JONNY: Series 6 Exam Brush Up/ Wrong Qs
Under the intrastate offering rule (Rule 147), when may a resident purchaser of these securities resell them to a nonresident?
6 months after the last sale made in that state In an intrastate offering, a purchaser of the issue may not sell the securities to a resident of another state for at least 6 months from the end of the distribution.
Corporate debt securities (such as commercial paper) are exempt from registration under the Securities Act of 1933 if their maturities do not exceed how many days?
270 days. Corporate debt securities (such as commercial paper) with maturities of 270 days or less are exempt from registration. Section: 3
Under the conduit theory of taxation, which of the following statements are TRUE?
A fund is not taxed on earnings it distributes if it distributes at least 90% of its net investment income. Investors are taxed on earnings they receive in cash. By qualifying as a regulated investment company (the conduit, or pipeline, tax theory), the fund is liable only for taxes on retained income if it distributes at least 90% of its net investment income to shareholders. Investors will pay taxes on distributed income whether received in cash or reinvested. Section: 3
Limited Power of Attorney
A limited power of attorney allows someone other than the account owner to trade in the account, but NOT to withdraw assets.
If still employed beyond age 70½ , which of the following is TRUE?
Contributions to the company 401(k) are permitted, and the required beginning date for distributions from the 401(k) is delayed.
Under the rules on communication with the public, review of which of the following by a principal may take place either before or after distribution?
Correspondence to 25 or fewer retail investors within any 30 calendar-day period A principal may review correspondence before or after its distribution as long as it is limited to no more than 25 retail investors during any 30 calendar-day period. The other choices require principal approval rather than just review before first use. Section: 1
If an investment representative hosts an investment seminar and intends to discuss general investment concepts and a specific mutual fund for which he has performance charts, which of the following are TRUE?
He may discuss the investment returns of the mutual fund using a specific time frame. He must disclose all material facts regarding the mutual fund to the audience. He may discuss the investment returns of the mutual fund as long as he uses a specific time frame. When discussing an investment, he must disclose all material facts pertaining to the investment, both negative and positive. Section: 1
Under the Insider Trading and Securities Fraud Enforcement Act of 1988, which of the following are insiders for purposes of insider trading?
Attorney who writes an offering circular for a company. Brother of a company's president. EXPLINATION: The Securities Exchange Act of 1934 defines an insider as an officer, director, or stockholder owning more than 10% of a company's outstanding voting equity. The definition also includes anyone else who has or could have access to insider information, such as immediate family members. Any professional who takes part in preparing the registration statement is automatically considered to have insider information. Section: 2
In July, a customer invested $10,000 in the ABC Mutual Fund. In December of the same year, ABC announced a long-term capital gains distribution. In May of the next year, the customer decided to redeem his shares for a capital gain. How are both of the capital gains treated for tax purposes:
The capital gain distribution is treated as long term. The capital gain from redemption is treated as short term. When long-term capital gains are distributed, the length of time an investor has owned the fund is not relevant; it's still a long-term distribution. However, redemption of shares follows the normal holding period rules. Therefore, when this customer sold shares ten months (July to May) after the purchase, the gain, like any other gain from a holding period that does not exceed 12 months, is short term. Section: 3
Which of the following must be registered as investment companies under the Investment Company Act of 1940?
Under the Investment Company Act of 1940, face-amount certificate companies, unit investment trusts, open- and closed-end management companies, and separate accounts of insurance companies used to fund variable annuity and variable life contracts must register with the SEC as investment companies. Note that the separate account is registered as an investment company, not the variable contract. Section: 3
Your customer has contributed $1,000 annually into her Roth IRA for seven years. Which of the following statements concerning her Roth IRA distributions is TRUE?
Your customer will not be taxed on the distributions if she is over the age of 59½ and the money has been held in the account for five years beginning with the first tax year for which a contribution was made to any Roth IRA established for the individual. EXPLINATION: Distributions from Roth IRAs made after age 59½ are tax-free if the money was in the account for five years beginning with the first tax year for which a contribution was made to any Roth IRA established for the individual. Contributions to Roth IRAs are made with after-tax dollars. Section: 2
Under the rules governing the activities of broker-dealer firms, prior consent of the employing firm would NOT be required in order for a registered representative of the firm to
discuss investment strategies with their brother whose account is at another broker-dealer EXPLINATION: Prior written consent from an employing broker-dealer is required for an associated person of the broker-dealer to open an account (cash or margin) at another broker-dealer, or any account in which the associated person has a beneficial interest, such as a spouse. Discussing investment strategies with a sibling, who has an account at another broker-dealer does not require notification or consent of the employing broker dealer. Section: 2
TCB wants to offer $7 million worth of common stock in its home state and in three other states. To clear the offer for sale, TCB must file a(n):
registration statement. TCB must file a standard registration statement because it is a nonexempt issuer selling securities interstate. Section: 1
When a customer, who is at least 59½, withdraws money from a traditional IRA that has been funded totally with deductible contributions:
the entire amount withdrawn is subject to taxation at ordinary income tax rates. EXPLINATION: All withdrawals from a traditional IRA that has been funded with pre-tax contributions are subject to taxation at ordinary income tax rates. There is no penalty once the account holder has reached age 59½. Section: 2
A generic ad for an investment company placed by a broker-dealer would contain:
the name of the broker-dealer placing the ad, but not the name of the investment company. A specific fund or investment company is not mentioned in generic advertising, but the broker-dealer who is placing the ad must be named. Section: 1
The ABC Corporation would like to raise capital via a Regulation D private placement. In order to qualify for an exemption from registering with the SEC under Rule 506, which of the following is true?
Advertising is allowed if only accredited investors may purchase the securities. If selling to nonaccredited investors, general solicitation is not allowed. If the private placement sells to any nonaccredited investors (with the maximum number being 35) no advertising or general solicitation is allowed. If the sale is exclusively to accredited investors, the private placement may advertise. Section: 1
Full Power of Attorney
Allows someone other than the account owner to withdraw cash and securities.
If two customers are tenants in common in a joint account, which of the following statements are TRUE of this arrangement?
They need not make equal investments in the account. They need not have equal interests in the property in the account. EXPLINATION: Under tenants in common, the tenants may make unequal investments in the account and may own a disproportionate interest in the property in the account. If one of the tenants dies, their assets are passed to their estate, not to the surviving joint tenant. The account must be frozen until this is carried out. Section: 2
