9-27-22 #3

Index Options are

A Speculative Investment

All investment adviser advertising must reflect fees, state actual market conditions during the referenced period, and disclose the specific group of clients to which it applies

Advertising that reflects past performance must show a minimum period of 1 year

Natural persons are human beings.

An adviser representative must be an individual

Liquidity constraints arise from

An investors need for spendable cash

Catch up contributions are allowed to participants who

Are age 50 and over

Banks are NEVER Investment Advisers.

Banks are NEVER Broker Dealers

If a promoter soliciting business for an Investment Adviser is compensated more than the de minimis amount, there must

Be a written agreement

Any securities held in custody by a broker-dealer or, an investment adviser must be segregated from those belonging to the broker-dealer or investment adviser.

Fully paid securities may not be loaned out, only those collateralizing a debit balance may be and, then, only with customer permission.

The price-to-earnings ratio is used in

Fundamental Analysis

Discounted cash flow is 1 of the most popular ways to value bonds.

The Dividend Discount Model can be used with preferred stock m because of its fixed dividend.

dividends must be declared by the corporation's board of directors.

The board of directors may elect to pay a Common Stock dividend in cash, property, or stock.

An investment adviser owes an undivided loyalty to its clients and therefore is considered to be

a Fiduciary

The Administrator may deny a registration if the applicant was convicted of a misdemeanor involving securities within the last 10 years. The Administrator may deny a registration if the applicant has been the subject of an

adverse order entered by the Administrator of another state within the past 10 years. Registrations may be suspended if agents or investment adviser representatives are not properly supervised

The Specialist: Designated Market Maker stands ready to buy or sell stock on the floor of

an exchange in an effort to keep an orderly market

Anchoring bias is when people tend to

base their decisions on reference points that are often arbitrarily chosen.

Total return is computed by adding together the income received plus any capital gain or loss. Because the bond is purchased at par, selling the bond at a loss is the only way the investor's total return could

be less than the coupon rate. When interest rates go up, bond prices go down.

Coordination is the simultaneous registration on

both the federal and state level

Notice filing is used by

certain issues of federal covered securities, primarily investment companies

An investment constraint that is unique to private foundations is the requirement to

distribute 5% of its assets each year as qualifying distributions

The SEC Model Marketing Rule for Investment Advisers incorporated significant amendments to the Advisers Act. Among the requirements of the rule is that an adviser who compensates a non-affiliated third party promoter for

endorsing the services of the IA must have a written agreement with that promoter if the compensation will exceed $1,000 over a 12-month period.

The primary source for the information necessary to construct a cash flow statement is

the company's income statement.

The Uniform Securities Act makes it illegal for any person to commit a fraudulent act in connection with

the sale or offer for sale of a security, not just agents and broker-dealers.

Although Treasury securities such as T-notes issued by the federal government do not carry default risk, the customer who buys them retains interest rate risk because

the value of the notes will fall if interest rates rise. Agent act improperly they do not disclose this to the customer.

An investment adviser representative is always an individual person. Employees who solicit business on behalf of investment advisers and

those persons who supervise other employees are investment adviser representatives.

A sole proprietorship's income is taxed on the owner's Form 1040. Specifically, Schedule C of the Form 1040 is used

to report income or loss from a sole proprietorship.

In terms of being considered compensation for determining the allowable contribution to an IRA, receipt of

Alimony received as part of a divorce decree signed in 2018 could be included

Review of an SEC-registered investment adviser's policies and procedures designed to prevent violation of the federal securities laws must take place no less frequently than annually.

An Adviser's Chief Compliance Officer reviews the Investment Advisers policies & procedures annually for adequacy and the effectiveness of their implementation

When a broker-dealer offers wrap fee programs, the exclusion from the definition of investment adviser is lost.

Any individual soliciting for the Broker Dealer would be considered an investment adviser representative and would need adequate supervision.

When an entertainment agent makes investment decisions for a client who is paying fees for overall services rendered, that agent now comes under the Release IA-1092 definition of an Investment Adviser.

Any person who is compensated for giving investment-related advice to employee benefit plans is considered a pension consultant and is required to register as an Investment Adviser under IA-1092.

There is no federal filing requirement for advertisements of investment advisers, although filing may be required by the state Administrator.

As long as the past performance is displayed in a manner consistent with the rules, there is no problem.

