Series 66

Which statement about the posting of a surety bond as a condition of a broker-dealer's registration in a State is TRUE? A A surety bond is not required if the broker-dealer does not take custody of client funds or securities B A surety bond is not required if the broker-dealer is registered in at least 5 other States C A surety bond is not required if the broker-dealer has been in business for at least 10 years in another State D A surety bond is not required if the broker-dealer has net capital that is more than the surety bond amount

A surety bond is not required if the broker-dealer has net capital that is more than the surety bond amount

Under the Investment Advisers Act of 1940, which of the following persons is exempt from registration with the SEC? A An investment adviser whose only clients are insurance companies B An investment adviser whose only clients are investment companies C An investment adviser whose only clients are pension plans D All of the above

An investment adviser whose only clients are insurance companies

Registration by Coordination can be stopped by the Administrator if it is in the public interest and the: A applicant cannot show that the registration is not incomplete in any material respect B applicant can show that the registration is incomplete in any material respect C Administrator cannot show that the registration is not incomplete in any material respect D Administrator can show that the registration is incomplete in any material respect

Administrator can show that the registration is incomplete in any material respect

Which statement is TRUE about the retention of Internet advertising by broker-dealers? A There is no requirement to retain copies of Internet advertising B Only the current web pages must be retained by the broker-dealer C All web pages created and displayed within the past 2 years must be archived D All web pages that have ever been created and displayed must be archived

All web pages that have ever been created and displayed must be archived

An Investment Adviser has adopted an external Business Succession Plan. Who is responsible for servicing the IA's client accounts if the managing director of the Investment Adviser suddenly dies? A Another Investment Adviser Representative currently in the firm B Another Investment Advisory Firm to which investment management has been transferred C The custodian bank that holds client funds and securities positions D An immediate family member of the deceased managing director

Another Investment Advisory Firm to which investment management has been transferred

Which of the following records of an investment adviser that takes custody of customer funds is NOT required to be retained under the provisions of the Investment Advisers Act of 1940? A Cash receipts and disbursements journal B Statement of financial position C Customer account statements D Beneficiary designations for each customer account

Beneficiary designations for each customer account

Under the Securities Exchange Act of 1934, credit extended to customers for the purchase of securities is controlled by the: A Securities and Exchange Commission B Board of Governors of the Federal Reserve C Office of Comptroller of Currency D Securities Investor Protection Corporation

Board of Governors of the Federal Reserve

What type of employee benefit plan given to executives has no limit on the amount of contribution that can be made annually? A 457 plan B Deferred compensation plan C 401(k) plan D Roth IRA

Deferred compensation plan

Which item is NOT included in a client's income statement? A Interest received from corporate bond investments B Depreciation of the customer's primary residence C Dividends from mutual funds that are reinvested in additional share purchases D Year-end bonus received from employer

Depreciation of the customer's primary residence

Index options are A American Style B European Style C Eastern Style D Western Style

European Style

An exempt reporting adviser must file: A Form PF with the SEC B Form BD with the SEC C Form ADV with the SEC D Form RIA with the SEC

Form ADV with the SEC

Which of the following statements is (are) TRUE about registration as an agent for a broker-dealer? I An unregistered agent can solicit business in a State once the agent's broker-dealer has been registered in that State II A registered agent can only sell securities that are registered in that State or that are exempt from registration III If an agent is not registered in a State, the agent may sell exempt securities in that State

II

Two agents work at the same broker-dealer. One of them has just resigned to go into his family's pizza business. The two agents verbally agree that all of the departing agent's clients will go to the agent that remains at the firm. The agent staying at the firm has agreed to pay 25% of the commissions from these clients to the departed agent for the next 6 months. The branch manager has been told of this arrangement and has agreed to it. Which statement is TRUE? A The arrangement is acceptable since all parties involved have full knowledge and are in agreement as to the terms B This arrangement is acceptable because the branch manager has approved C The arrangement is not acceptable because it is unethical D This arrangement is not acceptable because it is not documented in writing

The arrangement is not acceptable because it is unethical unregistered once he leaves so cannot accept commissions if not registered

Two 20-year corporate bonds are issued at par, with stated interest rates of 10%. One issue is callable at par in 5 years, while the other is callable at par in 10 years. If interest rates drop by 200 basis points shortly after issuance, which statement is TRUE? A The bond callable in 5 years will appreciate more than the bond callable in 10 years B The bond callable in 10 years will appreciate more than the bond callable in 5 years C Both bonds will appreciate by equal amounts D The rate of appreciation depends on the credit rating of the bonds

The bond callable in 10 years will appreciate more than the bond callable in 5 years

Under the Uniform Securities Act, the registration of a broker-dealer may be revoked for all of the following reasons EXCEPT the firm does not: A maintain required records B file financial reports with the Administrator C file advertising with the Administrator D file customer complaints with the Administrator

file customer complaints with the Administrator

Variable Universal Life Insurance (VULI) policies provide policy owners with: A guaranteed minimum cash values B variable premiums and the guarantees of term insurance C flexibility with respect to premium payments, investment options, and death benefits D the guarantees of whole life insurance plus the investment flexibility of variable life insurance

flexibility with respect to premium payments, investment options, and death benefits

A client might not wish to invest his or her funds in a single index fund because the client: A will get a lower rate of return than investing in a single stock or just a few stocks B gives up the ability to allocate funds among differing asset classes C will not achieve the desired level of diversification relative to returns achieved D gives up the ability to passively manage his or her portfolio

gives up the ability to allocate funds among differing asset classes A single index fund mimics the composition of the designated index - and indexes are composed of a single asset class (e.g., an equity index; or a debt index). Thus, by putting all of his money in a single index fund, the customer gives up the ability to allocate monies among differing asset classes. If the customer divided up the monies into investments in separate index funds composed of different asset classes, then the investor could balance his or her portfolio.

Registration by Qualification would be used by an issuer that: A is registering securities with the Securities and Exchange Commission and will sell the securities in many States B has previously registered securities in that State that were registered with the Securities and Exchange Commission C has never issued securities previously in that State nor has it registered securities with the Securities and Exchange Commission D has no office in the State and that is not a resident of that State

has previously registered securities in that State that were registered with the Securities and Exchange Commission

Under the provisions of the Uniform Securities Act, the determinant of whether an investment adviser can take custody of client funds is whether the RIA: A is named as the trustee of a client trust account B has taken out a surety bond C has a signed power of attorney D has at least $25 million of assets

has taken out a surety bond

A Registered Investment Adviser that is formed as a partnership has been in business for 15 years. They decide to merge with another investment adviser, in which they will have a 50% ownership interest. The RIA must: A pay a new filing fee to the State B have its existing clients sign an acknowledgment of the change of ownership C liquidate its customer accounts and complete a new account application for each customer D notify its customers of the change

have its existing clients sign an acknowledgment of the change of ownership

Under Uniform State Law, as adopted in most states, an agent may be affiliated with more than one broker-dealer at the same time: A if both broker-dealers are under common control B if each broker-dealer has consented to the arrangement in writing C if the Administrator consents to the arrangement in writing D under no circumstances

if both broker-dealers are under common control

The determinant of whether that State's Administrator would initiate a proceeding against an investment adviser for violations of the Uniform Securities Act is if the: A adviser has an office located in that State B violation involved securities registered in that State C illegal conduct occurred in that State D customer of the adviser filed a complaint in that State

illegal conduct occurred in that State

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

in the event the Administrator suspects fraud

A 4% coupon bond is being offered on a 3% basis. If interest rates for similar bonds rise above 3%, the basis for this bond will: A increase B decrease C be unaffected D be volatile

increase This is pretty simple. A basis quote is a yield to maturity quote. If market yields are rising, the basis quote will rise, forcing the bond's price down. If market yields are falling, the basis quote will fall, forcing the bond's price up.

Dark pools are operated by: A NYSE and NASDAQ B institutional investors C institutional broker-dealers D the Federal Reserve

institutional broker-dealers

A customer buys a new issue inflation-adjusted government bond with a 4% coupon at par. After the first year, the inflation rate as measured by the CPI has increased by 5%. For the second year of holding the security, the customer will receive: A interest of $40 B interest of $42 C interest of $50 D interest of $40 and a principal adjustment of $50

interest of $42 1000(1.05 - inflation rate in a TIPS adjusts the principal amount for inflation) = 1,050(.04 - coupon rate) = 42

An investment adviser is considered to "take custody" of funds or securities from a customer if it: A exercises discretionary authority by placing trades of securities for that customer B accepts a check from the customer made payable to the fund custodian to buy a mutual fund C accepts commissions for effecting trades for that customer's account through an affiliated broker-dealer D is appointed as trustee for a customer's trust account under a legally binding trust document

is appointed as trustee for a customer's trust account under a legally binding trust document

The SEC would revoke the registration of a federal covered adviser for all of the following reasons EXCEPT the adviser: A has been convicted of violating the Securities Exchange Act of 1934 five years ago B has been convicted of a misdemeanor involving securities nine years ago C is the subject of an adverse ruling in State Supreme Court in a civil lawsuit with a client D has been enjoined in a court of law of another state from being in the commodities business

is the subject of an adverse ruling in State Supreme Court in a civil lawsuit with a client

Which of the following option positions is used to hedge a long stock position? long call short call long put short put

long put

When the market price of a security has reached equilibrium, transaction costs will be: lower higher volatile stable

lower When a stock has found its equilibrium price in the market, this means that there is active trading occurring and that the number of buyers and sellers is balanced. In such a market, the spread is minimized, and this is a cost of trading (aside from commission costs).

