Exam 4
When can an investment adviser registered with the SEC use the term investment counsel? Its principal business consists of rendering investment advice. A substantial portion of its business involves investment supervisory services. It maintains full investment discretion.
1 and 2
With regard to taxation of distributions from a REIT, which of these are true? In the majority of cases, dividends are taxed as ordinary income. In the majority of cases, dividends are considered qualified for the lower tax rate. Capital gains distributions are treated as long-term capital gains. Capital gains distributions are taxed as ordinary income.
1 and 3
In order for an individual to receive Social Security benefits based on the earnings of the ex-spouse, the couple must have been married for at least
10 years
Under Keogh plan provisions, a full-time employee is defined as one working at least how many hours per year?
1000
A state-registered investment adviser with discretionary authority over client accounts discovered on Monday that the firm's net worth is below the required amount. He must notify the administrator and then file a report no later than A) the close of business Tuesday and close of business Friday. B) the close of business Tuesday and close of business Wednesday. C) the close of business Monday and close of business Friday. D) the close of business Monday and close of business Wednesday.
B
An elderly widower explains to his investment adviser representative (IAR) that he requires his investments to provide the maximum current income. The IAR should recommend A) a growth fund. B) a widow fund, structured specifically for this type of investor. C) a mutual fund that matches the investor's stated objective. D) a zero-coupon bond.
C
Which of the following attributes of common stock best describes why internal rate of return (IRR) is not generally used to determine the return on common stock? A) Uneven cash flows and no maturity B) Uneven cash flows C) Uneven cash flows, no maturity date and price D) No net present value
C
Mr. and Mrs. Rose, advisory clients of yours, request a meeting with you to discuss the options available if they wish to deposit a lump sum to save for college tuition for their child. All of these would be factors to consider except A) the expected inflation rate B) the age of the child C) current college costs D) the Roses' salaries
D
If the required rate of return is higher than anticipated in a present value calculation, the effect would be that
PV would be lower
IADs are always
natural persons
Among the advantages of forming an S corporation rather than a C corporation for a new business enterprise is A) unlike the C corporation, which is limited to 100 investors, there is no such limit for an S corporation. B) shareholders' losses are limited to the amount of their investment. C) the ease in raising substantial amounts of capital. D) any losses flow through to the investors.
D -- C is better at raising capital
The issuance of a stop order by a state securities Administrator requires
the subject of the stop order be given a hearing
In the SPAC process,
the targeted private company becomes public by virtue of a merger with an SPAC
An agent terminates his association with Broker-Dealer A and begins to work for Broker-Dealer B. Under the Uniform Securities Act, which of the following must take place? Broker-Dealer A must notify the Administrator. Broker-Dealer B must notify the Administrator. The agent must notify the Administrator. The supervisor to which the agent reported must notify the Administrator.
1, 2, and 3
Eighteen 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
8%
In which of the following cases could revocation of the registration of an IAR lead to disciplinary action against the investment adviser employing that individual? A) The IAR failed to make full disclosure of a previous felony conviction on Form U4. B) The firm supplied the IAR with a copy of its Code of Ethics and administered regular training on its contents. C) The firm was found guilty of failure to supervise. D) The IAR was found guilty of first-degree murder.
C
Under provisions of the Investment Advisers Act of 1940, investment advisers that maintain custody of client securities are required to do all of the following except A) keep copies of all confirmations sent to clients. B) maintain a separate ledger for each client, showing all purchases and sales. C) send an itemized statement to clients at least monthly. D) arrange for a surprise audit by an independent public accounting firm at least annually and subsequently file a report of the examination with the SEC.
C -- quarterly review other options
Among the benefits of an HSA is
funds not used for health expenses may be invested in mutual funds and other secs
A 55-year-old investor makes a withdrawal from his qualified pension plan. Which of the following can he do to avoid tax liability?
roll over funds into IRA within 60 days
A form of business structure that exposes all personal assets of the owner to creditors is
sole proprietorship
Esther Watson has recently been hired by Robinson, Ibbotson, Carlson, and Hanson (RICH), an investment adviser registered with the SEC. RICH has offices in 17 states and Esther works in the branch located in State A. If no exemption is available, Esther will have to register as an IAR with
the admin of state A
A contract between an investment adviser and a customer may be assigned to another investment adviser, provided
the client consents to the assignment
One measure of an investor's total return is called holding period return. The computation includes both income and appreciation and is used for both debt and equity securities. An investor's holding period return would be less than the bond's yield to maturity if
the coupons were reinvested at a rate below the YTM
when does admin have authority to require a surety bond
when BD exercises discretion or maintains custody
Under the Uniform Securities Act, when may an investment adviser legally have custody of money or securities belonging to a client? The investment adviser has insufficient net worth or is not appropriately bonded. The Administrator has not issued a rule prohibiting custody. The investment adviser does not also have discretionary authority over the account. The investment adviser has notified the Administrator that custody is maintained.
2 and 4
Bachelier and Louis Associates, BALA, is an investment adviser registered in States W, X, and Y. BALA is completing the Form ADV to register in State Z. Which of these would be automatically registered as an investment adviser representative in State Z simultaneously with BALA's effective registration? A) Janice, the director of the company's information technology (IT) department B) Wilson, the company's legal counsel C) Louise, vice president of the company's sales department D) Thomas, an IAR currently registered in States W, X, and Y
C
The Uniform Securities Act authorizes the Administrator to make certain demands of broker-dealers. In general, the Administrator would not require a broker-dealer to A) file various financial reports. B) promptly file a correcting amendment to any document on file with the Administrator that becomes inaccurate or incomplete in any material respect. C) post a surety bond if the broker-dealer does not have investment discretion over client accounts or does not maintain custody of customer funds and/or securities. D) publish an announcement of the application for registration in a newspaper published in the state.
