Series 66

A client invested $100,000 in an Equity Indexed Annuity. The participation rate is 90% with a cap rate of 15%. In year one, the index increased by 20%. In year two, the index lost 5%. In year three, the index gained 10%. What is the value of the annuity after year three? $135,700 $118,000 $125,350 $115,000

$125,350 ** 1.15 x 100k=115k 1.09 x 115k=125,350

Several years ago, a person received a gift of 300 shares of stock that were originally purchased for $10 per share. After the gift, the person then inherited 700 shares of the stock when the price was $20 per share. This year, the person sold all of the shares for $40 per share. What are the tax consequences? $23,000 long-term capital gain $14,000 long-term capital gain and a $9,000 short-term capital gain $14,000 short-term capital gain and a $9,000 long-term capital gain $30,000 long-term capital gain

$23,000 long-term capital gain ** 40-10 =30 30 X 300= 9000 40-20 = 20 20 X 700= 14,000 =23,000 LT

A portfolio has an alpha of 0%, a beta of 1.0, and an actual return of 12%. What would the alpha of the portfolio be if the beta was 0.9 and the actual return was 10.6%? 0.00% -0.20% 1.40% -1.40%

-0.20% ** 1) .9 X 12=10.8 2) actual - expected = 10.6-10.8=-.2

A portfolio has an alpha of 0%, a beta of 1.0, and an actual return of 12%. What would the alpha of the portfolio be if the beta was 0.9 and the actual return was 10.6%? 1.40% -1.40% 0.00% -0.20%

-0.20% ** 1) .9 X .12= 10.8 2) 10.6-10.8= -.20

During the first quarter of the year, XYZ common stock paid a $1 dividend, but the stock's price fell from $50 per share at the beginning of the quarter to $48 per share at the end of the period. Based on the quarterly results, what is the stock's annualized total return? 8% 2% -2% -8%

-8% ** Dividend + difference / original price 1+(-2)/50=-.02 -.02 X 4 for quarterly result = -.08

Julie owns 100 shares of CCC at $25. CCC declares a 25% stock dividend. After the ex-date, what will she own? 1)125 shares 2)100 shares 3)Cost basis of $25 4)Cost basis of $20

1 & 4 **Stock dividends make the number of shares owned increase and the cost per share decrease. The overall value should remain unchanged. 125 shares × $20 = $2,500; 100 shares × $25 = $2,500.

Which of the following statements about preemptive rights are TRUE? 1)Preemptive rights give shareholders the right to purchase shares in new stock issues in direct proportion to the number of shares they already own. 2)Preemptive rights allow shareholders to buy as many new shares as they want at any time. 3)Preemptive rights allow shareholders to maintain their proportionate share of ownership in the corporation.

1&3

A customer invested $25,000. After 20 years the investment is now valued at $100,000. How many years did it take to double in value? 4 7 5 10

10 ** doubled 2 times to reach 100k 2/20 = 10

An investment adviser must record the personal securities transactions that are effected by its officers, directors, partners, and employees by no later than: The day of the trade Within 90 days of the adviser's fiscal year Monthly 10 days after the end of the calendar quarter

10 days after the end of the calendar quarter

As an investment adviser, you are required to record and keep a record of every transaction in a security for a client's account within: 10 days of the end of each quarter 10 days of the end of each quarter, excluding direct obligations of the U.S. government 20 days of the end of each quarter 20 days of the end of each quarter, excluding direct obligations of the U.S. government

10 days of the end of each quarter, excluding direct obligations of the U.S. government

Under the Investment Advisers Act of 1940, it is legal for an investment adviser to 1) rebate the commission on a mutual fund sale to a client who has already paid a fee for investment advice 2) keep the commission on a mutual fund sale when the client who purchased the shares has already paid for investment advice 3)reduce a client's advisory fee by any commissions earned on mutual fund sales to that client A) I, II, and III B) II and III C) I and III D) I and II

2) keep the commission on a mutual fund sale when the client who purchased the shares has already paid for investment advice 3)reduce a client's advisory fee by any commissions earned on mutual fund sales to that client **Rebating commissions on mutual fund sales is prohibited.

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 after-tax inflation-adjusted return? 4% 9.5% 8% 2.86%

2.86% 1) 10% * 100-20= 8 2) ((1+.08)/ (1+.05))-1 =2.86

An investor in the 35% tax bracket is considering investing in a corporate bond, which has a 6% coupon. In order to earn an amount equal to her after-tax return from the corporate bond, she would need to invest in a tax-free bond that is yielding: 2.1% 2.5% 3.9% 6%

3.9% ** 1) .06 X (1-.35)= .39

An investor in the 35% tax bracket is considering investing in a corporate bond, which has a 6% coupon. In order to earn an amount equal to her after-tax return from the corporate bond, she would need to invest in a tax-free bond that is yielding: 3.9% 2.1% 6% 2.5%

3.9% *6 X (1-.35)-.039

A brokerage client buys stock worth $40,000 and sells it three years later for $60,000. If his long-term capital gains rate is 10%, what is his after-tax total return? 30% 33% 40% 45%

45% ** 60-40=20 .10 X 20=2 20-2=18 18/40= 45

A company issued $50 million of common stock in a private placement under Regulation D. In order to sell the stock initially in any state, the Administrator requires the filing of: ARegistration statement BForm 10-K Form ADV - NR A Notice Filing

A Notice Filing Since stock that's issued under Regulation D is federal covered, the shares do not need to be registered at the state level. **administrator still could have company notice file

Under the Uniform Securities Act, which of the following transactions is NOT exempt from state registration? The sale of securities by a sheriff An isolated, non-issuer transaction A transaction executed on a national securities exchange A Rule 147 offering

A Rule 147 offering **Federal exemption not a USA exemption

Under the Investment Advisers Act of 1940, which of the following entities providing advisory services would be considered an investment adviser? An accounting company A bank holding company, which is an investment company A bank A publishing company

A bank holding company, which is an investment company * Holding companies that are investment companies are IA's

Which of the following choices is a broker-dealer in State B? An agent in State A who contacts a client in State B A corporation that sells commercial paper every other week in State A broker-dealer registered in State A, where its only office is located, which has three individual clients in State B DA bank trust department that buys and sells securities for its customers

A broker-dealer registered in State A, where its only office is located, which has three individual clients in State B **No place of business and only having institutional investors is not a broker dealer , must deal with individuals to be a broker dealer

One of your ultra-high net worth clients would like to give some low cost basis stock as gifts to her adult grandchildren. It would be prudent for you to tell her that A) unlike an inheritance, there is no stepped-up cost basis. B) for purposes of the gift tax, her cost basis will be used. C) making the gift under the Uniform Transfer to Minors Act is generally the most advantageous for the child. D) it would be wise for her to use a TOD account to avoid probate.

A) unlike an inheritance, there is no stepped-up cost basis. **computing the value of a gift to determine if there is a gift tax obligation, it is the fair market value of the gift that is used

A federal covered investment adviser currently has five clients in State A. The IA would be required to make a notice filing with the Administrator in State A if it now enters into an advisory contract with which of the following? A bank's trust department using the adviser to manage $250,000 of account assets A government-authorized investment authority created to manage state funds An inter vivos trust account set up for a relative A mutual fund with assets of $1 million and 250 clients

An inter vivos trust account set up for a relative *IA would be exempt if it had business with institutions the trust would add to the number of retail clients they do business with

According to the Uniform Securities Act, which of the following investment advisory practices is prohibited? An investment advisory firm is purchased by a large broker-dealer and all client contracts are automatically amended to reflect the broker-dealer ownership A client's portfolio increases in value from $100,000 to $150,000 over a one-year period, so the adviser charges the client a fee based on the total value of the account An investment advisory firm appoints three new portfolio managers but does not disclose this to clients of the firm A client terminates an advisory relationship with an investment adviser halfway through the contract and the advisory firm refunds 50% of all prepaid fees, as called for in the contract

An investment advisory firm is purchased by a large broker-dealer and all client contracts are automatically amended to reflect the broker-dealer ownership * clients need to be notified if their contracts have been assigned

The manager of the XYZ Fund is permitted to move assets between the stock and bond markets, depending on economic conditions. Last year the manager had 70% of the fund's assets invested in stocks while only 30% in bonds. This year she has reversed the ratio. XYZ fund is most likely a(n): Hedge fund Equity income fund Balanced fund Asset allocation fund

Asset allocation fund **asset allocation allow the user to change holdings depending on economic conditions

One of your clients wishes to give her daughter $200,000 to start her own business. The daughter expects to be finished with graduate school and an internship in 8 years. The expected rate of return is 9%. Using the Rule of 72, calculate the amount the client must deposit today to meet that future goal. A) $144,000 B) $100,000 C) $72,000 D) $112,500

B) $100,000 **72/9=8

Under the Uniform Securities Act, which of the following persons has to register as an investment adviser? A) An agent of a broker-dealer who gives investment advice within the course of his duties with the firm for which a fee is charged B) A broker-dealer who gives advice for which he charges a specific fee C) An attorney who writes a legal opinion for a municipal bond indenture D) A broker-dealer who gives investment advice that is incidental to the course of its business and for which no special compensation is received

B) A broker-dealer who gives advice for which he charges a specific fee **Broker-dealers need not register as investment advisers unless they charge a separate fee for providing investment advice.

Jimmy Merchant is an agent with FLATT securities, a registered broker-dealer. When Jimmy submits an order ticket to purchase securities for a client, all of the following would appear EXCEPT A) the broker-dealer's name B) the current market price of the security C) the account number D) Jimmy's name

B) the current market price of the security Any order ticket submitted by an agent for execution at a broker-dealer will always include the account number, the agent's name, and that of the BD. All order details must be listed

Surrender charges may cause a reduction to all of the following EXCEPT A) the liquidation value of a variable annuity B) the death benefit of a variable life insurance policy C) the redemption value of Class B mutual fund shares D) the cash value of a variable life insurance policy

B) the death benefit of a variable life insurance policy

According to the Uniform Securities Act, which of the following clients may an agent borrow from? I Bank II Best Friend III B/D Iv Mortgage Broker

Bank Iv Mortgage Broker ** has to be in business of lending

Kevin is an agent of CMP Broker-Dealers which is registered in 10 states. Kevin is currently registered in five states, but only transacts business with institutional clients. Due to recent mergers, some of Kevin's clients will be relocating to North Carolina and CMP now wants to open a new office there. Kevin will not be moving from his current office in Missouri, a state in which both Kevin and CMP are registered. Under the USA: CMP is required to be registered in North Carolina, but Kevin is not Only Kevin is required to be registered in North Carolina Neither Kevin nor CMP is required to be registered in North Carolina Both Kevin and CMP are required to be registered in North Carolina

Both Kevin and CMP are required to be registered in North Carolina Both have to register because of the office that is being built

An agent who holds full discretionary authority over a customer's account may: Buy or sell securities in the account without consulting the customer Receive a fee for using his discretion in trading the account Withdraw money from the account Borrow assets from the customer's account

Buy or sell securities in the account without consulting the customer Withdraw money from the account ** can't receive a fee for discretionary trading or borrow

A wealthy client wishes to endow her favorite charity with a lump-sum gift that, with an assumed rate of return of 4% per annum, will provide $2,500 per month in perpetuity. What amount does the client need to deposit? A) $1,000,000 B) $75,000 C) $750,000 D) $100,000

C) $750,000 1) 2500 X 12 =30,000 2) 30,000/4 - 750,000

XYZ Corporation common stock has a market price of $45 per share and earnings per share of $3 when XYZ announces a 3-for-1 split. After the split, the price-to-earnings ratio of XYZ stock will be A) 5 B) 3 C) 15 D) 45

C) 15 45x 1/3

The alternative minimum tax is designed to ensure that certain high-income taxpayers do not avoid all income tax. This is done by adding back to the taxpayer's ordinary income, items such as accelerated depreciation and excess intangible drilling costs. The term used to describe these items used to arrive at the taxpayer's alternative minimum taxable income (AMTI) is A) tax preferred items. B) Form 6251 items. C) tax preference items. D) AMT taxable items.

C) tax preference items.

While searching for a suitable investment for your client, you narrow the choice to the following four companies. Company A with returns over the past 4 years of: 12%, 4%, 8%, 6% Company B with returns over the past 4 years of: 7%, 8%, 9%, 6% Company C with returns over the past 4 years of: 10%, 12%, −2%, 10% Company D with returns over the past 4 years of: 15%, 20%, −8%, 3% Which of these choices has the highest volatility?

Company D with returns over the past 4 years of: 15%, 20%, −8%, 3% ** take the averages and from that see which has the largest deviation from the mean based of the range

According to the NASAA Recordkeeping Rule, which of the following documents must be retained in a file by an investment adviser? Correspondences Photos of all employee The registration applications of its IARs Employment applications

Correspondences The registration applications of its IARs

Which of the following doesn't appear on a bond confirmation? Yield-to-maturity Current yield Yield-to-call Par value

Current yield

Mary is a bowling buddy of Susan, a covered investment adviser. Mary refers Amanda, a wealthy widow, to Susan, and after a very pleasant meeting, Amanda places $15 million under management with Susan. If Susan were to give Mary a cash payment for the referral, A) she would have to obtain Mary's permission first B) both Susan and Mary would have to disclose the cash payment to Amanda C) she would be engaging in an prohibited practice D) only Susan would have to make disclosure to Amanda

D) only Susan would have to make disclosure to Amanda

A life insurance policy where the premium increases each time the policy is renewed while the face amount remains level is A) variable universal B) increasing term C) decreasing term D) renewable level term

D) renewable level term

The time value of money is part of the computation for A) the real rate of return B) the risk-adjusted return C) the after-tax return D) the internal rate of return

D) the internal rate of return One of the unique features of IRR is that it is a compounded rate using the time value of money.

One method of securities registration under the Uniform Securities Act is Qualification. The effective date of a security registered using this method is A) within 2 business days of the filing of maximum and minimum proposed offering prices B) by noon of the 30th day following the filing of the application C) when the offering is made effective by the SEC D) when so ordered by the Administrator

D) when so ordered by the Administrator

An IAR, preparing a statement of cash flow for her clients would include all of the following items EXCEPT: A. Assets B. Expenses C. Salary D. Taxes

D. Taxes ** long term expenses = balance sheet

Zack is employed at Indiana Trust Company, a federally chartered bank. The CFO of the company asks Zack to help sell the bank's securities to some potential institutional clients as well as some select few retail investors who do not have accounts with the bank. Under the USA, Zack: Does not meet the definition of an agent if he sells the securities only to institutional investors Does not meet the definition of an agent under any circumstances Meets the definition of an agent if he sells the securities to any retail investors Meets the definition of an agent since he is selling the bank's securities to individuals who do not have an account with the bank

Does not meet the definition of an agent under any circumstances ** selling exempt securities and does not need to register

Which of the following statements is NOT TRUE regarding a SEP-IRA? An employer is not required to make annual contributions. Employees are immediately vested for any contributions that are made to the account. An employer makes contributions to an employee's SEP-IRA. Employees are permitted to make contributions to the account.

Employees are permitted to make contributions to the account. ***does not allow employees to make contributions. Instead, SEPs are funded by employer contributions only and these contributions are elective (discretionary)

Under the Uniform Securities Act, the statute of limitations for criminal violations of the Act is: One year Three years Five years There is no time limit for criminal violations

Five years

Foresight Advisers does not have an office in New Mexico. Under the Uniform Securities Act, in which of the following situations would the firm be required to register as an investment adviser in that state? Foresight limits its practice to wealthy individual investors with $1 million or more in net assets who are domiciled in New Mexico. Foresight only advises government entities. Foresight solicits its services to eight retail customers in New Mexico . Foresight has assets of $103.4 million under management.

