Series 65 Exam
An investor diversifying a corporate bond portfolio does NOT consider A) domicile of the investor B) issuer C) maturity D) quality
A
Which of the following statements about bid and asked prices are TRUE? I) The bid price is the price a dealer is willing to pay to buy a security. II) The asked price is the price a dealer is willing to accept to sell a security. III) The bid price for a security is higher than the asked price for the security. A) I and III B) I and II C) I, II, and III D) II and III
B
Which of the following firms in the business of rendering investment advice for compensation would be considered a federal covered adviser? A) GHI Consultants, a sole proprietorship, managing $82 million belonging to high-net-worth individuals B) ABC Money Managers, a partnership with $115 million under management C) JKL Pension Consultants, a management firm providing services to employee benefit plans, and currently has $179 million under management D) DEF Fund managers, a corporation managing an unregistered hedge fund with $10 million in assets
B. 115m falls into SEC registration status. Pension Plan would need 200m to be correct
An IAR is viewing the balance sheet of a corporation. Included in the computation of the company's working capital are all of the following EXCEPT A) cash B) marketable securities of other companies C) convertible bonds it has issued D) accounts receivable
C
An investor is reviewing his portfolio. To compute the real rate of return on an investment, it would be necessary to know all of the following EXCEPT A) the income received from holding the asset B) the rate of inflation C) the tax bracket of the investor D) the gain (or loss) recognized on the asset
C
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? A) Proceed with the account; the signature is not required. B) Don't do anything with the account until the customer's signature acknowledging receipt of the brochure is received. C) Proceed with the account, but make a supervisory person aware of this. D) Only unsolicited orders may be accepted until the signed receipt is received.
C.
Which of the following persons must register as an investment adviser under the Uniform Securities Act? A) An investment adviser whose advice is limited to securities issued or guaranteed by the U.S. government and who has 3 places of business in the state B) An accountant who makes no pretense of providing investment advisory services but gives incidental advice to clients as a small part of accounting services provided C) An investment adviser who only serves institutional clients and whose only office is in this state D) An investment adviser representative with no place of business in the state who has dealt with 7 retail clients during the most recent 12 month period
C. An IAR cannot be an IA
Which of the following would NOT be considered evidence of custody of a client's funds or securities? A) Client funds and securities are kept at a qualified custodian. B) The client makes a partial purchase, and the broker-dealer holds the securities until full payment is made. C) The investment adviser has discretionary authority over the client's account. D) The adviser writes checks on the client's account to pay for client's securities.
C. Discretionary Authority is not custody.
A viatical sale would generally involve A) a security with a large increase in value. B) the sale of a term life insurance policy. C) a leveraged ETF. D) an individual with a terminal illness.
D
Nurturing growth of the enterprise would be the objective of which of the following types of investments? A) Growth fund B) 529 plan C) Investment adviser D) Private fund
D
The interest from which of the following bonds is exempt from federal income tax? I) State of California bonds II) City of Anchorage bonds III) Treasury bonds IV) GNMA bonds A) III and IV B) II and IV C) I and III D) I and II
D
ABC Advisers, a federal covered investment adviser, is moving the firm's headquarters to a new office park in the suburbs. ABC is required to file this change with the SEC A) within 60 days B) within 30 days C) within 90 days D) promptly
D. Material changes must be reported promptly
Each of the following are advantages offered by a nonqualified deferred compensation plan that are not found in a qualified plan EXCEPT A) employer contributions to the plan are not subject to current taxation to the employee. B) they are an attractive benefit for highly compensated employees because they're free from the contribution limits. C) deferred compensation plans are not subject to most of the requirements of the Employee Retirement Income and Security Act of 1974 (ERISA). D) they are an attractive benefit to the employer because participation requirements and nondiscrimination restrictions do not apply.
A
If a group of money managers were having a discussion and the term LIBOR was mentioned, the topic would most likely be: A) short-term borrowing rates B) contract negotiations with the employee's union C) current economic conditions in Liberia D) long-term borrowing rates
A
When an individual registered with a broker-dealer has a change of residence, an amended Form U4 must be filed A) within 30 days B) within 60 days C) within 90 days of the end of the fiscal year D) within 2 business days
A
One major difference between the customer identification program (CIP) and the new account opening rules of the regulatory bodies is that A) the CIP only applies to individuals while the rules of the regulators apply to retail and institutional accounts B) the CIP requires date of birth while the regulators only require proof of legal age C) the CIP requires a residence address for individuals while the regulatory bodies will accept a PO Box D) the CIP requires a statement of the customer's goals while the regulators only require current financial information
B
The Administrator may require which of the following from a federal covered adviser? I) copy of the IA's Form ADV II) filing of the IA's advertising in the state III) a listing of the IA's fee schedule IV) a filing fee A) I and II B) I and IV C) I, II, III, and IV D) II and III
B
When comparing the pricing of open-end investment companies with that of closed-end investment companies, it is correct to state that A) the closed-end can issue common and preferred shares; the open-end can only issue one class of stock. B) only the open-end bases its price on the next computed net asset value per share. C) both must compute their NAV at least once every day as of the close of trading. D) shares of closed-end funds are generally priced higher than open-end shares.
