Series 66

Your client with $100,000 to invest is looking for maximum current income. Which of the following would offer the highest current return?

$100,000 market value of corporate bonds selling at a premium and yielding 6% to maturity

If the current risk-free rate is 5%, and the expected return on the market is 10%, what return can be expected from a security that has a beta of 1.5?

12.5% RF + (MR - RF)beta

A customer purchases stock for $40 per share and holds it for 1 year, selling it for $50 per share exactly 12 months after the date of purchase. Four quarterly qualifying dividends of $.50 were paid during the year. If the customer's tax bracket is 30%, what is the after-tax rate of return?

21.75% $10 gain on stock x 30% $2 x 15%(qualifying dividends max tax gain) 12-3.30 = 8.70/40

Under the Investment Advisers Act of 1940, an adviser's registration usually becomes effective how many days after it is filed?

45

Which of the following is NOT a person as defined by the Uniform Securities Act?

A child prodigy for whom his mother, as custodian, opened an account at a major securities firm.

Under the Investment Advisers Act of 1940, which of the following is considered an investment adviser?

A lawyer who specializes in consulting on investing in securities

Typical broker-dealer fees that must be disclosed as part of a fee disclosure document would include

A. a charge when a client requests that a stock certificate be issued in his name B. the interest charged by the firm on money owed by customers in their margin accounts 3 primary expenses involved with brokerage accounts that are not included in the fee disclosure template. Those are: commissions, markup/down, advisory fee for firms also registered as IA's

An investment adviser is analyzing 4 bonds of similar quality for a client. Bond A has a coupon of 6%, matures in 12 years, and is currently priced at 50. Bond B has a coupon of 8%, matures in 9 years, and is currently priced at 50. Bond C has a coupon of 4%, matures in 18 years, and is priced at 45. Bond D has a coupon of 12%, matures in 6 years, and is priced at 50. Based on NPV, which of these bonds represents the better value?

Bond C Use rule of 72

Under which of the following circumstances would it most likely be presumed that an adviser holds custody of client property?

Harold, a client, makes a check intended for his investment account payable to Gibraltar Advisers, which is dually registered as investment adviser and broker-dealer. Harold's fee is automatically withdrawn from his account on a semiannual basis. when fees are automatically withdrawn from the client's account, custody of client funds can be presumed

With regard to the powers of the Administrator, which of the following statements are NOT correct? I. The Administrator must seek an injunction to issue a cease and desist order. II. The USA requires an Administrator conduct a full hearing, public or private, prior to issuing a cease and desist order. III. The USA grants the Administrator the power to issue injunctions to force compliance with the provisions of the act.

I, II, and III

Which of the following would be a nonissuer transaction?

I. GEMCO Mutual Fund sells 100,000 shares of XYZ Corporation common stock out of its portfolio. II. Curt sells 1,000 shares of Giggle common stock to Chuck in an isolated transaction.

A portfolio that is primarily invested in corporate bonds would be subject to

I. credit risk II. interest rate risk III. opportunity cost IV. purchasing power risk

An investment policy statement would likely include

I. expected returns of the recommended strategy and the expected range of these returns II. recommended allocations among differing asset classes III. strategies used for selecting specific stocks in the equity portion of the portfolio

The Uniform Securities Act provides for civil penalties in the event of illegal activities of agents. Under the act, the maximum that a purchaser would be entitled to claim would be

I. the original consideration paid for the security II. interest at the state's legal rate III. attorney's fees IV. court costs

A bond with a par value of $1,000 and a nominal yield of 6% paid semiannually is currently selling for $1,300. The bond matures in 25 years and is callable in 15 years at $1,080. In the computation of the bond's yield to call, which of these would be a factor?

Interest payments of $30 YTC computation involves knowing the amount of interest payments to be received

Which of the following is NOT a standard used to determine whether a particular mutual fund is suitable for an individual investor?

Whether the investment is made directly through the fund itself or through a broker-dealer

Which of the following would be a violation of the NASAA Contents of Investment Advisory Contract Model Rule?

Without the consent of advisory contract holders, the owner of a majority of the stock of the advisory firm pledges that stock to a bank as collateral for a loan enabling the firm to acquire better cybersecurity technology.

While an application for registration as an agent of a broker-dealer is still pending, that person would be permitted to

assist registered employees of the firm by doing research on securities they are following

An investor goes short 5 soybean futures contracts on the Chicago Mercantile Exchange (CME). When the contract expires,

both the buyer and the seller are obligated to perform

When discussing the purchase of a scheduled premium variable life insurance policy with a client, it would be CORRECT to state that

by surrendering the policy, its cash value may be obtained

The semi-strong form of the efficient market hypothesis (EMH) asserts that stock prices

fully reflect all publicly-available information. weak form relates to historical information only, strong form relates to public and private4 information

The type of analysis that attempts to value securities by examining general economic trends and the growth potential and productivity of individual companies is

fundamental analysis whereas technical analysis relies on charts of past performances to forecast future price movements

The main difference between the current ratio and the quick ratio is that the quick ratio excludes

inventory.