Foresight limits its practice to wealthy individual investors with $1 million or more in net assets who are domiciled in New Mexico. Foresight solicits its services to eight retail customers in New Mexico ** dealing with individual invests means he must register ** servicing more than five investors means he must register

Assuming an expected rate of return, a specific holding period, and a sum to be invested, an IAR is able to determine an investment's: Present value Discount rate Future value Internal rate of return

Future value ** future value of an investment is based on the present value of the amount invested, using a discount rate each year

Which of the following is TRUE concerning the private placement of securities being distributed under Rule 506(c) of Regulation D? General advertising is prohibited. The securities may only be sold to no more than 35 non-accredited investors. The securities may only be offered to accredited investors. General advertising is permitted, but all investors must be accredited.

General advertising is permitted, but all investors must be accredited. **506c no retail 506b no more than 35 retail

One measure of a corporation's liquidation value is its book value per share. When performing this computation, which of the following must be taken into consideration? Goodwill Long-term debt Retained earnings Par value of the preferred stock

Goodwill Long-term debt Retained earnings Par value of the preferred stock

. An IAR works for a federally covered IA. The IA's main office is in State A. The IAR travels to see clients in State B. Under the U.S.A. , which of the following is(are)true? I IAR need not be registered in State B II IAR need not be registered in State A since the IA is federally covered III IAR needs to be registered in State B IV IAR needs to be registered in State A

IV IAR needs to be registered in State A I IAR need not be registered in State B ** federally covered reps only need to be registered in home office state

An Administrator in State Y who receives a complaint regarding an advertisement that originated in State X will take which of the following actions? Investigate the complaint Issue a subpoena for the advertiser to appear before the Administrator Enjoin the advertiser from further advertising Request the Administrator of State X to issue a cease-and-desist order

Investigate the complaint

Which of the following is/are regulated under the Investment Company Act of 1940? Investment companies investing money into other investment companies The firm that serves as a mutual fund's custodian and holds its assets The minimum rate of return required to remain registered as a fund The performance of the investment company

Investment companies investing money into other investment companies The firm that serves as a mutual fund's custodian and holds its assets **1940 does not regulate performance or require minimum return

According to the Uniform Securities Act, persons providing investment advice are NOT required to register as investment advisers if the adviser: Deals only with insurance or investment companies and has only one office in the state Is a savings institution, bank, or trust company Is in a profession such as accounting or law, where the performance of this service is incidental Conducts business exclusively with broker-dealers and other investment advisers and maintains branch offices only in the state

Is a savings institution, bank, or trust company Is in a profession such as accounting or law, where the performance of this service is incidental ** would not need to register with insurance or Ia or BD but has office in state

Which TWO of the following statements are TRUE of the dividend discount model? The model is only used for large cap stocks It is used to determine a stock's value by predicting future dividends and discounting them back to present value If the value determined by the model is higher than the stock's current value, then it is undervalued If the value determined by the model is higher than the stock's current value, then it is overvalued

It is used to determine a stock's value by predicting future dividends and discounting them back to present value If the value determined by the model is higher than the stock's current value, then it is undervalued *** If value of DDM is higher than current value the stock is undervalued

Which of the following statements is TRUE of an investment adviser that maintains custody of client funds or securities? It must initiate Form ADV-E. It must complete Form ADV-W. It must arrange for an independent public account to audit these assets on a regular basis at least every three years. Choices (a) and (c) are both correct.

It must initiate Form ADV-E. ** accountant would look at balance sheet once a year and IA would give advisor form ADV-E

Paul and Todd are starting their own business. They are trying to decide whether to organize this new business as a partnership or an S Corporation. What are some of the advantages of an S Corporation compared to a partnership? Fewer start-up costs More transparency Favorable tax treatment Limited liability

Limited liability ** partnerships are liable for debts lps and s corporations has favorable tax treatments and losses and profits are passed through

Under the USA, which of the following characteristics is required for a banker's acceptance to be exempt from registration? Maturities of no more than nine months Minimum denominations of $100,000 or more CIssued by a blue-chip company Rated in the highest category by at least three ratings companies

Maturities of no more than nine months **short term debt may qualify as exempt

An investor lives in New Jersey and is opening a 529 college savings plan that's sponsored by the state of Montana for his daughter's benefit. His initial contribution is $75,000. Which of the following statements is TRUE? Any earnings generated in the account will be taxed at the daughter's tax rate. The investor will be required to pay federal gift taxes on the $75,000, since the amount exceeds the annual gift exclusion. Neither the investor nor his daughter will be liable for gift taxes on the $75,000 contribution. The investor will be able to deduct the $75,000 from his state income taxes.

Neither the investor nor his daughter will be liable for gift taxes on the $75,000 contribution. ** they did not exceed gift tax

Bill is an investment adviser representative for an advisory firm that has satellite offices in Florida and California, but its principal office is in New York City. The adviser has assets under management of $63,000,000 and its largest client is the Aquarius SmallCap Growth Mutual Fund. Bill works in the New Jersey office and has clients that reside in Florida, New York, and New Jersey. In which of the following states must Bill register as an investment adviser representative? California New Jersey New York Florida

New Jersey **Bill only works out of the new jersey office

Sharpshooter Investments (a broker-dealer) has submitted its registration paperwork to the state Administrator. According to the Uniform Securities Act, its registration will become effective at: Noon on the 10th day after filing Noon on the 20th day after filing Noon on the 30th day after filing Midnight on the 30th day after filing

Noon on the 30th day after filing

A Nasdaq listed company is offering 1,000,000 shares of common stock in State A. The Administrator in State A may: Not require registration of the stock in State A. Require the issuer to perform notice filing. Require the issuer to pay a fee. Investigate the underwriter for possible fraud in connection with the offering.

Not require registration of the stock in State A. Investigate the underwriter for possible fraud in connection with the offering. ** securities on a national exchange are federally covered federally covered exchange listed ( dont pay fees file or provide consent to service)

On Tuesday, June 3, an IA discovers its net worth has fallen below the minimum requirement. When must the IA file a report of its financial condition with the Administrator? On Tuesday, June 3 On Wednesday, June 4 On Thursday, June 5 On Friday, June 6

On Thursday, June 5 **two day after disovery

When considering the tax consequences of trading securities within a trust, the trustee should examine: The taxable assets of the trustee The taxable income of the beneficiary of the trust The taxable assets of the grantor Other taxable income that is generated by the trust

Other taxable income that is generated by the trust *Taxes to the trust are taxed to the trust , income derived by the trust is important

A mutual fund is planning to issue 10 million Class B shares. Five hundred thousand shares will be offered in the state of Rhode Island. Under the Uniform Securities Act, the Administrator of Rhode Island will require the fund to: Register the shares in Rhode Island Include a prospectus with its registration Pay a filing fee Sign a Consent to Service of Process

Pay a filing fee Sign a Consent to Service of Process *exempt securities would only require filing fee and consent to service process

If TopJob Advisers has limited discretionary authority over client funds, it is required to: Prepare a balance sheet that is audited by an independent CPA and file it with the Administrator Prepare a balance sheet only if the majority of the firm's clients are qualified pension plans Prepare a balance sheet and file it with the Administrator Prepare an audited balance sheet and provide its books and records to be spot checked by the Administrator, but only if 72 hours' advance notice is provided

Prepare a balance sheet and file it with the Administrator ** no CPA or audit because its not full discretion

An adviser could recommend the purchase of a bond to a client, if its: Present value is more than its current market value Present value is less than its current market value Net present value is less than zero Future value is less than its current market value

Present value is more than its current market value ** present value is more than current market value its selling at a discount

How quickly must a broker-dealer notify the Administrator if material information relating to that broker-dealer's registration should change?

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: Covered puts on the stocks in the portfolio Puts on a comparable index Calls on a comparable index Call Options on the stocks in the portfolio

Puts on a comparable index **better hedge is a comparable portfolio because portfolio in questions is diversified

An initial public offering (IPO) is being sold in one state only and is not being submitted for registration with the SEC under the Securities Act of 1933. According to the provisions of the Uniform Securities Act, what method of registration would be used for this offering? ANotification Coordination Subordination Qualification

Qualification ***The notification and coordination methods of state registration may only be used when the issuer also files a federal registration statement under the Securities Act of 1933.

Under the Uniform Securities Act, all of the following meet the definition of an agent, EXCEPT an individual who: Effects transactions in registered securities with the public Represents a broker-dealer in effecting securities transactions, but does not earn commissions Works for a broker-dealer and sells exchange-listed securities Represents an issuer in effecting exempt transactions

Represents an issuer in effecting exempt transactions **to determine if agent is exempt for title look at who they represent , only agent of issuers can be exempt

Which of the following statements regarding the differences between Rule 506(b) and Rule 506(c) of Regulation D of the Securities Act of 1933 are TRUE? Rule 506(c) offerings can be advertised, while Rule 506(b) offerings cannot. Rule 506(c) offerings are limited to 35 nonaccredited investors, while Rule 506(b) offerings do not have a limit. The bad actor provisions only apply to Rule 506(c) offerings. Rule 506(c) offerings are limited exclusively to accredited investors, while nonaccredited investors can participate in Rule 506(b) offerings.

Rule 506(b) and Rule 506(c) of Regulation D of the Securities Act of 1933 are TRUE? Rule 506(c) offerings are limited exclusively to accredited investors, while nonaccredited investors can participate in Rule 506(b) offerings.

Which of the following securities is NOT considered exempt under the Uniform Securities Act? Securities issued by an automobile company Securities issued by a Canadian Province Savings and loan association securities Railroad trust certificates

Securities issued by an automobile company **Under the Uniform Securities Act, any security issued by Canada or a Canadian Province, or savings and loan association, or any railroad company is considered an exempt security.

Which of the following actions will require an adviser to register under the USA? Selling fixed annuities Selling investment management services selling equity-indexed annuities Selling mutual funds

Selling investment management services ** selling investment mgmt services require registration as ia

All the following descriptions are TRUE of a closed-end management company, EXCEPT: Shares are purchased at the current offering price Shares are redeemable Investors can purchase full and fractional shares The company may issue only common stock When making a purchase, a customer will pay a markup or a commission

Shares are redeemable The company may issue only common stock Investors can purchase full and fractional shares **closed end is not redeemable, can issue common or preferred or bonds, only full shares

Dan is the CEO of MKM Advisers and also a member of the local golf club. Dan has found that his club membership has provided MKM Advisers with a number of new clients and referrals. In an effort to continue building relationships, Dan decides to charge lower fees to members of the golf club than what nonmembers are charged. The services MKM provides are the same for all of its customers. MKM Advisers provides full disclosure of the special fee arrangement for golf club members in its advisory contracts and in Form ADV Part 2. Based on Uniform Securities Act regulations, which statement BEST describes MKM Advisers' fee arrangement? It causes nonmembers to be charged excessively and is prohibited under the USA It is always acceptable and does not violate the USA Since it is properly disclosed in all contracts and in Form ADV Part 2, the arrangement does not violate the USA For equal services, it discriminates against nonclub members in an unfair manner and is prohibited under the USA

Since it is properly disclosed in all contracts and in Form ADV Part 2, the arrangement does not violate the USA

According to the Uniform Securities Act, which of the following activities is considered a prohibited business practice by a broker-dealer? Stating to a client that the offering price of a security is the current market price, when the broker-dealer is the only firm making a market in that security. Stating to a client that the price at which it is offering to sell a security is the current market price, when the broker-dealer is one of five registered market makers in that security. Providing a client with material, public information regarding a company in which the client has expressed interest. Lending money to a client who is purchasing securities through her margin account.

Stating to a client that the offering price of a security is the current market price, when the broker-dealer is the only firm making a market in that security. ** being the only market maker does not mean that price is the CMP

NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers states that any fee arrangement based on capital gains or portfolio appreciation may only be used if which of the following disclosures is made in writing? That the arrangement never results in excessive fees That the arrangement always leads to lower fees over a long period The adviser must abstain from any such arrangement because the conflict of interest is too great That the arrangement may cause the adviser to recommend strategies that encourage a client to take greater-than-normal risks

That the arrangement may cause the adviser to recommend strategies that encourage a client to take greater-than-normal risks performance-based fees are generally prohibited under the Uniform Securities Act, some state Administrators make exceptions

With regard to the powers of the Administrator, which of the following statements are NOT correct? The Administrator must seek an injunction to issue a cease and desist order. The USA requires an Administrator conduct a full hearing, public or private, prior to issuing a cease and desist order. The USA grants the Administrator the power to issue injunctions to force compliance with the provisions of the act.

The Administrator must seek an injunction to issue a cease and desist order. The USA requires an Administrator conduct a full hearing, public or private, prior to issuing a cease and desist order. The USA grants the Administrator the power to issue injunctions to force compliance with the provisions of the act. *** admin seeks injunction in court no hearing required to issue cease and desist admin can issue cease and desist if ignored then can seek injunction

While a customer who resides in State A is traveling through State B, he is solicited to purchase a security by an agent who is registered in both State A and State B. The customer pays for the security while he is in State B, but then later, the agent sends the confirmation to the customer's home address in State A. Which Administrator(s) has/have jurisdiction over the transaction? Neither the Administrator of State A or State B if the agent is unregistered The Administrators of State A and State B The Administrator of State A only The Administrator of State B only

The Administrator of State B only **offer made in state b and offer accepted in state b

In completing Form BD, all the following information is required, EXCEPT: The Social Security number if the applicant is a corporation Minor rule violation Whether the applicant has been charged with a crime Whether the applicant has been convicted of a crime

The Social Security number if the applicant is a corporation

An investment adviser with no place of business within a state will not be required to register with the Administrator under which of the following conditions? The adviser will provide advice to four individual clients. The adviser has been in business for 10 years. The adviser will provide advice only to accredited investors. The adviser will provide advice only to 401(k) plans with assets of at least $500,000.

The adviser will provide advice to four individual clients.

When an investment adviser files Form ADV with the SEC, it will include: The past 10 years of business history and current affiliations of control persons An audited balance sheet The scope of authority over client funds The compensation to be received

The past 10 years of business history and current affiliations of control persons An audited balance sheet The scope of authority over client funds The compensation to be received

Advisers whose advice is limited to U.S. government securities are defined as investment advisers and required to register with: The SEC and state Administrator The state Administrator only The SEC only the appropriate SRO

The state Administrator only *Advisor that limits advice to GOV securities is exempt from IA definition

As of the close of business on Monday, a state-regulated IA has fallen below its minimum financial requirement. When must the deficiency be reported to the state Administrator? Tuesday Monday Thursday Wednesday

Tuesday ** state requirement is next business day

Which of the following advisers are exempt from registration under the Investment Advisers Act of 1940? Advisers to investment companies Domestic advisers that have fewer than 15 clients U.S. government securities advisers Advisers to charities and non-profit organizations

U.S. government securities advisers ** The IA Act of 1940 provides an exemption for advisers that limit their advice to U.S. government securities.

Which of the following advisers are exempt from registration under the Investment Advisers Act of 1940? U.S. government securities advisers Domestic advisers that have fewer than 15 clients Advisers to investment companies Advisers to charities and non-profit organizations

U.S. government securities advisers ** exempt federally if advice is only to us gov securities

The life insurance policy that allows for the greatest flexibility regarding the payment of premiums is: Decreasing term Universal Variable Split-dollar

Universal ** allows varying premium payments

Which of the following insurance contracts have the elements of term insurance, a cash value that is not market-based, and a flexible death benefit? Whole life Universal life Modified endowment policy Variable life

Universal life ** elect the amount of coverage and the size of the premium. Additionally, it has a cash value that grows at a minimum guaranteed rate. performance of the cash value is not market-based.

