S66

When a security is being registered in a State by coordination alongside a federal registration for that security being performed under the Securities Act of 1933, what information must be filed in the State? A A consent to service of process, copies of the prospectus, and a copy of the articles of incorporation and bylaws B A disclosure document that details the names and background of the company's directors covering the past 5 years, along with their salaries C A copy of the prospectus in final form D A notice filing

A A consent to service of process, copies of the prospectus, and a copy of the articles of incorporation and bylaws

The very first option style used was: A American B European C Eastern D Western

A American

An issuer hires an agent and registers that individual to distribute an offering of its securities. Which statement is TRUE under NASAA rules? A If the agent solicits transactions in a State where the agent is not registered, the issuer can be held liable B If the agent finishes distributing this securities offering and there is time left until the agent's registration lapses at year end, he or she can work for another issuer distributing that issuer's securities C The agent is only permitted to sell the issuer's securities to employees of that issuer D The agent must also affiliate with a registered broker-dealer in order to distribute the offering of securities

A If the agent solicits transactions in a State where the agent is not registered, the issuer can be held liable

What is the benefit of forming a business venture as a general partnership? A Reduced tax liability B No liability for investors C Partners share pro-rata in income and loss D Dissolution of the entity occurs at a pre-set date

A Reduced tax liability

A Registered Investment Adviser that is headquartered in State A has offices in States A, B and C. The IARs in each State only solicit clients in that State. The RIA must comply with the recordkeeping rules of: A State A only B States A, B and C respectively covering the transactions occurring in each State C the most restrictive State only D the Securities and Exchange Commission

A State A only

A capital needs analysis is performed in order to determine the: A amount of life insurance that should be purchased to meet a future financial goal if the client should die prematurely B liquid net worth of the client, which represents funds that are available for current investment C minimum net capital required by a client that wishes to start a business D income level needed by a customer to have a comfortable retirement

A amount of life insurance that should be purchased to meet a future financial goal if the client should die prematurely

The participation rate formula for an equity indexed annuity: A considers how much of the gain in the index will be credited to the annuity B considers how much of a fee will be subtracted from any gain in the index linked to the annuity C is the maximum rate of interest that the annuity will earn D determines the securities to be included in the reference index for tracking purposes

A considers how much of the gain in the index will be credited to the annuity

An institutional customer places a very large order to buy a thinly-traded security. The trader who receives the order believes that it will push the market price of the stock up and, prior to entering the order, places an order to buy that stock for the firm's trading account. This is an example of: A front running B trading ahead C high frequency trading D block trading

A front running

The difference between a cash forward contract and a commodity futures contract is that the forward contract: A is traded over-the-counter B has a standardized delivery date C deals with a specific quantity of the commodity D has an acceptable deliverable grade of range of grades of the commodity

A is traded over-the-counter Forward contracts are privately created and any trading (not likely) cannot occur on an exchange - rather, any trades would occur over-the-counter.

An investor employing sector rotation is using a: A timing strategy B momentum strategy C contrarian strategy D value strategy

A timing strategy

Cash value of a universal life insurance policy is: A premium payments plus cost of insurance B premium payments minus cost of insurance plus interest C premium payments, plus or minus growth or loss in the separate account, plus the cost of insurance D premium payments, plus or minus growth or loss in the separate account, minus the cost of insurance

B premium payments minus cost of insurance plus interest

Which of the following statements concerning closed-end management companies are TRUE? Closed-end management company shares: I are issued in a one-time offering II trade in the secondary market III are continuously issued IV are continuously redeemed A. I and II only B. I and IV only C. II and III only D. III and IV only

A. I and II only

Dividends paid by a corporation that are reinvested in the purchase of additional shares are: A not taxable until the shares are sold B taxable at capital gains rates C deposited directly to the owner's bank account D taxable at ordinary income rates

B taxable at capital gains rates

On an annual basis, an investment adviser must give, or offer to give, which of the following to his client? A A copy of the U-4 Form of the Investment Adviser Representative servicing the client B A copy of the ADV Part II, also called the brochure or disclosure document C An audited financial statement of the Investment Adviser D A list of customer complaints received by the Investment Adviser over the past year

B A copy of the ADV Part II, also called the brochure or disclosure document

"High Risk Investment = High Return Investment" "Low Risk Investment = Low Return Investment" This is an example of: A Efficient Market Theory B Correlation C Duration D Monte Carlo Simulation

B Correlation

What ratio would be used to evaluate a company's ability to pay off its short term debt? A Debt / Equity Ratio B Current Ratio C Price / Earnings Ratio D Dividend Payout Ratio

