4.9

Under the Securities Act of 1933, a registration statement for a security generally becomes effective how many days after it is filed? A) 20 days. B) 31 days. C) 10 days. D) 30 days.

20 days.

Which of the following would be considered unethical under the NASAA Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers? A) An investment adviser varies the annual fee based upon each client's assets under management, charging less for those with higher balances and more for those meeting the account minimum. B) A loan is made to an investment adviser representative by one of her clients who happens to be the chief loan officer where she maintains her principal banking relationship. C) An investment adviser representative receives an order to buy XYZ stock from an advisory client and simultaneously recommends that another advisory client sell that stock in an agency cross transaction. D) An investment adviser discloses in its brochure that, from time to time, they may sell securities recommended to clients directly out of the firm's inventory.

A loan is made to an investment adviser representative by one of her clients who happens to be the chief loan officer where she maintains her principal banking relationship.

You have a client who wishes to invest $100 per month into something that will give him the opportunity to share in the long-term growth prospects of the overall economy. Which of the following would probably be the most cost efficient investment vehicle? A) Class A shares of a large-cap growth fund. B) A fund of hedge funds. C) An exchange traded fund (ETF) that mimics the S&P 500. D) A no-load index mutual fund that mimics the S&P 500.

A no-load index mutual fund that mimics the S&P 500.

Which of the following statements about stock exchanges is TRUE? A) A securities exchange market is one in which prices are established by negotiations between buyers and sellers. B) A securities exchange market is an auction market in which prices are established by auction. C) A stock exchange buys and sells stocks itself. D) Any stock can be listed on any exchange.

A securities exchange market is an auction market in which prices are established by auction.

An application has been filed with the Administrator of State A for registration as a broker/dealer by Assured Success Investments (ASI), a broker/dealer registered in States B, C, and D. While the application is pending, a lawsuit against ASI is filed in civil court in State B. The effect of this would be A) ASI's registration in State B would be suspended B) ASI's application in State A would proceed as normal C) ASI's application in State A would be denied D) ASI's application in State A would be put on hold

ASI's application in State A would proceed as normal

Which of the following statements is TRUE? A) An Administrator may, at the request of a registrant, hold hearings in private. B) An Administrator may not refuse a registrant's request to hold hearings in private. C) Hearings of an Administrator must be held in public. D) All administrative hearings under the USA must be held in a court of competent jurisdiction.

An Administrator may, at the request of a registrant, hold hearings in private

The Securities Exchange Act of 1934 granted the SEC the authority to register a number of participants in the securities markets. One of those entities is a securities information processor (SIP). Which of the following statements best describes a SIP? A) Any person who uses a clearing agency to clear or settle securities transactions or to transfer, pledge, lend, or hypothecate securities. B) Any person who engages on behalf of an issuer of securities or on behalf of itself as an issuer of securities in countersigning such securities upon issuance. C) Any person who acts as an intermediary in making payments or deliveries or both in connection with transactions in securities or who provides facilities for comparison of data respecting the terms of settlement of securities transactions, to reduce the number of settlements of securities transactions, or for the allocation of securities settlement responsibilities. D) Any person engaged in the business of collecting, processing, or preparing for distribution or publication; or assisting, participating in, or coordinating the distribution or publication of information with respect to transactions in or quotations for any nonexempt security.

Any person engaged in the business of collecting, processing, or preparing for distribution or publication; or assisting, participating in, or coordinating the distribution or publication of information with respect to transactions in or quotations for any nonexempt security.

Under the Investment Advisers Act of 1940, which of the following statements is TRUE regarding jurisdiction for offenses? I. Generally, federal courts have no jurisdiction if a civil lawsuit based on the Advisers Act is filed in a state court. II. If the SEC wished to obtain an injunction or seek a civil penalty against an adviser, it would file a case in the federal court having jurisdiction over the place where the violation occurred. III. An adviser that wished to appeal an SEC order would file a motion in the US Court of Appeals. A) I, II and III. B) I and III. C) II and III. D) I and II.

II and III.

Which of the following debt instruments generally present the least amount of default risk? A) Municipal general obligation bonds. B) Municipal revenue bonds. C) Convertible senior debentures. D) High-yield corporate bonds.

Municipal general obligation bonds.

Your client is considering the purchase of a small-cap fund. Which of the following benchmarks would be most appropriate for comparing the fund's performance? A) Russell 2,000. B) Wilshire 5,000. C) DJIA. D) S&P 500.

Russell 2,000.

The National Securities Markets Improvement Act of 1996 (NSMIA): A) created a national market system. B) defined the term" federal covered adviser". C) created the concept of fraud, as used in the Uniform Securities Act. D) overcame the restrictions of selling securities in interstate commerce.

defined the term" federal covered adviser".

