1934, insider trading, 1940 act

Under the Investment Company Act of 1940, which of the following would be considered an affiliated person? Persons who control, are controlled by, or share common control with the company. Any officer, director, or employee of the company. Persons who own or control 5% or more of the voting shares of the company. A)II and III. B)I, II and III. C)I and III. D)III only.

B)I, II and III. Affiliated persons are any investment company directors, officers, employees, or owners of 5% or more of the voting shares of stock, and/or any persons controlling or controlled by such persons.

BD and transfer agents are regulated by

1934

SEC was created by

1934 Act

Investment advisers are regulated by

1940 investment company act

How long are contracts between funds and their adviers

2 years, then renew annually

How many SEC commissioners are there

5

13d requirement

5% ownership

How long can SEC suspend trading on an exchange

90 days

Family breakpoint qualification

A husband, wife, and all kids under 21 qualify as a single personD

What is needed for a contract between an investment company and an outside adviser

A written contract with certain provisions - contract can't be unilaterally assigned to another adviser

Currency transaction reports must be filed for cash transactions that exceed: A)$10,000 B)$50,000. C)$25,000. D)$100,000.

A)$10,000

How often must an investment company file reports with the SEC as required by the Investment Company Act of 1940? A)Annually. B)Quarterly. C)Semiannually. D)Monthly.

A)Annually. Registered investment companies are similar to other publicly registered entities in that an annual audited report must be filed with the SEC.

During your training, you overhear your manager discussing the Chinese wall. This is probably referring to A)internal provisions enacted to prevent material, nonpublic information from leaking from one department of the firm to another B)a leading tourist attraction in China C)takeout for lunch D)the increasingly high percentage of US government bonds held by the Chinese

A)internal provisions enacted to prevent material, nonpublic information from leaking from one department of the firm to another The term "Chinese wall" is used to describe the separation of divisions within the firm, protecting sensitive information from leaking to the wrong people. For example, the investment banking arm of the company may be working with a client company on a merger. This information cannot be shared with the trading or sales department until it is public knowledge.

What is a BD's associated person

An associated person is either an officer or a broker-dealer employee who represents the broker-dealer in soliciting the purchase or sale of securities. Associated person also includes any individual authorized to accept customers' orders for the broker-dealer

What does the investment company's BoD do

An investment company's board of directors concerns itself with policy and administrative matters

Mutual fund - Investment adviser's job

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

Can a convicted felon or person convicted of a finance related misdemeanor be on an investment company's BoD

no

Can mutual funds trade on margin

no

Which of the following documents must an existing customer sign to establish a discretionary account? A)New account application B)Options agreement C)Customer's agreement D)Trading authorization

D)Trading authorization To establish a discretionary account, the agent must receive written authorization from the customer(s) in whose name(s) the account has been established. An existing customer has already completed the new account application and signed any required customer agreements.

What is considered a gov security

Any sec issued by the US gov or one of its agencies, aka bonds issued by Tennessee valley authority whereas bonds issued by state of tennessee are munis

Political parties in SEC

At no point may there be more than 3 of the 5 from the same political party

Under the Investment Company Act of 1940, which of the following qualify for a discount in a mutual fund's sales charge? Mr. and Mrs. Jones each purchase $5,000 worth of shares; the fund offers a volume discount for a single purchase of $10,000. Neighbors Jan, Mickey, and Lee form an investment club; Jan places an order for $10,000 worth of shares to be held in their three names. The fund offers a volume discount for a $10,000 purchase. Allen is the vice president of a firm under contract to provide investment advice to a mutual fund. He buys shares of that fund. A)II and III. B)I and III. C)I, II and III. D)I and II.

B)I and III.

Does SEc have power over banks with regards to savings and loans

nor does it have jurisdiction over banks or savings and loans regarding their securities activities

Which of the following are regulated under the Securities Exchange Act of 1934? Broker-dealers. Investment advisers. Pension plans. Transfer agents. A)I and II. B)I and IV. C)III and IV. D)II and III.

B)I and IV. The Securities Exchange Act of 1934 regulates broker-dealers and transfer agents. Investment advisers are regulated under the Investment Advisers Act of 1940 (and, to a certain extent, the Investment Company Act of 1940), whereas pension plans in the private sector are regulated under ERISA.

Written discretionary authorization is not required for an agent to choose which of the following order instructions? Security to be bought or sold Number of shares to be bought or sold Time of execution Price of execution A)I and II B)III and IV C)I and III D)II and IV

B)III and IV If an agent chooses price or timing of an order only, that order is not a discretionary order, and a written discretionary authorization is not required. To be discretionary, the agent must choose 1 or more of the following: the action (buy or sell), the asset (the specific security), or the amount (number of shares).

Under the Investment Company Act of 1940, which of the following are considered affiliated persons of an investment company? -The vice president of finance of the company. -An individual authorized to open new customer accounts at the investment company. -A clerk employed by the fund's custodian bank. A)II and III. B)I, II and III. C)I and II. D)I and III.

C - 1 and 2 Affiliated persons include investment company directors, officers, most employees, or owners of 5% or more of the voting stock and/or any persons controlling or controlled by such persons. Although the custodian bank could be considered an affiliated person, clerical personnel employed by that custodian would not be.

Which of the following constitutes a discretionary account? A)An account in which the investor gives the broker-dealer authority as to pricing or timing of an investment B)The agent's personal trading account C)An account in which the investor gives the broker-dealer written authority to buy or sell securities D)The broker-dealer's trading account

C)An account in which the investor gives the broker-dealer written authority to buy or sell securities In a discretionary account, an agent has received authority to select the amount and type of investment for a client; the authorization must be in writing. Timing and price of a trade are not considered discretionary.

FinCEN Form 112

CTR (currency transaction report)

What disqualifies one form being an SIP

people who provide such information as part of their normal activities.

Management companies

trade the securities in the investment portfolio to achieve the investment objectives of the company, and which are subclassified into open-end and closed-end companies.

Under the Insider Trading and Securities Fraud Enforcement Act of 1988, a person who has violated the prohibition against insider trading is liable for a civil penalty of: A)twice the amount of the profit gained or loss avoided on the transaction. B)10 times the amount of the profit gained or loss avoided on the transaction. C)the amount of the profit gained or loss avoided on the transaction. D)3 times the amount of the profit gained or loss avoided on the transaction.

D)3 times the amount of the profit gained or loss avoided on the transaction. The Insider Trading and Securities Fraud Enforcement Act of 1988 provides that the SEC may seek treble (triple) damages through the courts for violations of the insider trading rules. This means that the 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.

Which of the following is considered an associated person of a broker-dealer? A)A secretary who assists brokers with clerical tasks. B)A clerical person who is not authorized to accept or execute orders for clients. C)A secretary to a general partner of a broker-dealer. D)A broker-dealer's officer who represents the broker-dealer in effecting or attempting to effect the purchase or sale of securities.

