s66 Final 2

financial risk

risk that a company's cash flow will be insufficient to cover the interest on its debt same as business risk which is the same as credit risk it is the risk that a company will fail (bankrupt) and the investor will not get paid

liquidity risk

risk that the investor will be unable to sell quickly at full market value

European style option contracts

- can only be exercised at expiration - most commonly used for hedging purposes

variable annuity features

-tax- deferral of earnings - participation in markets for securities - a fluctuating future stream of income THERE IS NO GUARANTEED PAYOUT

which of the following would be a feature of a Subchapter "S" Corporation? A. the business entity is permitted to sell shares to other corporations B. the business entity will carry liability for all owners that is not limited to their initial investment C. the business entity will always have a limited lifespan D. the business entity is limited to selling to 100 or fewer shareholders

D

business credit risk

risk the the issuer will default

what is Capital Asset Pricing Model (CAPM) used for?

CAPM is used to calculate the expected return. it is used to measure the relationship between risk and expected return. the result is an expected return that can be compared to the required return to determine whether or not an investment should be made.

risks that can be eliminated or reduced by diversification

unsystematic risks- which are business risks, liquidity risk, and financial risks

NPV

uses future cash inflows, and outflows, a discount rate, and time period but does not consider todays market value. NPV is used to determine if projects will be profitable over a specific period of time

an investor with a balances domestic portfolio who is looking for diversification and returns in the event that U.S. markets do not continue to expand, would be most interested in investing in which of the following? A. equities in Emerging markets B. equities in U.S. companies with international appeal C. equities in U.S. companies involved in exports of their products D. equities in Italian wine exporting companies

A An investor interested in diversification and returns in markets other than U.S. markets would be most interested in investing in equities in emerging markets. they would not invest in U.S. companies since they would be affected by the contraction of U.S. markets in general. they would not choose just one foreign company to invest in because that would not provide them with diversification.

which of the following are characteristics of a Money Purchase Plan? A. employer contributions are mandatory B. employee contributions are mandatory C. employers are obligated to contribute when it is profitable only D. employees must contribute regardless of how well or poorly the employee is performing

A a money purchase plan is a Defined Contribution pension plan which requires an employer to make contributions regardless of how well or how poorly the company is performing. employees are not required to contribute to money purchase plans

Generally, if stock prices are rising and such moves are above the moving averages for that stock's price over the past measured period it would be a signal to a technical analyst to do which of the following? A. buy the stock B. sell the stock C. hold the stock D. sell the stock short

A although there are many components to moving averages, generally if stock prices are increasing and are exceeding that stocks moving averages of past measured periods (60 days, 90 days, 200 days), it would be a signal to "buy" the stock for a technical analyst.

DEF company is incorporating and coming to market with an initial public offering of common stock. the company has already filed their registration statement and the registration has become effective. the company sees that demand for securities is high, and decided to amend the total amount of common stock that will be offered. would this amendment be allowable under the rules of the Uniform Securities Act? A. yes. though amendments to a registration statement that is beyond its effective date are generally not permitted, modification to the amount of securities being offered is a limited exception. B. no. though amendments to a registration statement are generally permitted, modification to the amount of securities being offered would not be permitted C. yes. Any amendments to a registration statement that is beyond its effective date are generally permitted, as long as they have been approved by the issuer. D. no. amendments in any capacity are not permitted beyond the effective date of a registration statement

A amendments to a registration statement that is beyond its effective date are generally limited to modifications to the amount of securities that are to be sold/ offered to the public. generally-speaking, other amendments are not permitted such as amendments to syndicate fees, discounts, organization, as well as changes to the actual pricing of the security to the public.

if an investor is willing to bear market risk, what is the best investment strategy to exploit their acceptance of market risk? A. the best risk management technique in this situation would be to eliminate the unsystematic risk from their portfolio B the best risk management technique would be to only invest in stocks with a beta of 1.0 C. the best risk management technique would be to buy insurance policies that would cover all of the investors losses. D. the best risk management would be to invest in treasury bonds in an Emergancy fund as an aside to their normal portfolio

A if an investor is willing to accept certain amounts of risk in their portfolio, the best investment strategies are those that that advantage of that acceptance of risk while minimizing all other types of manageable risk. if a person was not opposed to accepting systematic or market risk, then you would want to exploit that but at the same time, eliminate as much unsystematic risk as possible.

all of the following statements re true about cybersecurity and data protection, except (4.5) A. clients data should be stored on the firm's internal server, to increase the level of safety B. the firm must require all third party system providers to sign confidentiality agreements C. always use two ID's for staff to access all systems at work D. install anti-virus software on devises used to access client data and all updates should be automatically installed