Trade confirmations sent by broker-dealers to their customers must always include

the amount of commission charged commissions must always be disclosed, markup/markdown has to be disclosed under certain situations

An investor owns a long-term U.S. Treasury bond with a 5% coupon and 15 years to maturity. The client wishes to sell and receives a quote from a dealer of 104.22. This number represents

the bid price

Your client wants to have $1 million in her investment account when she retires at age 70. She is currently 50 and has about $215,000 available to invest today. You tell her that if the portfolio can earn at a compounded rate of 8%, she will reach her goal. That 8% rate is

the internal rate of return The internal rate of return is the earnings rate required to reach a specified future value from an amount that is currently available to invest

Regarding the treatment of estates by the IRS, it would not be correct to state any of the following EXCEPT

the maximum tax rate on estates is the same as that on gifts

Which of the following transactions are exempt?

I. Joe Smith, an agent with ABC Securities, Inc., sells XYZ Corporation's securities to a high-net worth client on an unsolicited basis. II. Alexander Wimpton had his sizable portfolio of stocks and bonds sold by the administrator of his estate upon his death.

According to both the Investment Advisers Act of 1940 and the Uniform Securities Act, under which of the following circumstances is an investment adviser required to make disclosure to the client?

I. The adviser intends to recommend the use of the broker-dealer with whom he is affiliated. II. The transactions recommended to the client are inconsistent with those for the adviser's own account. III. The investment adviser intends to sell the client the insurance policy recommended for his financial plan. IV. The adviser is employed by a broker-dealer but provides investment advisory services outside the scope of his employment with the broker-dealer.

Which factor is least important when assessing a defined benefit pension?

Investment performance of the fund Under a defined benefit plan, the pension payable is related to the length of service and usually expressed as a proportion of final earnings.

In which of the following situations has the investment adviser NOT violated the antifraud provisions of the Investment Advisers Act of 1940?

Linda tells clients the time is right to convert shares of a money market fund to shares of a growth stock mutual fund in the same mutual fund family. Without telling clients, she makes a similar conversion for her own account.

If an investment adviser places an advertisement in a newspaper offering a free brochure to those who call, under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, what may the adviser require from callers as a condition of receiving the brochure?

None, because no obligation may be placed on the callers

A client has purchased a nonqualified variable annuity from a commercial insurance company. Before the contract is annuitized, your client, currently age 60, withdraws some funds for personal purposes. What is the taxable consequence of this withdrawal to your client?

Ordinary income taxation on the earnings withdrawn until reaching the owner's cost basis

To which of the following situations does the transaction exemption apply?

The sale of an estate's holding of IBM shares by an executor Transactions by executors and estate administrators are examples of exempt transactions

If an unaffiliated person acts on behalf of an investment adviser in an attempt to solicit or refer new investment advisory clients, which of the following conditions is not required by the Investment Advisers Act of 1940 for the investment adviser to pay the solicitor a fee of $100 per month for this service?

The solicitor must be registered as an investment adviser.

An advisory client of yours discusses a business project she is involved with where the partnership is using accelerated depreciation to maximize losses in the early years. It would be prudent of you to inform the client that

accelerated depreciation could trigger the alternative minimum tax.

Sally is registered as an agent with ABC Securities Co., a major brokerage house with offices in most states. ABC has recently introduced a fee-based asset management program and has asked Sally to devote one hour per day soliciting her existing clients for this program. Under the USA, Sally would

be required to obtain registration as a registered investment adviser representative

A 61-year-old wanting to take a lump-sum distribution from his Keogh will

be taxed at ordinary income rates

Unless done under a specific exemption described in the law, it would generally be prohibited for an investment adviser to

charge fees based on performance

All of the following statements regarding futures contracts are correct EXCEPT

completing a futures contract requires the delivery of the commodity.

The Uniform Securities Act invests the office of the Administrator with a number of powers. However, the act does not permit the Administrator to

issue an injunction when there is evidence of wrongdoing Only a court of competent jurisdiction may issue injunctions.

Regarding performance-based fees charged by ​covered ​investment advisers, all of the following statements are correct EXCEPT

it must be disclosed that performance-based fees may motivate the investment adviser to assume greater investment risk than would apply with other compensation methods

An investment adviser has legal access to a broker-dealer's confidential research document and uses the information to support a recommendation to a client. The investment is successful. Under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, the adviser

need not disclose the source of the information

The DERP Corporation has an outstanding convertible bond issue that is convertible into 8 shares of stock. If the current market price of the bond is 80, the parity price of the stock is

$100 per share 800/8

A client owns an equity index annuity with the following characteristics: • 10% cap rate • 85% participation rate • 2% minimum annual guarantee The client purchased the annuity with an initial investment of $100,000. In the first year the underlying index returned +18%. In the second year, the market return was negative 4%, and in year three it returned +6%. What is the value of the annuity at the end of year three?

$117,922 Yr 1 = 110,000 (100,000*.10) Yr 2 = 112,200 (110,000*.02) Yr 3 = 117,922 (112,200 * .06 * .85)

The following table shows the individual weightings and expected returns for the 3 stocks in an investor's portfolio: V: Weight = .4 , ER = 12% M: Weight = .35 , ER = 8% S: Weight = .25 , ER = 5% What is the probable return of this portfolio?

8.85% E(RP) = 0.40(12) + 0.35(8) + 0.25(5) = 8.85%.

Which of the following transactions is NOT exempt under the Uniform Securities Act?

A broker/dealer makes an offer in a private placement to 15 noninstitutional investors in a state within a 30-day period. Transactions with executors of estates, institutions, and investment companies are all defined as exempt transactions under the Uniform Securities Act. Private placement exempt as long as offered to no more than 10 non-institutional clients during a 12 month period

Which of the following involves an offer or sale?