The Securities Act of 1933 requires that new issues of securities be registered with the SEC if the: A issue will be sold within 1 State only to residents of that State B mails, or other means of interstate commerce, are used to sell the securities C value of the securities offering exceeds $5,000,000 D securities offering will be made to more than 35 accredited investors

mails, or other means of interstate commerce, are used to sell the securities

A variable universal life (VUL) insurance policy has all of the following characteristics EXCEPT: A flexible premium payment B minimum cash value C variable cash value D variable death benefit

minimum cash value A variable universal life policy provides for investment of the cash value in separate accounts. With a universal life insurance policy, the policy owner can change the schedule of premium payments. After the cash value increases, the owner can skip a premium payment or the policy owner can use the money to buy additional insurance. The value of the separate accounts can rise or fall, so there is no minimum cash value. The cash value, as well as the death benefit, can vary.

A fund that invests in Treasury Bills, commercial paper, and guaranteed repurchase agreements is a(n): A government securities fund B money market fund C income fund D balanced fund

money market fund

The risk premium is the rate of return on an investment over the: A holding period return B stock dividend rate C current yield D money market return

money market return

A Registered Investment Adviser (RIA) is formed as a partnership. The RIA intends to charge an incentive fee that is based on investment performance. Under NASAA rules, the RIA: A must be able to show that the fee is fair and reasonable to the State Administrator B is not permitted to have an incentive fee under any circumstances C can charge an incentive fee as long as it is included in the partnership agreement D must offer the customer a fee refund if the performance does not meet the benchmark

must be able to show that the fee is fair and reasonable to the State Administrator

An investment adviser registered in the State of California takes custody of client funds. The State has a minimum $35,000 Net Worth requirement. The IA finds that its Net Worth is $34,500. The adviser: A is not required to do anything because the Net Worth deficiency is less than $1,000 B must deposit $1,000 as a Surety Bond with the State Administrator by the close of business the next business day C must cease business operations until the deficiency is cured D must notify the State Administrator by the close of business on the next business day and file a report of the adviser's financial condition the next day

must notify the State Administrator by the close of business on the next business day and file a report of the adviser's financial condition the next day

A private fund adviser with less than $150 million of assets under management: A must register with the SEC B must report to the SEC C must register with, and report to, the SEC D is neither required to register with, nor report to, the SEC

must report to the SEC

TechnoCorp is a small cap technology stock that is quoted in the OTCBB. Under the provision of the Uniform Securities Act, the common stock of TechnoCorp is a(n): A federal covered security that is exempt from State registration B exempt security as defined under the Uniform Securities Act C non-exempt security that must be registered in the State D exempt transaction that does not require registration in the State

non-exempt security that must be registered in the State

A customer sells 10 ABC Jan 50 Calls @ 4.75 when the market price of ABC is $51 per share. The maximum loss potential is: A $4,750 B $45,125 C $50,000 D unlimited

unlimited

To use Registration by Coordination, an issuer must file a registration statement with: I the Securities and Exchange Commission II the Administrator of that State III FINRA

I and II

Which statement is TRUE about the education of investment adviser key employees who establish investment strategy or manage client accounts? A Education standards are established by the SEC B Education and work background are disclosed on Form ADV Part 2B C Higher education standards are required for advisers that will take custody of client funds than for those that do not D Minimum education standards are established for advisers that will exercise discretion over customer accounts

Education and work background are disclosed on Form ADV Part 2B

A retirement plan that favors highly compensated employees compared to rank-and-file employees is a: I top heavy plan II key employee plan III qualified plan IV non-qualified plan

I and IV

Under the Uniform Securities Act, a consent to service of process is filed for each initial: I Agent registration II Broker-dealer registration III Investment adviser registration IV Securities registration

I, II, III, IV

Which annuity payout option usually results in the largest periodic payment? A Unit Refund Annuity B Joint and Last Survivor Annuity C Life Annuity D Life Annuity-Period Certain

Life Annuity

Who administers the Uniform Securities Act? A SEC B MSRB C FINRA D NASAA

NASAA

When considering investing in a DRIP, the benchmark rate of return that should be used for comparison is the: A 1 Year T-Bill rate B Long-Term Treasury Bond Rate C S&P 500 Index D S&P 500 Bond Index

S&P 500 Index

Administration of the Investment Advisers Act of 1940 is done by: A FINRA B CFTC C NASAA D SEC

SEC

Which of the following is a conflict of interest for an affiliated person on the Board of Directors of a mutual fund? A The affiliated person being compensated by the fund for being a member of the Board of Directors of the fund B The affiliated person voting for choice of an investment manager for the fund C The affiliated person being compensated by the broker-dealer that the fund uses to execute portfolio transactions D The affiliated person voting on the implementation of a 12b-1 plan for the fund

The affiliated person being compensated by the broker-dealer that the fund uses to execute portfolio transactions

ACME Advisers has as a client, a large broker-dealer - ACCO Brokerage. ACME wishes to open an account to buy securities on margin at ACCO Brokerage. Which statement is TRUE? A This is prohibited because of the inherent conflict of interest B This is prohibited under the Uniform Securities Act C This is permitted because the broker-dealer is in the business of lending money on securities D This is permitted because investment advisers can arrange loans from any willing lenders

This is permitted because the broker-dealer is in the business of lending money on securities

A registered agent effects a trade for a customer "privately" in a transaction that is not recorded on the books of the agent's broker-dealer. Which statement is TRUE? A This transaction is allowed as long as the agent told the customer that the trade was being done privately B This transaction is allowed if no commission was taken on the trade C This transaction is allowed without restriction D This transaction is a prohibited business practice

This transaction is a prohibited business practice

When prices in an economy are adjusted with relation to a price index by force of contract, this is called: A hyper inflation B inertial inflation C loop inflation D stagflation

inertial inflation

A lawyer, representing one of your clients who has an individual account, calls and tells you that he has just been given trading authorization to effect securities transactions for the customer. He places an order to buy $10,000 worth of a stock which trades on the NYSE. Which statement is TRUE? A You can submit the order as given as long as the branch manager approves of the transaction B You can submit the order as long as you mark the order ticket "unsolicited" C You can call the customer and, upon verbal confirmation that the lawyer has been given trading authorization, you can submit the order D You can call the customer and ask him if he wants to buy the $10,000 worth of stock and, upon his verbal authorization, you can submit the order

You can call the customer and ask him if he wants to buy the $10,000 worth of stock and, upon his verbal authorization, you can submit the order Third party trade authorization must be given in writing - verbal authorization is not legally acceptable.

Under the Uniform Securities Act, the definition of "guaranteed" means that the security is guaranteed by: A the issuer B a party other than the issuer C the State Administrator D the U.S. Government

a party other than the issuer

The primary reason for a customer to make a tax shelter investment is the: A economic viability of the project B immediate deductions generated by the project C immediate tax credits generated by the project D future capital gains generated by the project

economic viability of the project In considering a tax sheltered investment, economic viability comes first; tax benefits come second.

An annuitized account in a variable annuity is most similar to: A a mutual fund B a whole life insurance unit C pension payments D an individual retirement account

pension payments

An investor that purchases 10 year zero-coupon Treasury bonds with the intention of holding them to maturity should be MOST concerned with: A market risk B interest rate risk C purchasing power risk D reinvestment risk

purchasing power risk

Investment companies are obligated to send their financial statement to shareholders: annually semi-annually quarterly monthly

semi-annually

If an agent withdraws his or her registration, the withdrawal does not become effective for how many days? A 1 day B 30 days C 60 days D 90 days

30 days

Which recommendation is appropriate for a client who is subject to the AMT (Alternative Minimum Tax)? A "You should invest in an existing housing real estate limited partnership for stable income sheltered by depreciation deductions" B "A private activity municipal bond investment is suitable for you because of its tax-free income" C "Don't exercise any incentive stock options granted by your employer" D "You should be making investments in foreign corporations"

"Don't exercise any incentive stock options granted by your employer"

A representative is making a presentation to a married couple, ages 75 and 77, about their need for continuing income as the expected life spans of the general population have increased. The representative is strongly recommending that the couple buy an equity indexed annuity (EIA). Which statement made by the representative would NOT be misleading and fraudulent? A "EIAs guarantee a minimum rate of return that is equal to the Standard and Poor's 500 Index" B "EIAs can be redeemed at any time without penalty if you have an emergency cash need" C "EIAs are tax qualified, allowing you to reduce your taxable income by deducting any contribution that you make" D "EIAs provide a minimum guaranteed rate of return that is guaranteed by the issuing insurance company"

"EIAs provide a minimum guaranteed rate of return that is guaranteed by the issuing insurance company"

A $1,000 par bond is issued with 3 years to maturity. The coupon rate on the bond is 2.50%. If the inflation rate for the next 3 years is 1.50%, the bond will be worth how much in 3 years? A $1,000 B $1,046 C $1,077 D $1,125

$1,000 The bond matures in 3 years. At maturity, the bondholder receives par from the issuer. The 2.50% coupon ($25 in interest) is paid to the bondholder annually, divided into semi-annual payments. The inflation rate has nothing to do with this question.

