Series 7

Who may not trade on the floor of the NYSE? An independent broker A designated market maker An institutional block trader A floor trader

An institutional block trader may forward orders to the NYSE trading floor from the brokerage firm's trading desk but is not physically located and trading on the floor of the NYSE. The designated market maker, an independent broker, and floor traders are permitted to trade on the NYSE floor.

An investor, age 52, with funds in a 401(k) plan, is leaving her employer and wants to transfer the funds to an IRA account at your firm. Which of the following statements is TRUE? There will be a 10% penalty There will be a 50% penalty There will be no penalty There will be no penalty but the amount transferred will be taxable

An investor may transfer funds from one retirement account to an IRA or other retirement account without incurring taxes or penalties. A transfer is a situation where a plan's assets move directly from one trustee to another. There is no limit to the number of these transactions. An investor who withdraws money from an IRA before reaching the age of 59 1/2 will pay a 10% tax penalty on the amount withdrawn, in addition to being liable for ordinary income taxes on the withdrawal. The amount of the early withdrawal will be added to the investor's taxable income for that year.

Before accepting a DVP order from a customer, a broker-dealer must: Notify FINRA Obtain the name of the customer's agent from the customer Receive approval for the trade from the contrabroker Notify the appropriate banking regulator

Before accepting a DVP (delivery versus payment) or RVP (receipt versus payment) order from a customer, a broker-dealer must receive the name of the customer's agent and the customer's account number. The order ticket must be marked DVP or RVP.

Rule 145

Defines reclassifications as sales; reclassifications, mergers/consolidations, transfers of assets. Not subject to 145: stock splits, change in par value, etc.

Rule 147

Exemption for securities sold within borders of one state, provided 80p of companies revenues from within state, 80p of companys assets, 80p of proceeds will be used within state, 100p of purchasers are within state. 147 stock may not be sold to non-residents until 9 months after last sale

Regulation D

Exempts registration for private placements by a corp if buyer is (a) sophisticated investor (b) has financial information normally included in prospectus, sometimes via private placement memo (c) securities not sold to more than 35 non-accredited investors NW 1MM, NI 200k. Restricted sale for generally 6 months.

At what age must IRA withdrawals begin? 70 1/2 65 1/2 60 1/2 59 1/2

IRA withdrawals may begin at any age, but a penalty may be assessed if withdrawals begin prior to age 59 1/2. Withdrawals in traditional IRAs must begin by age 70 1/2. There is no required minimum distribution (RMD) for Roth IRAs. (Note: If the question does not specifically use the term Roth, students must assume it covers the traditional IRA.)

If an investor wrote one OEX March 725 put option and the option was exercised when the index was 722.00, the writer is obligated to deliver: 100 shares of the OEX index $300 $72,200 $72,500

If a stock index option is exercised against the writer, the writer is obligated to deliver the cash difference between the exercise price and the index value as of the close of trading on that day if the option is in-the-money. The exercise price of the put option is 725 and the lower index value is 722.00. The writer is obligated to deliver the cash difference of $300

Which TWO of the following choices are found in a municipality's official statement? Project feasibility Amount of good faith deposit Financial statements and audits Expenses to be borne by the purchaser or issuer I and III I and IV II and III II and IV

The project feasibility and financial statements are found in a municipality's official statement. The amount of good faith deposit and expenses to be borne by the purchaser or issuer would be found in a notice of sale.

Which of the following transactions qualifies a customer as a pattern day trader?

A customer is considered a pattern day trader if 4 or more day trades are executed over any 5-business-day period. The minimum equity required for a pattern day trader is $25,000.

Which of the following transactions qualifies a customer as a pattern day trader? 3 day trades executed in one week 3 day trades executed in one day 4 day trades executed in one week 10 day trades executed in one month

A customer is considered a pattern day trader if 4 or more day trades are executed over any 5-business-day period. The minimum equity required for a pattern day trader is $25,000.

