SERIES 6: Section 3 ... Securities & Tax Regulation

a principal

An employee involved in the management of a member firm's business, particularly in the supervision of business solicitation or in training, would have to be registered as

a principal.

An employee who is involved in the management of a FINRA member's business, particularly in the supervision of business solicitation or in training, must be registered as:

REITS.

An individual who holds a Series 6 license may sell all of the following EXCEPT:

closed-end investment company on its initial public offering.

An individual with a current Series 6 registration would be permitted to sell a:

A person who bought the same stock at about the same time.

An investor has been found guilty of making a stock sale on the basis of insider information. Which of the following persons could make a claim against him as a contemporaneous trader?

$25,000.00

An investor has contributed $50,000 to a nonqualified variable annuity over the years. She dies before retirement, when the total value of the annuity is $75,000. On how much must her beneficiary pay income tax?

$10,500

An investor purchases $10,000 of the ABC Income fund. During the course of the year $500 in dividends are reinvested and $500 of capital gains are received in cash. The fund has a 5% front end load. What is the investors cost basis at the end of the year?

The purchase of the rights, according to IRS rules, represents the reestablishment of the investor's position in substantially identical securities, and any potential losses will be disallowed under wash sale rules.

An investor sells EGH common stock that she has owned for six months at a loss of $2,500 on February 16. Two weeks later, she purchases preemptive rights to EGH common stock at a price of $1.50, exercisable at a price of $35. Which of the following best describes the tax treatment of this transaction?

the price of the shares will decline on the amount of the distribution.

Before your customer buys shares of XYZ Invest Mutual Fund, shortly before the ex-dividend date, he should understand that:

270 days.

Corporate debt securities (such as commercial paper) are exempt from registration under the Securities Act of 1933 if their maturities do not exceed how many days?

The current maximum contribution.

If Jorge, age 49, earns $400,000 per year in his salaried position and he participates in his company's 401(k) plan, how much may he contribute to his traditional IRA?

publish a tombstone advertisement.

If XYZ Corporation intends to offer stock in a public offering, it must do all of the following EXCEPT:

ERISA.

Participants in qualified private pension plans have their rights protected by:

All member firms must have at least one Office of Supervisory Jurisdiction (OSJ).

Regarding offices of FINRA member firms, which of the following statements is CORRECT?

a newsletter with a final exam.

All of the following are appropriate methods of conducting a firm's annual compliance meeting EXCEPT:

no penalty is charged for failing to withdraw funds after age 70 1/2.

All of the following are benefits of a traditional IRA EXCEPT that:

funds withdrawn after age 70 1/2 are tax free.

All of the following are benefits of owning a traditional IRA EXCEPT:

deferred compensation plans.

All of the following are corporate qualified retirement plans EXCEPT:

municipal bond funds.

All of the following are exempt securities EXCEPT:

a corporation raising capital by issuing stock.

All of the following are secondary market transactions EXCEPT:

closed end.

All of the following are terms for different types of underwritings EXCEPT:

withdrawals are always tax free

All of the following are true concerning a Coverdell Education Savings Account EXCEPT

Variable annuity

A 28 year old investor wishes to start saving for his daughter's college education. Which of the following would be the least appropriate investment vehicle for this plan?

type of tax-sheltered annuity available through mutual fund companies.

A 403(b)(7) plan is a

He may contribute 100% of earned income or the maximum allowable IRA limit, whichever is less.

A 45-year-old employment counselor has a Keogh plan for himself and three full-time employees who have been working for him for the past four years. If he earns $150,000 this year and contributes the maximum amount allowed to his Keogh plan, how much may he invest in an IRA?

II and IV.

A 457 plan could cover which of the following: I. employees of a corporation. II. independent contractors providing services to the county. III. employees of a nonincorporated business. IV. city employees.

I and IV.

A 51 year old customer of a FINRA member firm has made periodic contributions to a variable annuity with a contingent deferred sales charge for the past two years. A registered representative recommends that the customer do a 1035 exchange and switch to a new annuity that offers more attractive separate account returns and a deferred sales charge. The exchange would: I. not be taxable. II. be taxable. III. probably be considered a suitable recommendation. IV. probably not be considered a suitable recommendation.

completed at 32.25.

A FINRA member quotes 32.25 - 32.50 on an over-the-counter stock. A customer who wishes to sell at that price informs the broker-dealer of this, and the trade is completed. The customer delivers the stock the next day, but now the price is 28.75. According to the rules, the trade will be:

III and IV.

A Series 6 registered representative is permitted to sell which of the following securities? I. Real estate investment trusts. II. Secondary market closed-end investment companies. III. Open-end investment companies. IV. Unit investment trusts.

Home address.

A change to which of the following items requires amending the Form U-4?

$425,000.00

A client of a SIPC member firm has recently liquidated his entire holdings of $425,000 of stock and has had the proceeds swept into a money market fund sponsored by that broker-dealer. If the firm were to go bankrupt, the insurance payout for this client would be:

Regular way settlements is T+3 business days.

A client wants to place an order to buy 200 shares of ABC stock. Which of the following is true?

April 15 next year.

A client with a self-directed traditional IRA is permitted to make a contribution for this year no later than:

employees may use accumulated funds as collateral for a bank loan.

All of the following are true regarding nonqualified deferred compensation plans EXCEPT:

Keogh account.

A customer earned $100,000 this year and would like to make a large contribution toward his retirement. Because he is self-employed, you should recommend that he contribute to a(n):

remove the excess, plus associated growth, from the IRA.

A customer earns $26,000 this year and by error over contributes to her IRA. To avoid paying a penalty, she should:

The beneficiary must pay ordinary income tax on proceeds exceeding the cost basis.

A customer establishes a nonqualified periodic payment deferred annuity and makes payments for three years. If the customer suddenly dies, which of the following statements correctly identifies the tax consequences to the beneficiary?

All of the securities and all of the cash.

A customer has $250,000 in securities and $200,000 in cash with his brokerage firm. If the brokerage firm were forced to liquidate, how much of the account would SIPC cover?

$450,000 cash and securities for his account and $500,000 cash and securities for the joint account.

A customer has a cash account that has securities with a market value of $200,000 and $300,000 in cash. The customer also has a joint account with his wife that has securities with a market value of $300,000 and $200,000 in cash. If the firm were to go bankrupt, the customer would be covered under SIPC for cash and securities of:

$6,000.00

A customer has invested a total of $10,000 in a nonqualified deferred annuity through a payroll deduction plan offered by the school system where he works. The annuity contract is currently valued at $16,000, and he plans to retire. On what amount will the customer be taxed if he chooses a lump-sum withdrawal?

unsuitable because of surrender fees.

A customer purchased a variable annuity from an agent five years ago with an initial investment of $200,000. The annuity's surrender fee will expire in year seven, which coincides with the customer's anticipated need for the funds. In the fifth year of the contract, the value of the annuity increased from $300,000 to $375,000. The agent notices that the general market is on the decline and recommends she enter a 1035 exchange of the variable contract for another, thus increasing her death benefit and locking it in at a higher minimum. This recommendation is:

explain that FINRA rules don't allow for that

A customer requests not to receive confirmations of the trades he makes. The registered representative should

immediately.

A customer who has just started an IRA will be vested:

31 days.

A customer who sold a bond at a loss must wait how long before he can buy back a substantially identical bond and not have the sale classified as a wash sale?

employer only.

A deferred compensation plan needs the prior approval of the:

60 days.

A distribution from a corporate pension plan to be rolled over into an IRA must be completed within how many days to maintain its tax-deferred status?

18 years

A grandparent is interested in making a contribution to an ESA. Contributions may be made until the beneficiary's birthday at age

due diligence meeting.

A meeting between the issuer and underwriter to ensure that the prospectus is true and accurate is called:

The NAV per share was lower at the beginning.

A mutual fund shareholder purchases no-load shares at the beginning of an investment period and, at the end of the investment period, sells the shares for a gain. Which of the following statements is TRUE?

does not guaranteed that the employer will fulfill its obligation

A nonqualified deferred compensation plan

Transfers are always tax and penalty-free.