Which investment adviser MUST register with the SEC? An investment adviser with assets of: A $1,000,000 B $100,000,000 C $110,000,000 D all investment advisers must register with the SEC, regardless of their assets

$110,000,000

An example of Dollar Cost Averaging is buying A stocks when prices rise above their 200-day moving average B $150 of a Standard and Poor's 500 Index mutual fund every month C 200 shares of ABC ETF each month, regardless of its price D smaller dollar amounts of stock when prices are high and larger dollar amounts of stock when prices are high

$150 of a Standard and Poor's 500 Index mutual fund every month

A customer buys a new issue TIPS with a 3% coupon rate. If the CPI during the first year increases by 2%, the customer will receive annual interest the next year of: A $30.00 B $30.60 C $50.00 D This cannot be determined from the information given

$30.60 TIPS stands for Treasury Inflation Protection Security. The coupon rate at issuance is 3% and the security is issued at par. Each year, the principal amount is adjusted upwards by that year's inflation rate, so that the adjusted principal amount at the end of Year 1 will be: $1,000 x 1.02 = $1,020. The 3% coupon is applied to the adjusted principal amount, so 3% of $1,020 = $30.60 in interest that will be paid in Year 2:

A hedge fund wishes to make a seed capital investment in a start-up company under Rule 504 of Regulation D. The maximum permitted investment by the hedge fund is: A $5,000,000 B $10,000,000 C $20,000,000 D $50,000,000

$5,000,000

A customer buys 200 shares of GE at 72 and sells 2 GE 70 Calls @ $6. The maximum potential gain is: A $800 B $1,200 C $7,000 D unlimited

$800

The measure of incremental return earned for taking on incremental risk is: A (Total Return - Risk Free Return) / Standard Deviation B (Sum of All Cash Flows / # of Years) / Investment Amount C (Annual Income + Annual Accretion - Annual Amortization) / Average Life D (Total Return - Risk Free Return) / Duration

(Total Return - Risk Free Return) / Standard Deviation

A stock has a beta of +1 and an expected return of 12%. Another stock has a beta of +1.4 and an expected return of 18.8%. What is the alpha of the second stock position? A -2% B +2% C -6.8% D +6.8%

+2% 1.4 x 12% = 16.8% 18.8 - 16.8 = 2

Upon filing a withdrawal of registration with the State, the Administrator can commence a revocation or suspension proceeding for up to: A 1 year from the effective date of the withdrawal B 2 years from the effective date of the withdrawal C 3 years from the effective date of the withdrawal D 10 years from the effective date of the withdrawal

1 year from the effective date of the withdrawal

A customer has purchased 1,000 shares of ABC stock at $44 per share, paying a commission of $1.00 per share for the transaction. ABC stock declares a 20% stock dividend. When the dividend is paid, the tax status of the investment is: A 1,000 shares held at acost basisof $44 per share B 1,000 shares held at a cost basis of $45 per share C 1,200 shares held at a cost basis of $36.66 per share D 1,200 shares held at a cost basis of $37.50 per share

1,200 shares held at a cost basis of $37.50 per share 45/1.2 = 37.5

A portfolio increases in value from $1,000,000 to $1,210,000 over 24 months. The annualized rate of return is: 10 10.5 11 21

10 This question is basically seeing if you understand the time value of money on an annualized basis (that is, compound interest). This investment grew from $1,000,000 to $1,210,000 over 24 months, or 2 years. The best way to do this is to try each choice given. The first choice is 10% - so multiply by a factor of 1.1 (1 is the original investment amount; .1 is the interest rate). $1,000,000 x 1.1 = $1,100,000 after the first year. $1,100,000 x 1.1 = $1,210,000 after the second year. Thus, this investment grew at a 10% annualized rate.

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

10 people

An individual who has not reached retirement age who has an IRA account dies, splitting the estate equally between his wife and his son. The wife has a 16-year life expectancy and the son has a 35-year life expectancy. What is the maximum period of time over which the assets held in the IRA can be distributed to the son? A 5 years B 10 years C 16 years D 35 years

10 years If the beneficiary is a non-spouse, the assets are transferred into an "inherited IRA account" and must be depleted over the following 10 years. (There are some exceptions, but this is the general rule.)

An investment in common stock provides dividends equal to 4% per year and expected long term capital gains equal to 8% per year. For a lower-earning investor in the 30% tax bracket, the after-tax rate of return is: A 8.40% B 9.00% C 9.60% D 10.20%

10.20% Dividends and long-term capital gains are taxed at a maximum rate of 15% for lower earners and 20% for the highest earners. Thus, the after-tax rate of return on the dividends is 4% (100% - 15% Tax Bracket) = 3.4%; and capital gains is 8% (100% - 15% Tax Bracket) = 6.8%. Thus, the after-tax rate of return is 3.4% + 6.8% = 10.2%.

A customer invests $1,000 in an investment that is expected to generate $100 in the first year, $200 in the second year, and $300 in the third year, at which time the original $1,000 investment will be returned. What is the Return on Investment (ROI)? A 10% B 20% C 30% D 60%

20% Dollar Return = 600 / 3 years = 200 200/1000 = .2 = 20% return

A customer purchases 100 shares of ABC stock valued at $100 per share. After 13 months, the customer sells the stock at $130 per share. During this period, the stock paid $2.00 in cash dividends. If the average long-term capital gains tax rate is 20% and the investor's marginal tax rate is 37%, what is the customer's approximate after-tax rate of return? A 23% B 25% C 26% D 32%

23% 30(.8) = 24 24(12/13 - to annualize) = 22.15 2(.8) = 1.6 + 22.15 = 23.75 / 100 = 23.75%

An investment adviser receives a check from a customer made out to the adviser that the customer sent to the adviser inadvertently. This adviser will NOT have taken custody as long as it returns the check to the customer within: A 3 calendar days of receipt B 3 business days of receipt C 9 calendar days of receipt D 9 business days of receipt

3 business days of receipt

In a secondary offering, a member who acted as manager or co-manager CANNOT issue a research report on that company within how many days following the effective date? A 30 calendar days B 20 calendar days C 10 calendar days D 3 calendar days

3 calendar days

Registration of securities in a State by Filing becomes effective: A when the filing with the State is completed B 2 business days after the filing with the State is completed C 5 business days after the filing with the State is completed D when the Federal registration becomes effective

5 business days after the filing with the State is completed

Which security would be expected to have the smallest duration? A 5 year; 5% coupon bond B 5 year; zero-coupon bond C 20 year; 6% coupon bond D 20 year;zero-coupon bond

5 year; 5% coupon bond Duration is a measure of a bond's price volatility in response to changes in market interest rates. The bonds that are least volatile are those with short maturities and higher coupons; the bonds that are most volatile are those with long maturities and low coupons.

A portfolio manager generates a 10% rate of return on a "small cap" portfolio, compared to an 8% rate of return on the benchmark portfolio and a 6% rate of return on the Standard and Poor's 500 index over the same period. The passive rate of return on the portfolio is: 2 6 8 10

8 this is because the investor would've earned 8% if they just matched it to an index. the active earnings are 2%

Which statement is TRUE about trust taxation? A A Form 1025 must be filed reporting income, gain and loss B A Form 1040 must be filed reporting income, gain and loss C A Form 1041 must be filed reporting income, gain and loss

A Form 1041 must be filed reporting income, gain and loss

A written customer complaint is received by mail that the firm resolves to the customer's satisfaction. Which statement is TRUE regarding keeping this record? A A copy of the original complaint along with its resolution must be retained in the file of the agent by the broker-dealer B A copy of the original complaint along with its resolution must be retained at the firm's supervisory office C A copy of the original complaint along with its resolution must be retained by the State Administrator D There is no requirement to retain a copy of the complaint because it was resolved to the customer's satisfaction

A copy of the original complaint along with its resolution must be retained in the file of the agent by the broker-dealer

In connection with a new issue offering, a broker-dealer would be permitted to send which of the following to a customer if it were accompanied by a copy of the final prospectus? A An internal report prepared by the issuer that projects increasing product line market share over the next 3 years B Copies of advertisements used by the issuer to promote its products during the past year C An advance copy of the broker-dealer's research report on that issuer that will be released after the restriction period ends D A copy of the tombstone announcement prepared by the underwriter in connection with the offering of the issue

A copy of the tombstone announcement prepared by the underwriter in connection with the offering of the issue

The Administrator can require the filing of sales literature related to which of the following transactions? A An underwriter purchasing the stock of an issuer in a firm commitment underwriting B A for-profit company issuing securities that are not exchange listed C An investment company that is making purchases of listed stock in the secondary market D An offer of bonds made by a State government that guarantees payment of interest and principal

A for-profit company issuing securities that are not exchange listed

Which of the following would be required to register as an investment adviser in a State? A A person with no office in the State that only renders investment advice to insurance companies for compensation B A person who gives investment advice to charitable organizations on a "pro bono" basis C A person who has no current advisory customers, but who is seeking clients by newspaper advertising D A person who gives advice about investing in securities only as an incidental part of his accounting practice

A person who has no current advisory customers, but who is seeking clients by newspaper advertising

The wife of a customer who maintains an individual account with your firm telephones, and states that they are short of money, and that they will not be able to pay for the most recent securities purchase in the account. The securities have appreciated substantially since trade date, and the trade settles in 3 business days. The wife tells the agent to liquidate the position. Which actions by the agent are NOT allowed?I The agent may arrange for a loan to the customer of the money needed to purchase the securities II The trade may be canceled III The agent may sell the securities in the account; and may send the customer a check for the profit when that trade settles IV The agent may sell the securities in the account; but cannot send the customer a check for the profit until the original purchase is paid A I and II only B III only C III and IV only D All of the above

All of the above

All of the following are considered when evaluating a customer's tax status EXCEPT: A Age B Citizenship C Total earnings as of the last day of the tax period D Residency

Citizenship

Which of the following is a non-exempt security under Uniform State Law? A NASDAQ listed issues B Church bonds C Equipment Trust Certificates D Corporate bonds offered to fewer than 5 investors

Corporate bonds offered to fewer than 5 investors Corporate bonds of issuers that are exchange listed are exempt securities as well - but there is no mention of this in Choice D. Corporate bonds offered to 5 or fewer investors would qualify as an exempt transaction; not as an exempt security.

