Series 65
A common measurement used to evaluate attitudes regarding future economic conditions is the difference in yields between U.S. Treasury bonds and corporate bonds. This is known as A) a yield spread. B) the Consumer Price Index. C) a business cycle. D) a yield curve.
A
When performing a capital needs analysis for a client, factors to be considered would include: I. the client's projected earnings II. the projected inflation rate III. projected market volatility IV. the client's age A) I, II, and IV B) I, II, III, and IV C) I and II D) III and IV
A
Which of the following statements regarding the properties of duration is not true? A) Duration measures the holding period return on a bond. B) Duration measures the effect of an interest rate change on the price of a bond or bond portfolio. C) Duration is a weighted-average term to maturity of a bond's cash flows. D) Duration measures a bond's price volatility by weighting the length of time it takes for a bond to pay for itself.
A
A portfolio manager who routinely shifts portfolio assets to take advantage of the business cycle is said to be engaging in A) asset allocation B) sector rotation C) rebalancing D) correlation
B
There are numerous benefits to opening an account at a brokerage firm with a transfer on death (TOD) designation. One of those is A) estate taxes are reduced. B) probate is avoided. C) the owner of the account may change beneficiaries with the permission of the court. D) simplification of the transfer of assets held at multiple brokerage firms.
B
A bond is paying $100 per year in annual interest and is selling at par. If the discount rate is 10%, the net present value is A) negative B) the same as the coupon C) zero D) positive
C
All of the following would be prohibited practices under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers except A) maintaining custody of a customer's funds and securities without notification to the Administrator. B) borrowing money from an existing client who is an accredited investor. C) charging fees that are higher than customary but offering a performance guarantee to compensate for the higher fees. D) accepting an order from a client's spouse shortly after receiving a written trading authorization.
D
An investor who resides in New York reads a newspaper ad for advisory services in a newspaper published in New Jersey. More than 80% of the newspaper's circulation is in the state of New York. According to the Uniform Securities Act, an offer has been made in A) New Jersey. B) New York. C) New Jersey and New York. D) neither New Jersey nor New York.
D
Included in the Uniform Securities Act's definition of broker-dealer would be A) issuers of securities. B) individuals who are registered as agents. C) savings institutions. D) a broker-dealer with a place of business in the state whose only clients are insurance companies.
D
Life insurance companies offer many different products. Which of the following would not be considered a security? I. Index annuity II. Modified endowment III. Variable annuity IV. Variable life A) III and IV B) II and IV C) I and III D) I and II
D
Under federal law, an application for becoming an associated person of a broker-dealer would be denied for an individual: A) accused of a securities-related felony 110 months ago. B) convicted of a felony 122 months ago. C) who is not a citizen of the United States. D) pleading no contest to a misdemeanor involving a financial matter 65 months ago.
D
Under which of the following circumstances does NASAA allow an investment adviser to charge performance-based fees? I. The client must initially have $1.1 million under management or a net worth in excess of $2.2 million. II. Compensation paid in this way must be for gains reduced by losses. III. Disclosure must be made that the fee arrangement may create an incentive for the investment adviser to make investments that are riskier or more speculative than would be the case in the absence of a performance fee. A) II and III B) I only C) I and II D) I, II, and III
D
Which of the following insurance company products is likely to have the longest time for which a surrender charge will be levied? A) Variable annuity B) Whole life insurance C) Class B shares D) Bonus annuity
D
Which of the following investment strategies is likely to have the lowest tax impact for the client? A) Passive B) Indexing C) Contrarian D) Buy and hold
D
A client owns an investment-grade bond with a coupon of 7%. If similarly rated bonds are being issued today with coupons of 5%, and the market is efficient, it would be expected that the client's bond A) has a zero net present value B) will be selling at a discount from par C) has a positive net present value D) has a negative net present value
A
A money market mutual fund would be least likely to invest in which of the following assets? A) Newly issued U.S. Treasury notes B) Repurchase agreements C) Jumbo CDs D) Newly issued U.S. Treasury bills
A
A risk-averse client, living in the United States and holding a high proportion of his assets in cash and cash equivalents in U.S. dollars, is exposed to which of the following risks? A) Purchasing power risk B) Market risk C) Reinvestment rate risk D) Exchange rate risk
A
The interest from which of the following bonds is exempt from federal income tax? I. State of California bonds II. City of Anchorage bonds III. Treasury bonds IV. GNMA bonds A) I and II B) I and III C) II and IV D) III and IV
A
A support level is the price range at which a technical analyst would expect the A) supply of a stock to increase substantially B) demand for a stock to increase substantially C) demand for a stock to remain constant D) demand for a stock to decrease substantially
B
The purpose of the Investment Advisers Act of 1940 is to provide A) minimum standards of performance for those registered as investment advisers. B) standards at the federal level for the regulation of investment advisers. C) standards among the various states for the regulation of investment advisers. D) regulation for investment companies and their operation
B
Under which of the following circumstances will a private placement fail to qualify for exemption from registration under the Uniform Securities Act? A) The offer is directed to only five individuals during any 12-month period. B) A modest commission is paid to the agents who sell the offering to noninstitutional clients. C) The seller reasonably believes that individual purchasers are buying for investment purposes rather than immediate resale. D) A bank holding company purchases the offering for trading purposes rather than investment purposes.