A nurse has been participating in her employer's Keogh plan. Upon leaving the clinic, she may arrange for a transfer of the Keogh assets into an IRA and defer taxes on these assets if she completes the transaction within:

may be used to gather indications of interest.

A preliminary prospectus:

red herring prospectuses.

A principal must review or approve all of the following EXCEPT:

A mutual fund sales presentation held in person at the representative's office.

A prospectus must accompany or precede which of the following?

the amount of the contribution is tax deductible to the employee.

A qualified profit-sharing plan offered by a corporation to its employees has all of the following features EXCEPT:

his initial registration date.

A registered person leaves the securities industry and 18 months later reassociates with another member firm. FINRA requires that this person's cycle for determining the dates for the regulatory element portion of continuing education be based on:

2 years of the effective date of her Form U-5 filing.

A registered representative elected to terminate her registration while raising her child. She would be able to re-affiliate with a FINRA member in the same license capacity without re-examination if she filed a Form U-4 within:

providing investment advice and charging a fee for the advice.

A registered representative must register as an investment adviser representative if he is:

The representative must submit a court order directing an expungement.

A registered representative was recently involved in a Code of Arbitration dispute with a customer and would like the resulting decision removed from FINRA's CRD system. In order for this to happen, what must occur?

a principal.

A registered representative who works for a FINRA member firm must be supervised by:

120 days.

A registered representative with a FINRA member firm must complete the regulatory elements of CE within how many days of his registration anniversary date?

a mutual fund that redeems its own shares.

A registered representative with a Series 6 registration can sell which of the following:

403(b) plan.

A registered representative would most likely recommend which of the following retirement programs to be installed for the employees of a charitable nonprofit organization?

acts as a conduit for dividend distributions.

A regulated investment company:

$6,000.00

A retired public school teacher, age 65, has deposited a total of $10,000 into a nonqualified variable annuity, and her account's current value is $16,000. If she wishes to take a lump-sum withdrawal of the full amount, how much of this withdrawal is taxed at the ordinary income tax rate?

taking a position.

A securities firm that holds stock rather than sells the stock is:

FIFO.

A shareholder has redeemed some mutual fund shares that were purchased over a period of ten years. If the shareholder has not indicated the specific dates of purchase and cost of the shares that were redeemed on his tax return, the IRS will follow which of the following methods in determining the cost basis of shares redeemed?

been convicted of securities-related fraud.

A statutory disqualification applies to an employee or an officer of a broker-dealer who, within the past ten years, has:

an auction method to trade stock.

A stock exchange uses:

She will owe tax on the entire $29,000.

A teacher has a 403 (b) tax-qualified deferred retirement plan. The school system she works for has deposited $20,000 for her into the plan during the past ten years. At retirement, the total value of the plan has grown to $29,000. If she withdraws the entire amount at retirement, what will be the tax consequences?

$16,000.00

A teacher has a 403(b) plan and the school system he works for has deposited $10,000 into his plan over a 12-year period. At retirement, if the teacher withdraws the total value of $16,000, on what amount does he pay tax?

$4,500.00

A teacher has placed money into a tax-qualified variable annuity over the past 12 years. He has contributed $26,000, and the current value of the annuity is $36,000. If the 62-year-old teacher is in the 30% tax bracket and withdraws $15,000 today, his ordinary income tax liability is: ** Contributions to a tax-qualified annuity are taxable when withdrawn at ordinary income tax rates (30% of $15,000 equals a tax liability of $4,500). Remember, this is a qualified plan and therefore has no cost base.

Each may invest up to the maximum contribution into separate IRAs.

A woman, age 27, earned $35,000 this year, and her husband, age 29, earned $48,000. What is their maximum allowable IRA contribution?

gift tax rules do not apply, as long as the account is eventually used for higher education purposes.

All of the following are advantages of Section 529 plans EXCEPT:

mutual funds offer a minimum of $250,000 of SIPC coverage to shareholders.

All of the following are advantages of investing in mutual fund shares EXCEPT:

3.33%.

ABC Combination Fund has dual objectives of capital appreciation and current income. Last year, the fund paid quarterly dividends of $.25 per share and capital gains of $.10 per share. The annualized growth rate of the fund was 15%. The current net asset value (NAV) of the fund is $28.50 and the current public offering price (POP) is $30. Advertising and sales literature of the fund may report the fund's current yield to be: ** The current yield on mutual funds is calculated by dividing the annualized yield ($.25 × 4 = $1) by the POP. In this case, $1 / $30 = .0333 × 100 = 3.33%. In calculating the current yield, the law prohibits the inclusion of capital gains and growth.

$2.5 million.

ABC Corporation is offering 500,000 units to the public at $5 per unit. Each unit consists of two shares of ABC preferred stock and one perpetual warrant for ½ common share of ABC exercisable at $5. How much capital was raised by the initial sale of the issue? ** Since the issuing corporation is offering 500,000 units to the public at $5 per unit, the total amount of capital to be raised by this sale will be $2.5 million (500,000 units × $5 per unit). How the money is allocated is not significant.

primary transaction.

ABC Corporation raises capital through an offering of securities and is the issuer of those securities. A purchase of this issue is a(n):

Standby.

ABC is engaged in a stock rights offering with the help of Alpha Securities as managing underwriter. If Alpha Securities agrees to purchase the unused rights for any stock that ABC cannot sell to current stockholders, and use them to purchase stock for resale to the public, what type of underwriting arrangement is this?

ACE paid taxes on 9% of its net investment income last year.

ACE, an open-end investment company, operates under the conduit, or pipeline, tax theory. Last year, it distributed 91% of all net investment income as a dividend to shareholders. Therefore, which of the following statements is TRUE?

markup on the offering price of the securities

ALFA Securities acts as a dealer when filling a customer's order to purchase 300 shares of LMN. ALFA makes its profit from a

Firm commitment.

ALFA Securities is the managing underwriter for an initial public offering of one million shares of ABC common. It has agreed to sell all of the stock being offered and to buy, as principal, any stock it cannot sell to the public. ABC will receive the proceeds from the sale of one million shares. This arrangement is known as what type of underwriting?

annually.

According to investment company rules, open-end investment companies may not distribute long-term capital gains to their shareholders more frequently than:

I and IV.

According to the rules that established self-regulatory organizations (SROs), these organizations are regarded as which of the following? I.Accountable to the SEC for supervising the securities business within their assigned jurisdictions. II. Government agencies. III. Publicly traded. IV. Membership organizations that report to the SEC.

59 1/2 years old.

At what minimum age could retirement payments be made from a Keogh plan without a penalty?

a mutual fund holds a security after it has appreciated; although it is not sold, the security's appreciation is a taxable event to the shareholder.

All of the following regarding capital gains taxation are true EXCEPT:

AAA municipal bonds.

All of the following securities would be suitable investments for a traditional IRA EXCEPT:

contributions to SEPs are made with after-tax dollars.

All of the following statements about SEP IRAs are true EXCEPT:

you may make contributions for the past year after April 15, provided you have filed an extension on a timely basis.

All of the following statements concerning IRA contributions are true EXCEPT:

there are no income limitations restricting the ability to make contributions

All of the following statements concerning Section 529 plans are false EXCEPT

the income level of the contributor can affect the annual contribution amount.

All of the following statements regarding 529 plans are true EXCEPT:

they must have a resident principal

All of the following statements regarding branch offices are true EXCEPT

under Section 1035, an exchange can occur tax free only if it is made between policies of the same company.

All of the following statements regarding contract exchanges under Internal Revenue Code Section 1035 are true EXCEPT:

only teachers may participate.

All of the following statements regarding traditional IRAs and TSA plans are true EXCEPT:

the covered employee must receive reports on the status of the plan no less frequently than annually.

All of the following statements relating to a deferred compensation plan are correct EXCEPT:

while the issue is in registration.

An agent may deliver a preliminary prospectus for an IPO:

tombstone.

An announcement of a new issue of a security that gives the name of the issuer, the price and the name of the underwriter is called a(n):

principal.

An employee involved in the management of a FINRA member's business, particularly in the supervision of business solicitation or in training, must be registered as a:

principal.