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

Correlation

The formula for Net Working Capital is: A (Total Assets - Inventory) / Total Liabilities B Total Assets - Total Liabilities C (Current Assets - Inventory) / Current Liabilities D Current Assets - Current Liabilities

Current Assets - Current Liabilities

Under the Securities Exchange Act of 1934, which of the following MUST register with the Securities and Exchange Commission? I Broker-Dealers II National Securities Exchanges III Investment Advisers IV Securities Information Processors

I, II, IV investment advisers are regulated under the Investment Advisers Act of 1940

The independent auditor's annual report of verification of customer funds held in custody by an investment adviser, as required by the Investment Advisers Act of 1940, is filed with the SEC on: A Form ADV Part I B Form ADV Part 2 C Form ADV-W D Form ADV-E

Form ADV-E

Which statement is TRUE about hedge fund fees? A Hedge fund managers can only charge fees based on a percentage of assets under management B Hedge fund managers can only charge a fixed annual fee C Hedge fund managers can charge performance fees that are limited in amount by the Investment Advisers Act of 1940 D Hedge fund managers can charge performance fees that are not limited in amount

Hedge fund managers can charge performance fees that are not limited in amount

Which of the following is NOT a benefit of making an investment in an emerging markets fund? A Diversification B Liquidity C Higher investment yield D Reduced investment risk

Higher investment yield An emerging markets fund is a type of growth fund (growth investing) that invests in companies in rapidly growing countries (e.g., a "BRIC" Fund - Brazil-Russia-India-China). Investing via a mutual fund structure provides diversification (which reduces investment risk) and provides liquidity, since the fund shares can be redeemed daily at NAV, or if the fund is closed-end, the shares can be sold in the market. What is not a benefit is a higher investment yield - the yield may be higher than making direct investments in these foreign stocks or it may be lower.

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

History of RIA

Which form(s) MUST be signed by the customer in order to open a margin account? A New Account Form B Hypothecation Agreement C Loan Consent Agreement D All of the above

Hypothecation Agreement

Under the Investment Advisers Act of 1940, which of the following statements are TRUE about the acceptance of prepaid advisory fees by an investment adviser? I The fees must be detailed in writing in the advisory contract II The fees cannot amount to more than 6 months' payment in advance III Prepaid fees in excess of $1,200 require that the adviser's balance sheet be included in the "Brochure" IV Acceptance of a prepaid fee constitutes taking "custody" of customer funds

I, II, III, IV

A person CANNOT transact business as an investment adviser in a State unless that person: I is registered in the State as an Investment Adviser II has no place of business in the State and only handles the accounts of insurance companies in that State III has a place of business in the State and only handles the accounts of insurance companies in that State IV registers in the State as a Broker-Dealer

I and II

Which of the following issuers MUST report to the SEC under the Securities Exchange Act of 1934? I Corporations II Investment Companies III Municipalities IV Federal Agencies

I and II

Which statements are TRUE regarding mutual funds? I That day's closing price is the basis for fund purchase price computations II That day's closing price is the basis for fund redemption price computations III The next day's closing price is the basis for fund purchase price computations IV The preceding day's closing price is the basis for redemption price computations

I and II

Investment companies that are required to be registered with the SEC under the Investment Company Act of 1940 have at least: I 100 shareholders II 1,000 shareholders III $100,000 of net assets IV $1,000,000 of net assets

I and III

Under the Uniform Securities Act, if an offer of not-for-profit "church" bonds is to be made in a State: I the Administrator can require that a Notice Filing be made in the State II the Administrator can require that the issue be Registered by Coordination in the State III the Administrator can require the filing of any promotional materials used in connection with the offer and sale of the issue IV the Administrator can disallow the exemption without providing any reason for such a denial

I and III

When comparing options to futures contracts, which statements are TRUE? I Options are securities that are regulated and exchange traded II Options are not securities and are unregulated and trade OTC III Futures are contracts that are regulated and exchange traded IV Futures are not contracts and are unregulated and trade OTC A I and III B I and IV C II and III D II and IV

I and III

Which of the following corporate distributions are taxable to the recipient?I Cash dividend II Stock dividend III Product dividend IV Stock split A I only B I and III C III and IV D I, II, III, IV

I and III

Which of the following would constitute an "involuntary assignment" of an investment advisory contract under the Uniform Securities Act? I An investment adviser formed as a corporation sells all of its stock to an acquiring broker-dealer II An investment adviser formed as a partnership has a partner with a 25% interest resign III An investment adviser formed as a partnership has 1 partner leave and take the contract to a new advisory firm

I and III

Which statements are TRUE regarding the following? "The adviser shall not be liable for any loss or depreciation in the value of the account unless it shall have failed to act in good faith or with reasonable care." I This is an example of a hedge clause in an investment advisory contract II This is an example of a fiduciary clause in an investment advisory contract III This clause is misleading and fraudulent IV This clause does not misstate the adviser's fiduciary obligations to its clients

I and III

Which statements are TRUE? I In order to be eligible for social security, an individual must have worked for 40 calendar quarters II In order to be eligible for social security, an individual must have worked for 80 calendar quarters III The social security benefit is maxed out after an individual has worked for 35 years IV The social security benefit is maxed out after an individual has worked for 45 years

I and III

A money purchase retirement plan: I requires mandatory employer contributions II does not require mandatory employer contributions III requires mandatory employee contributions IV does not require mandatory employee contributions

I and IV

Which of the following BEST describes S corporations? S corporations are: I limited to 100 investors or less II not limited as to the number of investors III taxable entities IV not taxable entities

I and IV

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

I and IV

Which statements are TRUE about fixed annuity contracts? I The issuer assumes the investment risk II The issuer assumes the purchasing power risk III The purchaser assumes the investment risk IV The purchaser assumes the purchasing power risk

I and IV

Which of the following are considered to be an "offer to sell" a security? I An offer of a security that will be given as consideration for the purchase of another security II An offer of the gift of an assessable security III An offer of a stock dividend by an issuer to holders of that security IV The offer of rights to purchase an underlying security

I, II, IV

Which statements are TRUE when comparing Equity Indexed Annuities to Variable Annuities? I In a year of sharply rising stock prices, variable annuities will outperform equity indexed annuities II In a year of sharply rising stock prices, equity indexed annuities will outperform variable annuities III In a year of sharply falling stock prices, variable annuities will outperform equity indexed annuities IV In a year of sharply falling stock prices, equity indexed annuities will outperform variable annuities

I and IV Equity indexed annuities have a cap on their maximum annual return, while variable annuities do not. Thus, in a year of sharply rising stock prices, variable annuities will outperform equity indexed annuities. In a year of sharply falling stock prices, equity indexed annuities will do better, because they protect their positions with put options.

An agent may be associated with more than 1 broker-dealer at the same time if: I all broker-dealers with whom the agent is associated are under common control II the State Administrator allows the "dual registration" III the agent files a registration application through each broker-dealer, and discloses any other broker-dealer employers on the application

I, II, III

In connection with the sale of an issue to a customer, the agent of a broker-dealer must disclose any material public facts about the issuer if: I by not disclosing the information, the presentation to the customer would be misleading in any material respect II the customer is not an employee or officer of the issuer and therefore is not in a position to have knowledge of these material public facts III the information was disclosed to the agent by the broker-dealer, regardless of the broker-dealer's policies and procedures covering disclosure of information to customers

I, II, III

Under IA-1092, which of the following are defined as "giving advice about securities"? A person who: I advises on the selection of an investment adviser II prepares a list of securities that may be purchased without making specific recommendations III prepares an asset allocation plan that specifies percentage investments in stocks, bonds, real estate and insurance IV charts the price movements of stocks and distributes them to subscribers

I, II, III

Under the Uniform Securities Act, an offer or sale does NOT exist if the securities are: I being pledged as collateral for a loan II non-assessable and are given as a gift III exchanged for another type of security under a judicially approved reorganization

I, II, III

The State Administrator, under the Uniform Securities Act, is empowered to: I require examinations for officers of investment advisers and for investment adviser representatives II set different passing grades for examinations administered to officers of investment advisers and investment adviser representatives III waive an examination requirement under specified circumstances IV give either oral examinations or written examinations

I, II, III, IV

Under SEC Release IA-1092, which of the following are considered to be compensation to an investment adviser? I Prepaid advisory fees that will be refunded in part if the contract is canceled II Hourly advisory fees III Fixed advisory fees IV Commissions received on transactions that result from the implementation of a financial plan created for "free" by the adviser

I, II, III, IV

Which of the following are prohibited practices under NASAA guidelines?I An investment adviser lending money to a customer II An investment adviser lending money to a customer that is a relative III An investment adviser lending money to a customer through a bank affiliate IV A broker-dealer lending money to a customer where securities are collateral under Regulation T A I and II B III and IV C II, III, IV D I, II, III, IV

I., II

Ms. Muffy Vanderbilt is an entrepreneurial socialite who has successfully worked as a fund raiser for a not-for-profit organization for the past 10 years. Because of her success at raising money and her extensive list of social contacts, she is recruited by an investment advisory firm to become a representative. Ms. Vanderbilt would be permitted to: I state to customers that she has 10 years of experience in the industry II use the title "investment adviser representative" on her business card III state to customers that she is registered as a representative with the SEC

II IAR only register with thte state so they can't say they're registered with teh SEC

In March, an investment adviser wishes to increase its annual management fee from 1% of assets annually to 1.25% of assets annually, starting the following July 1st. In order to do this:I the investment adviser must amend the Form ADV filed with the State immediately II the investment adviser must amend the Form ADV filed with the State within 30 days III the adviser's customers must approve of the change by July 1st IV the adviser's customers are not required to approve the change

II and III

Under NASAA rules, advertisements by investment advisers: I can contain testimonials II cannot contain testimonials III can unconditionally make an offer of free services IV cannot unconditionally make an offer of free services

II and III

Under the Uniform Securities Act, which statements are TRUE regarding investment advisers that take custody of customer funds? I The administrator must give written approval before an adviser can take custody of customer funds II The administrator can require a higher surety bond for advisers that take custody of customer funds III Statements of account must be sent to customers whose assets are held in custody at least quarterly

II and III

Upon discovering that a violation of the Uniform Securities Act has, or is about to occur, the Administrator is empowered to: I refer the matter to a disciplinary panel for disposition II issue a cease and desist order against such person III make a determination based upon findings of fact and conclusions of law

II and III

Which statements are TRUE when comparing an exchange trading floor to the OTC market? I It is possible for a stock to trade at 2 different prices at the same moment on an exchange floor II It is not possible for a stock to trade at 2 different prices at the same moment on an exchange floor III It is possible for a stock to trade at 2 different prices at the same moment in the OTC market IV It is not possible for a stock to trade at 2 different prices at the same moment in the OTC market

II and III An exchange floor is a centralized trading market, where a DMM (Designated Market Maker), handles the trading of each stock. There are not competing market makers on the exchange, so the stock can only be traded at one price at any given moment. The OTC market is a network of independent dealers who trade. In the OTC market, each dealer prices the securities as the dealer sees fit. Each dealer will not have the exact same price. (For example, different car dealers offer the same exact car at different prices).