When opening a new customer account to trade options, which of the following documents is not needed? A new account agreement An options account agreement A hypothecation agreement The approval for options trading

A customer needs all of the items listed except a hypothecation agreement. This is needed to open a margin account and gives the brokerage firm the right to pledge customer securities to a bank as collateral for a loan.

When opening a new customer account to trade options, which of the following documents is not needed? A new account agreement An options account agreement A hypothecation agreement The approval for options trading

A customer needs all of the items listed except a hypothecation agreement. This is needed to open a margin account and gives the brokerage firm the right to pledge customer securities to a bank as collateral for a loan.

Rule 144A

Allows sales of restricted stock like 144, but to Qualified Inst. Buyers. Insurance companies, reg inv companies,SDCs, pension funds, RIAs, etc.

A variable annuity contract holder dies during the accumulation period. In this situation, which of the following statements is TRUE regarding the tax consequences?

When a variable annuity contract holder dies during the accumulation period, the proceeds in excess of cost are taxable to the beneficiary as ordinary income.

If an at-the-opening order is not executed: It will be put in the designated market maker?s book for later execution It will be cancelled It will be executed off the floor It is handled as a market order

An at-the-opening order is an order placed for execution at the opening price of the day. If it is not executed, it will be cancelled. Do not confuse this type of order with an opening transaction, which is a trade to establish or add to an option position.

The transfer of bonds from one party to another may be accomplished by an endorsement on the back of the bond certificate or through a: Letter of credit Legal opinion Bid form Bond power

A customer who sells a security is required to sign the certificate. The usual method of endorsing a stock (or bond) certificate is to sign on the back and then mail the certificate to the broker-dealer. In order to safeguard the certificate, the seller can send the certificate by registered mail. An alternate method is for the customer to send the certificate, unsigned, in one envelope and to send a signed bond (or stock) power in a separate envelope. In this way, if the certificate were to fall into unauthorized hands, it would have no value since it would not be negotiable.

A designated market maker (DMM) may not accept which of the following orders? Not-held order Market order Good-'til-cancelled (open) order Day order

A designated market maker (formerly known as a specialist) may accept all of the orders listed except a not-held order, which allows a floor broker to use discretion in executing an order. If the question asked which orders may be accepted and placed on his book, the answer would be open (GTC) and day orders only. A DMM may accept a market order but must execute it immediately and may not place it in his book.

A direct participation program in real estate does NOT have which of the following characteristics? Passive income The tax benefit of depreciation Cash dividends A tax rate on capital gains that is lower than ordinary income

A direct participation program in real estate, which is also known as a real estate limited partnership (RELP), would distribute either passive income or passive losses. Both depreciation of the buildings and a lower tax rate on capital gains if the property is sold after one year, are characteristics found in any real estate investment. A REIT, not a RELP, pays cash dividends that are taxable at the same rate as ordinary income.

A business that is traded on an exchange, owns properties in its portfolio, and makes mortgage loans to developers is an example of a(n): Closed-end investment company Exchange-traded note Hybrid REIT Direct participation program

A real estate investment trust (REIT) that owns properties (e.g., office buildings) and also makes loans to real estate developers is a hybrid REIT. These business structures are a combination of an equity REIT and a mortgage REIT.

Which of the following securities may NOT be purchased in a discretionary account without prior written approval by the customer? An exchange-traded note A variable-rate demand obligation A direct participation program A collateralized mortgage obligation

A registered representative may not purchase a direct participation program in a discretionary account without prior written approval by the customer.

Which of the following short positions violates SEC rules?

A tender offer takes place when an entity offers to buy a corporation's shares at a premium to the current market price. It is normally done for the purpose of acquiring control of the company. According to SEC rules, a customer may not tender short (borrowed) shares.

A registered representative receives an order from the president of XYZ Corporation to sell unregistered XYZ shares. The client purchased the shares in a private placement 90 days ago. This order: Will require the filing of Form 144 with the SEC May be executed without any restrictions Must be approved by a principal prior to execution Is a violation of Rule 144 if executed

According to Rule 144, an affiliated person (e.g., the president of a company) must hold unregistered (restricted) stock for at least six months before it may be sold. Since the president of XYZ Corporation owned the stock for only 90 days, the order to sell violates Rule 144, if executed.