An employee involved in the management of a FINRA member's business, particularly in the supervision of business solicitation or in training, would have to be registered as a:

The entire amount

An investor who works for the city is ready to retire. The city has operated a Section 457 plan for its employees, in which he has participated. What portion of his withdrawals will be taxable?

is liable for federal taxes on its net investment income.

An open-end investment company that does not distribute at least 90% of its net income:

municipal fund security

Another name for Section 529 plan is

a designated principal.

Any trade made by a registered representative of a FINRA member firm must be reviewed by:

There is no age at which distributions are required.

At what age is an individual required to begin taking distributions from a Roth IRA?

compile a prospect list.

Before becoming registered as a representative of a member firm, an individual may:

Income tax on $20,000 and a $2,000 penalty

Bob Smith, who is in his 40s, has just been placed into an extremely generous defined benefit plan at his company. He has decided he no longer needs his variable annuity for retirement purposes and wants to use the money for a trip to Africa. Over the years, he has invested $60,000 in the annuity, and its total value is now $80,000. How much will Bob owe in taxes and penalties if he cashes it in?

I and III

Bob's Series 6 registration with FINRA was placed in a specifically designated inactive status while in military service for three years. Upon his release from service Bob would like to resume his career with a different broker-dealer than the one he was with prior to his service. Which of the following events are necessary in order for Bob to work for another broker-dealer? I. Notify FINRA that military service has ended II. Retake the Series 6 exam III. Fill out a new U-4 IV. Take a current Regulatory Element Exam

under no circumstances.

Capital gains distributions may be combined with income distributions to calculate annual yield on mutual fund shares:

the day of the trade.

Cash settlement for a trade in a customer's account must settle:

cash and securities, with cash coverage not to exceed $250,000.

Client coverage under SIPC is $500,000 for:

Requiring a written letter to opt out.

Customers of financial institutions must be given the opportunity to opt out of information sharing with nonaffiliated third parties. Which of the following opt-out procedures would be unacceptable under Regulation SP?

I and II.

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

if this strategy is consistent with the objectives of the plan.

ERISA allows the fiduciary of a corporate retirement plan to write covered calls on the securities in the portfolio:

Private sector retirement plans.

ERISA regulations apply to which of the following?

amount allocated to the individual's account plus accumulated earnings during the employee's participation in the plan.

Distributions from a profit-sharing plan made to an employee after retirement are from the:

whether the dividends are received in cash or reinvented.

Dividend distributions from a bond fund would be taxable:

401(k) plan

Don is a young man, just beginning his career as an engineer at the ABC Corporation. He doesn't have a lot of financial obligations and he'd like to start saving for his retirement. Which of the following retirement plans would favor his situation the most?

The portion representing the return of the principal invested voluntarily is not taxed, while the rest is taxed as ordinary income.

During her employment at a law firm, your customer was covered under the firm's Keogh Plan and, in addition to the contribution made on her behalf by the partners, she also elected to make voluntary after-tax contributions equal to 5% of her salary. She is now 61 and wishes to retire with a lump-sum distribution. Which of the following statements best describes the tax ramifications of this choice?

an executive of a corporation who receives $5,000 in stock options from his employer

Each of the following individuals is eligible to participate in a Keogh plan EXCEPT

a stock option plan.

Each of the following is a defined contribution plan EXCEPT:

an advertising executive who informally advised the board of his corporation on the company's investments.

Each of the following persons would be eligible under a Keogh plan EXCEPT:

6%.

Excess IRA contributions are subject to a penalty of:

aunts and uncles.

FINRA Rule 5130 states that each of the following is considered immediate family EXCEPT:

I and IV

FINRA fees paid by a member firm are based on which of the following? I. Number of registered representatives employed II. Number of trades carried out per year III. Number of employees IV. Number of branch offices registered with FINRA

II and III.

FINRA was established to: I. set and standardize charges and commissions. II. encourage just and equitable principles of trade. III. adopt and enforce its Conduct Rules among brokers and dealers. IV. prevent high profits in securities trades.

is not qualified because of lack of experience.

FINRA will deny a person's registration in all of the following situations EXCEPT when the applicant:

vice president of human resources for the firm and its affiliates.

Fingerprinting is generally required of all of the following individuals associated with a member firm EXCEPT:

Two days.

For a nonexempt security, Regulation T requires payment be made in how many business days after regular way settlement?

record date.

For an owner to be paid a dividend, his name should be recorded on the stock record book of the issuer's transfer agent by the:

any individual with access to investment-relevant information not available to the public.

For purposes of the Insider Trading and Securities Fraud Enforcement Act, an insider would be best described as:

Principal of a member.

General communications by a broker-dealer firm, such as customer orders and complaints, must be reviewed by which of the following?

They may each contribute 100% of earned income or the maximum annual allowable dollar limit, whichever is less, to an IRA.

If a 40-year-old customer earns $65,000 a year and his 38-year-old spouse earns $40,000 a year, how much may they contribute to IRAs?

The amount by which he over contributed.

If a 41-year-old investor who earns $26,000 this year over contributes to his IRA, how much will be subject to the 6% penalty?

the FINRA.

If a FINRA member firm suspends a registered representative, the firm must report the suspension to:

was either long or short the security.

If a client were said to be holding a position in a security, that would mean that the client:

may be published during the cooling-off period.

If a company intends to issue one million shares of common stock, a tombstone advertisement for the company's stock:

may continue to contribute to his IRA, but the contributions may not be 100% deductible, depending on his level of compensation.

If a company starts a pension plan for an employee who already has an IRA, this employee:

Employee contributions grow tax deferred if they are invested in an annuity.

If a corporation begins a nonqualified retirement plan, which of the following statements is TRUE?

$50,000

If a corporation's investment account received $100,000 in dividends and $20,000 in interest; how much of the $120,000 received would be subject to taxation? ** Corporations that receive dividends from investments have a 70% dividend exclusion. This means that out of the $100,000 received, only 30%, or $30,000 is subject to taxation. No such exclusion exists for interest received. Therefore, $30,000 plus $20,000 equals $50,000 subject to taxation.

Two business days.

If a customer does not pay for a trade regular way, how much additional time does Regulation T give the broker-dealer to deal with the problem? ** Regular way settlement is three business days after the trade date (T+3). Under Regulation T, payment must be made two business days after the settlement date (S+2), which gives the broker-dealer an additional two business days.

II and III

If a customer does not pay for securities purchased in a cash account within the stated time limit, and owes the firm more than $1,000, Regulation T requires that the firm I. freeze the account for 60 days II. freeze the account for 90 days III. liquidate the unpaid positions in the account IV. close the customer's account

sell the securities and charge the customer for any loss.

If a customer fails to pay for XYZ mutual fund shares within the required amount of time, the broker-dealer may:

Combined $400,000 in the cash and margin account and $195,000 in the joint account.

If a customer has securities worth $250,000 in a cash account, $150,000 worth of fully-paid-for securities in a margin account, and $195,000 worth of securities in a joint account with his wife, what is the total SIPC coverage?

he is not eligible to participate.

If a customer works as a nurse in a public school, each of the following statements regarding his school's TSA plan are true EXCEPT:

60

If a member firm is notified by FINRA that it must begin tape-recording the phone calls of its assistant representatives and registered representatives to existing and potential customers, it must do so within how many days of notification?

5%.

If a mutual fund paid $.30 in dividends and $.75 in capital gains during the year, and the offering price at the end of the year is $6.00, the fund's current yield for the year is:

She is not required to requalify by examination.

If a registered representative left her firm three years ago but is ready to return to the industry, which of the following statements is NOT true?

She is not required to re-qualify by examination.

If a registered representative left her member firm 3 years ago to care for a child and is now ready to return to the securities industry, which of the following statements is NOT true?

Under no circumstances.

If a representative possesses material inside information about a publicly traded company, under which of the following circumstances may he communicate this information to a customer?

It will be taxed as ordinary income plus a 10% penalty.

If a retiree is 58 years old and wants to take a lump-sum distribution from his SEP, what would be the tax treatment of this distribution?

full-time employees who have been employed for at least one year, aged 21 years and over.

If an employer has a Keogh plan, the employer must make contributions for all:

is disabled.