B
A municipal bond has a coupon of 6.25%, and at the present time, its yield to maturity is 6.75%. From this information, it can be determined that the municipal bond is trading A) at a premium. B) at par. C) at a discount. D) flat.
C
In which of the following cases is the exemption from registration with the SEC not based on the value of assets under management? A) An investment adviser that acts as an adviser solely to one or more national banks B) An investment adviser that acts as an adviser solely to private funds and has assets under management in the United States of less than $150 million C) An investment adviser that acts as an adviser solely to one or more venture capital funds D) An investment adviser with assets under management of less than $25 million
C
Under the Uniform Securities Act, an offer to sell would not include which of these? I. Stock acquired through a merger II. The issuance of warrants or convertible securities III. The issuance of stock rights to existing shareholders A) I and III B) II and III C) I only D) I, II, and III
C
The Investment Company Act of 1940 does which of the following? A) Prescribes procedures for the establishment of investment companies B) Sets rules for the registration of investment advisers C) Regulates the secondary market D) Governs the issuance of new issues
A
Under the USA, which of the following fits the definition of a sale? A) Contract to dispose of a security B) Issuing a prospectus C) Attempt to dispose of a security for value D) Solicitation of an offer to buy a security for value
A
The value of which of the following would be least likely to be impacted by changes in interest rates? A) A laddered bond portfolio B) A bank CD maturing in 5 years C) A U.S. Treasury bond issued 25 years ago with a 30-year maturity D) A convertible preferred stock
B
All of the following securities transactions are exempt under the Uniform Securities Act except A) a purchase of stock by an underwriter from the issuer in a firm commitment underwriting. B) a sale of stock to a pension trust. C) a sale of private placement securities to 25 noninstitutional investors in a state. D) an offer of preorganization certificates made to 25 persons that involves no commission or payment.
C
An elderly widow with no independent income wishes to invest the proceeds from her recently deceased husband's life insurance. Which of the following would be the most suitable recommendation? A) Oil and gas exploration program that you know is going to strike B) Municipal bonds C) High-grade corporate bond mutual fund D) Call options
C
The Investment Advisers Act of 1940 excludes from the definition of "investment adviser" persons whose advice: I. relates solely to municipal issues. II. relates solely to issues issued by or guaranteed by the U.S. Treasury. III. is solely incidental to their professional practice as an aeronautical engineer. IV. is limited to insurance companies only. A) I, II, and IV. B) I, II, III, and IV. C) II and III. D) III and IV.
C
An investor buys a 5% AA-rated corporate bond at par. After 1 year, if his total return on the position is 4%, the most likely explanation for this is A) interest rates decreased causing the bond price to increase B) the investor paid accrued interest when he bought the bond diminishing his first year's return C) the bond rating was downgraded D) interest rates increased causing the bond price to decrease
D
Which of the following is an example of a passive investment management style? A) Use of index funds in conjunction with selecting specific securities in the index to overweight certain sectors B) Investment in small capitalization technology securities C) Value investing D) Exclusive use of index fund
D
With respect to taxation, an investment adviser representative should not A) discuss the tax implications of investments. B) consider tax implications as a way of improving a client's after-tax returns. C) explain the taxable status of particular investments. D) draft tax and estate documents to ensure compliance with current law to provide substantial after-tax returns.