A the firm should use the cloud which is more secure than the firms internal server

a federally covered adviser is properly registered under the investment advisers act of 1940. the firm plans to advertise to the public in a certain state in order to attempt to get more business. Each of the following are requirements for advertisements under the investment Advisers Act of 1940 EXCEPT: (6.8) A. the federal covered adviser is prohibited from using advertising unless it has previously submitted the advertising to the SEC for approval B. the federal covered adviser s permitted to use graphs and formulas in their advertising, but must disclose that such graphs and formulas do not, by themselves, determine securities that should be purchased or sold. C. the federal covered adviser is prohibited from using testimonials of celebrities in their advertising D. the federal covered adviser is permitted to offer "free" reports, but only is permitted to do so if the offer is actually free without condition.

A. Each of the items listed is true except for the statement regarding submitting advertising to the SEC prior to use. this is a false statement. Federal covered adviser must abide by regulations created which cover advertising, but do not have to submit all advertising to the SEC prior to use.

an investor looking for which of the following investment goals would be BEST served by a deferred variable annuity? (7.6) A. investors who prefer a fixed rate of return B. investors seeking capital appreciation over a long period of time C. investors looking to maximize their current level of income D. investors interested in receiving inflation adjusted returns

B

a federal covered adviser, without satisfying as exemptive order or rule would not be allowed to receive which of the following types of compensation? (6.4) A. an arrangement where an adviser changes an hourly rate with a minimum dollar amount. B. an arrangement where an adviser charges fees on an annual basis that are based on increases in the value of the clients holdings C. an arrangement where an adviser charged a fee of $1,000 to develop a financial plan for a client D. an arrangement where an adviser provides a monthly newsletter for $250 per issue to a select group of subscribers.

B Generally, the Investments Advisers Act of 1940 prohibits fees that are based on performance. increases in value would be considered performance-based. This is different from percentage of assets under management which is permitted. performance- based fees are never allowed under the uniform securities act and are only permitted for "qualified" investors under the 1940 Act.

the person who oversees the running of a limited partnership is known as all of the following EXCEPT the A. sponsor B. investment adviser C. manager D. general partner

B an investment adviser gives advice about securities and/or manages a portfolio of securities. the general partner, also called the sponsor or manager manages a partnership in real estate, oil and gas and other businesses

from a historical perspective, investments in real estate would be expected to (7.7) A. move in the same direction as investments in the stock market B. move in the opposite direction to investments in the stock market C. perform entirely independently of the stock market D. provide higher returns than investments in the stock market

B historically, real estate prices frequently move in the opposite direction of prices of other financial assets such as stocks and bonds. though returns vary based on each respective investment, on an overall basis, the stock market would be expected to provide higher returns to investors than investments in real estate

which of the following is TRUE of a no-load mutual fund? (5.2) A. it charges a sales charge up-front B. it has an expense ratio of approximately 50 basis points C. it charges a deferred sales charge D. it cannot charge 12b-1 fees.

B no-load mutual funds generally have an expense ratio of approximately 50 basis points (.50%) and are allowed to charge 12b-1 fees (which are generally small). a sales load and a sales charge are the same thing and would not be charged by a no load mutual fund

A financial planning firm is trying to determine whether registration as an investment advisory firm is necessary. in making the distinction as to whether the firm must register, which of the following criteria is least relevant? (1.2) A. whether the firm provides advice on securities and receives compensation in return B. whether the firm actually implements recommendations that are given in the course of creating a plan C. whether the firm holds themselves out to be an investment advisory firm D. whether the firm provides specific advice on securities for specific clients

B of the choices listed, the determination as to whether to register or not would hinge least on whether the firm implements a financial plan for a client. A firm that provides specific advice on securities, provides advice for compensation, and/or advertises as an investment adviser, MUST register as an investment adviser. Implementation of a financial plan is not a requirement set forth under the USA.

excluded from the definition of an investment adviser under the USA is: (1.2) A. an insurance company that, for a fee, provides investment advice to clients B. a trust company that, for a fee, provides investment advice to clients C. a firm that, for a fee, provides investment advice about public institutions only D. a firm that, for a fee, provides investment advice about municipal bonds only.

