from convertiable proferred stock . THEY CAN NOT EXLCUDE interest income unless it is tax free muni interest incoem . they MAY exclude 50% of div received from taxation
which are included in the taxable income of a corp
dividends received from domestic investments, interest recived from foreign investments, gain on the sale of a capital asset
under unifrom securities act the definition of guaranteed means that the security is guaranteed by abnother partysas to payment of
dividends, interest, principal
which are included in taxable income or a corp
dividneds received from foreign ivnestments and gain on sale of a capital asset
hedge funds
do not trade. they are illiquid investments that are typically set up as privte parternships
a federal covered adviser located in STate A advsertisies in state B. the admin of sTate B can
do nothing all a state can require is a notice filing supervision is responsibility of SEC. the onyl juridiction retained by state over fed covered adiser is if fraud is
an investment adviser is a private fund adviser that is not req to register with the SEC. it has a pol of qual investors and wants to ad to pool . in oder to retain exempt pool tstatsus the ivnestement adviser
does not publicly offer securtiies and has 100 or fewer benefitical owenrs of it securities OR it does not publicly offer its securiteis and only limits its owners to qualified purchasers . quliaified purchaser is tougher then acceredited investors it is an indiv or trust with at least 5M in assets avail for investement or an investement amanager or company with at least 25M assets avail for investment
the settlor
donates assets to the trust, appoints the trustee, establishes the purpose of the trust
the grantor of the trust is the person who
donates the assets into the trust
which recommendation is appropriate for a client who is subject ot he AMT
dont exercise any incentive stock options granted by your employer
an indication of interest for a new stock offering is normally taken
during the 20 day cooling off period before a new issues registration becomes effective. the underwriters use the indications collected as one of the determinants for pricing the issue (this happens at the very end of the cooling off period)
rebalancing of a client portfolio based on shifting values of different asset classes is called
dynamic asset allocation
per stirpes
each famiy branch gets an equal share of the estate
SEC commissioners
each hold office for a term of 5 years, there are 5 SEC commissioners appointed y the president of US with consent of the senate, no outside business or employment
which is true about a joint account held as tenants in common
each indiv ownership interest in a tenants in common account is freely transferable to another person while they are alive. no req that each person has an equal percentage. if an owner dies the percentage goes to his estate so the estate becomes partial owners of the account.ownership must go through probate before it can leave estate and be inherited by another party
JTWROS
each tenant owns 100% of account when one days the other 100% owns the account bypassing estate and probate
bid ask spreads
earend by market makers who are in the business of buying and selling secrutieis for their own account
under internal revennue code guidlines a royalty received is defiend as
earned income and may be dudected against any earned income
a money manager that employs momentum investing makes decisions on the
earnings trends of the company
in the beginnign of a period of economic reocvery an investor who employs a sector rotation stategyr
eary phase recovery: technology late phase recovery: industrials peak: consumer goods early phase recession: utilities/telecom late phase recession: financials
primary advantage of a general partnership structure when starting a business is
ease of formatino
the primary reason for a customer to make a tax shelter investement is the
economic viability of the prokect , tax benefits come second
the purchaser of an index stock fund believes in
effectient market theory
registration by filing
effective 5 business days after the filing
registration by coordination
effective when the federal registration becomes effective
index options are
eiropean style (exercisable only at expiration)
transfer on death registration would likely be used by
elderly father and adult son
the order to sell 100 ABC @ 90 STOp is
elected at $90 or below and executed after the order is elected at the next avail price. sell stop is placed below the current market value
subchapter S corporations
elextion of subchapter S status is not permitted if the company has more than 100 shareholders, all items of corporate income and loss flow thourgh onto the shareholdesr tax returns without being taxed at the corp level, the company canonot issue senior securities
employee contributinos to a 401k plan
employee contributinos reduce employees taxable income emplyee contributinos are immediately vested. taxed on employee contributinos are deferred until distributino
403b plan contributions
employees may contribute by salary reduction, an employee may contribute up to 19500 by means of salary reductino for 2020
a BD is a sydndicate member in a negotiated underwriting of revenue bonds issued by florida development. if the issue is oversubscribed under NASAA rules it would be unethical for the bonds to be sold to
employees of the BD that are florida residents. it must make a bona fide sale to the investing public and can't retain part of the issue for itself or employers. the issue can be sold to both florida and non florida residetns as long as it is suitable.