D)A broker-dealer's officer who represents the broker-dealer in effecting or attempting to effect the purchase or sale of securities.

If general interest rates increase, the interest income of a bond unit investment trust will probably: A)decrease. B)increase. C)change as soon as the portfolio manager can take advantage of the higher rates now available in the marketplace. D)remain the same.

D)remain the same. Since the portfolio of a UIT is fixed, the income generated by that portfolio will not change. Remember, a UIT does not have a portfolio manager.

All of the following must register with the Securities Exchange Commission EXCEPT: A)securities information processors. B)securities listed on the Pacific Stock Exchange and the Nasdaq Stock Market. C)issuers of NYSE exchange-listed securities. D)state securities Administrators.

D)state securities Administrators. State securities Administrators are not registered with the SEC, but the SEC requires securities issuers, transfer agents, securities information processors, as well as major stock exchanges, and the Nasdaq Stock Market to be registered.

Describe a UIT portfolio

It is fixed, no active management. Interest rates don't affect it.

Open-end shares are bought at

NAV

Can a minor with guardian approval invest on margin

No, prohibited by UGMA and UTMA

Do order tickets show market price

No. Only if buy/sell, solicit/un/discretionary

Do order tickets have the customers name

No. Only the account number

Who appoints SEC commissioners and how long are they in office

President, 5 year terms

Whor egulates SIPs

SEC

Investment company adviser renewal

Written, states compensation, contract terminable upon max 60 day notice, annually renewed by either a majority vote of the board of directors or of the outstanding shares as well as a majority vote of the noninterested members of the board

SEC in charge of

administering all federal securities laws

Investment company - shareholder approval not needed for

authorize the fund to invest consistent with the fund's objectives

Discount in mutual fund's sales charge is called

breakpoint

Closed end shares are bought at

current asking price - based on supply and demand

Are BD SIPs

no

How long can SEC suspend trading in a registered security listed on an exchange

up to ten days if it believes such action to be in the public interest

Section 13D Time

within 10 business days of the transaction.

1940 act - would a custodian bank be considered an affiliated person

yes, but clerical personnel employed by them are not

Insider trading - penalty

> of $1 million or 3 times damages

Under the Securities Exchange Act of 1934, which of the following would NOT be grounds for disqualification of a broker-dealer's registration? A)Being sued by a client. B)Prohibition by court order from practicing as an investment adviser. C)Violating a securities act. D)Conviction of misappropriation of client funds.

A)Being sued by a client. Being sued by a client is not grounds for disqualification. Items that would disqualify a registration include being currently under suspension, revocation, or injunction by any court, regulatory authority or SRO, domestic or foreign; currently employing a person statutorily disqualified; having been convicted in the past ten years of a felony or a securities or financially related crime; or falsifying an application for registration.

Which of the following statements are TRUE of a discretionary account at a broker-dealer? It must be approved by a designated supervisory individual of the firm. It must be reviewed frequently to minimize the chances that the account has been churned. A discretionary order may be placed once the customer has placed a power of attorney in the mail. It must be approved by the Administrator of the state of residence of the client. A)I and II B)III and IV C)I and III D)II and IV

A)I and II A new discretionary account must first be approved by a designated supervisory person, and the account must be reviewed frequently for suitability and avoidance of churning. The written discretionary power must be "in hand," not in the mail, before discretion may commence.

Under the Investment Advisers Act of 1940, which of the following powers does the SEC have at its disposal to enforce the act? The SEC may conduct investigations. The SEC may subpoena witnesses and administer oaths. The SEC may make and issue rules. A)I, II and III. B)III only. C)II only. D)I and II.

A)I, II and III. In enforcing the Investment Advisers Act, the SEC may investigate, administer oaths, subpoena witnesses, books, and records, issue and make rules, issue stop orders, hold hearings, and seek court injunctions against persons who have violated or are about to violate any provisions of the act. The SEC may also file civil actions in the federal court system in enforcing the provisions of the act, or refer information to the U.S. Justice Department for criminal prosecution.

Under section 13(d) of the Securities Exchange Act of 1934, a person who acquires more than 5% of a class of securities registered under the act must, within ten days, file a report of beneficial ownership with: the SEC. the issuer. the exchange where traded. A)I, II and III. B)I and II. C)II and III. D)I and III.

A)I, II and III. Persons who own more than 5% of the outstanding equity securities of a registered issuer are known as interested persons under the act. These persons are required to file a Schedule 13D report of beneficial ownership with the issuer, the exchanges, and the SEC within ten days of reaching the greater than 5% level.

Which of the following is (are) TRUE regarding the Securities Exchange Act of 1934? The act bars the use of credit to purchase new issues. The act prohibits the simultaneous purchase and sale of a security to create the appearance of trading. The act prohibits the spread of false rumors to induce others to trade. A)I, II and III. B)I and II. C)I and III. D)II and III.

A)I, II and III. The Securities Exchange Act of 1934 specifically bars the use of credit to purchase new issues and also prohibits installment payments when making such purchases. The act also prohibits any form of manipulation of securities prices or any practices that would influence the market price of a security. This includes wash trades, which are simultaneous purchases and sales that create the appearance of trading activity, and the use of rumors to induce others to trade.

Which of the following regarding the SEC under the Securities Exchange Act of 1934 are TRUE? It regulates the securities exchanges. It requires the registration of broker-dealers. It prohibits inequitable and unfair trade practices. It regulates over-the-counter markets. A)I, II, III and IV. B)I and II. C)I and IV. D)III and IV.

A)I, II, III and IV. Under the Securities Exchange Act of 1934, the SEC is concerned with the regulation of exchanges, registration of broker-dealers, inequitable and unfair trade practices, and regulation of OTC markets.

Under the Securities Exchange Act of 1934, which of the following is a government security? Bonds issued by the state of Indiana Securities which are issued or guaranteed by the Tennessee Valley Authority Treasury bills A)II and III B)I, II and III C)I and II D)III only

A)II and III The Securities Exchange Act of 1934 defines government securities as those issued or guaranteed by the U.S. government or one of its agencies. Securities issued or guaranteed by a state, county, city, etc., or any agency of a nonfederal governmental unit are municipal securities.

The term "churning" means: switching a client's account from an income fund to a growth fund. excessively trading securities in the account of a client primarily for the purpose of generating commissions for the agent. trading unsuitable securities in a client's account. a bond swap in a customer's account for tax benefits. A)II only. B)I and III. C)II and IV. D)I and II.

A)II only. Churning is conducting excessive transactions in a customer's account for the purpose of generating commissions and is prohibited.