B the Uniform Securities Act defines an investment adviser as anyone who provides advice related to ANY security for compensation. excluded from the definition are banks, savings institutions, and trust companies (but not insurance companies)

a sole proprietorship is in the process of becoming a corporation. This will be a smaller corporation with offering of shares intrastate to add capital so that the company can keep up with growing demand for a product. when it comes to this scenario which of the following is an accurate statement according to the rules of the uniform securities act? A. the stock of the corporation would have to be registered by qualification but only if the administrator feels it necessary B. the stock of the corporation would have to be registered by qualification because as described, the stock would not qualify for any exemptions C. the stock of the corporation would be exempt, because it is only being sold intrastate. D. the stock of the corporation would be exempt, because the size of the corporation is still small

B the administrator of the state can prescribe exemptions by rule or order, but is not permitted to arbitrarily enforce rules on registration. in this case, the corporation would be selling securities within the state that would have to be registered by qualification. as with all registered securities, the company would then have to file and abide by sales literature requirements.

A client calls into their broker-dealer and is looking to achieve greater tax relief now that it is tax time. The client tells the agent that they wish to include some losses from a general partnership venture which includes a mortgage. the client asks the agent if those losses could be written off as if they were securities, such as the stocks in the clients portfolio. what is an appropriate response from the agent? (1.3) A. The agent should inform the client that the losses can easily be written off as long as the general partnership interest and mortgage are carried in the securities accounts of the broker-dealer. B. The agent should inform the client that general partnerships and mortgages are not considered securities and cannot be included as if they were securities and should refer the client to a tax specialist in order to maximize tax relief. C. the agent should inform the client that the losses related to the general partnership can be written off as if there were securities, but that the mortgage losses/payments are not subject to any form of tax relief. D. The agent should inform the client that if the client sells their general partnership interest and pays off the mortgage, the client will be in better financial standing for tax purposes

B the agent in this scenario should inform the client hat general partnership interests and mortgages are not considered "securities" under the Uniform Securities Act. The agent should also refer or suggest that the client go to a tax specialist in order to maximize tax relief. in this scenario, there is not enough information to determine, nor would it be the agents job to determine, whether or not the general partnership interest should be sold and the mortgage paid off. the client may see profits and/or tax relief from the partnership interest and mortgage that the agent is unaware of

which of the following terms is NOT synonymous with the other three terms listed? A. the real return B. the internal rate of return C. the inflation-adjusted return D. the real interest rate

B the inflation-adjusted return is aka the real return and the real interest rate. it is equal to the rate of return less the rate of inflation. the internal rate of return is aka dollar weighted return and it not synonymous with the other three terms

an investor is concerned with the rate of inflation in relation to a portfolio of bonds that the investor holds. the investor's concern stems from the fact that the bond portfolio has an annual return of 3%, while the rate of inflation has increased to 2%. if the investor adjusts the return for inflation and finds that the return was only 1%, which of the following is TRUE? A. the 1% reflects the total return on the portfolio B. the 1% reflect the real rate of return on the portfolio C. the investor will only owe taxes in relation to the 1% figure D. the 1% would represent either the expected return or internal rate of return, depending on the duration of the portfolio

B the investor's return was 3% and inflation was 2%, so real rate of return aka inflation adjusted. return would be 1%. (3%return-2% inflation rate = 1% IRR). taxes would be paid on the actual return of 3%, depending on the type of bond in the portfolio. the total return, expected return, and IRR are all calculated differently and would be unlikely to be 1% with the information provided

All of the following statements about mutual fund fees and expenses are TRUE, EXCEPT: (7.3) A. mutual fund fees and expenses can significantly reduce and even eliminate returns for investors B. no-load funds do not charge any sales-loads, fees, or expenses C. even after paying a sales load and annual expenses related to a mutual fund, an investor may have to pay redemption fees when redeeming shares. D. 12b-1 fees are a form of annual operating expenses that are used to pay for distribution, marketing, and services

B though a no-load fund will not charge a sales load on the front or back end, these funds will often have annual expenses, fees associated with purchasing shares, fees associated with exchanging shares, and fees associated with redeeming shares. all of the other statements listed are true.

according to NASAA regulations, which of the following would be required in order to establish a margin account for a client? (4.3) A. require the client to sign a margin agreement prior to executing any transactions in the account. B. require the client to sign a margin agreement promptly after the initial transaction in the account C. require the client to file financial statements to determine the suitability of a margin account for the client D. require the client to fist establish a cash account with the firm for a period of time to establish the clients suitability.

