Chapters 11-14 Final Questions

B) Individual states Answer Explanation: "Blue-sky laws" are the laws of the individual states. Textbook Reference: Please see textbook section 13.4

"Blue Sky" laws are those administered by (the) A) FINRA B) Individual states C) NYSE D) SEC

C) I and III Answer Explanation: The U.S. Treasury requires that all financial services firms implement Customer Information Programs to verify the identity of every customer. A CIP is a required element in every Anti-Money Laundering program. Firms that do not accept cash are still required to establish a CIP and verify customer identity. Textbook Reference: Please see textbook section 14.3.3.2

A Customer Information Program I. Requires verification of identity of U.S. and non-U.S. citizens II. Requires verification of identity for non-U.S. customers only III. Is a required part of an Anti-Money Laundering programs for all financial institutions IV. Is a required part of an Anti-Money Laundering program only for firms that accept cash A) II and IV B) I and IV C) I and III D) II and III

D) Ensure that the firm had adequate policies in place to prevent insider trading. Answer Explanation: In order to protect itself from liability for insider trading, broker dealers are required to implement appropriate supervisory procedures, conduct annual compliance reviews, and have information barriers in place to prevent the flow of sensitive information between departments. If the firm can prove that it followed protocol, it would not necessarily be held liable for insider trading by an employee. Textbook Reference: Please see textbook section 14.2.3

A broker dealer learns that one of its employees has been using insider information on a recurring basis. What is the best way that the firm can protect itself from liability? A) Sue the employee in civil court. B) Handle the matter internally without notifying authorities. C) Review its fidelity bond coverage with its insurer. D) Ensure that the firm had adequate policies in place to prevent insider trading.

B) offers advice that is solely incidental to securities sales and receives no special advisory compensation. Answer Explanation: Broker-dealers and registered reps can provide advice that is solely incidental to their main business and receive no special compensation for advisory services. In this case, they are exempt from investment adviser registration. Textbook Reference: Please see textbook section 13.5.2

A broker-dealer is not subject to investment adviser registration, provided that it A) only offers fee-based accounts. B) offers advice that is solely incidental to securities sales and receives no special advisory compensation. C) advises only sophisticated investors and institutions. D) does not advise clients to purchase mutual funds or hedge funds.

C) within 30 days. Answer Explanation: Firms must designate two associated persons as emergency contacts. If these people or their contact information changes, FINRA must be notified promptly (within 30 days). Textbook Reference: Please see textbook section 14.6.1

A broker-dealer provides to FINRA the emergency contact information included in its business continuity plan. If there is a change to the contact person, FINRA must be notified A) in the next filing of the business continuity plan, but not later than end-of-calendar year. B) within 7 business days. C) within 30 days. D) within a reasonable period of time.

B) Yes, if more than 25 clients visit the lobby within 30 calendar days Answer Explanation: Retail communications are distributed or made available to more than 25 retail investors within 30 calendar days. Putting the brochure in the lobby makes it available to any visitor, whether or not he/she reads it or takes it home. Textbook Reference: Please see textbook section 14.5.1

A brokerage firm prints a brochure and leaves it in the lobby for visiting clients to read. This is its only form of distribution. Is it considered retail communication? A) No, it is for internal use only B) Yes, if more than 25 clients visit the lobby within 30 calendar days C) Yes, if more than 25 clients take the brochure home with them within 30 calendar days D) No, it is correspondence

D) Must pass an additional qualification exam in order to become fully registered in the securities industry. Answer Explanation: Passing the SIE alone does not qualify an individual to conduct a securities business. An additional exam must be completed prior to becoming fully registered. The SIE credential is valid for four years. Textbook Reference: Please see textbook section 13.3.3.1

A college sophomore has recently completed the SIE Exam. This individual A) May begin selling securities immediately. B) Must complete an additional qualification exam prior to graduating from college. C) Must pass an additional oral exam prior to becoming fully registered D) Must pass an additional qualification exam in order to become fully registered in the securities industry.

A) Correspondence Answer Explanation: A communication made available to retail investors cannot be classified as institutional. If the number of retail recipients is up to and including 25 persons, it is classified as correspondence. For larger audiences (more than 25 retail persons), it is considered retail communication. Textbook Reference: Please see textbook section 14.5.1

A communication made available to 20 institutional clients and 20 retail clients is classified as A) Correspondence. B) Retail communication. C) Institutional communication. D) A blog post

B) restricted from receiving compensation for and performing any activities that require registration Answer Explanation: If registered representatives do not complete Regulatory Element as required, their broker-dealers must restrict them from performing, or being compensated for, any duties that require registration, including supervision. This is referred to as being CE Inactive. Textbook Reference: Please see textbook section 13.3.8.1

A covered person fails to complete the Regulatory Element when required. This individual is A) Subject to a fine from the broker-dealer B) restricted from receiving compensation for and performing any activities that require registration C) subject to a fine from FINRA D) subject to statutory disqualification

C) $10,000 Answer Explanation: A CTR must be completed if the deposit exceeds $10,000. Textbook Reference: Please see textbook section 14.3.1

A currency transaction report (CTR) must be completed for cash deposits at a financial institution if the deposit exceeds A) $100,000 B) $1,000,000 C) $10,000 D) $1,000

D) Is in writing Answer Explanation: Under FINRA rules, a complaint is any written statement of a customer, or any person acting on behalf of a customer, alleging a grievance involving the activities of persons under the control of the member in connection with disposition of securities or funds on behalf of the customer. If directed to a representative, a customer complaint must be forwarded to supervisory personnel in accordance with written supervisory procedures Textbook Reference: Please see textbook section 14.4.10

A customer grievance is considered a complaint subject to FINRA complaint filing and reporting requirements if it A) Alleges embezzlement B) Is directed to the firm's compliance department C) Involves an unsolicited transaction D) Is in writing

B) FINRA BrokerCheck. Answer Explanation: FINRA BrokerCheck provides public information regarding all registered broker-dealers and representatives. In addition to information about the type of businesses a broker-dealer is engaged in, BrokerCheck discloses past regulatory issues and also information about senior management. The FINRA CRD system is not available to the public. Textbook Reference: Please see textbook section 13.3.6

A customer wishes to check on his broker-dealer's past regulatory issues. This information is publicly available through A) SIPC. B) FINRA BrokerCheck. C) the SEC's website. D) FINRA's CRD.

