Weighted Mock 2

A 403(b) plan may invest in various instruments, such as?

A 403(b) plan may invest in various instruments, including mutual funds, stocks, bonds, and CDs in addition to annuity contracts.

One problem facing agent and client alike is determining how much life insurance is necessary to meet future needs. One tool that is useful for making that determination is a?

A life insurance capital needs analysis takes into consideration the future needs of the insured and family and then factors in how much needs to be filled in by life insurance.

A limited liability company is?

A limited liability company is a form of business entity in which the shareholders (called members) are taxed individually at their respective tax rates as is the case in a partnership.

What is a nonissuer transaction?

A nonissuer transaction is a transaction in which the "proceeds" do not directly or indirectly go to the issuer as in a secondary transaction. Follow the proceeds.

A" fiduciary" is a?

A person entrusted with the duty of acting for the benefit of another party is a fiduciary and must follow the standards of fiduciary duty appropriate to the nature of the relationship.

An Administrator has jurisdiction over an offer to sell securities if it is made in a newspaper published out of state?

A state Administrator never has jurisdiction over a securities offering made in a bona fide newspaper published out of state. However, the Administrator has jurisdiction if the paper is published in his state except where 2/3 or more of the paper's circulation is out of that state.

The most advantageous tax benefit available to a taxpayer is?

A tax credit permits a dollar-for-dollar reduction in a person's tax liability.

Accredited investors are?

Accredited investors are financial institutions, wealthy persons meeting specific requirements, and for a particular issue persons involved in the management of the issuer.

Remember.

Advisers who have custody must segregate a client's securities, keep in a safe place, commingle only client funds in one bank account as long as complete records r kept, quarterly reports to clients , and annually arrange for an unannounced audit.

Can an investment adivsory contract be assigned without the consent of the client? Such as an advisory firm being sold to another advisory firm, what happens to the client?

An investment advisory relationship may not be assigned without the consent of the client. The client may choose to enter into a contract with the new firm. The contract with the old firm becomes void when it sells its business.

Any primary offering, unless the security is exempt, requires?

Any primary offering, unless the security is exempt, requires timely delivery of a prospectus. Treasury notes and private placements are exempt.

When is the grantor trated as the owner?

As long as the grantor has the power directly or indirectly to control the trust, he is treated as the owner. The grantor may be taxed on trust income if the grantor either actually or constructively receives the income.

What vehicles make use of the unified estate tax credit?

Both the bypass trust and the generation skipping trust are tools used by estate planners to reduce estate taxes. They do so by passing the amount in the unified credit currently $5.34 million for 2014.

What are brady bonds and is it an asset class?

Brady bonds are considered a debt security, but not an asset class. Brady bonds are issued by a developing country as a result of a restructuring of its defaulted bank debt.

Because of liquidity issues involving portfolio holdings, most "country" funds are?

Closed-End. In many cases, the liquidity of those securities is somewhat limited and, therefore, operating as an open-end fund in the US, where ready redemption at NAV must take place, would be a problem.

If you were describing an investment that trades on an exchange with a price set by supply and demand, rather than its underlying value, it would be a?

Closed-end fund. The stock of closed-end investment management companies trades on exchanges and, like any other exchange security, is priced based upon supply and demand. Although closed-end funds compute their NAV, it is market forces that determine price.

What are country funds?

Country funds are those where the portfolio is invested in securities of issuers domiciled in that country.

What term is used to describe which employees will be covered by a pension plan?

Eligibility. Pension plans must have a uniform nondiscriminatory eligibility program. All employees must be covered when they become eligible, which means reaching one year of service working full time and age 21.

Estate taxes are due when?

Estate taxes are due 9 months after death, and unless there are other assets not listed here, no tax is due because this estate is less than $5.25 million the amount exempt from taxation for 2013.

The Administrator may require what from a federal covered adviser?

Even though the Administrator has limited jurisdiction over federal covered advisers, they can require filing of a copy of the information filed by that IA with the SEC (the Form ADV) as well as a filing fee.

Are fingerprints a specific requirement of the USA?

Fingerprints are not a specific requirement of the Uniform Securities Act.

If you are seeking diversification, you want the correlation between the 2 portfolios to be?

Low or more negative. A high correlation means that their performance will be similiar. A low correlations means that they will act in opposite ways.

What are match orders and when do they occur?

Matched orders occur when market participants agree to buy and sell securities among themselves to create the appearance of activity or trading in a security.

Under federal law, a registered agent could offer securities for sale during the underwriting period and before the effective date of registration when?

Never. This time in the life of an underwriting is commonly referred to as the cooling-off period, during which indications of interest may be accepted with the use of a red herring. No offers or sales may be made before the registration's effective date.

Which contact has no activity in the secondary market?