HSAs are
employer established and fundde with tax deductible contributinos
a money purchase retirement plan is
employer mandatory . contribution amounts are fixed rather than vairable. employers are req to make annual contribution to each employees account regadless of the companys profitability for the year. ,ax permitted contribution made by em
taxation of 401k plans
employer matching contributinos are tax deductible to the employer and dsitrbuions are taxed at ordinary income tax rates
defenses against identify theft tha tmust be used at a BD or investement adviser
encryption of data, installation of anti malware software and password proetction for system entry
a market maker is defiendas a person thtat
engages in business of effecting transactions in seucrities for his or her own account(principal)
EXEMPT securities under unfirom securtie
equpment trust certificates issues by railroad subject to ICC regulation are eempt bc of ICC regulation. iissues of banks and savings and loans are exempt issuers listed on major exchanges are federal covered securtiies and can't be req to reister in teh state
the spread s
eraned by a market maker when it effects a round turn prinicpal transaction and the differentce between the bid and a
457 plans
established by gov employers and certain non profit employers. non qual plans beeause they are discrimatory there is no tax penalty for early withdrawals . the amount contribuited is a salary reductino, earnings build tax deferred, when distrbutions are take
401k plans are typically
established by the employer and funded by salary reduction e
state secutities laws
established by unifrom securities act
monte carlo simulation
establishes a fewuency distribution of ivnestment returns over a range of different condiitons
an account is opened for 3 indiv as tenants in common. if one dies the
estate assumes the tenancy of the deceased indiv in the account
Trandfer on Death account registration
estate tax is still due upon death.
gift and estate taxes
estates of married persons that are willed to the surviving spouse are eligible for an unlimited exclusion from tax, gifts valued up to 15k in 2020 are exlcuded from tax, tax liability rests with the donor or estate
a 61 yearold wants to palce money the ivnestmenet time horizon used should be
estimate dlife expectancy minus current a
the assumed interest rate associated with variable annuities is the
estimated future rearnings rate needed to maintain level payments to the annuitant. it is a conservative estimate of annual return needed for the insurance company to maintain a constant annuity payment amount.
included in footnotes to a corps financial statements
estimatesd legal liab, deferred tax liab, open contractual commitments, significant accounting policies, outstnading lease obligations, future pension obligations, details of discontinued operations charges
non wroking spouse social security
even if they never worked they are entitled to social security benefit equal to 50% of amount that would be apid to the working souse, it doesn't reduce spouse beenfit and it can not be clamed until age 62 or later
which are inlcuded in the Alterntive Min Tax
excess depreciation, excess depletion, excess intangible drilling costs, private purpose muni interest income
which are preference items included int he aTM computation
excess intangible drilling costs, excess depletion, and excess depreciation (Amount over straight line)
preference items included in alternative min tax computation
excess intanglible drilling costs, excess depletion, excess depreciation
which risks are unique to foreign investmnts
exchange rate risk and political risk
ETNS
exchange traded structured products that are much less liquid they are typically 7 year notes that tie their return to a reference index. however these ia cap and a floor on returns. backed by credit of issuing bank and these products have credit risk if the bank defaults.
in most states an agent may be associated at one time with no more than
1 broker dealer. it is permitted for an agent to be registered with a number of BDs that are under "common control". a few state admins permit multiple registrations with different BDs.
which is an acceptable formation of a limited partnership
1 general partner and 1 limited partner. there can be multiples of each in a limited partnership
to form a limited partnership, there must be at leat
1 limited partner and 1 generl partner
the sale of securities by a state chartered bank is
exempt from both SEC and state registration. securities issued by banks (but NOT bank holding companies) are exempt from both federal and state registration. remember, banks are already extensively regulated at both the fed and state level, so to require registration of their securities is considered to be overkill
the sale of a new issue of securitites by a state chartede bank is
exempt from state and SEC registeredation. securtiies issued by banks (but NOT bank holding companies) are exempt from both. banks are already extensively regulation atboth fed and state level.