A) Qualified educational expenses Answer Explanation: Any distributions from a 529 Plan that are not used for qualified education expenses are subject to ordinary income tax as well as a 10% federal penalty. Textbook Reference: Please see textbook section 12.4.1.5

A distribution from a 529 plan is taxable to the extent that the distribution exceeds A) Qualified educational expenses B) $10,000 C) $18,000 D) The taxpayer's college expense allowance

B) I and IV Answer Explanation: Representatives and broker-dealers must keep Form U-4 information current at all times and notify FINRA within 10 days of a statutory disqualification, or within 30 days of most other changes, such as a change of address. Textbook Reference: Please see textbook section 13.3.1

A firm is required to amend the Form U-4 of a registered representative with FINRA within I. 10 days for statutory disqualification II. 30 days for statutory disqualification III.10 days for a change of address IV. 30 days for a change of address A) II and III B) I and IV C) I and III D) II and IV

C) A municipal securities principal (Series 53 qualified) Answer Explanation: A municipal securities principal is responsible for approving advertising and correspondence as well as all new accounts, and transactions. Sales principals can oversee sales activity, but cannot approve advertising material. Textbook Reference: Please see textbook section 14.5.4

A municipal securities firm's advertising must be approved prior to first use by A) A municipal securities sales principal (Series 9/10 qualified) B) The MSRB C) A municipal securities principal (Series 53 qualified) D) The SEC

A) Contributes after-tax dollars and must pay tax on any growth on the invested funds Answer Explanation: A non-qualified variable annuity is funded with after-tax dollars and these contributions then grow on a tax-deferred basis. When an individual receives distributions from this annuity, they will be subject to regular taxation on any growth of the invested funds. In contrast, a qualified variable annuity is funded with pre-tax dollars, and all distributions from the contract are fully taxable to the investor. Textbook Reference: Please see textbook section 12.3.3.5

A non-qualified variable annuity contract is one where an investor A) Contributes after-tax dollars and must pay tax on any growth on the invested funds B) Contributes pre-tax dollars and must pay tax on all subsequent distributions from the contract C) Contributes after-tax dollars and must tax on all subsequent distributions from the contract D) Contributes pre-tax dollars and must pay tax on any growth on the invested funds

D) 48 hours prior to the mailing of the confirmation of sale Answer Explanation: A preliminary prospectus when used in conjunction with an IPO is required to be delivered by the broker-dealer at least 48 hours prior to the confirmation of sale. Textbook Reference: Please see textbook section 8.1.2

A preliminary prospectus must be delivered to a potential purchaser no later than A) Upon settlement of the transaction B) With the confirmation of sale C) 24 hours prior to the mailing of the confirmation of sale D) 48 hours prior to the mailing of the confirmation of sale

D) reported to the compliance department of the firm. Answer Explanation: Any activity that negatively impacts the credit of a registered representative must be reported to the compliance department of the broker-dealer. This topic is not explicitly covered in the textbook, but as long as you review this rational for this question you will be covered for exam purposes. Textbook Reference: Please see textbook section 13.3.4

A registered representative has become deficient in making timely payments on his credit card, resulting in a reduced credit standing. This activity must be A) documented in the rep's employee file and the rep must be placed on a watch list until the situation improves. B) reported to FINRA within 10 business days. C) recorded on the books and records of the broker-dealer. D) reported to the compliance department of the firm.

A) I and IV Answer Explanation: FINRA requires that registered representatives provide prior written notice to their firms before accepting outside employment or positions as officers, directors, or partners. Written permission from the firm is not required. Textbook Reference: Please see textbook section 14.4.4

A registered representative has been asked to provide consulting services in the preparation of a valuation textbook. The project is expected to require approximately ten hours of his time over the next month, and the rep will be compensated for this work. The registered representative I. Must provide written notice to his employer II. Is not required to provide notice to his employer III.Must receive permission from the employing member before accepting the position IV. Is not required to receive permission from the employing member before accepting the position

A) may accept an unsolicited order from a customer. Answer Explanation: If a registered representative has material non-public information, they may accept an unsolicited order from a customer. Textbook Reference: Please see textbook section 14.2.3.1

A registered representative has knowledge of material non-public information. The representative A) may accept an unsolicited order from a customer. B) may contact a customer and ask if she would like to place a trade. C) should contact FINRA so the information may be made public. D) is prohibited from accepting any orders from a customer

C) II and IV Answer Explanation: A control relationship exists when a brokerage firm or an employee of a firm is in a position to control or influence the issuance of securities by an issuer. Control relationships are not prohibited but are subject to stringent disclosure requirements. Textbook Reference: Please see textbook section 14.4.12

A registered representative of a municipal securities firm has just been elected mayor of his small city. The city is preparing to issue new bonds to build a police station. This relationship is I. prohibited; the representative cannot hold the position of mayor and continue his current sales responsibilities II. not prohibited; the representative can hold the position of mayor and continue his current sales responsibilities III. a financial advisory affiliated relationship IV. a control relationship A) I and IV B) I and III C) II and IV D) II and III

D) is currently unemployed and is carrying significant monthly expenses . Answer Explanation: A variable annuity would not be suitable for an individual who has significant cash needs and in unable to set aside funds today for retirement. Textbook Reference: Please see textbook section 12.3.3.6

A registered representative would be least likely to recommend a variable annuity to an individual who A) is not covered by an employer retirement plan. B) is a college graduate with no student loan debt, and is currently employed C) has reached their maximum contribution level in their other retirement plans. D) is currently unemployed and is carrying significant monthly expenses

B) CE Inactive status Answer Explanation: A representative that fails to complete Regulatory Element when required is considered CE Inactive, and cannot perform, or be compensated for, activities that require registration. Textbook Reference: Please see textbook section 13.3.8.1

A representative that does not complete Regulatory Element is subject to A) Termination B) CE Inactive status C) Statutory disqualification D) Censure

A) Annually Answer Explanation: All covered persons are required to complete Firm Element training annually, regardless of how long they have been registered. Textbook Reference: Please see textbook section 13.3.8.2

A retail salesperson who has been registered for only 2 years must complete the Firm Element of Continuing Education A) Annually B) Every 5 years, within 120 days of the anniversary date of the individual's registration C) Every 3 years, within 120 days of the anniversary date of the individual's registration D) Within 120 days of the 2nd anniversary of the individual's registration

B) Registered as an open-end investment company under the Investment Company Act of 1940 Answer Explanation: When the assets of the separate account of an insurance company are managed by the insurance company's investment company, the account is registered as an open-end investment company. When the investment management of the insurer passes the responsibility of management to subaccount fund managers the separate account must be registered as a unit investment trust. Textbook Reference: Please see textbook section 12.3.1