B Current Ratio

Which 2 of the following investments are passively managed? I Index funds II Sector funds III Growth funds IV Unit investment trusts A I and III B I and IV C II and III D II and IV

B I and IV

Which statements are TRUE about an investment adviser with an office in State A? I If the investment adviser's only clients are investment companies, the investment adviser must register with the SEC II If the investment adviser's only clients are investment companies, the investment adviser must register in the State III If the investment adviser's only clients are insurance companies, the investment adviser must register with the SEC IV If the investment adviser's only clients are insurance companies, the investment adviser must register in the State A I and III B I and IV C II and III D II and IV

B I and IV

What represents business risk? A The risk that a company presents fraudulent financial statements B The risk of buying a single stock C The risk of investing in an enterprise that does not have a government backing D The risk is making an investment commitment when prices are peaking

B The risk of buying a single stock

Under the provisions of the Uniform Prudent Investor Act, a trust: A can only invest in securities that are included on that State's "Legal List" B can customize its investments based on suitability as determined by the needs of the beneficiaries C must determine that each individual investment is prudent D gives the trustee complete discretion as to which investments are suitable

B can customize its investments based on suitability as determined by the needs of the beneficiaries

A Federal Covered Adviser (FCA) located in State A advertises in State B. The Administrator of State B can: A require the FCA to submit its advertising to the State B Administrator before use B do nothing C only require the adviser to meet Federal guidelines for advertising D require the FCA to submit its advertising to the State B Administrator 10 days prior to use

B do nothing

A Federal Covered Adviser can be audited by the State Administrator: A any time the Administrator believes it is in the public interest B in the event the Administrator suspects fraud C no more than once per year after the updated Form ADV is filed D only if a complaint is lodged against the Adviser by a customer in the State

B in the event the Administrator suspects fraud

A federally registered investment adviser makes a subsequent material change to its manner of business operations. This event: A is not required to be reported to the Administrator of each State where the adviser does business B must be reported promptly to the Administrator of each State where the adviser does business C must be reported within 30 days to the Administrator each State in which the adviser does business D must be reported to the Administrator when the adviser files its annual ADV Part II update with the State

B must be reported promptly to the Administrator of each State where the adviser does business

An investment adviser makes presentations to existing and prospective clients using a chart that determines when to buy or sell securities. In order to do this, the adviser: A must prominently disclose its performance history over the time period used in the chart B must prominently disclose the limitations of using the chart and the difficulties regarding its use C must prominently disclose the fact that past performance does not predict future results D surviving spouse acts as trustee for all assets in the trust, including those of the deceased individual

B must prominently disclose the limitations of using the chart and the difficulties regarding its use

An individual who represents an issuer selling federally covered nationally traded securities: A is not required to register as an agent in the State B must register as an agent in the State if compensation is being paid for this activity C must register as an agent in the State if the individual is not federally registered D must register as an agent in the State

B must register as an agent in the State if compensation is being paid for this activity If the individual were representing the issuer selling exempt securities, such as Treasuries, Agencies and Municipals, then the individual is not defined as an agent. The exclusion from registration given to an individual who represents an issuer in transactions in specified "covered securities" only applies to private placements and to sales to qualified investors (wealthy investors).

Which of the following is NOT an accredited investor under Regulation D? A. An individual with a $3 million net worth B. An individual with $2 million in securities C. An employee benefit plan with $7 million to invest D. A couple that has $400,000 per year of annual income

B. An individual with $2 million in securities

Which statement is TRUE about a joint account held as "Tenants in Common"? A Tenants in Common joint account ownership only provides for equal account ownership for each tenant and is typical for a married couple B If an owner of an account held as Tenants in Common dies, the deceased individual's ownership interest becomes the property of the remaining tenant(s), bypassing the deceased individual's estate and probate C Each individual's ownership interest in a Tenants in Common account is freely transferable to another person D The death of an individual owner in a Tenants in Common account terminates the joint account agreement and the remaining tenant(s) must sign a new joint account agreement to keep the account open

C Each individual's ownership interest in a Tenants in Common account is freely transferable to another person

Under the Investment Advisers Act of 1940, when a Registered Investment Adviser is renewing its annual contract with customers, which is NOT required to be disclosed? A Business Address B Fees C History of RIA D Type of clients

C History of RIA

Under the NASAA Model Rule covering Investment Adviser records, the adviser's articles of incorporation must be retained for how long after the adviser ceases business operations? A 1 year B 2 years C 3 years D 5 years