under unifform securities act if a broker dealer receives an unsolicited customer order to buy a security for a customer this is an
exempt transaction whether the secrutiy involved is exempt or non e
the sale of securities by issuers to financial institutions is an
exempt transaction. isoalted transactions with someone other than an issuer (non-issuer), transactions between issuers and udnerwriters, transactions with banks, financial institutions and trusts. no req for the securities to be registered in the state
the purchase of an emerging markets foreign index fund wil subject to which risks
exhcange rate risk, political risk and business risk
CAPM
expected return= risk free rate + risk premium. risk premium= beta * (expected market return- risk free rate)
an investment policy statement prepared for a client would include which of the follwoing
expected returns of the recommended strategy and the variance of these returns, recommended allocations among differing asset classes, strategies used for selecting specific stocks in the equity portfolio
with a variable annuity the insurer takes the risk that exepsnes for admin will not be more than expeceted. what is the charge the nsurer makes for taking this risk
expense risk charge
when evaluating an investment in a direct participating program all are relevant considerations
experience of general partner, economic viability of business venture, objectives of the program
unsutiable trade
explain to the customer that the trade is not suitable and get a signed non solicitation letter from customer before accepting the order
an ivnestement ina real estate limited partnership
exposes the limited partner to capital risk of the amount invested . the key advvantage s that loss is limited to the amount invested. only the gernal parter in the parntership assumes unlimited liablity . if they seign a recourse note they can lose that too
the investment advisers act of 1940 excludes
family offices from definition of investment adviser, if the family office only provides investment advice to client who are part of that family, the family office must be wholly owned by family clients and exclusively controlled by family members or entities, it can't be owned or controlled by the key employees though key employees can make investments, family office cannot hold itself out as an investment adviser, there is no asset size for this exclusion
securities exchange act of 1934
fed legislation aimed at preventing menipulation and fraud in secondary (trading) market
which statement is true regarding fed covered advisers and their registration requirements?
federal covered advisers are req to register with the SEC under the Investment Advisers Act of 1940.
under securities exchange act of 1934, the power to set margins on securities is given to the
federal reserve board controls the extension of credit on securities transactions. REgulation T of the FRB controls credit on securities from broekr to customer. Regulation U of FRB controls credit on securities extended by banks to their customers including institutions and brokers
the securities exchange act of 1934 is concerned with
fiar trading practices on securities exchanges used by the public, curbing insider trading abuses, registration of broker dealers that partiicpate int he securities markets . this rule is to curb abuses in the secondary trading market such as insider trading, registration req for BDS and exchanges and prohbitiioms on various manipulative trading pracitces
if a registered investment adviser for the first time decides to req prepayment of 1200 or mroe of advisory fees, 6 mo or more in advance of rendering services, the adivser must
file an audited balance sheet promptly with the SEC Form ADV PArt 2A promptly
changes to the terms of advisory contracts must be
filed with the admin on form ADV within 30 days and approve
a limited parternship is formed as a legal entity by
filing a certificate of limited partnership in that state. the certificate names each of the general and limited partners, and details the ownership interest of each. if anyone wants to sue the partnership the staet has a record of the owners to give to the person iniating the suit
all of the following may be req to maintain reg with admin
filing financial reports, filing of renewal fees, filing of sales lt
if the issuer of a federal covered security has filed notice in a state for an initial poublic offering then
filing notice is req for each subsequent secondary offering of tha tissuer in that state and a filing fee must be paid to the state with each notice
the admin can require which regarding federal covered securities offered in a state
filing of documents relating to the issue in the state, notice filing for the issue in the state, payment of a filing fee in the state
adviser would be permitted toborrow from an
financial institutino that is in the business of making this type of loan
a broker dealer excludes
financial institutions and issuers of securities
which may be req by admin to be filed by a BD to maintain registraion
financial reports, registration renewal fees, sales literature, advertising and paynment of renewal fees
all of the following may be req by admin to maintain registration
financial reports, renewal fees, sales lit
if a sole proprietor wishes to register with the state as an investment adviser, which of the following documents are req?