All of the following statements are NOT TRUE, EXCEPT: Variable life, as with whole life, has fixed premiums paid at fixed intervals Universal life, as with variable life, gives the policyholder flexibility in changing how the cash value is invested Variable life, as with whole life, has fixed premiums and a fixed death benefit Variable life, as with universal life, gives the policyholder the flexibility to change the death benefit and

Variable life, as with whole life, has fixed premiums paid at fixed intervals ** universal life allows changes in prem and death benefit Variable has fixed prem and fixed min death benefit

An investment adviser's client base is limited to insurance companies. If the adviser has its only office in State A, with whom must it register? With the SEC under the Investment Advisers Act of 1940 and notice file with State A With the SEC under the Investment Advisers Act of 1940 only With State A under the Uniform Securities Act, but not with the SEC under the Investment Advisers Act of 1940 With the SEC under the Investment Advisers Act of 1940 and with State A using the coordination method under the Uniform Securities Act

With State A under the Uniform Securities Act, but not with the SEC under the Investment Advisers Act of 1940 ** insurance companies are exempt but IA would register with state

Howie is both a registered investment adviser and a licensed real estate agent. He recently prepared a financial plan for Bob. In this plan, Howie recommended that Bob increase his life insurance coverage and also consider putting a portion of his portfolio in hard assets, such as real estate. Howie knew of a property called Blackacre that was currently for sale and told Bob about it. Bob eventually purchased Blackacre using Howie as his real estate agent and Howie received a commission for the purchase. Would Howie's commission for selling Blackacre be considered compensation under the Investment Advisers Act? No, real estate transactions are governed by state regulation Yes, Howie's commission for Blackacre would be considered part of his compensation as an investment adviser No, since the commission was not connected with the purchase or sale of a security Yes, but only if Howie did not fully disclose that he was receiving a commission from the sale of Blackacre

Yes, Howie's commission for Blackacre would be considered part of his compensation as an investment adviser **investment adviser compensation includes "any economic benefit."

The USA would permit an agent to use the term "guaranteed" to refer to a security that is backed by the U.S. government a bond that is backed by the taxing power of a governmental body a bond whose interest and principal payments are guaranteed by someone other than the issuer a stock whose dividend payments are guaranteed by someone other than the issuer

a bond whose interest and principal payments are guaranteed by someone other than the issuer a stock whose dividend payments are guaranteed by someone other than the issuer **under usa term guaranteed = obligation of someone other than the issuer

A broker-dealer with an office in this state would be defined as an investment adviser if it charges: commissions for selling securities commissions for selling securities while offering investment advice incidental to the sale of the securities a fee for selling investment research and additional fees in the form of commissions for the sale of securities fees for investment research sold exclusively to institutions located in this state

a fee for selling investment research and additional fees in the form of commissions for the sale of securities fees for investment research sold exclusively to institutions located in this state

A corporation calls in a portion of its long-term debt at 101. This will have the effect of decreasing working capital increasing working capital decreasing net worth increasing net worth

decreasing working capital decreasing net worth

If an investment increases in value, which of the following statements would be TRUE? A Regardless of the actual holding period, the holding period and annualized return are always identical If it was held for less than one year, the holding period rate of return would be greater than the annualized return CIf held for more than one year, the holding period return would be less than the annualized return If it was held for less than one year, the annualized rate of return would be greater than the holding period return

f it was held for less than one year, the annualized rate of return would be greater than the holding period return **if you have a return for less than year you will earn more if you had that return for an entire year

All of the following would qualify as management companies EXCEPT face-amount certificate companies unit investment trusts closed-end investment companies open-end investment companies

face-amount certificate companies unit investment trusts

Under the Uniform Securities Act, an investment adviser may legally have custody of money or securities belonging to a client if the Administrator has not prohibited this practice if the investment adviser has notified the Administrator that it has custody only as long as the adviser does not also have discretionary authority over the account

if the Administrator has not prohibited this practice if the investment adviser has notified the Administrator that it has custody The Administrator may prohibit advisers from having custody of client securities or funds. If no such prohibition applies, the Administrator must be notified in writing that the adviser has custody.

Registration by coordination would most likely be used to register what type of offering? A new issue of mutual fund shares B An intrastate offering An initial public offering D A new issue of shares listed on Nasdaq

initial public offering

Among the differences between C corporations and S corporations is the liability assumed by the shareholders the number of allowable shareholders the tax treatment of the corporation's earnings residency requirements of shareholders

the number of allowable shareholders the tax treatment of the corporation's earnings residency requirements of shareholders **there is a limit placed on the number of shareholders in an S corporation. At the time of this printing, that maximum is 100, none of whom may be a nonresident alien (C corps have no residency restrictions). The primary practical difference is the fact that S corporation earnings (and losses) flow through to the shareholders, whereas C corporation earnings are only received by shareholders when dividends are paid

An investment adviser presented a statement regarding the performance of its recommendations for the past 10 years. In compliance with the minimum recordkeeping requirement, the IA has only kept evidence of its performance for the last five years. In this case, has the IA violated the Uniform Securities Act? No, the IA has not violated any regulations. Yes, because the IA did not maintain evidence of performance for the last 10 years. No, because the IA maintained the minimum documents for five years; however, it was unethical because it doesn't have the appropriate documents. No, because the IA maintained records for the minimum of five years.

years; however, it was unethical because it doesn't have the appropriate documents. *presented a statement regarding performance for the last 10 years and only had records for 5

Starflier Mutual Fund, regulated under the Investment Company Act of 1940, wishes to change its investment policy. It may do so with approval of A) the fund's investment adviser B) a majority of the outstanding shares C) no one because they do not need approval D) a majority of the board of directors

B) a majority of the outstanding shares only requires a vote

Stephen Gigs is about to retire and is concerned about having enough income to supplement his Social Security retirement savings. He would like to buy a conservative investment that can help offset inflation. Mr. Gigs takes the advice of his agent and purchases Treasury Inflation-Protected Securities (TIPS) with a face value of $100,000 and a coupon rate of 2 3/4%. Six months later, he reads that the CPI is up 3 1/2%. What is the approximate amount of Mr. Gigs' next interest payment? 1,375 $1,423 $2,750 $3,500

$1,423 **3.5x100,000+100,000=103,500 103,500*2.75

Under the Investment Advisers Act of 1940, which of the following is (are) excluded from the definition of an investment adviser? 1)The publisher of a financial newsletter on a paid subscription basis, which contains only general securities recommendations 2) Persons whose investment advice relates solely to issues distributed or guaranteed by the U.S. government 3) A lawyer who charges a separate fee for investment advice that is provided as a separate part of the business

1)The publisher of a financial newsletter on a paid subscription basis, which contains only general securities recommendations 2) Persons whose investment advice relates solely to issues distributed or guaranteed by the U.S. government

Which of the following statements regarding a 100% stock dividend are TRUE? 1)The share price is reduced by half. 2)The total market value of the outstanding stock decreases. 3)The total market value of the outstanding stock may increase or decrease as a result of the split. 4)The number of shares doubles.

1)The share price is reduced by half. 4)The number of shares doubles. **In a 100% stock dividend, the number of outstanding shares is doubled and the price is reduced by half. The total market value (market cap) of the issuer's stock remains the same.

A member of the investment banking department of ABC Securities is explaining some of the advantages and disadvantages of rights and warrants to the board of directors of XYZ Corporation. Which of the following statements could he make? 1) The exercise prices of stock rights are usually below the current market price of the underlying security at time of issue. 2)The exercise prices of warrants are usually above the current market price of the underlying security at time of issue. 3)Both rights and warrants may trade in the secondary market and may have prices that include a speculative (time) value. 4)Warrants are often issued attached to a bond issue to reduce the interest costs to the issuer.

1,2,3,4

Which of the following statements about open-end investment companies are TRUE? 1)Open-end investment companies are also known as mutual funds. 2)Open-end investment companies continually offer shares for sale to the public. 3)The price at which an open-end investment company will sell shares to the public is based on the share's net asset value (NAV).

123

What is an investor's internal rate of return if she invested $1,000 and it has grown to $4,000 in 10 years? 14.4% 7.2% 300% 30%

14.4 ** 1) 1k-2k 3k-4k= doubled 2x 2) 10/2 =5 3) 72/5

An investor pays $100 per share for 1,000 shares of a 6% cumulative preferred stock which has one year of dividends in arrears. One year after making the purchase, the issuer has paid its normal preferred dividend, plus the dividends in arrears. At that point, if the investor then sells the preferred stock at $104 per share, what is the total return on the preferred stock for the period? 16% 12% 10% D6%

16% *** $6 dividend for two years + $4 appreciation

Investor Jones begins the year with a portfolio of high-grade bonds and blue-chip stocks valued at $300,000. During the year he receives dividends and interest amounting to $11,345, all of which is reinvested. At year-end, the portfolio is valued at $325,435. The percentage return for the year for this portfolio is: 8.5% 12.3% 7.8% 3.7%

8.5% **increase divided by original value

A corporation has the following financial information: $3 million in cash$5 million in accounts receivable$8 million of inventory$7 million of equipment$2 million in short-term debt$40 million in long-term debt$4 million accounts payable What's the corporation's current ratio? 5:1 1:2 4:3 8:3

8:3 1) cash + account rec + inventory = 16 2) ST debt + scct payable = 6 3) 16/6= 8/3

A court has appointed a person to be the guardian for an incompetent individual. To open a guardianship account with a broker-dealer, which of the following court-issued documents is required? A guardianship agreement A power of attorney A durable power of attorney A certificate of incumbency

A certificate of incumbency ** A certificate of incumbency is a court-issued document that provides the legal authority of a court-appointed guardian to act on behalf of another person.

Which of the following firms would be required to register as an investment adviser in the state of Utah? A firm with $90 million in assets under management and an office in Utah that deals exclusively with four small institutional customers A firm with $24.6 million in assets under management with no office in that state that deals exclusively with institutions A firm with $107 million in assets under management that leases or owns several offices in Utah A firm with no office in that state that sends communications to five or fewer noninstitutional customers within a 12-month period

A firm with $90 million in assets under management and an office in Utah that deals exclusively with four small institutional customers *must register because they have less than $100M AUM

Ten years ago, Tom bought 100 shares of ABC stock at $150 ($15,000 basis). Eight years later, ABC stock was trading at $250 and he gave his brother Vince 40 of his shares. Two years later, Tom passed away and Vince inherited Tom's remaining 60 shares when ABC stock was trading at $350. If Vince immediately disposes of all 100 shares at $400, the tax consequences are: A long-term capital gain of $13,000 A long-term capital gain of $25,000 A long-term capital gain of $15,000 A stepped up basis on all shares

A long-term capital gain of $13,000 1) vince cost basis = 40 X 150 2) Vice sold his shares at 40 * 250 = 10,000 3) 350 * 60 value at brothers death 4) 350 * 60 - 60*400= 3,000 5)= 10,000 + 3,000= 13,000

Which of the following securities would NOT be considered federal covered, but would still be considered exempt under the Securities Act of 1933? An exchange-traded futures contract A variable annuity contract subject to the insurance commissioner's oversight A certificate issued by a court-approved trustee A municipal bond issued by a state and sold only in that state

A municipal bond issued by a state and sold only in that state

Which of the following securities would NOT be considered federal covered, but would still be considered exempt under the Securities Act of 1933? A municipal bond issued by a state and sold only in that state A variable annuity contract subject to the insurance commissioner's oversight A certificate issued by a court-approved trustee An exchange-traded futures contract

A municipal bond issued by a state and sold only in that state **municipal bond is exempt from registration but not exempt

Which of the following statements is (are) TRUE? A person with a place of business in the state who transacts business exclusively with banks and savings institutions is not a broker-dealer under the Uniform Securities Act. A person excluded from the definition of investment adviser under the Investment Advisers Act of 1940 who offers investment advice to individual investors residing in this state, and has less than $25 million in assets under management, is subject to the jurisdiction of the state Administrator. A person included in the definition of an investment adviser under the Investment Advisers Act of 1940, who manages funds on a regular basis as a business headquartered in a state, is subject to payment of filing fees required by the state Administrator. Broker-dealers who supply incidental investment advice and make securities recommendations to customers who pay commissions for the execution of their trades are not investment advisers subject to state or federal registration.

A person included in the definition of an investment adviser under the Investment Advisers Act of 1940, who manages funds on a regular basis as a business headquartered in a state, is subject to payment of filing fees required by the state Administrator. Broker-dealers who supply incidental investment advice and make securities recommendations to customers who pay commissions for the execution of their trades are not investment advisers subject to state or federal registration. **Broker-dealers who supply investment advice incidental to their business and receive no special compensation for it are not investment advisers. **any person excluded from the definition of investment adviser under the Investment Advisers Act of 1940 is considered a federal covered adviser. Therefore, regardless of the amount of money under management, the state has no jurisdiction.

Under the Uniform Securities Act, all of the following individuals meet the definition of an agent, EXCEPT: A person who advises clients about securities for compensation A person who is employed by a broker-dealer and sells stocks that are listed on the NYSE A person who represents an insurance company in the sale of variable annuities A person who effects securities transactions, but does not receive commissions

A person who advises clients about securities for compensation **agent represents a B/d pr issuer in effecting transactions

Under the Uniform Securities Act, all of the following persons are considered agents, EXCEPT: A person who is employed by a broker-dealer in a ministerial function and receives no commissions, but is authorized to accept client orders A person who is hired to sell an issuer's securities to existing employees, but does not receive compensation that specifically relates to this activity A person who represents an issuer and receives no commissions, but does receive a quarterly bonus based on the amount of money raised A person who represents a broker-dealer and offers unregistered, exempt securities to accredited investors

A person who is hired to sell an issuer's securities to existing employees, but does not receive compensation that specifically relates to this activity

If employed by a federal covered adviser, which of the following individuals would be required to register as an IAR in State A? A person who works at the home office located in State B A person who works at the home office in state A however all of his clients are institutions located in State A and State B A person who resides in State A but works at the home office located in State B A person who resides and works in state B, and has five retail clients who live in state A

A person who works at the home office in state A however all of his clients are institutions located in State A and State B **deminimis rule doesnt apply for state advisors ** if he has an office in a state he needs to register

According to the Uniform Securities Act, which of the following is an exempt security? An equity transaction between the issuer and its underwriter The pledge of securities to collateralize a loan A public offering of U.S. government securities An isolated, unsolicited transaction involving non-exempt securities

A public offering of U.S. government securities ** all other choices are exempt transactions

Under the Uniform Securities Act, which of the following statements is/are TRUE regarding the registration of securities? A security is considered registered for one year from the effective date of its registration statement Once the registration statement is declared effective by the Administrator, the security is considered to be registered as long as the issuer files quarterly and annual financial statements If the registration statement for a security is declared effective by the Administrator of one state, it is also immediately effective in any state in which an identical registration statement has been filed The filing of a registration statement may be done by a person other than the issuer

A security is considered registered for one year from the effective date of its registration statement The filing of a registration statement may be done by a person other than the issuer

Which TWO of the following statements are TRUE of stop orders? A stop order may be described as a suspended market order A stop order may be executed only at the stop price or better A stop order, when triggered, guarantees an execution A stop order, when triggered, becomes a limit order and needs its limit price to be satisfied for execution

A stop order may be described as a suspended market order A stop order, when triggered, guarantees an execution ***

Under the Uniform Securities Act, all the following are considered to meet the definition of agent, EXCEPT: A sales representative of a broker-dealer who sells only securities that are covered under a federal exemption An assistant to a sales agent who accepts orders when the agent is unavailable A subsidiary of a bank that is registered as a broker-dealer and sells non-exempt securities to the public A broker-dealer that sells only exempt securities within the state

A subsidiary of a bank that is registered as a broker-dealer and sells non-exempt securities to the public A broker-dealer that sells only exempt securities within the state

Under the Uniform Securities Act, which of the following is exempt from the definition of an investment adviser? A trust company that provides investment advice to trust clients for a fee An insurance company that provides investment advice to clients for a fee A company that provides investment advice to non-profit organizations and municipalities for a fee A firm that solely provides advice on municipal bonds for a fee

A trust company that provides investment advice to trust clients for a fee *Trust company is exempt from definition of investment advisor

Under the Investment Advisers Act of 1940, an adviser's registration usually becomes effective how many days after it is filed? A) 45 B) 30 C) 20 D) 10

A) 45

Under the Investment Advisers Act of 1940, for how many years must records be kept after the end of the fiscal year in which an entry was made? A) 5 years B) 10 years C) 2 years D) 1 year

A) 5 years Records must be kept for a full 5 years — the first 2 years in a in the firm's principal office

Under the Uniform Securities Act, most books and records of investment advisers must be maintained for A) 5 years, the first 2 in the firm's principal office B) 1 year C) 3 years, the first 2 in the firm's principal office D) 2 years

A) 5 years, the first 2 in the firm's principal office

Which of the following statements regarding internal rate of return (IRR) is TRUE? A) IRR is a discount rate at which the net present value (NPV) of an investment is equal to zero. B) IRR cannot be used effectively to measure return on investments with even cash flows, such as bonds. C) IRR ignores the time value of money. D) If the IRR is higher than the cost of borrowing to fund an investment, the investment is likely to be unprofitable.