B under NASAA statements of policy, the broker-dealers shall not execute any transactions in a margin account without securing from the customer in written margin agreement promptly AFTER the initial transaction in the margin account. verbal authorization cannot replace the written agreement.

of the following individuals who are employed by a federal-covered adviser, which individual would be required to register as an IAR in a state? (2.1) A. a person who manages 20 pension plans and 2 individuals as a clients B. a person advising 5 mutual funds and managing individual retirement accounts for 8 relatives C. a person advising 10 mutual funds and 6 individuals, 4 of whom are officers of the investment adviser D. an individual whose sole function is writing a column for the IAs weekly newsletter about upcoming IPOs

B. If an IA or IAR has more than 5 clients in a state, the IAR must register in that state. institutional investors and officers of the IA are disregarded when counting clients. this rule generally applies only to Its but in USA Section 201 end notes, IARs were added to this exemption

when may an investment adviser (IA) share in profits or losses of a clients account? (3.1) A. only when the state administrator permits it by rule or order. B. only when the IA and client have agreed in a written contract C. only when the IA is deducting advisory fees from profits that have been earned by the client. D. only when capital gains are realized, not on-paper profits.

B. when an investment adviser shares in profits and losses in a clients account it must be agreed to in a written contract between the IA and client. the IA does not need the administrators permission. don't confuse performance based fees with "sharing" sharing = IA and client agreed in writing performance based fees = only when administrator permits by rule or order

qualified plan fiduciaries, responsible for the investment choices of a qualified plan, would find which of the following in the Investment Policy Statement of the Plan? A. the investment managers compensation arrangement B. the specific asset allocations required among asset classes to minimize the risk of large losses C. the goals, objectives, and responsibilities of the plan participants D. the tax treatment of the plan

C

a financial analyst is reviewing projected income flows and outflows for a project. she wants to understand what these projected revenues and costs mean in today'd dollars. the analysts should use which of the following analysis tools? A. Dividend Discounted Model (DDM) B. Capital Asset Pricing Model (CAPM) C. Discounted Cash Flow Methodology (DCF) D. Efficient Market Hypothesis

C DCF, including NPV and IRR are means evaluating investments or projects utilizing discounting to arrive at present values for future revenues (inflows) and expenses (outflows) for a number of periods in the future. the dividend discount model does employ DCF analysis but that tool is used to determine the value of a dividend paying stock by discounting future dividends. it is not used for project decision making.

celest is n agent of a broker-dealer. over the years, she has become active in donating time and money to a non profit for a favorite cause. she wants to help this non-profit bring an issue of bonds to market and she has volunteered to do so without compensation. Under NASAA regulations, Celeste (4.4) A. is not required to provide verbal or written notification, because the issuer is a non-profit organization and she will not be compensated for her assistance. B. must verbally notify the broker-dealer firm of her intentions C. must notify, in writing, the broker-dealer firm of her intentions and receive the firms written approval for her participation. D. must notify, in writing, the broker-dealer firm and NASAA of her intentions and receive both written firm approval and written NASAA approval prior to participating

C an Agent representing both a broker-dealer and an issuer at the same time is a potential conflict of interest. under NASAA Model Rules for agents, such potential conflicts may be resolved by written disclosure to the employing firm. approval by a regulator would not be required.

Broker-Dealer Inc. is located state A. Indie is an individual who represents Broker-dealer Inc. in state B as an independent contractor. In this case, Indie is (1.1) A. not considered an agent of Broker-Dealer Inc, because Indie is an independent contractor and not a direct employee of Broker-dealer Inc. B. considered an agent of Broker-Dealer Inc, but would not have to register in state B, due to the independent contractor status. C. considered an agent of Broker-Dealer Inc and both BD and Indie would have to register in state B. D. considered an agent of BD Inc, but only Indie would be required to register in state B due to the independent contractor status.

C an agent is any individual who represents a BD as an employee or independent contractor in a state. regardless of whether an agent is considered an independent contractor or a direct employee of a broker dealer firm, both the agent and the Broker-Dealer firm would have to be registered in state B.