Who regulates margin

FRB

CTR filed

FinCEN Form 112 for each cash transaction that exceeds $10,000

Under the Investment Company Act of 1940, which of the following statements is (are) TRUE about an investment company that wishes to contract with an outside investment adviser to manage its portfolio? This is prohibited under the act. Investment companies may employ outside advisers if a written contract is executed. The initial contract must be approved by either the board of directors or a majority vote of the outstanding shares. A)II only. B)I only. C)I, II and III. D)II and III.

A)II only. One of the requirements of the Investment Company Act of 1940 is that the contract between a management investment company (open or closed-end) must be in writing. The initial contract must be approved by a majority vote of the outstanding shares and the "non-interested" members of the board of directors. It is renewed annually by either a majority vote of the outstanding shares or the board of directors as well as a majority of the directors who are considered to be non-interested parties.

Under the Investment Company Act of 1940, SEC Rule 12b-1 allows a fund to charge distribution and sales expenses to net assets as a percentage of the total assets. Normally, the cost of distribution of the shares is paid by the underwriter out of the sales load paid by the individual purchaser. For a fund to impose 12b-1 charges, which of the following conditions apply(ies)? -The board of directors has sole approval authority. -The majority of the outstanding shares has sole approval authority. -Both the board and the majority of outstanding shares must approve it. -A distribution plan must be written. A)III and IV. B)I only. C)I and III. D)II and III.

A)III and IV. For the fund to impose 12b-1 charges, the distribution plan must be in writing and approved by a majority of the outstanding shares as well as a majority of the board of directors, including a majority of directors classified as outside directors.

What is the purpose of the Securities Exchange Act of 1934? A)It regulates the persons involved in the secondary market. B)It provides requirements relating to new issues. C)It provides policies relating to unethical business practices. D)It provides standards among the states.

A)It regulates the persons involved in the secondary market. The Securities Exchange Act of 1934 was designed to regulate securities transactions, securities markets, and securities firms that trade in the secondary market. The Securities Act of 1933 was designed to provide regulation in the new issue market. Unethical business practices are covered in NASAA's Statements of Policy on Unethical Business Practices. The Uniform Securities Act provides a model for the states.

Under the Securities Exchange Act of 1934, which of the following would NOT be considered associated with XYZ Corp., a broker-dealer? A)Robust, Inc., a tiny fraction of whose stock XYZ has purchased for its own account. B)Arvin, one of XYZ's agents. C)Brian, an XYZ vice president. D)Paula, who is on XYZ's board of directors but who has no other connection with the firm.

A)Robust, Inc., a tiny fraction of whose stock XYZ has purchased for its own account. An associated person of a broker-dealer includes any partner, branch manager, officer, or director of a broker-dealer, including outside directors. It also includes employees such as account executives or sales representatives who are not clerks or ministerial personnel, and anyone who controls, is controlled by, or is under common control with the broker-dealer.

he XYZ corporation, listed on the NYSE, has 100 million shares of common stock outstanding. Mr. Warren Trump has owned 4 million shares since 1999. If Mr. Trump were to acquire 1.1 million additional shares, which of the following statements is CORRECT? A)Schedule 13D would have to be filed within 10 business days of the transaction. B)Schedule 13D would have to be filed before the end of the 2nd business day following the transaction. C)Form 144 would have to be filed concurrent with the transaction. D)Because Mr. Trump does not own more than 10% of the outstanding shares, no form is required to be filed.

A)Schedule 13D would have to be filed within 10 business days of the transaction. Section 13(d) of the Securities Exchange Act of 1934 requires filing of a Schedule 13D once a person becomes an owner of more than 5% of the outstanding voting shares of a reporting company. Form 144 is only filed when securities are sold.

Margin regulations are determined by the Board of Governors of the Federal Reserve System. The authority for them to do so is found in the: A)Securities Exchange Act of 1934. B)Federal Reserve Act of 1913. C)Maloney Act of 1938. D)Securities Act of 1933.

A)Securities Exchange Act of 1934. The Securities Exchange Act of 1934 contains the authorization for the FED to regulate the use of credit in the securities business.

Mary bought 1,000 shares in the morning and sold 1,000 shares of the same security in the afternoon. Under the Securities Exchange Act of 1934's rules dealing with the regulation of the use of manipulative and deceptive devices, which of the following statements is TRUE? A)She has violated the act only if she was trying to create market activity for the security to give a misleading appearance. B)Her broker has violated the act. C)She has violated the act. D)She has violated the act if a profit was made.

A)She has violated the act only if she was trying to create market activity for the security to give a misleading appearance. The purchase and sale of the same security on the same day are permissible as long as the investor is not attempting to create the appearance of market activity.There is nothing in the act prohibiting "day-trading"; only trading made for the purpose of manipulating market prices.

Under the Securities Exchange Act of 1934, which of the following is a securities information processor? A)The OTC Markets Group Inc, (formerly known as the Pink Sheets) B)"The Wall Street Journal" C)FINRA D)TEFRA

A)The OTC Markets Group Inc, (formerly known as the Pink Sheets) Excluded are newspapers, magazines, or other publications of a general and regular circulation, SROs, banks, broker-dealers, or others who provide such information as part of their normal activities.

Which of the following has the power to close a stock exchange for up to 90 days? A)The SEC. B)The President of the United States. C)The Administrator in the state where that stock exchange is located. D)The President of that stock exchange.

A)The SEC. The Securities Exchange Act of 1934 granted the SEC the power to close any registered stock exchange for up to 90 days. All that is required is notice to the President of the U.S.

Under the Investment Company Act of 1940, which of the following statements about advisory contracts between an investment company and an outside adviser is TRUE? A)The contract may not be unilaterally assigned to another adviser. B)The initial contract is effective once approved by the board of directors. C)The contract may be in writing, or it may be oral if there are at least two witnesses to the agreement. D)The contract must be established for a 1-year period and renewed annually thereafter.

A)The contract may not be unilaterally assigned to another adviser. All contracts between an investment company and an outside adviser must be in writing and must contain certain provisions; these include that the contract may not be unilaterally assigned to another adviser. The initial contract may be for two years, but it is subject to annual reapproval by a majority vote of the outstanding shares or the board of directors as well as a majority of the directors who are considered to be non-interested parties.

Under the Investment Company Act of 1940, which of the following statements regarding the renewal provisions of an investment adviser's contract is NOT true? A)The renewal may be executed orally, provided it is done within 2 years of the initial contract. B)The renewal must be approved by either a majority vote of the board or a majority vote of the outstanding shares as well as a majority vote of the noninterested members of the board. C)The renewal must state the adviser's compensation. D)The contract must be terminable upon not more than 60 days notice.