A) IRR is a discount rate at which the net present value (NPV) of an investment is equal to zero.

Which of the following statements regarding nonqualified annuities is CORRECT? A) It is possible to receive distributions from an annuity before age 59½ without incurring tax penalties. B) Because only insurance companies issue variable annuities, they are not considered securities. C) Because taxes on earnings are deferred, all money withdrawn will be subject to income tax when received. D) The exclusion ratio applies to accumulation units only.

A) It is possible to receive distributions from an annuity before age 59½ without incurring tax penalties. Nonqualified annuities, fixed or variable, are those where contributions are made with after-tax dollars. Withdrawals due to death or disability or taking substantially equal annuity distributions over the life of the insured can begin before age 59½ without being subject to a tax penalty.

It would be least likely for dividends paid on which of the following investments to meet the requirements to be considered qualified? A) REITs B) Preferred stock C) Equity mutual funds D) Common stock

A) REITs You may be asked about REITs, and their dividends do not meet the definition. In similar fashion, dividends on bond funds and money market funds are not qualified because the majority of those dividends represent interest earned by the fund.

Fundamental analysts give significant credence to financial ratios. Which of the following tends to give an indication of the profitability of the enterprise? A) Sales-to-earnings ratio B) Debt-to-equity ratio C) Current ratio D) Price-to-earnings ratio

A) Sales-to-earnings ratio

Which of the following is NOT included in Form ADV Part 2A? A) States in which the investment adviser is registered or intends to register B) A description of how the adviser is compensated C) Investment policy of the adviser D) Types of investments made by the adviser

A) States in which the investment adviser is registered or intends to register The states in which the adviser is registered or intends to be registered are not contained in ADV Part 2A

Market interest rates rise by 50 basis points. If each of these bonds has about the same maturity date, which of the following would decline the least? A) Treasury bond issued at par carrying a 7% coupon B) AAA corporate bond carrying a 6% coupon C) Treasury bond issued at par carrying a 6% coupon D) AA corporate bond carrying a 7% coupon

A) Treasury bond issued at par carrying a 7% coupon Treasury bonds are the safest = least volitile Bonds with the highest coupon are least volitile

Regarding the use of testimonials in advertising, all of the following are true EXCEPT A) an investment adviser representative may only use a testimonial from an existing client B) divulging a list of the investment adviser's clients in response to a court order is not considered a testimonial C) an agent of a broker-dealer may use a testimonial from an existing client with the approval of a designated officer of the firm D) a prominent celebrity speaking publicly about his relationship with the investment adviser is considered to be giving a testimonial

A) an investment adviser representative may only use a testimonial from an existing client Testimonials are prohibited under any circumstances for investment advisers and their representatives. Agents and broker-dealers are permitted to use testimonials if they meet FINRA standards.

All of the following statements regarding futures contracts are correct EXCEPT A) completing a futures contract requires the delivery of the commodity. B) a short position will increase in value if the underlying commodity or asset declines in value. C) futures contracts can be written on financial assets or commodities. D) purchasing a contract for future delivery is considered taking a long position.

A) completing a futures contract requires the delivery of the commodity. **In almost all cases, the holder of the futures contract will purchase an offsetting contract canceling the original position or sell the contract prior to expiration.

A company's dividend on its common stock is A) determined by its board of directors B) voted on by shareholders C) mandatory if the company is profitable D) specified in the company charter

A) determined by its board of directors

Five years ago, an investor purchased an ABC Corporation BBB-rated debenture with a coupon of 6% maturing in 2037. Currently, new BBB-rated debentures maturing in 2037 are being issued with coupons of 7%. Based on the discounted cash flow method, one could say that the present value of the investor's security is A) less than the par value B) more than the par value C) negative D) equal to the par value

A) less than the par value Because this investor's debenture is paying at a rate of 6%, its cash flow is less valuable than a 7% bond; therefore, it will sell at a discount (below par).

You have a 70-year-old client who owns a whole life insurance policy. The face amount of the policy is $1 million and it currently has a cash value of $400,000. The client is interested in a life settlement. If the policy is accepted, the client would expect to receive A) more than $400,000, but less than $1 million. B) the $1 million face amount. C) the face amount plus the cash value. D) less than $400,000.

A) more than $400,000, but less than $1 million. policy is sold through the life settlement process, the insured receives more than the cash value, but less than the face amount of the policy.

Broker-dealers and investment advisers must keep all of the following records EXCEPT A) records of incoming and outgoing telephone calls B) electronic correspondence C) account books D) memoranda

A) records of incoming and outgoing telephone calls only required to be recorded if administrator asks you to

An IAR with a state-registered adviser would like to employ the services of an individual as a solicitor to help bring in more business. The solicitor will be compensated by receiving a percentage on all assets placed under management. In order to do this, all of the following must be complied with except A) the client must sign the contract at the same time as he receives the IA brochure and the solicitor disclosure document B) the terms of the compensation must be spelled out C) disclosure of the arrangement must be made to the client D) the solicitor must be registered as an IAR in order to receive compensation based upon advice

A) the client must sign the contract at the same time as he receives the IA brochure and the solicitor disclosure document **contract is not signed until he agrees to assign the services of the IA

All of the following would be reasons for an employer to choose a nonqualified plan over a qualified plan EXCEPT A) the nonqualified plan provides an immediate income tax deduction for the employer. B) the nonqualified plan provides greater flexibility. C) the nonqualified plan can discriminate in favor of highly compensated employees. D) the nonqualified plan is not subject to ERISA reporting and disclosure requirements.

A) the nonqualified plan provides an immediate income tax deduction for the employer. ****Nonqualified plans do not provide a tax deduction to the employer until the employee receives the economic benefit as income at some point in the future. They are, however, more flexible because they do not have to comply with ERISA reporting and nondiscrimination requirements.

. A client enters an order as follows: Sell stop 100 shares of LTC at 45 limit 45.50. Following the entry of that order, trades occur in the following sequence: 47; 46; 45.12; 44.97; 45.28; 45.97; 46.05. More than likely, the client received A. 45.97 B. 46.05 C. 45.28 D. 44.97

A. 45.97 ** first order is stop at 45 or less t second is limit of 45.50 or higher

Which of the following is included in Adjusted Gross Income (AGI)? A. Alimony B. Municipal Bond Interest C. Child Support D. 401k contributions

A. Alimony ** is reportable income

If a federally registered IA has its principal office in State A and has offices in 3 other states and a client of the IAR who is registered in State A moves to a state in which the IAR is not registered then the IAR may A. Continue business as usual since the IA is federally registered B. Continue business with the client because it is less than 5clients C. Not continue business with the client until the IAR is registered in the client's new state D. Not continue business with the client until the IA is registered in the client's new state

A. Continue business as usual since the IA is federally registered ** rep only needs to be registered in home office

A broker/dealer operating on the premises of a bank would have to make certain disclosures in an advertisement for all of the following, EXCEPT A. Was a radio spot of 30 seconds or less B. Was a television spot of 30 seconds or less C. Was published in a general circulation magazine D. Was only sent to existing customers of the bank

A. Was a radio spot of 30 seconds or less **disclosure not required if ad is 30 seconds or less

Which of the following retirement plans would have the least tax consequence? A. a non-qualified annuity B. IRA C. 401(k) D. 403(b)

A. a non-qualified annuity ** has the highest cost basis and would lower taxable amount

A Savings and Loan association, organized in State A and authorized to do business in State B, has an offering of common stock being made in State B. In order for an individual selling the offering to be excluded from the definition of agent in State B, the individual A. would have to be employed by the Savings and Loan B. would have to be employed by a broker/dealer registered in the otherstate C. would have to be employed by a broker/dealer registered in this state D. could not sell without being an agent

A. would have to be employed by the Savings and Loan ** work for an issuer of an exempt security is not an agent

Which of the following is NOT considered a valid receipt of an offer to buy or sell securities in this state under the Uniform Securities Act? A) A television broadcast transmitted from a neighboring state B) A radio broadcast transmitted from in a neighboring state C) A newspaper advertisement in a paper published in the state but which has over 2/3 circulation outside the state

ABCD

Under the Investment Advisers Act, which of the following forms must be filed if an investment adviser has custody of customer funds and securities? ADV-W ADV-E ADV-NR ADV-H

ADV-E ***ADV-E with the SEC is required if the adviser has custody of client funds and securities.

Klearkettle Associates is a registered investment adviser in Delaware. Due to the retirement of the firm's senior partner and namesake, Horace Klearkettle, the firm decides to close it doors permanently, effective Thanksgiving weekend. What is the status of the registrations of Klearkettle's IA representatives upon the firm's closing? All registrations will remain effective for 90 days but are classified as independent agent registrations BAll registrations will remain effective until year-end but are classified as administrative jurisdictional transitional registrations All registrations will remain effective until December 31 All registrations will be ineffective upon the closing of the firm

All registrations will be ineffective upon the closing of the firm *when IA goes out of business representatives lose their registration

Which of the following choices is NOT a broker-dealer in State B? An agent in State A who contacts a client in State B A corporation that sells commercial paper every other week in State B A broker-dealer registered in State A, where its only office is located, which has only insurance companies as clients in State B A bank trust department that buys and sells securities for its customers

An agent in State A who contacts a client in State B A corporation that sells commercial paper every other week in State B A broker-dealer registered in State A, where its only office is located, which has only insurance companies as clients in State B A bank trust department that buys and sells securities for its customers

According to NASAA's Statement of Policy on Unethical Business Practices, which TWO of the following statements are TRUE concerning information to be included in an investment advisory contract? The fee for managing equity securities may not be higher than for fixed-income securities. An assignment of the contract can be made only by the investment adviser with the consent of the client. There is disclosure explaining that no prepaid fees will be returned if the contract is terminated. There is disclosure as to whether the contract grants discretionary power to the adviser.

An assignment of the contract can be made only by the investment adviser with the consent of the client. There is disclosure as to whether the contract grants discretionary power to the adviser.

The definition of "offer" (offer to sell) includes which of the following? An attempt to dispose of a security for value A solicitation of an offer to buy an interest in a security for value The actual sale of a security for value An offer to dispose of a security for value

An attempt to dispose of a security for value A solicitation of an offer to buy an interest in a security for value An offer to dispose of a security for value

A small, single-office investment advisory firm has $4 million in assets under management. The firm is located in Texas. According to the Uniform Securities Act, which of the following persons associated with the firm will NOT fall under the definition of an investment adviser representative? A partner of the adviser who supervises investment adviser representatives The firm's supervisory analyst who does not have client contact An in-house accountant who tabulates investment results for client accounts A school teacher who is employed full-time by a school district and does some part-time investment counseling and to whom the adviser pays a nominal commission on assets directed its way

An in-house accountant who tabulates investment results for client accounts *advisor performs clerical duties

If an adviser has custody of customer funds and securities, the submission of Form ADV-E must be performed by: An independent accountant within 120 days after the completion of an audit 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 90 days after the completion of an audit

An independent accountant within 120 days after the completion of an audit

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 bonus **any security that an investor receives as a bonus for purchasing another security is considered an offer of that security.

According to the Securities Act of 1933, which of the following descriptions would meet the definition of a security? A contract for the future delivery of 35,000 pounds of pork bellies An options contract for the future delivery of 50,000 pounds of copper Ownership interest in an endowment life insurance policy, with a cash value of $75,000 An unsecured promissory note issued by a corporation, maturing in 270 days or less A money-market mutual fund

An options contract for the future delivery of 50,000 pounds of copper An unsecured promissory note issued by a corporation, maturing in 270 days or less A money-market mutual fund Promissory note is a security, Futures on options are and

Under the USA, which of the following transactions is NOT considered exempt? An unsolicited issuer transaction that is executed through a registered broker-dealer A transaction by a trustee that is involved in a bankruptcy proceeding A transaction by an executor of an estate An offering being made to an investment company

An unsolicited issuer transaction that is executed through a registered broker-dealer

Limited partnerships are offered to the public or are sold through private placement. To avoid registration with the SEC, partnership interests can only be sold to which of the following persons? Any number of accredited investors No more than 35 nonaccredited investors No more than 35 accredited investors Both accredited and nonaccredited investors

Any number of accredited investors No more than 35 nonaccredited investors Both accredited and nonaccredited investors

Under the Uniform Securities Act, what information is NOT disclosed in an investment advisory contract? Any other states in which the investment adviser is registered A provision disallowing the investment adviser to assign the contract to another party without client consent A provision prohibiting the investment adviser from being compensated based on a share of capital gains The manner in which the advisory fee will be computed

Any other states in which the investment adviser is registered

Under the Investment Company Act of 1940, which of the following statements regarding the renewal provisions of an investment adviser's contract is NOT true? A) The contract must be terminable upon no more than 60 days' notice. B) The renewal may be executed orally, provided it is done within 2 years of the initial contract. C) The renewal must state the adviser's compensation. D) The renewal must be approved by either majority vote of the board or majority vote of the outstanding shares, as well as majority vote of the noninterested members of the board.