Municipal bond unit investment trusts do NOT include which of the following characteristics? Investors can buy units in the fund, usually in multiples of $1,000 The certificates have coupons attached and are in bearer form Investors can redeem the units at any time through the fund's trustee The value of the unit will decline if interest rates rise

All of the characteristics listed are true, except that the certificates have coupons attached and are in bearer form. Some unit investment trusts are funds that buy bonds for a portfolio and usually hold the bonds until maturity. The life of these funds is usually limited to the life of the bonds in the portfolio. Units can be bought in multiples of $1,000. The units can be redeemed at any time. If the general level of interest rates change, so will the price of the units. The funds are issued in book-entry form and registered form.

An investor would NOT purchase an oil and gas limited partnership for which of the following reasons? The oil depletion allowance Intangible drilling costs Tax incentives Recapture provisions

All of the choices would be reasons for investing in an oil and gas limited partnership except recapture. Recapture is the amount added back to income for tax purposes that was allowed as a deduction in a prior period.

On Tuesday, the S&P 500 Index closed at 1,600. At 11:30 the next morning, the S&P 500 Index is at 1,488. All NMS stocks will: Stop trading for 15 minutes Stop trading for 30 minutes Stop trading for the remainder of the day Continue to trade

If the S&P 500 Index falls by 7% from the previous trading day's closing price, it is defined as a Level 1 Market Decline and triggers a 15-minute trading halt. In this question, the drop from the closing price of 1,600 to 1,488 the next day (112 points) is a 7% decline.

Manny Ortiz, a registered representative with Red Sock Financial, has recommended the purchase of a variable annuity to Derek Pettitte, one of his clients. After agreeing to purchase the contract, which of the following actions must be taken?

If the purchase of a variable annuity is made after a recommendation by a registered representative, several steps must be taken before the application is submitted to the issuing insurance company. In this example, Manny must document and sign the recommendation before forwarding the application to the Office of Supervisory Jurisdiction (OSJ) of the member firm. The principal at the OSJ reviews the application to determine suitability. The principal must approve or reject the application within seven business days of receipt and must document and sign the approval or rejection.

Which TWO of the following statements are TRUE about a divided account?

In a divided account (Western account), the member is responsible for its own participation in the syndicate. If any bonds remain unsold, it is the responsibility of that member. In an undivided or Eastern account, any unsold bonds are the responsibility of the entire syndicate. Each member would then be liable for the same proportion as his original participation.

Which of the following statements is TRUE concerning the suitability of a Section 1035 exchange? Exchanges made within 36 months of a previous exchange are generally considered inappropriate The exchange is suitable if the new contract provides a higher return New surrender periods are not considered important when making an exchange The representative need not sign off on the recommended exchange

In order for a 1035 exchange to be considered appropriate, the individual must benefit from the new contract, and the representative must sign off on its suitability. Exchanges made within 36 months of a previous exchange are generally considered inappropriate. Higher returns do not guarantee suitability. Surrender periods on the new contract are one of the major factors in determining suitability.

Which TWO of the following statements are TRUE concerning gifts and gratuities? Gifts should be valued at the lower of the cost or the market value Gifts should be valued at the higher of the cost or the market value The rule would apply to a personal gift for the birth of a child The rule would not apply to a personal gift for the birth of a child I and III I and IV II and III II and IV

Member firm personnel may not give, or permit to be given, a gift of material value exceeding $100 per recipient per year to personnel employed by another member firm. The gifts should be valued at the higher of the cost or market value. For example, if tickets to a concert have a face value of $90, but the tickets were purchased at a value of $150, the higher value would be used. The rule does not apply to personal gifts such as the birth of a child or a wedding gift, provided these gifts are not related to the business between the recipient and the broker- dealer.