If an individual makes a withdrawal from her IRA at age 52, she pays no penalty tax if she:

1933

If an individual purchases open-end investment company shares without first receiving a prospectus, the registered representative is in violation of the Act of:

capital gains rates on capital gains distributions and ordinary income rates on dividends.

If an investor has received dividends and capital gains distributions on mutual fund shares she has held for four months, the investor will pay

He may not purchase the new issue because he is considered a restricted person.

If an officer of a member firm wants to purchase a new issue on the effective date, which of the following statements is TRUE?

The issuer has filed a standard registration statement.

If the SEC has cleared an issue, which of the following statements is TRUE?

not approved the security but has cleared its sale to the public.

If the SEC has released a security for sale, then the SEC has:

Thursday, January 15

If the ex-date for a stock is Tuesday, January 13, what is the record date?

She will pay income taxes on the full amount she withdraws each year.

If the owner of a $1 million IRA leaves it to his daughter, which of the following best describes the income tax treatment to the daughter?

Your neighbor.

If you are an associated person of a FINRA member, which of the following individuals is NOT considered a restricted person and may buy shares of a new issue?

I and III.

If you invest in a front-end load mutual fund and choose automatic reinvestment, you should expect that: I. dividend distributions will be reinvested at net asset value. II. dividend distributions will be reinvested at the public offering price. III. capital gains distributions will be reinvested at net asset value. IV. capital gains distributions will be reinvested at the public offering price.

All ordinary income.

If your customer invests in a tax-sheltered variable annuity, what is the tax treatment of the distributions he receives?

final prospectus.

If your firm is in the process of underwriting a new issue, sales literature, including a record of past performance, may be included in a mailing of the:

I and III.

In July, a customer invested $10,000 in the ABC Mutual Fund. In December of the same year, ABC announced a long-term capital gains distribution. In May of the next year, the customer decided to redeem his shares for a capital gain. How are both of the capital gains treated for tax purposes: I. The capital gain distribution is treated as long term. II. The capital gain from redemption is treated as long term. III. The capital gain from redemption is treated as short term. IV. The capital gain distribution is treated as short term.

I and III.

In July, a customer invested $10,000 in the ABC Mutual Fund. In December of the same year, ABC distributed a capital gain on securities it had held for five years. In May of the next year, the customer decided to redeem his shares for a capital gain. How are both of the capital gains treated for taxation purposes? I. The capital gain distribution is treated as long term. II. The capital gain from redemption is treated as long term. III. The capital gain from redemption is treated as short term. IV. The capital gain distribution is treated as short term.

$16 per share.

In May, an investor bought 100 shares of ABC for $16 per share. If he decides to give the stock to his nephew in December when the stock is selling for $25 per share, what is his nephew's cost basis?

a sale must take place.

In order for an investor to realize a capital gain or loss:

I and IV.

In which of the following cases would an early withdrawal from an IRA NOT be subject to a penalty? I. Equal installments based upon life expectancy. II. Purchase of a second home. III. Qualified education expenses for a niece. IV. Disability.

II and III.

In which of the following prospectus offerings could a Series 6 limited representative participate? I. Bond offering by CNY, a manufacturing company. II. Initial public offering by KLP, a closed-end investment company. III. Variable annuity offered by an insurance company. IV. Common stock offered by an insurance company.

deal in closed-end funds in the primary market only.

Individuals licensed as Series 6 representatives:

The proceeds munis John's cost basis taxed as ordinary income at Sue's tax rate.

John is the annuitant in a variable plan, and Sue is the beneficiary. Upon John's death during the accumulation period, Sue takes a lump-sum payment. What is her total tax liability?

His annuity payments are partly taxable and partly tax-free return of capital.

John owns a nonqualified, tax-deferred annuity. When he retires, what will be the tax consequences of his annuity payments?

by April 1, the year after the owner turns 70 1/2

Minimum distributions from a traditional IRA must begin:

Cash value removed from the policy is subject to income tax and a possible 10% penalty.

Mr. Jones has over-funded his variable universal life insurance, and it is now defined as a Modified Endowment Contract (MEC). Which of the following statements accurately describe what that means?

II and IV

Mr. Jones is 45 years old and converts $50,000 from a traditional IRA into a Roth IRA in his name. What are the consequences of this conversion? I. Because Mr. Jones is under age 59 ½, a 10% penalty will be paid on the distribution. II. $50,000 of income must be added to Mr. Jones tax return. III. Any growth from the original investment is subject to capital gains taxes. IV. Mr. Jones may make the standard IRA contribution in addition to the conversion amount.

II and IV

Mr. Jones is 45 years old and converts $50,000 from a traditional IRA into a Roth IRA in his name. What are the consequences of this conversion? I. Because Mr. Jones is under age 59½, a 10% penalty will be paid on the distribution. II. $50,000 of income must be added to Mr. Jones' tax return. III. Any growth from the original investment is subject to capital gains taxes. IV. Mr. Jones may make the standard IRA contribution in addition to the conversion amount.

rolling over the IRA and declaring the entire IRA value as ordinary income

Mrs. Beech, age 52, surviving spouse of Mr. Beech, age 62, is the sole beneficiary of his IRA. All of the following are options regarding the IRA, EXCEPT

unrealized capital gains.

Mutual fund shareholders are not taxed on:

As a short-term gain because the bond fund was held for less than 12 months.

On February 14, an investor purchases 1,000 shares of ACE Bond Fund, with an objective of providing the highest possible level of income on a monthly basis. On August 15, the investor informs his agent that he has changed his mind and wishes to exchange his bond fund shares for shares of a common stock growth fund with an objective of capital appreciation within the same family of funds. If the investor's bond fund shares increase in value before the exchange, how will they be taxed?

The income is taxed as long-term capital gain.

On November 10, your customer purchased 1,000 shares of the ABC open-end investment company. On November 22 of the same year, ABC sold 25,000 shares of TCB common stock at a profit. ABC had held the shares for 3 years. On December 15, ABC distributed the gain from the sale of TCB to shareholders. How will your customer be taxed on this distribution?

I and IV.

One of your clients owns a small business. She would like to start an employer-sponsored qualified IRA. A SIMPLE plan might be appropriate as long as her firm: I. does not already have a qualified plan. II. only has a profit-sharing plan. III. has 50 or fewer employees. IV. has 100 or fewer employees.

An institution.

One of your clients tells you that he is trading in the fourth market. Who is he trading with?

He can declare a $2,000 loss.

One of your customers had a rich uncle who died and left him $20,000 worth of mutual fund shares. The customer, who is in the 20% tax bracket, notices after a few months that the shares have gone down in value to $18,000. He would like to liquidate them before they depreciate further. What tax consequences can he expect?

Three customers.

One of your customers has a margin account and a discretionary mutual fund account with your firm. He is also custodian of an UTMA account for his son and has a JTWROS margin account with his wife. Under the Securities Investor Protection Act, how many customers is this?

Complete coverage for all three accounts.

One of your representatives has an individual account with your firm that has $20,000 in securities and $40,000 in cash. His wife has an individual account with $15,000 in securities and $10,000 in cash. They also have a joint account with $65,000 in securities and $60,000 in cash. How much SIPC coverage do they have?

A date determined by the investment company board of directors.

Open-end investment company shares normally go ex-dividend on what date?

the day after the record date.

Open-end investment company shares normally go ex-dividend:

I and II

Presuming IRS requirements are satisfied, which of the following receive tax-free distributions? I. Roth IRAs II. Coverdell Education Savings Accounts III. Traditional deductible IRAs IV. SEP IRAs

student at a nonprofit college.

Qualified annuity plans offered under Section 403(b) of the Internal Revenue Code, referred to as tax-sheltered annuities (TSAs), are not available to a:

I and IV.

Regarding money in a 401(k) plan: I. there is no vesting period for the employee's contributions. II. there is no vesting period for the employer's contributions. III. there may be a vesting period for the employee's contributions. IV. there may be a vesting period for the employer's contributions.

I and IV.

Regarding settlement of a customer's trade through a broker-dealer, which of the following statements are TRUE? I. The customer is requested to settle regular way. II. The customer is requested to meet Regulation T requirements. III. The customer is required to settle regular way. IV. The customer is required to meet Regulation T requirements.

a salesperson who works for the issuing firm's underwriter.