A separate account that is actively managed by the insurance company is A) Is not registered under the Investment Company Act of 1940 B) Registered as an open-end investment company under the Investment Company Act of 1940 C) Registered as a unit investment trust under the Investment Company Act of 1940 D) Registered as a closed end investment company under the Investment Company Act of 1940

C) All of his Traditional IRAs, in the aggregate Answer Explanation: If an individual has several Traditional IRAs, the contribution limits apply to all, in the aggregate. Contributions may be made to any, as long as the total doesn't exceed the annual dollar limit. Textbook Reference: Please see textbook section 12.2.2

Alex has three Traditional IRAs. He is single and earns a salary of $90,000. He can contribute up to the annual dollar limit to A) Only one Traditional IRA B) Any two Traditional IRAs C) All of his Traditional IRAs, in the aggregate D) Each Traditional IRA

B) An offer to reimburse a customer for losses on a municipal bond that was purchased in error for the customer's account Answer Explanation: Customers may be reimbursed for losses sustained due to errors of the firm. Bona fide repurchase agreements are not guarantees against loss; however, an agreement that is based only on the performance of the security is not a bona fide repurchase agreement. Textbook Reference: Please see textbook section 14.4.6

All of the following constitute a guarantee against loss EXCEPT A) A promise to reimburse a customer for potential future losses from securities purchased in a principal transaction B) An offer to reimburse a customer for losses on a municipal bond that was purchased in error for the customer's account C) An offer to waive any fees for assets under management if the account loses value D) An offer to buy back a security at a predefined date if it does not meet performance targets

B) The MSRB

All of the following enforce MSRB Rules EXCEPT A) The Federal Deposit Insurance Corporation B) The MSRB C) The Comptroller of the Currency D) The Financial Industry Regulatory Authority

C) Tax returns for the past 3 years Answer Explanation: Form U-4 must include the following personal information: -name; -SSN, -physical characteristics, -5 years of residential address history, -10 years of employment experience; and -education It must also report information relating to customer complaints, arbitration claims, regulatory proceedings, bankruptcies, certain criminal history, certain civil litigation and liens and judgments.

All of the following information is required when submitting a Form U-4 for a registered representative EXCEPT A) Employment history for the past 10 years B) Social Security Number C) Tax returns for the past 3 years D) Residential history for the past 5 years

A) it can issue new rules without approval. Answer Explanation: FINRA is a self-regulatory organization (SRO), which is empowered by and accountable to the SEC. FINRA can make rules, but they must be approved by the SEC before they become effective. Textbook Reference: Please see textbook section 13.1.1

All of the following statements about FINRA are accurate except A) it can issue new rules without approval. B) it regulates broker-dealers. C) it is overseen by the SEC. D) it is a self-regulatory organization.

A) They are similar to the front-end load sales charge that applies to mutual fund A-share purchases Answer Explanation: Surrender charges are similar to contingent deferred sales charges, or back-end loads, of B-share mutual funds. Textbook Reference: Please see textbook section 12.3.3.4

All of the following statements about variable annuity surrender charges are true EXCEPT A) They are similar to the front-end load sales charge that applies to mutual fund A-share purchases B) They apply when individuals withdraw funds from an annuity within a certain period of the purchase payment C) They usually decrease over the period of time for which they apply D) They help the insurance company recover upfront costs when they have less of the original purchase payments to invest

C) Persons subject to statutory disqualification are barred from working in the securities industry for a minimum of two years Answer Explanation: Not all persons subject to statutory disqualification are barred from the industry, because firms may request relief from eligibility if they wish to sponsor a person subject to statutory disqualification. If an exemption is not available, the person may be disqualified for 10 years. Statutory disqualification may disqualify a firm or individual from the securities industry. When a firm learns of a statutory disqualifying event, it must update the U-4 within 10 days. Textbook Reference: Please see textbook section 13.3.7

All of the following statements are true regarding statutory disqualification EXCEPT A) A statutory disqualification can prevent a person from becoming registered B) It can apply to both firms and representatives C) Persons subject to statutory disqualification are barred from working in the securities industry for a minimum of two years D) A firm must amend a U-4 form within 10 days of learning of a statutory disqualifying event

C) Only if the speech is given to 25 or fewer retail investors Answer Explanation: The slides are considered electronic communication. Retail communication is any written or electronic communication delivered to more than 25 retail investors in a 30 calendar-day period. If he gives the speech to 20 people and does not show the slides to anyone else in the same 30-day period, this is correspondence (not retail communication) and is not subject to prior principal review. Textbook Reference: Please see textbook section 14.5.1

Alvin, a registered rep, gives a speech to a group of retail investors, during which he shows PowerPoint slides. In which case would he not be required to obtain prior principal approval for the slides? A) Only if he receives a blanket exemption from his firm B) Only if there are no printed handouts of the slides C) Only if the speech is given to 25 or fewer retail investors D) In no case

B) to provide benefits resulting from a significant disability prior to 26 year of age. Answer Explanation: The ABLE account may be established for the expenses incurred with respect to a significant disability. The account may be opened in cases where the onset of the disability occurred prior to the age of 26. Textbook Reference: Please see textbook section 12.4.3

An ABLE account may be opened for an individual A) who is saving for qualified educational expenses. B) to provide benefits resulting from a significant disability prior to 26 year of age. C) to supplement a company sponsored medical plan D) who is preparing for retirement.

C) I and II only Answer Explanation: Both the "tipper" and the "tippee" are in violation of insider trading rules. Violators are subject to criminal fines of up to $5 million and 20 years in prison. Textbook Reference: Please see textbook section 14.2

An individual has made a trade based on material non-public information she learned from her neighbor. Which of the following statement are true? I. The neighbor who shared the information has violated insider trading rules II. The individual who made the trade has violated insider trading rules III. Violators of the insider trading rules may be asked to pay criminal penalties of up to $10 million dollars A) I and III only B) I, II, and III C) I and II only D) II and III only

C) Is bound by the decision of the arbitrator Answer Explanation: Arbitration is a final and binding dispute resolution process. A complaint regarding the matter may be filed with FINRA or the SEC; who may choose to investigate and could fine or take other appropriate action against the firm or representative involved. An individual is not required to have attorney representation in an arbitration. Disputes regarding sexual harassment or discrimination only go to arbitration if both parties agree. Textbook Reference: Please see textbook section 13.3.1.1

An individual that agrees to choose arbitration as a means of dispute settlement A) Cannot file a complaint with FINRA or the SEC B) Must be represented by an attorney in the proceeding C) Is bound by the decision of the arbitrator D) is mostly fighting a discrimination claim

C) 4 years. Answer Explanation: The SIE credential is valid for four years, within which time a top-off exam (e.g. Series 7 or 79) would need to be completed to ensure full registration is achieved. Otherwise, the SIE credential would lapse after four years and would need to be re-established. Textbook Reference: Please see textbook section 13.3.3.1

An individual who has passed the SIE will need to take a top-off exam within a period of A) 120 days. B) 2 years. C) 4 years. D) 6 years.