D
A technical analyst (chartist) with a long position in a particular stock would most likely enter a sell stop order below that stock's A) 200-day moving average B) support level C) resistance level D) previous high
B
Which of the following are prohibited practices? I. An investment advisory firm organized as a partnership fails to inform its clients of the departure of a partner with a very small interest in the partnership. II. An investment advisory firm charges an annual fee equal to 2% of the first $250,000 in assets under management; 1% of the next $500,000; and 0.5% for everything in excess of $750,000. III. The majority stockholder of a registered investment adviser pledges his stock as collateral for a loan taken out by the firm to expand its services without obtaining client consent for assignment of their contracts. IV. An investment advisory firm engages in agency cross transactions. A) I, II, III, and IV B) I and III C) III and IV D) I and IV
B
A working group convened by NASAA has developed a model fee disclosure schedule to help investors better understand the costs involved in doing business with their broker-dealer. The template has broker-dealers disclosing which of the following fees? A) Commissions B) Advisory fees C) Account closing fees D) Markups and markdowns
C
Calvin has the following securities in his portfolio: ABC common stock, XYZ common stock, PQR mutual fund (domestic small cap), DEZ mutual fund (foreign small cap), 30-year Treasury bond, and 5-year Treasury note. Which of the following risks should not concern Calvin? A) Business risk B) Reinvestment rate risk C) Default risk D) Systematic risk
C
Under the Investment Advisers Act of 1940 (as amended by the NSMIA of 1996 and the Dodd-Frank Act of 2010), an adviser is required to be registered with the SEC if A) the adviser's clientele is exclusively federal credit unions and the adviser has less than $100 million in assets under management. B) the adviser is the publisher of a news magazine of general and regular circulation. C) the adviser's clients are investment companies registered under the Investment Company Act of 1940. D) the adviser's advice relates solely to securities issued or guaranteed by the U.S. government.
C
Under the Uniform Securities Act, all of the following are exempt from state registration as investment advisers except A) investment advisers with no office in the state who only advise employee benefit plans with assets of more than $1 million. B) publishers of financial publications that are not addressed to clients' specific individual investment situations. C) financial planners who provide fee-based investment advisory services to clients. D) investment adviser representatives.
C
Amie Lear is a securities analyst employed by Empyreal Benefits, Inc., a registered broker-dealer. She is assigned to cover a number of different equity and debt investments. One of the investments is Taylor, Inc. (Taylor), a manufacturer of a wide range of children's toys. Based on her extensive analysis, she determines that her expected return on the stock, given Taylor's risks, is 10%. However, when applying the capital asset pricing model (CAPM), the result is a 12% rate of return. Based on Lear's analysis, Taylor's stock is A) correctly valued. B) neither overvalued nor undervalued. C) undervalued. D) overvalued.
D
An agent who carefully evaluates a client's risk tolerance, financial situation, and investment objectives engages in an unethical practice when he A) buys or sells securities with exceptionally high commissions or transaction costs. B) fails to discuss a company's working capital position (because the client does not want to be bothered by details) if the securities are fundamentally suitable for his portfolio. C) underestimates a company's interest rate risk as a result of cautious accounting practices recently adopted by the company. D) automatically recommends securities that are highly regarded by other agents in the office.
D
Mountain High Securities is a broker-dealer registered in Wyoming and Colorado with its principal office located in Colorado. With reference to the Uniform Securities Act, it would be correct to state that A) the Administrator of Colorado would have to approve of the broker-dealer's method of recordkeeping. B) it is required that any broker-dealer meet the recordkeeping requirements of each state in which they are registered. C) meeting the recordkeeping requirements of Colorado is sufficient even if those of Wyoming are more stringent. D) Mountain High Securities must meet the recordkeeping requirements of the SEC.