Deferred compensation plans are: I typically suitable for rank and file employees II typically suitable for high level employees III ERISA qualified plans where employee assets are held in trust IV non-ERISA qualified plans where employee assets are held by the corporate employer

II and IV

Delivery of the brochure under the "Brochure Rule" is required for which of the following? I Impersonal advisory services requiring payment of less than $500 annually II Prepaid advisory fees requiring payment in advance of $1,000 or more III Advisory contracts with investment companies IV Advisory contracts with pension plans

II and IV

Which of the following persons would be defined as "sales representatives"? I A clerical employee of a broker-dealer who does not effect securities trades and does not receive commissions II A clerical employee of a broker-dealer who effects securities trades and receives commissions III A partner of a broker-dealer who does not effect securities trades and who receives commissions IV A partner of a broker-dealer who effects securities trades and who does not receive commissions

II and IV

Forward contracts are: I standardized and exchange traded II non-standardized and OTC traded III can be easily offset with a closing trade IV cannot be easily offset with a closing trade

II and IV Forward contracts are custom contracts that are negotiated between buyer and seller. They are issued OTC and there is very limited trading - thus it may not be possible to do an offsetting trade with a forward contract. Forward contracts are not subject to federal regulation.

An elderly customer seeking extra income who has $100,000 to invest could be recommended which of the following? I The $100,000 purchase of a variable annuity II The $100,000 purchase of dividend paying blue chip stocks in a cash account against which calls are sold III The $200,000 purchase of dividend paying blue chip stocks at 50% margin in a margin account IV The $100,000 purchase of Treasury bonds

II and IV not a variable annuity bc not enough tinme for it to grow

Which of the following statements concerning 403(b) plans are TRUE?I Investments are limited to annuities II An employee who elects salary deferral to a 403(b) plan cannot elect salary deferral to another retirement plan III A 403(b) plan can provide only for employee contributions without employer contributions IV Deferrals to a 401(k) plan reduce the amount that an employee can defer to a 403(b) plan A I and II only B I and III only C II and III only D III and IV only

III and IV

When is a bank considered to be a broker-dealer? A Never, because banks are excluded from the definition of a broker-dealer under the Uniform Securities Act B If an assistant manager at the bank solicits a customer to obtain a mortgage from the bank, which the bank then sells to Fannie Mae, which packages the mortgage into a pass-through certificate C If a teller of the bank, when assisting a customer that is making a deposit of a payroll check, offers the customer a money market mutual fund that is primarily invested in Treasury Bills D If a customer service representative at a bank call center offers a bank certificate of deposit of a customer that asks about an investment that is FDIC-insured and that cannot lose value

If a teller of the bank, when assisting a customer that is making a deposit of a payroll check, offers the customer a money market mutual fund that is primarily invested in Treasury Bills

Which of the following is NOT EXCLUDED from the definition of an "investment adviser"? A Broker-dealer B Trust company C Insurance company D Savings and loan

Insurance company

A blue chip corporation is making a bond offering that is rated AAA. During the issue's first year of trading, what is the greatest potential risk that a bondholder assumes? A Inflation risk B Liquidity risk C Marketability risk D Interest rate risk

Interest rate risk

If the U.S. dollar goes up in value, what type of investment would be most affected? A International stocks B Large cap stocks C Small and mid-cap stocks D Stock index funds

International stocks

The executor of an estate has all of the following fiduciary obligations EXCEPT: A Maintenance of records of transactions involving estate assets B Filing of the will in probate court and filing of tax returns for the estate C Payment of taxes due to State and Federal Governments D Management of assets placed into trust by the decedent

Management of assets placed into trust by the decedent

Which of the following is NOT a qualified custodian under NASAA rules? A FDIC Insured Bank B Registered Broker-Dealer C Foreign Financial Institution D National Securities Clearing Corporation

National Securities Clearing Corporation

An agent recommends that a customer purchase an unregistered non-exempt security. This is a violation of which section of the Uniform Securities Act? A Part I - Fraudulent and Other Prohibited Practices B Part II - Registration and Notice Filing Procedures For Broker-Dealers, Agents, Investment Advisers and Investment Adviser Representatives C Part III - Registration and Notice Filing Procedures Of Securities D Part IV - General Provisions

Part I - Fraudulent and Other Prohibited Practices

A portfolio that is rebalanced annually is considered to be: A Active B Passive C Fixed D Strategic

Passive The terms "active" and "passive" are most often used when looking at the management of a stock portfolio. An actively managed portfolio has its investments selected by a professional manager; whereas a passive portfolio has a composition that is matched to a market index. However, "active" and "passive" can also be used to refer to the frequency of portfolio rebalancing. A portfolio that is rebalanced once annually is said to be "passive;" a portfolio that is rebalanced more frequently or as market conditions move is said to be "active."

Under the Uniform Securities Act, an agent may engage in which of the following transactions? A Effecting transactions in a State where he is not registered, but where the broker-dealer is registered B Effecting transactions in a State where the broker-dealer is not registered, but where he is registered C Performing investment advisory services for customers as long as they are solely incidental to his work as a broker and no fees are charged D Soliciting orders for non-exempt unregistered securities if he is registered in the State

Performing investment advisory services for customers as long as they are solely incidental to his work as a broker and no fees are charged

Which of the following is covered by ERISA? A State employee pension plans B Private employee pension plans C Individual Retirement Accounts D Medical Trust Savings Accounts

Private employee pension plans

What rate would be used to find the present value of a TIPS? A Real Rate of Return at the time the bond was issued B Risk-Free Rate of Return at the time the bond was issued C Internal Rate of Return of the bond's cash flows D LIBOR

Real Rate of Return at the time the bond was issued

For a family limited partnership account, who gets the termination benefits? A Grantor B Trustee C Income beneficiary D Remainder beneficiary

Remainder beneficiary

Rule 147 offerings under the Securities Act of 1933 are exempt from: A SEC registration B State registration C Both of the above D Neither of the above

SEC registration

A Chinese Wall must be maintained by a broker-dealer between all of the following EXCEPT: A Sales and Back Office Operations B Research and Trading C Investment Banking and Research D Investment Banking and Sales

Sales and Back Office Operations

Pension funds are prohibited from using which investment strategy? A Purchase government and agency securities B Sell short government and agency securities C Sell covered call contract D Buy puts on stock positions

Sell short government and agency securities Pension funds and all retirement plans cannot trade on margin; only cash accounts (fully paid positions) are permitted.

A municipal employee has a 403(b) plan in which he has invested $8,000. The plan is currently worth $14,000. The employee decides to surrender and take a partial withdrawal of $8,000. Taking into consideration the customer's tax exclusion, what is the tax treatment? A The withdrawal is considered to be a return of capital, therefore it is not taxed B Since the cost basis in the account is "0," the entire withdrawal will be taxed as capital gain C $2,000 of the withdrawal will be considered to be a return of capital; the balance will be taxed as ordinary income D Since the cost basis in the account is "0," the entire distribution will be taxed as ordinary income

Since the cost basis in the account is "0," the entire distribution will be taxed as ordinary income All contributions to 403(b) plans reduce taxable income, so they are made with "before-tax dollars." The customer has no cost basis in the account, therefore, all distributions are 100% taxable at ordinary income tax rates

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

State A only

A customer that lives in State A is traveling by air to State C. While he is changing planes in State B, he receives a call on his cell phone from his broker, who solicits him to buy a security. He places the order with his broker and boards his connecting flight to State C. When he returns to his home in State A, he finds the trade confirmation in his mailbox. Which State Administrator(s) has (have) jurisdiction over the transaction? A State A only B State B only C Both State A and B D States A, B and C

State A only

Under the Uniform Securities Act, a person could give advice about all of the following securities without having to register in the State as an investment adviser EXCEPT: A Treasury Bonds B Ginnie Mae Pass-Through Certificates C Fannie Mae Debentures D State General Obligation Bonds

State General Obligation Bonds A person who gives investment advice relating solely to U.S. Government securities (including Agency securities), is excluded from Federal registration under the Investment Advisers Act of 1940. Any person excluded from registration with the SEC under the Investment Advisers Act of 1940 is a "federal covered adviser" and cannot be required to register in the State. Note that if the person gives advice about municipal bonds (Choice D), that person is not excluded and must register.