A gift of an assessable security

The risk/return pyramid where the bottom is lowest risk and the "point" is the highest, generally places commodities

at the top

Which of the following statements regarding exemptions is TRUE?

An exemption for a transaction must be established on an individual basis before each transaction.

Which of the following securities is most likely to be registered by coordination under the USA?

An initial public offering of a security that does not qualify for inclusion on any exchange or Nasdaq and is to be distributed in several states Registration by coordination is available to any issuer that is also registering securities with the SEC under the Securities Act of 1933

Which of the following persons must register as an investment adviser under the Uniform Securities Act?

An investment adviser who only serves institutional clients and whose only office is in this state

Which of the following actions by an investment adviser registered in 3 states is permitted?

Announcing that the first 50 new clients to sign up will receive a 25% discount on their fees for the first year

Distributions from which of the following can be rolled over into an IRA?

Another IRA Corporate pension plan Corporate profit-sharing plan Keogh plan

Of the 4 pairs of assets below, which pair provides the highest level of diversification?

Assets 7 & 8: with a correlation coefficient of −0.88 Highest level of diversification is when correlation coefficient is closest to -1

When a nonspouse inherits an IRA, the beneficiary can choose from all of the following options except

keeping the money in the deceased's IRA

Which of the following does NOT meet the compensation test for defining investment advisers under SEC Release 1A-1092?

Your next-door neighbor recommends the purchase of a certain security from his broker, which you eventually do

A couple explains to their financial adviser that they are seeking investments to preserve and increase their buying power over the inflation rate with a medium to long time horizon. Which of the following best describes their customer profile and suitable investments?

Capital growth through equity investments

Although generally prohibited, there are conditions under which a state-registered investment adviser is permitted to charge performance-based fees. Which of the following meets the necessary criteria?

Charging a performance-based fee to an elderly client whose net worth is $2.3 million, with only $150,000 under the adviser's management

Nonsecurities derivatives include futures and forwards. Among the differences between futures and forwards is that futures contracts

are rarely exercised while forwards generally are.

Based on the following information, which stock is most likely to appeal to a growth investor?

Dividend yield of 0.3% Growth investors usually seek stocks with high-growth expectations, reflected by a higher-than-normal P/E ratio, typically 20:1 or higher, and a low dividend yield, usually caused by a low dividend payout ratio

If you overheard an analyst referring to an investment's indicative value, the discussion would most likely be about

ETNs

A client wishes to evaluate a mutual fund's returns over the past five years. Reviewing the prospectus, she finds the returns were 2%, 5%, 9%, 1%, and 12%. Which of the following would be the most meaningful calculation for her to perform?

Geometric mean Geometric mean is more meaningful when evaluating an investments return. Arithmetic mean will always be higher

The Administrator may require which of the following from a federal covered adviser? I. copy of the IA's Form ADV II. filing of the IA's advertising in the state iii. a listing of the IA's fee schedule IV. a filing fee

I and IV

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

I, II, and IV

Which of the following characteristics describe a futures contract?

I. Exchanged-traded

Which of the following statements is most accurate regarding employer-sponsored retirement plans?

In a defined benefit plan, the client can have some reasonable certainty about the amount of income that will be received in retirement.

A grantor retained annuity trust (GRAT) would not be used to reduce

Income Taxes

If a customer who has granted a durable power of attorney to her son dies, which of the following statements regarding the power of attorney is TRUE?

It is canceled on the death of either principal.

Securities of which of the following issuers are exempt under the USA?

National banks State banks Federal Savings and loan association

An adviser who is describing a section 529 plan to a client would indicate that these programs offer which of the following benefits?

Post-tax contributions and tax-free distributions if used for elementary school, secondary school, or college tuition.

Which of the following statements regarding Section 529 plans is CORRECT?

Qualified expenses could include tuition for attendance at a foreign university.

A credit union is issuing participation units in this state. Which of the following statements relating to the Uniform Securities Act is TRUE?

The issue is subject to the antifraud provisions of the Act.

The donor to a 529 plan has decided to move the existing plan to one offered by another state. Which of the following statements is NOT true?

This may be done, but only if the entire account is rolled over.

In the banking industry, the term POD refers to an account similar to the TOD designation used by broker-dealers. An old, but sometimes still used term to describe this kind of account, is

Totten trust

Which of the following transactions are NOT exempt from registration?

Transactions with intrastate manufacturing companies

Which of the following statements is TRUE concerning variable life separate account valuation?

Unit values are computed daily and cash values are computed monthly.

Which form of the efficient market hypothesis (EMH) suggests that fundamental analysis and insider information may produce above-market returns?

Weak

Maria, age 49, was discussing with some coworkers the recent family vacation she took. She commented that she was able to afford it by taking a penalty-free withdrawal from her retirement plan. Based on that statement, Maria must be covered under

a 457 plan.

An investment adviser representative may describe dollar cost averaging to a customer as

a funding technique that will cause the average cost per share to be less than the average price per share

Duration is

a measure of a bond's volatility with respect to a change in interest rates

One of the likely consequences of a rating downgrade on a bond is

a reduction in the market price of the bond.

