Series 66 Exam

The criminal penalty for violations of the Uniform Securities Act is:

$5,000 fine, 3 years' imprisonment, or both

When it comes to personal finances, what must be disclosed to clients of an adviser?

- An adviser's financial impairment must be disclosed to clients if the adviser has discretion or has has custody or required prepayment of more than $1,200 in fee, 6 or more months in advance. - also required to include an audited balance sheet with Part 2 of Form ADV, which must be filed with the SEC and made part of the adviser's disclosure brochure.

An agent may always:

- Make material representation in the sale of a secuirty - unregistered security may be sold in an exempt transaction and an exempt secuirty does not need registration.

457 Plan

- Non-qualified, deferred compensation plan established by state and local governments for tax-exempt government agencies and tax exempt employees. - allows coverage to discriminate in favor of key employees

A portfolio manager using index options is trying to hedge which of the following types of risks?

- Systematic risk

What is required of a fee disclosure document?

- must be up-to-date - any changes must be announced in advance.8

The portfolio manager of a bond fund believes that interest rates are going to increase in the near future. As such, it would be wise for that manager to

- shorten the avg duration of the portfolio to reduce the effects of an increase to int. rate.

W/ a forward contract what are the risks?

- they are considered illiquid - a seller must always be concerned about the ability of the buyer to pay

Mr. Beale buys 10M 6.6s of 10 at 67. What will his annual interest be?

10 M-means $10k worth of - beale receives the nominal yield of the bonds, which is 6.6% of $10k--so the interest will be 1,000

Common stock of KAPCO, Inc., trades on the NYSE. Which of the following securities would not be exempt from registration under the USA? A) KAPCO, Inc. subordinated debentures, traded on the "Pink Sheets" B) KAPCO noncumulative preferred stock C) Stock rights to acquire KAPCO common stock D) Limited partnership interests in a shopping center with KAPCO, Inc., as the general partner

D- when an issuer acts as a general partner in a real estate offering, it is not its security that's being sold, so the exemption does not apply

If the return on Treasury bills is 3% and the equity risk premium is 4%, the expected equity returns should be

Expected return on an equity investment is the risk-free rate of return added to the equity risk premium (3+4=7)

Under the USA, what are the maximum penalties for a securities-related felony?

Under the USA, the max penalty is $5,000 and/or 3 years for a securities-related felony.

If a brokerage house starts offering a fee-based asset management program, does the agent have to register?

Yes-- once a brokerage house starts offering a fee-based asset management program, it loses its exclusion from the definition of IA. so you have to register as an IAR

Simple trust

must distribute their DNI on an annual basis

Commodities

soybeans, wheat, and corn

It is NOT a violation of the USA if an agent does:

split commissions with another agent in the office and fails to disclose this to clients.

Dividends have a significant influence on:

the value of the corporation's stock

Price-earnings ratio

valuation ratio used to calculate the value of stock