series 66 Saturday test 2
Which of the following must register as a broker-dealer under the USA?
A broker-dealer with a place of business in the state that effects transactions exclusively with broker-dealers registered in other states.
All of the following statements concerning IRA contributions are true EXCEPT:
Contributions can be made to an IRA only until the first tax filing deadline (April 15), regardless of having filed an extension.
Which ratio would be looked at to determine the liquidity of a corporation?
Current. A company's current ratio is their current assets divided by their current liabilities. If their current ratio is strong, they have a highly liquid position.
To comply with Section 404(c) of ERISA,
D) the plan must offer at least 3 different investment choices, including a stable value option, an income option, and a conservative growth option
A bond analyst who determines the value of a debt security by adding the present value of the future coupons to the present value of the maturity value is using which of the following valuation methods?
Discounted cash flow This type of question sometimes appears on the exam. There is a second answer that could be correct, but is not scored as such. In this example, a case could be made for present value, but the better choice is discounted cash flow; it is more correct.
A securities analyst does not believe that markets are highly efficient. This analyst most likely follows which of the following investing strategies? Active Passive Strategic Tactical
I and IV Those who believe that stock markets are not efficient believe that they can "beat the market." That is the style followed by active or tactical managers. Those who believe in efficient markets would be passive or strategic investors.
A Form K-1 would be used for tax reporting to the owners by which of the following business entities? Sole proprietorship S corporation C corporation LLC
II and IV Legal entities that pass through income or loss use the Form K-1 to indicate the amount of that income or loss attributable to the individual shareholder/member/partner. Sole proprietorships generally complete Schedule C of the individual Form 1040, and C corporations are taxed themselves by filing a Form 1120 (S corporations file a Form 1120s along with a K-1 for each shareholder).
Which of the following statements regarding advisers who maintain custody over client accounts
Which of the following statements regarding advisers who maintain custody over client accounts is NOT true?
A working group convened by NASAA has developed a model fee disclosure schedule to help investors better understand the costs involved in doing business with their broker-dealer. The template has broker-dealers disclose all of the following fees EXCEPT
advisory fees There are 3 primary expenses involved with brokerage accounts that are not included in the fee disclosure template. Those are: commissions; markups and markdowns; and advisory fees for those firms that are also registered as investment advisers.
All of the following statements regarding scheduled premium variable life insurance are correct EXCEPT:
better than anticipated results in the separate account could lead to a reduction in annual premium. Scheduled (fixed) premium variable life premiums are fixed. It is universal life that has flexible premiums.
Under the Uniform Securities Act, an investment advisory contract must contain (in writing) all of the following provisions EXCEPT:
on the departure or death of a majority shareholder of an investment advisory corporation, the advisory agreement must be renewed to prevent an unlawful assignment of the account.
The purpose of the Investment Advisers Act of 1940 is to provide:
standards at the federal level for the regulation of investment advisers.
An Administrator may deny or revoke a security's exemption:
without a hearing if the issuer is given an opportunity for a hearing after the revocation.
Under the Investment Company Act of 1940, which of the following are considered affiliated persons of an investment company?
Affiliated persons include investment company directors, officers, most employees, or owners of 5% or more of the voting stock and/or any persons controlling or controlled by such persons. Although the custodian bank could be considered an affiliated person, clerical personnel employed by that custodian would not be.
Alvin Hill is an IAR with Kapco Advisers, Inc., a covered investment adviser with offices in New York City, Chicago, and Los Angeles. Alvin is registered in the states of New York, New Jersey, and Connecticut. Alvin has clients who move to San Diego and officially become California residents. Once settled there, they decide to open an advisory account for each of their children. What are Alvin's options?
Continue to do business as usual with the existing clients as well as open the children's account because Alvin does not have a place of business in California. Under Section 203A of the Investment Advisers Act of 1940, an investment adviser representative of a covered investment adviser is required to register only in those states in which that IAR maintains a place of business. Even though the firm has a California office, nothing here indicates that Alvin plans to establish one there. If Alvin had been associated with a state-registered IA, then, once the clients had been residents of California for 30 days, Alvin would have to begin counting them towards the 5 in any 12 months de minimis limit which, once exceeded, would require registration as an IAR in CA.
The purpose of SEC Release IA-1092 is to: unify the requirements of the Uniform Securities Act and the Investment Advisers Act of 1940. clarify the Securities Exchange Act of 1934. clarify the activities that would subject a person to regulation under the Investment Advisers Act of 1940.