NASAA Model Rule 502 (c) applies to: A State registered advisers only to the extent that the conduct is fraudulent or deceptive B Federal Covered advisers only to the extent that the conduct is fraudulent or deceptive C State registered advisers and Federal Covered advisers only to the extent that the conduct is fraudulent or deceptive D Federal covered advisers and State registered advisers only to the extent that the conduct is fraudulent or deceptive

State registered advisers and Federal Covered advisers only to the extent that the conduct is fraudulent or deceptive

The Administrator of State Z receives a complaint about an advertisement placed by an investment adviser. The complaint claims the advertisement stated that: "Any investment made with IZZI Advisers would double in 5 years." IZZI Advisers is located in State X and the advertisement was created in State X and distributed in States X and Z. Which statement is TRUE? A The Administrator of State Z has no jurisdiction because the adviser is located in State X B The Administrator of State Z will refer the complaint to the Administrator of State X C The Administrator of State Z will investigate the complaint D The Administrator of State Z will enjoin IZZI Advisers from the publication of future advertisements in the State Z

The Administrator of State Z will investigate the complaint

A Canadian broker-dealer has a client who comes to the United States for 4 months as a contract employee for an American company. Which statement is TRUE about the Canadian broker-dealer doing securities business with the client in the United States? A The Canadian broker-dealer can continue to do business with the client in the United States without taking any further action B The Canadian broker-dealer can rely on the "vacationing" client exemption and does not have to register in the State C The Canadian broker-dealer must register in the State D The Canadian broker-dealer need only register in the State if the client is not a dual citizen

The Canadian broker-dealer can continue to do business with the client in the United States without taking any further action

An agent of a broker-dealer has been spending his spare time, at night and on weekends, on the Internet. The agent has been trading a thinly traded stock listed in the Pink Sheets, and has accounted for more than 50% of the trading volume in the stock. The agent has also been sending out e-mails to potential investors, recommending the stock. The agent has not informed his broker-dealer of these activities, since they only occur when the broker-dealer is closed. Which statement is TRUE regarding the applicability of the Uniform Securities Act to these activities? A The agent is defined as a statutory broker-dealer and must register in the State B Activities effected through the Internet are exempt from the provisions of the Uniform Securities Act C A violation of the Uniform Securities Act will occur only if there is a customer complaint lodged against the agent with the Administrator D The State Administrator can issue a stop order against the agent's broker-dealer for these actions

The agent is defined as a statutory broker-dealer and must register in the State

An agent of a broker-dealer is effecting non-exempt transactions through a private investment firm owned by his friend. The arrangement has been approved by the broker-dealer, who is not recording the transactions because they are being recorded on the books of the private investment firm. Why is the agent permitted to do this? A The agent is permitted to do this because the securities involved are non-exempt B The agent is permitted to do this because the broker-dealer gave approval C The agent is permitted to do this because an agent is free to engage in securities transactions with any employer once that agent is licensed D The agent is permitted to do this because the private investment firm is not subject to the provisions of the Investment Company Act of 1940

The agent is permitted to do this because the broker-dealer gave approval

An agent receives physical certificates from a customer that the customer wishes to deposit to his brokerage account. Which statement is TRUE? A The agent must forward the certificates to the broker-dealer immediately B The agent must enter the certificates into street name and destroy the old certificates immediately C The agent can accept the securities for safekeeping for no longer than 3 months D Under no circumstances can a broker-dealer take physical custody of securities unless approval of the Administrator is obtained

The agent must forward the certificates to the broker-dealer immediately

Which of the following can cause the Administrator to deny an application for registration? A The applicant was convicted of a Driving Under the Influence misdemeanor 4 years ago B The applicant plead guilty to a minor traffic violation 2 years ago C The applicant is the subject of an order from a Canadian court suspending registration as a securities representative D The applicant declared bankruptcy in another State 5 years ago

The applicant is the subject of an order from a Canadian court suspending registration as a securities representative

Which of the following statements describes a whole life insurance policy? A A policy owner has flexibility in skipping some premium payments B The cash value increases based on equity investments C The death benefit is fixed and guaranteed for the insured's entire life D Premium payments are low for a young insured and increase with age

The death benefit is fixed and guaranteed for the insured's entire life Whole life insurance protects the purchaser from increasing premiums as that person ages, and there are no renewals - the policy is good for that person's "whole" life. With a whole life policy, the annual premium is level, and will start out higher than a term life policy. Part of the premium is invested in the insurance company's general account and is guaranteed to grow at a fixed, guaranteed rate. As the general account investment portion grows, the policy builds "cash value" that can be borrowed.

Who is responsible for filing a U-5 Form with IARD when an investment adviser representative is terminated and associates with another advisory firm? A The investment adviser that is the former employer is responsible B The investment adviser that is the new employer is responsible C The Investment adviser representative is responsible D No one is responsible for notifying IARD when the investment adviser representative is terminated

The investment adviser that is the former employer is responsible

Which of the following falls under the jurisdiction of the Administrator of the State of New Jersey? A The purchase of call options by a customer living in New Jersey via a Nebraska-based broker-dealer's Internet web site B The sale of certificates of deposit by an Internet bank located in South Dakota to customers residing in the State of New Jersey C The delivery of securities by DTCC located in New York to customers located in the State of New Jersey D The redemption of mutual fund shares with the paying agent located in Massachusetts by customers located in the State of New Jersey

The purchase of call options by a customer living in New Jersey via a Nebraska-based broker-dealer's Internet web site

In what way are Class C mutual fund shares unique? A They convert to Class B shares after being held for a stated period of time B They charge a redemption fee if redemption occurs within the first 7 years of purchase C They charge a level annual load regardless of how long the shares are held D They are subject to lowered sales charges (breakpoints) for larger dollar purchases

They charge a level annual load regardless of how long the shares are held

An agent of a broker-dealer is approached by the manager of a local bank, who tells that agent the following: "If you have any customers who want an extremely safe investment, you can sell them CDs issued by our bank and we will pay you a $50 referral fee for each completed sale." Which statement is TRUE about the agent engaging in this activity? A This is permitted because the CD is an exempt security B This is an unethical activity known as selling away unless the agent obtains written permission of his or her firm to sell the bank's CDs C This is an illegal activity because agents are prohibited by law from selling away from their employing broker-dealer D This is permitted because the agent is only receiving nominal compensation for each CD sold

This is an unethical activity known as selling away unless the agent obtains written permission of his or her firm to sell the bank's CDs

A registered representative with a broker-dealer makes recommendations of securities to a customer, and charges a commission on each trade. Which statement is TRUE? A This person must register with the State as an investment adviser representative B This person must register with the State as an investment adviser C This person is excluded from the definition of an investment adviser D This person is defined as an investment adviser, but is exempt from registration

This person is excluded from the definition of an investment adviser Broker-dealers and their registered representatives are excluded from the definition of an investment adviser as long as they do not charge separately for advisory services. Thus, a broker-dealer can charge a commission on each recommended trade and not be defined as an investment adviser that must register in the State (note however, that it must still register as a broker-dealer in that State).

A customer who is retired wants to select an investment that is liquid, marketable, and that provides regular income. The BEST choice would be to recommend: A Treasury Bills B Treasury Notes C Preferred Stock D Certificates of Deposit

Treasury Notes Certificates of Deposit are non-negotiable - they are non-marketable, so this does not meet the client's needs. Preferred stock is marketable, but not as marketable as Treasury securities, making Treasury securities the better choice. So we are left with either a T-Bill or a T-Note. Treasury notes pay interest semi-annually; while Treasury Bills do not provide a regular income stream, so a T-Note is the better choice.

Which statement is TRUE? A Universal variable life insurance was derived from the fixed annuity B Variable life insurance was derived from whole life insurance C Term life insurance was derived from variable life insurance D Whole life insurance was derived from universal variable life insurance

Variable life insurance was derived from whole life insurance

An investment adviser representative obtains a list of all 263 members of the local Kiwanis Club and sends a coupon to 52 leads on the list, along with a letter, offering a 20% discount on services to new clients that are club members. Aside from retaining a copy of the letter, under the provisions of the Investment Advisers Act of 1940, the investment adviser MUST keep: A a memorandum describing the list and the source of the list B a record of the names and addresses of the persons to whom the offer was made C the worksheets that estimate the net worth of leads and the standards used to determine which leads were to receive the offer D a record of the names and addresses of all of the Kiwanis Club members on the list

a memorandum describing the list and the source of the list if more than 10 people, don't have to keep the actual names and addresses

An investment adviser representative recommends the purchase of DEFF stock to her client. DEFF is currently trading at $50 per share. The client is not terribly eager to make the investment, so the IAR tells the client that over the next 12 months, the adviser will repurchase the stock from the client at no less than $45 per share. This action is: A a prohibited performance guarantee B not a prohibited performance guarantee since the buyback price represents a loss to the client C a repurchase agreement, as defined under State law, since the buyback price is established D a round trip stock transaction

a prohibited performance guarantee

All of the following may be required by the Administrator to maintain registration EXCEPT the filing of: A financial reports with the Administrator B renewal fees with the Administrator C sales literature with the Administrator D a renewal consent to service of process with the Administrator

a renewal consent to service of process with the Administrator this is only filed for the initial registration application

An investment adviser is a private fund adviser that is not required to register with the SEC. All of the following would be permitted investors in order to retain its exempt pool status EXCEPT: A an individual who is an accredited investor under Regulation D B an individual who has at least $5 million of assets available for investment C an hedge fund with at least $25 million of assets under management D a trust with at least $5 million of assets available for investment

an individual who is an accredited investor under Regulation D

A broker-dealer participates in the distribution of a new issue on a firm commitment basis, receiving a spread for selling the issue. The broker-dealer is: A acting as agent for the issuer and as an investment adviser to the purchasers B acting as principal for the issuer and as an investment adviser to the purchasers C acting as agent for the issuer and as an underwriter of the securities D acting as a principal for the issuer and as an underwriter of the securities

acting as a principal for the issuer and as an underwriter of the securities Firms that handle new issue distributions for issuers are underwriters. The underwriter can either act as a principal or agent in the underwriting. A firm commitment underwriting obligates the underwriter to buy the issue from the issuer - the underwriter takes full financial liability. A best efforts underwriting means that the underwriter acts as agent, using its best efforts to sell the issue to the public, taking no liability. For this, it earns an underwriting fee on each share or bond sold.

