Series 6 Unit 4

The KPF Growth Fund charges no redemption fee. An investor brings 200 shares to your firm for redemption. The next quote on the fund is $9.15 bid, $10.00 ask. If liquidated by the firm without charge, he would receive for his shares:

$1,830; investors redeem their mutual fund shares at the next calculated net asset value or bid price

How much money must be paid for a speaker to have it be stated in the advertisement?

$100

An investor redeems 200 shares of ABC Fund, which has no redemption fee. If the quote is $12.05 bid $13.01 asked, what amount will the investor receive?

$2,410

A customer has invested $9,000 and signed a letter of intent for a $15,000 mutual fund investment. If his reinvested dividends during the 13 months total $720, how much money must he contribute to fulfill the letter of intent?

$6,000

An investor executes a letter of intent to invest $15,000 in a fund to qualify for a reduced sales charge. The investor makes an initial purchase of $8,000. If the account grows to $11,000 before another purchase is made, how much will be due to fulfill the letter of intent?

$7,000

A mutual fund has a net asset value (NAV) of $7.80 per share, and the fund pays its underwriter a concession of $0.12 per share. If the fund has a sales load of $0.50 per share and an administrative fee of $0.15 per share, how much does the investor pay per share to purchase a Class A share of this fund?

$8.30; the investor pays the public offering price (POP) when purchasing mutual fund shares. For a Class A share upon purchase, the POP is the NAV plus the sales charge

The FINRA review requirement is within:

10 days

There are retention requirements for certain records of a broker-dealer. One of those is the firm's retail communications files. Under FINRA rules, copies of retail communications must be retained for:

3 years after last use

A mutual fund must send a check for its tendered shares within how many days after receiving a written request for their redemption?

7 days

Letters of intent may be backdated up to how many days?

90 days

Your customer has redeemed some of his mutual fund shares, but finds that the price he received is somewhat less than was reported as the NAV of his fund in the newspaper the next day. The most likely because of?

A contingent deferred sales charge

An investor buys a mutual fund over the Internet. How does the investor get the required information?

By downloading an electronic copy of the statutory prospectus

What mutual fund share classes has no back-end load, lower operating expenses, and low or no 12b-1 fees?

Class A

An investor with a long time horizon and $100,000 to invest would most likely be interested in:

Class A shares

If an investor has long-term growth objectives but only has a small amount to invest, what share class should they invest in>

Class B shares because they would pay no front-end load for B shares and only 12b-1 fees

Shares of which classes may eventually convert to another share class?

Class B shares often convert to Class A shares after the contingent deferred sales charge has expired

Mutual fund shares that carry a level load are:

Class C shares

A customer with an aggressive growth investment objective and short-term (6- to 12-month) time horizon wants to invest $50,000 in a mutual fund. He has a substantial net worth, but none of it is invested in mutual funds. You inform him that mutual fund investments are intended to be long-term investments, but he expresses his intention to make the short-term investment anyway. If the XYZ fund family (one you have dealt with in the past) offers an aggressive growth fund that has a respectable track record, your recommendation should be to:

Class C shares; the sales load would be lower than that of either Class A or Class B shares

A client invests $2,200 in an open-end investment company and signs a letter of intent for a $10,000 breakpoint. If he deposits $11,000 6 months later, what happens?

He will receive a reduced load on $13,200 worth of the shares

What material is exempt from spot-checking?

Material that makes no claims for a security, but simply states its price

A RR uses outside electronic addresses and Twitter among other sources to communicate with clients and provides copies to the firm, would this result in regulatory sanctions?

No

Does a training presentation that is marked for internal use only require review by a principal?

No

Is a public appearance a retail communication?

No

Is sending a copy of a newspaper article (with supervisory approval) about a company whose stock is being solicited a potential violation?

No

May a mutual fund company include applications to invest in advertisements?

No because an application but be accompanied by a prospectus

Are prospectuses considered public communications of a broker-dealer?

No, they are prepared by the issuer

A customer purchases 1,000 ABC mutual fund Class A shares and wishes to redeem the shares 30 days later, what appens to the shares?

Shares will be redeemed at a price equal to the next calculated net asset value

A customer signed a letter of intent (LOI) stating that she would purchase $25,000 worth of ACE Fund over the next 13 months. After 13 months, she has invested only $12,000, and she wants to know what effect she can expect. What can you tell her?

She will be charged whatever sales charge she is entitled to for the actual amount invested

An investor owns $10,000 of shares in ABC bond fund. Due to a change in his financial situation, he wishes to exchange the bond fund shares for shares in ABC's aggressive growth fund, how is this taxed?

The exchange is considered a taxable event that must be recognized in the current year

What would prevent a mutual fund with a front- end load from charging as much as 8.5% of POP as a sales charge?

The fund does not offer breakpoints

Under what circumstances may a member firm use a fictional name or DBA (doing business as) in its communications?

The name is filed with both FINRA and SEC

A first year broker-dealer posts an ad in the newspaper to recruit series 6 registered representatives on May 5, 2010 and again on August 14, 2010. How long must the broker-dealer maintain records of this?

Three years from August 14, 2010

Must qualifications be given on a speaker if he is providing technical information or opinions that make it appropriate to do so?

Yes

A registered representative places an ad in her church newsletter promoting her services as an expert retirement planner. Does this advertisement need to be pre-approved by a principal?

Yes, the ad will be defined as retail communication requiring pre-approval of a principal

Can a member firm make alterations to an article on securities before using it as an independently prepared reprint?