D
KPT, Inc., is preparing to report its net income for the past year. An increase in which of the following causes a decrease in the reported net income? I. Tax rate II. Cash dividend III. Interest charged on bank loans A) I and III B) I and II C) I only D) II only
A
Which of the following individuals is clearly eligible to make a catch-up contribution? A) Hannah, who is 55 years old B) Emily, who is fully vested C) Sam, who has completed 15 years of service D) Roger, who has completed 1 year of service
A
An investor wishing to buy US Treasury bonds receives a quote from the dealer of 98.16. This represents A) the offer price B) a discount C) the bid price D) an indication of falling interest rates
A
When would an individual employed by an issuer to sell its stock to the public have to register as an agent? A) When the employer is an insurance company B) When the employer is the U.S. Treasury C) When the transaction is exempt D) When the employer is a savings institution
A
Which of the following would be most useful information for an IAR attempting to determine the ability of a client to have the necessary funding to purchase an investment with a $25,000 minimum entry level? A) Family balance sheet. B) Income tax return. C) Marginal tax bracket. D) Cash flow statement. Explanation
A
A transactional exemption would be offered when a sale is made by A) an investment adviser. B) a court-appointed guardian for a minor. C) a custodian for a minor appointed under the Uniform Transfer to Minors Act. D) a broker-dealer.
B
Samantha Wells, a British citizen temporarily working in the United States, wants to form a business venture with other investors. She is looking for favorable tax treatment of earnings and losses. She also wants to limit the number of investors, but is willing to share control of the enterprise with others to attract them. What business form do you advise to her? A) S Corporation B) General Partnership C) C Corporation D) Limited Partnership
B
There are certain requirements for an investment to qualify as a REIT. Which of the following is not one of them? A) At least 75% of the assets must be invested in real estate-related assets, cash, and U.S. government securities. B) At least 75% of the REIT's taxable income must be paid out as dividends to investors. C) At least 75% of the REIT's annual gross income must be from real estate-related income such as rents from real property and interest on obligations secured by mortgages on real property. D) At least 90% of the REIT's taxable income must be paid out as dividends to investors.
B
When a variable annuity is annuitized A) the number of annuity units redeemed each payment period varies based upon the performance of the separate account B) the number of annuity units redeemed each payment period remains constant C) the number of accumulation units redeemed each payment period remains constant D) the number of accumulation units redeemed each payment period varies based upon the performance of the separate account
B
Under the antifraud provisions of the Investment Advisers Act of 1940, an investment adviser must disclose to clients A) the number of clients with whom the adviser does business. B) that any transactions made on the adviser's own account are consistent with the advice given to clients. C) that the adviser has never been subject to disciplinary action or censure by the SEC. D) the association between the investment adviser and the broker-dealer with whom the overall investment plan will be implemented.
D
Under which of the following conditions does NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers permit an investment adviser to divulge personal information about a specific client? I. When it will be used in a testimonial regarding the advisory services offered II. When the investment adviser has received a subpoena from a court of competent jurisdiction III. When the client has given the investment adviser specific permission to do so IV. With the approval of the Administrator A) II and IV B) I and IV C) I and III D) II and III
D
A widowed customer with no children has a portfolio invested in mutual funds valued at $250,000. The portfolio generates a monthly income of $1,600, an amount that exceeds her living expenses by $300. The investment portfolio is her sole source of income. Her agent recommends she sell $30,000 worth of her mutual funds and purchase a deferred variable annuity to take advantage of the tax deferral and death benefit features. This recommendation is A) unsuitable B) suitable because it offers a growth opportunity with a death benefit for a portion of her holdings C) suitable because it provides diversification D) suitable because it provides tax deferral features
A
Dan is the owner of a mutual fund that returned him a before-tax return of 15% last year. Inflation is running at an annual rate of 3%, and Dan is in a 27% marginal income tax bracket. What has been Dan's approximate inflation-adjusted after-tax return on the fund over the course of the last year (rounded to the nearest 2 decimal points)? A) 7.95% B) 10.95% C) 12.00% D) 8.76%
A
If a customer's chief concern is to shelter as much of his portfolio earnings from tax as possible, which of the following securities would be most suitable? A) Municipal GOs B) Money market instruments C) High-yield bonds D) Treasury receipts
A
Registration statements for securities under the Uniform Securities Act are effective for A) one year from the effective date. B) one year from the date of issue. C) one year from the previous December 31. D) a period of time determined by the Administrator for each issue.