FinCEN Form 112, the Currency Transaction Report, is filed with the Department of the Treasury for

Currency transactions in excess of $10,000.

An individual employed by a broker-dealer who is involved in the sale of securities such as

Direct Participation Programs must register as an agent

Dividends are the share of a corporation's profits that the corporation pays to shareholders as owners of the corporation

Dividends are not paid to shareholders automatically, and shareholders have no contractual right to receive dividends. I

Becoming a registered securities agent with the state does not infer or imply any sort of approval of you or your credentials.

Once the firm has told you that you have an effective registration, you can commence accepting orders from client's residents of the state, prospect new clients in the state & state you have passed the required exams.

If a support level is broken, this provides a sell signal.

Once the stock has lost its support, expectations are that it will continue to fall

When a security is registered with the Administrator, it means that the securities may be legally sold in the state.

Only exempt securities and exempt transactions are exempt from the advertising filing requirements Federal covered securities don't register with the Administrator; they notice file.

The purpose of portfolio rebalancing is used to make sure that the percentage of the portfolio invested in various asset classes remains constant.

Portfolio rebalancing is the technique that adjusts the portfolio to maintain constant percentages in the amounts invested in various asset classes

Federal exemptions apply to advisers whose clients are all in one state, whose principal office is in that state, and whose clients are not furnished advice on exchange-traded securities.

Private fund managers are exempt from SEC registration until their AUM in the U.S. reaches $150 million

Direct Participation Programs include any form of business that allows for direct pass through of tax consequences to participants.

Real Estate Investment Trusts do not allow for pass through of losses, so they are not direct participation programs

Discounts for quantity purchases of mutual fund shares are not allowed for investment clubs.

SEC & FINRA rules allow sales charge discounts for individual purchasers making large purchases, tax-exempt organizations like pension plans, & employee benefit plans, & for directors, officers, employees, underwriters, and other persons affiliated with the fund.

With regard to an SEC-registered investment adviser employing the services of a promoter to solicit business, an Investment Adviser may not compensate a

Solicitor who is subject to a Statutory Disqualification: Therefore, any person who would be unable to register as a securities professional because of prior conduct, cannot act as a solicitor for a registered Investment Adviser

High-grade bond funds do not offer the substantial growth but

Supplement modest income

A chartist is interested in the volume of shares traded, and the short interest for that particular stock.

The advance/decline line is another technical indicator.

Prior to the Uniform Prudent Investor Act, the focus was on individual investment choices, which made it very difficult to focus on the risk and return of the entire portfolio.

The benefits of diversification are firmly established. The standard of prudence is now applied to any investment as part of the total portfolio rather than to that investment individually. And Fiduciaries have the ability to delegate the portfolio management decisions to others: who must be qualified

no matter how low the price of the stock fell (even to zero), the investor can exercise the put and sell the stock for that amount.

The loss is limited to that the difference between the stock price & strike (plus the premium paid for this insurance). This is the most common way to hedge a long stock position

The P/E ratio is only used with common stock. T

The parity price is a way to value a convertible bond or convertible preferred stock.

Matched orders result in painting the tape because

The phony trades make the stock appear more frequently on stock tickers

It is acceptable for a fiduciary acting under the prudent expert rule to Purchasing AAA-rated debentures, a growth mutual fund, new issues of a AAA-rated issuer & write covered calls on dividend paying stocks

The prudent expert rule permits a fiduciary to invest in securities that a prudent expert might buy. These investments are nonspeculative, low to moderate risk, and likely to be considered prudent if they are used in a way consistent with modern portfolio theory

Under Section 4942 of the Internal Revenue Code, a private foundation must pay out each year an amount equal to 5% of its net investment assets in "qualifying distributions"

There is no legal requirement on how much must be invested each year, and having an investment policy statement is not unique to foundations

Once an annuity contract, fixed or variable, is annuitized, the charge ceases and no longer applies to the account.

There may be an internally computed charge, but unlike the accumulation period, the charge is not broken out separately

A person who renders investment advice solely with respect to securities issued by the U.S. government is excluded from the definition of investment adviser under federal law and is,

Therefore, exempt from state registration requirements, so is a Federal Covered Adviser

Certain products carry higher compensation rewards to the broker-dealer than do others of a similar nature. This presents a potential conflict of interest, should the firm recommend these over others.