A)The renewal may be executed orally, provided it is done within 2 years of the initial contract When an investment company employs an outside investment advisory firm to manage its portfolio, the act requires a written contract setting forth the adviser's compensation. The contract is for two years initially and must be renewed annually thereafter. The contract must be initially approved by a majority vote of the outstanding shares and the noninterested members of the board of directors and annually renewed by either a majority vote of the board of directors or of the outstanding shares as well as a majority vote of the noninterested members of the board. The contract must be terminable at any time, with a maximum of 60 days notice and with no penalty, upon a majority vote of the board of directors or of the outstanding shares, and it must terminate automatically if assigned. .

Which of the following is TRUE of SEC Commissioners under the Securities Exchange Act of 1934? A)They may not invest in any securities other than those issued or guaranteed by the U.S. government. B)Their political affiliation is of no concern. C)They are appointed by a senate panel. D)They are appointed for life.

A)They may not invest in any securities other than those issued or guaranteed by the U.S. government. Other than securities issued or guaranteed by the U.S. government, SEC commissioners are prohibited from investing during their term in office. The policies of the SEC are determined by five Commissioners appointed to staggered, 5- year terms by the President of the United States with the advice and consent of the Senate. No more than three may belong to the same political party, and Commissioners may not engage in any outside employment.

In order to come under the SEC's requirement to file a Form 13F, an institutional manager must have discretion over: A)a portfolio of at least $100 million of 13(f) securities. B)a portfolio of at least $100 million. C)more than 10% of the outstanding voting securities of a reporting company. D)a portfolio of at least $50 million.

A)a portfolio of at least $100 million of 13(f) securities. An institutional money manager, with at least $100 million in 13(f) securities under discretionary management, is required to file Form 13F.

If you were describing an investment that trades on an exchange with a price set by supply and demand, rather than its underlying value, it would be a (an): A)closed-end fund. B)hedge fund. C)open-end fund. D)forward contract.

A)closed-end fund. The stock of closed-end investment management companies trades on exchanges and, like any other exchange security, is priced based upon supply and demand. Although closed-end funds compute their NAV, it is market forces that determine price.

As defined in the Investment Company Act of 1940, the term "investment company" would NOT include a: A)holding company. B)unit investment trust. C)face amount certificate company. D)management company.

A)holding company. Holding companies are not included in the definition of investment company.

The Securities Exchange Act of 1934 covers all of the following EXCEPT: A)issuance of corporate securities. B)trading of corporate securities. C)issuance of financial reports by corporations. D)trading on exchanges.

A)issuance of corporate securities. The Securities Exchange Act of 1934 regulates secondary trading or trading markets, including reporting requirements. The Securities Act of 1933 regulates the issuance of new, nonexempt securities.

The Securities Exchange Act of 1934 granted the SEC the power to regulate all of the following EXCEPT: A)margin requirements. B)securities information processors (SIPs). C)transfer agents. D)broker-dealers.

A)margin requirements. The Securities Exchange Act of 1934 granted the Board of Governors of the Federal Reserve System the power to regulate margin requirements.

Under the Securities Exchange Act of 1934, the SEC may suspend all trading on an exchange: A)only with prior notification to the President of the United States. B)under no circumstances. C)for ten days, in its discretion. D)only if it has cause to believe that such suspension is necessary to prevent criminal violations that are about to occur on the exchange.

A)only with prior notification to the President of the United States. To suspend all trading on an exchange, the SEC must first notify the President of the United States. The SEC may summarily suspend trading in any nonexempt security for up to 10 days without prior notice.

The currency reporting threshold for cash and equivalent instruments is: A)over $10,000. B)over $25,000. C)over $3,000. D)over $5,000.

A)over $10,000. The currency reporting threshold for cash and equivalent instruments is over $10,000. These transactions must be reported on a CTR (currency transaction report) (FinCEN Form 112). The Form 112 is electronically filed with the Department of the Treasury.

Under both federal and state law, the concept of a discretionary account is defined. It would be considered discretion when an agent: A)picks the specific security that is the subject of a transaction. B)makes the decisions in the account once the client assures the agent that the proper authorizations are in the mail. C)can decide the specific price. D)can decide the specific time at which the transaction will be made.

A)picks the specific security that is the subject of a transaction. Discretion is the ability to pick the Asset (the specific security), the Action (buy or sell) or the Amount (the number of shares or bonds). Time and price are not discretionary and nothing can take place until the proper papers have been received and documented.

The Securities Exchange Act of 1934 would consider it a fraudulent and prohibited business practice for an order ticket for a transaction in shares of a common stock to exclude all of the following EXCEPT: A)the customer's name. B)if a sale, whether long or short. C)the account number. D)an indication as to whether the order was solicited, unsolicited, or discretionary.

A)the customer's name. Order tickets do not include the name of the customer. The account number is the appropriate identifier.

All of the following statements regarding corporate insiders are true EXCEPT: A)reports of changes in holdings must be filed with the SEC. B)only public information can be used to make transactions. C)purchases may not be made through the exercise of options. D)short selling is prohibited.

C)purchases may not be made through the exercise of options. A corporate insider, or affiliate, is defined as an officer, a director, a greater than 10% stockholder, or a family member of an insider. Insiders can purchase stock through the exercise of options. All of the other statements are true.

Which of the following individuals would be considered a noninterested person in a mutual fund? A)A member of the board of directors who is also employed as the investment adviser. B)A member of the board of directors who does not hold another position within the investment company. C)A person who holds a position with the fund's underwriter. D)A shareholder who owns 10% of the fund's shares.

B)A member of the board of directors who does not hold another position within the investment company. The Investment Company Act of 1940 defines an interested person as someone employed by or has a material business relationship with the fund, its adviser, or underwriter. Someone who owns 5% or more of the outstanding shares (an affiliated person) is also considered "interested". Merely sitting on the board does not make someone an interested person. Thus, a director with no other relationship with the fund qualifies as a noninterested person.

Which of the following statements regarding an investment company's board of directors is NOT true? A)No convicted felon or person convicted of a misdemeanor involving the securities industry ​within the past 10 years ​may serve on the board of directors of an investment company. B)An investment company's board of directors manages the portfolio on behalf of the investor shareholders. C)The board of directors contracts with an outside investment adviser or portfolio manager to invest the cash and securities held in the fund's portfolio. D)An investment company's board of directors concerns itself with policy and administrative matters.

B)An investment company's board of directors manages the portfolio on behalf of the investor shareholders. The board of directors sets policy and manages the administrative affairs of the investment company, but it does not manage the portfolio. The board contracts with an outside investment manager to invest the funds.​ It is unlawful for any person to serve or act in the capacity of employee, officer, director, or investment adviser of any registered investment company, or principal underwriter for any registered open-end company, registered unit investment trust, or registered face-amount certificate company if that person, within the past 10 years, has been convicted of any felony or a misdemeanor involving the purchase or sale of any security.