With respect to taxation, an investment adviser representative should NOT: A) discuss the tax implications of investments. B) explain the taxable status of particular investments. C) consider tax implications as a way of improving a client's after-tax returns. D) draft tax and estate documents to insure compliance with current law to provide substantial after-tax returns.

draft tax and estate documents to insure compliance with current law to provide substantial after-tax returns.

When a security purchased on margin suffers a decline in market value, it may cause the equity in the account to fall to a level such that additional funds are required under the terms of the margin agreement between the client and the broker/dealer. The term that describes the request by a broker/dealer rather than an SRO for more money is: A) house call. B) regulation T call. C) sell-out. D) margin call.

house call.

All of the following are money market instruments EXCEPT: A) Treasury bills. B) newly issued Treasury notes. C) jumbo (negotiable) CDs. D) commercial paper.

newly issued Treasury notes.

A client with a sizeable estate would probably find it most efficient to pay estate taxes with A) proceeds from a life insurance policy B) proceeds from the liquidation of a diversified portfolio C) cash D) proceeds from the liquidation of a tax-deferred retirement plan

proceeds from a life insurance policy

Greater Wealth Managers, (GWM) is an investment adviser registered in States A, B, C, and D. They have recently hired an individual to solicit new advisory accounts for the firm. This person will not be engaged in giving advice of any kind, and all activities will be closely supervised by senior personnel of the firm. Under Section 201 of the Uniform Securities Act, A) no registration is required, because this individual is not rendering investment advice and is being closely supervised B) no registration is required, because this individual is not rendering investment advice C) registration as an investment adviser representative is required for this individual D) registration as an investment adviser representative and as an agent is required for this individual

registration as an investment adviser representative is required for this individual

Among the unique characteristics of a universal life insurance policy is A) the policy may be overfunded B) that policyowners may borrow against the cash value C) death benefits may increase above the initial face amount D) early termination could lead to surrender charges

the policy may be overfunded

Which of the following investments gives the investor the least exposure to reinvestment risk? A) Treasury notes. B) Preferred stock in a growth company. C) Treasury STRIPS/zero-coupon bonds. D) Common stock in an electric utility.

Treasury STRIPS/zero-coupon bonds.

An agent has been recommending that customers buy common stock in XYZ Company. If on a visit to XYZ he overhears unreleased news that XYZ has just lost its biggest account, the agent should: I. discuss the situation with his supervisory principal. II. continue to recommend the security to customers and prospects. III. stop recommending the security to customers and prospects. IV. sell the stock short in his brother's account. A) I, III and IV. B) III only. C) I only. D) I and III.

I and III.

John, an investment adviser, employs an investment adviser representative who is found guilty of defrauding many of the firm's clients over a long period of time. Which of the following is (are) TRUE under the Uniform Securities Act? I. The investment adviser representative is subject to criminal penalties specified in the act and to civil liabilities resulting from clients who sue as a result. II. John may be subject to civil liabilities resulting from actions taken by the investment adviser representative. III. John is not subject to civil liabilities as a supervisor if he can prove that he had no knowledge of the actions of the representative and while exercising reasonable care, he could not have had knowledge of the violations. A) I and III. B) I and II. C) I, II and III. D) II and III.

I, II and III.

A client who purchased a variable life insurance policy 15 months ago has suffered a stroke. In addition, he has developed adult onset diabetes. When receiving treatment for the stroke, he was diagnosed with lung cancer. He has decided to convert his variable policy to a whole life policy. Which of the following statements is CORRECT? I.He will not be able to convert to a whole life insurance policy because his health has deteriorated to such a severe level. II.The new policy will bear the same issue date and age as the original policy. III.The face amount must remain the same. IV.The premium will be rated as his health has taken a marked turn for the worse. A) I, II, III and IV B) I and IV C) II, III and IV D) II and III

II and III

Tax considerations are frequently an important factor when determining appropriate recommendations for advisory clients. In which of the following accounts is the tax status of the individual a critical factor? I. An account opened in the name of the XYZ Corporation, organized as a C corporation, by their chief investment officer. II. An account opened by a sole proprietor in the name of the company. III. An account opened in the name of ABC Corporation, an S corporation by one of its shareholders. IV. An account opened in the name of the GHI fund, a Regulated investment company, by the fund's portfolio manager. A) I and II. B) III and IV. C) I and IV. D) II and III.

II and III.

The Uniform Securities Act provides for civil penalties in the event of illegal activities of broker/dealers and their agents. Under the act, the maximum that a purchaser would be entitled to claim would be: I. the original consideration paid for the security or the current market value, whichever is greater. II. interest at the state's legal rate. III. attorney's fees. IV. court costs. A) I, II, III and IV. B) III and IV. C) I and II. D) II, III and IV.

II, III and IV.

Which of the following will be the risk that you will face during the first year after purchasing a corporate AA bond that matures in 15 years? A) Market. B) Interest rate. C) Inflation. D) Liquidity.

Interest rate.