Series 66 Test Prep

What is the biggest benefit to a general partnership?

- ease of formation *** do not get confused with LLC , general partners are 100% liable***

What is a benefit of HSA? (Health savings account)

- funds not used for health can be but into mutual funds or other securities - max contribution is 3,450 per indiviual - Requirements of HSA are a High deductible

In order to act as an agent and adviser in a transaction, what must the adviser do?

- must give client full written disclosure as to capacity - consent from client

Private placement Rules

-Private placements are offers to no more than 10 noninstitutional persons in a 12-month period for investment purposes -The fraud provisions apply to any person involved -transactions are exempt from registration requirements

The investment Advisor contract must contain ...

1)Advisory contracts must contain the services to be provided 2)the term of the contract 3)he amount of the advisory fee or the formula used to compute it 4)he amount of fee to be refunded if the advisory fee is prepaid 5)whether the adviser has discretionary authority and to what extent

Who is excluded from STATE definition of investment adviser?

1. Banks 2. L.A.T.E 3. Broker Dealers 4. publishers of newspaper 5. IAR

Who is excluded from Federal definition of IA?

1. Banks 2. L.A.T.E 3. Broker Dealers 4. Publisher of newspaper 5. Person who only advises on gov security

Before taking any disciplinary action with respect to a registration under the Uniform Securities Act, the Administrator must always do which of the following?

1. Finding a public interest 2. Finding a clause in the act

How long does a federal covered investment adviser who's AUM fall below $90 million have to register with the state(s) it operates in?

180 days

How long do Broker Dealer have to keep their files?

3 years

Under section 529 savings plan what is the maximum am out someone can contribute without having to pay gift taxes?

5 years worth of gift tax exclusion so (5 x 15,000) = 75,000

How long does and investment adviser registered under state law whose assets reach $110 million have to register with the SEC?

90 days

How often must The Form ADV be updated?

90 days after end of fiscal year

What is the Form ADV Part 2

A disclosure document that, under state and federal securities laws, is required to be given to clients (known as the "brochure") Made up of 3 parts - Part 2A of Form ADV: Firm Brochure- - Part 2A Appendix 1 Form ADV: Wrap Fee Program Brochure - Part 2B Form ADV: Brochure Supplement (describes certain supervised persons of the firm)

What makes an adviser exempt from STATE registration?

An adviser is exempt from state registration if it has no place of business in the state and limits clientele to other investment advisers, banks and insurance companies, or broker-dealers. There is a de minimis exemption, but it is for no more than 5 (not 12) clients during a 12-month period.

Part 2B on the adviser brochure contains people who ?

Are in direct relation with the client/ hold discretion in clients accounts *** Board of directors are NOT included ***

What is the risk measure associated with the capital market line (CML)? A) Alpha B)Standard deviation C)Beta D)Systematic risk

B) standard deviation (market risk)

What type of risk is measured with SML security market line? A) Alpha B)Standard deviation C)Beta D)Systematic risk

C) Beta

A person who has passed the proper exams but license is not active yet can only do what?

Clerical duties

Whats included in capital gain or loss

Cost of investment - sale price of investment ***cash dividends have nothing to do w/ capital gain***

In a life settlement, the seller receives more than the premiums paid into the policy but less than

Face amount

What entity sets margin requirements?

Federal Reserve Board

how long do IAs have to maintain books?

Five years from the end of the fiscal year during which the last entry was recorded

What doesn't trade in the secondary market?

Forwards

An administrator may deny application for registration of an agent if ... i) the applicant has been convicted of a misdemeanor involving securities fraud within the past 120 months ii)the applicant is insolvent iii)the applicant has been convicted of a felony within 10 years of the date of application V)the applicant has filed an incomplete application

I,II,III,V

A measurement of investment return that takes the time value of money into consideration is

IRR

Annuities are taxed by what a) lifo b) fifo

LIFO

Mutual Funds redeem their shares at ?

NAV

Reinvestment for mutual funds is always at what price

NAV

Is a 1035 exchange of annuities a taxable event? yes or no

NO

What is the penalty for someone found guilty of insider trading?

SEC may seek court action that imposes civil penalties of 3 times the profit gained or 3 times the loss avoided as a result of inside information.

Fees for jail and penalty for state and federal IA?

State - 3 yr jail and 5,000 Federal- 5yr jail and 10,000

Investment Adviser Representatives of federal covered investment advisers must register with who?

The Administrator *** IAR's only register with adminstrator

Nav - redemption fee =

The amount an investor will recieve at redemption

ERISA section 404(c) places the investment risk of 401k plans with

The plan participant rather than the plan fiduciary

A higher sharpe's ratio indicates that...

The return is better than expected for the amount of risk

Time Weighted Average (TWA)

Time-weighted returns are used to evaluate the performance of portfolio managers separate from the influence of additional investor deposits or withdrawals

dollar-weighted average return

Usually is used to evaluate investor performance

defined benefit plan

a pension plan in which the amount an employee is to receive on retirement is specifically set forth ( ex 3 years worth of salary )

When is an adviser exempt from SEC registration?

adviser whose clients are all residents of the state in which the adviser maintains its principal office who renders no advice on any exchange-listed security and does not give advice to any private funds -Advisers whose clients are limited to insurance companies - foreign advisers who limit themselves to fewer than 15 clients a year (none of whom can be investment companies), do not advertise or hold themselves out to be investment advisers and have less than $25 million in AUM in the United States *** Bank clients are not exempt ****

When must a broker dealer register in the state?

every state where it does business Exception to the rule: - no place of business in the state and no business is done other than institutional clients

Two major factors in CAPM are

market risk premium and stock risk premium

What is not allowed regarding an investment adviser contract ?

performance based fees are never permitted

defined contribution plan

retirement plan in which the employer sets up an individual account for each employee and specifies the size of the investment into that account

parties of a trust...

settlor: person who supplies the property for the trust trustee: an individual or other party holding legal title to property held for the benefit of another personbeneficiary: person for whose benefit property is held in trust

When an agent transfers employment from a broker-dealer registered with the SEC to a broker-dealer registered solely in this state

the agent, the former broker-dealer, and the current broker-dealer must all notify the Administrator

A sudden decrease in market interest rates will have the effect of increasing the trading price of an existing bond because?

the present value of the bond's future cash flows increases

Are partial rollovers allowed from an IRA ?

yes