Which of the following statements regarding discretionary accounts is TRUE? A)A principal must approve discretionary orders before entry. B)An order in which an investor designates the security's name, the number of shares, and whether to buy or sell and gives the agent discretion as to time and price only is not considered discretionary. C)The rules regarding churning of accounts do not apply to discretionary accounts. D)A branch manager must approve discretionary orders before entry.

B)An order in which an investor designates the security's name, the number of shares, and whether to buy or sell and gives the agent discretion as to time and price only is not considered discretionary. An order is discretionary only if an agent selects the size of the trade, the security, or whether to buy or sell. Selecting only price and/or time does not constitute discretion. Churning rules apply to discretionary accounts, and a principal must approve order tickets after the trades, not before.

The Securities Exchange Act of 1934 granted the SEC the authority to register a number of participants in the securities markets. One of those entities is a securities information processor (SIP). Which of the following statements best describes a SIP? A)Any person who uses a clearing agency to clear or settle securities transactions or to transfer, pledge, lend, or hypothecate securities. B)Any person engaged in the business of collecting, processing, or preparing for distribution or publication; or assisting, participating in, or coordinating the distribution or publication of information with respect to transactions in or quotations for any nonexempt security. C)Any person who acts as an intermediary in making payments or deliveries or both in connection with transactions in securities or who provides facilities for comparison of data respecting the terms of settlement of securities transactions, to reduce the number of settlements of securities transactions, or for the allocation of securities settlement responsibilities. D)Any person who engages on behalf of an issuer of securities or on behalf of itself as an issuer of securities in countersigning such securities upon issuance.

B)Any person engaged in the business of collecting, processing, or preparing for distribution or publication; or assisting, participating in, or coordinating the distribution or publication of information with respect to transactions in or quotations for any nonexempt security. This answer is taken directly from the Act itself. There is a second part to the definition and that is that a SIP is also any person distributing or publishing (whether by means of a ticker tape, a communications network, a terminal display device, or otherwise) on a current and continuing basis, information with respect to such transactions or quotations.

Under the Securities Exchange Act of 1934, which of the following would result in statutory disqualification from association with a FINRA member broker-dealer? A)Loss of a civil lawsuit involving securities. B)Court injunction prohibiting the individual from acting as an underwriter. C)A lack of experience in the securities business. D)Engaging in a course of business that requires one to be registered as an investment adviser.

B)Court injunction prohibiting the individual from acting as an underwriter. Loss of a civil lawsuit, lack of experience, or being registered as an investment adviser does not cause statutory disqualification to be associated with a member of a self-regulatory organization such as FINRA. However, administrative sanctions, findings of criminal wrongdoing, court injunctions, etc., are cause for statutory disqualification.

FinCEN Form 112, the Currency Transaction Report, is filed with the: A)SEC. B)Department of the Treasury. C)Federal Bureau of Investigation (FBI). D)National Security Agency.

B)Department of the Treasury. Currency transactions in excess of $10,000 are reported electronically on FinCEN Form 112 to the Department of the Treasury.

The Securities and Exchange Commission does NOT have any regulatory jurisdiction over which of the following? A)FINRA. B)Federal Reserve Board. C)National securities exchanges. D)Municipal Securities Rulemaking Board

B)Federal Reserve Board. The Federal Reserve Board is not regulated by the SEC.

Under the Investment Company Act of 1940, the reporting requirements investment companies must comply with include: filing an audited report with the SEC annually. sending semiannual reports to shareholders. notifying shareholders of changes in the portfolio as those changes occur. A)II and III. B)I and II. C)I and III. D)I, II and III.

B)I and II. Investment companies must file audited reports with the SEC annually and send at least semiannual reports to shareholders. They are not required to notify shareholders of changes in the portfolio as they occur.

To enforce the Securities Act of 1933, the SEC may: conduct formal investigations. issue cease and desist orders. refer evidence to the attorney general for possible criminal prosecution. A)I and II. B)I, II and III. C)I and III. D)II and III.

B)I, II and III. A difference between the Uniform Securities Act and the Securities Act of 1933 is who enforces them. The Uniform Securities Act is enforced by the state Administrators, while the federal acts are enforced by the SEC. In complying with its enforcement responsibilities, the SEC may make, amend, and rescind rules, issue cease and desist orders, administer oaths, conduct investigations, take evidence, and subpoena witnesses, books, and records. The SEC may also seek temporary or permanent injunction from the courts, file civil suits, and refer evidence to the attorney general for criminal prosecution.

The Investment Company Act of 1940 allows a majority vote of outstanding shares of a registered investment company to authorize the fund to: borrow money from a commercial bank. invest funds in securities consistent with the fund's objectives. change the objectives of the fund. change the nature of its business and cease to be an investment company. A)II and III. B)I, III and IV. C)I, II and III. D)I only.

B)I, III and IV. Under the Investment Company Act of 1940, a vote of the majority of outstanding shares may approve borrowing money from a bank, changing the investment objectives of the fund, and deciding to cease to be an investment company.

Under the Investment Company Act of 1940, which of the following statements regarding the investment objective of a mutual fund are TRUE? -Only the board of directors needs to approve changes in the investment objective. -The majority of outstanding shares must vote to approve changes in the investment objective. -The SEC must approve all changes in the investment objective. -The investment adviser does not set, but tries to meet, the investment objective. A)III and IV. B)II and IV. C)I and II. D)I and III.

B)II and IV. A majority of the outstanding shares must vote to approve any change in investment objective or policy.

The Securities Exchange Act of 1934 calls for the registration of many different entities involved in the securities business, such as exchanges and broker-dealers. The Act also requires registration of securities information processors such as CNBC "Investor's Business Daily" ​Securities Industry Automation Corporation (SIAC) ​OPRA A)I and IV B)III and IV C)I and II D)II and III

B)III and IV Securities information processors (SIPs) collect and disseminate trading and pricing information. TV stations, such as CNBC, and newspapers, such as IBD, obtain information from SIPs and then rebroadcast or reprint it.

The Investment Company Act of 1940 does which of the following? A)Governs the issuance of new issues. B)Prescribes procedures for the establishment of investment companies. C)Regulates the secondary market. D)Sets rules for the registration of investment advisers.

B)Prescribes procedures for the establishment of investment companies. The Investment Company Act of 1940 requires all investment companies to register with the SEC as such and be regulated under the act. The companies are still subject to all the other applicable securities acts. However, the Investment Company Act of 1940 provides additional regulation to ensure investors are fully informed and fairly treated by the management of investment companies.

Which of the following is responsible for administration of the Bank Secrecy Act? A)Securities and Exchange Commission. B)The Financial Crimes Enforcement Network. C)Department of Health and Human Service. D)Security Services.