Included in the USA's definition of an exempt transaction would be any transaction by any of the following EXCEPT

a trustee of an irrevocable trust

The Uniform Securities Act requires that a consent to service of process be filed by each of the following EXCEPT

a trustee operating in a fiduciary capacity in the state

DERP Corporation has issued 5% convertible debentures maturing in 2040. The conversion price is $40 and the common is currently trading at $48 per share. One would expect the DERP debentures to be selling somewhat

above $1,200. 1000/45 = 25 25 x 48 = 1200 convertible securities generally sell at a slight premium over their parity price.

Under the USA, a person who has passed the appropriate NASAA examination but whose license has not yet been issued can participate in

filing payroll report Filing payroll reports is a clerical activity, and registration would not be required to perform that function.

Under the Uniform Securities Act, an investment advisory contract must contain (in writing) all of the following provisions EXCEPT

on the departure or death of a majority shareholder of an investment advisory corporation, the advisory agreement must be renewed to prevent an unlawful assignment of the account

Alice is a financial planner who is properly registered as an investment adviser and occasionally meets with clients with negative cash flow and substantial indebtedness. Alice refers such clients to Norman, a bankruptcy attorney. Likewise, when Norman encounters clients who need help managing their assets, he refers them to Alice. This activity is

permissible if the referral arrangement is disclosed to clients

One way in which universal life and variable life are similar is that both

permit loans against the cash value

If two agents of a broker-dealer agree to work together as a partnership in soliciting business and they agree to split commissions, this practice is

permitted

All of the following statements regarding universal life insurance are correct EXCEPT

premiums are fixed for the life of the policy

Value investors

seek securities that are undervalued or selling for less than their intrinsic value

A transactional exemption would be available under the Uniform Securities Act when an agent for a broker-dealer

sells a large block of an unregistered nonexempt security to an insurance company that is not authorized to do business in this state

Broker-dealers provide a bid and offer price when functioning as market makers. In this context,

the bid price represents the price the market maker is willing to pay for the stock and the offer price is the market maker's selling price.

An investor plans to fund the college education for her newborn child by purchasing $5,000 of investment-grade bonds on an annual basis. She is most likely using

the bullet strategy. Used when aiming at a target, like education.

There are several popular investment styles and, in many cases, portfolio managers use a blended approach to security selection. If a portfolio manager adhered to a pure value style, he would put most of his focus on

the company's financial statements The value style of portfolio management looks for stocks that are undervalued. The only way to find this out is by looking at a company's balance sheet

All of the following statements regarding investment advisory contracts under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers are true EXCEPT

the contract's term may not exceed 1 year

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 yield to maturity

One of your clients will be separating from his current employer and asks you for your suggestion as to what should be done with the assets in his contributory 401(k) plan. The plan documents indicate that plan assets must be distributed upon termination. Given the following choices, your recommendation would be to

use a direct rollover to have the assets placed into a rollover IRA

All of the following are exempt from state registration EXCEPT

variable annuities issued by a major insurance company

Grandpa bought 100 shares of XYZ common stock 10 years ago for $10 per share. The stock split 2 for 1 several years ago and grandpa gave all of the stock to his grandson when the price per share was $20. Three months ago, grandpa passed away and left the grandson another 100 shares of XYZ that had been purchased one month earlier at $25 per share. At the date of death, the XYZ stock had already climbed to $30 per share. If the grandson sells the XYZ stock for $35 per share, the taxable consequences would be

$6,500 long-term capital gain.

An 8% M&S bond with ten years left until maturity is quoted 103 x 104. A client enters a market order to buy and receives prompt execution. What is the current yield on the investment?

7.7% don't forget that 8% is calculated off par CY = Annual Interest / MP

The Uniform Securities Act invests a great deal of power in the Administrator. These powers include all of the following EXCEPT

citing a witness for contempt of court for failing to appear at a hearing

Which of the following is NOT a violation of the Uniform Securities Act?

A brokerage corporation that manages client funds on a discretionary basis hires a prominent portfolio manager to oversee discretionary accounts without informing clients or the investing public.

Which of the following persons, natural or corporate, fall under the definition of a broker/dealer under the Uniform Securities Act?

A corporation that sells interests in an oil and gas limited partnership to qualified investors

The Uniform Securities Act's definition of investment adviser would include

A person who, on a regular basis for compensation, offers specific investment advice to clients as to the value of securities

Which of the following transactions is NOT exempt from the registration requirements of the Uniform Securities Act?

A solicitation by an agent to clients occurs and results in the purchase of securities registered by qualification

Which of the following would NOT be an example of market manipulation?

A specialist on the NYSE buys and sells stock for his own account

Under the USA, which of the following are considered a sale or an offer to sell?

A. The gift of assessable common stock B. The sale of a warrant to purchase stock

To make a quantitative evaluation using the present value computation, which of the following is NOT needed?

Account value at the beginning of the period

Under the Investment Advisers Act of 1940, which of the following is TRUE about the use of the term "investment counsel" by investment advisers?

Advisers may use the term only if their principal business is acting as an investment adviser and a substantial part of their business consists of providing continuous advice based on a client's individual needs.

Which of the following is not an assumption of the capital market theory?

All market participants borrow and lend at different risk-free rates.

Which of the following statements relating to termination of registration of a securities professional registered under the USA is TRUE?

An Administrator may cancel the registration of a securities professional if mailings addressed to that registrant are returned with the notification "no forwarding address."

A middle-aged couple with no children, two stable government jobs, and a conservative risk tolerance meet with their financial adviser. Which of the following would be the most appropriate investments for them?

