4.11

Which of the following statements regarding Coverdell ESAs and QTPs is NOT correct? A) If a portion or all of the withdrawal from a QTP is spent on anything other than qualified higher education expenses, the owner/contributor will be taxed at her own tax rate on the earnings portion of the withdrawal. B) QTPs are extremely useful tools that provide significant tax savings, allow for substantial investments for a child's education and provide a tool for avoidance of gift and estate taxes if used correctly. C) Coverdell ESAs are designed to offer tax benefits to those individuals who wish to save money for a child/grandchild's higher education expenses. D) Coverdell ESAs currently permit up to $5,000 in annual contributions, whereas QTPs allow large contributions reaching as high as $250,000 and above.

Coverdell ESAs currently permit up to $5,000 in annual contributions, whereas QTPs allow large contributions reaching as high as $250,000 and above.

If you are registered as an agent for a broker-dealer in State Y and you conduct business as an agent of theirs in State Z, a state in which you are not registered as their agent, you: I.expose yourself and your employer to disciplinary action by State Z II.expose yourself to a possible fine III.may obligate your broker-dealer to offer your client the right to rescind the sale IV.may have your registration in State Y revoked A) I, II, III and IV B) II and III C) II, III and IV D) I, II and III

I, II, III and IV

To protect the public, the Administrator may: I. deny the registration of an agent with insufficient net capital. II. require an applicant for registration as both a broker/dealer and an investment adviser to limit activities to those of a broker/dealer due to lack of qualifications to render investment advice. III. require an applicant for registration to submit to an oral examination. A) I, II and III. B) II and III. C) I and II. D) I and III.

II and III.

Which of the following acts requires publicly traded corporations to issue annual reports? A) Trust Indenture Act of 1939. B) Investment Company Act of 1940. C) Securities Exchange Act of 1934. D) Securities Act of 1933.

Securities Exchange Act of 1934.

According to the Investment Advisers Act of 1940, under which of the following circumstances is an exculpatory provision acceptable in a contract between an investment adviser and its clients? A) This provision is prohibited under all circumstances. B) The client is purchasing government securities only. C) The client has received written disclosure of this provision and has signed a written acceptance prior to any transaction. D) The client is a broker/dealer.

This provision is prohibited under all circumstances.

Under the Uniform Securities Act, when an IAR acting in the capacity of trustee of a family trust executes a transaction on behalf of the trust, it is A) a nonexempt transaction B) a violation of the trustee's fiduciary responsibility C) an exempt security D) an exempt transaction

a nonexempt transaction

As a fiduciary, the investment adviser owes his clients an affirmative duty of utmost good faith, and full and fair disclosure of all material facts. This affirmative duty of disclosure is required by the adviser in all of the following situations EXCEPT: A) he has donated funds to a nonprofit medical research institute that owns securities that the adviser has recommended. B) his family has a beneficial interest in a private medical equipment firm that he recommends to the client. C) the advice he is providing is outside the scope of his brokerage employment and is not under the control or supervision of his employer. D) he receives compensation from his employing broker for transactions that are executed through the brokerage house.

he has donated funds to a nonprofit medical research institute that owns securities that the adviser has recommended.

One method used by some analysts to estimate the future value of a stock is the dividend growth model. This model would probably be most useful in the case of a: A) cumulative preferred stock. B) large-cap stock. C) AAA corporate bond. D) small-cap stock.

large-cap stock.

One of the quantitative measurements of investment performance is total return. In performing this computation, it would not be necessary to know: A) capital growth during the period. B) income received during the period. C) purchase price. D) length of time the investment was held.

length of time the investment was held.

There are several popular investment styles and, in many cases, portfolio managers use a blended approach to security selection. If a portfolio manager adhered to a pure value style, he would put most of his focus on: A) projecting future earnings based on past earnings. B) lagging indicators. C) using technical analysis. D) the company's financial statements.

the company's financial statements.