A
Savant Investment Managers (SIM) has a client with a long position in PQR common stock. The position has an average cost per share of $30, and with PQR currently selling at $50 per share, the client is interested in a method that will allow her to protect some of the unrealized profit without an expenditure of funds. Her representative at SIM could suggest A) entering a sell stop order at $45. B) buying PQR 45 put options. C) entering a buy stop order at $45. D) entering a sell stop order at $55.
A
Which of the following would not be considered a fraudulent or prohibited business practice? A) Attempting to solicit a trade in unregistered exempt securities with an individual client B) Submitting a trade order for a potential client who has promised that the new account will be opened tomorrow C) Omitting a material fact because the agent felt the client would not understand the information involved D) Larger-than-ordinary commissions without prior disclosure to the client
A
Because a trust account is managed for the beneficial interest of the beneficiary, the investment adviser representative handling the account can A) arrange to have the trust's funds pledged to support a loan for the trustee. B) have a check drawn on the account payable to the trustee for trustee expenses. C) have funds withdrawn from the account at the direction of the beneficiary. D) place the securities in the trust fund in a noncustodial brokerage accoun
B
Which of the following is not included in the calculation of a mutual fund's NAV per share? A) Accrued custodian bank fees B) Accrued sales charges C) Closing values of portfolio assets D) Accrued management fees
B
According to the Uniform Securities Act, which of the following would be defined as an investment adviser representative? I. John, who opens an investment advisory firm where he devotes his time exclusively to management responsibilities as the sole proprietor of the firm II. Paul, who works for a firm soliciting investment management accounts on behalf of several different investment managers III. Margaret, who works as a commission sales agent for a broker-dealer IV. Mark, an employee of AAA Broker-Dealers, who solicits brokerage clients for commissions on the basis of research conducted by his firm's securities analyst A) II and III B) II and IV C) I and II D) I and IV
C
All of the following statements regarding bonds selling at a discount are correct except A) they will appreciate more than comparable bonds selling at a premium if interest rates fall. B) they can indicate that the issuer's credit rating has fallen. C) they are more likely to be called than comparable bonds selling at a premium. D) they can indicate that interest rates have risen.
C
If an individual leaves her current employer and takes a new job, which of the following can she NOT do with the assets in her 401(k) plan? A) Roll them over into a traditional IRA. B) Keep them in the plan. C) Roll them over into a variable annuity using a 1035 exchange. D) Roll them over into the new employer's 401(k) plan
C
In an effort to benefit from the economies of scale, Liquid Assets Management, Inc., (LAMI) and Strategic Assets Management Company (SAMCO)—both registered with the Administrator as investment advisers—have merged into a new firm with the name of Strategic and Liquid Assets Management Company (SLAMCO). This would A) be an unethical business practice. B) require notification of the clients within a reasonable period of time. C) be considered an assignment of the advisory contracts and would require consent of the clients. D) require the filing of a new Form ADV along with the proper registration fee.
C
Sharon is an investment adviser representative (IAR) with Highwater Advisers, a federal covered investment adviser with its principal office in State X. Sharon provides advisory services to a bank located in State X, a state in which she has no place of business. Under current regulations, A) because Sharon's client is a bank, she does not have to register as an IAR in State X. B) because Sharon has a client in State X, registration as an IAR would be required in State X. C) because Sharon has no place of business in State X, she does not have to register as an IAR in State X. D) because Highwater's principal office is in State X, Sharon would be required to register as an IAR in State X.