Treasuries and money-market instruments, aiming for a very low risk of loss, with limited upside

Which of the following describe indications of interest secured during the 20-day cooling-off period?

Nonbinding on the customer and Nonbinding on the broker-dealer

Under the Uniform Securities Act, persons providing investment advice do not have to register as investment advisers if they have no place of business in the state and they

I .deal only with institutional investors II. have 5 or fewer noninstitutional clients in the state during any 12-month period III. deal only with other registered investment advisers

Under the provisions of the Uniform Securities Act, securities exempt from registration requirements include

I. securities issued by the U.S. government II. securities issued by a building and loan association organized under the laws of any state and authorized to do business in this state III. bonds issued by an insurance company organized under the laws of any state and authorized to do business in this state

William and Kat, a married couple, are advisory clients of yours. Each is employed and covered by a qualified plan. Which of the following statements are correct?

I. Employees covered by a qualified plan are eligible to open Roth IRAs. II. Distributions from a qualified plan may be rolled over into a Roth IRA.

Under the Investment Advisers Act of 1940, which of the following are exempt from the requirements for registration?

I. Foreign investment advisers with fewer than 15 clients per year who do not hold themselves out as investment advisers to the public and have less than $25 million in AUM in the United States II. Investment advisers who conduct all of their business in 1 state and who do not provide advice on securities listed on an exchange and have no private funds as clients

Which of the following are true about the trusted contact person listed on a customer's new account form?

III. A firm may contact the trusted contact person to disclose potential financial exploitation of the customer IV. A firm may contact the trusted contact person to confirm the customer's current health status, mental capacity, and legal guardianships

Under which of the following conditions may an agent sell an unregistered nonexempt security?

If the order was unsolicited

An investor is analyzing the impact of the specific type of risk affecting bonds because the fixed cash payments that they deliver may become less valuable. What risk is this?

Inflation risk

Under the Investment Advisers Act of 1940, who is not excluded from the definition of investment adviser when their investment advice is solely incidental to the individual's profession?

Insurance agents The persons excluded from the definition of investment adviser when advice is provided solely incidental to their profession include lawyers (attorneys), accountants, engineers, and teachers

Which of the following is a risk common to all fixed-income securities?

Interest rate risk

Long-Term Financial Solutions, Inc. (LTFSI), an investment adviser registered in five states, files a Form ADV-W indicating the business is closing. It is being acquired by another federal covered adviser, Gold and Sylver Advisers, LLC. Which of the following statements is correct?

LTFSI is responsible for ensuring that a copy of the LTFSI corporate charter is preserved for at least three years after the acquisition.

A new client indicates a desire to avoid investing in mid-cap stocks because of large losses suffered several years ago. What type of consideration would this be?

Nonfinancial

A notice filing would be most appropriate for which of the following new issues?

Open-end investment company shares

An elderly investor covers living expenses with the income produced from her diversified long-term bond portfolio. Most of the bonds were purchased 3-5 years ago, when interest rates were higher than they are today. The investor is concerned that the prevailing market rates may impact her investments and ability to maintain her standard of living. All of the following are true statements except

Quotes for her bonds would show a yield to maturity that is above their nominal yield.

Over the past year, the market, with a beta of 1.0, has returned 15%. Under CAPM, which of the following stocks would be considered overvalued?

RJP, beta 1.2, return 17.5%

Regarding open-end investment companies, which of the following sales charges is based on the NAV per share?

Redemption fee

Which of the following is considered to be a security?

Section 529 plan

Which of the following securities are NOT exempt from state registration?

Securities issued by a corporation whose shares are publicly traded in Kansas and entirely owned by residents of Kansas

Under the Uniform Securities Act, which of the following is TRUE regarding the registration of securities?

State registration by coordination is available only if a federal registration statement has been filed under the Securities Act of 1933 in connection with the same offering.

Impressed by a televised interview with a fund manager, a client calls an adviser at 10 AM to purchase shares. The fund's NAV per share is $30.00 and there is a 5.00% sales charge. Which of the following statements is true?

The adviser can accept the order and fill it at the end of the day at $31.58, if the NAV remains at $30.00 $30.00 / (1 - 0.05) = $30.00 / 0.95 = $31.58

Under the Regulation D, Rule 506(b) private placement offering exemption, which of the following statements is true?

The issuer can use an online questionnaire to qualify potential investors

Your client turns in a buy limit order for 100 shares of ABC at $58. Following the entry of the order, trades occur at 59, 59, 58.80, 58.20, 58.40, 57.95, 57.85. At what price was this limit order triggered?

The order was not triggered. read carefully, it asks about triggered

Under the Uniform Securities Act, which of the following is NOT an exempt transaction?

The sale of U.S. government securities to an individual with a net worth in excess of $2 million by a registered government securities dealer

As year-end approaches a trustee is reviewing a trust's principal and the net investment income it produced during the year. The trustee is considering how to best distribute those assets in accordance with the trust documents. Which of the following statements regarding the trust are true?

The trustee must distribute all trust net income, if it is a simple trust Complex trust permits the retention of net investment income year over year

An investment adviser (IA) has its primary office in State A. They have branches in states B and C, and they advertise in states D, E, and F. What net capital requirements must they meet?

