SIE - Unit 4
Under the Investment Company Act of 1940, which of the following is NOT considered an investment company?
Hedge fund (hedge funds are organized as private investment companies (often limited partnerships), which are excluded under the definition of investment company under the Investment Company Act of 1940.)
The sales charge for Class A shares may not exceed
8.5% of the total investment (thought they are almost always must smaller, sales charges for Class A shares may not exceed 8.5% of the money invested.)
ACE, an open-end investment company, operates under the conduit, or pipeline, tax theory. Last year, it distributed 91% of all net investment income as a dividend to shareholders. Therefore, which of the following statements is true?
ACE paid taxes on 9% of its net investment income last year (ACE pay taxes on any portion of income it does not distribute, as long as it distributes at least 90%; ACE paid taxes on 9%.)
All of these are part of the expense ratio of a mutual fund EXCEPT
CDSC (The contingent deferred sales charge (cdsc) is charged against the proceeds of a sale of the fund's shares, not against the fund's assets.)
Under the IRC Subchapter M, if the WWF Fund only distributes 85% of its net investment income to its shareholders, then which of these is true? I. The fund must pay taxes on the undistributed 15% of net investment income. II. The fund must pay taxes on 100% of the net investment income. III. The shareholder pays no tax if the income is reinvested. IV. The shareholder must pay taxes if the income is received in cash or reinvested.
II and IV
Which of these would not affect the NAV per share of a mutual fund share?
Portfolio securities that had to be sold for a big capital loss
A diversified goth fun charging 0.4% of net assets per years as a 12b-1 fee may not make which of the following statements?
The fund is a no-load fund.
All of the following actions would cause the NAV per share of the mutual fund to increase EXCEPT
a large number of investors making deposits in the fund.
The Windmill Growth Fund has breakpoints at $10,000, $25,000, and $50,000. Your customer places an unsolicited purchase through you for $47,000. You place the trade as requested without question or comment. This action is
a rules violation
An investor has purchased Class A mutual fund shares. The net asset value (NAV) per share of the fund is the price the investor
will receive upon redemption of the shares. (NAV per share of a mutual fund is calculated by dividing the net assets of the fund by the number of shares outstanding. When purchasing Class A shares, NAV plus a sales charge is paid; when redeeming the shares, the investor simply receives NAV.)
Which of the following issues only common stock?
An open-end management investment company
Which of these would be unlawful regarding the use of a mutual fund prospectus?
Calling an investor's attention to a section that may be interesting.
Which of the following investment companies has an actively managed portfolio?
Closed-end company
Short-term purchases and sales of a mutual fund to take advantage of price fluctuation is known as
market timing (the practice of market timing in mutual funds is not illegal but is rarely advantageous)
A mutual fund can offer all of the following to investors EXCEPT
physical custody of the fund's portfolio cash and securities. (services mutual funds offer may include retirement account custodianship, investment plans, check-writing privileges, transfers by telephone or online, withdrawal plans, and a number of other services and privileges. The Act of 1940 requires that each investment company place portfolio cash and securities with a custodian for safekeeping.)