B) The renewal may be executed orally, provided it is done within 2 years of the initial contract. must be in writing

As defined in the Investment Company Act of 1940, the term "investment company" would NOT include A) a management company B) a holding company C) a face-amount certificate company D) a unit investment trust

B) a holding company

Create A Large Legacy (CALL), Inc., is a state-registered investment adviser with offices in States X, Y, and Z. CALL currently does not have a place of business in State W, but does have 5 retail clients who are residents there. Opening an account for which of the following prospective clients domiciled in State W would now require CALL to register in State W? A) An insurance company account with an opening balance of $750,000 B) A trust having 4 minor children as beneficiaries with total trust assets of $5 million C) A county in State W desiring advice on investment over $250,000 of surplus funds D) A small community bank depositing $500,000

B) A trust having 4 minor children as beneficiaries with total trust assets of $5 million IF they have over 5 retail client they must register **assets don't affect mini maxi rule

An investor inherits 1,000 shares of the ABC Global Growth Fund when the NAV is $9.50, the bid price is $9.00, and the ask price is $9.15. Two years later, the investor sells all shares when the NAV is $14.25, the bid is $14.50, and the ask is $14.60. What are the tax consequences of this sale? A) Long-term capital gain of $4,750 B) Long-term capital gain of $5,500 C) Long-term capital gain of $5,350 D) Long-term capital gain of $5,450

B) Long-term capital gain of $5,500 NAV does not factor into calvulations 1000* 9 1000* 14.60

Which of the following statements is most accurate regarding the net present value (NPV) and internal rate of return (IRR) on a bond? A) IRR assumes the cash flows are reinvested at market interest rates. B) NPV assumes the cash flows can be reinvested at market interest rates. C) IRR assumes the cash flows are reinvested annually. D) NPV assumes that cash flows can be reinvested at the bond's IRR.

B) NPV assumes the cash flows can be reinvested at market interest rates.

According to the Investment Advisers Act of 1940, which of the following statements regarding registration of investment advisers is TRUE? State registration is a requirement for federal registration. An investment adviser must be registered with the SEC to be registered at the state level. A) Both I and II B) Neither I nor II C) II only D) I only

B) Neither I nor II IA's if required to register, they register with either the state or the SEC, never with both. This is unlike broker-dealers who invariably register with both the SEC and the state(s) in which they do business.

Which of the following is least likely to be considered an investment constraint when preparing an investment policy statement? A) Legal and regulatory factors B) Risk tolerance C) Liquidity needs D) Tax concerns

B) Risk tolerance The commonly tested investment constraints are: liquidity needs, time horizon, taxes, legal and regulatory factors, and unique needs and preferences. Risk tolerance is used to help determine what investment objectives will best meet the investor's goals.

John Law is the owner of Mississippi Advisory Services (MAS), an independent financial planning organization. Law is registered as an investment adviser representative of SSC Securities and Investments, registered as a broker-dealer, and an investment adviser with the SEC. Supervision over Law's advisory activities is the responsibility of A) the SEC. B) SSC's CCO. C) John Law. D) MAS's CCO.

B) SSC's CCO. The rules emphasize that these independent contractors are under the supervision of the carrying firm's CCO

Which of the following is TRUE regarding a state Administrator's authority? A) The Administrator's subpoena power covers that state only where officiating. B) The Administrator may suspend an agent's license based solely on the public good doctrine. C) With certain limited exceptions, the Administrator has authority over any transaction made in the state where officiating. D) If a specific securities transaction meets the USA's definition of "exempt transaction," the Administrator does not have the power to void that exemption.

B) The Administrator may suspend an agent's license based solely on the public good doctrine. With certain limited exceptions, a state Administrator has jurisdiction over securities transactions conducted in the officiating state.

Your client turns in a buy limit order for 100 shares of ABC at $58. Following the entry of the order, trades occur at 59, 59, 58.80, 58.20, 58.40, 57.95, 57.85. At what price was this limit order triggered? A) $58.20. B) The order was not triggered. C) $57.85. D) $57.95.

B) The order was not triggered. Only stop orders have triggers. A buy limit order will be executed at the limit price or better (lower). In this case, $57.95.

Which of the following statements best describes the risk-free rate of interest? A) The rate of interest required to produce a net present value (NPV) of zero B) The rate of interest earned on the 91-day U.S. Treasury bill C) The rate of interest in excess of the pure time value of money D) The arithmetic mean of the CPI over the past 12 months

B) The rate of interest earned on the 91-day U.S. Treasury bill NPV=0 is IRR

The antifraud provisions of the Uniform Securities Act would apply to all of the following except A) persons availing themselves of the de minimis exemption. B) an individual employed by a registered broker-dealer whose sole function is selling commodity futures contracts. C) a broker-dealer registered pursuant to the limited registration option available to Canadian broker-dealers and their agents. D) newsletter publishers who do not give advice to subscribers on the subscriber's specific investment situation.

B) an individual employed by a registered broker-dealer whose sole function is selling commodity futures contracts. Uniform Securities Act's antifraud provisions deal with securities; commodities are not a security.

One of your clients just inherited some money and wishes to invest $250,000 into the GEMCO International Equity Fund. The client is attracted to the Class B shares because there is no up-front sales charge on them while the Class A shares have a 3% front-end load. The appropriate response would be that A) you feel so strongly that the Class A shares represent a more attractive solution for the client that you will rebate your share of the commissions B) because of the higher 12b-1 charges levied against the Class B shares as well as the CDSC, Class A shares are recommended for a purchase of this size C) the client is doing the smart thing by avoiding the sales charge, even though you will be losing out on the opportunity to earn a nice commission D) as long as the client will hold the Class B shares no longer than 4 years, the higher 12b-1 fees will be much less than the load paid on the Class A shares

B) because of the higher 12b-1 charges levied against the Class B shares as well as the CDSC, Class A shares are recommended for a purchase of this size 4 years there will still be cdsc

The terms mean, median, and mode are all measures of A) standard deviation B) central tendency C) correlation coefficient D) beta coefficient

B) central tendency middle distribution

Under the Uniform Securities Act, all of the following are exempt from state registration as investment advisers EXCEPT A) publishers of financial publications that are not addressed to clients' specific individual investment situations B) financial planners who provide fee-based investment advisory services to clients C) investment advisers with no office in the state who only advise employee benefit plans with assets of more than $1 million D) investment adviser representatives

B) financial planners who provide fee-based investment advisory services to clients Financial planners who provide fee-based investment advisory services to the public generally must register with their state securities Administrator, as long as their total assets under management are less than $100 million.

The Investment Company Act of 1940 allows a majority vote of outstanding shares of a registered investment company to authorize the fund to do all of the following EXCEPT A) change from an open-end to a closed-end investment company B) invest in securities consistent with the fund's objectives C) change the objectives of the fund D) change the nature of its business and cease to be an investment company

B) invest in securities consistent with the fund's objectives **Under the Investment Company Act of 1940, a vote of the majority of outstanding shares may approve changing from an open-end to a closed-end company, changing the investment objectives of the fund, and deciding to cease to be an investment company.

An investor's required rate of return is 6%. If the internal rate of return of the investment offered is 5.75%, then the NPV is A) zero B) negative C) between 5.75% and 6% D) positive

B) negative

An IAR has received several referrals from a prominent estate-planning attorney. Under the USA, the IAR would be permitted to A) open a managed account for the attorney and offer a discounted fee structure based on the frequency of referrals B) refer advisory clients who need estate planning to this attorney C) compensate the attorney with a fee based on the assets placed under management as a result of these referrals D) send a thank you note and nothing else

B) refer advisory clients who need estate planning to this attorney you can show appreciation by giving referrals to other professionals but it must be disclosed to other professionals

A company's current ratio is .5:1. This could be an indication A) the company's current assets are twice its current liabilities. B) the company may have trouble paying its bills. C) the company is highly leveraged. D) the company's working capital is sufficient to meet daily needs.

B) the company may have trouble paying its bills. *you want the number to be low

Net asset value per share for a mutual fund can be expected to decrease if A) the securities in the portfolio have appreciated in value B) the fund has made dividend distributions to shareholders C) the fund has experienced net redemptions of shares D) the issuers of securities in the portfolio have made dividend distributions

B) the fund has made dividend distributions to shareholders

A FINRA member broker/dealer, is registered in 10 states. Regarding financial requirements, the B/D must meet those of A. The state in which the principal office of the member islocated B. The SEC C. FINRA D. The state with the most stringent financial requirements

B. The SEC ** Finra= fed registered

A semi-retired IAR works for an investment adviser that is located in State A, but she intends to spend the winter months in her second home in State B. The IAR put the addresses of both her office in State A and her home address in State B on her business cards since she intends to continue servicing her clients that reside in State A over the winter months. If the investment adviser does not have an office in State B, which of the following statements is TRUE? Neither the IAR nor the investment adviser need to be registered in State B since they are only doing business with clients whose residence is in State A. Both the IAR and the investment adviser need to be registered in State B since the IAR's residence in State B is considered an office and it is listed on her business card. The IAR needs to register in State B, but the investment adviser does not. The investment adviser needs to register in State B, but the IAR does not since neither she nor her clients are residents of the state.

Both the IAR and the investment adviser need to be registered in State B since the IAR's residence in State B is considered an office and it is listed on her business card. ** because client put her address on her business card both IA and rep would need to register

Which of the following are required in order to be in compliance with the recordkeeping requirements of the Uniform Securities Act? Broker-dealers must maintain customer ledgers for 3 years. Investment advisers must keep partnership records for 3 years after the partnership is terminated. Agents must keep customer records for 3 years. Investment adviser representatives must maintain records for 5 years.

Broker-dealers must maintain customer ledgers for 3 years. Investment advisers must keep partnership records for 3 years after the partnership is terminated. There are no record-keeping requirements for agents or IARs.

Which of the following statements is NOT TRUE concerning the registration requirements of securities professionals? Investment advisers with no place of business in a state and whose only clients are institutional investors in a state need not register Broker-dealers with no place of business in a state and a limited number of noninstitutional clients in a state must register Broker-dealers with no place of business in a state who limit their agents to selling exempt securities in a state need not register Investment advisers with no place of business in a state and a limited number of noninstitutional clients need not register

Broker-dealers with no place of business in a state who limit their agents to selling exempt securities in a state need not register ** the securities are exempt not the agent selling them no deminimis

Which of the following individuals would be considered a noninterested person in a mutual fund? A) A shareholder who owns 10% of the fund's shares B) A member of the board of directors who is also employed as the investment adviser C) A member of the board of directors who does not hold another position within the investment company D) A person who holds a position with the fund's underwriter

C) A member of the board of directors who does not hold another position within the investment company Merely sitting on the board does not make someone an interested person.

Which of the following insurance company products is likely to have the longest time for which a surrender charge will be levied? A) Class B shares B) Variable annuity C) Bonus annuity D) Whole life insurance

C) Bonus annuity

What document must accompany an initial registration application for those individuals required to register as agents under the Uniform Securities Act? A) State photo identification B) Proof of U.S. citizenship C) Consent to service of process D) A birth certificate confirming the registrant is over 18 years of age

C) Consent to service of process The USA requires that a consent to service of process accompany an application for registration.

Which of the following securities is (are) exempt from registration under the Uniform Securities Act? Municipal securities Government securities Stock or bonds issued by an insurance company authorized to do business in this state A) I and III B) I only C) I, II, and III D) II and III

C) I, II, and III government and municipal securities are exempt from registration requirements under the Uniform Securities Act,

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) Stock rights to acquire KAPCO common stock C) Limited partnership interests in a shopping center with KAPCO, Inc., as the general partner D) KAPCO noncumulative preferred stock

C) Limited partnership interests in a shopping center with KAPCO, Inc., as the general partner *** Issuer acts as a general partner in a real estate offering, it is not its security that is being sold, so the exemption does not apply.

An individual purchased a variable life insurance policy 10 years ago with a guaranteed death benefit of $100,000. The annual premium for this policy was $2,000 per year. The individual dies and, due to outstanding performance of the separate account, leaves a death benefit to the beneficiary of $121,000. What are the income tax consequences to that beneficiary? A) Ordinary income tax is due on the $1,000 that exceeds the original cost. B) Ordinary income tax is due on $21,000. C) No tax is due. D) There is a long-term capital gain of $1,000.

C) No tax is due. no taxes due becuase its insurance

Tim earns $30,000 at his employment and is not offered a pension plan. His wife is not currently employed. What is the best way to set up an IRA to give maximum retirement benefits? A) Set up one joint account for $12,000. B) Set up one IRA for $6,000 or 100% of earned income, whichever is less. C) Set up separate accounts for $6,000 each. D) Set up separate accounts totaling $12,000.

C) Set up separate accounts for $6,000 each. A one-worker couple can open a spousal IRA. This type of arrangement allows the contribution of a total of $12,000 to the two accounts and no more than $6,000 in either account. S

Which of the following offers the opportunity to realize a capital gain rather than ordinary income? A) Deferred annuities B) Section 529 plans C) Stock dividends D) Cash dividends

C) Stock dividends Stock dividends, unlike cash dividends, are not taxable in the year of receipt. Instead, they reduce the owner's cost basis and, when sold at a price above that cost basis, are treated as capital gain rather than ordinary income

Under the Uniform Securities Act, all of the following are included in the definition of the term exempt transaction except A) a sale of unregistered nonexempt securities in an unsolicited transaction B) a sale of nonexempt securities to a broker-dealer C) a sale of securities to an individual investor with a net worth of more than $5 million D) a sale of securities to a bank

C) a sale of securities to an individual investor with a net worth of more than $5 million ** no matter the net worth a sale to an individual is not exempt

Life insurance is generally purchased to replace the lost income of the insured. A client wishing to purchase a policy with a level death benefit and level premium for as long as the premiums are paid would choose A) a universal life policy. B) a 5-year renewable term policy. C) a whole life policy. D) a decreasing term policy.

C) a whole life policy. Whole life insurance is permanent insurance with a level premium and a level death benefit.

The Investment Advisers Act of 1940 would consider each of the following investment advisers to be exempt from registration EXCEPT A) an adviser who maintains an office in only one state, advises only residents of that state (none of whom is a private fund), and gives advice relating solely to securities not traded on any national exchange B) an adviser whose only clients are insurance companies C) an adviser whose only clients are banks D) an adviser whose only clients are venture capital funds

C) an adviser whose only clients are banks

If an investor wanted to verify a company's working capital, she would do so by reviewing their A) cash flow statement B) income statement C) balance sheet D) footnotes

C) balance sheet

A firm is registered as an investment adviser under the Investment Advisers Act of 1940. It has decided to raise its annual management fee from $1,500 to $1,800 and require that it be paid 1 year in advance instead of quarterly. The firm would A) need SEC permission to make this change B) now come under the requirement to include a balance sheet as part of its brochure C) be in violation of the law that prohibits pre-payments more than 6 months in advance D) continue doing business as before because the firm was already charging more than $1,200 per year

C) be in violation of the law that prohibits pre-payments more than 6 months in advance For federal covered investment advisers, a prepayment in excess of $1,200 and for periods of 6 months or more in advance (substantial prepayment) requires the adviser to submit an annual audited balance sheet as part of its ADV Part 2 (and brochure).