Where its principal office is located

Under the Uniform Securities Act, it is NOT considered fraudulent if an agent

actively solicited orders in unregistered exempt securities

All of the following activities comply with the requirements for agency cross transactions EXCEPT

after proper written disclosure, an adviser recommends the transaction to both the seller and the buyer Cannot recommend the trade to both sides

All of the following permit investments into various securities, such as stocks, bonds, and mutual funds EXCEPT

an FSA. Flexible Spending Accounts

Under the Securities Act of 1933, the definition of prospectus includes

an offer of a security made in an email communication

Your client often makes irrational financial decisions because she bases her decisions on information that should have no influence on the decision at hand. The client's behavior is known as

anchoring.

Among the provisions of the Investment Company Act of 1940 designed to protect the interests of investors is the provision that

any change in fundamental investment policy must be approved by stockholders

In general, when describing the characteristics of equity index annuities and variable annuities, each of the following would be a true statement EXCEPT

both offer an opportunity for unlimited gain EIAs have a cap rate

Under ERISA, all of the following retirement plans must set standards for vesting, eligibility, and funding EXCEPT

deferred compensation plans not qualified plans and may be discriminatory

Active Technicians (AT), a state-registered investment adviser serving primarily retail accounts, would be in compliance if it

did not send an annual brochure to its clients if there was no material change from the previous year

Selmer Jones has just inherited some money and wants to set some of it aside for a vacation in Hawaii one year from today. His bank will pay him 5% interest on any funds he deposits. In order to determine how much of the money must be set aside now and held for the trip, he should use the 5% as a

discount rate.

Which of the following would meet the USA's definition of federal covered adviser? An investment adviser who

is registered under section 203 of the Investment Advisers Act of 1940

One of your clients has told you that his employer has just instituted a Roth 401(k) plan. If the employer wishes to make matching contributions,

it may contribute a specified percentage of the employee's pay to a regular 401(k)

In order to compute an investor's real rate of return on a common stock holding, all of the following are necessary EXCEPT

marginal tax bracket

An exemption from registration under the Securities Act of 1933 is available to securities that are

sold only to persons resident in one state when the issuer is a resident doing business within that state

A unique requirement for those investment advisers who maintain custody of customer assets is the filing of

the Form ADV-E

As a result of an SEC hearing, an investment adviser's penalty is $5,000 and a 50-day suspension. If the IA wishes to appeal this verdict, a request for review must be filed with

the U.S. Court of Appeals within 60 days of the order

Under the USA, a sales agent's registration may be suspended by the Administrator for all of the following reasons EXCEPT

the agent is accused of violations of the antifraud provisions of the USA

Under the Uniform Securities Act, all of the following would cause an agent's registration to be canceled by the Administrator EXCEPT

the agent is found by a court to have violated a securities statute

Computing the Sharpe ratio for a specific stock requires using all of the following EXCEPT:

the beta for the subject security. (actual rate of return minus the risk-free rate of return) divided by the standard deviation of the security

Surrender charges may cause a reduction to all of the following EXCEPT

the death benefit of a variable life insurance policy

According to the NASAA investor advisory regarding fees charged by broker-dealer firms for services and maintenance of investment accounts,

the schedule should be made available on the broker-dealer's public website without requiring any login or password

One of the actions available to the Administrator is the issuance of a cease and desist order. When the Administrator issues a cease and desist order,

the subject of the order must promptly put a halt to the specified activity

If a client wishes to purchase a life insurance policy that doesn't invest in the market, but allows the holder to pay additional premium if desired, the recommendation is

universal life.

A bond purchased at $900 with a 5% coupon and a 5-year maturity has a current yield of

5.56% CY = annual interest / current MP

Under the Uniform Securities Act, it is required to file an application with the Administrator to become a registered broker-dealer in the state. Among the disclosures that must be made on that application are

I. the form of business organization to be used by the firm II. any felonies or certain misdemeanors on the records of partners or officers III. business history of the principals of the firm IV. financial information about the firm

Among the special characteristics of a universal life insurance policy is

the policy may be overfunded

An investor is looking for a packed product that can provide rental income as well as potential capital gains. You would most likely recommend

an equity REIT.

In general, a broker-dealer is required to register with the SEC. An exception to that requirement would apply to a broker-dealer who

maintains a place of business in a single state, only deals with residents of that states, and does not execute transactions in securities traded on a national exchange.

A valuation that considers a bond's future interest payments and the return of principal, and converts them into their present value is best described as a

discounted cash flow analysis.

Under the brochure rule of the Investment Advisers Act of 1940

each client must be delivered a written disclosure statement no later than at the time of agreement to contract for the adviser's services

If a car dealer offers $1,000 bonds as a bonus for the purchase of cars, the car dealer is

engaging in the offering for sale of a security

You have a client whose income from a real estate limited partnership is $11,000. During the same year, your client had net capital losses of $2,000 and losses from an oil and gas drilling program of $6,000. The effect of this investment activity would be to increase the client's taxable income by

$3,000

Under current tax law (2019), how much can a married couple give to their adult son and his wife without incurring a gift tax obligation?

$60,000 read carefully 15k per donor to each recipient

An agent is analyzing the financial statements of a corporation. The company has cash on hand of $2 million, accounts receivable of $500,000, accounts payable of $700,000, land valued at $3 million, wages payable of $300,000, goodwill of $100,000, inventory of $1.5 million, and retained earnings of $5 million. From this information, the agent would determine that the acid-test ratio for this company is

2.5:1 The acid-test, or quick, ratio is all of the current assets, except for inventory, divided by the current liabilities.