A passively managed index fund, to compensate for a negative tracking error, would: A rebalance its portfolio B actively manage a portion of its portfolio C terminate its portfolio manager and hire a more experienced individual D implement a new strategic asset allocation plan

actively manage a portion of its portfolio

To raise new capital for the company, a company director decides to sell unissued shares directly to employees of the company. The director earns a commission for selling these shares. This director is defined as a(n): A agent B broker-dealer C issuer D non-issuer

agent

A broker-dealer is required to register with: A the SEC B FINRA C the state where it is located or does business with the public and the SEC D all of the above

all of the above

All of the following are plan fiduciaries under ERISA EXCEPT the: A trustee of the plan B attorney that provides legal advice to the plan C investment adviser to the plan D individual that has discretion over the administration of the plan

attorney that provides legal advice to the plan

Under the Uniform Securities Act, if the Administrator prohibits an investment adviser from taking custody of customer funds or securities, the investment adviser would be permitted to: A buy securities for a customer using the investment adviser's monies, and then delay delivery of those securities to the customer B buy securities for a customer who has given a limited power of attorney to the adviser using monies deposited by that customer to an account established by the adviser specifically for that purpose C hold customer funds in accounts established and maintained by the adviser that have been segregated and properly identified D accept a prepaid advisory fee of $500 from the client covering a period of up to 1 year

buy securities for a customer who has given a limited power of attorney to the adviser using monies deposited by that customer to an account established by the adviser specifically for that purpose

A 20-year, 6% bond is quoted by a dealer on a 5% basis. The bond is callable in 10 years at par. To calculate the dollar price for the bond, the dealer would use the: A redemption date to find the number of years over which the discount would be earned B call date to find the number of years over which the discount would be earned C redemption date to find the number of years over which the premium would be lost D call date to find the number of years over which the premium would be lost

call date to find the number of years over which the premium would be lost this is a premium bond

An investment adviser representative (IAR) is also a commissioned representative at a brokerage firm. The IAR has developed an asset allocation portfolio model for the client, who approves of the plan and acknowledges all fees associated with the implementation of the plan. These include a management fee and commissions on securities transactions. The IAR: A cannot implement the plan B can implement the plan C can implement the plan only if no commissions are charged D can implement the plan only if no management fee is charged

can implement the plan

An investment adviser registered in State Y effects all of its portfolio transactions through a broker-dealer registered with the SEC and State Y. Regarding required filings from the broker-dealer in State Y, the Administrator of State Y A can only require the same filings as it requires from the investment adviser that does its portfolio trades through that broker-dealer B can only require the filing of the broker-dealer's reports that are filed with the SEC C can require the filing of any records demanded by the Administrator of State Y D cannot require the filing of any records because of the federal supremacy of the broker-dealer filings that are required with the SEC

can only require the filing of the broker-dealer's reports that are filed with the SEC

The Standard and Poor's 500 Index is: A an average of 500 different stock prices B capitalization weighted C based on 500 mid-cap securities D one-on-one weighted

capitalization weighted

The IRR (Internal Rate of Return) of an investment assumes that: A cash flows generated by the investment are not reinvested B cash flows generated by the investment are reinvested at the risk-free rate of return C cash flows generated by the investment are reinvested at the internal rate of return D cash flows generated by the investment are reinvested at the total rate of return

cash flows generated by the investment are reinvested at the internal rate of return

Investment advisers are prohibited from doing all of the following EXCEPT: A assigning a customer's contract without permission B charging a retainer fee C charging commissions on trades effected for the client D changing partnership management without notifying clients

charging a retainer fee

All of the following are defined as "giving advice about securities" under IA-1092 EXCEPT a person who: A advises on the selection of an investment adviser B prepares a list of securities that may be purchased without making specific recommendations C prepares an asset allocation plan that specifies percentage investments in stocks, bonds, real estate and insurance D charts the price movements of stocks and distributes them to subscribers

charts the price movements of stocks and distributes them to subscribers

All of the following are defined as "persons" under the Uniform Securities Act EXCEPT: A individuals B joint stock companies C unincorporated organizations D trusts where the interests of the beneficiaries are not evidenced by a security

trusts where the interests of the beneficiaries are not evidenced by a security

Under the provisions of the Uniform Securities Act, registration of an agent: A expires when that individual leaves the employment of a broker-dealer B expires if not renewed by December 31st of each year C expires on the anniversary date of association with the broker-dealer D only expires if notice is given to the Administrator that the individual is no longer associated with the broker-dealer

expires if not renewed by December 31st of each year

All of the following State-registered advisers must file an annual audited financial statement with the Administrator within 120 days of completion of a surprise audit EXCEPT an adviser that: A accepts $500 or more of prepaid advisory fees, 6 months or more in advance of rendering services B uses a qualified custodian to hold customer assets C maintains custody of customer assets D exercises discretion in customer accounts under a limited power of attorney

exercises discretion in customer accounts under a limited power of attorney Being given investment discretion is only "custody" if the adviser has a full power of attorney over the account, which gives the adviser the ability to withdraw customer funds or securities. If the adviser is given a limited power of attorney, the adviser can trade, but cannot withdraw funds or securities, so the adviser does not take custody.

A client is in the process of opening a new account at a broker-dealer. The client has told the agent that her investment objective is capital preservation. When performing the suitability determination, the client refuses to disclose net worth and previous trading experience. The client also wants the agent to enter trades in the account without specific direction from the client, but has not yet returned a signed power of attorney. The representative is: A not permitted to enter an order in the account until the power of attorney is received B permitted to place an order for a security that has low volatility and that pays a substantial dividend C only permitted to accept unsolicited trades in the account D permitted to enter trades in the account with the express advance approval of the branch manager

not permitted to enter an order in the account until the power of attorney is received

Under the Investment Advisers Act of 1940, a solicitor that contacts a customer to purchase the services of an investment adviser must, upon entering into a written contract: A give the customer the adviser'sbrochure B give the customer both the adviser's brochure and the solicitor's brochure C obtain a signed and dated statement from the customer acknowledging receipt of the adviser's brochure D obtain a signed and dated statement from the customer acknowledging receipt of both the adviser's brochure and the solicitor's brochure

obtain a signed and dated statement from the customer acknowledging receipt of both the adviser's brochure and the solicitor's brochure

All of the following are defined as "investment advisers" who must register under SEC Release IA-1092 EXCEPT a person who: A only advises on asset allocation B only creates overall financial plans but who does not effect recommended transactions C creates overall financial plans and who effects recommended transactions D only gives advice on U.S. Government securitie

only gives advice on U.S. Government securitie Specifically excluded from the definition of an investment adviser under the Investment Advisers Act of 1940 is anyone who gives advice about U.S. Government securities.

A customer holds a $250,000 portfolio invested solely in U.S. Government bonds. If the equities market were to rally because of the expectation of a growing economy, while market interest rates remained stable, the risk associated with holding the bond portfolio would be: A opportunity cost B default risk C liquidity risk D reinvestment risk

opportunity cost

All of the following customers are considered to be long 100 shares of ABC stock EXCEPT a customer who: A has bought 100 ABC shares in a regular way trade that has not yet settled B owns 1 ABC call contract C owns two ABC convertible bonds, convertible into 50 shares each, who has given irrevocable instructions to convert D owns 100 ABC warrants and has exercised those warrants

owns 1 ABC call contract A customer is considered to be long stock once the stock has been purchased. The transaction does not have to settle for the customer to be considered to be long. A customer is considered to be long if he owns options or warrants and has exercised. Choice B is not considered a long stock position since the call has not been exercised, while Choice D is a long position because the warrants have been exercised. A customer is considered to be long stock if the customer owns a convertible security and gives irrevocable instructions to convert (Choice C), because he or she will then receive the shares from the conversion.