B)The Financial Crimes Enforcement Network Or FinCEN as it is more commonly printed. .

The term "discretionary" refers to an: A)account in which someone has been given custodial power over another individual's account. B)account in which the agent has the power to decide which securities to buy or sell without customer authorization for those specific trades. C)order that specifies size, security, or action but leaves the choice of time and price up to the agent. D)account in which a person has power of attorney over an incompetent individual's account.

B)account in which the agent has the power to decide which securities to buy or sell without customer authorization for those specific trades.

In 1940, Congress passed the Investment Company Act. Among the provisions of this sweeping law was the listing of the classifications of investment companies. Included in that listing would be all of the following EXCEPT: A)unit investment trusts. B)holding companies. C)management investment companies. D)face amount certificate companies.

B)holding companies. Even though holding companies do many of the same things as investment companies (buy stock in other companies to try to make a profit), they are not included in the definition stated in the Investment Company Act of 1940

If general interest rates increase, the interest income of a bond unit investment trust will probably: A)increase. B)remain the same. C)decrease. D)change as soon as the portfolio manager can take advantage of the higher rates now available in the marketplace.

B)remain the same. Since the portfolio of a UIT is fixed, the income generated by that portfolio will not change. However, one would expect the value of the unit to decrease. Remember, a UIT does not have a portfolio manager.

All of the following purchases are permitted in a mutual fund's portfolio EXCEPT: A)index options. B)stock on margin. C)junk bonds. D)shares of other mutual funds.

B)stock on margin. Mutual funds may not purchase securities on margin. A fund is not prohibited from buying options, low quality bonds, or other mutual funds, if the purchase is in line with the fund's objectives.

To be in compliance with the Investment Company Act of 1940, it is permissible for the portfolio manager of an open-end investment company to buy all of the following securities EXCEPT: A)high yield bonds. B)stock on margin. C)call options. D)shares of other mutual funds.

B)stock on margin. The Investment Company Act of 1940 generally prohibits mutual funds from making purchases on margin. There are exceptions to this rule, such as in the case of hedge funds. A fund is not prohibited from buying options or low-quality bonds. A mutual fund may invest in other mutual funds so long as it does not acquire more than 3% of the outstanding shares of the other fund.

Under the Investment Company Act of 1940, an investment company may initially retain the services of an investment adviser only with approval of: A)the majority vote of the board of directors. B)the majority vote of the outstanding shares and a majority of that portion of the board of directors that are considered noninterested members. C)the majority vote of the noninterested directors. D)the majority vote of the outstanding shares.

B)the majority vote of the outstanding shares and a majority of that portion of the board of directors that are considered noninterested members. The investment adviser's contract must be initially approved by a majority vote of the outstanding shares and a majority of the noninterested members of the board of directors. It is renewed annually by either a majority of the board or a majority of the outstanding shares. In addition, as with all contracts, initial and renewal, it requires a majority of the noninterested board members.

The NASAA Statement of Policy on Unethical and Dishonest Business Practices of Broker-Dealers and Agents contains an extensive list of prohibited practices, but concludes with the statement that the list is not inclusive. This means that even practices not specifically enumerated will be prohibited if they are in violation of the standards of ethical behavior. One such circumstance that may arise is an agent making an initial sale of shares of an open-end investment company in a quantity just below a breakpoint published in the fund's prospectus. In this case, the agent: A)must explain the procedure for taking advantage of rights of accumulation on future purchases. B)would violate those ethical standards by failing to disclose that adding a small amount to the purchase would save a significant amount of sales charge. C)recognized the limitations of the client's ability to invest any further sum of money. D)has violated the suitability standards by failing to explain the risks inherent in making an investment below a breakpoint.

B)would violate those ethical standards by failing to disclose that adding a small amount to the purchase would save a significant amount of sales charge. A breakpoint is that purchase level where there is a reduction in the fund's sales charge. Allowing a client to purchase a quantity just below that level without describing the benefits of investing a small amount of additional capital, or perhaps signing a letter of intent, would be a violation of the standards of ethical behavior.

CTR are part of

Bank secrecy act

Who has jurisdiction over banks saving/loans

Banking authorities, such as the Federal Reserve Board, the Federal Deposit Insurance Corporation, and others, regulate banks and savings and loans.

What do Holding companies do

Buy stock in other companies to try and make a profit (like investment companies) , but aren't included in 1940 act

If having discretion over $100 million or more in 13(f) securities, which of the following would be exempt from filing a Form 13F? A)A trustee B)An investment adviser that manages mutual fund assets C)A natural person who exercises investment discretion over her own account D)A natural person who exercises investment discretion over the account of any other natural person or entity

C)A natural person who exercises investment discretion over her own account An institutional investment manager is also a natural person or an entity that exercises investment discretion over the account of any other natural person or entity. For example, an investment adviser that manages private accounts, mutual fund assets, or pension plan assets is an institutional investment manager; so is the trust department of a bank. A trustee is an institutional investment manager, but a natural person who exercises investment discretion over her own account is not an institutional investment manager.

What are the 3 classifications used to identify investment companies? A)Face-amount certificate companies, management companies, and closed-end companies. B)Unit investment trusts, closed-end companies, and open-end companies. C)Face-amount certificate companies, unit investment trusts, and management companies. D)Face-amount certificate companies, management companies, and open-end companies

C)Face-amount certificate companies, unit investment trusts, and management companies.

Under the Insider Trading and Securities Fraud Enforcement Act of 1988, which of the following are insiders for purposes of insider trading? Attorney who writes an offering circular for a company. An investor holding 4% of the company's stock. The next-door neighbor of a board member of a company. Brother of a company's president. A)II and IV. B)I and III. C)I and IV. D)II and III.

C)I and IV. The Securities Exchange Act of 1934 defines an insider as an officer, director, or stockholder owning more than 10% of a company's outstanding voting equity. The definition also includes anyone else who has or could have access to insider information, such as immediate family members. Merely being someone's neighbor does not automatically classify someone as an insider. Any professional who takes part in preparing the registration statement is automatically considered to have insider information.

Under the Securities Exchange Act of 1934, which of the following statements is (are) TRUE about the authority of the SEC to investigate violations of securities laws? The SEC may not investigate violations of the Securities Act of 1933 and the Securities Exchange Act of 1934. The SEC has the power to investigate violations of all federal securities acts. The SEC may investigate violations of the rules of the SROs. A)I and III. B)II only. C)II and III. D)I only.

C)II and III. The SEC may investigate violations of all federal securities acts, including the Acts of 1933 and 1934, and may also investigate violations of the rules of SROs.