Mr. Blue's margin account has a market value of $20,000 and a debit balance of $9,000. If he purchases $2,000 of options, he will need to deposit: 0 $1,000 $2,000 $3,000

The margin requirement when purchasing options is 100% of the purchase price (premium). Since the purchase price of the options is $2,000, Mr. Blue may use the $1,000 SMA and will be required to deposit an additional $1,000. The SMA is found by subtracting the required equity, $10,000 ($20,000 x 50%) from the current equity in the account ($11,000).

There are 2,600,000 shares of XYZ Corporation outstanding, which are listed on the NYSE. Mr. Smith owns 300,000 shares of restricted securities, which he has held for more than six months. He is not an affiliate of XYZ. Mr. Smith would like to sell some of his securities under Rule 144. The weekly trading volume for the last six weeks is: 1 week ago 25,000 shares 2 weeks ago 26,000 shares 3 weeks ago 27,000 shares 4 weeks ago 28,000 shares 5 weeks ago 27,000 shares 6 weeks ago 27,000 shares How many shares of XYZ Corporation is Mr. Smith able to sell according to Rule 144? 26,000 shares 26,500 shares 27,250 shares 30,000 shares

Mr. Smith is be able to sell 26,500 shares. Under Rule 144, the amount that may be sold during any 90-day period is 1% of the outstanding shares or the average weekly volume of trading for the four weeks prior to the sale, whichever is greater. One percent of the outstanding shares is 26,000. The average weekly volume from the prior four weeks is 26,500 shares.

Regulation A

New issues of 5MM or less over 12m period, exempt from the Act. Offering statement with SEC and offering circular to prospective purchasers

Regulation M

Prevents distribution participants (underwriters, issuers) from bidding on in the secondary market stock offered in the distribution. Limited time around offering date.

All of the following choices are benefits of a limited partnership, EXCEPT: Limited liability Recapture Flow-through of income and expense Tax credits

Recapture is a situation where tax benefits previously taken should be paid back to the government. This is obviously not a benefit of a limited partnership.

An IRA contribution may be claimed for a tax year providing the contribution is deposited in the IRA no later than:

Regardless of when a person files his tax return, the IRA contribution must be made no later than April 15 of the following year.

A transaction for a stock that is not DTCC eligible, settles on a regular-way basis. This means that settlement occurs: In three business days In five business days At the buyer's premises At the seller's premises I and III only I and IV only II and III only II and IV only

Regular-way settlement for stock transactions is in three business days. In most cases, settlement occurs electronically through DTCC. In this case, since the seller must make physical delivery of the securities, settlement takes place at the buyer's premises.

A customer at your firm has an online trading account. If the customer places a limit order for a Nasdaq-listed stock and your firm is a market maker in this security, the order will be: Executed automatically Sent to an ECN Displayed only if it improves the inside market Displayed only if it improves the market maker's quote

The SEC Order Handling Rules require that a customer's limit order be displayed in a market maker's quote if it improves that quote. This is true even if the customer's order does not improve the inside market. The order may (not will) be sent to an electronic communication network (ECN). The order will be executed automatically only if the price and size of the order can be matched in the Nasdaq trading system.

Which of the following statements is TRUE concerning reverse convertible securities? An investor will receive a coupon rate below prevailing market rates An investor is anticipating a decrease in the value of the underlying asset They would be suitable for an investor who wants to own shares of the underlying asset The investor is anticipating that the price of the underlying asset would be above the knock-in value

Reverse convertible securities are short-term notes issued by banks and broker-dealers that usually pay a coupon rate above prevailing market rates. They are considered structured products because, in addition to the coupon rate, the investor may be required to purchase shares of an underlying asset at a fixed price. The underlying asset may be an equity security unrelated to the issuer, or a basket of stock, or an index. The issuer agrees to pay this higher coupon rate since it has an option to sell a security to the investor if the price of the security falls below a specified value known as the knock-in level. If the price of the underlying asset stays above the knock-in level, the investor will receive the high coupon and the full return of her principal (the most beneficial option). If the underlying asset falls below the knock-in level, the investor will be obligated to purchase shares of the underlying asset at a fixed price. The price of this asset may have depreciated below the knock-in level and the investor may receive substantially less than the original principal. The investor is anticipating a stable price for the underlying asset and is not able to participate in any increase in the value of the underlying asset. Choice (c) is incorrect since the investor does not want to own the underlying asset.