This is legal as long as there is disclosure of the conflict of interest to the client

A the higher the correlation, the more the securities move in tandem, lessening diversification

When correlation is low or negative, there is more diversification and will therefore provide the largest reduction in portfolio risk.

A matched order is an order to buy or sell securities that is entered with knowledge that a matching order on the opposite side of the transaction has been or will be entered for the purpose of

creating a false or misleading appearance of active trading in any publicly traded security or creating a false or misleading appearance with respect to the market for any such security.

Mutual funds that offer growth and income best meet offering

growth for retirement and current income.

If a person serves as a pension consultant with $200 million or more in AUM, the person

has the option of registering with the SEC as an investment adviser

The specialist: AKA Designated Market Maker performs his activities on the floor of an exchange, while the market maker

performs a similar function in the OTC market.

An issue done solely within one state: intrastate offering is

registered using qualification

When a will calls for a per stirpes distribution of assets, it provides that if any named beneficiary predeceases the testator: the maker of the will, surviving children of

that individual share in the share that the individual would have received.

Partnerships, LLCs, and S corporations are flow-through entities. They file information returns and send a Schedule K-1 to each owner indicating

the amount of taxable income or loss to be reported by that owner who then is responsible for any tax consequences.

When a will calls for property to be distributed per stirpes, it means that the property is divided into as many equal shares as there are surviving children of

the designated ancestor and deceased children who left surviving descendants

A Market Maker stands ready to buy or sell stock on

the over-the-counter market in an effort to keep an orderly market

In the real world, no fund group that would accept a $250,000 order for Class B shares; A no fund group wouldn't even accept one above $100,000.

At that level, the reduced front-end load available on the Class A shares due to reaching a breakpoint, combined with lower or lack of 12b-1 charge & no redemption charge CDSC, makes them a better deal than the Class B shares. Rebating of commissions is not allowed, & even at a 4-year holding period, there still is a CDSC.

Letters of intent may be backdated up to 90 calendar days, provided the total investment period used to qualify for the breakpoint

Does not exceed 13 months

For divorce decrees entered into before January 1 2019, court-ordered alimony is taxable to the payee and tax deductible to the payor. Therefore, receiving it is considered compensation for purposes of an IRA contribution.

Effective January 1, 2019, there are changes to the tax treatment of alimony for all divorce agreements entered on and after that date no changes to those already in existence

In general, one would prefer to purchase a bond when its current market price is less than its present value, therefore having a positive net present value

Every bond selling at a discount has a market price that is less than its future value (par),

The Uniform Securities Acto requires broker-dealers and investment advisers to update any information filed with the state regarding any material change that takes place.

Federal covered investment advisers may be required to file copies of their SEC registration and amendments with state Administrators, along with filing fees.

Under the Uniform Securities Act, the Administrator can require w broker-dealers and investment advisers

Files Sales Literature, Financial Statements & Amendments to Registrations & Maintain records

A person who has passed the NASAA exam cannot transact securities business until the Administrator notifies the employer that the registration is effective

Filing payroll reports is a clerical activity, and registration would not be required to perform that function

Form ADV E is completed by an investment adviser who maintains custody of customer funds and/or securities

Form ADV E is submitted by the independent public accountant who examines the funds and/or securities in the custody of an investment adviser.

Under the Uniform Securities Act, a state securities Administrator who believes that a registered investment adviser representative is about to violate a provision of the act would initially issue a cease and desist order

If the registered investment adviser representative continues to pursue activities that result in a violation of the USA, the Administrator may seek a court injunction to prevent the abuse

Clerical and ministerial personnel are specifically excluded from the definition of investment adviser representative

Included in the definition of an investment adviser representative are directors, officers, partners, associates, & employees of state-registered advisers who carry out investment advisory or solicitation functions, or who supervise those functions.

Those who are bullish on a stock, but don't have sufficient funds at this time to purchase the stock, can "lock-in" their future cost by going long a call.

Income is generated only through selling options. Because a long call is on the same side of the market as long stock, there is no hedge. A spread involves a long and short option

Retirement Plans are NOT SECURITIES

Indentures are NOT SECURITIES.

Sole Proprietorships are taxed on

Its income

Matched orders are an attempt to

Manipulate market prices

"Direct participation programs", when referring to tax-sheltered investments, includes, Oil & Gas Limited Partnerships,

Real Estate Limited Partnerships, & Equipment Leasing Limited Partnerships

The strong form holds that stock prices follow a random walk and no technical analysis price charting or fundamental analysis annual report, or industry publication research is of value in obtaining superior results.