Under the Securities Exchange Act of 1934, commissioners of the SEC: are appointed by a joint House/Senate panel. are appointed by the President. may not engage in any other business. A)III only. B)I and II. C)II and III. D)II only.

C)II and III. The SEC was created by the Securities Exchange Act of 1934 with the power to enforce the Securities Act of 1933 and all subsequent federal securities acts. The policies of the SEC are determined by five commissioners appointed by the President of the United States, with the advice and consent of the Senate, to staggered 5-year terms (with 1 expiring each year). No more than three commissioners may belong to the same political party, and commissioners may not engage in any outside employment.

An agent for a broker-dealer member of FINRA may exercise his judgment as to which of the following without written authorization from the customer? Quantity. Time. Security. Price. A)I and II. B)III and IV. C)II and IV. D)I and III.

C)II and IV. Agents (or any of the other securities professionals) have the authority to decide the timing and price of a trade. Under prevailing securities law, time and/or price does not constitute discretion. Decisions involving the quantity and security require written trading authorization from the client.

Which of the following acts requires publicly traded corporations to issue annual reports? A)Investment Company Act of 1940. B)Trust Indenture Act of 1939. C)Securities Exchange Act of 1934. D)Securities Act of 1933.

C)Securities Exchange Act of 1934. The Securities Exchange Act of 1934 mandates that public issuers file annual and quarterly reports with the SEC.

Under the Securities Exchange Act of 1934, which of the following is TRUE regarding the jurisdiction of the SEC over a person who violates the rules of the Municipal Securities Rulemaking Board? A)Only the MSRB has the authority to investigate violations of its rules. B)The SEC has the authority to investigate such violations only if the person is a financial institution. C)The SEC has the authority to investigate such violations unless the person is a financial institution. D)The SEC has the authority to investigate such violations even if the person is a financial institution.

C)The SEC has the authority to investigate such violations unless the person is a financial institution. The SEC is charged with administering the federal securities laws, under which the Municipal Securities Rulemaking Board (MSRB) exists. So the SEC has jurisdiction over the MSRB. However, financial institutions come under the jurisdiction of banking regulatory authorities.

Which of the following would be considered when determining whether excessive trading has occurred in a client's account? A)The number of years the account has been opened. B)The performance of the account in comparison to other client's accounts. C)The nature of the client's financial objectives. D)The size of the companies issuing the securities.

C)The nature of the client's financial objectives An agent is engaging in unethical conduct if she induced a client to trade securities too frequently in view of the financial resources, investment objectives, and character of the client's account. Frequent trading and trading in large amounts is not necessarily wrong. It is only wrong if the trades are not suitable for a particular client. Thus, the only factor listed that must be considered in determining whether trading is excessive is the nature of the client's financial objectives. .

Which of the following may an agent determine without written discretionary authority? A)Whether to buy or sell a particular security B)Which security should be purchased C)The time or price at which to enter an order D)How many shares of a particular security should be purchased

C)The time or price at which to enter an order An agent must have written discretionary authority to determine which security, what action, and how many shares to purchase or sell; time and price decisions alone do not require discretionary authority.

Which of the following statements is TRUE about sales of new issues under the Securities Exchange Act of 1934? A)The SEC determines what issues may be purchased on margin. B)Installment payments are allowed on purchases. C)The use of credit to purchase new issues is prohibited for the first 30 days. D)Credit may be used in purchasing new issues.

C)The use of credit to purchase new issues is prohibited for the first 30 days. The Securities Exchange Act of 1934 specifically bars the use of credit in purchasing new issues for the first 30 days from the date of issue. In addition, it prohibits installment payments on issues that can be bought on margin. The Securities Exchange Act of 1934 also empowered the board of governors of the Federal Reserve Board (FRB) to set margin requirements, and the FRB determines which issues may be purchased on margin.

An account where a securities professional may invest the client's money, without consulting the client about the amount or type of security for the trades that are placed for the account, is known as A)an advisory account B)a wrap account C)a discretionary account D)a margin account

C)a discretionary account

Starflier Mutual Fund, regulated under the Investment Company Act of 1940, wishes to change its investment policy. It may do so with approval of: A)the fund's investment adviser. B)a majority of the board of directors. C)a majority of the outstanding shares. D)they do not need approval.

C)a majority of the outstanding shares. Changes in investment policy require a vote of the majority of outstanding shares for approval.

Usually, the fee received by the management company, from an investment company, depends on the: A)type of securities in the fund portfolio. B)volume of new shares sold. C)average annual net assets of the fund. D)profit of the fund.

C)average annual net assets of the fund. The adviser under contract to manage the fund receives a fee that is most commonly based on the amount of assets under management. It is true that the fee can be affected by the types of securities in the portfolio such as a lower fee for money market funds and a higher fee for small cap funds, but, in this case, the best answer is the one that applies universally.

When an agent is discussing possible discounts related to the purchase of mutual funds shares, she would be referring to: A)reinvesting distributions. B)the CDSC. C)breakpoints. D)12b-1 fees.

C)breakpoints. Mutual funds that carry a load will have a schedule of reduced sales charges when reaching specified quantity levels known as breakpoints.

When shares of a closed-end investment company are purchased by an investor, the price paid is based upon the: A)net asset value plus commission. B)current bid price. C)current asking price. D)net asset value.

C)current asking price. Closed-end investment company shares are priced based on supply and demand. The ask is the price that investors will pay for purchasing shares and the bid is what investors receive when selling. Investors will also pay a commission as this is what the broker charges for executing the transaction. Shares of open-end investment companies are bought and redeemed based on NAV, but that is not so of closed-end companies.

The Securities Exchange Act of 1934 regulates or mandates each of the following EXCEPT: A)creation of the SEC. B)extension of credit to customers. C)full and fair disclosure on new offerings. D)manipulation of the secondary market.

C)full and fair disclosure on new offerings. The Securities Exchange Act of 1934 created the SEC and regulates the secondary market. The Securities Exchange Act of 1934 does not address full and fair disclosure issues; the Securities Act of 1933 addresses such issues.

Under the Securities Exchange Act of 1934, SEC Commissioners A)must have professional experience as attorneys as well as knowledge of the securities business B)must not be affiliated with any political party C)must not have any other business or employment besides their ​role with the SEC D)are ​appointed by ​FINRA and ​confirmed by the United States Senate

C)must not have any other business or employment besides their ​role with the SEC SEC Commissioners may have no other business or employment other than their commission seat​. They must also refrain from any securities trading. However, experience as ​an attorney is not a qualification. Commissioners are not elected but are appointed by the president and confirmed by the senate. Political party affiliation is a consideration, since no more than 3 of the 5 Commissioners may belong to the same party.

he Securities Exchange Act of 1934 gives the SEC the power to do all of the following EXCEPT: A)refer evidence for prosecution. B)administer oaths. C)set margin requirements. D)subpoena witnesses

C)set margin requirements. The Securities Exchange Act of 1934 specifies that the Federal Reserve Board will have control over the issuance of credit when trading securities. The Securities Exchange Act of 1934 gives the SEC the power to make, amend, and rescind rules; issue cease and desist orders; administer oaths; conduct investigations; take evidence; and subpoena witnesses, books, and records. The Commission may seek temporary or permanent restraining orders (injunctions) from the courts, file civil suits, or refer evidence to the attorney general for criminal prosecution.