Answer Explanation: A call or put contract with 9 months or less to expiration must be purchased in full. The initial margin requirement in this example is 2 contracts x $300 per contract or $600. Textbook Reference: Please see textbook section 11.2.2.2

An investor wishes to purchase 2 XYZ Jan 50 calls trading at 3 that are purchased in August. What is the initial margin requirement for these calls? A) $600 B) $150 C) $300 D) $1,200

C) Death of spouse Answer Explanation: The death of the spouse of the Roth IRA holder would not qualify as an exception to the 10% early withdrawal penalty from the account. Textbook Reference: Please see textbook section 12.2.1.3

An investor, aged 52, wishes to withdraw funds from her Roth IRA which she began funding 3 years ago. Withdrawals for which of the following reasons would require the investor pay a 10% early withdrawal penalty? A) Qualified educational expense B) Major medical expense C) Death of spouse D) Physical disability

A) After one year of work service Answer Explanation: ERISA's general eligibility standard has age (21) and work service (one year with the employer) components. A plan can select less restrictive eligibility criteria, but not more restrictive. Textbook Reference: Please see textbook section 12.1.1.1

Andrew is taking a new job with a company that offers a defined contribution plan. He is age 22. When can he expect to become eligible to participate in the plan, under ERISA's general eligibility standard? A) After one year of work service B) After two years of work service C) When he turns 24 D) When he turns 25

B) Withdrawals are made before age 59ó Answer Explanation: Withdrawals made from a Traditional IRA before age 59 ó are subject to ordinary income tax plus an additional 10% penalty, unless they qualify for an exception. Textbook Reference: Please see textbook section 12.2.1.3

Assuming that the customer does not qualify for an exception, when would withdrawals made from a Traditional IRA be subject to an additional 10% penalty? A) Withdrawals are made before the customer retires. B) Withdrawals are made before age 59ó. C) If withdrawals exceed an annual limit. D) If the contributions were made on a pre-tax basis income tax.

B) 25 or fewer retail investors in any 30-calendar day period Answer Explanation: If communications are distributed to more than 25 retail investors in any 30 calendar-day period, they are retail communications, not correspondence. To remember this, it may help to simplify it as 25 investors per month. Textbook Reference: Please see textbook section 14.5.4

Correspondence is defined under FINRA Rule 2210 as any written or electronic communication distributed or made available to A) 50 or fewer retail investors in any 30-calendar day period B) 25 or fewer retail investors in any 30-calendar day period C) Fewer than 25 retail investors in any 30-calendar day period D) Fewer than 50 retail investors in any 60-calendar day period

C) II and IV Answer Explanation: Currency Transaction Reports (CTRs) must be filed whenever a financial institution receives cash deposits in excess of $10,000 during the same business day, either from one transaction or a combination of cash transactions. CTRs are filed with the Internal Revenue Service. Textbook Reference: Please see textbook section 14.3.1

Currency transaction reports (CTRs) must be filed I. When a customer deposits cash of $5,000 or more in one day II. When a customer deposits cash of $10,000 or more in one day III. With the SEC IV. With the IRS A) II and III B) I and III C) II and IV D) I and IV

C) neither employees nor the employer are required to make annual contributions. Answer Explanation: Profit-sharing plans are designed for flexibility. They allow employers to make contributions in profitable years (or whenever they wish) and make little or no contributions in other years. The key requirement is that the same percentage of salary must be contributed for all eligible plan participants. Textbook Reference: Please see textbook section 12.1.1.3

Donald is employed by a company that offers a straight profitsharing plan. He wants to know whether he is required to contribute his own money to the plan, and also whether the company is required to contribute money. The answer is A) employees are required to contribute; employers aren't. B) both employees and the employer are required to make annual contributions C) neither employees nor the employer are required to make annual contributions. D) employees are not required to contribute; employers are.

D) All $10,000 is tax-free and there is no 10% penalty Answer Explanation: This is a qualified distribution. She has met both requirements: five-year holding period and after age 59 ó. The withdrawal is tax-free and there is no penalty. Textbook Reference: Please see textbook section 12.2.2

Elizabeth has one Roth IRA, which she started at age 50. She is now age 62 and wants to distribute $10,000 for retirement income. What is the tax consequence of her distribution? A) Only the earnings portion is taxable and there is no 10% penalty B) Only the earnings portion is taxable, and there is a 10% penalty C) The full $10,000 is taxable and there is a 10% penalty D) All $10,000 is tax-free and there is no 10% penalty

A) I and IV Answer Explanation: FINRA Broker Check provides information from FINRA filings about firms and representatives to the public. Public persons may access this information by telephone, electronically or by making a written request. Textbook Reference: Please see textbook section 13.3.6

FINRA BrokerCheck supplies information I. Regarding firms and representatives II. Regarding only representatives III. That is accessible only to other firms and associated persons IV. That is accessible to the public by telephone, written request, or electronically A) I and IV B) II and IV C) II and III D) I and III

D) incarceration Answer Explanation: Although FINRA cannot sentence rule violators to jail, FINRA is empowered to: censure a member firm or associated person impose a fine upon a member firm or associated person suspend the membership of a member firm or associated person a definite period or a period contingent on the performance of a particular act; expel a member firm, cancel the membership of a member firm, or revoke or cancel the registration of an associated person suspend or bar a member or associated person from association with all members; impose a temporary or permanent cease and desist order against a member firm or associated person

FINRA has the authority to impose all of the following sanctions for rules violations EXCEPT A) permanent cease and desist order B) censure C) expulsion from membership D) incarceration

D) Three years Answer Explanation: Member firms must retain records of retail communications for three years. This includes the piece itself and also dated, signed records of the principal's review and approval. Textbook Reference: Please see textbook section 14.5.2

FINRA members must retain records of all retail communications, including principal reviews and approvals, for how long? A) Five years B) Two years C) As long as the piece of communication is used plus two years D) Three years

B) II only Answer Explanation: A complaint is subject to FINRA filing requirements only if it is a written allegation of complaint against a representative. Textbook Reference: Please see textbook section 14.4.10

FINRA recordkeeping requirements for customer complaints apply to which of the following I. An oral complaint made to a representative by an attorney on behalf of a customer II. A letter from a customer to the supervisor of a representative that states that the representative engaged in unauthorized transactions and requests that the firm take disciplinary action III. A phone call from a customer to the compliance officer of a firm that accuses the representative of unscrupulous behavior A) II and III only B) II only C) I and II D) I, II, and III

C) the representative may engage in this activity without providing notification to the employing broker-dealer. Answer Explanation: Outside business activities of registered representatives require prior written notification to the employing firm; an exception to this rule exists in the case of an outside passive investment, in which case the notification requirement is waived. Textbook Reference: Please see textbook section 14.4.4

If a registered representative wants to make a passive investment in an outside business, A) FINRA must be notified in advance of this investment. B) the representative must obtain written consent from the employing broker-dealer. C) the representative may engage in this activity without providing notification to the employing broker-dealer. D) this activity must be disclosed to the employing broker-dealer.