B
All of the following actions must be completed prior to customers entering their first option trade EXCEPT A) approval by a designated options supervisor B) receipt of a completed options agreement C) completion of the new account form D) delivery of the options disclosure document (ODD)
B. Customers do not have to complete (sign) the options agreement prior to entering an order; under current rules, the agreement must be signed and returned by the customer within 15 days of account approval.
The Uniform Securities Act contains a number of exemptions from registration of securities. Which of the following do not qualify for any of those exemptions? I) A bond issued by a corporation II) A bond issued by the city of Athens, Greece III) A bond issued by the province of Manitoba IV) A security issued by a credit union authorized to do business in the state A) III and IV B) I and IV C) II and III D) I and II
D
Sharon Smith is an investment adviser representative with Highwater Advisers, a federal covered investment adviser with its principal office in State X. Sharon provides advisory services to a bank located in State X, a state in which she has no place of business. Under current regulations, A) because Sharon has a client in State X, registration as an IAR would be required in State X. B) because Sharon's client is a bank, she does not have to register as an IAR in State X. C) because Highwater's principal office is in State X, Sharon would be required to register as an IAR in State X. D) because Sharon has no place of business in State X, she does not have to register as an IAR in State X.
D.
A 401(k) offering which of the following choices would be most likely to be in compliance with Section 404(c) of ERISA? A) Money market fund, intermediate-term government bond fund, large-cap stock index fund B) Long-term bond fund, large-cap stock index fund, foreign equity fund C) Money market fund, intermediate-term municipal bond fund, large-cap stock index fund D) Small-cap fund, large-cap stock ETF, money market fund
A
Which of the following regarding the registration of investment advisers and their representatives is TRUE? A) ABC Advisers, Inc., registered with the Administrator, employs an investment adviser representative who left the employment of another investment advisory firm 6 months ago. ABC must notify the Administrator of this association promptly. B) XYZ Advisers, Inc., is a federal covered investment advisory firm registered with the SEC; therefore, its representatives need not be registered with the Administrator. C) An investment adviser representative, terminated his employment with ABC Advisers and, 6 months later, was employed as an advisory representative by KLM, a federal covered adviser. Each firm is required to notify the Administrator of each event. D) ABC Advisers, Inc., is an investment advisory firm registered with the Administrator; therefore, its representatives need not be registered with the Administrator.
A. State - Individual notifies Federal - Firm notifies
A broker-dealer registered with State A created a website 2 years ago to promote its services. Recently, they hired a new media person who totally redesigned the site. Under the recordkeeping requirements of the Uniform Securities Act, A) a copy of the new website page must be maintained for a period of 3 years from the first use of the original site B) a copy of the original website page must be maintained for 3 years from original use C) there are no requirements for storage of electronic data D) copies of both the original and the new website page must be maintained for 5 years after original use
B.
One of the differences between broker-dealers and investment advisers is the disclosures that must be made when the IA is acting as a principal or agent in a transaction with an advisory client. In the case of a firm registered in both capacities, those disclosures would not be required when A) approval was granted by an officer of the firm B) there was a transaction with a client of both entities, but the trade was not based upon advisory services rendered C) cleared with the Administrator D) the transaction was in an exempt security
B.
Which of the following actions by an investment adviser registered in 3 states is permitted? A) Delivering the brochure within 48 hours after signing of the contract, as long as there is a 5-day, penalty-free withdrawal provision B) Announcing that the first 50 new clients to sign up will receive a 25% discount on their fees for the first year C) Stating in the advisory contract that fees will be reimbursed if account performance is less than agreed upon D) Guaranteeing a rate of return equivalent to a 5-year insured bank CD or waiving their yearly fees
B. This is not considered discrimination, because the discount applies equally to all (if they are among the first 50). Fee reimbursement or waivers are not permitted. The 5-day withdrawal provision applies to state-registered investment advisers when the brochure is not delivered at least 48 hours prior to (not after) the signing of the contract.