financial statement of sole proprietor and affirmation made by the sole proprietor that the document files is true and correct
in order to revoke a registration the admin must
find that the action is in the public interest, cite a casue fot the action found in the unfirom securities act, provide an opporuntiy for the aggrieved person to have the order reviewed
excluded from Broekr dealer registration
firm with no place of business in the state that does not have clients in the state or that deals solely with issuers, broker dealers or financial indsittutions. EXEMPT is the demininmis exemption offeredin a minority of states is exclueded as well
a gift in amount above which i subject to gift tax
first 15k is excluded but any amount above is subject to gift tax to be paid by the donor. an unlimited marital exclusion applied to both gifts and estates
a person is excluded from the definition of an investment adviser if he or she gives advice soley about
fixed annuity contracts
at the point where a variable annuity separate account interest is annuitized the holder of the contract receives
fixed number of annuity units based on the value of accumultion units
most unresonable for client with small amount of assets unde rmamanagement
flat fee assessed for the year
variable universal life insurance provide policy owners with
flexibility with respect to premium payments, investmetn options and death benefits. it provides flexibility in premium payments, investmetn funding choices and felxibility of death beenfits based on investmetn results
variable universal life has
flexible premium payment, variable cash value, variable death benefit
the advantage of a limited partnership business structure as opposed to a corp business structure is
flow through of gain and loss
parntership advantage
flow through of gain and loss. any net income is taxed once and any net loss is included on the partners tax return.
under investment advisers act of 1940 which persons are exempt from registration with the SEC
for SEC an investment adviser whose only clients are insurance companies. (under state law the adviser to pension plan would be exempt and adviser to investment companies would be excluded since it would be a fed covered adviser)
which are issuers under unfirom securities act
for corporate securities, the corporation itself is the issuer, for collagteral trust certificates, the person performing the functinos of depositor under the trust agreement is the issuer, for equitment trust certificaties, the corp is the issuerthre i no issuer for oil and gas program fractional interstest.this makes a person offering oil and gas unitys to investors to regiseter in the staet under the gouhest method registration by qualification
issuer for trusts
for securities where the structure is such that there is no board of directors( these include collateral trust certificates, voting trust certificates, certificates of deposit for security and UIT) the issuer is the person performing the functions of manager or depositor under the trust agreement
exchange rate exsts when making an ivnestement in a
foreign security when the US dollar strengthwns . we do not want the US dollar to strengthen when we are investing in foreign securities
if a person accunuates 5% or greatere in a publicly held company with intentino ofe exercising control
form 13d filing with the SEC within 10 business days
the annual renewal filed tiwht the sEC by an ivnesemeent adviser is an amendment to
form ADV part 1 and part 2 if there are any changes to the brochure . filed by an electronic amendment to form ADV part 1 and also Part 2 ( the borchure if there are any changes. Part 2A is brochure and borchure upplement is part 2B
invesetgmnt adviser wishinto take custody of cilent funds or securities
form ADV part 2A must be provided to the customer, the invesetment adviser must be audited on a suprise basis at least annualy and customers must receive account statements at least quarterly
annual renewal of registration as an agent or an investment adviser in each state is made by filing
form U-4 within 30 days of the date that renewal statements are sent out. U-4 is used for fed and state reg of agents and state reg of investment adviser reps. if they aren't filed amended and paid for by mid December the reg will expire on dec 31st
what is req to be in an investment advisory contract under NASAA rules
formula for computing the advisory fee, clause prohibiting the advisor from assigning the contract without customer consent, disclosure of whether the contract gives the adviser discretionary authority, amount of prepaid fees to be returned if contract is terminated early, dicslosure that fee for managing equity may be higher than debt
NASAA perimts oral discretion to be exercised by investment adviser
forup to 10 business days as long as written power of attorney is obtained within 10 bus days of exercising oral discretion. if the investment adviser is also registered as a BD the rules of FINRA would NOT permit this FINRA req written power of attorney from the customer prior to exercising discretion in the customers account
a food manufacturer has entered into a contract to buy 5k bushels of corn at 4.23 per bushel to be fdelivered at firms place of business 6 mo from now. the firm has entered into an
forward contract. forward contracts are custom, unregulated, OTC contracts entered intto between a buyer and a sleer that specift that the underlying asset be delivered at contract price at stated date. hese are non standardized contracts that are not exchange traded.