Equity = LMV + Credit - SMV - Debit

SMA does not enter the calculation of Equity.

Rule 144

Sale of restricted stock and affiliate (control stock). Holder must hold for 6 months. Individual selling must file Form 144. Form 144 filing good for 90 days. Amount sold is max of 1% of total outstanding or avg weekly volume over past 4 weeks. No volume restrictions after 1 year.

A customer has received a Regulation T margin call. He can meet the call by depositing in his account which TWO of the following choices? NYSE-listed stock with a market value equal to the amount of the call Cash equal to the amount of the call Nasdaq-listed stock with a loan value equal to the call 50% of the cash amount of the call I and III I and IV II and III III and IV

Stock listed on the NYSE or Nasdaq is marginable. The customer can meet the call by either depositing in his account cash equal to the amount of the call or marginable stock with a loan value equal to the dollar amount of the call. Choice (I) is incorrect because it indicates stock with a market value equal to the amount of the call can be deposited, when it should be stock with a loan value equal to the amount of the call. Choice (IV) is incorrect because it states 50% of the cash amount of the call is required, whereas 100% of the cash amount of the call is required.

In the Interbank market, foreign currency transactions: May settle on a spot or forward basis Occur on exchanges throughout the world Are regulated by the SEC Are reported on the Nasdaq system

The Interbank market is an unregulated over-the-counter market in which currencies of different countries are bought and sold. Foreign currency transactions may settle on a spot or forward basis. Spot transactions settle in two business days from the trade date. In a forward transaction, the exchange rate is established on the trade date but settlement occurs in more than two business days. While foreign currency transactions are not reported on Nasdaq, spot quotes are available from information vendors such as Knight-Ridder Financial Information Systems, Reuters, and Telerate.

A customer at your firm has an online trading account. If the customer places a limit order for a Nasdaq-listed stock and your firm is a market maker in this security, the order will be: Executed automatically Sent to an ECN Displayed only if it improves the inside market Displayed only if it improves the market maker's quote

The SEC Order Handling Rules require that a customer's limit order be displayed in a market maker's quote if it improves that quote. This is true even if the customer's order does not improve the inside market. The order may (not will) be sent to an electronic communication network (ECN). The order will be executed automatically only if the price and size of the order can be matched in the Nasdaq trading system.

An investor shorts a stock at $6 per share. What is the SRO minimum maintenance requirement for this position?

The SRO minimum maintenance requirement for a stock sold short at $5 per share or above is $5 per share or 30% of the market value, whichever is greater.

An investor shorts a stock at $6 per share. What is the SRO minimum maintenance requirement for this position? $1.50 per share $1.80 per share $3.00 per share $5.00 per share

The SRO minimum maintenance requirement for a stock sold short at $5 per share or above is $5 per share or 30% of the market value, whichever is greater.

On May 25, the president of MaxCo bought 3,000 shares of MaxCo stock in the open market at $33. Two months later, the stock has increased to $40. If the president now wants to sell the shares: Permission must be granted by the MaxCo board of directors The profit from the trade must be forfeited according to the short-swing profit rule Notification must be made to the corporation's legal counsel Permission must be granted by FINRA

The Securities Exchange Act of 1934 prohibits insiders from making short-swing profits. A short-swing profit is a profit made on stock held by insiders for less than six months. If the president of MaxCo sold stock two months after it was purchased, MaxCo could sue for recovery of the profit. Under Rule 144, the six-month holding period applies only to restricted stock and, since the stock was purchased in the open market, the shares would be considered control stock.