Because a trust account is managed for the beneficial interest of the beneficiary, the investment adviser representative handling the account can A) have a check drawn on the account payable to the trustee for trustee expenses B) place the securities in the trust fund in a noncustodial brokerage account C) arrange to have the trust's funds pledged to support a loan for the trustee D) have funds withdrawn from the account at the direction of the beneficiary
A
James Stillman is an investment adviser representative with Rock, Feller, and Standard (RFS), a covered adviser with its principal office in State O. Stillman works out of an office in State P and has 4 retail clients there. In addition, Stillman has 25 retail clients in State D, 6 retail clients in State M, and 1 retail client in State O. Stillman would be required to register as an investment adviser representative in A) State P. B) States D and M. C) States P, D, and M. D) States P and O.
A. As an IAR for a federal covered investment adviser, Stillman is required to register only in those states in which he (Stillman) has a place of business. Although Stillman has clients in several states, the question tells us that his place of business is the office in State P. Please note that, as long as an IAR with a covered adviser does not maintain a place of business in a state, there is no numerical limit on the number of clients he can have and still be exempt from registering in that state.
Which of the following would probably be an acceptable hedge clause under SEC interpretations? A) "Kapco Advisers shall not be liable for any loss or depreciation in the value of the account unless it shall have failed to act in good faith or with reasonable care." B) A clause that limits the investment adviser's liability for losses caused by conditions and events beyond its control, such as war, strikes, natural disasters, new government restrictions, market fluctuations, or communications disruptions C) "It is understood that we will expend our best efforts in the supervision of the portfolio, but we assume no responsibility for action taken or omitted in good faith if negligence, willful or reckless misconduct, or violation of applicable law is not involved." D) A hedge clause that seeks to limit liability to acts done in bad faith or pursuant to willful misconduct but also explicitly provides that rights under state or federal law cannot be relinquished
B.
Under the NASAA brochure rule requirements for investment advisers, an investment adviser (unless qualifying for an exemption) must deliver, A) within 90 days of the end of its fiscal year, a free, updated brochure and related brochure supplements which include or are accompanied by a summary of material changes. B) within 120 days of the end of its fiscal year, a free, updated brochure and related brochure supplements which include or are accompanied by a summary of material changes. C) a free, updated brochure and related brochure supplements every year even when there are no material changes. D) at least 48 hours in advance of entering into the advisory contract, a copy of the adviser's brochure.
B. The rule calls for delivery within 120 days of the end of the fiscal year. The 48-hour rule is not mandatory; if the adviser waits until the signing of the advisory contract, there is a five-day penalty-free withdrawal privilege granted to the customer. If there are no material changes, delivery of an annual brochure is not required.
Under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, which of the following statements regarding the distribution of reports prepared by 3rd parties that are not affiliated with the adviser is TRUE? A) An adviser is required to disclose any source of information used in making recommendations to clients. B) An adviser need not disclose the author of any outside 3rd-party report unless the client asks. C) An adviser is prohibited from basing recommendations on work that is wholly the product of someone else's efforts. D) An adviser may use a report prepared by someone else if the source of the report is disclosed.
D.
If a federal covered adviser's fiscal year ends on October 31, 2017, it must file its annual updating amendment to its Form ADV no later than A) March 30, 2018 B) December 31, 2017 C) February 28, 2018 D) January 29, 2018
D. 90 days from the end of the Fiscal Year
An applicant for registration as an investment adviser discloses on Form ADV that it plans to use palm readers to help determine investments most suitable for their clients. Under the Uniform Securities Act, the Administrator A) will probably turn to the SEC for guidance B) is empowered to deny this application C) will request that the applicant furnish past performance records to determine whether this method of investment analysis has merit D) may deny applications only on the basis of the limitations of the law
D. An applicant for registration as an investment adviser discloses on Form ADV that it plans to use palm readers to help determine investments most suitable for their clients. Under the Uniform Securities Act, the Administrator A) will probably turn to the SEC for guidance B) is empowered to deny this application C) will request that the applicant furnish past performance records to determine whether this method of investment analysis has merit D) may deny applications only on the basis of the limitations of the law
If an agent solicits a client to purchase nonexempt, unregistered securities, and the solicitation results in a sale, which of the following statements is NOT true? A) The employing broker-dealer must offer the right of rescission within 30 days of discovery. B) The broker-dealer may be sued if the client loses money, but if money is made the client may keep it. C) The broker-dealer who employs the agent may be sued. D) The agent may be subject to civil penalties.
A. There is no time frame on the rights of rescission to be offered, only to be accepted.
One way in which an investment adviser acting in the capacity of an agent in a transaction with a client differs from a broker-dealer performing the same task is that the investment adviser A) shall obtain client consent before completion of the transaction B) may not charge a commission on the transaction C) shall notify the Administrator of its capacity in the proposed transaction D) shall disclose the agency capacity before the transaction
A. In order to act as an agent (or principal) in a trade with an advisory client, there are 2 requirements: - The client receives full written disclosure as to the capacity in which the adviser proposes to act - Consent of the client Both of these are required before the completion of the transaction.
