4.7

Under the USA, what are the maximum penalties for a securities-related felony? A) $3,000 and three years' imprisonment. B) $3,000 and five years' imprisonment. C) $5,000 and three years' imprisonment. D) $5,000 and five years' imprisonment.

$5,000 and three years' imprisonment.

A client has a TIPS with a coupon rate of 3.5%. The inflation rate has been 4% for the last year. What is the inflation-adjusted return? A) 3.50% B) 4.00% C) -0.50% D) 7.50%

3.50%

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

A registered dealer sells Canadian government securities to an individual client.

Which of the following are characteristics of a REIT? I.It is traded on an exchange or over the counter. II.It is professionally managed. III.It passes through both gains and losses to investors. IV.It is a type of limited partnership. A) I and II B) II and III C) III and IV D) I and IV

I and II

Company-sponsored 401(k) retirement programs have which of the following? I. Voluntary employee contributions. II. Voluntary employer contributions. III. Mandatory employee contributions. IV. Mandatory employer contributions. A) I and II. B) II and III. C) I and IV. D) III and IV.

I and II.

An agent under the USA is a(n): I. individual who represents an issuer in nonexempt transactions. II. registered broker/dealer that deals in registered securities. III. individual who sells nonexempt securities as a representative of a registered broker/dealer. IV. individual who has no place of business in the state and sells securities to an existing client who is not a resident of the state. A) I and IV. B) II and IV. C) I and III. D) II and III.

I and III.

There are several popular portfolio management styles employed by professional money managers. In which asset allocation program is it most likely that commission expense will have a significant impact on portfolio performance? A) Tactical B) Indexing C) Passive D) Strategic

Tactical

With respect to a federal covered adviser, which of the following statements is NOT true? A) Withdrawal of its registration by an adviser will become effective on the 45th day after the request. B) Within 45 days after filing Form ADV, the SEC will either grant the registration or institute proceedings to determine whether the application should be denied. C) An investment adviser must file an annual updating amendment to the Form ADV within 90 days of its fiscal year-end. D) If material misstatements are contained in an adviser's registration documents, the SEC may censure, suspend for up to 12 months, limit the activities of, or revoke the adviser's registration.

Withdrawal of its registration by an adviser will become effective on the 45th day after the request.

In order to come under the SEC's requirement to file a Form 13F, an institutional manager must have discretion over: A) a portfolio of at least $50 million. B) a portfolio of at least $100 million of 13(f) securities. C) more than 10% of the outstanding voting securities of a reporting company. D) a portfolio of at least $100 million.

a portfolio of at least $100 million of 13(f) securities.

When referring to a federal covered investment adviser, all of the following are supervised persons EXCEPT: A) the chief analyst. B) an investment adviser solicitor. C) an investment adviser representative. D) the receptionist who works for the investment adviser and analyzes client financial profiles.

an investment adviser solicitor.

You inform a customer that you are not allowed to solicit an order for a stock but will accept that customer's buy order if placed. This is: A) an offer to sell only if it is accepted. B) an offer to sell. C) an offer to purchase. D) an unsolicited transaction.

an offer to sell.

A commodities speculator purchases a 1,000 bushel wheat futures contract at 50 cents per bushel. At expiration, the settlement price is 45 cents per bushel. This individual A) effectively hedged the long wheat position B) has a $50 loss C) must make delivery of the wheat D) has a $50 gain

has a $50 loss

Under the exchange provision, within the first 24 months, a variable life policy may be converted into a A) variable annuity B) mutual fund shares C) term insurance policy D) permanent form of life insurance policy

permanent form of life insurance policy

All of the following statements regarding the selling of private placements under the USA are true EXCEPT that: A) they cannot be offered to more than 35 noninstitutional persons in 12 consecutive months. B) no commission or other remuneration may be paid for soliciting noninstitutional buyers. C) they can be offered without limitation to institutional investors. D) the seller must reasonably believe that all noninstitutional buyers are purchasing for investment purposes only.

they cannot be offered to more than 35 noninstitutional persons in 12 consecutive months.

Which of the following would be considered a nonissuer transaction as defined in the Uniform Securities Act? I.Gates Williams, the largest shareholder in Maxihard Corporation, sells 100,000 shares in a registered secondary transaction. II.Buffy Warren, the largest shareholder in Barkshire Mathaway, purchases an additional 50,000 shares on the NYSE. III.In its capacity as a market maker, XYZ Securities sells 200 shares of Gemco common stock to the corporate treasurer of Gemco, buying for the company's investment account. IV.Gemco, traded on the Nasdaq Stock Market, sells 5,000 shares of its stock to XYZ Securities, a registered market maker in Gemco stock. The stock was donated to Gemco by a former officer of the firm. A) I and II. B) III and IV. C) I, II and III. D) II and III.

I, II and III.