Internal Revenue Code Section 1031: A permits a like-kind exchange of appreciated real estate for another investment property to defer capital gains tax due B values securities held in an estate at fair market value at the date of death, avoiding capital gains tax on appreciated positions C allows for the swap of an investment that has depreciated for another similar but not identical asset, with no disallowance of the capital loss D defers the generation skipping tax owed by an estate on assets left directly to grandchildren

permits a like-kind exchange of appreciated real estate for another investment property to defer capital gains tax due

The use of customer names by an investment adviser to promote the sale of the firm's advisory services is: A prohibited in all circumstances B permitted if the adviser notifies each client of its intentions C permitted if the adviser notifies each client of its intentions and the clients consent to such disclosure D permitted if the adviser notifies the State Administrator that the client names will be used

permitted if the adviser notifies each client of its intentions and the clients consent to such disclosure

An IAR discusses a trading strategy with one of her clients, who tells the IAR to sell her ABC stock position whenever you see an opportunity. After this conversation, the client leaves the IAR's office for a vacation. Two days later, the IAR sees that ABC stock has risen in price and believes that this is an opportune time to sell the position. The IAR should: A not place the order and try and contact the client B place the trade and notify the client in writing within 2 business days C place the trade and get written discretionary authority from the customer within 10 business days D get approval from his or her direct manager before placing the trade

place the trade and get written discretionary authority from the customer within 10 business days

A Registered Investment Adviser publishes a web-based newsletter. He is approached by a marketing firm for a list of the RIA's customers. The marketing firm is not going to pay for the customer list, but has agreed to give the RIA computer equipment that will be used in publishing the RIA's newsletter. This action is: A permitted because it directly benefits the RIA's customers B permitted because the SEC permits the payment of "soft dollars" C prohibited because the computer equipment qualifies for accelerated depreciation deductions under IRS rules D prohibited because the RIA did not get written permission from each client to release their information

prohibited because the RIA did not get written permission from each client to release their information

An investment adviser makes presentations to existing and prospective clients using a chart that determines when to buy or sell securities. In order to do this, the adviser must: A prominently disclose its performance history over the time period used in the chart B prominently disclose the limitations of using the chart and the difficulties regarding its use C prominently disclose the fact that past performance does not predict future results D show a comparison of performance to the relevant benchmark index for the preceding 1-year, 5-year, and 10-year time periods

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

During the payout period of a fixed annuity contract, the annuitant assumes: A mortality risk B purchasing power risk C expense risk D investment risk

purchasing power risk

Under the "Brochure Rule," existing customers of an investment adviser MUST: A receive a "Brochure" at least quarterly only if there are material changes B receive a "Brochure" at least quarterly whether or not there are material changes C receive a "Brochure" at least annually only if there are material changes D receive a "Brochure" at least annually whether or not there are material changes

receive a "Brochure" at least annually only if there are material changes

Under the Investment Advisers Act of 1940, if an adviser accepts prepaid advisory fees of $1,200 or more, 6 months or more in advance of services rendered, each new client MUST: A give discretionary authority to the adviser B receive a copy of the adviser's balance sheet C be provided with a "Brochure" at least 5 days in advance of signing a contract D be reported to the Securities and Exchange Commission

receive a copy of the adviser's balance sheet

An investment adviser is considered to "take custody" of funds or securities from a customer if it: A exercises discretionary authority by placing trades of securities for that customer B accepts a check from the customer made payable to the fund custodian to buy a mutual fund C accepts commissions for effecting trades for that customer's account through an affiliated broker-dealer D receives quarterly management fees from the custodian by direct deduction with client consent

receives quarterly management fees from the custodian by direct deduction with client consent

An investor has a broadly diversified portfolio of blue chip stocks. The use of index options to hedge the portfolio: A reduces non-systematic risk B reduces systematic risk C reduces both systematic and non-systematic risk D cannot be used to reduce any risk since the portfolio is fully diversified

reduces systematic risk Index options can be used to hedge a portfolio. If index puts are bought, then a drop in the market lowering the portfolio's value will be offset by a gain in the value of the index puts. This strategy hedges against market risk, also known as systematic risk. Non-systematic risk is the risk that any one security will perform poorly. The larger the portfolio, the lower the effect of non-systematic risk.

Under the provisions of the Uniform Securities Act, the Administrator, in connection with a securities registration, is prohibited from revoking a: A registration prior to providing an opportunity for a hearing B registration retroactively C statutory exemption in a specific sale of securities to a bank D statutory exemption in a specific sale of securities to a broker-deale

registration retroactively

An investor in municipal bonds would be primarily concerned with which risk? A market risk B business risk C regulatory risk D credit risk

regulatory risk Regulatory risk is the risk of law changes; primarily the risk of tax law changes. Since the interest income from municipal bonds is exempt from Federal income tax, the main risk associated with these securities is that the Federal government may attempt to tax their interest income (this has already happened with certain types of municipal bonds).

A money manager that employs momentum investing makes investment decisions based on the: A fundamental value of the company as determined by analysis of the company B earnings growth of the company C reported earnings of the company as compared to the "whisper" number D efficient market theory

reported earnings of the company as compared to the "whisper" number

Under the Investment Advisers Act of 1940, the renewal of an advisory contract under different terms than the preceding contract: A is made by filing a Form ADV-S with the SEC within 90 days of year end B requires that the customer be given a revised "Brochure" at least 48 hours prior to contract renewal C requires that a revised "Brochure" must be given to the customer at, prior to, contract renewal D is prohibited unless the investment adviser files a Form ADV Part 2A and balance sheet with the SEC immediately

requires that a revised "Brochure" must be given to the customer at, prior to, contract renewal

Under the provisions of the Uniform Securities Act, for willful violations, the State Administrator can: A institute criminal proceedings B impose a monetary fine C file suit under civil liability provisions D revoke registration of persons

revoke registration of persons

All of the following must act in a fiduciary capacity EXCEPT a(n): A securities agent that recommends a security to a customer B investment adviser representative that recommends a security to a customer C executor of an estate D trustee of a pension plan

securities agent that recommends a security to a customer

A Debt/Equity Ratio of 1 means that: A the company will be able to pay all of its debts in the upcoming year B shareholders and creditors have an equal stake in the company's assets C the company has not used any leverage in its capital base D the company's interest payments to bondholders equals the company's dividend payments to shareholders

shareholders and creditors have an equal stake in the company's assets

All of the following are disclosed in Form ADV Part 2A EXCEPT: A investment policies of the adviser B type of investments made by the adviser C investment practices of the adviser D states in which the adviser is registered

states in which the adviser is registered

If a corporation issues new stock at a price above par value, the excess above par is termed: A surplus capital B retained earnings C earned surplus D adjusted par value

surplus capital another name for "additional paid in capital" - that is, the amount above par value paid by a common shareholder to the company for the stock on the initial public offering.

Given the formula: ( Corporate Yield %) x (1 - Tax Bracket %) = X X is equal to the: taxable exquivalent yield tax-free equivalent yield

tax-free

A 62-year old man takes a distribution from a non-tax qualified variable annuity. The distribution is: A tax free without any penalty imposed B taxed at capital gains rates without any penalty imposed C taxed as ordinary income without any penalty imposed D taxed in accordance with federal tax law

taxed in accordance with federal tax law

Lincoln Investments is registered as a broker-dealer and as an investment adviser. When opening an account for a customer, the firm has the customer sign a statement that discloses that transactions recommended by Lincoln Advisers are effected through Lincoln Brokerage, which earns commissions on those trades. Obtaining the signed statement would NOT be required if: A Lincoln Advisers recommends the purchase of a security and Lincoln Brokerage sells the customer that security out of its inventory B Lincoln Advisers recommends the sale of a security and Lincoln Brokerage executes the sale acting as agent in the OTC market C the customer effects a trade through Lincoln Brokerage that was not recommended by Lincoln Advisers D the customer signs a waiver covering all disclosures that are legally required

the customer effects a trade through Lincoln Brokerage that was not recommended by Lincoln Advisers

A broker-dealer registered in States A and B has an agent that is registered in State A. The agent takes an unsolicited order from a customer in State B. The agent will have to register in State B if: A this is an existing customer who resides in State A but is temporarily vacationing in State B B the customer is the issuer of the securities involved in the transaction C this is an isolated transaction D the customer is an accredited investor

the customer is an accredited investor If the broker-dealer or agent is not a resident, but is dealing only with wealthy investors in the State, there is no exemption granted and both must be registered in the State.

A broker-dealer has a marketing agreement with a local bank and has located offices in each of the bank's branches. If a bank customer makes an inquiry about mutual funds offered by the broker-dealer in the branch, all of the following are true EXCEPT: A oral disclosure is required that the products offered are not FDIC insured; are not deposits; and are subject to risk of loss of principal B written disclosure is required that the products offered are not FDIC insured; are not deposits; and are subject to risk of loss of principal C the customer's signature must be obtained on a document acknowledging receipt of the appropriate risk disclosures D reasonable efforts must be made to obtain the customer's signature on a document acknowledging receipt of the appropriate risk disclosures

the customer's signature must be obtained on a document acknowledging receipt of the appropriate risk disclosures

If a representative that transacts business in a State terminates employment with an investment adviser: A the representative must notify the Administrator promptly B the investment adviser must notify the Administrator promptly C both the representative and the investment adviser must notify the Administrator promptly D both the representative and the investment adviser must notify the Administrator within 30 days

the investment adviser must notify the Administrator promptly

Under the Uniform Securities Act, all of the following are requirements for advisory contracts EXCEPT: A the investment adviser cannot assign the contract to another adviser without the written consent of the customer B the investment adviser must notify the customer of any changes in the composition of the partnership, if the adviser is so structured C the investment adviser must notify the customer of its current standing as either a federal covered adviser or state registered adviser D the investment adviser cannot be compensated based on the performance of the securities held in the managed portfolio

the investment adviser must notify the customer of its current standing as either a federal covered adviser or state registered adviser

If a customer purchases in a 200% leveraged ETF, the customer can lose: A the investment amount B more than the investment amount C two times the investment amount D an unlimited amount

the investment amount

A new client with no other investment assets has just come into an inheritance of $500,000 of ABCD stock, a blue chip company listed on the NYSE. As the adviser to this customer, your IMMEDIATE concern should be: A whether the company is a candidate for delisting B the possibility that the value of ABCD stock may decline sharply C the lack of diversification of the customer's investment Incorrect answer D. You chose this answer. D whether the customer paid any estate tax liability due

the lack of diversification of the customer's investment Incorrect answer D. You chose this answer.

If a customer stops making payments on a whole life policy, all of the following are permitted EXCEPT: A taking the cash value of the contract as a lump sum B taking a reduced paid-up whole life policy C using the equity to purchase a term life policy D using the equity to purchase a non-participating policy

using the equity to purchase a non-participating policy

Level premium and permanent are terms associated with: A term insurance B whole life insurance C universal life D fixed index universal life

whole life insurance