which is true about cash forward contracts and futures contracts
forward contracts are non standardized private contracts while future contracts are subject to the rules and regulations of a futures exchange, forward contracts are not subject to federal regulation while future contracts are subject to g=federal regulation, forward contracts are not priced in open competitive bidding while futures contracts are competitively priced in the market, forward contracts are traded OTC wjhile futures contracts are exchange traded
an extremely wealthy family that is seeking to establish a lasting charitable legacy would be best advised to set up a
foundation. a trust has a fixed life but a founddation has an indefinite life. a trust can only accept a donation from settlor/grantor but a foundatino can accept donations from multiple sources such as multiple family members. a board of trustees determines which charitable orgs receive contributions from the foundation
if a customer of a BD fails to pay for a securities purchase by the 4th bus day from trade date thecustomers account must be
frozen for 90 days. if payment is not received the unpaid position must be sold and account must be frozen for 90 days. many firms call this pyutting a CUF (cash up front) on the account. the customer can make pruchases ina frozen account but must pay up front
if a customer of a BD fails to pay for a securities purchase by the 4th bus day from trade date, the customers account must be
frozen. after 4th bus day past trade date it is frozen for 90 days. a customer can make purchases in the account but most depoist cash amount in advance. the freeze comes off after 90 days.
which of the following are deductible from a taxable estate
funeral and admin expenses, claims against the estate, state death taxes, mortgages against real property owned by the estate
deductible from a taxable estate
funernal and executors admin espenses, cost of estate attonrey, claims made against the estate, mortgages on property owned by the estate, state death tax liability, any state estate tax bill is deductible from federally taxable estate. all assetsin the estate are valued at fair market value at time of death
after tax return
gain for stock $9 (100%-tax bracket %)= 9 (.65) = 5.85 div is $1( 100%-15%) = 1* .85 = 5.85+.85= 6.70 / $20 investment = 33.50%
funds deposited to purchase a fixed annuity contract are invested by the insurance company in its
general account
which are exempt issues under Securities Act of 1933
gov bonds, muni bonds, state chartered bank issues, small business investment companies
who can be the beneficiary of a trust
grantor, trustee, beneficary
the settlor of a trust is the
grantor. who grants property to the trust for benefit of one or more beenfiticary. settlor is also called grantor, donor or trustor. trustee is apppointed by the settlor to manage the assets of the trust. the trustee is a fiduciary
under the NASAA statement of policy on dishonest and unethical business practicesm which is prohibited?
guaranteeing a customer against loss for any security and borrowing money from customer
an internet communication by a BD will not be deemed to be transacting business in the state where the communication was received if all of the following conditions are met
the communication is limited to general info on products and services, the communication contains a legend that the BD can only transact business if it is registered in the state, there are no follow up individualized reposnes to prospects that involve effecting securities transactions for a fee unless the BD is registered in the state
a dividend paid by a foreign corp will be qualified in all of the cases
the corp is incopratated in a country that has a comperehensive tax treaty with the US, the corp is incorp in a US possession, the corp has its shares listed on an established trading market in teh US
a corp has issued 10% AA rated sinking fund debentures at par. three years later similar issues are being offered int he primary market at 8%. which are true about outstanding 10% issue
the curent yield will be lower than the nominal yield, the dollar price of the bond will be at a premium to par . when interest rates drop current yields on bonds already trading must also dro
REgulation D
under SEcurities Act of 1933 gives private plceaement exemption for securtieis that are sold to no more than 35 non accredited investors.