Which TWO of the following offerings are subject to the Trust Indenture Act of 1939? An offering of municipal revenue bonds An offering of convertible securities by a company listed on the NYSE An offering of corporate notes with a maturity of three years A private placement of bonds issued by a corporation, sold by a broker-dealer

The Trust Indenture Act of 1939 regulates the public issuance of corporate securities that are sold interstate. It does not cover exempt securities such as U.S. government securities, municipal securities, or private placements. A sale of corporate convertible securities and an offering of corporate notes are subject to the 1939 Act. Corporate debt with a maturity of 270 days or less (commercial paper) is exempt from the 1933 Act and the 1939 Act.

A municipal tombstone ad shows bonds maturing serially from 2012 through 2030. The 2030 maturity is a 6.00% bond offered at a 6.75 basis. The bonds maturing in 2020 and thereafter are callable beginning in 2018 @ 102, at 101 in 2019, and at par on any interest date after 2019. The bonds maturing in 2030 should be priced to the:

The bonds are being offered at a discount since the yield to maturity (6.75%) is greater than the coupon rate (6.00%). A discount bond is always priced to maturity.

A customer's initial trade in a margin account is the short sale of 500 shares of DEF stock at $20. After making the required deposit, the credit balance in the account is: $5,000 $10,000 $15,000 $20,000

The credit balance in a short margin account is determined by adding the short sale proceeds and the Reg T deposit. In this example, the short sale proceeds are $10,000 (500 shares x $20). The Reg T requirement is $5,000 ($10,000 x 50%). The credit balance is $15,000.

A brokerage firm erroneously confirms to a customer a purchase of 100 shares of XYZ Corporation at 28.25. The firm later finds that the purchase was actually made at 28.75. The customer: Must pay 28.25 Must pay 28.75 Can accept the 28.75 or cancel the order Can cancel the order

The customer must pay 28.75 which was the actual purchase price, even though the brokerage firm confirmed (erroneously) to the customer that the purchase was made at 28.25.

Your client is president of XYZ Corporation and is selling XYZ shares pursuant to Rule 144. A filing must be made with the SEC:

The filing must be made at the time of the sale and is effective for 90 days.

A client sells short 1,000 shares of KPL at $46 a share. Fourteen months later the client covers the short and on the same day delivers the stock to close out the short position at $35 a share. For tax purposes, the client will report: A short-term capital gain A long-term capital gain Neither a gain nor a loss since the trade involved a short sale A short-term capital loss

The gain or loss on a short sale is typically treated as a short-term capital gain or loss, since a holding period for the security is not established. The customer closed out the short position the same day, so the holding period was less than one day. In this example, the client has a short-term capital gain taxable in the year the short sale was covered and the stock was delivered.

A registered options principal (ROP) must review: Retail communication concerning options General options prospecting letters Option seminar transcripts Allocation of exercise notices I, II, and III only II, III, and IV only I, II, and IV only I, II, III, and IV

The registered options principal (ROP) is specifically responsible for the firm's compliance program with respect to its options activities. The ROP performs an audit function to determine that these activities are conducted in compliance with current applicable regulations and rules. Some of the ROP's principal duties include establishing guidelines for options retail communication, and reviewing all such material before it is used. The ROP also reviews the method of allocation of exercise notices.

An investor sells short 1,000 shares of JonCo stock at 3.50. The customer must deposit: $1,750 $2,000 $2,500 $3,500

The required equity for a short sale where the stock is less than $5 per share is the greater of $2.50 per share or 100% of the market value. An investor selling 1,000 shares of JonCo stock short must deposit $3,500 because the market value (1,000 shares x $3.50) is greater than $2.50 per share (1,000 shares x $2.50).

A customer has a short margin account with a broker-dealer. This account must be marked to the market: Twice a day Once a day Once every five business days Once a month

The term marked to the market refers to the adjustment made in a customer's account due to a change in the market value of the securities. A margin account is marked to the market once a day (daily) to make sure the account is above the maintenance requirement. Any change may result in the customer being required to deposit additional funds in the account.

According to FINRA, the maximum sales charge on a variable annuity contract is:

There is no statutory maximum sales charge on variable annuities or variable life insurance policies. The sales charges must be fair and reasonable.

