Chapter 1 missed questions

Changes in the NAV of a mutual fund of the past ___ years will be found in the ________

10 ; prospectus

Under the Securities Act of 1933, which of the following actions may a broker-dealer take before the effective date of a new offering? A) Accept client orders. B) Give a client a preliminary prospectus together with sales literature concerning the offering. C) Give a client a preliminary prospectus. D) Give a client sales literature concerning the offering.

Give a client a preliminary prospectus. During the cooling-off period, the broker-dealer may not accept orders for, or provide sales literature about, the new issue. However, the broker-dealer may provide a preliminary prospectus.

During the cooling off period of a securities registration, the underwriters will generally distribute a preliminary prospectus. This document: I. may contain incomplete information. II. will not contain the effective date. III. may be used to solicit indications of interest, as long as payment of post-dated checks only is accepted. IV. may be accompanied by a special report on the security, prepared for the occasion by the underwriter's research department.

I & II -premliary prospectus = 'red Herring' - info may undergo change = effective date is in the final prospectus only

Which of the following statements about an established FINRA member firm's handling of a mutual fund's sale literature are TRUE? I. The material used to solicit the sale of mutual fund shares requires prior approval by a principal of the firm. II. FINRA must review all mutual fund retail communications within three days of its first use. III. If the mutual fund sponsor has had the literature reviewed by FINRA in advance, other firms need not submit it. IV. FINRA must review all mutual fund sales literature within seven days of its first use.

I + III -principal must approve retail comm before use - if FINRA has reviewed it, it does not need to be submitted to every BD wanting to use it -FINRA review requirement is 10 days of first use

Which of the following actions are the responsibility of an investment bank? I. Distributing large blocks of stock to the public and to institutions. II. Selling previously unissued securities to an issuer and buying them from the public. III. Raising long-term capital for corporations by underwriting new issues of securities. IV. Lending money to corporate customers that require debt financing.

I + III NO LENDING

Which of the following constitute a public appearance? I. Interactive electronic forum. II. Radio advertisement. III. Television commercial. IV. Television interview.

I + IV

Which of the following is accurate with regard to using a summary prospectus for the sale of a mutual fund? I. A statutory prospectus must precede or accompany delivery of the summary prospectus. II. A statutory prospectus may be delivered after the summary prospectus. III. Electronic delivery of the statutory prospectus is allowed after the sale. IV. A paper prospectus must be delivered within 3 days of the sale.

II & III The summary prospectus may include an application for sale. The statutory or full prospectus must be available online.

Which of the following securities documents are NOT prepared by a broker-dealer? I. A research report on a new company II. A prospectus III. An ad for a company's stock IV. A preliminary prospectus

II + IV -prospectus and preliminary prospectus is prepared by the ISSUER

If a registered representative wishes to distribute a copy of a national magazine article about the GAON Mutual Fund, which of the following statements is CORRECT? I. Because this material is already in the public domain, it is excluded from the rules on communication with the public. II. This material meets the definition of an independently prepared reprint. III. The article may be used without prior approval of a principal of the member firm. IV. The article may not be sent without prior or concurrent delivery of the GAON Fund prospectus.

II + IV Independently prepared reprint -neither pair not sponsored by investment company -needs principal approval - needs prospectus

Filing at least 10 business days before first use is required for which of the following? A) Retail communication that contains a ranking published by an independent entity B) Correspondence C) Literature prepared by the AGH Insurance Company highlighting the performance of its variable annuity separate accounts over the last 10 years D) Mutual fund advertisements placed by a broker-dealer that became a member of FINRA 7 months ago

Mutual fund advertisements placed by a broker-dealer that became a member of FINRA 7 months ago -retail comm filed by members within their first year of regristraion must file 10 days before first use -established firms required to file within 10 days of first use

Which of the following are NOT considered public communications of a broker-dealer and therefore not filed by the broker-dealer with FINRA? A) Market letters B) Telephone directory advertisements C) Research reports D) Prospectuses

Prospectuses Prospectuses are not prepared by the broker-dealer, they are prepared by issuers and not broker-dealers.

