Series 6 section 3

A 12b-1 plan must be approved by (3 things)

majority vote of the shares, board of directors, and noninterested members of the board of directors. The fee must be reapproved annually by the board.

ALFA Securities acts as a dealer when filling a customer's order to purchase 300 shares of LMN. ALFA makes its profit from a

markup on the offering price of the securities

Under SEC Rule 498, a summary prospectus may be used in a mutual fund sales presentation resulting in a sale

only when the investor is able to access a statutory prospectus online

AIR becomes a factor only if

the account is annuitized.

Under what circumstances may an open-end investment company act as its own distributor?

If the fund is established under Section 12b-1.

An investor redeems 200 shares of ABC Fund, which has no redemption fee. If the quote is $12.05 bid $13.01 asked, what amount will the investor receive?

$2,410

The NAV of a mutual fund is $14.17 per share. The POP is $15.32 per share. To determine the sales charge of the fund:

Subtract the NAV from the POP.

Closed-end investment company shares are sold on a _______ basis

Supply & Demand

If the broker-dealer were acting as agent when filling a customers order, the BD makes a profit on

Commissions

Liquefying home equity to generate funds for investment purposes

Requires communication of the unique risks associated with this investment strategy by the broker-dealer

Which of the following retirement plans are always funded with after-tax contributions?

Roth IRA's

The variable life refund provision returns cash value only if it is surrendered after the

Second Year

A life settlement contract is a

Secondary sale of a life insurance policy.

An open-end investment company is permitted to borrow money from financial institutions, provided an asset-to-debt ratio of

3:1 (300%) is maintained. Open-end companies only issue one class of security (common stock) and therefore, are not permitted to issue senior securities (preferred stock or bonds), buy securities on margin, or re-issue shares that have been redeemed. Redeemed shares must be canceled.

The phrase employer matching is commonly used when referring to which type of retirement plan?

401(k) Plans

A variable life insurance plan may charge a maximum sales charge of

9% over a period not to exceed 20 years.

The Investment Company Act of 1940 requires a mutual fund to provide reports to shareholders how often?

Semiannually

Which of the following activities by a mutual fund require approval by a majority vote of outstanding shares?

A change in sales load policy A change in investment policy

According to investment company rules, open-end investment companies may not distribute long-term capital gains to their shareholders more frequently than:

Annually

The death benefit of a variable life policy must be calculated at least:

Annually

IRS Code Section 1035 permits exchanges between

Annuities and annuities and life insurance and annuities. It does not allow exchanges between annuities and life insurance.

When a customer wants income from an annuity and chooses the option of life with 20-year period certain, how will distributions be taxed?

As ordinary income based on an exclusion ratio

When an investor receives payments during the annuity period of a nonqualified variable annuity, how will he be taxed?

At ordinary income rates on growth portion

Dollar cost averaging results in a lower average cost per share than the average price per share paid, only if the share price during the investment period:

Shows any fluctuation

Primary feature of Money Market Security funds aside from liquidity and low risk

Check writing privileges are a primary feature adding to the liquidity of these shares.

A tombstone ad may be published by an issuer of common stock during the

Cooling off period

The pop of a mutual fund is

Each share's public offering price (POP) is based on the net asset value (NAV) of the share plus sales charges. (not minus)

The first date on which the buyer would NOT be entitled to receive a declared dividend being paid by a corporation is the:

Ex-date

The 1035 exchange provision applies to transfers from

Fixed policies to variable policies and vice versa, but may not be used to transfer from an annuity to a life insurance policy.

A client could be assured of federal government backing for an investment issued by

Government National Mortgage Association

The investment adviser's job is to try to achieve the

Investment Objective

Under the Investment company act of 1940, A majority of the outstanding shares must vote to approve any change in the

Investment objective or policy

Deferred compensation plans are not tax qualified and therefore

May be discriminatory

Qualified Plans Must: (4 things)

May not discriminate between eligible employees. They must have a set vesting schedule, the plans must be in writing, not voice recorded, and an employer must update the status of all employees at least annually.

Only a closed-end company can have an asking price below

NAV

Public offering price is equal to

NAV divided by (1 − sales charge)

Deferred compensation plans are not qualified plans: True or False?

TRUE

When discussing the benefits of a Section 1035 exchange with a client, it would be appropriate to point out that the main benefit is:

Tax savings

Only changes in portfolio values, positive or negative, and receipt or payment of dividends affect

The NAV of a mutual fund

When faced with a CDSC on Class B shares, the charge is levied against the lesser of

The current NAV or the original purchase price.

Open-end investment company shares normally go ex-dividend:

The day after the record date

An investor's portfolio includes ten bonds and 200 shares of common stock. If both positions increase by one point, what is the appreciation?

The gain would be $100 for the bonds (one point for one bond is $10 × 10 bonds) and $200 for the common stock (one point is $1 × 200 shares). The total portfolio gain is $300.

The investment policy of a mutual fund can be changed by a majority vote of:

The outstanding shares

A nonqualified variable annuity valued at $400,000 is annuitized and the annuitant received $220,000 in payments until his death. At his death, if his wife received a lump sum payment of $180,000, this example illustrates a:

Unit refund annuity

Fees charged under Section 12(b)-1 are assessed against the fund's

annual average daily net assets and must be reviewed at least quarterly by the investment company's board of directors.

A front-end sales load is defined as the:

difference between the public offering price and the net asset value of a mutual fund share.