Regarding the sale of a new issue, a customer becomes a restricted person under FINRA Rule 5130 if he is:

Funding.

Regulations regarding how contributions are made to tax-qualified plans relate to which of the following ERISA requirements?

I and II

SEC Rule 17f-2 requires fingerprinting of certain employees of registered broker-dealers. Included in this rule are individuals who: I. handle customer funds and/or securities. II. supervise those who prepare records of original entry. III. work in the back office as a filing clerk. IV. prepare research reports on stocks and bonds.

I and III.

SIPC provides coverage for which of the following securities held in a customer account? I. Common stock. II. Futures contracts. III. Rights and warrants. IV. Precious metals.

II and IV.

Several customers have failed to make payment for their trades within the time period required under Regulation T, and the broker-dealer is faced with selling out their securities. Which of the following customers need NOT have their positions closed out? I. The KLP Company, whose account owes $1,050 on a small equity trade. II. Joe Bennett, who owes $850 on a closed-end fund purchase. III. Bill Smith, who is close friends with his registered representative and who still owes $1,100 on a stock trade. IV. Mr. and Mrs. J. F. Wilson, who owe $540 on a zero-coupon bond trade.

registration statement.

TCB wants to offer $7 million worth of common stock in its home state and in three other states. To clear the offer for sale, TCB must file a(n):

variable annuity to life insurance policy.

The 1035 provision may be used to transfer funds from one policy to another in each of the following instances EXCEPT:

I and IV

The ABC Corporation would like to raise capital via a Regulation D private placement. In order to qualify for an exemption from registering with the SEC under Rule 506, which of the following is true? I. Advertising is allowed if only accredited investors may purchase the securities. II. Advertising is not allowed if selling to a minimum of 35 nonaccredited investors. III. If selling to a minimum of 35 accredited investors, general solicitation is allowed. IV. If selling to nonaccredited investors, general solicitation is not allowed.

All or none

The Acme Boat Corporation needs to raise $250 million in order to build a manufacturing plant through an initial public offering. What type of underwriting agreement is best suited for this goal?

403(b) plan.

The Centerboro School District is initiating a retirement plan for its teachers and staff. Those who participate will make pretax contributions directly from their salaries, which will be invested according to a trust agreement. What type of retirement plan is this?

between member firms and members of the public.

The Conduct Rules apply to a transaction:

Continue to compensate a registered representative for sales made while the representative was working for the firm according to a previous contract.

The Conduct Rules permit FINRA member firms to do which of the following?

I and II.

The GEM Growth Fund has announced that it will pay a dividend of $0.73 per share to all holders of record as of Monday, October 4. The ex-dividend date: is determined by the fund's board of directors. would probably be Tuesday, October 5. would probably be Thursday, September 30. is the last date an investor purchasing shares of the GEM Fund will be eligible to receive that dividend.

Public elementary school

The IRS permits an employer sponsored retirement plan known as a TSA to be established by certain entities. One of those is known as a 403(b) institution and would include which of the following?

net investment income.

The Investment Company Act of 1940 requires that mutual funds pay dividends from their:

Regulated

The KPF Corporate Bond Fund received $10 million in interest last year and no dividends from the securities that make up its portfolio. It had $500,000 in expenses and distributed $9 million of income directly to shareholders. Which of the following words applies to this fund?

$10 million.

The KPF Growth and Income Fund experienced $10 million in net investment income last year. Of this, it distributed $8.9 million to its shareholders. On how much of its net investment income must the fund itself pay income tax?

auction market where the highest bid and lowest ask prices prevail.

The New York Stock Exchange is characterized as a(n):

Auction.

The New York Stock Exchange is characterized as what type of market?

full and fair disclosure.

The Securities Act of 1933 addresses:

offerings of new securities.

The Securities Act of 1933 regulates:

Treasury bonds.

The Securities Act of 1933 requires that all of the following be offered by a prospectus EXCEPT:

issuance of corporate securities.

The Securities Exchange Act of 1934 covers all of the following EXCEPT:

full and fair disclosure on new offerings.

The Securities Exchange Act of 1934 regulates or mandates each of the following EXCEPT:

intrastate securities offerings.

The Securities and Exchange Commission regulates all of the following EXCEPT:

vary with the actual requirements to fund a certain benefit.

The contribution in a defined benefit plan will:

the total cost, including sales charges, plus dividends or capital gains reinvested in the fund

The cost basis of mutual fund shares includes

on the cover of the prospectus

The disclaimer stating that the SEC does not approve or disapprove of a securities issue must appear

Monday, January 19.

The ex-dividend date of a stock is Thursday, January 15. What is the record date?

Securities Exchange Act of 1934.

The federal act that regulates securities markets and broker-dealers is the:

ex-date

The first date on which the buyer would NOT be entitled to receive a declared dividend being paid by a corporation is the:

I and IV

The managing underwriter has indicated it is unlikely the issuer can sell $100 million of common stock to the public. In which of the following types of offerings does a syndicate have no financial obligation for unsold securities? I. Best efforts II. Firm commitment III. Standby IV. All or none

Dealer

The over-the-counter market could be characterized as what type of market?

401(k) plans.

The phrase employer matching is commonly used when referring to which type of retirement plan?

protect employees from the mishandling of retirement funds by corporations and unions.

The primary purpose for creating ERISA was to:

regulation of the secondary market.

The provisions of the Securities Act of 1933 include all of the following EXCEPT:

is set by the issuing corporation to determine which stockholders will receive a declared dividend.

The record date:

second business day preceding the record date.

The regular way ex-dividend date for cash dividends is the:

submit a U-5 form.

When a member firm terminates a registered representative, the terminating firm must:

Funding.

The rules for ensuring that money will be available in a retirement plan (for paying out to participants during their retirement) are covered by which of the following types of requirements?

Participation.

The rules regarding who may be covered in a retirement plan are stated within which of the following sections?

marginal tax rate.

The tax rate levied on your last dollar of income is known as the:

all or none.

The type of underwriting where the deal is cancelled if the underwriter is unsuccessful at placing the entire issue is known as:

The loss is not deductible.

Three years ago, a customer purchased 300 shares of ACE Fund. He sold the shares on August 15 for a loss of $400. If he then purchased 300 shares on September 4 of the same year, how would he record the loss for tax purposes?

$11,800.00

Three years ago, your client invested $10,000 in the RIF Fund. During this time, the fund has distributed $700 in dividends and $1,100 in capital gains, all of which have been reinvested in additional shares. If the client decides to liquidate his position of 1,173.452 shares when the POP is $12 and the NAV is $11.52, the client's cost base is:

12 months

To avoid tax and penalty, an IRA may be rolled over once every

30 days.

To avoid the wash sale rules of the IRS, one may not replace a securities position for how many days before or after the sale of a security?

post its privacy policy on its internet site and in its lobby for public display.

To comply with Regulation SP, a brokerage firm is required to do all of the following EXCEPT:

I and II.

To which of the following persons may a broker-dealer pay commissions under a continuing commission contract? I. To a retired employee, for past business. II. To the widow of a former employee, for past business. III. To a retired employee who refers a neighbor to the broker-dealer. IV. To a retired employee who, in the course of his travels, acquires new business for the broker-dealer.

Primary.

To which securities market does the Securities Act of 1933 apply?

The new issue market.

To which securities market does the Securities Act of 1933 apply?

deferred compensation plans.

Under ERISA, all of the following retirement plans must set standards for vesting, eligibility, and funding EXCEPT:

A director at a firm that sells only mutual funds.

Under FINRA Rule 5130, which of the following would be permitted to invest in a new offering?

annually

Under FINRA rules, carrying firms must advise their customers of the BrokerCheck phone number or Web address

exchange of a variable life insurance policy for a mutual fund account.

Under Internal Revenue Code Section 1035, each of the following exchanges may occur on a tax-free basis EXCEPT the:

1,000 hours.

Under Keogh plan provisions, a full-time employee is defined as one working at least how many hours per year?

Rare oil painting

Under a Keogh plan, which of the following is NOT an acceptable investment?

I and II.

Under a qualified defined contribution plan, which of the following statements are TRUE? I. The participant is guaranteed a contribution based on an agreed-upon percentage or rate. II. The participant's retirement benefits are based on the balance in his individual account. III. The employer may discriminate among employees as to participation. IV. Employer contributions remain the property of the company until retirement.