B) Notify her employer Answer Explanation: Any outside business activities, such as bartending, requires prior written notice to the firm. Approval is not specifically required for this type of activity based on this FINRA rule. Textbook Reference: Please see textbook section 14.4.4

If a registered representative wants to take a second job as a bartender, she must A) Keep records of her weekly work hours and submit this information to her compliance dept. B) Notify her employer C) Complete the necessary outside work forms and submit these forms to her HR dept. D) Notify and receive consent from her employer

D) Report the activity to his supervisor Answer Explanation: If representatives come into contact with suspicious activity or transactions involving potential money laundering activity, they are to report the activity to their supervisor. The representative does not file CTRs or SARs. These are filed if necessary by the firm's Anti-Money Laundering officer on behalf of the firm. Textbook Reference: Please see textbook section 14.3.2

If a representative comes into contact with suspicious activity involving currency transactions, the representative should A) File an SAR B) File a CTR C) Contact the FBI D) Report the activity to his supervisor

D) I and IV Answer Explanation: When a representative fails to complete Regulatory Element when required, his registration status is inactive, and the representative cannot perform, or be compensated for, activities that require registration. Textbook Reference: Please see textbook section 13.3.8.1

If a representative fails to complete Regulatory Element when required I. Registration status is inactive II. Registration is terminated III. All business activities must cease IV. All business activities that require registration must cease A) I and III B) II and III C) II and IV D) I and IV

B) Small and mid-size Answer Explanation: In general, small and mid-size advisers are prohibited from registering with the SEC, unless an exception applies. Textbook Reference: Please see textbook section 13.5.1

In general, unless an exception applies, which types of RIAs are prohibited from registering with the SEC? A) Small only B) Small and mid-size C) Large only D) Mid-size and large

A) Raises investor protection concerns Answer Explanation: Firms should be most concerned with investor protection as they review requests for outside securities activity. Their procedures should call for restriction or prohibition of the activity if it compromises investor protection. If the outside securities activity is not for compensation, the rep must still notify the firm, but permission is not required. Textbook Reference: Please see textbook section 14.4.4

In reviewing whether a representative's request for outside securities activity is acceptable to the firm, the firm should be MOST concerned with whether the employment activity A) Raises investor protection concerns B) Compromises the time the employee commits to his employment with the firm C) Creates a conflict of interest with the employee's current position D) Is an outside business activity that should be supervised by the firm

A) In no case Answer Explanation: There are no exceptions to the five-year holding period requirement. It must be met to take a qualified distribution from a Roth IRA. Textbook Reference: Please see textbook section 12.2.2

In which case can Maurice take a qualified distribution from his Roth IRA before he meets the five-year holding period requirement, measured from his first Roth IRA contribution? A) In no case B) He turns age 59 ó C) He becomes disabled D) He loses his job

D) nonpublic if it has not generally been released to the public through SEC filings or broad-based news channels. Answer Explanation: The 34 Act requires broker-dealers to establish, maintain and enforce written policies and procedures to prevent misuse of material nonpublic information. Textbook Reference: Please see textbook section 14.2

Information is considered A) confidential if it has not generally been released to the public through SEC filings or broad-based news channels. B) closely-held if it has not generally been released to the public through SEC filings or broad-based news channels. C) material if it has not generally been released to the public through SEC filings or broad-based news channels. D) nonpublic if it has not generally been released to the public through SEC filings or broad-based news channels.

C) Yes, if the expenses are qualified Answer Explanation: The exception to the 10% penalty for higher education expenses is fairly liberal. Expenses must only be qualified i.e., used to pay for tuition, fees, books, supplies or equipment required to attend an eligible institution. Textbook Reference: Please see textbook section 12.2.1.3

Jim wants to know if he can take a penalty-free withdrawal from his Traditional IRA at age 50 to pay for his child's college tuition. A) Not unless he qualifies for a hardship B) Yes, if the child attends a four-year college C) Yes, if the expenses are qualified D) Not if he has other funds available to meet the need

A) If John communicates the complaint to Bedrock Securities in any written manner, it becomes a complaint. Answer Explanation: FINRA defines a complaint as any written grievance, so once a customer disseminates the complaint to a broker dealer via any written means (e.g. email or letter) it is defined as a complaint and must be forwarded to a principal immediately. Textbook Reference: Please see textbook section 14.4.10

John Darniels, a securities client of Bedrock Securities, Inc., calls Robert, his registered rep to complain about the service and attention he has received from the firm. Which of the following best describes the status of John's grievance? A) If John communicates the complaint to Bedrock Securities in any written manner, it becomes a complaint. B) Since this is a verbal grievance, it must immediately be forwarded to a principal. C) It only becomes an official complaint if John writes a letter and sends it to Bedrock Securities via registered mail. D) It is Robert's responsibility to record the complaint in writing.

C) Yes, up until her tax filing deadline Answer Explanation: All IRA contributions must be made by the due date of the individual's federal income tax return, which usually is the next April 15. Textbook Reference: Please see textbook section 12.2.1

Karen made a $2,000 contribution to her Traditional IRA in November. After she looked at her 1099 wage statement the following February, showing annual compensation of $78,000, she wished that she had made a larger contribution. Can she? A) Only with the permission of her employer B) Only with the permission of the IRS C) Yes, up until her tax filing deadline D) No, it is too late

C) to invest in a New York state 529 as there may be certain tax advantages at the state level. Answer Explanation: Investors may after-tax contributions to the 529 Plan. The earnings in the plan grow tax-free and any distributions for qualified educational expenses are tax-free at the federal level. Additionally, registered representatives must disclose that there may be certain tax benefits for opening a plan inside your state of residency, for example, tax deductions off of your state income taxes. Conversely, if an individual invests in a 529 Plan outside of their state, their state of residency might make they pay taxes on the growth of the plan. Textbook Reference: Please see textbook section 12.4.1.6