One of the disadvantages when investing in forward contracts is that there is no active secondary market.

The SEC has the power to?

The SEC has the power to make, amend, and rescind rules in administering the securities laws. the SEC may administer oaths, obtain written statements, subpoena witnesses, take evidence, and require the production of books and records. The SEC does not have the power to arrest and detain suspects.

The application process for an agent's registration requires the agent to provide?

The application process for an agent's registration requires the agent to provide a Form U4 application, a consent to service of process, and a filing fee. Tax returns and business plans are not required.

What describes the death benefit provision of a variable annuity?

The death benefit insures that the investor will never receive back less than the original amount contributed to the account. Unlike life insurance proceeds, with annuities, anything above the cost basis is taxed as ordinary income.

When a specific sum is mentioned, what kind of need is this indicating?

The easiest way to determine if it is a constraint or a capital need is if a dollar amount is stated. When a specific sum is mentioned, it is a capital need.

The federal act defines an exempt private placement as a?

The federal act defines an exempt private placement as a sale to no more than 35 nonaccredited persons.

What circumstances would require an investment adviser to notify all clients of the firm?

The investment adviser must disclose to the client any change in the members of a partnership.

Who is the Settlor and what term is synonymous?

The settlor, sometimes referred to as the grantor, is the person who establishes the trust. The trustee administers the trust and could be the grantor but does not have to be.

A federal covered investment adviser employs the services of a third-party solicitor. The Investment Advisers Act of 1940 would require the solicitor to deliver?

Third-party solicitors must provide a copy of the investment adviser's brochure (Form ADV Part 2), as well as a copy of the solicitor's brochure.

When would investment advisers be permitted to use the term "investment counsel"?

To use the term "investment counsel", two criteria must be met. First, the principal business of the adviser must be the rendering of investment advice. Second, the nature of the advice must meet the definition of investment supervisory service.

What is the best measurement of a security's performance?

Total return reflects the entirety of a security's performance because it includes both income and capital appreciation.

Do treasury bills or TIPS have the stated interest rate?

Treasury bills bear no stated interest rate. They are sold at a discount through weekly auctions and are actively traded in the money market. Treasury notes and Treasury bonds as well as TIPS, all carry stated interest rates.

Under IA-1092, an investment adviser?

Under the SEC's release, the rendering of advice does not have to be a person's principal activity. Rather, it must be a regular activity, and compensation may be received directly or indirectly.

Unlike mutual fund shares, ETF shares can?

Unlike mutual fund shares, ETF shares can be traded on margin and sold short.

For purposes of the definition found in Rule 501 of Regulation D of the Securities Act of 1933, the term accredited investor would not apply to?

an investment adviser representative. An individual is not an accredited investor solely by virtue of being an IAR. If that person had the net worth or income specified in the Rule, OK, but just being in the business does not qualify.

The Uniform Securities Act defines an exempt private placement as a?

as an offer to no more than 10 noninstitutional persons in a particular state.

Investment constraints are limitations on the ability to make use of particular investments. They can be?

can be liquidity, time horizon, tax concerns, legal and regulatory factors, and unique circumstances ethical objectives or social responsibility considerations.

An advisory client of yours dies, and you transfer the $1.4 million of securities in the individual's name to the estate account. You will?

continue to manage the account unless the advisory contract called for termination upon death or informed otherwise by the executor. Unless the advisory contract has a termination upon death provision or the executor wishes to assume management of the account.

Anytime the NPV is higher than the cost of the investment, you will have?

cost of the investment, you will have made a profitable investment.

A money purchase pension plan is a?

is a defined contribution plan established by the employer, thereby making the contributions mandatory. Employee participation by making voluntary contributions to the plan is optional. Employees who contribute to the plan usually contribute a percentage of their income.

The formula for real rate of return would most likely be used when the adviser wishes to?

measure inflation-adjusted performance. The real return formula measures inflation-adjusted performance.

A basic feature of a nonqualified plan is that the benefits are?

nonqualified plan is that the benefits are not guaranteed. If they were, the tax characteristics of the plan would change.

A client has told you that she has been reading in the financial press about something known as an "alternative investment". What is an AI?

on your exam it will refer to Direct participation programs and Hedge funds.

A client with a sizeable estate would probably find it most efficient to pay estate taxes with?

proceeds from a life insurance policy. In general, people with estates where there is a potentially large estate tax liability, find that the most efficient way to pay those taxes is through a life insurance policy.

It is easier to remember the things that are not a security such as?

retirement plans, nonvariable insurance policies, collectibles, commodities, condominiums, and currencies.

Federal covered securities include those on exchanges registered with the SEC, such as?

such as the NYSE, the AMEX, and the Nasdaq Stock Market as well as investment companies registered under the Investment Company Act of 1940.