C
Under the Uniform Securities Act, an Administrator may deny, suspend, or revoke the registration of a security on what grounds? I. It is in the public interest. II. There is cause for action as stipulated in the Uniform Securities Act. III. The issuer reports an operating loss for more than four quarters. IV. It is a preferred stock and defaults on its dividend. A) II and III B) III and IV C) I and II D) I and IV
C
Under the Uniform Securities Act, which of the following is a broker-dealer? A) A credit union that sells its own stock B) An issuer C) A corporation that sells interests in an oil and gas limited partnership to investors, with the proceeds going to the issuer D) An agent
C
When an Administrator acts summarily to postpone or suspend a registration of a security, which of the following statements is true under the Uniform Securities Act? I. The suspension will not go into effect until after a hearing. II. The registrant must be promptly notified of the action and given an opportunity for a hearing. III. A hearing must be held within 15 days of written request of the registrant. A) I, II, and III B) I and III C) II and III D) I only
C
Which of the following securities is the least suitable recommendation for a qualified money purchase plan account? A) A-rated corporate bond B) Treasury bond C) Investment-grade municipal bond D) Large-cap common stock
C
Which of the following statements regarding ADRs are true? I. The securities are vehicles used to facilitate U.S. trading of foreign securities. II. Dividends are received in the foreign currency. III. Holders have foreign currency risk. IV. The receipts are issued by a foreign branch of a domestic bank. A) I, II, and III B) II and IV C) I and III D) I, III, and IV
C
Which of the following would be deemed to be an assignment of an investment adviser's contracts? I. All of the stock in NLT Advisers, a corporation, is acquired by MMS Advisers, Inc. II. The Lucky Seven Partnership is an investment adviser with seven partners. Four of the partners make a fortune and decide to retire. They are replaced by new partners. III. Albert is an investment adviser. His clients' accounts are automatically debited monthly for his fee. Because of this steady cash flow, his banker readily accepts a pledge of these accounts as collateral for a loan. A) I and III B) II and III C) I, II, and III D) I and II
C
The RAN Corporation's common stock is listed on the New York Stock Exchange. To raise additional working capital, RAN's board of directors has authorized the sale of $75 million in subordinated debentures. Under the Uniform Securities Act, which of the following is not a true statement? A) The Administrator can require that the issuer provide a notice filing in the state. B) The Administrator can bring an enforcement action against the issuer if it is deemed that the issue is fraudulent. C) The Administrator may require a filing fee to be paid prior to sales taking place in the state. D) The Administrator can require the RAN Corporation to register the debentures prior to an offering in the state.
D
Under the Uniform Securities Act (USA), which of the following statements regarding the posting of surety bonds is not true? A) The Administrator requires the posting of bonds primarily to cover the cost of civil liabilities associated with violations of the USA. B) The Administrator can accept securities instead of cash if the posting of a bond is required. C) Bonds may be required for agents of broker-dealers. D) The Administrator requires all broker-dealers to post bonds even if they maintain net capital in excess of minimum amounts.
D
All of the following statements regarding registration of broker-dealers under the Uniform Securities Act are true except A) a successor firm is exempt from filing a consent to service of process until the renewal date. B) a successor firm is exempt from paying registration fees until the renewal date. C) broker-dealers with discretion over client accounts may be required to post a surety bond. D) no broker-dealer can be required to meet financial requirements in excess of those of the SEC.
A
An investment adviser sends a notice offering a research report she has recently prepared to a group of 25 new members of the local Lions Club. Under the NASAA Model Rule on recordkeeping for investment advisers, the firm must keep a copy of the notice along with A) a memorandum describing the list and its source. B) the date the Administrator approved the research report. C) a copy of the full roster of the local chapter. D) the names of those members to whom the report was sent.
A
John owns a nonqualified, tax-deferred annuity. When he retires, what will be the tax consequences of his annuity payments? A) His annuity payments are partly taxable and partly tax-free return of capital. B) His annuity payments are partly taxable as capital gain and partly taxable as ordinary income. C) His annuity payments are tax free. D) His annuity payments are all taxable as ordinary income.