an investment adviser may receive a percentage of gains and losses in a clients account
under no circumstances
accredited investor
under regulation D private placement rule is an indiv with 200k of annual income, a married couple with 300k of annual income and indiv with a net worth of 1M or an indivestment manager with at east 5M of assets avial for investmenet
which is NOT a derivative
unit ivnestemnet trust
which annuity payment options will pay the estate of the annuitant if the full value of the account was not received
unit refund annuity , his estate gets a refund of the remaining value
for which contracts does the insurer tytpically invest the premium in the insureres general account
universal and whole life insurance
what type of flexible insurance policyu has a savings component
universal life
a customer wants to buy permanaent life insurance. he has no desire to participate int he market and may hvae addiotnal money oto add to premiums in the future. the best recommendatino for this client is
universal life. the policy owner can change the schedule of premium payments.
under unfirom securities act which is true about an agents registration
unless the state adopts another rule, registration expires on dec 31st of each year, if an agent terminates employement with a BD, the agents reg is terminated. once an agent cmoplestes a reg application that is accepted byu the state the licendoes not become effectie for 30 days.
a married couple has a combined net worth of 8M if one dies in 2020 the taxable amoun tof the setate to the sruvivng spouse is
unlimited marital exclusion thus is husband dies no estate taxes are paid at that point. whent hat person dies the estate is subject to tax aiwht an estate tax exclusion on the first 11,580,000
hedge funds are
unregistered securities offered in private placements . hedge funds are limited to 99 investros so they do not have to register as investement companies under investement copmany act of 1940. they are offered to priv placements only to accredited investors
an agents license remains in effect
until December 31st of that year
when coverting a traditional IRA to a ROth IRA
upon conversion, income tax must be paid on teh current value of the IRA
when wil intestate succession be followed
upon the death of a tenant ina n jpiont account held as tenants in common where the tenant dies witohut elaving a will
an indiv has purchased a 10 year level premium life insurance policy. the insurance company would be req to pay a claim
upon the death of the insurad within the 10 year period
which are exempt securities under BOTH the securties act of 1933 and state blue sky laws
us gov bonds, muni bonds, commercial paper
filing of ads with the admin is not req for
us gov securities, muni securities, investment company securities . filing advertising is not req for exempt sec, exempt transactions or fed covered securities. US gov and munis are exempt, NYSE and NASDAQ listed and investment company securities are federal covered. options are non exempt and can req advertising.
which of the following securities are exempt under securities act of 1933
us treasury bills, general obligation bonds, water authority bonds issued by the city of rochester,minnestoa (muni securities such as general obligatino bonds and revenue bonds
the SEcurities Act of 1933 Rule 147 prohbits
use of mails or other means of inerstate commerce to offer or sell securities unless seucrities are either registered with the SEC or are exempt from registration, this includes telephone and internet. must be negotiated face to face in the state
what is a characteristic of a dark pool
users are not aware of the size or identity of availale orders
what is asecirty
variabel annuity , option on a precious metals futures contract, american depoistary receipt
which is true about variable annuity contracts
variable anniuty contracts are regulated by the SEC as a security product in additino to being regulated by the state as an insurance product , investment risk is borne by the purchaser of the contract
which are defined as a security under unifrom seurities act
variable annuity contrac,t unit investment trust, commodity option contract
which is true
variable life insurance was derived from whole life insurance with the added feature of investment of cash value in separate account for better returns. cash value can be used to increase the death benefit or can be borrowed against
an adviser is creating a financial plan for retirement using a capital needs approach. which insurance policy would be recommended as part of the plan
variable life. expected growth is greater because preimums are invested in separate account holding an equity mutual fund.
a BD application is received by the state admin for a nw BD subsidiary of a swiss securtiies firm. application includes the disclosure that the parent firm was suspended from memebrship 6 years ago because of unathorized trading by its hong kong branch the state admin
violations of law of a foreign jurisdiction have a 5 yer statute of limitations. this insance hapepned 6 years ago so state admin cannot deny registration based on action taken by foreign regukatior
which are securities
voting trust certificates, real estate condo investments and commercial paper
earned income
wages, salaries, tips, bonuses, roylaties for books and self employment income
which are defined as securities
warehouse receipt, collateralized mortgage obligation, pre-org certificate.