Noreen and her husband Jeff, residents of New York City, have just had their first child Ali. They are interested in opening a 529 Plan for Ali in order to save for her future college education. As a registered representative, it would be most appropriate to tell them A) it does not matter which state they open up a 529 Plan in as the distributions will be treated the same regardless. B) to invest in a New York state 529 as there may be certain tax advantages at the federal level. C) to invest in a New York state 529 as there may be certain tax advantages at the state level. D) to invest in a 529 Plan outside of New York state as there may be certain tax advantages at the federal level

D) Yes, if a written agreement is in place between the two parties. Answer Explanation: This type of conduct is allowed, provided a written contract is in place, describing the full extent of the arrangement. It is formally known as the Continuing Commissions policy. Textbook Reference: Please see textbook section 14.4.3

Once retired, may a previously registered representative receive commissions from accounts that were opened while they were working? A) Yes, if these accounts generated a specified level of commissions while the registered rep was working. B) No, unless written consent has been provided by a principal. C) No, this arrangement is specifically prohibited by securities industry rules. D) Yes, if a written agreement is in place between the two parties

A) A short-term loan to a customer in a cash account to enable the customer to meet the terms of settlement Answer Explanation: Broker-dealers or representatives are not permitted to make loans to customers for firm-related business unless an exception applies, such as: loans to immediate family members; if the customer is in the lending business (i.e., it is a bank); if the lending relationship is based on a personal relationship outside of the broker-dealer customer relationship; or if the lending relationship is based on a business relationship outside of the firm. Textbook Reference: Please see textbook section 14.4.9

Permissible lending arrangements between broker-dealers, representatives and customers include all of the following EXCEPT A) A short-term loan to a customer in a cash account to enable the customer to meet the terms of settlement B) Margin loans from broker-dealers to customers C) A loan from a registered representative to a neighbor to provide short-term assistance for payment of medical expense D) Loans from registered representatives to immediate family members

B) Ordinary income tax but no penalty Answer Explanation: Beneficiaries pay ordinary income tax on withdrawals from Traditional IRAs. But withdrawals by a beneficiary after the account owner's death is one exception to the 10% penalty. The exception is not available to a spouse beneficiary who elects to treat the IRA as his/her own Textbook Reference: Please see textbook section 12.2.1.3

Ted inherits a Traditional IRA from his father, after the father's death. It is worth $75,000 and he takes a full immediate withdrawal. No part of it is non-deductible contributions. Ted is 45 years old. What tax will he pay on the withdrawal? A) 10% penalty but no ordinary income tax B) Ordinary income tax but no penalty C) No tax or penalty D) Ordinary income tax + 10% penalty

D) covered registered persons Answer Explanation: The Firm Element of Continuing Education requires that broker-dealers establish a formal training program for its covered registered persons. This program will be based on the firm's size, structure, and scope of business. The program must be administered at least on an annual basis. Textbook Reference: Please see textbook section 13.3.8.2

The Firm Element of Continuing Education must be completed by all A) full time employees B) supervisory persons C) registered representatives D) covered registered persons

A) CTR Answer Explanation: A CTR is used to report currency transactions in excess of $10,000 to FinCEN. It is known as Form 104. Textbook Reference: Please see textbook section 14.3.1

The form that must be filed with FinCEN to report currency transactions in excess of $10,000 in one business day is a(n) A) CTR B) SAR C) BSA D) OFAC

D) FINRA Answer Explanation: Headquartered in Washington, FINRA is one of the largest and most powerful SROs in the U.S. Securities industry. FINRA was formed in 2007 when the NASD merged with the securities enforcement arm of the New York Stock Exchange. Textbook Reference: Please see textbook section 13.1.1

U.S. securities dealers are required to be members of which selfregulatory organization? A) CFA B) NYSE C) MSRB D) FINRA

D) Does not trigger bans if the check was written on the personal account of the spouse Answer Explanation: If the check was written on the spouse's personal account rather than a joint checking account the contribution is entirely attributed to the spouse. If the check was from a joint checking account, the contribution would be viewed as split evenly by the contributors. Textbook Reference: Please see textbook section 14.4.13.2

Unbeknownst to a municipal finance professional, her spouse made a $1,000 contribution to the election of a local official that is campaigning for mayor. This contribution A) Is not a violation even if the check was written on the joint account B) Does not trigger bans on underwriting unless the candidate wins C) Is not a violation if the MFP is not entitled to vote for the candidate because of his residence location D) Does not trigger bans if the check was written on the personal account of the spouse

A) Two principals Answer Explanation: FINRA generally requires that general securities firms have a minimum of two principals. They must also have access to a Financial and Operations Principal. Textbook Reference: Please see textbook section 13.3.3.3

Under most circumstances a general securities firm is required to have a minimum of A) Two principals B) Three principals C) Five principals D) One principal

A) II and III only Answer Explanation: The Securities Exchange Act of 1934 provides for maximum jail sentence of up to 20 years. Individual persons may be fined no more than $5 million if convicted of violations under the Act. Persons other than natural persons (corporations, partnerships, etc.) may be fined up to $25 million. Textbook Reference: Please see textbook section 14.2.2

Under the Securities Exchange Act of 1934, which of the following statements are true? I. That maximum prison sentence for violation of insider trading rules under the Act is 5 years II. The maximum criminal fine for an individual is $5 million III. The maximum fine for all persons other than individuals is $25 million A) II and III only B) I and II only C) I and III only D) I, II, and III

A) Desire for growth to ensure income that lasts for life Answer Explanation: Variable annuities are best suited to individuals who are planning for retirement. They typically have higher charges when compared to other investment options because of the guarantees they deliver. Tax-deferred growth can be achieved in other types of retirement plans. Fixed annuities protect against loss of principal, but may lose purchasing power. Textbook Reference: Please see textbook section 12.3.3.6

Variable annuities are most suitable for an investor with which of the following objectives? A) Desire for growth to ensure income that lasts for life B) Long-term savings and protection from loss of principal C) A low-cost investment option that provides access to many different investment options with a low minimum investment D) Tax-deferred growth to meet long-term savings objectives

B) I, II and III Answer Explanation: Like mutual funds, variable annuities are subject to most securities regulations. The Securities Act of 1933, The Securities Exchange Act of 1934, The Investment Company Act of 1940 and the Investment Advisors Act of the 1940 apply to variable annuities. Textbook Reference: Please see textbook section 12.3.1