Mike owns his own small investment advisory firm where he is the only adviser. he unfortunately suffers a stoke and ends up in the hospital in a medically induced coma. During this time, several clients cannot reach him and contact. the administrator. The Administrator, after a reasonable effort to contact mike, also fails to reach Mike, but finds a note on the door of mikes office from his wife that explains the situation. Trying to asses the situation the Administrator visits the hospital where he finds Mike is in a medically induced coma still. all of the following are in the administrators authority at this time EXCEPT: (2.2) A. The administrator can cancel or suspend the firms registration due to inability of customers to contact the IA after reasonable effort. B. The. Administrator can cancel or suspend the firm's registration due to Mikes current inability to handle customer accounts C. The Administrator cannot cancel Mike's registrations and must wait to see what the outcome is of Mike's health situation D. The Administrator can cancel or suspend the firm's registration because at this time Mike's firm has essentially ceased operating

C choices A, B, and D are reasons why registration may be canceled. choice "C" is incorrect since the Administrator would have the authority to cancel or suspend the firms registration

Suzanne is an IA who handles Bobby's account. bobby is heavily invested in bonds and regularly reviews and calculated the current yield on his bonds. which of the following would be of greatest concern to Suzanne in relation to bobby's view of the bonds? A. Bobby isn't getting an accurate idea of the market value on the bonds B. bobby isn't getting an accurate idea of the nominal yield of th bonds C. bobby isn't getting the accurate idea of the yield to maturity of the bonds D. bobby isn't viewing a valid number when calculating current yield on any bond.

C current yield is a great snapshot of a bond considering the bonds nominal yield (coupon rate) divided by the bonds current market price. it is a valid tool in analyzing bonds but does NOT give an accurate assessment of a bonds YTM.

An investment adviser employee several IAR's. the IA is required to maintain a copy of which of the following with regard to its IAR's? (4.2) A. securities screenings and background checks that were performed on each IAR B. a copy of their driver's license C. the initial application completed by each IAR D. a copy of each IAR's fingerprints obtained from a police department

C record keeping regulations require the IA to retain a copy of each car's initial application for registration

State administrators have certain authority regarding the establishment of requirements related to the net capital and registration of broker-dealers. which best describes this authority? A. administrators must establish minimum capital requirements that are greater to those of the SEC. B. Administrators can act in the public interest, establishing appropriate minimum net capital requirements for broker-dealers C. administrators can only enforce the minimum net capital requirements of the SEC. D. administrators have no authority to establish or enforce net capital requirements of broker dealers.

C remember that Federal Law always preempts state law and that states can never require more than what is required at the federal level (SEC). the administrator has discretion as to whether or not to enforce the SEC requirements on net capital but does not have the discretion to establish minimum thresholds. the administrator does have authority, but that authority is limited in scope. for example, say the SEC has a $25,000 minimum net capital requirements for a particular type of firm. the state administrator has the authority to require $25,000 minimum net capital or not require it at the state level, but the state administrator is not permitted to create a minimum net capital that is lower than $25,000 or higher than $25,000 at the state level.

According to the uniform securities act which of the following is true of an applicant for registration who within the past 10 years has been found to have violated securities laws of another state by the administrator? (2.2) A. registration cannot be denied but the administrator may place limits on the applicants activities B. the administrator may not take any action against an applicant for the violation of another state's securities laws C. the administrator may deny registration, limit the person's business activities, or bathe person from employment with a registered investment adviser or broker-dealer D. registration cannot be denied but the administrator can require the applicant to maintain bonding as a prerequisite registration

C the administrator may deny registration, or limit or bar registration if the administrator finds that denial is in the best interest of the public

Steve owns a Sub-Chapter S Corporation and is one of th major shareholders in the corporation. the company has had a good year and has realized capital gains which will be distributed to all shareholders. How will these distributions be reported by the shareholders when they file their tax returns? (8.1) A. ordinary income B. Earned income C. shareholder capital gains D. dividend income

C when a Sub Chapter S corp has realized capital gains, those gains are distributed to the shareholders as shareholder capital gains. the S-Corp does not pay taxes, and gains are "passed-through" to shareholders

while employed, sally had purchased shares of a mutual fund with an aggressive growth investment objective. sally has decided to retire this year and wants to change the investment objective to moderate growth and income. The IAR managing the account recommends an appropriate fund within the same family of funds. What fees, if any, should sally be aware of when making this change? A. there are no fees provided she makes this change with the same IAR B. redemption fees C. exchange fees D. sales loads

C when mutual fund investors want to change investment objectives, they will most likely have to exchange those shares for shares with desired investment objective. most companies offering mutual funds will allow an investor to exchange their shares for shares of a different fund in the same family of funds. by staying in the same family of funds, investors will avoid purchase fees, redemption fees, and sales loads. However, there will likely be a fee associated with exchanging one type of fund for another fund within the same family of funds and these fees are called "exchange fees"

in working as an investment adviser (IA), you see opportunity to benefit your clients holding non-discretionary accounts by gaining access to initial public offerings. in order to have more choices as to the IPO offerings, you decide to hire a person, who is unaffiliated with your firm and not registered with the SEC or any state. this person charges a finder's fee of a quarter of the value of any investment secured through the use of the service. According to the investment advisers act of 1940, the person charging the finder's fee cannot accept such payments because (6.7) A. there has been no interest expressed in the investments by the non discretionary account holders B. the IA has gone outside of the broker-dealer research groups who could have performed the same services for less cost. C. in soliciting information from the offering companies, the unaffiliated person would then be acting on behalf of the IA as a solicitor D. the unaffiliated person would be acting as a broker-dealer because they would be receiving commissions based on their finding the securities.