Securities Exchange Act of 1934.

Under federal law, which act regulates the activities of broker-dealers and associated persons?

I and III.

Which of the following concerning Section 529 plans are TRUE? I. Qualified withdrawals are exempt from federal income tax. II. Contributions are made with pre-tax dollars. III. Contribution limits are set at the state level. IV. Qualified withdrawals may be used for pre or post-secondary education.

II and IV.

Under the IRC Subchapter M, if WWF fund only distributes 85% of its net investment income to its shareholders, then the: I. fund must pay taxes on the undistributed 15% of net investment income. II. fund must pay taxes on 100% of the net investment income. III. shareholder pays no tax if the income is reinvested. IV. shareholder must pay taxes if the income is received in cash or reinvested.

I and IV.

Under the Insider Trading and Securities Fraud Enforcement Act of 1988, which of the following are insiders for purposes of insider trading? I. Attorney who writes an offering circular for a company. II. An investor holding 4% of the company's stock. III. The next-door neighbor of a board member of a company. IV. Brother of a company's president.

Give a client a preliminary prospectus.

Under the Securities Act of 1933, which of the following actions may a broker-dealer take before the effective date of a new offering?

$500,000 for cash and securities but no more than $250,000 of cash per separate customer.

Under the Securities Investor Protection Act, customer cash and securities at a broker-dealer firm are covered up to:

third business bay following the trade date.

Under the Uniform Practice Code, regular way transactions for common stock settle on the:

third business day following trade date.

Under the Uniform Practice Code, regular way transactions for equity securities settle on the:

I and IV.

Under the conduit theory of taxation, which of the following statements are TRUE? I. A fund is not taxed on earnings it distributes if it distributes at least 90% of its net investment income. II. Investors are not taxed on earnings they reinvest. III. A fund is only taxed on interest income. IV. Investors are taxed on earnings they receive in cash.

It is solely up to the company who may participate in this type of plan.

Under what circumstances must an employee be given an opportunity to participate in a deferred compensation plan?

When the distribution is used to purchase a first home.

Under which of the following circumstances can an owner of a Roth IRA take an early distribution without a penalty?

Whenever all or part of the dividend payment comes from a source other than current income or accumulated undistributed net income.

Under which of the following conditions does the Investment Company Act of 1940 require a written statement disclosing the source of a dividend payment?

I and IV

What are the consequences of Grandpa giving $50,000 of stock to his granddaughter? I. Grandpa is responsible for any gift tax due. II. The granddaughter reports $50,000 as ordinary income. III. The granddaughter gets a stepped up cost basis to the fair market value on the date of the gift. IV. The granddaughter's cost basis in the stock remains the same as grandpa's cost basis.

April 15 of the following year.

What is the latest date that an IRA participant may make an IRA deposit for the current year?

The current maximum per child

What is the total amount that may be invested in a Coverdell Education Savings Account in one year?

a principal and charges a mark-up

When a brokerage firm sells stock from its own inventory, it is acting in the capacity of

must deposit the full purchase price before a purchase order may be executed.

When a client's cash account is frozen, the client:

At least on an annual basis.

When a customer opens an account with a financial institution, the institution is required to give a clear and conspicuous disclosure to the new customer regarding its policies and procedures for customer privacy. How often must the customer receive an updated notice containing the same information?

Only the amount that represents investment income is subject to tax.

When a customer receives payment during the annuity period of a variable annuity, which of the following is TRUE?

As ordinary income based on an exclusion ratio

When a customer wants income from an annuity and chooses the option of life with 20-year period certain, how will distributions be taxed?

the entire amount withdrawn is subject to taxation at ordinary income tax rates.

When a customer, who is at least 59½, withdraws money from a traditional IRA that has been funded totally with deductible contributions:

At ordinary income rates on the growth portion.

When an investor receives payments during the annuity period of a nonqualified variable annuity, how will he be taxed?

must be reviewed by a principal

When an order is accepted to purchase mutual fund shares, that order

tax savings.

When discussing the benefits of a Section 1035 exchange with a client, it would be appropriate to point out that the main benefit is:

full-time employees who are at least 21 years old and have worked for the company for one or more years.

When operating a Keogh plan, a self-employed individual must make contributions for:

Employer contributions.

When pension plan proceeds (employer contributions only) are rolled into a Roth IRA, what portion is taxable?

the spouse of an officer of a bank affiliated with a broker-dealer.

When purchasing a new issue, a customer would be considered a restricted person if he were:

I and III.

When referring to employee retirement plans, the term nonqualified refers to plans: I. not approved by the IRS. II. that offer tax-deductible contributions and tax-deferred growth. III. under which employers may discriminate as to the inclusion of employees in the plan. IV. under which employers may deduct contributions made on behalf of employees as the contributions are made.

The market value of the securities using the FIFO method.

When securities are inherited, what will be the recipient's cost basis?

On the over-the-counter market.

Where are securities traded that are not listed on an exchange?

On the cover.

Where must the SEC's no-approval clause appear in a prospectus?

I and III.

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

I and III.

Which of the following activities are characteristic of a primary offering? I. Raising additional capital for the company. II. Selling previously issued securities. III. Increasing the number of shares outstanding. IV. Buying previously issued securities.

II and IV.

Which of the following are among the purposes and objectives of FINRA? I. Solely to facilitate trading on the exchanges. II. To promote self-discipline among members. III. To ensure that members enjoy high profits. IV. To investigate and adjust grievances between members.

II and III.

Which of the following are types of corporate retirement plans? I. 403(b) plans. II. Defined benefit plans. III. Profit-sharing plans. IV. Solo 401(k) plans.

Telemarketing clerk

Which of the following brokerage firm employees is NOT required to be fingerprinted?

I and II.

Which of the following businesses could have a Keogh Plan? I. A private medical clinic. II. A plumber with a small shop. III. A research foundation. IV. A corporation with fewer than 100 employees.

Bankruptcy.

Which of the following changes to a U-4 form must be communicated to the registered representative's broker-dealer and to FINRA?

Complies with the full and fair disclosure requirements of the Securities Act of 1933.

Which of the following characteristics describes a final prospectus?

II and IV.

Withdrawals from a 401(k) plan without penalty are permitted for which of the following? I. To purchase a business. II. Disability. III. To purchase a second dwelling. IV. Attainment of age 59½.

I and III.

Which of the following concerning Section 529 plans are TRUE? I. Qualified withdrawals are exempt from federal income tax. II. Contributions are tax qualified. III. Some states will tax the withdrawals as income. IV. Withdrawals may be used for any expenses incurred by a student.

I and IV.

Which of the following could start a tax-sheltered annuity? I. A public school. II. A county government. III. A small law practice. IV. A research foundation.

TIC commodities account with son.

Which of the following customer accounts is NOT SIPC-insured?

II and III.

Which of the following describe a securities exchange? I. Prices are set by negotiation between interested parties. II. The highest bid and the lowest offer prevail. III. Only listed securities can be traded. IV. Minimum prices are established at the beginning of the day.

I and III.

Which of the following describe how prices are arrived at in the securities markets? I. By auction in the exchanges. II. By auction in the OTC markets. III. By negotiation in the OTC markets. IV. By negotiation in the exchanges.

II and III.

Which of the following employees of a small medical clinic would NOT have to be included in its ongoing Keogh plan? I. A full-time receptionist who has been with the clinic for 12 years but who was not an employee at the time the plan was initiated. II. A student nurse who works 15 hours per week. III. A full-time aide who joined the clinic earlier this year. IV. A medical technician with 12 years' experience who joined the clinic 18 months ago.

SIPC.

Which of the following entities was created to protect investors who have money and/or securities on deposit at member firms?

Securities Act of 1933.

Which of the following federal acts governs the issue of new securities?

I and II.

Which of the following funds may NOT be sold by a Series 6 registered representative? I. Hedge fund. II. Exchange-traded fund. III. Fund of hedge funds. IV. Speculative bond mutual fund.

I and III.