C 3 years

What constitutes "taking custody" under NASAA rules for investment advisers? A An employee of an advisory firm who is given discretionary authority by a client B A client who signs a power of attorney, giving the adviser the right to trade on the client's behalf C An employee of an advisory firm acting as a trustee for a firm D An introducing broker-dealer receiving checks made out to the carrying broker-dealer that are to be deposited at a broker-dealer

C An employee of an advisory firm acting as a trustee for a firm

Who must register in a State as an investment adviser? A A person selling a subscription to a service that gives timing of buy and sell orders for specific investment company securities that are exchange traded B An investment adviser representative who has been registered with an investment adviser for more than 5 years C An on-line broker-dealer who offers a "no maximum number of trades" program for a 90-day period for a set dollar amount D A bank that is offering "Raise-Your-Rate" Certificates of Deposit for a set promotional period

C An on-line broker-dealer who offers a "no maximum number of trades" program for a 90-day period for a set dollar amount

Which statement is TRUE about the tax treatment of capital gains and capital losses? A Capital gains are offset against capital losses and any net capital gains are taxed at earned income rates B Capital gains are offset against capital losses and there is no limit to the amount of net capital gains that can be carried forward C Capital gains are offset against capital losses and there is no limit to the amount of time that a net capital loss that can be carried forward D Capital gains are offset against capital losses and any net capital losses are deductible in full for that tax year

C Capital gains are offset against capital losses and there is no limit to the amount of time that a net capital loss that can be carried forward

An investment adviser representative gives a new client who has agreed to buy advisory services the "brochure," but did not obtain the client's signature attesting to this fact at that time. In the brochure is a paragraph stating that the client has the "2 day right of rescission." Which statement is TRUE about this under NASAA rules? A The IA and IAR have failed to comply with NASAA rules because the customer signature must be obtained at, or prior to, entering into an oral or written advisory contract B The IA and IAR have complied with NASAA rules because the client has been given the "2 day right of rescission" C The IA and IAR have failed to comply with NASAA rules because the customer must be given 5 business days after signing the contract to rescind without penalty D The IA and IAR have complied with NASAA rules because the customer was provided with the brochure, at or prior to, entering into the advisory contract

C The IA and IAR have failed to comply with NASAA rules because the customer must be given 5 business days after signing the contract to rescind without penalty

Under the provisions of the Prudent Investor Act, a Registered Investment Adviser should consider all of the following when investing and managing trust assets EXCEPT: A General economic conditions B Possible effect of inflation C Trading patterns of plan beneficiaries D Investment tax consequences

C Trading patterns of plan beneficiarie

A Federal Covered Adviser discovers a material error in its Form ADV. When must Form ADV be amended with the State to correct the error? A Never B Within 5 business days C Within 30 calendar days D On the SEC filing anniversary

C Within 30 calendar days

A registered investment adviser that has been growing rapidly would like to borrow funds for the expansion of its corporate offices and to add staff. The adviser would be permitted to borrow from a(n): A client who has the financial capability of making the loan, as long as the loan is documented in writing and the existence of the loan is disclosed in writing to the adviser's other clients B a client that meets the definition of an accredited investor under Regulation D C financial institution that is in the business of making this type of loan D bank that is also a client of the registered investment adviser

C financial institution that is in the business of making this type of loan

A general partnership is buying a piece of real estate to expand its facilities and will finance a portion of the purchase amount with a level debt service mortgage. The partnership wants to protect itself in the event of the unforeseen death of one of the general partners, which could result in the partnership being liquidated. As a safety measure, the partnership should buy a: A fixed annuity for each managing partner B variable annuity for each managing partner C level term life insurance policy for each managing partner D property and casualty policy covering the purchased real estate

C level term life insurance policy for each managing partner

The Prudent Investor Act requires that fiduciaries manage the assets of their beneficiaries based upon: A legal list requirements B efficient market theory C modern portfolio theory D value investing theory

C modern portfolio theory

When managing the assets of a trust, an investment adviser would NOT be concerned with the: A financial needs of the trust beneficiary(ies) B investment limitations specified in the trust document C tax considerations of the trust settlor D anticipated market movements that could affect trust investments

C tax considerations of the trust settlor

A Registered Investment Adviser has been retained by a trustee to develop an investment plan for the trust. Such a plan would consider all of the following EXCEPT: A inflation forecast B investment objectives C will for the trustee D liquidity needs

C will for the trustee

Under the Investment Advisers Act of 1940, copies of all advertising, notices and circulars must be retained if distributed to at least: A.1 person B.5 people C.10 people D.15 people

C. The Investment Advisers Act of 1940 requires that copies of advertising, notices and circulars be retained as a record for 5 years if distributed to 10 or more people.