Variable annuities are subject to which of the following securities regulations? I. The Investment Company Act of 1940 II. The Investment Advisers Act of 1940 III. The Securities Exchange Act of 1934 A) II and III only B) I, II and III C) I and III only D) I and II only

D) I and II only Answer Explanation: Variable annuity contracts must be registered with the SEC and with the insurance department of each state in which they are to be offered. They are not registered with banking regulators like the FDIC. Textbook Reference: Please see textbook section 12.3.3

Variable annuity contracts must be registered with which of the following regulatory organizations? I. SEC II. State insurance departments III. FDIC A) II and III only B) I and III only C) I, II and III D) I and II only

B) No, because he is not a first-time homebuyer Answer Explanation: This exception is only available to a first-time homebuyer. The new home is considered a first home if neither the IRA owner nor a spouse had an interest in a main home in the two years before the home's purchase. He would have to wait at least two years between transactions to qualify. Textbook Reference: Please see textbook section 12.2.1.3

Walter, age 40, wants to sell his home and buy a new one right away, using his Traditional IRA to make the down payment. As a homebuyer, can he qualify for an exception to the 10% penalty on Traditional IRA withdrawals before age 59 ó? A) Yes, in any case B) No, because he is not a first-time homebuyer C) No, because he is too young D) Only if the new home costs more than his current home

B) His income Answer Explanation: Roth IRA contributions are available only to taxpayers who work, earn compensation, and have income below a certain dollar amount. Textbook Reference: Please see textbook section 12.2.2

What determines whether Pablo can make a Roth IRA contribution this year? A) Whether he is age 21 or older B) His income C) Whether he has a corporate retirement plan D) Whether he is under age 70 ó

B) Form ADV Answer Explanation: Form ADV is the Uniform Application for Investment Adviser Regulation. After it is filed, the SEC has 45 days to review the information and determine whether it should be approved. Textbook Reference: Please see textbook section 13.5.1

What form does an RIA file to register with the SEC? A) Form SF-3 B) Form ADV C) Form ATS D) Form 15-F

D) A promised retirement income, starting at retirement age Answer Explanation: In defined benefits plans, participants gradually earn a retirement income (pension) paid by the plan, starting at retirement age. Defined benefit plans work like traditional pensions. Textbook Reference: Please see textbook section 12.1.1.2

What is an important benefit for participants in a defined benefit plan? A) Ability to take loans B) Opportunity to roll over a plan balance C) Ability to self-direct personal investments in the plan D) A promised retirement income, starting at retirement age

B) Participants make their own investment decisions Answer Explanation: In a participant-directed retirement plan each eligible employee chooses the amount of wages to invest and how those savings should be invested. Generally, plans offer employees a selection of diversified investment options, each with a different risk/return profile. Textbook Reference: Please see textbook section 12.1.1.3

What is the defining characteristic of a "participant-directed" retirement plan? A) All eligible employees are automatically enrolled B) Participants make their own investment decisions C) All employees are eligible to participate D) All participants have access to loans

D) There is no limit Answer Explanation: There is no longer an age limit for contributing to a Traditional IRA. This is a rule change under the Secure Act passed in December 2019. Note that there used to be an age limit for opening a Traditional IRA of 70 ó. Candidates should be familiar with both the new and the old rule. There is no age limit for opening a Roth IRA brokerage account. Textbook Reference: Please see textbook section 12.2.1

What is the maximum age at which an individual can open a Traditional IRA? A) 70.5 years old B) 65.5 years old C) 59.5 years old D) There is no limit

C) Zero Answer Explanation: Employers always have the option or whether or not to match, and what part of deferrals to match. Textbook Reference: Please see textbook section 12.1.1.3

What is the minimum level of matching an employer can choose in a 401(k)? A) 20% of deferrals B) 50% of deferrals C) Zero D) 10% of deferrals

A) 403(b) Answer Explanation: 403(b)s are participant-directed ERISA plans sponsored by non-profit organizations and educational institutions. Like 401(k)s, they allow participants to make elective deferrals and manage their own investments. Textbook Reference: Please see textbook section 12.1.1.4

What is the name of a participant-directed ERISA plan sponsored by a non-profit organization or educational institution? A) 403(b) B) 401(d) C) 457(b) D) 454(f)

B) To ensure the communication fair, balanced and not misleading Answer Explanation: The principal review should focus on accuracy and comprehension (plain English), but the primary objective is to ensure the communication is fair, balanced and not misleading. Textbook Reference: Please see textbook section 14.5.2

What is the primary objective of the principal review and approval of retail communications? A) To ensure the communication comprehensible by the average investor B) To ensure the communication fair, balanced and not misleading C) To ensure the communication is completely accurate D) To ensure the communication reflective of the firm's core philosophy

D) Signature and date Answer Explanation: The principal must approve each piece of retail communications by adding his/her signature or initials and documenting the date of the review. The date establishes that the review took place prior to first use. Textbook Reference: Please see textbook section 14.5.2

What two notations must a registered principal make on each piece of retail communications reviewed, prior to its first use? A) # of pages and intended audience B) Category and date C) Category and # of pages D) Signature and date

C) Form U-5 with FINRA within 30 days. Answer Explanation: Upon the termination of a registered rep with a FINRA member firm, the firm must file Form U-5 electronically with FINRA within 30 days. The terminated individual must be provided with a copy of the form when it is filed with FINRA. Textbook Reference: Please see textbook section 13.3.5

When a registered rep's association with a FINRA member firm is terminated, the firm must file A) Form U-5 with FINRA within 10 days. B) Form U-4 with FINRA within 30 days. C) Form U-5 with FINRA within 30 days. D) Form U-10 with FINRA within 30 days.

D) 2 years Answer Explanation: A registered rep is required to complete a U5 upon leaving a firm and a U4 upon joining a new firm but is not required to retake an examination as long as no more than two years has elapsed. Textbook Reference: Please see textbook section 13.3.5.1

When a registered representative leaves a firm, within what time period is the individual required to reassociate with a new firm and complete a U4 before a registration expires? A) 1 year B) 10 years C) 6 months D) 2 years

D) At account opening and upon request Answer Explanation: Customers of broker-dealers receive disclosure of the firm's business continuity plan upon account opening and upon request. Textbook Reference: Please see textbook section 14.6

When is a firm required to disclose its business continuity plan to their customers? A) With each quarterly account statement B) At account opening only C) Annually D) At account opening and upon request

D) All used to pay for the beneficiary's qualified college costs Answer Explanation: Distributions from a 529 Plan that are used to pay for the beneficiary's qualified college education costs are federally income tax-free. These include fees for room and board. Textbook Reference: Please see textbook section 12.4.1.4