whcih are derviatives
warrant (long term issuer created call option that can be attached to stock and bond offerings), credit default swap, option contract
a state admin would reboke an investment advisers reg if the adviser
was convicted of asecurities misdemeanor 5 years ago. convictions during tpast 10 years for securities or money related misdemeanors or any felony will cause the state to deny registration
which of the fiollowing will be denied fed reg as an investment adviser a person who
was suspended from Finra, caused a suspension of a firm for which he formerly worked, was imprisoned for 2 yrs for counterfeiting, is subject of an SEC order suspending or revoking registration, willfully filed a misleading or false application, been convicted of any securities or money fraud withinpast 10 years or temporarily or permanently enjoined from engaging in securities busines, any person with a criminal record and has spent 1 year or more in prison will be denied registration
what form states of efficient market theory that one cannot detect mispriced assets and consistnelty outperform the marke thourgh technical analysis
weak form
which is defined as advertising
website if they are non password protected. if they are password protected they are defined as sales literature because it is seen by specific audience. letter to client is correspondence. prospectus is not ads or sales lit
password poretected
websites are defined as sales literature and non password portected websites are defined as advertising
an ivnestment adviser falls below the min net capital required by the state on monday. the IA must file a report with the admin no later than
wednesdqy of that week for the report. tuersday of that week is for the notice.
wchich MUST be included ona customer confirmation
wether a payment for order flow was made, the customer name and account number and price of execution. the solicited or not is req on an order ticket but NOT on a trade confirmation. the commission charged and payment for order flow, customer name, number of account, size of trade and price of executino must be on confriamtion
the passive rate of return is
what would be the return on the index
state registration of a security registered by qualification becomes effective
when the administrator so determines
when is an investment adviser deemed to have custody of client funds
when the adviser holds a check payable to client from client's BD, when the adviser holds a full power of attoney over the clients acct, when the adviser acts as a trustee where the client is the beneficiary of the trust
registration of securities in a state by coordination becomes effective
when the federal registration becomes effective. registration of securities in a state by coordination becomes effective at the same time that the federal registration becomes effective. however the admin req that the registraion info be on file with the state for at least 10 bus days prior to the state registration becoming effective
the IAR can make the facorable mention of the securities offering only
when the registration becomeseffective
regarding a roth IRA when is a loss permitted to be dudecuted from the owners tax return
when the roth is liquidated and the investemtns are sold for less than their cost basis
states are NOT permitted to req the registratino of a person
who is excluded from the definition of an investemnt adviser under the invesetment advisers act of 1940 ,who is registered with the sec as an invesetment adviser or with no place of business in the state who gives investement advise to fewer than 6 clients who are residents of thes tae during the preceding 12 months (de miniimis exemption
under uniform securities act of 1956, as amended, an issuer is defined as any person
who issues or proposes to issue a security
wha type of life insurance policy has fixed premiums, guaranteed cash value and a guaranteed death benefit?
whole life
which type of insurance has a fixwed annual premium, a fixed death benefit, coverage for the entire life of the insured and cash value
whole life
what insurance product is also called straight life insurance
whole life because the premium amonunt is level and fixed thorughout the life of the policu. in contrast, term life increase with polic renewal, vairable life can vary , universal life is flexible and allow insured to pay alower min amount each month that covers cost of insurance or a higher amount that adds a savings cmponet to the premium
buy stop orders
will be elected at the stop price or higher, once elected buy stop orders may be executed at above or below the stop price specified
under the uniform securities act, an agent that sells securities to a customer in a transaction that is not recorded on the books and records of his or her BD
will cause the agent to become a statutory broker dealer
an adviser that charges a performance fee to clients must disclose that sucha fee arrangement
will give the adviser increased comp based on realized and unrealized appreciation of the customers securities. allows performance fees to be charged if a customer has 1M of assets with the firm or 2.1M net worth.