Your high-net-worth advisory client has a large cash position in his money market account and is considering using the cash to purchase an investment property. You believe that the real estate investment will not provide the same returns that can be realized by investing in bonds, so you prepare a proposal that estimates the income stream and potential capital growth of a portfolio of convertible bonds currently in the firm's inventory. The recommendation is quite suitable for the client based on his current objectives. If the transaction is completed and you fail to disclose that the bonds were sold in a proprietary transaction and receive client consent, you would have A) to disclose the amount of commission on the trade confirmation B) misrepresented a material fact C) committed a prohibited practice D) not breached your fiduciary duty

C) committed a prohibited practice **if a trade is going to include proprietary assets it must be disclosed under FEDERAL AND STATE LAW

Under the provisions of the Uniform Securities Act, it is NOT necessary for an investment adviser to register when it A) has a place of business in the state but deals exclusively with federal covered advisers B) has a place of business in the state but has conducted business with 3 individual investors during the preceding 12 consecutive months C) has no place of business in the state and deals with savings and loan associations only D) is headquartered in a state where it conducts most of its business with broker-dealers only

C) has no place of business in the state and deals with savings and loan associations only

The term "federal covered investment adviser" would apply to a person who A) limits the advice offered strictly to securities listed on the New York Stock Exchange (NYSE) B) is registered as such under the Investment Company Act of 1940 C) is registered as such under the Investment Advisers Act of 1940 D) limits the advice offered strictly to securities issued or guaranteed by the U.S. government or 1 of its political subdivisions

C) is registered as such under the Investment Advisers Act of 1940 Only federal covered investment advisers register under the Investment Advisers Act of 1940. E

Harry Thomas has turned 19 and decided that he is going to join the Marines and postpone going to college. If Harry decides to stay in the military, the unused funds contributed to his Coverdell ESA A) must be returned to the donor with tax plus a 10% penalty on the earnings B) must remain in the plan until Harry's 30th birthday C) may be transferred into another Coverdell ESA for Harry's 25 year-old cousin, Julia D) must be distributed to Harry no later than 30 days after his 21st birthday

C) may be transferred into another Coverdell ESA for Harry's 25 year-old cousin, Julia **funds can be transferred to someone under the age of 30 who is family **Funds would need to be distributed 30 days after 21st birthday

Included among the powers of the Administrator is the ability to A) sentence an investment adviser representative who has been convicted of fraud to a prison sentence, not to exceed 3 years B) arrest an agent who violates the USA C) request the court to appoint a receiver to freeze the bank accounts of a broker-dealer who is the subject of an injunction D) deny the registration of a securities professional, if doing so is in the public intere

C) request the court to appoint a receiver to freeze the bank accounts of a broker-dealer who is the subject of an injunction **Administrator cannot deny registration just based of public interest

Included among the powers of the Administrator is the ability to A) arrest an agent who violates the USA B) deny the registration of a securities professional, if doing so is in the public interest C) request the court to appoint a receiver to freeze the bank accounts of a broker-dealer who is the subject of an injunction D) sentence an investment adviser representative who has been convicted of fraud to a prison sentence, not to exceed 3 years

C) request the court to appoint a receiver to freeze the bank accounts of a broker-dealer who is the subject of an injunction **In order to deny a registration, not only must it be in the public interest, but there must be some other issue, such as insolvency, incomplete application, et cetera.

Rachel is an agent registered with a broker-dealer in this state. It would prohibited for her to A) disclose to a client that a transaction in a thinly traded stock will result in a higher-than-normal commission B) share in the profits and losses in a client account without a financial contribution to the account C) solicit sales of a security whose registration is not yet effective D) execute a transaction in a discretionary account after having received the necessary documentation

C) solicit sales of a security whose registration is not yet effective

A registered investment company whose capitalization may include preferred stock and/or bonds is A) the open-end management investment company. B) the face-amount certificate company. C) the closed-end management investment company. D) the unit investment trust.

C) the closed-end management investment company.

The difference between present value and net present value represents A) the discounted cash flow B) the internal rate of return C) the initial cash outlay D) the credit risk premium

C) the initial cash outlay

A policyowner could surrender a whole life insurance policy and choose from all the following EXCEPT A) purchasing a reduced coverage whole life policy B) taking the cash value C) transferring the policy to another person D) purchasing an extended term life policy

C) transferring the policy to another person

A wealthy, married couple, who are both in their 40s, have money that they would like to invest. If their objective is long-term growth with minimum tax liability upon liquidation in 25 years, which of the following investments is the most appropriate? A variable annuity Municipal bonds An equity-indexed annuity Individual equity securities

Individual equity securities **long-term capital gains tax rate is lower than the highest rate at which ordinary income is taxed.

Under the Uniform Securities Act, when an IAR acting in the capacity of trustee of a family trust executes a transaction on behalf of the trust, it is A. An exempt transaction B. An exempt security C. A non-exempt transaction D. A violation of the trustee's fiduciary responsibility

C. A non-exempt transaction ** fiduciary transactions regarding trusts are exempt relating to bankruptcy

An IA hires a solicitor to recruit clients. According to the Investment Adviser act of '40,what records would the IA be required to keep? A. A receipt of any fee charged, signed by the client B. A written agreement between the client and the solicitor and signed by the client C. A statement that disclosures were given, signed by the client D. No records are required to be kept by the IA

C. A statement that disclosures were given, signed by the client *maintain records of disclosure

Which of these efficient market hypotheses dictates that future performance cannot be based upon historical data? A. weak B. Moderate C. Strong D. Semi-strong

C. Strong **

Under federal law, the statute of limitations for civil liability is A) 2 years after the action B) 1 year after discovery of the action C) 2 years after discovery or 3 years after the action, whichever is sooner D) 1 year after discovery or 3 years after the action, whichever is sooner

D) 1 year after discovery or 3 years after the action, whichever is sooner

Twelve years ago, an investor placed $2,500 into an account. The account is now worth $10,000. Using the Rule of 72, you can determine that the approximate annual return was A) 400%. B) 6%. C) 36%. D) 12%.

D) 12%. 72/12=6 ** to double it we would need 12

XYZ stock has a beta of 0.92. The risk-free rate of return is 3% and the market's rate of return is 8%. Using the capital asset pricing model (CAPM), what is the expected rate of return of this stock? A) 6.85% B) 5.06% C) 10.12% D) 7.60%

D) 7.60% RF + Beta ( RR-RF)

Which of the following would be considered a security under the provisions of the USA? A) An endowment contract issued by a life insurance company licensed to do business in the state B) Gold bullion C) A fixed annuity contract issued by a life insurance company not authorized to do business in the state D) A certificate of interest in a real estate limited partnership offering

D) A certificate of interest in a real estate limited partnership offering

Which of the following transactions would NOT be exempt under the Uniform Securities Act? A) Securities are sold that were collateral for a defaulted loan. B) The executor of an estate sells securities to liquidate the property. C) A registered dealer sells Canadian government securities to a retail client. D) A customer calls his broker-dealer and submits an order to purchase a specific security.

D) A customer calls his broker-dealer and submits an order to purchase a specific security. **Unsolicited non issuer transactions are exempt **registered dealer selling exempt securities is not an exempt transaction

Under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, an investment adviser may NOT borrow money from which of the following clients? A) A finance company not affiliated with the adviser B) A broker-dealer not affiliated with the adviser C) A bank not affiliated with the adviser D) A federal covered investment adviser not affiliated with this adviser

D) A federal covered investment adviser not affiliated with this adviser B/D , BAnk , Client would need to be affiliated

In 1933, Congress passed the Securities Act which required the registration of new issues before their offering to the public. However, the law contained a number of exemptions, including that for A) obligations of the Canadian government B) corporate common stock listed on the NYSE C) stock issued by regulated insurance company D) equipment trust certificates issued by a regulated common carrier

D) equipment trust certificates issued by a regulated common carrier ** all the other options are exempt under USA not Federal law

Due to health reasons, Danny has decided to withdraw his registration as an agent. The withdrawal will take effect A) on the 30th day after filing of the Form U5 B) immediately C) when authorized by his employing broker-dealer D) on the 30th day after filing of the Form U5 unless the Administrator determines an earlier date

D) on the 30th day after filing of the Form U5 unless the Administrator determines an earlier date

Which of the following statements describes a person who provides investment advice on a regular basis but does not charge fees, yet would be considered an adviser under Release IA-1092? A) A wealthy college professor gives free lectures on sound investment practices and makes specific securities recommendations based on a quantitative model he has developed. B) A retired chief investment officer of a well-known investment management company, without compensation, writes a column in a general circulation newspaper commenting on the value of investing in equity securities; many readers find his advice useful and become clients of his former investment management company. C) The secretary of the U.S. Treasury, as part of his official duties, comments on conditions in the financial markets and their future investment implications. D) A financial planner sold his business and spends his time consulting with pension plans on whether to retain or hire new investment managers based on their performance. He does not charge fees; however, those managers retained as a result of his recommendations routinely provide him with noncash benefits such as vacations, computers, and office space.

D) A financial planner sold his business and spends his time consulting with pension plans on whether to retain or hire new investment managers based on their performance. He does not charge fees; however, those managers retained as a result of his recommendations routinely provide him with non cash benefits such as vacations, computers, and office space. financial planner is in the business of giving advice to pension plans, actually provides that advice, and is compensated for it, he meets all 3 elements in the definition of an adviser.

Which of the following investment advisers would be permitted to use the term "investment counsel"? A) A financial planner offering a wide range of services to his clients, including tax planning, estate planning, insurance planning, and investment advice B) An investment adviser who has been admitted to the bar in the state in which the firm's principal office is located C) A professional providing a market timing service with an annual subscription fee of $995, with this service attempting to maximize profits by suggesting entry and exit points for over 100 listed stocks D) A firm whose exclusive business is placing clients' assets into model portfolios

D) A firm whose exclusive business is placing clients' assets into model portfolios *counsel = continuous investment advice to individual clients

An investment adviser representative is researching a security and notices that its beta is zero. Which of the following securities is probably the subject of that research? A) A 5-year U.S. Treasury note B) A 91-day U.S. Treasury bill C) An ETF tracing the index of gold stocks D) A public utility stock

D) A public utility stock All of the other choices would typically have a low beta, but none would have a beta of zero.

Which of the following would have to register as an investment adviser under the Uniform Securities Act? A) An accountant who advises clients about investments as an incidental part of services B) A trust company C) An economics professor who occasionally gives a lecture to business groups about the stock market D) A retired aeronautical engineer who charges a nominal fee for holding seminars on opportunities in aerospace stocks

D) A retired aeronautical engineer who charges a nominal fee for holding seminars on opportunities in aerospace stocks The advice is not incidental or general

You have a 37-year-old client whose wife has just given birth to triplets. Because of the added responsibilities, he wants to maximize the amount of life insurance he can acquire. Which of the following types of insurance will give him the greatest amount of coverage for the lowest initial premium? A) Whole life B) Universal life C) Variable life D) Annual renewable term

D) Annual renewable term At any given age, term insurance always carries the lowest premium and, of the term policies available, annual renewable term always has the lowest initial premium.

Which of the following investment companies registered under the Investment Company Act of 1940 can include senior securities in its capital structure? A) Unit investment trusts B) Face-amount certificate companies C) Open-end management investment companies D) Closed-end management investment companies

D) Closed-end management investment companies **They can have preferred stocks and bonds

Howard Robard is an investment adviser representative with Hughes & Company, a state-registered investment adviser having its principal office in State O and offices in States P and D. Howard works out of an office in State P and has 4 retail clients there. In addition, Howard has 25 retail clients in State D, 6 retail clients in State M, and 1 retail client in State O. Howard would be required to register as an investment adviser representative in A) State P. B) States P, D, M, and O. C) States D and M. D) States P, D, and M.

D) States P, D, and M.

When constructing a portfolio, one of the goals is to increase diversification. Which of the following pairs offers the most diversification? A) Large-cap stock/blue-chip stock B) Municipal GO bonds and long-term U.S. Treasury bonds C) Corporate debentures/convertible bonds D) U.S. equity securities and foreign equity securities

D) U.S. equity securities and foreign equity securities Most convertible bonds are debentures. Only in the case of domestic and international stocks will we find a low correlation.

All of the following are exempt transactions EXCEPT A) a client, on his own initiative, requesting a transaction in a security that is not registered in the state B) a pledgee liquidating securities that were put up as collateral for a loan that has now gone into default C) an administrator of an estate selling securities to liquidate the estate's assets D) a Certified Financial Planner selling NYSE-listed securities to numerous high-net-worth individual clients

D) a Certified Financial Planner selling NYSE-listed securities to numerous high-net-worth individual clients **his would not be true if the financial planner's clients were all financial institutions rather than individuals.

A mutual fund's expense ratio is found by dividing its expenses by its A) income B) public offering price C) dividends D) average annual net assets

D) average annual net assets

In general, a broker-dealer will disclose any changes to its fee schedule A) to the Administrator and then to the clients B) when requested by the client C) within 30 days following the change D) by notifying clients of the change in advance

D) by notifying clients of the change in advance **B/Ds must notify clients 30 days in advance of fee changes

A federally covered advisor has its home office in State A. It solicits 5 customers in State B and holds a seminar in state C. Which of the following is true? A. Must register in State A only B. Must register in State A and State C only C. Must register in State A, State B and State C D. Need not register in any State

D. Need not register in any State ** only has to be registered in home state

The internal rate of return calculation dictates that the interest earned in a portfolio is reinvested at the: A. IRR B. Inflation rate C. US Treasury rate D. Required Return

D. Required Return **IRR is used to find required rate of return

A federally covered adviser has offices in 10 Mid-western states. Regarding record-keeping requirements, the IA must meet those of A. The state in which their principal office isolated B. The state with the most stringent financial requirements C. Each state in which they have a place of business D. The SEC

D. The SEC ** federally covered

Jerry is a successful divorce attorney in your community. Based on a favor you did for him involving one of his cases, he offers to send brokerage business to your firm but asks that you provide him with duplicate confirmations and statements on all clients he refers. What is the best practice in this situation? You may send the duplicate confirmations as long as each customer gives you verbal permission and has previously signed a Regulation SP avoidance waiver (Reg. SP-AW) Duplicate statements may not be sent unless you obtain written consent from each client You may send duplicate confirmations as long as this activity is approved by your firm's chief compliance officer and your supervising branch manager You must refuse the business since sending duplicate confirmations through the U.S. mail is a violation of numerous federal securities laws

Duplicate statements may not be sent unless you obtain written consent from each client ** Need clients written consent to share information

Which of the following is a characteristic of a Money Purchase Plan? Employees must make mandatory contributions Employers must make mandatory contributions Employees and the employer must make mandatory contributions Employer contributions are discretionary

Employers must make mandatory contributions **defined benefits plan where employer must make contribution

An investment company has entered into a contract with an investment adviser. The investment adviser seeks to have an exculpatory provision included in the contract. According to the Investment Advisers Act of 1940, which of the following statements is TRUE? Exculpatory provisions are prohibited in any contract In order for an exculpatory provision to be allowed, the SEC would need to approve the contract A majority of shareholders would need to approve the exculpatory provisions of the contract The contract is valid only when exculpatory provisions are included

Exculpatory provisions are prohibited in any contract

XYZ broker-dealer is located in State A, where it maintains its corporate headquarters. Under the Uniform Securities Act, XYZ would meet the definition of a broker-dealer in State B if it: Has an office in State B and only sells securities to investment companies located in State B Has an office is State B and conducts business only with other broker-dealers that do not have an office in State B Has no office in State B and only sells securities to high net worth clients that are residents of State B Has no office in State B and only conducts business with other broker-dealers that have an office in State B

Has an office in State B and only sells securities to investment companies located in State B Has an office is State B and conducts business only with other broker-dealers that do not have an office in State B Has no office in State B and only sells securities to high net worth clients that are residents of State B **USA does not include no office and only interacts with institutions and issuers if it has an office it meets the requirements regardless

An IAR of a federal covered investment adviser splits his time between an office in State A and State D. The IAR has retail clients as follows: I. 16 clients in State A II. 12 clients in State B III. 6 clients in State C IV. 4 clients in State D

I. 16 clients in State A ** only state A because its federally covered if it was state covered diminims

Which of these features are common to both variable annuities and scheduled premium variable life insurance? Income earned in the separate account is tax deferred. Separate account performance below the AIR causes a reduction in cash value. Fixed contributions are required. Contract owners have voting rights.

Income earned in the separate account is tax deferred. Contract owners have voting rights.