A
Under the Securities Exchange Act of 1934, an exchange is A) an organization that provides facilities for bringing together buyers and sellers of securities B) an organization of securities professionals designed to promote fair practices in doing business with the public C) any transaction involving a security D) a disposition of a security for value
A
Which of the following is not a fraudulent business practice when committed by a registered broker-dealer? A) Acting as agent for both buyer and seller on a transaction B) Engaging in trades between other broker-dealers to increase or decrease the price of securities C) Trading securities between house accounts and customer accounts to create trading volume or the appearance of interest in a security D) Conducting transactions that do not result in the transfer of ownership between buyers and sellers
A
Which of the following is not a person as defined by the Uniform Securities Act? A) A child prodigy for whom his mother, as custodian, opened an account at a major securities firm B) XYZ Dry Cleaners, Inc., whose shareholders all work on the premises and also offer financial advice to customers who request it C) A small unincorporated investment club D) Guelph, a small city outside of Toronto, Ontario, that maintains an investment account at a brokerage house to invest surplus funds
A
Many parents prefer to use a Section 529 plan over a Coverdell ESA to finance their child's education plans because: I. contribution limits are higher II. funds may be withdrawn tax-free if used for qualified education expenses III. there are no earnings limits IV. 529 contributions are tax deductible on the federal level A) I and II B) I and III C) I, II, and III D) III and IV
B
An agent opening a wrap account for a wealthy client is required to disclose that A) wrap fees generally result in higher costs than separate charges for advice, management, and transactions. B) wrap fees always result in lower costs than separate charges for advice, management, and transactions. C) wrap fees may result in higher costs than separate charges for advice, management, and transactions. D) wrap account managers will generally outperform index fun
C
An investment adviser has devised a charting system and wishes to advertise this fact in order to obtain additional clients. To do so, the USA would require A) disclosure of the length of time the charting system has been employed. B) past performance since inception of the system to be shown. C) a statement as to the limitations of and difficulties involved in using this system. D) if the system is indeed foolproof, verification of that fact.
C
When contrasting preemptive rights and warrants, it would be correct to state that, at issuance, A) rights have intrinsic and time value while warrants only have intrinsic value. B) rights have time value while warrants have intrinsic and time value. C) rights have intrinsic and time value while warrants only have time value. D) rights have intrinsic value while warrants have intrinsic and time value
C
When reviewing a corporation's financial statements, shareholders' equity is computed by A) adding together retained earnings, preferred and common stock, and long-term debts. B) subtracting current liabilities from current assets. C) subtracting total liabilities from total assets. D) multiplying the current market price per share times the number of outstanding shares.
C
Which of the following securities are NOT exempt from state registration? A) Securities issued by the Japanese government. B) An investment contract issued by the pension fund of ABC Corporation, a large manufacturing corporation whose shares are traded on the New York Stock Exchange. C) Securities issues by the Episcopal diocese of Cleveland, Ohio. D) Securities issued by Jones Corporation, whose shares are publicly traded in Kansas and entirely owned by Kansas residents.
D
Why may the Administrator deny an application for registration as an agent? I. The applicant has been convicted of a misdemeanor involving securities fraud within the past 120 months. II. The applicant is insolvent. III. The applicant has been convicted of a felony within 10 years of the date of application. IV. The applicant has filed an incomplete application. A) I and III B) I, III, and IV C) I and IV D) I, II, III, and IV
D
It would not be a violation of the Uniform Securities Act for an applicant for registration as an agent to do which of the following while the application is pending? A) Sell fixed annuities B) Use a preliminary prospectus to obtain indications of interest for a new issue but wait until he is registered before accepting any orders C) Limit his sales activity to immediate family members only D) Conduct seminars on asset allocation
A
An agent registered in one state may solicit business in another state, provided A) the agent was previously registered with a different firm in the other state. B) both the agent and the employing broker-dealer are properly registered in the other state. C) the agent applies for registration in the other state. D) the agent's firm is properly registered in the other state.
B
Which of the following must register as an agent under the Uniform Securities Act? A) An administrative assistant who provides securities quotes to clients B) A sales assistant who takes orders on behalf of agents in a branch office C) An individual who sells securities of an issuer to the issuer's employees without earning a commission D) A broker-dealer with offices in the state
B
Which of the following situations would require registration as an investment adviser? I. A broker-dealer provided investment research services to a customer and charged a fee for the services. II. An agent of a broker-dealer recommends the purchase of ABC securities to a customer, who then purchases 100 shares, and the agent earns a commission. III. A broker-dealer has its agents prepare complete financial plans for customers for a nominal fee. The plans recommend specific securities transactions, and when the customers place orders, the agents earn commissions on those securities transactions. IV. A broker-dealer charges its customers for collecting dividends and maintaining their accounts in addition to commission charges for transactions executed. A) I only B) I, III, and IV C) I and III D) I, II, III, and IV
C
Which of the following statements regarding a traditional IRA for someone filing a 2023 tax return is true? A) Distributions without penalty may begin after age 59½ and must begin by April 1 of the year preceding the year an individual turns 73. B) Distributions before age 59½ are subject to a 10% penalty in lieu of income taxes. C) The income and capital gains earned in the account are tax deferred until the funds are withdrawn. D) With sufficient earned income, a taxpayer who contributes $6,500 to a Roth IRA can also contribute $6,500 to a traditional IRA.