Yes, the member firm could alter the presentation format to make it consistent with regulatory standards or the member firm could correct the reported number of shares being offered if the original article stated the number incorrectly

A contingent deferred sales charge is best described as:

a back-end sales charge that decreases the longer the investor holds the shares

Mutual fund Class B shares assess:

a deferred sales load

Written recommendations prepared by a research department for dissemination to the public need prior approval of:

a principal of the firm

If a registered representative wishes to place an advertisement in a local newspaper offering her services as a mutual fund representative for XYZ Funds, the advertisement must be approved by:

a registered principal

FINRA members are allowed to speak about their funds if they use what sort of time frame?

a specific time frame

A registered representative tells his client, "Because this investment made a 5% return for the last 20 years, it should easily do so again next year." This constitutes:

a violation of the Conduct Rules

What is retail communication?

any written (including electronic) communication that is distributed or made available to more than 25 retail investors within any 30 calendar-day period

The rules on communications with the public permit a member firm to exclude mention of its name in any retail communication or correspondence that:

attempts to recruit registered representatives for the local branch office

What are the hours allowed for cold calling?

between the hours of 8:00 am and 9:00 pm in the customer's time zone

Does correspondence to 25 or fewer investors within any 30 calendar-day period have to be reviewed by the principal before or after?

both

Your firm is doing interviews of the top candidates from among those who responded to a recruiting advertisement. Advertising rules require that:

both the job opportunity and the industry itself be represented honestly

The NAV of a mutual fund Class A share is supposed to be higher or lower than POP?

can never be higher than POP and can never be so much lower than the POP that the difference exceeds 8.5% of the POP

Some open-end investment companies offer their investors combination privileges which permit an investor to:

combine the investments of one fund with another in the same fund family to reach a breakpoint.

Some mutual funds that are in a family of funds managed by the same company offer an exchange privilege. This privilege gives a shareholder the right to:

convert shares to a different mutual fund within the family of funds on a dollar-for-dollar basis

An investor in Class B shares with a 7 year contingent deferred sales charge liquidates shares four years after purchase. The CDSC is:

deducted from the lower of the original cost or the NAV when those shares are redeemed

Some open-end investment companies offer their investors a conversion privilege, which permits an investor to:

exchange shares of one mutual fund for those of another within the same fund family, at net asset value

The exchange privilege offered by open-end investment companies allows investors to:

exchange shares of one open-end fund for another in the same fund family at a net asset value basis

The Telephone Consumer Protection Act of 1991 does what?

exempts calls made to established customers and calls made at the invitation of prospective customers

ALFA Securities, a FINRA member firm, wants to buy shares in ATF Mutual Fund from the fund's sponsor at a discount. This arrangement is possible if ATF's sponsor:

is also a FINRA member and there is a sales agreement between ALFA and the sponsor

An investor purchases $10,000 of the Class B shares of the KAPCO Growth Fund. Two years later, the client redeems the shares. The redemption charge is a percent of the:

lesser of the NAV or purchase price

An investor purchased 200 shares of ACE Fund when the POP was $11.60 and the NAV was $10.60. ACE Fund's current POP is $12.50, and current NAV is $11.50. If the investor liquidates his 200 shares now, he will have a:

loss of $20

In past years, XYZ Securities has focused primarily on high-net-worth individuals acquired through word of mouth and has never advertised. Their target market has expanded, and they have decided to begin advertising to the public. Under the rules on communications with the public, filing of advertisements

may be done within 10 business days after first use

Your firm has prepared some institutional sales material on several of the securities it deals in and has provided it to three mutual funds. One of the fund managers calls your firm to ask for some extra copies of the material, because he would like to send it to some of his investor friends. This request:

may not be complied with if your firm wishes to continue to treat the material as institutional communications

Recommendations to a customer:

must reflect the facts disclosed by the customer regarding other holdings and financial situations

Is the SEC disclaimer required for public communication?

no

Fund to investor has what sales charge?

none

The statutory or full prospectus must be available where?

online

According to the Conduct Rules, a member firm may give certain selling concessions to:

other FINRA member firms

According to the Conduct Rules, a FINRA member firm may give certain selling concessions to who?

other member firms

A broker-dealer member firm of FINRA would like to conduct business under another name. The use of a DBA is:

permitted if the name is filed with both FINRA and the SEC

Is an internal memo a public or private communication?

private

Filing with FINRA is required for mutual fund-related:

retail communication

What must a fund offer in order to charge 8.5%?

rights of accumulation, breakpoints, and automatic reinvestment at NAV

The conversion and exchange privilege offered by many mutual fund families permits the exchange of shares in one fund family for:

shares of another in that family at net asset value

Performance charts of a particular mutual fund must be based on an assumption that the investor paid:

the highest sales charge

The communication must disclose what about a fund?

the maximum amount of load or fee

A generic ad for an investment company placed by a broker-dealer would contain:

the name of the broker-dealer placing the ad, but not the name of the investment company

Investment recommendations must be fully explained, with special emphasis placed on:

the risks inherent in the investment

A breakpoint sale is:

the sale of investment company shares in dollar amounts just below the point at which the sales charge is reduced on quantity transactions to incur the higher sales charge

A registered representative is hosting a seminar to solicit sales of a specific mutual fund. He has highlighted features of the fund in the prospectuses he will hand out and has prepared summary sheets of the prospectus for distribution. Regarding this situation, what is wrong with this?

they may not highlight a prospectus and they may not distribute summary sheets of the prospectus

In general, the Conduct Rules permit selling concessions and discounts:

to FINRA member firms engaged in the investment banking or securities business

Mutual fund promotional material may predict a rise in share prices:

under no circumstances

Breakpoints must be offered:

uniformly

A broker-dealer with a sales agreement with a mutual fund must return all concessions to the underwriter if a customer redeems his shares:

within seven business days of the initial purchase

Does a form letter sent to 10 prospective retail customers every week need princial approval?

yes because 10 letters per week (for a total of 40 in 28 days) exceeds 25 in a 30-day period