Which distributions from a 529 plan are federally income tax-free? A) All B) Those held in the plan for at least five years C) Non-deductible contributions D) All used to pay for the beneficiary's qualified college costs

B) Securities and Exchange Commission (SEC) Answer Explanation: The Securities and Exchange Commission (SEC) is not part of the US Treasury Department. It is a US Government agency which oversees the US securities markets. Textbook Reference: Please see textbook section 14.3

Which of the following entities is not part of the US Treasury Department? A) Internal Revenue Service (IRS) B) Securities and Exchange Commission (SEC) C) Office of the Comptroller of the Currency (OCC) D) Financial Crimes Enforcement Network (FINCEN)

B) Blue chip stock Answer Explanation: The dividends paid by a blue chip stock are not tax-deferred, and appropriate income taxes must be paid for the year in which they are received. The other choices in this question all feature tax-deferred growth. Textbook Reference: Please see textbook section 12.1

Which of the following instruments does not offer tax-deferred growth to the investor? A) Non-qualified retirement plan B) Blue chip stock C) Variable annuity D) Individual retirement account

A) Specified gold coins minted by the Treasury Answer Explanation: Investments that can't be held in an IRA include most collectible - art works, antiques and precious metals - other than specified U.S. gold or silver coins minted by the U.S. Treasury and certain gold, silver, platinum or palladium bullion bars. Textbook Reference: Please see textbook section 12.2.1.1

Which of the following is a permitted investment in an IRA brokerage account? A) Specified gold coins minted by the Treasury B) Antiques C) Life insurance D) Most collectibles

A) A 40-year-old individual who works 60 hours per week. Answer Explanation: According to securities industry rules, a vulnerable investor is a person age 65 or older, or, any person age 18 or older who the firm, or a rep, reasonably believes has a mental or physical impairment, rendering that person unable to protect his own interests. Textbook Reference: Please see textbook section 11.6.5

Which of the following persons would not be considered a vulnerable investor? A) A 40-year-old individual who works 60 hours per week. B) A 62- year-old individual who is unable to identify the members of his family. C) A 75-year-old individual who lives with her grandchildren. D) A 25-year-old individual who was recently injured in a skiing accident and is now immobile.

B) I, II, III and IV Answer Explanation: A statutory disqualification occurs when an individual or member firm has violated securities regulations and has been barred, suspended, expelled, enjoined, fined or possibly jailed for the activity for a period of time. Whenever a member firm becomes aware of a statutory disqualification it is required to report the event to FINRA. Certain persons or firms may be allowed to continue in the securities industry following a statutory disqualification but only with written approval from FINRA and heightened supervision. Textbook Reference: Please see textbook section 13.3.7

Which of the following statements regarding statutory disqualification are TRUE? I. An individual or firm may be subject to a statutory disqualification II. Certain persons may re-enter or continue in the securities industry following a statutory disqualification III. Disqualifying events can include bars, injunctions suspensions and expulsions from certain activities, SROs and exchanges IV. Once it becomes aware of a statutory disqualifying event a member is obligated to report the event to FINRA A) II and III only B) I, II, III and IV C) I and III only D) I and IV only

C) Corporation Answer Explanation: Corporations have unlimited life, so there is no need to name an account beneficiary. Textbook Reference: Please see textbook section 11.4.1

Which of the following types of brokerage accounts will NOT specify a beneficiary? A) Sole proprietor B) Personal C) Corporation D) Partnership

B) Research reports Answer Explanation: The three types of communications with the public are retail communications, correspondence and institutional communications. It is the audience to which communications are distributed that determines which type it is. Textbook Reference: Please see textbook section 14.5.1

Which one of the following is not a type of communications with the public, as defined by FINRA Rule 2210? A) Retail communications B) Research reports C) Institutional communication D) Correspondence

D) Customers must be mailed a copy of the plan at least annually. Answer Explanation: Customers must receive a copy of the business continuity plan at account opening. It also must be on the broker-dealer's website and customers must be mailed a hard copy on request. It is not required to be mailed to customers annually. Textbook Reference: Please see textbook section 14.6

Which statement regarding delivery of the summary of the brokerdealer's business continuity plan to customers is not accurate? A) Customers must receive a copy of the plan at account opening. B) Customers must be able to access the plan on the broker-dealer's website. C) Customers must be mailed a copy of the plan upon request. D) Customers must be mailed a copy of the plan at least annually.

C) II and III Answer Explanation: Materials prepared by dealers, or third parties on their behalf, that is designed to communicate with the public are advertisements. Preliminary Official Statements, Official Statements, dealer offering lists, and memos for internal use only are not communications with the public. An abstract or summary or abstract of an Official Statement and form letters are considered advertising. Textbook Reference: Please see textbook section 14.5.4

Which two of the following documents would be considered an advertisement under MSRB rules? I. a dealer offering sheet II. an abstract of an official statement III. a form letter IV. an interoffice memo A) I and II B) II and IV C) II and III D) III and IV

A) Large advisers Answer Explanation: Large advisers (with more than $100 million in AUM) are required to register with the SEC unless they qualify for an exemption. Most mid-size and small advisers are prohibited by law from registering with the SEC. Textbook Reference: Please see textbook section 13.5.1

Which type of advisers must be registered with the SEC? A) Large advisers B) Large and mid-size advisers C) Large, mid-size and small advisers D) Mid-size and small advisers

A) The owner Answer Explanation: The owner retains control over plan assets, including the ability to select investments. Textbook Reference: Please see textbook section 12.4.1.1

Who controls assets and makes investment decisions in a 529 plan? A) The owner B) The beneficiary C) A third-party trustee D) Either the owner or beneficiary

A) Anyone who was diagnosed with a disability prior to age 26 Answer Explanation: ABLE accounts are tax-advantaged savings account owned by and used for the benefit of persons diagnosed with a disability prior to age 26. Note that an individual does not need to be under the age of 26 to have an ABLE account, instead their disability must have been diagnosed prior to age 26. Textbook Reference: Please see textbook section 12.4.3

Who is eligible to have an ABLE account? A) Anyone who was diagnosed with a disability prior to age 26 B) Anyone with a disability C) Anyone under the age of 26 who has a diagnosed disability D) Anyone under the age of 19

D) Saving for retirement Answer Explanation: While annuities can help investors meet a number of investment objectives, they are well-suited for helping investors prepare for retirement because they are long-term products that can be used to provide monthly income that is guaranteed for life. Textbook Reference: Please see textbook section 12.3.3.6

With which of the following investment objectives is a variable annuity usually associated? A) College education funds B) Long term growth C) Emergency savings D) Saving for retirement