The general rules dealing with a broker-dealer extending credit for a customer to purchase securities are found in Regulation T of the Federal Reserve Board. However, Regulation T does NOT address

maintenance margin

The Investment Advisers Act of 1940 excludes from the definition of "investment adviser" persons whose advice

I. relates solely to issues issued by or guaranteed by the U.S. Treasury II. is solely incidental to their professional practice as an aeronautical engineer

If a client in the 30% marginal income tax bracket can earn an after-tax rate of return of 7% when the estimated inflation rate during the holding period of an investment is 4%, the client's real rate of return is

less than 7%

In the formula for determining the real rate of return,

the inflation rate is subtracted from the investment return

XYZ Corporation common stock has a market price of $45 per share and earnings per share of $3 when XYZ announces a 3-for-1 split. After the split, the price-to-earnings ratio of XYZ stock will be

15 45/3 = 15

A customer determines that he has been sold unregistered, nonexempt securities in a prohibited transaction. In accordance with the USA, he can exercise the right to file a civil suit within

2 years from discovery or 3 years from occurrence, whichever is sooner.

Keogh Plans are qualified plans intended for those with self-employment income and owner-employees of unincorporated businesses or professional practices filing a Form 1040 Schedule C with the IRS. Which of the following statements relating to Keogh Plans is NOT true?

A former corporate employee who decides to become self-employed may not rollover any distributions from a qualified corporate plan into a rollover IRA if he has created a Keogh Plan.

One of your clients has a margin account. There is a drop in the value of the stock owned in the account, and additional funds are required based on the terms of the firm's margin agreement. This would be known as

A house call also known as a maintenance call

Which of the following must register as an agent when representing a broker-dealer?

An employee who accepts unsolicited orders from institutional clients

What is the appropriate procedure to follow when a customer fails to sign the form provided by the investment adviser stating that he has received a copy of the investment adviser's brochure?

Proceed with the account, but make a supervisory person aware of this.

Under the Uniform Securities Act, which of the following statements about federal covered securities is NOT true?

Federal covered securities must be registered with the states.

In this industry, many words have similar meaning. Which of the following choices consists of a pair which are NOT properly considered synonyms?

Financial risk—market risk

Fast Execution Services (FES), a registered broker-dealer, provides investment advice as an incidental part of its commission business. Madeleine, an agent registered with FES, charges for investment advice as a freelance investment adviser outside the scope of her employment at the firm. Which of the following statements are true?

I. Madeleine must register as an investment adviser. II. FES need not register as an investment adviser.

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 7 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.

Which of the following statements (is)are TRUE?

I. An Administrator can suspend a pending registration on a summary basis. II. An Administrator may not issue a stop order without prior notice and opportunity for a hearing.

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. 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.

There are several ways that a securities professional's registration can be terminated. Nonpunitive termination of a securities professional's registration could be done through

I. Cancellation IV. Withdrawal these are nonpunitive punitive include: suspension, revocation and denial

Broker-dealers and their agents can have their licenses suspended or revoked for engaging in business practices in violation of NASAA's policy statements on unethical and prohibited practices. Which of the following activities would NASAA consider an unethical or prohibited practice?

I. Hypothecating a customer's securities in a margin account without written consent from the customer II. Exercising discretionary power and effecting securities transactions within the first 10 business days of a customer's account with verbal authority from the customer III. Charging unreasonable fees or commissions for brokerage execution services I

Under the USA, which of the following statements regarding the withdrawal of an IAR's registration is TRUE?

I. If disciplinary action is initiated within 30 days after filing, the automatic effective date may be delayed. II. The Administrator may institute disciplinary proceedings within one year after the effective date of the withdrawal.

Which of the following statements is (are) TRUE regarding the jurisdiction of the SEC under the Securities Exchange Act of 1934?

I. The SEC has jurisdiction over exchanges and SROs. II. The SEC has jurisdiction over broker-dealers, investment advisers, and associated persons that are required to be registered under federal law.

A client is evaluating a potential bond investment. The bond is XYZ's 20-year zero coupon bond. Which of the following statements are true?

I. The bond has a long duration III. The bond will be volatile

Under the Investment Advisers Act of 1940, which of the following criteria are considered in determining whether a person is in the business of rendering investment advice?

I. The person regularly gives advice on securities. II. The person receives compensation from rendering advice on securities.

A broker-dealer with an office in this state would be defined as an investment adviser if it charges:

I. a fee for selling investment research and additional fees in the form of commissions for the sale of securities II. fees for investment research sold exclusively to institutions located in this state

It would not be considered an unethical business practice under NASAA's policies for an investment adviser to charge fees

I. as well as commissions II. based on an hourly rate IV. based on a percentage of the aggregate value of funds under management

An investment adviser wishes to engage the services of a third party to solicit new clients for the firm. To be in compliance with the Investment Advisers Act of 1940,

I. compensation may not be sales related II. the solicitor must not be subject to statutory disqualification

If you are registered as an agent for a broker-dealer in State Y and you conduct business as an agent of theirs in State Z, a state in which you are not registered as their agent, you

I. expose yourself and your employer to disciplinary action by State Z II. expose yourself to a possible fine III. may obligate your broker-dealer to offer your client the right to rescind the sale IV. may have your registration in State Y revoked

As part of its suitability determination, an IA firm requires that all potential nonbusiness clients complete a family balance sheet. Items that would be included are

I. gold jewelry II. loan secured by the family automobile III. the balance owed to the dentist for new crowns

Under the NASAA Model Rule on Custody Requirements for Investment Advisers, an investment adviser who has custody of clients' securities or funds must

I. keep funds deposited in accounts containing only client funds II. be subject to a surprise audit performed at least annually by an independent accountant III. send clients' statements at least once every 3 months showing balances

Which investment strategy is consistent with a belief in the efficient market hypothesis?