if purchased by a resident of the state the muni
will not be taxed at the state or fed bracekt
a bd that is registered in NY and that is not registered in any other state may effect transactions in securities in other states
with any existing customer that is a NY resident, while the customer is temporarily on vacation in another state
private fund advisers
with less than 150M of assets under management are exempt from registereing with the SEC. it is not req to do so because either it does not publicly offer its securtiies and has 100 or fewer benefiicla owners of its securities (typical for a hedge fund) or it does not publicly offer is secrutiies and only limits its owners to qualified purchasers. to be aqualified purchaser is tgougher than accredited investor under reg d. a qualifieid purchaser is an indiv or trust with at least 5M of assets avaol or an investmeent maanger or company with at least 25M or assets available
an ivnestment adviser to a hedge fund with 200M of AUM has invested 50% of fund assets in gold, anticipating a stock market decline and flight to safety by investors. the investment adviser must register
with the SEC
a registrterd rep would ask a potential client which of the following when doing a suitability determination
with the funds that you have avilable is it better for you to buy a new car or put theh funds into an IRA? suitability means that the recomended security meets the customers investement objective, risk tolerance level, and investement time horizon it has to make a recommendation of a security the IRA
the dept of treasury req notification for which of the following instances
withdrawal of 11k cash
a federal covered adviser discovers a material error in its form ADV. when must form adv be amended with the state to correct the error?
within 30 calendar days
federal covered adviser discovers a material error in its form ADV. when must form ADV be amended with the state to correct the error
within 30 days
if an agent withdrawsfrom employment from a BD the withdrawal takes effect
within 30 days
appeals of decisions made by the state admin must be filed
within 60 days
if an indiv disagrees with a final order of the admin he or she can make an appeal within how much time of the order
within 60 days of the order
an updating amendment to form ADV mst be filed by an investment adviser with the sEC
within 90 days of the firm's fiscal year end
an upadting amendment to form adv must be filed by an ivnestement adviser with the SEC
within 90 days of the frms fiscal year end must be filed electronically with SEC no later than 90 days after the firms fiscal year end. the updating ADV amendment must be filed with NASAA under the same time frame for state registered advisers.
an investment adviser may be compensated with which of the following
wrap fees charged to customers for all services rendered by the adviser, soft dollars paid by an executing broker to the adviser in return for trades sent to the broker by the adviser, 12b-1 fees paid by a mutual fund to the adviser based on annual net assets, commissions paid to an affiliated BD on trades recommedned by the adviser
an investment adviser may be compensated with which of the following
wrap fees charged to customers for all services rendered by the adviser, soft dollars paid by an executing broker to the adviser in return for trades sent to the broker by the adviser, commissions paid to an affiliated BD on trades recommended by the adviser
which are defined as correspondence
written letter to a client, email, instant message
withdarawal at age 50from 401k
wualified plan no contributions were included in taxable income so there was no tax paid on contribution amount. 100% of distributionis taxable. if an employee takes a premature distribution prior to age 59.5 the entire amount is subject to regular income tax plus a 10% penalty tax
under NASAA, investment advisers must update their ADV filing made with the state
yearly, within 90 days of fiscal year end, within 30 days of any significant material change
what is the most appropriate measure for calucluating discount bond yeild
yeild to maturity
can 529 be used for american univ in paris
yes as long as american univ is on list of foreign schools that qualify for title IV fed student aid
if a bond is purchased at a discount
yield to call is higher than yield to maturity, and yield to amtruity is higher th
for bonds trading at a premium rank the yield measures from lowest to highest
yield to call, yield to maturity, current, nominal
the closest approvimation of the internal rate of return on a bond is the bonds
yield to maturity
which is essentially the inrernal rate of return
yield to maturity on a bond. internal rate of return finds the interest rate that discounts an investements projected future cash flows toa present value of 0. yield to matrutiy is interst rate that discounts bonds projected cash flows to a present value equal to bonds purchase price.
which security would suffer the largest adverse price movement due to a rise in interest rates
zero coupon bond, the bonds that fall fastest in price when interest rates rise are those with long maturirites and low coupons