C. the activities of non-registered persons working together with the registered investment advisers are very limited. they are basically limited to clerical work which must be closely supervised by the IA. they are usually paid either hourly or a salary, but never on commission.

To enter into an investment advisory contract with a client permitting performance based fees, the IA must disclose all of the following EXCEPT: A the period of time that will be used to measure investment performance B the nature of the benchmark index that will be used for comparison. C that a performance based fee may create an incentive for the IA to take greater risks D that the IA may not be compensated for both realized capital gains and unrealized capital appreciation in the same portfolio

D NASAA Regulations do not expressly prohibit compensation based on realized capital gains AND unrealized capital appreciation in the same portfolio. However, the rules do require full disclosure. Here, the statement answer "d" prohibits both, which is incorrect, also this is not a disclosure that must be made.

in th bankruptcy process, real estate is sold for a value higher than the amount owed on the mortgage for that real estate. How are the proceeds that exceed the mortgages used? A. the proceeds that exceed the mortgage balance are then directed toward the borrower/ debtor B. the proceeds that exceed the mortgage balance are then directed toward the lender/ mortgage holder C. the proceeds that exceed the mortgage balance are only used to repay the claims of secured creditors D. the proceeds that exceed the mortgage balance are used to pay all other claims and creditors

D this question is directed towards Chapter 7 bankruptcies, though that is not specified in the question. in chapter 7, the proceeds of a sale of real estate that exceed the amount owed on a mortgage are used to then pay all claims and creditors. Typically secured creditors will receive physical assets or proceeds from the sale of specific physical assets.

a variable annuity contract is similar to a life insurance policy because it may contain all of the following EXCEPT: (7.6) A. death benefits B. beneficiary designation C. loan provisions D. guaranteed cash values

D variable life annuities do not have guaranteed cash values

which of the following represent characteristics that value investors would look for when evaluating equity securities? I. overvalued companies II. undervalued companies III. low yield with high price/earnings IV. High yield with low price/earnings

II and IV value investors in equity securities focus on value stocks which are undervalued with low price/ earnings ratios which also provide income. large levels of income would mean a high-yield security.

in terms of the market for Collateralized Mortgage Obligations (CMO's), CMOs usually trade in the (7.4) A. listed market with commissions B. listed market with mark-us and mark-downs C. OTC market with commissions D. OTC market with mark-ups and mark-downs

D.

George is a registered investment adviser and is opening a new account with Elizabeth, a new customer. According to the USA, it is acceptable for George's compensation to be based on which of the following? (3.1) A. a share of elizabeths portfolio's capital gains B. any mutually agreed upon terms that are in writing and signed by Elizabeth C. a portion of Elizabeth's net capital gains as long as net capital losses have been subtracted or offset D. a percentage of the managed fund's average total value over a specific period of time

D. performance fees are generally prohibited under the USA. Generally, investment adviser fees are based on a percentage of the total value of the funds under management averaged over a measured period of time

An agent of a broker-dealer would like to sell to his clients, through a company outside of his own broker-dealer, a security that is not offered by the employing broker-dealer. which of the following is true with regard to this transaction?(4.3) A. the employing broker-dealer would be required to prohibit the transaction to remain within compliance of record keeping rules on transactions B. such transactions may not occur, unless the agent becomes registered at the outside company, which is then solely responsible for oversight of the agents activities related to the security. C. such a transaction may occur, provided that verbal authorization was granted to the agent prior to execution of the transactions. D. such a transaction may occur, provided that written authorization was granted to the agent prior to execution of the transactions