All of the following are advantages of universal life insurance EXCEPT: A) ability to adjust the amount of premium payments. B) the policy is guaranteed never to lapse. C) ability to change death benefit amount. D) when the cash value is sufficient, no premium payment is required.

the policy is guaranteed never to lapse.

Which of the following statements relating to trusts is CORRECT? A) A simple trust is required to distribute all of its income in the year earned. B) A complex trust is required to distribute all of its income in the year earned. C) A complex trust may only distribute principal during the year in which the trust terminates. D) A simple trust may distribute principal during the year.

A simple trust is required to distribute all of its income in the year earned.

A state-registered investment adviser with $18 million under management is preparing a new registration application seeking federal registration with SEC. She may do so if she expects the funds under management to grow to $100 million within how many days? A) 120. B) 360. C) 90. D) 180.

120.

William and Kat, a married couple, are advisory clients of yours. Each of them is employed and covered by a qualified plan. Which of the following statements are CORRECT? I. Employees covered by a qualified plan are not eligible to open Roth IRAs. II. Employees covered by a qualified plan are eligible to open Roth IRAs. III. Distributions from a qualified plan may be rolled over into a Roth IRA. IV. Distributions from a qualified plan may not be rolled over into a Roth IRA. A) II and III. B) II and IV. C) I and IV. D) I and III.

II and III.

An agent of a broker/dealer is currently doing business in one state and would like to conduct business in another state. When checking with the firm's compliance department, the agent would be told which of the following? A) Registration is required only if an offer is directed, accepted, and paid for in that state. B) No registration is necessary if no commission or other remuneration is paid or given directly or indirectly. C) No registration is necessary in the other state provided the agent's activities are limited exclusively to effecting transactions in certain exempted securities. D) If the agent is a partner, officer, or director and held that position at the time the broker/dealer was registered in that state, the individual need not register separately.

If the agent is a partner, officer, or director and held that position at the time the broker/dealer was registered in that state, the individual need not register separately.

Because of failing economic conditions, Kapco Advisers, an adviser with slightly less than $120 million in assets under management, lays off a registered investment adviser representative. In this case, who would notify the state Administrator of the termination? A) The IAR. B) Both Kapco and the IAR. C) The IAR's new employer. D) Kapco Advisers.

The IAR.

According to the Investment Company Act of 1940, all of the following statements are true EXCEPT: A) an investment company's board of directors may be composed of up to 70% of the company's interested persons. B) shareholders have the right to vote on a company's change from a closed-end to an open-end investment company. C) an investment company must have more than $100,000 capitalization to be offered to the public. D) open-end investment companies must redeem securities within seven days after their tender.

an investment company's board of directors may be composed of up to 70% of the company's interested persons. At least 40% of the board of directors must be noninterested persons. No more than 60% may be interested persons of the investment company.

As a federal covered security, the KAPCO Growth Fund is required to notice file under the laws of State A. State A's Administrator can require the issuer to provide copies of A) a report of the amount of the federal covered security sold in the state B) proxy statements C) a listing of the officers and directors of the issuer D) the schedule of compensation to the fund manager

a report of the amount of the federal covered security sold in the state

Among the many exempt transactions under the Uniform Securities Act are the private placement and the preorganization certificate or subscription. While these two exemptions have several requirements in common, they have which of the following differences? I.The private placement exemption places a limit on the number of sales to retail investors while the preorganization certificate places a limit on the number of offers to all investors.​ II.Payment for the purchase may be made in the case of a private placement, while no money changes hands in a preorganization subscription. III.It is expected that noninstitutional buyers of the private placement are purchasing for investment only, while no such requirement exists for the investors in a preorganization certificate. IV.Commissions may be paid on the sale of a private placement to noninstitutional clients, while no remuneration is payable on the sale of a preorganization subscription. A) II and IV B) I and III C) I and IV D) II and III

II and III