A discounted cash flow evaluates each coupon payment and the repayment of a bond's principal at a present value, Each partner shares equally in the partnership's profits It is easy to dissolve or liquidate the partnership Income is only taxed once Each partner has limited liability

Income is only taxed once

What is the biggest advantage of investing in a general partnership? Income is only taxed once Each partner has limited liability Each partner shares equally in the partnership's profits It is easy to dissolve or liquidate the partnership

Income is only taxed once

Jack has a substantial amount of cash value built up in his variable life insurance policy. He would like to use some of it for a home renovation project. Which TWO of the following choices would be used to explain to Jack his options for accessing his cash value? If he withdraws some of his cash value, it will be treated as taxable earnings first, then a tax-free return of premiums (LIFO). If he withdraws some of his cash value, it will be treated as a tax-free return of premiums first, then taxable earnings (FIFO). If he takes a loan against the cash value, it will be taxed as earnings first, then treated as a tax-free return of premiums (LIFO). If he takes a loan against the cash value, it will be tax-free.

If he withdraws some of his cash value, it will be treated as a tax-free return of premiums first, then taxable earnings (FIFO). If he takes a loan against the cash value, it will be tax-free. **all withdrawals from life insurance are a return of prem 1st which is tax free

David is the owner of a private company and his firm needs to raise capital in order to expand its e-commerce business. David's company will issue debt securities and has decided to avoid hiring an investment bank. Under the USA, in which situation will David's salespersons be exempt from registration as agents? If the company wants to raise capital and issues debt in minimum denominations of $100,000 that matures in four months If the company wants to raise capital and issues debt in minimum denominations of $25,000 that matures in 270 days If the company wants to raise capital and issues debt in minimum denominations of $100,000 that matures in less than one year If the company wants to raise capital and issues debt in minimum denominations of $100,000 that matures in two years

If the company wants to raise capital and issues debt in minimum denominations of $100,000 that matures in four months agent of issuer is not an agent if the issue is debt that has a maturity less than 9 months

A broker-dealer is registered in both State A (where it has an office) and State B (where it doesn't have an office). If the Administrator of State B determines that the broker-dealer is insolvent, what action can it take? It can revoke the broker-dealer's registration in all states, since the Administrator has broad enforcement powers. None. It must defer to the Administrator in State A. It can revoke the registration of the broker-dealer in State B. It can request that the broker-dealer post a surety bond.

It can revoke the registration of the broker-dealer in State B. ** admin can only revoke registration that it has issued

What is the benefit of discounting the cash flows of a fixed-income security? It compares the price of a bond against the sum of the present values of the bond's future payouts An adviser can focus on a company's long-term growth potential and its ability to repay the bond's principal at maturity It will measure the degree of price volatility that a bond will exhibit if interest rates increase It provides the most accurate measurement of interest-rate fluctuations and volatility for bonds having maturities of 10 years or more

It compares the price of a bond against the sum of the present values of the bond's future payouts *A discounted cash flow evaluates each coupon payment and the repayment of a bond's principal at a present value,

A federal covered investment adviser has which of the following obligations regarding the state in which it maintains its principal place of business? It must notify the Administrator of its SEC registration. It must pay state-required filing fees. Its adviser representatives are exempt from state-required exams. It must maintain net worth equal to the higher of federal requirements or those of the state.

It must notify the Administrator of its SEC registration. It must pay state-required filing fees.

Jill has created a revocable trust to provide for the support of her adult child. The trust has generated $20,000 in income during the year and is invested in a wide variety of stocks and bonds. Which of the following statements concerning this trust is NOT TRUE? The trust will become irrevocable upon Jill's death. Jill reduces her potential estate tax liability by the amount of the gains in the trust. Jill controls the assets in the trust. The trust must be structured as a living trust.

Jill reduces her potential estate tax liability by the amount of the gains in the trust. irrrevocable trusts offer tax reduction not revocable, trade off is acess but increased taxes and vice versa

During the past year, the market price of Kapco common stock has increased from $47 to $50 per share. Over that period, Kapco's earnings per share have increased from $2.00 to $2.50 per share, and their dividend payout ratio has decreased from 50% to 40%. Based on this information, Kapco's P/E ratio has decreased Kapco's P/E ratio has increased an investor holding Kapco over this period would have noticed a decrease in income received an investor holding Kapco over this period would have noticed no change in income received

Kapco's P/E ratio has decreased an investor holding Kapco over this period would have noticed no change in income received ** 47/2= 23.5 to 50/2.50= 20 = decrease in PE ** 50% of 2 = 1$ 40% of 2.50. = 1$

Fred works for Lasker Securities and is holding an investment seminar in Connecticut. Fred has sent 100 invitations to people located in New York. Since his firm has no place of business in New York, he has the responses returned to his office in Connecticut. Which TWO of the following statements are TRUE? Lasker Securities would not need to be registered as a broker-dealer in New York if it has no place of business in New York, and the seminar is to be held in Connecticut. Lasker Securities would need to be registered as a broker-dealer in New York, since it is conducting business in the state. Fred would need to register in the state of New York as an agent, since he is doing business within the state. Fred would not need to be registered as an agent in New York, but must be registered in Connecticut, since the seminar will take place in Connecticut.

Lasker Securities would need to be registered as a broker-dealer in New York, since it is conducting business in the state. Fred would need to register in the state of New York as an agent, since he is doing business within the state.

Under the Uniform Securities Act, an institutional investor: Has more than $2.1 million of net worth Has a minimum of $1 million under management with an investment adviser May be designated as such by rule or order of the Administrator Is any financial institution or trust

May be designated as such by rule or order of the Administrator

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 The owners of both types of corporations have the protection of limited liability.

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

Most of the contract's terms are set by the buyer and the seller The buyer of a futures contract cannot be forced to take delivery

Under the Investment Company Act of 1940, which of the following qualify for a discount in a mutual fund's sales charge? Mr. and Mrs. Jones each purchase $5,000 worth of shares; the fund offers a volume discount for a single purchase of $10,000. Neighbors Jan, Mickey, and Lee form an investment club; Jan places an order for $10,000 worth of shares to be held in their 3 names. The fund offers a volume discount for a $10,000 purchase. Allen is the vice president of a firm under contract to provide investment advice to a mutual fund. He buys shares of that fund.

Mr. and Mrs. Jones each purchase $5,000 worth of shares; the fund offers a volume discount for a single purchase of $10,000. Allen is the vice president of a firm under contract to provide investment advice to a mutual fund. He buys shares of that fund. **investment clubs don't qualify for breakpoints

Megamerger is a federal registered investment adviser with offices in all fifty states. John is an investment adviser representative with Megamerger. He is registered in New York where his primary office is located but often travels to New Jersey and uses one of Megamerger's offices there to conduct business. John: Must register in New Jersey unless all of his clients there are institutions BIs exempt from registration, since he is already registered in New York CIs exempt from registration in New Jersey, since he is only using the office temporarily Must register as an IAR in New Jersey

Must register as an IAR in New Jersey **IA has an office therefore must register

A broker-dealer has offices in States X and Y. One of its agents is registered in State X where the agent's primary office is located. The agent often travels to State Y and uses the broker-dealer's office there to meet with clients. The agent: Is exempt from registration in State Y, since the agent is only using the office temporarily Must register in State Y, since the agent uses an office there Is exempt from registration in State Y as long as the agent does not have more than five clients who are residents of State Y Must register in every state in which the broker maintains an office

Must register in State Y, since the agent uses an office there

Bill is an investment adviser representative for an advisory firm that has satellite offices in Florida and California, but its principal office is in New York City. The adviser has assets under management of $63,000,000 and its largest client is the Aquarius SmallCap Growth Mutual Fund. Bill works in the New Jersey office and has clients that reside in Florida, New York, and New Jersey. In which of the following states must Bill register as an investment adviser representative? California New Jersey New York Florida

New Jersey **IARs only have to register in states they use the office for FED covered IAS

Under the Uniform Securities Act, in which of the following circumstances may the Administrator take action against an advisory firm? Nine years ago, the Administrator of another state found that the president of the firm violated the securities laws of that other state. The firm has liabilities that exceed its assets. A minority shareholder with no management role in an investment adviser organized as a corporation cannot meet his financial obligations as they come due.

Nine years ago, the Administrator of another state found that the president of the firm violated the securities laws of that other state. The firm has liabilities that exceed its assets. **Liable for 10 years if violation occurs **insolvency does give grounds to take action

Over the most recent 18 months, a U.S. computer manufacturer repurchased one million shares of its outstanding common stock. The company will be required to take which of the following actions if it intends to distribute these shares in the form of a stock dividend? The distribution of shares qualifies as a private placement offering under Regulation D. The company must register new shares of common stock, since the repurchased shares have been cancelled and are no longer valid for reissue. The shares must be registered with the SEC. No special action is required by the company.

No special action is required by the company. **registration does not expire

An agent who is registered in State A contacts an individual investor in State B. The investor agrees to open an account and buy a security through the agent. If the broker-dealer is registered in State B, but the agent is not, the agent MAY: Not sell the security Sell the security as long as the agent's supervising principal is registered in the state Sell the security if it is registered in State B and the agent's registration is pending in State B Sell the security if it is exempt

Not sell the security **Agent needs to register because its a new client **if client was established he could sell with a pending registration for 60 days

Joshua is employed by JTR Investments. He holds Series 7 and 66 registrations. He also recently organized his own corporation through which he plans to sell promissory notes. Before he begins selling these notes to investors, Joshua must: Have JTR Investments file an amended application with the state Administrator Notify JTR Investments in writing and receive its written permission Pass Series 24 or Series 9/10 and become registered as a principal Notify JTR Investments by simply amending his U4

Notify JTR Investments in writing and receive its written permission

A broker-dealer advertises on a radio program that is broadcast from a bank. Which of the following would be prohibited by the Administrator? Omitting the name of the bank during any 30-second ads during the show Mentioning the advantages of investing in mutual funds without sending a prospectus Mentioning that the broker-dealer that sponsored this show is affiliated with the bank Omitting the name of the broker-dealer in any 30-second ads during the show

Omitting the name of the broker-dealer in any 30-second ads during the show **B/d are not allowed to publish a blind add

On Tuesday, June 3, an IA discovers its net worth has fallen below the minimum requirement. When must the IA file a report of its financial condition with the Administrator? On Thursday, June 5 On Wednesday, June 4 On Friday, June 6 On Tuesday, June 3

On Thursday, June 5 **notify administrator in one day but file in 2 days

An investment adviser is both registered in and located in State A. One of the firm's IARs has three non-institutional clients and one institutional client in State B. A different IAR of the firm has four non-institutional clients in State B. If the investment adviser does NOT have an office in State B, who must register in State B? Only the IARs Only the investment adviser The IARs and the investment adviser Neither the IARs nor the investment adviser

Only the investment adviser **in total the IA has more than 5 non institutional advisors

All of the following securities prices are quoted based on the market price, rather than NAV, EXCEPT: Hedge funds Closed-end management companies Exchange-traded funds Open-end management companies

Open-end management companies

Employee contributions to a 401(k) plan are subject to Social Security taxes federal unemployment taxes federal income tax withholding state income tax withholding

Social Security taxes federal unemployment taxes

An investment adviser representative was the subject of a customer complaint two years ago in the state of Idaho and resigned his position as a result. The Administrator conducted an investigation, the results of which were not made public. He is currently applying for a mortgage for a new home in Boise. The bank where he is applying requests his employment history and contacts the investment adviser for verification. The personnel manager at the firm is reluctant to give the bank any information about its former employee and directs the bank to contact the state Administrator. When the bank calls the Administrator, what information can it expect to receive? The Administrator will contact the investment adviser for authorization to release the information The Administrator will not release any details of the complaint The adviser must contact the Administrator for approval to release the information to the bank The Administrator will provide the details of the complaint since it was securities-related

The Administrator will not release any details of the complaint ** no information is required to be disclosed because the investigation was not public

An investor who resides in State Y is visiting State X. Before returning to his home, he meets with a friend who is an agent and is registered in State X. While at a restaurant in State X, the agent convinces the client to immediately buy a specific security, rather than waiting until the client gets home. The client pays for the purchase and is told that the confirmation will be sent to his home in State Y. If the agent sold this client an unregistered, non-exempt security, which of the following statements is TRUE? The Administrators of State X and State Y may take action against the agent. The Administrator of every state in which the agent is registered may take action against the agent. Only the Administrator of State Y may take action against the agent. Only the Administrator of State X may take action against the agent.

The Administrators of State X and State Y may take action against the agent. **action can be taken in both states

An investment adviser has begun to experience difficulties in collecting fees from the accounts of clients that do not elect to have the fees deducted directly from their accounts. As a result, the firm has decided to raise its fees and require a larger up-front deposit from all new accounts for the upcoming year. However, to reward its current clients, the adviser has decided to waive the fee increase and will not change the terms of their contracts. For this situation, what is the adviser required to do? The IA must make all of the necessary changes and promptly file amendments to its Form ADV The IA must notify all of its current clients of the new fees and update its Form ADV Part 2 within 60 days The IA must make necessary changes to all of its disclosure documents and receive written consent from all of its current clients within 30 days The IA must update its Form ADV Part 2 and any customer disclosure documents within 90 days of its year-end

The IA must make all of the necessary changes and promptly file amendments to its Form ADV **changes apply to current customers so IA only needs to update ADV and does not need consent of current clients

The Administrator of the state of Wisconsin has designated the Investment Adviser Registration Depository (IARD) as the approved method for filing registration applications in that state. All filings must be done electronically through the IARD. Under which TWO conditions would an investment adviser requesting an application in Wisconsin NOT need to file electronically with the IARD? The IARD is not able to recognize the form that is filed. The application is not filed during normal business hours. The investment adviser claims a hardship exemption from filing. The firm has not previously filed a Form ADV.

The IARD is not able to recognize the form that is filed. The investment adviser claims a hardship exemption from filing. **two exceptions when IARD is the method for filing hardship and form cannot be read

According to the Uniform Securities Act, in which TWO of the following cases is an investment adviser exempt from sending clients a written disclosure document under the Brochure Rule? The adviser's clients are only investment companies. An adviser provides impersonal advisory services to online subscribers that cost $250 per year . An investment adviser has no office in the state. The adviser's clients are select institutional investors.

The adviser's clients are only investment companies. An adviser provides impersonal advisory services to online ** brochure real exception if client is an investment company or impersonal advice is provided

All of the following choices are required to be included in a trade blotter, EXCEPT: The account in which the trade was executed The trade date The unit value and total value of the transaction The amount of interest or dividends the investor will receive

The amount of interest or dividends the investor will receive

According to the Uniform Securities Act, which of the following conditions constitutes completion of the registration application process? The application, any other documents, and fees have been received by the Administrator All required documents are received by the Administrator The adviser is approved by the Administrator The application has been sent to the Administrator

The application, any other documents, and fees have been received by the Administrator *administrator does not approve registration

An employee of a federally chartered bank would like to sell mutual funds to the bank's current customers. Which of the following statements is TRUE? The bank employee is exempt from the definition of an agent in this situation The bank employee is exempt if the securities are sold only to current customers The bank employee needs to be registered as an agent The bank employee is exempt because of a safe harbor rule

The bank employee needs to be registered as an agent **employee of bank making sales must register

The Administrator may require an investment adviser to file which of the following documents along with its initial ADV application? A list of all customer securities and the location where they are held A list of all of its recommendations for the past five years A list of all customers and their addresses The firm's current financial condition

The firm's current financial condition

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 doesn't need to be registered. The contractor doesn't need to register with the SEC as a solicitor. The investment adviser is prohibited from paying the contractor. The contractor must register with the SEC as a solicitor.