Which of the following statements concerning the books and records of an investment adviser under the Investment Advisers Act of 1940 is (are) TRUE? I. Books and records must be maintained in the principal office of the adviser for the first two years from the origination date. II. Books and records must be maintained in an easily accessible place for no less than 5 years from the end of the last fiscal year in which an entry was made. III. Copies of all investment letters, advertisements, or communications to ten or more persons must be preserved for five years from the end of the fiscal year of the publication date. IV. An adviser who ceases business continues to be responsible for the maintenance and preservation of records for the balance of any required period and must notify the SEC of the address at which the required records will be maintained. A) II only. B) I only. C) I, II, III and IV. D) I, II and III.

I, II, III and IV.

Assets that might be found on a family balance sheet include: I. car loan. II. gold watch. III. Keogh plan. IV. salary. A) I and II. B) I and IV. C) II and III. D) III and IV.

II and III.

An 80-year-old client who is barely able to afford rent and other living expenses inherits $75,000. What is the most suitable investment objective for this client? A) Preservation of capital and liquidity. B) Inflation protection and income. C) Income and preservation of capital. D) Income and growth.

Income and preservation of capital.

Which of the following is NOT considered to be in the business of investment advising? A) A person who prepares reports about securities in general. B) Insurance agents who discuss the merits of life insurance verses nonsecurities financial instruments and who receive commissions on the sale of life insurance only. C) An insurance agent who provides advice regularly, but such advice represents a small portion of her business. D) A financial planner who provides advice on many types of financial instruments, including securities, and receives commissions on the sale of life insurance.

Insurance agents who discuss the merits of life insurance verses nonsecurities financial instruments and who receive commissions on the sale of life insurance only.

An issuer wishing to comply with Regulation D of the Securities Act of 1933 must file a Form D with the SEC: A) no later than the time of the first sale. B) no later than 15 days after the first sale. C) no later than 30 days after the first sale. D) no less than 20 days prior to the first expected date of sale.

no later than 15 days after the first sale.

Under the NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, which of the following statements regarding the use of reports is TRUE? A) An adviser is prohibited from basing a recommendation wholly on the product of someone else's work. B) One adviser may distribute a report prepared by another adviser if the source of the report is disclosed. C) An adviser must disclose the source of any information used in making a recommendation whenever requested by the client. D) An adviser is required to disclose all sources of information used in making a recommendation to a client.

One adviser may distribute a report prepared by another adviser if the source of the report is disclosed.

Under the USA, which of the following statements regarding the posting of surety bonds is NOT true? A) Bonds may be required for agents of broker/dealers. B) The Administrator requires all broker/dealers to post bonds even if they maintain net capital in excess of minimum amounts. C) The Administrator can accept securities instead of cash if the posting of a bond is required. D) The Administrator requires the posting of bonds primarily to cover the cost of civil liabilities associated with violations of the Uniform Securities Act.

The Administrator requires all broker/dealers to post bonds even if they maintain net capital in excess of minimum amounts.

Under the Uniform Securities Act, all of the following are prohibited in a sale EXCEPT: A) telling a client that he is trading commission free when, in actuality, your firm is acting as a principal and placing a mark-up on his trades. B) telling a client that her stock is a sure candidate for a takeover bid. C) a statement by the agent that the security will be listed on an exchange within 1 year after the company announced its intention to do so. D) an agreement by the agent to repurchase the security from the customer for the same price at a future date.

a statement by the agent that the security will be listed on an exchange within 1 year after the company announced its intention to do so.

An adviser has custody of a client's securities or funds if the adviser: A) uses a broker/dealer to hold the customer's funds and securities and has limited trading authority over the account. B) accepts prepayment of advisory fees or has discretion over a customer's account. C) maintains the customer's funds and securities in an account as JTWROS with the registered investment adviser. D) has authority to withdraw funds from a client's account for the benefit of the adviser for the payment of the quarterly advisory fees.

has authority to withdraw funds from a client's account for the benefit of the adviser for the payment of the quarterly advisory fees.

Regarding performance-based fees charged by ​covered ​investment advisers, all of the following statements are correct EXCEPT A) to determine performance, the results of the client's investment portfolio must be compared against an appropriate index or benchmark B) performance-based fees may be charged against the assets of a closed-end investment company listed on the NYSE C) it must be disclosed that performance-based fees may motivate the investment adviser to assume greater investment risk than would apply with other compensation methods D) performance-based fees are generally prohibited

it must be disclosed that performance-based fees may motivate the investment adviser to assume greater investment risk than would apply with other compensation methods

The Sharpe ratio is the average annual return of a security: A) plus the risk-free rate divided by the security's beta. B) divided by the risk-free rate. C) divided by the expected return of the market. D) minus the risk-free rate for the period divided by the security's standard deviation.

minus the risk-free rate for the period divided by the security's standard deviation.