Selecting a random set of stocks for a portfolio

The STU Corporation has issued common stock, preferred stock, promissory notes, and mortgage bonds. Should STU enter bankruptcy proceedings, the order of payment against claims would be

the mortgage bonds, the promissory notes, the preferred stock, and the common stock.

Under the Uniform Securities Act, securities issued by charitable organizations are exempt if

the organization is a nonprofit company

A person who renders investment advice solely with respect to securities issued by the U.S. government

is excluded from the definition of investment adviser under federal law and is, therefore, exempt from state registration requirements

An order is received from one of your clients to purchase 200 shares of GEMCO common stock at 45 GTC. Two days later, while at a luncheon meeting with a different client, you are informed by that individual that the inside scoop is that GEMCO is going to be the subject of an FBI investigation. An hour after you return from lunch, you see an execution report for the 200 shares at 44.90. Under the Insider Trading and Securities Fraud Enforcement Act of 1988, you

are not in violation because the order was placed before you learned of the inside information

A high-risk investment strategy is the short sale of stock. Each of the following is a method of offering some degree of protection EXCEPT

buying a put on the short stock.

A client owns an investment-grade bond that has a coupon of 7% and is priced to yield 5.4%. If similarly rated bonds are being issued today with coupons of 5%, it would be expected that the client's bond

has a positive net present value

Charlie Mindel is the portfolio manager for the Steady Yield Bond Fund. If Charlie was of the opinion that interest rates were going to fall, he would

increase the average duration of the portfolio

A bond's yield to maturity reflects its

internal rate of return

Which of the following investment adviser compensation arrangements is (are) permitted under the Uniform Securities Act?

A. The adviser charges a fee of 1% of the average value of the account portfolio during the year. B. The adviser charges a flat fee of $1,000 if the client's portfolio assets are $100,000 or more or $2,000 if the client's assets increase to $200,000 or more.

Under the Securities Act of 1933, when registering securities with the SEC, who must sign the registration statement?

I. The chief executive officer (CEO) II. A majority of the board IV. The chief financial officer (CFO)

Under which of the following circumstances can an agent conduct customer transactions without the activity being recorded on the books and records of his broker-dealer employer?

The transactions are authorized in writing by the broker-dealer before execution of the transactions.

In general, the favored way of measuring the performance of a money manager is by

comparing her performance to a relevant benchmark.

Each of the following are advantages offered by a nonqualified deferred compensation plan that are not found in a qualified plan EXCEPT

employer contributions to the plan are not subject to current taxation to the employee.

A popular vehicle for saving for retirement is the variable annuity. An agent explaining the benefits of this product would probably be in violation of the NASAA Statement of Policy on Dishonest or Unethical Business Practices of Broker-Dealers and Agents by claiming that variable annuities offer

lower overall expenses than a mutual fund with similar investment objectives In general, variable annuity expenses are higher than those of a mutual fund with similar objectives.

Regional Financial Services, LLC, is registered as an investment adviser in States A, B, C, and D. They have just filed an application for registration in State E. Registration of this investment adviser in State E automatically confers registration as an IAR in State E on

officers, partners, and directors of the firm who will be functioning in State E as IARs

All of the following statements regarding a client's attitudes, beliefs, and values are correct except

the IAR should pay little attention to a client's attitudes, beliefs, and values during the information gathering process.

To comply with Section 404(c) of ERISA,

the plan must offer at least 3 different investment choices, such as a stable value option, an income option, and a conservative growth option

Assume that a corporation issues a 5% Aaa/AAA-rated debenture at par. Two years later, similarly rated debt issues are being offered in the primary market at 5.5%. Which of the following statements regarding the outstanding 5% debenture are TRUE?

I. The current yield on the debenture will be higher than 5%. II. The dollar price per bond will be lower than par.

An agent made written disclosure to his employing broker-dealer that he intends to execute a series of private securities transactions with individuals who do not have accounts with his broker-dealer. The agent did not acquire express written permission from the broker-dealer and did not receive compensation for executing the transactions, but did receive written acknowledgment of receipt of the agent's notice. In this case, the agent

is guilty of selling away. Must be authorized in writing by BD

Paradigm Investors Group (PIG), LLC, is an investment adviser registered with the SEC. Larry Small is an IAR with PIG. The firm's research team has just completed a webinar for the firm's IARs where they gave their strongest possible buy recommendation to JKL common stock. After the report is released to the media, Larry immediately sends out a blast email to all his advisory clients urging them to add JKL to their portfolio. This would probably be viewed as

the unethical practice of making a blanket recommendation.

An agent unintentionally sells nonexempt securities that have not been registered. Under the Uniform Securities Act, the broker-dealer may write a letter and offer to buy back the security plus interest, minus any income received. The client gives up the right against the firm to bring action in court if he does not respond within how many days of receipt of the letter?

30 The right of rescission under the Uniform Securities Act allows the customer 30 days to respond to a rescission letter from a broker-dealer offering to buy back securities sold illegally