If the SEC has cleared an issue, which of the following statements is TRUE? A) The SEC has guaranteed the issue. B) The SEC has endorsed the issue. C) The SEC has guaranteed the accuracy of the information in the prospectus. D) The issuer has filed a standard registration statement.

The issuer has filed a standard registration statement. The SEC does not approve, disapprove, endorse, or guarantee a registration statement's accuracy.

A first year broker-dealer posts an ad in the newspaper to recruit series 6 registered representatives on May 5, 2010 and again on August 14, 2010. How long must the broker-dealer maintain records of this? A) Three years from August 14, 2010 B) Until December 31, 2013 C) Three years from the date the advertisement was filed with FINRA D) Three years from May 5, 2010

Three years from August 14, 2010 IPRs must be recorded starting the date of first use, and kept 3 years after last use

An announcement of a new issue of a security that gives the name of the issuer, the price and the name of the underwriter is called a(n): A) red herring. B) tombstone. C) offering memorandum. D) prospectus.

Tombstone A tombstone includes: -the name of the issuer, -the price of the security, -the name of the underwriter

Retail communications apply to all of the following EXCEPT A) a public appearance B) billboard C) an email sent to 30 existing customers D) website

a public appearance Retail communication is defined as any written communication that is distributed or made available to more than 25 retail investors in any 30 calendar-day period.

The rules on communications with the public permit a member firm to exclude mention of its name in any retail communication or correspondence that: A) offers a research report prepared by a firm other than the member sending the report. B) attempts to recruit registered representatives for the local branch office. C) appears on a television program sponsored by the firm. D) announces the promotion of three individuals to vice president.

attempts to recruit registered representatives for the local branch office -Recruitment advertising is the only form of communication with the public that is not required to include the name of the member firm.

If your firm is in the process of underwriting a new issue, sales literature, including a record of past performance, may be included in a mailing of the: A)preliminary prospectus. B)final prospectus. C) either preliminary or final prospectus. D) red herring prospectus.

final prospectus. No literature may accompany a preliminary prospectus or red herring. All such information may only be used with a final or statutory prospectus.

A generic advertisement A) is filed with FINRA B) must mention the name of the investment being advertised C) may describe performance as long as it is made clear that past results are no assurance of the future D) must include the name of the broker-dealer placing the advertisement

must include the name of the broker-dealer placing the advertisement

An application to open an account with an open-end investment company would be found: A) with the statement of additional information (SAI). B) online if the prospectus can be downloaded from that site. C) in an advertisement in "The Wall Street Journal". D) upon request to FINRA

online if the prospectus can be downloaded from that site. -an app to open an account with an open end investment company is a sales solicitation. -mutual funds must be sold with prospectus -online sales are permitted if prospectus can be downloaded

Under SEC Rule 498, a summary prospectus may be used in a mutual fund sales presentation resulting in a sale A) under no circumstances because the summary prospectus is only used to encourage potential investors to request the full prospectus B) only when the investor is able to access a statutory prospectus online C) only when preceded or accompanied by the fund's full prospectus D) only when the client does not request the statement of additional information

only when the investor is able to access a statutory prospectus online

All of the following must be disclosed in a mutual fund communication containing performance data EXCEPT A) that investors who redeem shares may receive more or less than the original cost B) the fact that investment returns fluctuate C) the SEC disclaimer stating that the securities have not been approved or disapproved by the SEC D) data represents past performance

the SEC disclaimer stating that the securities have not been approved or disapproved by the SEC - SEC disclaimer is not required in public comm.

An agent may deliver a preliminary prospectus for an IPO: A) as a final sale document. B) during a sales solicitation C) while the issue is in registration. D) only to persons who have attended the due diligence meeting.

while the issue is in registration.