D. under NASAA Model Rule on Agents, an agent shall not effect securities transactions not recorded on the regular books or or records of the broker-dealer which the agent represents (selling away), unless the transactions are authorized in writing by the broker dealer prior to execution of the transactions. as well, if an agent works for a broker dealer and an outside entity is selling securities, the employing broker dealer would be responsible for the oversight of the agents activities at both businesses (both the broker dealer and the outside business would be responsible for oversight of the agent's activities)

a limited partnership is formed for the purpose of an oil and a gas exploration program. In which of the following scenarios would the interest in the oil and gas exploration program be exempt from registration? (2.4) A. the general partner(s) of the limited partnership participate in a separate entity which has qualified for exemption from registration due to non-profit status. B. the limited partners of the limited partnership participate in a separate entity which has qualified for exemption from registration due to non-profit status. C. the general partner(s) of the limited partnership serve as executives at the corporation which has securities that are listed on a national stock exchange. D. none of the exemptions listed above would apply to the interest in the limited partnership

D. when it comes to the formation of a limited partnership and sales of interests in a limited partnership, registration would be required, because the Uniform Securities Act considered these interests to be "securities". just because a general partner or limited partner participates in some separate entity which qualifies for exemption does NOT mean that the exemptions carry over to this limited partnership (which again, is a separate entity)

the investment company act of 1940 regulated which of the following? (6.11) I. investments by one investment company in another II. who may or may not have custody of investment company assets III. the return to its clients an investment company must achieve in order. to remain registered

I, II the Investment Company Act of 1940 does regulate restrictions on one investment company into another investment company and does regulate who may or may not have custody of investment company assets. However, the Act does NOT regulate returns to clients. that is determined by the market performance of the securities in the funds portfolio

under the investment advisers act of 1940 an investment adviser would be required to register if they answer "yes" to which of the following? (6.2) I. does the person give advice about securities II. is this person in the business of giving advice about securities III. is this person compensated for giving advice about securities

I, II, III under the advisers act of 1940, a person would be required to register as an investment adviser if they answer yet to all statements. !. do they provide advice about securities. @. are they "in the business" of giving advice about securities, and 3. are they compensated for giving advice about securities

A parent corporation has securities that are listed on a national stock exchange. the parent corporation wishes to issue other securities, but does not want to have to register the securities being issued. which of the following qualify for exemption from registration under the uniform securities act? (2.4) I. secured equipment bonds II. subscription Rights and Warrants for Additional shared of common III. Preferred stock IV. Subordinated debentures

I, II, III, IV all of the choices listed fall within the exemption under the Uniform Securities Act. Exemption is provided for "any other security of the same issuer which is of senior or substantially equal rank, any security calls for by subscription rights or warrants so listed or approved, or any warrant or right to purchase or subscribe to any of the foregoing.

according to the securities exchange act of 1934, which of the following items would be required on an order ticket for a securities transaction? (6.10) I. the account number II. the designation of the IA, if the order is entered by an IA on behalf of the client III. the price of the security at the time the order is entered Iv. the terms and conditions of the order

I, II, IV all choices would be required on an order ticket except that you would NOT need the price of the security at the time the order was entered. the "designation of the IA" would be a reference to how the IA is functioning and could include discretionary status, whether the order was solicited/ unsolicited, and whether or not the IA is acting in a principal or agency capacity on the trade.

An investment adviser (IA) charges a fee for an overall financial plan for a client, which of the following facts must be disclosed to the client? the fact that the IA (6.3) I. will receive compensation related to the transactions in equity and debt securities recommended in the financial plan II. owns shares of an unaffiliated mutual fund which carries some of the same investments that the IA is recommending III. makes a market in the bonds recommended in the financial plan IV. produced a research report on a company that is a competitor of one of the recommended equity securities.

I, III only the IA is required to disclose compensation related to the securities recommended outside of the financial planning fee. the IA is also required to disclose the fact that the IA makes a market in the bonds recommended in the plan. Both of these facts pose a potential conflict of interest. the IA is not required to disclose ownership of shares of a mutual fund under separate control that happens to have the some of the same investments that have been recommended, which differs from a scenario where the IA firm directly owns or chooses to sell the same securities that are being recommended. Also, the IA is not required to disclose the production of a research report for a competitor of one of the recommended equity securities.

after starting her own business several years ago, Susan's business has become very successful and Susan has assets that she never thought she would have. she has been thinking about getting an investment adviser to her her out since she is busy with her own business, but before she meets with the IA she wants to put together a personal balance sheet on her own. Which of the following items would Susan include on her personal balance sheet? I. mutual fund investments at their current market price value at the point in time she creates the document II. common stock investments at their original cots when they were purchased III. personal property IV. liabilities

I, III, IV common stock would be listed at the current market price that the balance sheet is created. not at the original cost.

if an investment adviser has a principal place of business in a given state, that state's administrator may impose what requirements according to the USA? (3.3) I. it may require the IA to file certain financial statements. II. it may require the IA to file amendments to existing registration applications III. it may require the IA to file its sales literature. IV. it may require the IA to maintain records