C
Which of the following would be considered unethical under the NASAA Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers? A) A loan is made to an investment adviser representative by one of her clients who happens to be the chief loan officer where she maintains her principal banking relationship. B) An investment adviser representative receives an order to buy XYZ stock from an advisory client and simultaneously recommends that another advisory client sell that stock in an agency cross transaction. C) An investment adviser discloses in its brochure that, from time to time, it may sell securities recommended to clients directly out of the firm's inventory. D) An investment adviser varies the annual fee based upon each client's assets under management, charging less for those with higher balances and more for those meeting the account minimum.
A
The Uniform Securities Act defined many terms. Among them is the term sale. Which of the following would be included in the definition of sale? I. An offer of common stock in a new issue properly registered or exempt from registration in the state II. A gift of assessable stock III. An investor exercising preemptive rights previously received directly from the issuer IV. A corporation distributing 10 million new shares as part of a 2-for-1 stock split to all holders of its $1.00 par common stock A) III and IV B) I and II C) I and IV D) II and III
D
Under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, which of the following statements about material conflicts of interest is true? I. Any conflicts of interest must be disclosed either orally or in writing before rendering advice. II. Material conflicts of interest must be disclosed in writing before rendering advice. III. Material conflicts relating to the adviser, adviser representative, or adviser employees must be disclosed. A) I only B) II only C) I and III D) II and III
D
Under the Uniform Securities Act, an investment adviser who has custody of or discretionary authority over client assets or who charges fees of more than $500 six or more months in advance is required to disclose which of the following to its clients? I. The financial condition of the adviser that could impair its ability to meet contractual commitments to clients II. A legal or disciplinary event that would be material to evaluating the adviser's integrity or ability to meet its contractual commitments to clients III. That the adviser was convicted of or pleaded no contest to a felony within the past 10 years or is currently subject to a criminal proceeding involving a felony IV. That the adviser was found to have violated SRO rules, which resulted in suspension, expulsion, or a fine of more than $2,500 A) I, II, III, and IV B) I only C) III only D) I, II, and III
A
Individuals are faced with choices every day. Sometimes the choices we make result in a favorable outcome while some choices don't. When it comes to investing, an investor who, when presented with several investment options, selects one that ultimately provides the poorest returns has encountered which risk? A) Market risk B) Opportunity cost C) Business risk D) Liquidity risk
B
The Uniform Securities Act provides for civil penalties in the event of illegal activities of broker-dealers and their agents. Under the act, what is the maximum that a purchaser would be entitled to claim? I. Attorney's fees II. Court costs III. Interest at the state's legal rate IV. The greater of the original consideration paid for the security or the current market value A) I, II, and III B) I, II, III, and IV C) III and IV D) I and II
A
According to the Investment Advisers Act of 1940, which of the following statements regarding Part 2 of Form ADV are true? I. It must be filed with the state Administrator. II. A balance sheet must be submitted if the adviser collects prepaid fees of more than $1,200, six or more months in advance. III. Certain minimum business and education qualifications must be met before an investment adviser can file. IV. It may be used to satisfy the brochure requirements of the act. A) II and IV B) I, II, and IV C) I, II, and III D) I and IV
A
Which of the following is not among the powers granted to the Administrator under the Uniform Securities Act (USA)? A) The power to require individuals associated with federal covered advisers in the capacity of investment adviser representatives to register as such in his state as long as the investment adviser has a place of business in the state B) The power to require a federal covered adviser who has individual clients in his state to file with the Administrator, prior to acting as a federal covered adviser in his state, any documents that have been filed with the Securities and Exchange Commission that the Administrator wishes C) The power to audit the books of a federal covered adviser with clients in his state if he suspects fraudulent business behavior D) The power to permit an investment adviser to charge performance-based fees on an account of a client with a net worth of $750,000 and an account balance of $200,000
A