III only. The purpose of SEC Release IA-1092 is to clarify the definition of investment adviser in the Investment Advisers Act of 1940 and to clarify the types of activities that are subject to regulation.
What is the appropriate procedure to follow when a customer fails to sign the form provided by the investment adviser stating that he has received a copy of the investment adviser's brochure?
Proceed with the account, but make a supervisory person aware of this. Although it is true that there is no legal requirement for a client to sign acknowledging receipt of the brochure, if it is the adviser's practice, the account may proceed, but only with notice to the appropriate supervisory person.
arithmetic mean
The arithmetic mean is the simple average of all of the numbers
Which of the following statements regarding civil liabilities under the Uniform Securities Act are TRUE? In a fraudulent securities transaction, the customer is entitled to recover the amount of the transaction with interest at a rate set by the Administrator, less any income earned on the security plus attorney's fees. Causes of action under the USA survive the death of either plaintiff or defendant. No suit may be initiated more than three years after the transaction or two years after the discovery of the violation, whichever occurs first. Rights and remedies in this act are in lieu of any others that exist under other laws.
The rights and remedies under the Uniform Securities Act exist in addition to any other rights and remedies that exist under other laws. Civil liabilities of the Uniform Securities Act allow for the recovery of the amount of the transaction with interest at a rate set by the Administrator, less any income earned on the security plus attorney's fees. Every cause of action under this provision survives the death of either plaintiff or defendant. No suit may be initiated more than three years after the transaction or two years after the discovery of the violation, whichever occurs first.
An individual representing an issuer in the sale of that issuer's security is not defined as an agent if the security is
issued by and representing an interest in or a debt of, or guaranteed by, any bank organized under the laws of the United States, or any bank, savings institution, or trust company organized and supervised under the laws of any state; issued or guaranteed by the United States, any state, any political subdivision of a state, or any agency of the foregoing; any security issued or guaranteed by Canada, any Canadian province, any political subdivision of any such province, any agency of the foregoing, or any other foreign government with which the United States currently maintains diplomatic relations, if the security is recognized as a valid obligation by the issuer or guarantor; a promissory note, draft, bill of exchange or bankers' acceptance that evidences an obligation to pay cash within 9 months after the date of issuance, is issued in denominations of at least $50,000, and receives a rating in one of the 3 highest rating categories from a nationally recognized statistical rating organization; or any investment contract issued in connection with an employees' stock purchase, savings, pension, profit-sharing, or similar benefit plan if the Administrator is notified in writing thirty days before the inception of the plan It is not just any exempt security that qualifies the individual for the exemption - only the five listed above. A confusing point is that the individual is not an agent when the sales are made in any exemption transaction with no exceptions. Reference: 2.3.2.2 in the License Exam Manual
Strategic asset allocation involves:
long-term client objectives. Strategic asset allocation involves the deployment of customer investment capital to meet long-term objectives, while tactical asset allocation is an active style using market timing.
Under the Uniform Securities Act, an investment adviser would be permitted to maintain custody of customer cash and/or securities if:
notification was given to the Administrator and custody was not prohibited by that state's rules. In order to maintain custody, notification must be given to the Administrator and, obviously, the state must not have a rule forbidding custody. Does the customer have to approve of the custody arrangement? Yes, but that is done AT the time of entering into the contract, not before. What about bonding or net worth? Under the USA, in order to maintain custody, an IA must have net worth of no less than $35,000, or provide a suitable surety bond.
During a trip to visit grandchildren, one of your clients suffers a massive heart attack and dies, intestate. Directions for handling the account could only come from the:
person appointed as administrator of the estate. Dying intestate means that there is no valid will. In that case, the state will appoint someone as administrator of the estate with the responsibility of handling all of the affairs of the deceased. Only when there is a will is there an executor and a durable power of attorney is cancelled upon the death of either party to the power. Only if the account were registered as JTWROS with the spouse (or if the spouse were named the executor) would the spouse have any authority.
From the date of discovery, how many years is the statute of limitations in place for civil offenses covered under the USA?
two years.
Under ERISA, a fund manager wishing to write uncovered calls may do so:
under no circumstances. ERISA prohibits retirement plans from making investments that are excessively speculative such as uncovered call writing, which possesses unlimited risk.