Which of the following individuals are eligible to participate in a tax-sheltered annuity? I. Maintenance engineer at a state university. II. Student in a public school system. III. Minister. IV. Office clerk at a small corporation.

A wealthy individual withdraws $10,000 from his IRA to purchase his first principal residence.

Which of the following individuals may make an early withdrawal from a traditional IRA without penalty?

I and II.

Which of the following information must be included in a prospectus describing variable life insurance to customers? I. Summary explanation in nontechnical terms of the principal features of the policy. II. Statement of investment policy of the separate account. III. Copy of the underwriter's contract. IV. Insurance company's most recent profit and loss statement.

II and IV.

Which of the following investments may be suitable for a Roth IRA? I. Uncovered calls. II. Covered calls. III. Commodity futures. IV. International bond mutual funds.

II and III.

Which of the following investors are eligible to establish an IRA? I. Independently wealthy individual whose sole source of income is $125,000 per year in dividends and interest. II. Law student who earned $1,200 in a part-time job. III. An individual who earned $3,500 last year selling encyclopedias but whose spouse is covered by a company profit-sharing plan. IV. Property owner whose income is solely from rent charged on family dwellings he owns.

Tax deferral.

Which of the following is a key advantage of purchasing a variable annuity?

Broke-dealer failure.

Which of the following is covered by the Securities Investor Protection Corporation?

III and IV

Which of the following penalties apply to individuals who are guilty of insider trading? I. Criminal penalties of up to ten years in prison. II. Civil penalties of a minimum amount equal to the profit made or loss avoided. III. Civil penalties of a base amount that is indexed for inflation. IV. Criminal penalties of up to 20 years in prison.

A SEP IRA.

Which of the following permits the highest annual contributions?

An officer of a large manufacturing corporation listed on the New York Stock Exchange.

Which of the following persons could purchase shares of an IPO of common stock without restriction?

II and III.

Which of the following persons would be ineligible for a Keogh plan? I. Self-employed doctor. II. Engineer employed by a major corporation. III. A teacher working in a public school. IV. An artist who works in an art gallery he owns.

529

Which of the following plans does NOT allow a catch-up contribution for individuals who are at least 50 years old?

They are used primarily by small businesses.

Which of the following regarding SEP IRAs is TRUE?

I and IV.

Which of the following regarding a Roth IRA are TRUE? I. The contributions are nondeductible. II. Contributions must cease at age 70½. III. Withdrawals must begin at age 70½. IV. Withdrawals after age 59½ can be tax free.

Roth IRAs.

Which of the following retirement plans are always funded with after-tax contributions?

Keogh Plans.

Which of the following retirement plans would allow insurance to be purchased within the plan?

Defined benefit plan.

Which of the following retirement plans would be advantageous for an older employee whose skills are essential to the operation of a corporation's business?

A corporate defined benefit plan.

Which of the following retirement plans would have to conform to the requirements of the Employee Retirement Income Security Act?

I and III.

Which of the following securities are exempt from the 1933 Act? I. Federal and state governmental issues. II. Stocks being issued in more than one state. III. Nonprofit organizations. IV. A 20-year corporate bond being offered nationwide.

II and IV

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

A new stock being offered in 3 states.

Which of the following securities is NOT exempt from the registration provisions of the Securities Act of 1933?

Employer contributions are determined by the company's profits.

Which of the following statements about 401(k) plans is NOT true?

I and II.

Which of the following statements about FINRA are TRUE? I. It has authority to regulate the OTC market in nonexempt securities. II. All branch offices of a member broker-dealer must be registered with FINRA. III. All broker-dealers must hold FINRA membership. IV. If a FINRA member firm is an exchange member at all, it may only belong to the New York Stock Exchange.

III and IV.

Which of the following statements are TRUE concerning compliance meetings? I. They must be attended by registered representatives, but not principals. II. They can be a video-taped presentation available for viewing at the convenience of the registered person. III. They may have other items on the agenda. IV. They may be held in conjunction with another meeting.

I and III.

Which of the following statements are TRUE of mutual fund dividend distributions? I. The fund pays dividends from net investment income. II. An individual taxpayer may exclude $100 worth of dividend income from taxes annually. III. An investor is liable for taxes on distributions, whether taken in cash or reinvested in the fund. IV. An investor is not liable for taxes if he automatically reinvests distributions.

II and III.

Which of the following statements are TRUE of the Securities Act of 1933? I. The act only applies to listed securities traded over the counter. II. The purpose of the requirements for registration and a prospectus is to provide full disclosure of pertinent information to the public. III. The act is designed to prevent fraud in the sale of newly issued securities. IV. The act regulates exchanges and the OTC market.

II and IV.

Which of the following statements correctly describe a Roth IRA? I. The maximum annual contribution is 100% of earned income or a maximum allowable dollar limit, whichever is greater. II. The maximum annual contribution is 100% of earned income or a maximum allowable dollar limit, whichever is less. III. Contributions are tax deductible. IV. Contributions are not tax deductible.

I and II.

Which of the following statements describe the Securities Exchange Act of 1934? I. It created the SEC. II. It requires registration of broker-dealers with the SEC. III. It provides for registration of new issues. IV. It regulates the activities of investment advisers.

The maximum annual contribution varies from state to state.

Which of the following statements describing Section 529 plans is TRUE?

A self-employed person may participate.

Which of the following statements describing traditional IRAs is NOT true of 403(b) qualified plans?

Customers must be given annual privacy disclosures on a separate piece of paper.

Which of the following statements is NOT true of Regulation S-P?

They must be held annually.

Which of the following statements is TRUE concerning compliance meetings?

The SEC has cleared this issue for sale to the public.

Which of the following statements may be made by an issuer selling securities to the public that are registered under the Securities Act of 1933?

An employer can also make contributions to the 403(b) plan on behalf of the nonworking spouse of an employee.

Which of the following statements regarding 403(b) plans is NOT true?

I and III.

Which of the following statements regarding Coverdell Education Savings Accounts are TRUE? I. After-tax contributions of up to an indexed maximum per student per year are allowed. II. Contributions may not be made for students past their 18th birthday. III. If the account value is not used for educational purposes, it can be rolled over into a traditional IRA. IV. Distributions are always taxable.

it must be established under a trust agreement.

Which of the following statements regarding a qualified profit-sharing plan is TRUE?

Benefits are not paid until the employee reaches age 65.

Which of the following statements regarding a qualified profit-sharing retirement plan is NOT true?

Contribution limits are the same.

Which of the following statements regarding both traditional and Roth IRAs is TRUE?

I and IV.

Which of the following statements regarding deferred compensation plans are TRUE? I. They are available to employees selected by the employer. II. They must be nondiscriminatory. III. Under no circumstances may officers or directors be included. IV. The employer does not receive a tax deduction for the deferred payment until actually made.

I and II.

Which of the following statements regarding qualified pension plans are TRUE? I. They must not discriminate. II. They must have a vesting schedule. III. They must be in writing or voice recorded. IV. Every month the employer must update the current status of all accounts.

Dividend distributions are reported on IRS Form 1099-DIV.

Which of the following statements regarding taxable investment company distributions to investors is TRUE?

If a participant receives a distribution from a pension plan and rolls it into an IRA within 60 days, the 20% withholding applies.

Which of the following statements regarding the IRA 20% withholding requirement is TRUE?

It requires registration of securities.

Which of the following statements regarding the Securities Exchange Act of 1934 is NOT true?

III and IV.

Which of the following statements regarding the withdrawals from a qualified retirement plan are TRUE? I. The employee will be taxed at the ordinary income tax rate on his cost basis. II. Funds may be withdrawn after retirement (as defined) with no tax on the withdrawn amount. III. Funds may be withdrawn early by the beneficiary if the covered person dies. IV. All qualified plan provisions must be in written form.

I and IV

Which of the following statements regarding unrealized gain in a mutual fund portfolio are TRUE? I. It affects the mutual fund's shares' value. II. It is taxable as of the year it takes place. III. It is treated as part of the mutual fund's net investment income. IV. It is realized by shareholders when they redeem their shares.

I and IV.

Which of the following terms are associated with over-the-counter trading? I. Market maker. II. Floor broker. III. Auction market. IV. Negotiated market.