C
A state-registered investment 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 terms of the investment adviser's compensation must be spelled out. B) the solicitor is considered a supervised person. C) the solicitor must be registered as an investment adviser representative in order to receive compensation based upon advice. D) the client must sign the advisory contract at the same time that the investment adviser's brochure is delivered.
D
Federal covered investment advisers must comply with the SEC's Model Marketing Rule for Investment Advisers. That rule includes A) a prohibition against reduced-fee introductory offers. B) a requirement that a copy of all advertisements be sent to the SEC at the time they are disseminated to the public. C) a prohibition against showing the adviser's past performance. D) requiring a written agreement between an investment adviser and a promoter who receives more than $1,000 over a 12-month period for endorsing the services of the adviser.
D
An agent is registered in Montana and North Dakota. While working in his North Dakota office, he places a call to the cell phone of one of his Montana resident clients who happens to be on vacation in Wyoming. After describing the reasons for a particular stock recommendation, the client asks the agent to call back tomorrow. The agent does so and reaches the client in Idaho. The client decides to purchase 100 shares of the stock. When the client arrives home, he notices that he has already received his stock certificate from the transfer agent located in Illinois. In this case, jurisdiction resides with the Administrators of which states? North Dakota Idaho Wyoming Illinois Montana
ND, Idaho, Montana
Which of the following are defined as securities under the Uniform Securities Act? Real estate investment trust certificates Preorganization subscription agreements Shares of treasury stock Voting-trust certificates issued by a corporation undergoing a reorganization
all 4
If a customer of your firm receives stock from the estate of her mother, the stock's cost basis in the hands of the customer is
market value at date of death
an agent of a BD must have written discretion authority ..., while an IAR must have written discretion authority...
prior to effecting transactions within 10 days of first discretionary trans
If an index annuity has a participation rate of 80%, it means
the investor's account will be credited with 80% of the growth of the index
An investment adviser must disclose which of the following legal or disciplinary actions to clients and prospective clients if they occurred within the last 10 years? Conviction of a misdemeanor involving an investment-related business SEC or other federal regulatory agency proceedings in which the person was found in violation of an investment-related statute A proceeding before FINRA in which the adviser was barred or suspended from membership Conviction of a misdemeanor in a civil action regarding payment of motor vehicle violations
1, 2, and 3
An investment adviser who has custody of customer funds and securities discovers that her net worth has dropped below the required minimum under the rules of the state Administrator. Under NASAA rules, the adviser must do which of these? Notify the Administrator by close of business after the day of discovery. File a report of its financial condition no later than close of business the day after notification. Include in the report of financial condition a statement as to the number of client accounts. Cease doing business.
1, 2, and 3
Broker-dealers operating on the premises of a financial institution must disclose, orally and in writing, that the securities products purchased or sold in a transaction with the broker-dealer I. are not insured by the Federal Deposit Insurance Corporation (FDIC). II. are not deposits or other obligations of the financial institution and are not guaranteed by the financial institution. III. are insured by the Securities Investor Protection Corporation (SIPC). IV. are subject to investment risks, including possible loss of the principal invested.
1, 2, and 4
A mutual fund's computed NAV on April 24 was $100 per share. On April 25, the portfolio realized gains of $2 per share and enjoyed $1 per share in unrealized appreciation. What would the NAV be on April 26 assuming an unchanged market?
101 per share
ABC Combination Fund has dual objectives of capital appreciation and current income. Last year, the fund paid quarterly dividends of $0.25 per share and capital gains of $0.10 per share. The annualized growth rate of the fund was 15%. The current net asset value (NAV) of the fund is $28.50, and the current public offering price (POP) is $30. Advertising and sales literature of the fund may report the fund's current yield to be
3.33% div/POP
An investor purchases $10,000 of A-rated debentures in early January. At the end of the year, $500 in interest has been received and the value of the investment is $9,500. If the investor is in the 25% tax bracket, the after-tax yield is
3.75%
Among the differences between a Coverdell Education Savings Account and Section 529 plans are one has adjusted gross income limits, the other does not one has contribution limits set by federal law, the other by the individual state if the money is not used, money reverts back to the donor in one and to the beneficiary in the other
all 3 1 - coverdell has gross income limits 2 - ESA limits set by fed 3 - 529 to donor, ESA to ben
One of your clients has made plans to get an advanced degree by enrolling in the local community college in three years. At the same time, her child expects to be entering veterinary school. What would you recommend as the most appropriate tool to accumulate funds for both of them?
section 529 plans
The statement, "Stock prices fully reflect all information from public and private sources," can be attributed to which form of the efficient market hypothesis (EMH)?
strong form
Ebony sets up a revocable trust, naming her daughter, Sylvia, as the sole beneficiary. Ebony has appointed the Pacific Atlantic Trust Institution (PATI) as the trustee. Any income to the trust will be taxable to
the grantor
A corporation offering securities registered under the Act of 1933 may make which of the following statements? The SEC has passed on the merits of these securities as an investment. The SEC has released our securities for sale to the public. The SEC has passed on the accuracy of the information in our prospectus. The SEC has declared this prospectus effective.
2 and 4