A customer's margin account is as follows. Long Market Value $25,000 MNO $11,000 XYZ Debit Balance $20,000 SMA $ 800 The customer sells $3,000 of stock in the account. What will the value of the SMA be after the sale? $800 $1,500 $2,300 $3,800

This account is restricted since the equity ($16,000) is less than the Reg T requirement of the account's market value ($36,000 x 50% = $18,000). When stock is sold in a restricted account, 100% of the sale proceeds will be used by the brokerage firm to reduce the customer's debit balance. The broker-dealer will also credit the customer's SMA with an amount equal to the sale proceeds multiplied by the Reg T requirement of 50%. In this question, the sale of $3,000 worth of stock will be used to reduce the customer's debit balance to $17,000 and the SMA will be credited by $1,500 ($3,000 sale x 50% Reg T). This will bring the SMA up to $2,300 ($800 + $1,500).

The trading of exchange-listed securities between institutions on a private over-the-counter computer network, rather than over a recognized exchange such as the New York Stock Exchange (NYSE) or Nasdaq. Trades between institutions will often be made in large blocks and without a broker, allowing the institutions to avoid brokerage fees. The difference is that you either trade with a counterparty directly or through a ECN which is considered to be a new market.

Trading by non exchange-member brokers/dealers and institutional investors of exchange-listed stocks. In other words, the third market involves exchange-listed securities that are being traded over-the-counter between brokers/dealers and large institutional investors.

Regulation S

US Co may issues unlimited number of securities outside US without filing. Transaction must be offshore.

Under what circumstances may a variable annuity be recommended as a short-term investment?

Under industry rules, mutual funds or annuities may not be recommended as short-term investments or trading vehicles. The fact that a product is no-load does not change this SRO prohibition. There is no such thing as a CDSC reduction agreement.

A doctor, who is covered under a corporate pension plan, retires. The doctor can roll over the distribution received from the pension plan into an IRA, with no tax consequences, within: 30 days 60 days 90 days 1 year

When a lump-sum withdrawal is made from a qualified retirement plan and the check made payable to the participant is deposited in an IRA, it is referred to as a rollover. If the rollover is done within 60 days, it will be tax-free. Only one rollover is permitted once every twelve months. However, the distributing corporation will withhold 20% of the distribution for the IRS.

An investor is interested in purchasing an interest in a real estate limited partnership. To exhibit suitability, the investor could provide: Past tax returns A notarized document attesting that the investor is an expert in managing real estate Executed copies of subscription agreements from other programs in which he is a limited partner A completed subscription agreement

When investing in a DPP, the customer must verify that he meets all suitability standards. This can be accomplished by furnishing documents such as past tax returns and a statement of net worth.

An investor has sold a stock short. If the present market value is $2.00 per share, the minimum maintenance requirement will be: 50% $2.50 per share $2.00 per share 30%

When selling short securities that have a market value less than $5 per share, a minimum maintenance requirement of $2.50 per share or 100% of the market value, whichever is greater, applies. Since $2.50 a share is greater than $2.00 per share, this is the correct answer.

A broker-dealer owns 100 shares of ABCO stock, which it purchased at 28. If the stock is sold to a customer, the broker-dealer will base a markup on: The inventory cost of 28 The highest bid on the Nasdaq system The lowest offer on the Nasdaq system A price that is fair and reasonable

When selling stock to a customer, a markup should be based on the lowest offer on the Nasdaq system, not the price the dealer paid to purchase the stock (dealer's inventory cost).

XYZ Corporation will need to borrow funds in the bond market soon. While current interest rates are not attractive from its viewpoint, the company knows that interest rates could drop suddenly. The company would like to be ready to sell the bonds quickly. It would also like the bonds to be as liquid as possible in order to attract investors. Which of the following choices is most appropriate for its needs? A private placement under Regulation D An intrastate offering under Rule 147 A traditional registration statement A shelf registration under Rule 415

While the sales described in choices (a), (b), and (d) will usually be faster than a full registration, both Regulation D and Rule 147 place various restrictions on resales, reducing the liquidity of the issue. A shelf registration under Rule 415 will satisfy all of XYZ Corporation's needs.