Strong Form believes no information, public or private, that can assist an investor in achieving consistently superior investment returns. So, an investor using a buy-and-hold strategy dollar cost averaging into an S&P 500 Index fund would be an example of this

A money market fund is the most appropriate for an elderly person seeking preservation of capital and some income on a regular basis.

T Bills are safe but provide interest income only at maturity.

In an effort to further protect the interests of clients, the Investment Advisers Act of 1940, as amended, contains recommendations for implementing a Code of Ethics

The Code of Ethics must reflect the nature and scope of the business done by the firm

The Form ADV-E E for surprise Examination, must be completed by investment advisers that have custody of client funds or securities and that are subject to an annual surprise examination

The Investment Adviser gives the form to the independent public account that examines client funds and securities in the custody of the investment adviser & performs the surprise examination must submit this form within 120 days of the time chosen by the accountant for the surprise examination

Section 529 Plans are known as municipal fund securities.

The MSRB requires delivery of an official statement, sometimes called an offering circular but, never referred to as a prospectus.

In adopting the code, the SEC did not specify a particular standard that firms would be required to adopt. However, the Commission did indicate a minimum standard.

The SEC directed each firm to adopt standards that reflect the nature and scope of the business done by that firm and applicable state and federal fiduciary law. Code of Ethics are required for all Registered Investment Advisers

The Uniform Securities Act requires the filing of sales literature and advertising as well as a prospectus addressed or intended for clients or prospective clients, unless exempt under the act.

The Uniform Securities Act requires books and records be kept for a minimum of 3 years for broker-dealers & 5 years for investment advisers & Provides that an Administrator may require the filing of financial reports regarding the net worth of the firm.

An investment adviser registered with the SEC may state "registered with the SEC" in advertisements. But a registered investment adviser may not use the title in any way to suggest or imply that the SEC sponsors or approves the adviser

The title in no way indicates that the adviser's abilities or qualifications have been approved. RIA is not an academic designation; it may not be used as such.

In an efficient market, the price of the stock will represent all information that is public

When increasing a dividend is not public knowledge until declared, no price change would take place before the announcement. A price change, representing the increase in dividends, would be expected immediately after the information became public.

In a QDRO, withdrawals from the IRS, unless due to one of the allowable exceptions: death, disability the 10% tax penalty applies.

When there is a divorce and an IRA is split, the ex-spouse: A: now has an IRA in his or her name with no mention of the previous owner B. There is technically no distribution so there is nothing to rollover.

Under NASAA's Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents, the test of whether trading in a client's account is excessive depends on

Whether the trading is in line with the client's investment objectives, financial resources, and the character of the client's account

Static social media content is that it is usually not changed once published and

does not provide a method for interaction: commenting once published.

Most convertible securities are sold with antidilutive clauses that provide

for an adjustment in the number of shares based on stock splits or stock dividends.

If the person engages in other financial activities in connection with the advice,

it cannot be used to avoid the business standard.

Registration with the state as an investment adviser would be required for a person with an office in this state who

manages $13 million in assets for 4 clients

Advertisements may not contain false statements, refer selectively to past recommendations, refer to a chart or device for evaluating securities without explaining its limitations and difficulties, or

offer anything free of charge if in fact there will be some requirement, however minor, for obtaining the free item

If the person receives any compensation that represents a clearly definable charge, commission, or fee for such advice whether

paid separately or not, she is considered in the business.

Included in the definition of an Investment Adviser Representative are persons who

perform similar functions for SEC-registered advisers and who have a place of business

An investor that has never invested before may be uncomfortable with

potential fluctuations in the principal of bond funds.

QDROs apply only to qualified plans and, therefore, if the ex-spouse withdraws funds from the 401(k) prior to age 59½, it will generally

qualify for the exemption from the 10% penalty.

If the adviser manages a registered investment company

the Adviser must be a Federally Covered Adviser

If a person advertises as one who provides investment advice or engages in providing investment advice or analyses on a regular basis even if not

the person's principal business activity, the person is considered in the business of giving investment advice.

The breaking of a resistance level is a buying opportunity, &

the price of the asset gathers momentum to the upside