The contractor doesn't need to register with the SEC as a solicitor. ** State law says solicitors must be registered to receive compensation Federal law only requires a contract

Assume that a corporation issues a 5% Aaa/AAA-rated debenture at par. Two years later, similarly rated debt issues are being offered in the primary market at 5.5%. Which of the following statements regarding the outstanding 5% debenture are TRUE? The current yield on the debenture will be higher than 5%. The current yield on the debenture will be lower than 5%. The dollar price per bond will be higher than par. The dollar price per bond will be lower than par.

The current yield on the debenture will be higher than 5%. The dollar price per bond will be lower than par.

An investment adviser will NOT violate NASAA's model rules by charging a different fee to different clients for the same advisory service if: The fees are reasonable based on industry standards and are disclosed it provides separate and distinct contracts to each client It receives written acceptance from each client It discloses that the fees are negotiable

The fees are reasonable based on industry standards and are disclosed *acceptance of a fee is not enough to avoid violation

Global Investments is a broker-dealer based in State A. It is currently registered as a broker-dealer is States B, C, and D. The firm is looking to expand its business to State E. Under the Uniform Securities Act, in which of the following situations would Global Investments NOT be required to register as a broker-dealer in State E? The firm transacts business only with other broker-dealers. The firm's sole business in State E is with four or fewer noninstitutional customers within a 12-month period. The firm's sole business in State E is limited to transactions in federal covered securities. The firm transacts business only with institutional investors.

The firm transacts business only with other broker-dealers. The firm transacts business only with institutional investors. ** since there is no office the amount of noninstitutional customers is not a factor ** no exemption for the type of securities

An investment adviser manages the portfolio of a mutual fund and is considered to have custody of the assets. Based on this information, the adviser is subject to an annual audit and is required to maintain copies of which of the following records for a minimum of five years? The minutes of the fund's board of directors The fund's audited financial statements The day-to-day status of the securities in the fund's portfolio The fund's bank records

The fund's audited financial statements * because its has custody it must maintain records for independent audit

The ABC Growth Fund charges a 12b-1 fee. This fee is based on: The sales charge that the client pays when shares are purchased The fund's average annual NAV The fund's POP as of the close of business on the date of purchase The sales charge assessed when shares are redeemed

The fund's average annual NAV *marketing

Which of the following statements is TRUE concerning taxation of capital gains distributions from a Subchapter S Corporation? The gain would be taxed as a capital gain at the corporate level and shareholders would receive a tax-free distribution The gain would be exempt from corporate taxes, but would be taxable to the individual as ordinary income The gain would be taxable to both the corporation and individual as a capital gain The gain would be exempt from corporate taxes, but would be taxable to the individual as a capital gain

The gain would be exempt from corporate taxes, but would be taxable to the individual as a capital gain *taxed as a partnership , shareholders are taxed as capital gains

As it relates to viatical investments, which of the following is NOT required to register under the USA? The viatical investment The broker-dealer that offers the investment The agents who sells the investment The insured

The insured **viatical investments are securities and must be registered so BD and agents must register

An investment adviser's sole office is located in State A and its only client is the State A Triple Tax-Free Municipal Bond Fund. The adviser exercises discretion over the fund's investments and also performs safekeeping services for the fund. Which of the following statements is TRUE? The investment adviser must be registered in State A. Since the investment adviser has discretion over a client's funds, it must meet the minimum net worth requirement of the Uniform Securities Act or State A, whichever is higher. Since the investment adviser maintains custody of a client's funds and securities, it must meet the minimum net worth requirement set by the Uniform Securities Act or State A, whichever is higher. The investment adviser is not required to meet the net worth requirements or post a bond since it is regulated at the federal level.

The investment adviser is not required to meet the net worth requirements or post a bond since it is regulated at the federal level. ** Federally covered advisors dont have minimum net worth requirements and is not required to register at state level

A company is issuing stock through an underwriting syndicate. As a part of the syndicate's compensation, it will be given warrants which are able to be exercised at any time over the next two years. Under the Uniform Securities Act, which TWO of the following statements is TRUE regarding the issuer of the stock? The issuer must register the stock or distribute it under an exemption before the warrants can be issued The issuer may distribute the warrants when the registration statement for the stock is filed The issuer is subject to state reporting requirements until the warrants expire The issuer is subject to state reporting requirements only until the stock distribution is completed

The issuer must register the stock or distribute it under an exemption before the warrants can be issued The issuer is subject to state reporting requirements only until the stock distribution is completed ***in order for the warrants to be exercised/converted, the underlying stock must be registered or sold under an exemption prior to the warrants being issued. Under the Uniform Securities Act, the conversion/exercise privilege being offered by the warrants constitutes an offer/offer to sell for the term of the warrant

Which of the following statements are NOT true? The kiddie tax applies to any income received by a child under the age of 19. IRAs have advantages over other estate assets when left to charity. Simple trusts have to distribute income annually. For U.S. citizens, there is an unlimited marital estate tax deduction.

The kiddie tax applies to any income received by a child under the age of 19. IRAs have advantages over other estate assets when left to charity. ***The kiddie tax applies to unearned income only such as that received in an UTMA account. Leaving IRA assets to a charity offers the same estate tax benefits as any other asset.

Related to a transaction, which of the following actions would cause it to be subject to the laws of State Z? The offer and acceptance occur in State Z. The offer originates over the phone from State Z and is directed to State A. The offer is mailed from State A, directed to State Y, and accepted in State Z. The offer originates over the phone from State Y and the sale occurs in State A.

The offer and acceptance occur in State Z. The offer originates over the phone from State Z and is directed to State A. The offer is mailed from State A, directed to State Y, and accepted in State Z. *for letters where offer is accepted takes priority

According to the Uniform Securities Act, which of the following statements is/are TRUE concerning private placements? The offer may not be made to more than 10 persons in that state during any 12-month period. The offer may not be made to more than 35 persons in that state during any 12-month period. The offer may be made to any number of institutional investors during any 12-month period. Commissions may not be paid if the buyers are non-institutional customers.

The offer may not be made to more than 10 persons in that state during any 12-month period. The offer may be made to any number of institutional investors during any 12-month period. Commissions may not be paid if the buyers are non-institutional customers.

According to the Uniform Securities Act, which of the following statements is NOT TRUE concerning a private placement offering? The offer may not be made to more than 10 retail investors in the state during any 12-month period. The offer may not be made to more than 35 retail investors in the state during any 12-month period. The offer may be made to an unlimited number of institutional investors during any 12-month period. Commissions may not be paid if the buyers are non-institutional investors.

The offer may not be made to more than 35 retail investors in the state during any 12-month period. *Rule is for no more than 10

In which TWO of the following circumstances will dollar cost averaging result in an average cost per share that is always less than the average price per share? The price of the stock has fluctuated over a given period. A fixed number of shares is purchased regularly. A fixed-dollar amount is invested regularly. A constant-dollar plan is maintained.

The price of the stock has fluctuated over a given period. A fixed-dollar amount is invested regularly

Under the Uniform Securities Act, the sale of limited partnership interests to a bank is exempt from: The antifraud provisions The registration requirements The filing requirement for advertisements

The registration requirements The filing requirement for advertisements

Registration of a security in a state is not required for ALL of the following reasons, EXCEPT: The security has been registered with the Securities and Exchange Commission under the Securities Act of 1933 The security is offered in an exempt transaction The security is exempt The instrument does not meet the definition of a security

The security has been registered with the Securities and Exchange Commission under the Securities Act of 1933 SEC registration has no bearing on state resgistration

A broker-dealer registered in Colorado sells a security listed on a national securities exchange. The transaction takes place in the secondary market and both clients are residents of Colorado. Under the USA, which of the following statements is TRUE The Administrator in Colorado may not require any filing of information about the broker-dealer or issuer The security is not required to be registered in Colorado The issuer would be required to register the security in Colorado The broker-dealer would be required to register the security in Colorado

The security is not required to be registered in Colorado ** Exempt transaction because its a non issuer

If an investment adviser has an arrangement with a third-party solicitor, what must the adviser maintain? The solicitor's disclosure document The solicitor's Form U4 The solicitor's fee disclosure document The solicitor's Form ADV

The solicitor's disclosure document **Solicitor does not need to be registered because its an IA not a B/D ** no need for u4/ ADV

An investment adviser is also registered as a broker-dealer. According to the Investment Advisers Act of 1940, which of the following statements regarding contracts for impersonal advisory services is/are TRUE? These services may be provided orally. These services may contain statistical information as long as the IA expresses no opinions about the statistics. These services may be distributed in writing. These services cannot claim to meet any specific investment goals of any particular investor.

These services may be provided orally. These services may contain statistical information as long as the IA expresses no opinions about the statistics. These services may be distributed in writing. These services cannot claim to meet any specific investment goals of any particular investor.

A broker-dealer has summer interns who are involved in sales and solicitations, but they are not paid. Are these interns considered agents and subject to registration? They are not, since there is no compensation involved They are not, since they are not considered employees of the broker-dealer They are, since anyone who represents a broker-dealer in effecting securities transactions is defined as an agent They are not, since they are only working during the summer, are considered temporary employees, and not subject to registration

They are, since anyone who represents a broker-dealer in effecting securities transactions is defined as an agent compensation is not a factor

Broker-Dealer A is a publicly traded company listed on the New York Stock Exchange. Which of the following statements is TRUE regarding an agent of Broker-Dealer A who wants to sell securities of his company to a client? This is acceptable if the agent discloses the relationship verbally prior to the transaction since no written disclosure is necessary This is acceptable if the agent discloses the relationship verbally prior to the transaction and in writing before the settlement date This is acceptable only if the agent discloses the relationship in writing prior to the transaction This would be considered an unethical business practice

This is acceptable if the agent discloses the relationship verbally prior to the transaction and in writing before the settlement date **disclosure must be in writing and made verbally

XYZ Inc. is an investment adviser. One of its institutional clients would like to sell 1,000 shares of ABC stock. XYZ believes that this would be a suitable investment for another institutional client. XYZ proposes to arrange a trade between the two clients and would charge each customer a small fee for its services. This would allow each client to receive a better price than either could obtain in the open market. Which of the following statements is TRUE in this situation? AThis is permitted since the two clients are institutional investors, but would be prohibited if they were not This is permitted if XYZ discloses to each client that it is acting as a broker for both parties and receives each client's written consent This is not permitted under any circumstances unless XYZ waives any fee for arranging the transaction This is permitted if XYZ discloses to the buyer that it is representing the seller in the transaction and receives the buyer's written permission

This is permitted if XYZ discloses to each client that it is acting as a broker for both parties and receives each client's written consent ** IA must disclose which capacity it is acting in **obtain clients written consent

Which of the following choices would NOT meet the definition of an exempt transaction? an unsolicited nonissue transaction with a retail investor A transaction by a trustee involved in a bankruptcy Transactions between an issuer and retail investors A transaction executed by a bona fide pledgee

Transactions between an issuer and retail investors **transactions with trustees and bankruptcy are exempt **bona fide pledgee are considered exempt transactions

One element in preparing a financial plan for a client is to determine the appropriate type and amount of life insurance. If a client is conservative, 30 years old, and married with 2 young children, whose income is unpredictable, the IA may recommend what type of life insurance policy? Universal life insurance Whole life insurance Term life insurance Variable life insurance

Universal life insurance ** Since the client is conservative, with unpredictable income, universal life may be more suitable, since the premiums can be increased, decreased, or skipped, by using the cash value to fund the policy.

An investment adviser's client base is limited to insurance companies. If the adviser has its only office in State A, with whom must it register? With the SEC under the Investment Advisers Act of 1940 and with State A using the coordination method under the Uniform Securities Act With the SEC under the Investment Advisers Act of 1940 and notice file with State A With the SEC under the Investment Advisers Act of 1940 only With State A under the Uniform Securities Act, but not with the SEC under the Investment Advisers Act of 1940

With State A under the Uniform Securities Act, but not with the SEC under the Investment Advisers Act of 1940 ** exempt from registration by dealing with only insurance companies but would still register with a state

Under the Investment Advisers Act of 1940, when is a firm's registration required to be renewed? Within 30 days of the adviser's fiscal year-end Within 90 days of the adviser's fiscal year-end Within 30 days of the calendar year-end Within 90 days of the calendar year-end

Within 90 days of the adviser's fiscal year-end **Federal regulation for IA is based on fiscal year

Which of the following are exempt transactions under the Uniform Securities Act? XYZ Company signs an agreement to sell 1 million shares of its stock to ABC broker-dealer, who will then act as an underwriter in marketing the shares to the public A nonissuer sale of securities listed on the Nasdaq Stock Market to several individual clients of the agent Mr. Jones sells 100 shares of an unregistered security he owns to his next-door neighbor for $1,000 A customer calls a registered agent and asks to buy 1,000 shares of SPHG, a company the representative is not familiar with, and the representative fills the order

XYZ Company signs an agreement to sell 1 million shares of its stock to ABC broker-dealer, who will then act as an underwriter in marketing the shares to the public Mr. Jones sells 100 shares of an unregistered security he owns to his next-door neighbor for $1,000 A customer calls a registered agent and asks to buy 1,000 shares of SPHG, a company the representative is not familiar with, and the representative fills the order ***Transactions between an issuer and an underwriter, isolated non-issuer transactions (Mr. Jones), and unsolicited non-issuer transactions (SPGH) are exempt under the Uniform Securities Act.

The National Securities Markets Improvement Act of 1996 (NSMIA) created a new definition known as a covered security. In general, these securities do not have to register on a state level. If XYZ common stock is listed for trading on the NYSE, which of the following XYZ securities are considered covered? XYZ participating preferred stock XYZ first mortgage bonds Warrants to purchase XYZ common stock Rights issued in advance of an offering of additional XYZ common stock

XYZ participating preferred stock XYZ first mortgage bonds Warrants to purchase XYZ common stock Rights issued in advance of an offering of additional XYZ common stock

If XYZ is a registered broker-dealer with its lone office located in State T, under which of the following circumstances must it also register in State L? XYZ's only dealings in State L are directly with issuers of securities in State L. XYZ engages in extensive transactions with the largest insurance company in State L. XYZ routinely sells nonexempt securities to extremely high net-worth residents of State L. XYZ purchases exempt securities from extremely high net-worth residents of State L for resale to residents of State T.

XYZ routinely sells nonexempt securities to extremely high net-worth residents of State L. XYZ purchases exempt securities from extremely high net-worth residents of State L for resale to residents of State T. ** USA if BD engages with individual investors it must register ** USA if BD has no office and engages with institutions it has no reason to register

Violations of the Investment Advisers Act of 1940 are punishable by a fine of up to $10,000 a prison term of up to 20 years suspension of registration

a fine of up to $10,000 suspension of registration

A broker-dealer would be required to register in Pennsylvania if the broker-dealer: Has an office in Pennsylvania and executes nonissuer transactions of securities listed on a national securities exchange Has no office in Pennsylvania and executes nonissuer transactions of securities listed on a national securities exchange with clients that are residents of Pennsylvania Has an office in Pennsylvania and executes transactions of municipal securities with clients that are not residents of Pennsylvania Has no office in Pennsylvania and executes transactions of municipal securities with clients that are residents of Pennsylvania AI and II only I, II, III, and IV CIII and IV only I and III only

all situations b/d would register **A broker-dealer executing a transaction in an exempt security or exempt transaction is required to register, unless it is exempt from the definition of a broker-dealer in that state