Contributions to which of the following accounts may be income tax deductible? A. Coverdell ESA B. Roth IRA C. Traditional IRA D. 529 Plan

C. Traditional IRA

The fiduciary engaged in the administration of a trust finds that, under the directions of the trust document, there is a conflict of interest relating to a proposed investment. Under the provisions of the Prudent Investor Act, the fiduciary: A. should do nothing and permit the investment to be made B. is permitted to allow the investment as long as it is made in accordance with the Prudent Investor rule C.should ask the settlor of the trust to amend the trust document by express provision, expanding or restricting the provisions of the Prudent Investor Act for this investment D. should not permit the investment, otherwise the fiduciary is subject to liability for breach of fiduciary responsibility

C.should ask the settlor of the trust to amend the trust document by express provision, expanding or restricting the provisions of the Prudent Investor Act for this investment

Under NASAA rules, Investment Advisers must retain copies of all advertising for: A 3 years in an easily accessible place with the first year's records kept in the principal office of the adviser B 3 years in an easily accessible place with the first 2 years' records kept in the principal office of the adviser C 5 years in an easily accessible place with the first year's records kept in the principal office of the adviser D 5 years in an easily accessible place with the first 2 years' records kept in the principal office of the adviser

D 5 years in an easily accessible place with the first 2 years' records kept in the principal office of the adviser

Which of the following is NOT required to be included in the State registration application of a broker-dealer or investment adviser? A Consent to service of process B Business history of applicant C Fingerprints of the officers D Books and records of the broker-dealer used by the applicant

D Books and records of the broker-dealer used by the applicant (Note, however, that the Administrator has the power to inspect books and records of a BD or IA at will.)

Commodities futures contracts and options on commodity futures contracts belong to which class of investments? A Swaps B Indices C Assets D Derivatives

D Derivatives

Which is a passive investment? A Making investments in an Individual Retirement Account B Making investments in a 401(k) Account C Investing in 100 shares each of 10 different companies D Investing in shares of a S & P 500 Index Fund

D Investing in shares of a S & P 500 Index Fund

A customer who is concerned with social and environmental issues would minimize which risk when making an investment decision? A Market B Opportunity C Financial D Regulatory

D Regulatory

An issuer has filed a registration statement in a State for a new issue of securities that is effective and sale of the issue has started. The issuer finds that there is great demand for the offering and wishes to increase the number of shares being issued. In order to do this, a(n): A new registration statement must be filed with the State, if it is within 6 months of the date of sale B amendment must be filed, as long as it is within 6 months of the date of sale C amendment must be filed, as long as it is within 6 months of the date of sale along with the payment of a late registration fee only D amendment must be filed, as long as it is within 6 months of the date of sale along with the payment of an additional filing fee and a late registration fee

D amendment must be filed, as long as it is within 6 months of the date of sale along with the payment of an additional filing fee and a late registration fee

A federal covered adviser has its home office in State A, where it has most of its clients. It also has offices in States B and C, where it also has clients. The Administrator of State A: A can require the IARs in States B and C to register in State A because that is where the adviser has its home office B can require the IARs in States B and C to register in State A because the home office in State A uses the mails or other means of interstate commerce in its dealings with clients located in States B and C C cannot compel the IARs in States B and C to register in State A because the firm is a federal covered adviser D cannot compel the IARs in States B and C to register in State A because this is beyond the jurisdiction of the Administrator of State A

D cannot compel the IARs in States B and C to register in State A because this is beyond the jurisdiction of the Administrator of State A

Which of the following must be registered as agents of a broker-dealer in the State? I Director II Sales employee III Clerical employee

I & II

An insurance policy that promises to pay a named beneficiary a specified amount of money only if the insured dies within a certain limited time is a: A. whole life policy B. universal life policy C. variable life policy D. term life policy

D. term life policy

Under NASAA's rules on Unethical Business Practices for Registered Investment Advisers and Investment Adviser Representatives, which of the following client information is permitted to be disclosed to a third party without first obtaining client consent? I Account information directed to be disclosed by the client's CPA in a written letter signed by the CPA II Aggregated and averaged account information that the adviser wants to use in an advertisement III Account information directed to be disclosed by the investment adviser by the State Administrator IV Account information directed to be disclosed by the investment adviser by the client's spouse

II & III