I,II, III. IV administrators may require that the IA file all of the above items as well as maintain certain records

which of the following accurately describes a scenario where an IA could reasonably recommend high-quality debt instruments with shorter maturities that may not have the highest yield, but are very safe and liquid? I. a scenario where an elderly investor wants get a limited amount of income from investments to supplement their pension, but is concerned with preservation of capital. II. a scenario where a couple inherits a sizable amount of money, all of which they intend to use as a down payment on a home in the next 6-9 months III. a scenario where the CEO of a business sees an opportunity to purchase a competitor within the next 2-3 years with excess cash derived from aggressive investments, but where there is a high likelihood that the deal will fall through and the funds will be retained by the company. IV. a scenario where a middle aged man receives a bonus from work and intends to put the entire bonus towards his Childs freshman year tuition at college the following september

I,II, IV

which of the following should be a part of a personal balance sheet? I. the cash value of life insurance policies II. outstanding credit card balances III. the original purchase cost of securities owned IV. the market value of the persons residence

I,II, and IV securities should be listed according to the current market value as of the date of the balance sheet

a new broker-dealer firm has just opened its doors. the firm has an office located in California, but intends to do all of its business online. the firm does not have clients outside of California at this time, but intends to do business in any state where clients may be interested in the online platform. with the regulations with the USA in mind, which of the following statements about this scenario is true? (3.3) I. since the firm intends to do all of its business online, it will be required to register with the SEC only. II. the firm will be required to register with the SEC and in any states in which it transacts business with clients III. the firms website is considered advertising, and copies of the current version as well as prior versions of the site must be maintained and stored according to regulations. IV. if the firms website is limited to order executions only, the website will not be considered advertising

II and III According to the uniform securities act, regardless whether business is conducted of whether business is conducted via the internet, telephone, orin person, broker-dealers must be registered in states where they conduct business. this includes a customer transacting business through an online platform in a particular state.this firm would be required to register with the SEC as well as with any states in which it does business or directs advertising. websites are considered to be a form of advertising according to the uniform securities act. for this reason, a copy of the current version of the website as well as prior versions and material changes must be maintained by the broker-dealer. such records may be stored electronically, but in such a case, they must not be in a format that can be altered, they must be able to be occupied as needed, and duplicate copies must be stored in separate locations.

An investor is looking at investing in smaller corporations. in considering several, one, "s" corporation has stood out as a seemingly good investment choice. which of the following would NOT be benefits of an "S" corporation (8.1) I. with an "s" corp, investors have limited liability II. with an "S" corp, the number of investors and type of investor is limited III. with an "S" corp, income is based through directly to investors who pay taxes only once IV. with an "S" corp, transferability of shares can be restricted.

II and IV limitations on investors and restriction of transferability are not benefits of an "s" corp to an investor. "s" corps are typically limited to 100 shareholders, all of whom must be domestic. as well, transferability of shares is sometimes limited to buy/sell agreements, which require shareholders to offer their shares to other shareholders prior to selling to an outside party. this can restrict or limit easy transferability. "s" corporations offer limited liability to shareholders, which is a benefit. they also have pass through taxation, where the business entity does not pay taxes prior to the distributions of gains. this means that shareholders pay capital gains taxes on the gains of the company only once, which is a benefit of an "s" corp over a "c" corp.

All of the following are included in the definition of an "agent" under the Uniform Securities Act, EXCEPT: (1.1) A. An individual representing an issuer in effecting transactions in equity securities. B. an individual who represents a broker-dealer as the broker -dealer effects sales of the broker-dealer's securities where commissions are paid. C. an individual who is a partner of a broker-dealer who effects purchases and sales of the broker-dealer's securities to existing employees where no commission is paid D. an individual representing an issuer who effects sales of the limited partnership interests

c there are specific exclusions which permit commission free transactions to employees of a firm without registration of the individual who distributes the securities. these ar put into place for situations such as employee stock option plans, where no commissions are paid and the person likely id part of the HR department.

an investor owns 3% in dividends and 10% in capital appreciation over the course of a year. during that period of time, inflation was 2.5%. what was the investors real rate of return? (9.2) A. .5% B. 7.5% C. 10.5% D. 12%

c to calculate the real rate of return (aka inflation adjusted rate of return) subtract the rate of inflation from the total return on the investment . in this case (10%+3%) - 2.5%= 13%- 2.5% = 10.5%