I and IV

Which of the following terms describe a third market transaction? I. Listed securities II. Unlisted securities III. Trading on exchanges IV. Trading OTC

I and III

Which of the following trades would take place in the primary market? I. A corporate IPO. II. The specialist in GE sells 10,000 shares on the floor of the NYSE. III. The sale of $50 million State of Georgia GO bonds through a selling syndicate. IV. The sale of $50 million State of Illinois GO bonds from the portfolio of the ZYX Insurance Company to the CBA Municipal Bond Fund.

The purchase of NYSE-listed closed-end fund shared.

Which of the following transactions may be made on margin?

Defined contribution pension plan.

Which of the following types of retirement plans would be most beneficial to a young employee of a corporation?

Conviction for the misdemeanor of petty theft of money from a client

Which of the following violations could bar an agent from employment in the securities industry?

Agreement among underwriters.

Which of the following will NOT be found in a final prospectus?

Withdrawals are tax free if used for qualifying expenses.

Which of these is TRUE about an ESA?

The fund's board of directors

Who sets a mutual fund's ex-date?

the contingent deferred sales charge (CDSC).

You explain to your client that a variable annuity you are recommending has a typical surrender charge period schedule, which lasts seven years and decreases by 1% each year. These charges are called:

U.

You plan to obtain a loan at your local bank for which you will use your 500 shares of ABC stock as collateral. To determine how much collateral value it will assign to the stock, the bank will check the Federal Reserve Board's Regulation:

a variable annuity is probably not a suitable investment choice because of your investor's age and the contingent deferred sales charges that apply on withdrawals.

Your 75-year-old customer has read many articles about variable annuities and would like you to choose one that would be appropriate for his $100,000 investment. Your customer has a well-diversified investment portfolio and is not currently in need of additional income. The most appropriate response to your customer's request in this situation is:

Both an IRA and a Keogh plan.

Your client has a salaried, full-time position, but his employer does not offer a company retirement plan. He also has his own clock repair business, organized as a sole proprietorship, that earns less than his salaried position. If he wants to invest for his retirement, which of the following investments is an option for him?

II and III.

Your client has asked about the automatic dividend reinvestment plan offered by the ABC Growth and Income Fund. In describing the differences between dividend reinvestment and receiving distributions in cash, which of the following statements are CORRECT? I. One benefit of dividend reinvestment is that distributions reinvested are tax deferred, whereas dividends received in cash are taxable in the year of receipt. II. The taxation of the dividend distribution is not affected by your choice to reinvest or receive the dividend in cash. III. Reinvestment of dividends tends to have a compounding effect, while taking the distributions in cash inhibits the opportunity for growth of capital. IV. Taking the dividends in cash actually creates more wealth because the reinvested dividends are subject to sales charges.

Capital gain of $4,750

Your client inherits 1,000 shares of ABC mutual fund when the NAV is 9.50 and POP is $10.00. Two years later, the client sells all of the shares when NAV is 14.25 and POP is 15.00. What are the tax consequences?

II and IV.

Your client is interested in some of the tax ramifications of investing in variable annuities. You could tell her: I. withdrawals before age 59½ are not subject to tax penalty if the investment has been held at least five years. II. partial withdrawals from nonqualified plans are taxed on a LIFO basis. III. choice of settlement option has no effect upon taxation of the distributions. IV. if she is dissatisfied with one company, Section 1035 of the Internal Revenue Code will permit her to liquidate one variable annuity and place the funds into a different one without being taxed.

may start his own IRA.

Your client works full time for XYZ Company, where he is covered by a qualified pension plan. To make a few extra dollars, he also works part time for the local hardware store, which offers no retirement plan. Your client:

earnings are taxable on an annual basis.

Your client, working for a local municipality, tells you that he has the opportunity to participate in a Section 457 plan. Explaining some of the characteristics and features of this type of plan, you could tell him all of the following EXCEPT:

earnings on plan assets are taxable on an annual basis.

Your client, working for a local municipality, tells you that he has the opportunity to participate in a Section 457 plan. Explaining some of the characteristics and features of this type of plan, you could tell him all of the following EXCEPT:

$1,000,000.00

Your customer has a cash account with $300,000 worth of securities, his spouse has a cash account with $300,000 in securities, and they have a joint account with $400,000 in securities, all held at ALFA securities. If ALFA files for bankruptcy, what is the SIPC coverage?

Keogh plan

Your customer has a salaried, full-time position with a 401(k) plan. He also gives paid evening seminars and wishes to use the fees to help fund his retirement. If he wanted to be able to take a tax deduction for his contributions, you would tell him he could use a portion of his fee income to fund a

The distribution is subject to a withholding tax.

Your customer has applied for a social security number but has not received it yet. An account was opened and mutual fund shares were purchased. If the fund distributes a dividend, what will happen?

Your customer will not be taxed on the distributions if she is over the age of 59 1/2 and the money has been held in the account for five years beginning with the first tax year for which a contribution was made to any Roth IRA established for the individual.

Your customer has contributed $1,000 annually into her Roth IRA for seven years. Which of the following statements concerning her Roth IRA distributions is TRUE?

a solo 401(k) plan.

Your customer has his own sole proprietorship. He and his wife are the only full-time employees. He would like to start a retirement plan for his business but would like to have access to the funds in the account by means of loans. You would recommend:

II and III.

Your customer has received insider information about a company. He has asked you what he may do with it. After cautioning him not to disclose it to anyone or use it in trades, you tell him which of the following? I. He may use the information as soon as you disclose it to a principal of your broker-dealer. II. As long as it is not known to the public, he may not use the information. III. He may use the information when it becomes available for evaluation by the general public. IV. The information may never be used in trades even after it is made public.

Taxed as ordinary income

Your customer is 61 years old. He would like to take a lump-sum distribution from his SIMPLE plan. What is the tax treatment of this distribution?

Five - the man, his wife, and their sons' UTMA accounts taken collectively.

Your customer owns two accounts with your firm: a cash account and a margin account. He and his wife own a joint account. He is also the custodian of UTMA accounts for their two older sons, and his wife is the custodian for an UTMA account for their youngest son. The Securities Investor Protection Corporation would consider this to be how many customers?

The first shares purchased are the first shares redeemed.

Your customer uses the FIFO method to determine his capital gains. What does this mean?

1035 exchanges are not allowed from annuities to life insurance.

Your customer would like to do a 1035 exchange of his variable annuity for a life insurance policy and wants to be sure there will be no adverse tax consequences. You tell him:

I and III.

Your customer, 35, is self-employed and owns a traditional IRA. Under which of the following circumstances will he avoid the 10% premature withdrawal penalty? I. He uses the withdrawal to pay his college tuition. II. He uses a $10,000 withdrawal for a down payment on a vacation home. III. He uses the withdrawal to pay medical expenses exceeding what is defined by his AGI. IV. He uses the withdrawal to pay emergency business expenses incurred by his sole proprietorship.

She and her employees are not eligible for a Keogh plan.

Your customer, a self-employed, incorporated small-business woman, wishes to establish a Keogh plan for herself and her two employees. According to IRS rules, which of the following is TRUE?

$400.00

Your customer, who has been making pretax contributions to her IRA, decides to take a well-earned vacation to celebrate her 30th birthday. If she withdraws $4,000 from her IRA to pay for a cruise, in addition to income tax, what penalty must be paid on the amount withdrawn?

a Section 457 plan.

Your customer, who owns a small business, would like to make provision for his retirement. You might suggest to him any of the following EXCEPT:

$5,000 long-term capital gain

Your father purchased $10,000 of ABC stock 10 years ago and purchased an additional $5,000 on April 1. On September 1, when the current market value of the stock is $25,0000, your father passes away and you inherit the ABC stock. On November 1, you sell the stock for $30,000. What do you report on your tax return?

III and IV.

Your open-end investment company customer has decided to make automatic reinvestment of dividend and capital gains distributions. This choice will: I. defer taxation on these distributions. II. lower the proportionate ownership in the fund each time a distribution is made. III. not change the tax status of these distributions.allow your customer to reinvest the distribution without paying a sales charge.

not alter the tax due on the distributions.

Your open-end investment company customer has decided to take automatic reinvestment of dividends and capital gains distributions. This choice will: