Series 65
Financial statements must be filed when an investment adviser's (IA's) renews its registration. How long after the IA's fiscal year-end must financial statements be filed with the SEC? Five days 10 days 30 days 90 days
90 days
While examining a client's investment profile, an IAR determines that the client is able to tolerate a high degree of risk and does not anticipate the need to access invested funds for the next 25 years. What is the best investment allocation for the client's portfolio? 40% debt, 50% equities, and 10% money-market instruments 95% equities and 5% money-market instruments 25% bonds, 25% equities, 25% money-market instruments, and 25% real estate 65% bonds and 35% equities
95% equities and 5% money-market instruments
Currency risk would be the LEAST of a concern for which of the following investors? A 28-year-old saving for retirement The parents of a thirteen-year-old saving for college expenses A 55-year-old couple seeking to invest their annual IRA contributions A 28-year-old couple saving to buy a house in two years
A 28-year-old saving for retirement
An investment adviser (IA) only has one client. The IA is NOT provided an exemption from the registration requirements of the Investment Advisers Act of 1940 based on which of the following clients? A Section 3(c)(1) private fund that has $110 million of assets under management An insurance company A venture capital fund A Section 3(c)(7) private fund that has $200 million of assets under management
A Section 3(c)(7) private fund that has $200 million of assets under management
Schedule 13D is required to be filed with the SEC by any person, or those acting together, who acquire more than 5% of the voting stock of a public corporation. Which of the following statements is NOT TRUE regarding Schedule 13D? It must be filed within 10 days of acquisition of the stock It must be filed with the SEC, the issuer, and the appropriate exchange A copy must be given to the current shareholders It must disclose the purchaser's purpose for acquiring the stock
A copy must be given to the current shareholders
How must a REIT create its portfolio? 100% of the total assets must be invested in real estate and properties. At least 90% of the total assets must be invested in real estate or commercial mortgages, while the remainder can be invested in cash equivalents and government securities. At least 75% of the total assets must be invested in real estate assets, cash and equivalents, and government securities. At least 85% of the investments must be invested in real estate stock, residential mortgages, and commercial mortgages, while the remainder can be invested at the discretion of the manager.
At least 75% of the total assets must be invested in real estate assets, cash and equivalents, and government securities.
Which of the following is a benefit of owning a master limited partnership (MLP)? Double taxation Exempt from registration under the Securities Act of 1933 Exchange-listing Availability for all industries
Exchange-listing
All of the following would indicate inflationary pressure on the economy, EXCEPT: Falling weekly jobless claims Rising retail sales figures Falling industrial production A rising consumer price index
Falling industrial production
According to the ABC test, an individual must earn compensation for providing advice in order to be considered an investment adviser. Which of the following statements is NOT TRUE regarding the meaning of compensation? Fees are considered compensation Nominal commissions are considered compensation Fees must be received directly from the client who makes use of the advice The fee for advice may be either listed separately or included as part of a larger bundled charge
Fees must be received directly from the client who makes use of the advice
Investment advisers (IAs) may accept discretionary orders: For up to 10 days before receiving signed power of attorney Only after they have received signed power of attorney Only if they're affiliated with a broker-dealer Only if assets are being held at the investment adviser
For up to 10 days before receiving signed power of attorney
A broker-dealer must keep all the following records, EXCEPT: Original copies of all incoming client correspondence Form ADV for any investment adviser for which the broker-dealer provides safekeeping services Signed copies of all discretionary account agreements executed by clients Copies of all order tickets
Form ADV for any investment adviser for which the broker-dealer provides safekeeping services
A stock trades ex-dividend on Monday, June 20. What's the last day that an investor can purchase the stock and be entitled to the dividend? Monday, June 13 Thursday, June 16 Friday, June 17 Monday, June 20
Friday, June 17
What type of investment analysis uses financial data that's specific to one issuer to make investment decisions? Discounted cash flows Fundamental analysis Technical analysis Odd-lot theory
Fundamental analysis
What securities are most likely used to create asset-backed securities? Jumbo mortgages Qualified mortgages Stocks Home equity loans
Home equity loans
Sales of viatical investments can be made only to suitable investors. Which TWO of the following investors are considered suitable? I) An accredited investor under Regulation D II) Anyone with a minimum net worth of $150,000 and gross income last year of at least $100,000, or a minimum net worth of $250,000 III) Anyone who is in the highest marginal tax bracket and is in need of liquidity IV) Anyone who has been specifically approved by the state Administrator
I and II
All of the following are characteristics of futures contracts, EXCEPT: Most of the contract's terms are set by the buyer and the seller The amount of the commodity being traded is standardized Prices are negotiated between the buyer and the seller The buyer of a futures contract cannot be forced to take delivery
I and IV
Which TWO of the following choices are differences between exchange-traded funds (ETFs) and exchange-traded notes (ETNs)? ETNs carry credit risk that is tied to the issuer that backs the note and ETFs do not have issuer credit risk ETFs may be sold short and ETNs may not ETF returns are based on the performance of an index and ETNs pay a fixed coupon rate ETNs have a maturity date and ETFs do not
I and IV
Which TWO of the following statements regarding investment advisory contracts are TRUE? Under the Uniform Securities Act, IA contract must be written Under the Uniform Securities Act, IA contracts are not required to be written Under the Investment Advisers Act of 1940, IA contracts must be written Under the Investment Advisers Act of 1940, IA contracts are not required to be written
I and IV
A broker-dealer is required to have in place a business continuity plan that addresses all the following issues, EXCEPT: I) How the firm will communicate with regulators II) Mission-critical systems III) That the firm may not deviate from the plan IV) That the plan must be reviewed by the firm annually
III only
Which of the following choices is NOT considered to be a leading economic indicator? Plant and equipment orders Industrial production Building permits Index of consumer expectations
Industrial production
Which of the following statements is TRUE about marketing rules for investment advisers? An investment adviser representative's business card can use the abbreviation "IAR." A registered investment adviser's website may refer to itself as an "RIA." Registered investment advisers may disclose that they have been approved after their registration has been granted by the relevant state Administrator(s). Investment adviser representatives may refer to themselves as investment adviser representatives in their profile on a social media site.
Investment adviser representatives may refer to themselves as investment adviser representatives in their profile on a social media site.
Which of the following statements is TRUE regarding a client's occupation as it relates to her financial status and the suitability of recommendations? Its importance relates solely to the amount of income it produces. It can influence the liquidity needs of the client's portfolio. It is generally irrelevant when evaluating the client's financial needs. It is only relevant if the client works in the securities industry.
It can influence the liquidity needs of the client's portfolio.
The Administrator in State A is investigating potentially fraudulent activities by a broker-dealer that's registered in every state. The Administrator in State A wants to inspect records of the broker-dealer in State B. Which of the following statements regarding the inspection by the Administrator of State A is TRUE? It may issue a subpoena, but only for records of clients who reside in State A. It must coordinate its investigation with the Administrator of State B. It may issue a subpoena, but only for records of transactions that are made by agents who are registered in State A. It may independently subpoena all records
It may independently subpoena all records
The major advantage of an S Corporation versus a C Corporation is that an S Corporation: Provides its owners with limited liability Has greater access to the capital markets Is exempt from state corporate income taxes May elect to be treated like partnerships for federal tax purposes
May elect to be treated like partnerships for federal tax purposes
An IA may charge a client an investment advisory fee for rendering investment advice while receiving compensation for effecting securities transactions related to such advice: Under no circumstances But may only retain the greater amount of the two Only if disclosed to the client Only if the IA is also an agent of a broker-dealer
Only if disclosed to the client
An investment adviser is registered and located State A. One of the IAR's has three non-institutional clients and one institutional client in State B. A different IAR has four non-institutional clients in State B. If the investment adviser does NOT have an office in State B, who must register in that state? Only the IARs The IARs and the investment adviser Only the investment adviser Neither the IARs nor the investment adviser
Only the investment adviser
Under the Uniform Securities Act, which of the following persons automatically becomes registered as an investment adviser representative when the investment adviser's registration becomes effective? Only individuals who have been investment adviser representatives in another state All officers, directors, and partners of the investment adviser Only those officers, directors, and partners with management responsibilities Any person who performs clerical service for the investment adviser
Only those officers, directors, and partners with management responsibilities
A U.S. manufacturer imports steel from Japan. The company manufactures the steel into parts and exports them for sale into Japan. The yen has recently devalued. All of the following items will decrease, EXCEPT: Revenue Operating expenses Operating profit margin Cost of goods sold
Operating expenses
The disadvantages of limited partnerships include: Inflation risk Potential assessments Double taxation of distributions Limited liability
Potential assessments
When must the Administrator be notified if an agent's employment is terminated by his broker-dealer? 10 days prior to the termination Within 10 days of the termination Within 60 days of the termination Promptly
Promptly
A pension fund manager wants to protect the fund's diversified stock portfolio against a market downturn. To best meet this objective, she should purchase: Call Options on the stocks in the portfolio Covered puts on the stocks in the portfolio Calls on a comparable index Puts on a comparable index
Puts on a comparable index
Which of the following is the BEST explanation of the difference between progressive and regressive taxes? Progressive taxes assess higher rates on lower income individuals. Regressive taxes assess higher marginal rates on lower income individuals. Progressive taxes assess the same tax rate for all taxpayers. Regressive taxes will result in lower income individuals paying proportionately more in taxes than higher income individuals.
Regressive taxes will result in lower income individuals paying proportionately more in taxes than higher income individuals.
Mary had two children, Donald and Sarah, who each had three children of their own. Donald and his spouse died in an accident. Mary's will calls for a per stirpes distribution. If Mary predeceases the remaining family members, the result would be: Donald's three children receive 75% of the estate, while Sarah receives 25% of the estate. Donald's three children receive 50% of the estate, while Sarah and her three children split the other 50% of the estate. Sarah receives 50% of the estate, while Donald's children split the other 50% of the estate. Sarah's children split 25% of the estate, while Donald's three children receive 75% of the estate.
Sarah receives 50% of the estate, while Donald's children split the other 50% of the estate.
The third market is concerned with: OTC equity securities trading on an exchange Listed securities trading on an exchange Securities listed on an exchange, but traded in the OTC market Securities listed on an exchange that are traded directly between institutional investors
Securities listed on an exchange, but traded in the OTC market
The third market is concerned with: OTC equity securities trading on an exchange Securities listed on an exchange, but traded in the OTC market Listed securities trading on an exchange Securities listed on an exchange that are traded directly between institutional investors
Securities listed on an exchange, but traded in the OTC market
Under the Uniform Securities Act, the securities registration documentation for which of the following offerings must be filed with the Administrator? Securities that are sold under the provisions of Regulation A of the Securities Act of 1933 Bonds issued by a municipality A Canadian bank that's listed on the Toronto Stock Exchange Securities issued by a bank that's organized under the laws of the United States
Securities that are sold under the provisions of Regulation A of the Securities Act of 1933 (Although Regulation A securities are exempt from registration with the SEC, there's no exemption for Regulation A securities under the Uniform Securities Act. As a result, securities that are sold under Regulation A are required to be registered at the state level with the Administrator(s).)
Broker-Dealer W is participating as an underwriter in the distribution of municipal securities issued by the city of Albuquerque, New Mexico. If the offering is oversubscribed, which of the following business practices would be considered unethical by Broker-Dealer W? Selling the securities to nonresidents of New Mexico Selling the securities to retail investors who were residents of New Mexico Selling part of their allocation to employees of the broker-dealer Selling part of their allocation to institutional investors
Selling part of their allocation to employees of the broker-dealer
Which of the following investments is acceptable in an IRA? Crude oil futures Landscape art Shares of a REIT Life insurance
Shares of a REIT
Under which of the following circumstances will an individual be required to register with the Administrator as an investment adviser representative? She solicits brokerage services She supervises the accounting department of a registered investment adviser She holds herself out as an investment adviser representative She serves on a committee that makes investment decisions for an investment adviser's managed accounts
She serves on a committee that makes investment decisions for an investment adviser's managed accounts
ABC Corporation has 10,000,000 shares outstanding and they're currently selling for $50 per share. ABC Corporation is an example of which type of company? Cyclical Defensive Small capitalization Large capitalization
Small capitalization
What type of order may a customer use to protect profits or limit losses in current positions? Price/time order Stop order Market order Limit order
Stop order
A technical analyst will consider which of the following Supply and demand figures P/E ratio Risks Beta
Supply and demand figures
All of the following are types of market efficiency under the Efficient Market Hypothesis, EXCEPT: Strong Weak Semi-strong Systematic
Systematic
The Administrator of State A believes that an agent who's registered in State B is operating in State A without being registered. State A's Administrator wants to begin investigating the agent by requesting records from State B. Which of the following statements is TRUE regarding State A's investigative authority? The Administrator of State A must notify the Administrator in State B that it's conducting an investigation. Both Administrators must notify the SEC of the potential rule violation. The Administrator of State A may begin its investigation without notifying the Administrator of State B. The Administrator of State A must coordinate its investigation with the Administrator of State B.
The Administrator of State A may begin its investigation without notifying the Administrator of State B.
A client asks her IAR to develop an updated comprehensive financial plan for her. After creating the plan, the IAR realizes that the client is likely to encounter serious tax consequences over the next several years as a result of changes in the plan. Despite this, the IAR is confident that the financial plan he developed is the best plan for the client. What should the IAR do? The IAR shouldn't mention the possible future tax consequences and should deliver the updated financial plan to the client. Despite the fact that the IAR believes the financial plan is the best for the client, he should rework it due to the tax consequences. The IAR should suggest that the client seek the assistance of a tax accountant or refer her to one. Since the IAR cannot provide the best financial plan that eliminates serious future tax consequences, the IAR should transfer the client's account to another IAR.
The IAR should suggest that the client seek the assistance of a tax accountant or refer her to one.
While meeting with a client, an investment adviser representative (IAR) is asked if she is registered. The client also questions the IAR as to whether being registered indicates that she is qualified to be an IAR. According to the Uniform Securities Act, how should the IAR respond? The IAR should tell the client that only qualified representatives may use the IAR designation The IAR should tell the client that if she was unqualified the state would have revoked her registration The IAR should tell the client that she will always act in an ethical and honest manner because she is an IAR The IAR should tell her client that being registered does not equate to the Administrator considering her to be capable or qualified to act as an IAR
The IAR should tell her client that being registered does not equate to the Administrator considering her to be capable or qualified to act as an IAR
Registration by coordination is used in conjunction with which of the following Acts? The Securities Act of 1933 The Securities Exchange Act of 1934 The Investment Company Act of 1940 The Investment Advisers Act of 1940
The Securities Act of 1933
Under the Investment Advisers Act of 1940, if an individual wants to create her own investment advisory firm, with which authority would she need to file the application? The Administrator The North American Securities Administrators Association (NASAA) The Financial Industry Regulatory Authority (FINRA) The Securities and Exchange Commission (SEC)
The Securities and Exchange Commission (SEC)
An investment adviser contracts with a person who is not affiliated with the firm. In fact, the contractor is not registered with any state Administrator or with the SEC. Under the Investment Advisers Act of 1940, if the IA intends to give the contractor a finder's fee for any investment advisory client that's secured through her service, which of the following statements is TRUE? The investment adviser is prohibited from paying the contractor. The investment adviser doesn't need to be registered. The contractor must register with the SEC as a solicitor. The contractor doesn't need to register with the SEC as a solicitor
The contractor doesn't need to register with the SEC as a solicitor
A client of an investment adviser representative has just died. If the client did not have a will, from whom may the investment adviser representative accept instructions? The intestate Administrator The deceased client's adult child Any person with a legally executed power of attorney The deceased client's spouse
The intestate Administrator
An investment adviser's (IA's) only client is a 3(c)(1) fund that has $110 million in assets under management (AUM). Which of the following statements regarding the registration requirements of the IA is TRUE?' The investment adviser is federally covered and must register with the SEC by filing Form ADV Parts 1 and 2 with the IARD. The investment adviser is an exempt reporting adviser (ERA) and is not required to register with the SEC, but must notice file with the state Administrator(s) and pay a fee. The investment adviser is regulated under the Uniform Securities Act and must register with the state Administrator(s) by filing Form ADV Parts 1 and 2 with the IARD. The investment adviser is not required to register with either the state Administrator(s) or the SEC.
The investment adviser is an exempt reporting adviser (ERA) and is not required to register with the SEC, but must notice file with the state Administrator(s) and pay a fee.
What information is not included on the registration application for a broker-dealer? Whether the broker-dealer is a partnership or corporation The types of businesses in which the broker-dealer intends to engage The names and addresses of the agents the broker-dealer intends to register The broker-dealer's current financial condition
The names and addresses of the agents the broker-dealer intends to register
A broker-dealer has filed an application to withdraw its registration. Which of the following statements is TRUE? The withdrawal will become effective within 60 days after the application is received by the Administrator The withdrawal will become effective when the Administrator determines whether there is an action for revocation of the firm's license pending at the time the application was filed By filing an application to withdraw, the firm agrees to settle all charges currently pending without admitting or denying them The Administrator has two years after the date the firm's registration is withdrawn to initiate a proceeding for revocation of its license
The withdrawal will become effective when the Administrator determines whether there is an action for revocation of the firm's license pending at the time the application was filed
If a company's total assets remain the same but stockholders' equity decreases, which of the following statements is TRUE? Total liabilities increase Accrued expenses decrease Retained earnings increase Capital in excess of par increases
Total liabilities increase
Which of the following choices would NOT meet the definition of an exempt transaction? A transaction by a trustee involved in a bankruptcy An unsolicited nonissuer transaction with a retail investor Transactions between an issuer and retail investors A transaction executed by a bona fide pledgee
Transactions between an issuer and retail investors
Which of the following is NOT an option exercise style? American Capped European Uncovered
Uncovered
A person purchasing securities in a private placement would receive; Control stock Registered stock Unregistered stock An exempt security
Unregistered stock
An investment adviser representative has been given a client's username and password in order to access her brokerage account. The client wants the IAR to have the ability to execute trades and withdraw cash to pay the client's bills. Does this constitute discretion? No, since the account is held by a brokerage firm. No, since the brokerage firm must hold client assets with a qualified custodian. Yes, IARs always have custody and discretion of their clients' cash and securities. Yes, since the IAR is able to withdraw funds and execute trades
Yes, since the IAR is able to withdraw funds and execute trades
Your client has an annual income exceeding $250,000. He tells you that he wishes to retire in 18 years with a lump sum of at least $5,000,000. You tell him he can invest in zero-coupon municipal bonds that have a yield of 4%. If the client buys 5,000 bonds now, how much will he pay for each bond to achieve a yield of 4%? $500 $250 $600 $125
$500 (The rule of 72 is a shorthand method of determining how many years it will take an investor's money to double given a fixed rate of interest. If you divide 72 by the rate of interest, this approximates the number of years it will take for the money to double. At 4%, the money would double approximately every 18 years. This means the investor would need to invest $2,500,000 to have $5,000,000 in 18 years. $5 million dollars of bonds is equal to 5,000 bonds at a par value of $1,000. $2,500,000 divided by 5,000 equals $500)
Provided a broker-dealer has written procedures allowing for an agent to borrow or lend money to a customer, the agent may do so in all of the following situations, EXCEPT: A customer is a member of the agent's immediate family A customer is registered with a different broker-dealer than the agent A customer is a financial institution engaged in the business of making loans A customer has a personal relationship with the agent that exists outside their brokerage relationship
A customer is registered with a different broker-dealer than the agent
A corporation has the following financial information. $1 million in cash$2 million in accounts receivable$5 million of inventory$10 million of equipment$3 million in short-term debt$50 million in long-term debt$2 million accounts payable What is the corporation's current ratio? 1.6 2.0 2.6 3.6
1.6
An agent is soliciting investors for a private placement. Under the Uniform Securities Act, this is an exempt transaction as long as the agent doesn't offer the securities to more than: Five retail investors during a 12-month period 10 retail investors during a 12-month period 10 non-accredited investors during a 12-month period 35 non-accredited investors during a 12-month period
10 retail investors during a 12-month period
An investor is in the 20% marginal tax bracket and has a yield of 10% on a portfolio. If the CPI is 5%, what's the investor's approximate after-tax inflation-adjusted return?
3%
An investor purchased $50,000 worth of a 6% bond that was issued by a Brazilian company. If the bond is held to maturity, what will the investor receive at the maturity date? 50,000 U.S. dollars 53,000 U.S. dollars 51,500 Brazilian reals 50,000 Brazilian reals
51,500 Brazilian reals
A client buys a bond that pays $35.00 in interest every six months and the bond is selling in the market for $900. What's the bond's coupon rate? 7.7% 7.0% 3.5% 3.3%
7.0%
A bond pays a 7% coupon. Later, a 9% coupon bond is issued. This bond is issued at: A premium to the 7% bond A discount to the 7% bond Par with the 7% bond A flat price
A premium to the 7% bond
According to the Uniform Securities Act, investment advisers must maintain books and records that include which of the following? A roster of any person who attended a seminar that was conducted by the adviser All copies of stock certificates that are owned by clients All originals of stock certificates that are owned by clients All originals and copies of advertisements and sales literature that are used by the adviser
A roster of any person who attended a seminar that was conducted by the adviser (not D bc it is only for 2 or more people)
Under the Uniform Securities Act, which individual is considered to be an agent? A secretary who accepts customers' securities orders A principal of a broker-dealer A person who solely performs clerical functions A silent partner of a broker-dealer
A secretary who accepts customers' securities orders
Which of the following will a syndicator of a blind pool real estate investment trust include in the investment policy statement? The estimated timing of the real estate purchases The estimated location of the real estate purchases A disclosure that investment losses are guaranteed by SIPC A statement which breaks down the contributions made by limited partners
A statement which breaks down the contributions made by limited partners
Which of the following choices would meet the definition of an investment adviser under the Investment Advisers Act? A broker-dealer that holds itself out to the public as a provider of securities research An accountant who holds herself out to the public as a provider of financial planning advisory services A bank that holds itself out to the public as a provider of trust services A technical analyst who holds himself out to the public as a provider of foreign currency research
An accountant who holds herself out to the public as a provider of financial planning advisory services
If an adviser has custody of customer funds and securities, the submission of Form ADV-E must be performed by: The adviser within 120 days after the completion of an audit The adviser within 90 days after the completion of an audit An independent accountant within 120 days after the completion of an audit An independent accountant within 90 days after the completion of an audit
An independent accountant within 120 days after the completion of an audit
An investor has a portfolio comprised of large-cap, mid-cap, and international equities. To which of the following risk is the investor LEAST exposed? Market Regulatory Currency Money-rate
Money-rate
According to the SEC, soft dollars may be used to purchase all the following items, EXCEPT: Trading systems Clearance and settlement services Research reports Advertising and marketing
Advertising and marketing
An adviser would meet the business standard portion of the three-pronged test pursuant to SEC Release 1092 if: Advice was given on a regular periodic basis The adviser devoted at least 25% of its time to providing advice The advisory firm had at least three offices in a particular state The adviser received compensation based on the appreciation of the account
Advice was given on a regular periodic basis
Which of the following investment advisers is subject to registration with the SEC? An Internet investment adviser An adviser that has retail clients in fewer than 15 states A hedge fund adviser that manages $100 million in assets An adviser that expects to be eligible for SEC registration within 120 days of its second anniversary
An Internet investment adviser
Under the USA, which of the following choices is considered an offer of securities? An investor purchased bonds and received a warrant as a bonus An investor receives additional shares due to a stock split An investor receives a stock dividend An investor receives a tender offer
An investor purchased bonds and received a warrant as a bonusq
Which of the following statements is TRUE of using a UGMA or UTMA account to save for college tuition compared with using a 529 plan? Growth in the account is tax-deferred. Withdrawals from the account are tax-free if they're used for qualified education expenses. Contributions are exempt from the gift tax limit. Assets in the account are considered the property of the minor.
Assets in the account are considered the property of the minor.
A client of an investment adviser has an IRA. The client owns shares of funds that invest in large-cap U.S. equities, municipal bonds, small-cap stocks, and U.S. Treasury securities. Which investment likely requires immediate discussion with the client? Large-cap U.S. equities U.S. Treasury securities Small-cap stocks Municipal bonds
Municipal bonds
A corporation's balance sheet lists intangible assets of $40 million, equipment of $5 million, and real estate of $30 million. The company also has cash of $20 million, inventory of $5 million, and receivables of $5 million. The corporation's equity is $65 million and it has $15 million of long-term debt. The total short-term liabilities are $25 million which consists of accounts and interest payable. Based on this information, what can be assumed about the company's long-term liquidity? Since the company's quick ratio exceeds 1.0, it has long-term liquidity. Based on the company's working capital and current ratio, it has sufficient long-term liquidity. Since the corporation's current liabilities are larger than its current assets, it's illiquid. Based on the company's debt-to-capital and debt-to-equity ratios, it has sufficient long-term liquidity.
Based on the company's debt-to-capital and debt-to-equity ratios, it has sufficient long-term liquidity.
A firm will charge a commission for the service of: Buying and selling securities when acting as principal and assuming risk Buying and selling securities on a client's behalf Dispensing advice to its high net worth clients Acting in the role of the specialist
Buying and selling securities on a client's behalf
Cash dividends declared by a corporation: Must be approved for payment by the shareholders Must be approved for payment by the board of directors Are taxed as capital gains Are not taxed
Must be approved for payment by the board of directors (are taxed as ordinary income)
In order for an individual to be eligible for a Health Savings Account (HSA) the individual must be: Covered under a high deductible health plan (HDHP) Covered under a qualified retirement plan A joint owner with their spouse Enrolled in Medicare
Covered under a high deductible health plan (HDHP)
If an adviser wants to evaluate a publicly traded firm's ability to pay down its short-term debt, which ratio would be most appropriate? P/E Ratio Sharpe Ratio Debt Coverage Ratio Current Ratio
Current Ratio
A 6% coupon bond is selling at a basis of 6.20. If interest rates in the market decline below 6%, the bond's basis will: Increase Remain the same Increase or decrease, depending on its maturity Decline
Decline
If an IA or any advisory affiliate pleads nolo contendere to a felony that was committed in a foreign jurisdiction, this action is: Disclosed to clients on Form ADV Part 1 Disclosed to clients on Form ADV Part 2 Disclosed to clients on Form ADV-NR Not required to be disclosed since the action occurred in a foreign jurisdiction
Disclosed to clients on Form ADV Part 2
Which of the following statements is NOT TRUE regarding a SEP-IRA? An employer makes contributions to an employee's SEP-IRA. An employer is not required to make annual contributions. Employees are immediately vested for any contributions that are made to the account. Employees are permitted to make contributions to the account.
Employees are permitted to make contributions to the account.
Who is eligible to enroll in a private 457 plan? All employees of a publicly traded company Employees who are members of a union New York City sanitation workers A librarian who works in the Philadelphia Public Library
Employees who are members of a union (Participants in a private 457 plan may include members of a union, hospital workers, and employees of charitable organizations.)
Which of the following is a characteristic of a Money Purchase Plan? Employees must make mandatory contributions Employer contributions are discretionary Employees and the employer must make mandatory contributions Employers must make mandatory contributions
Employers must make mandatory contributions
Under what circumstances may the Administrator of State X issue a cease-and-desist order on behalf of the Administrator of State Y? Only when the agent involved is also registered in State X Only if the Administrator in State X receives a written request from the Administrator of State Y Never Anytime the Administrator of State X believes that the agent is about to violate the law in State X
Never
According to the Investment Advisers Act of 1940, access persons must submit their personal security holdings reports by: No later than 10 days after becoming an access person; then at least every 12 months thereafter No later than 30 days after becoming as access person; then at least monthly thereafter No later than 45 days after becoming an access person; then at least monthly thereafter Promptly upon becoming an access person; then at least monthly thereafter
No later than 10 days after becoming an access person; then at least every 12 months thereafter
According to the Investment Advisers Act of 1940, when must an access person submit a transaction report? No later than 10 days after the end of the calendar quarter in which the transaction was effected Promptly No later than 30 days after the end of each calendar quarter Within 90 days of the end of the adviser's fiscal year
No later than 30 days after the end of each calendar quarter
An individual opened a brokerage account and placed trades on his own. The transactions subsequently generated a 20% return for the individual, but also very large commissions. Is the broker-dealer in violation of industry rules? Yes, due to the very large commissions. Yes, this is a violation of the broker-dealer's fiduciary responsibility. Not if the customer has signed a wavier consenting to the larger commissions. No, because the broker-dealer is not soliciting the transactions.
No, because the broker-dealer is not soliciting the transactions.
An investment adviser (IA) is dually registered as a broker-dealer in State A. The IA is also registered in State B, but it's not registered as a broker-dealer there. If the investment adviser only has advisory clients in State B, is it required to register as a broker-dealer in State B? Yes, if the firm has a place of business in State B. No, since the firm does not have any brokerage clients in State B. No, because the firm is already registered as an IA in State B. Yes, since broker-dealers must register in every state.
No, since the firm does not have any brokerage clients in State B.
An investment advisory firm and an accounting firm have offices in the same building, but are otherwise unaffiliated. One of the investment adviser representatives pays a cash referral fee to a CPA in the other office for any clients she sends over to the adviser. All the following statements are TRUE, EXCEPT: The CPA must give the investment adviser's brochure to the clients that she refers to the adviser. The CPA must give a separate disclosure document to any clients that she refers to the adviser. The adviser must give each client that is acquired through the CPA another copy of the separate solicitor disclosure document at the time the client agrees to enter into an advisory relationship. The adviser must make a bona fide effort to ensure that the CPA is giving the clients whom she refers copies of the adviser's brochure and the separate solicitor disclosure statement.
The adviser must give each client that is acquired through the CPA another copy of the separate solicitor disclosure document at the time the client agrees to enter into an advisory relationship.
Which of the following persons would be required to register as an investment adviser under the Uniform Securities Act? A federal covered adviser An accountant who provides investment advice that is incidental to her tax practice A bank's trust department that provides fee-based investment advice The publisher of a financial periodical that responds to each subscriber with personalized investment advice
The publisher of a financial periodical that responds to each subscriber with personalized investment advice
Which of the following is a right that's provided to owners of preferred stock? The right to receive a dividend if the payment is approved by the board of directors The right to vote in corporate elections The ability to sell the preferred share at a predetermined price A guaranteed dividend payment
The right to receive a dividend if the payment is approved by the board of directors
All of the following are characteristics of a revocable trust, EXCEPT: The trust does NOT avoid probate During the grantor's lifetime, any income taxes are paid by the grantor Estate taxes are paid by the estate Assets are included in the grantor's estate
The trust does NOT avoid probate
What are theta and gamma used to measure? The volatility of the intrinsic value and time value of an option's premium. A stock's expected rate of return that compensates for the historical volatility of the stock's price relative to the market as a whole. risk-adjusted rate of return that measures how much additional return was earned for each unit of risk. The volatility of a stock's price relative to the market as a whole.
The volatility of the intrinsic value and time value of an option's premium.
If an adviser inadvertently receives client funds and/or securities, it can avoid the implication that it is maintaining custody of the assets by returning them to the sender within: Three business days of receiving them Three calendar days of receiving them Seven business days of receiving them Seven calendar days of receiving them
Three business days of receiving them