When an agent submits an order ticket to purchase securities for a client, all of the following would appear EXCEPT: A)the agent's name. B)the details of the order. C)the current market price of the security. D)the broker dealer's name.

C)the current market price of the security. Any order ticket submitted by an agent for execution at a broker-dealer will always include the agent's name and that of the BD. All order details must be listed, e.g. the number of shares, limit or market, etc. but the current market price is never included.

Under the Insider Trading and Securities Fraud Enforcement Act of 1988, a person who buys securities with material, privileged, nonpublic information may be subject to a civil penalty of: A)$20,000 B)an amount equal to the amount of violation. C)up to 3 times the amount of gain or prevention of loss. D)the amount paid or saved on the securities trade.

C)up to 3 times the amount of gain or prevention of loss. Trading on inside information is prohibited under the Securities Exchange Act of 1934, and, under the Insider Trading and Securities Fraud Enforcement Act of 1988, the SEC is empowered to seek the greater of $1 million or treble damages through the courts for violations of the inside trading rules. The damages can amount to up to three times the profit gained or three times the loss avoided on the transaction. All persons who controlled the insider are also subject to these damages if improper supervision is proven.

SEC power with regards to trading on national exchange

Can suspend all trading with prior notification to president

1934 Margin purchase rules

Can't buy new issues for 30 days after issuing on credit, and can't do payment plans on credit.

Which of the following persons may legally open an account to trade on margin? A)A minor child with approval of a court-appointed guardian. B)An open-end investment company. C)A custodian of an UTMA account. D)A corporation.

D)A corporation. A corporation may open an account to trade on margin if provided for in the charter and authorized in the bylaws. Both UTMA and UGMA specifically prohibit custodians from either engaging in speculative trading or borrowing money or securities in the name of the minor through trading on margin. Mutual funds are also prohibited from trading on margin.

Under the Securities Exchange Act of 1934, which of the following are municipal bonds? Treasury bonds. State bonds. Bonds issued by a city. A)I only. B)I and II. C)I, II and III. D)II and III.

D)II and III. Municipal securities are debt-related securities issued by or guaranteed by any political entity that is not part of the federal government or a government agency. Treasury bonds are part of the federal government and do not qualify under the definition.

Which of the following qualifies as discretionary trading under the Securities Exchange Act of 1934? A)Receiving oral authority from a client to make a specific purchase at a price to be decided by the broker-dealer. B)Obtaining authorization from a client to purchase a particular security if the price hits a specific level. C)Purchasing securities at the discretion of a client. D)Determining which securities to buy for a client.

D)Determining which securities to buy for a client. Discretion indicates that someone other than the owner has authority to buy or sell securities on behalf of the owner without specific direction from the owner for each transaction. One who carries out instructions from the owner does not have discretion. If you have general agreement with a client over investment policy, but carry out transactions based on your own authority without the client's approval, you have discretion. Time and/or price is not considered discretion.

Seven years ago, Ivan was found guilty of embezzling securities from clients. He now wishes to join another brokerage firm. Which of the following statements is TRUE regarding this situation? A)There are no provisions restricting his employment because the restriction time period has elapsed. B)He may be employed in a sales position, provided the firm agrees to be liable for any losses due to his misconduct. C)He may be employed by a brokerage firm, provided he is not involved directly in any dealings with clients. D)He cannot be employed because he is still subject to statutory disqualification provisions.

D)He cannot be employed because he is still subject to statutory disqualification provisions.

Which of the following statements is (are) TRUE regarding the jurisdiction of the SEC under the Securities Exchange Act of 1934? The SEC has jurisdiction over exchanges and SROs. The SEC has jurisdiction over broker-dealers, agents, investment advisers, and representatives that are required to be registered under federal law. The SEC has jurisdiction over banks and savings and loans regarding their securities activities. A)I only. B)I, II and III. C)II only. D)I and II.

D)I and II

Which of the following statements regarding SEC Commissioners are CORRECT? The maximum number that may serve at any one time is five Political affiliation plays a role in limiting who may be appointed They are appointed by the POTUS with the advice and consent of the SCOTUS Upon confirmation, other than holdings in U.S. government securities, all securities positions must be liquidated. A)I and III. B)II and IV. C)I, II, III and IV. D)I and II.

D)I and II. The SEC consists of a maximum of 5 Commissioners serving staggered five year terms. At no point may there be more than 3 of the 5 from the same political party. They are appointed by the President of the United States (POTUS) with the advice and consent of the Senate, not the Supreme Court (SCOTUS) and, other than U.S. government securities, all positions must be placed into a blind trust.

Under the Securities Exchange Act of 1934, which of the following is (are) TRUE regarding the authority of the SEC to suspend trading? The SEC may suspend all trading on a specific exchange for up to 90 days. The SEC may summarily suspend trading on a particular nonexempt security for up to 10 days. The SEC may suspend trading on exempt securities. A)I, II and III. B)I and III. C)I only. D)I and II.

D)I and II. The SEC may suspend all trading on a specific exchange for up to 90 days with prior notification of the President of the United States and may summarily suspend securities trading in a registered security listed on a stock exchange for up to ten days. The SEC does not have the authority to suspend trading in exempt securities.

The Securities Exchange Act of 1934 requires written authority for a discretionary account, unless the securities professional's discretionary authority is limited to determining: the price of the stock. the amount of the stock. the time of the order. A)I and II. B)II and III. C)I only. D)I and III

D)I and III The securities professional's ability to determine the time and/or price at which a specific customer order will be executed does not constitute discretionary power and, therefore, does not require written authorization.

Section 15 of the Investment Company Act of 1940 spells out many of the specific requirements for the contract between a management investment company and its investment manager. Among those requirements is that: -no contract may be terminated with more than 60 days notice in writing. -the initial contract is for a maximum of 1 year and then may be renewed on either an annual or biannual basis. -unless a specific exemption applies, the fund may not engage in margin trading. -the contract must be in writing. A)I and III. B)II and IV. C)II and III. D)I and IV.

D)I and IV. Contracts between funds and their advisers may not be terminated with more than 60 days notice and these contracts must be in writing. The initial contract is for a 2-year period and then renewed on an annual basis. Whether the fund can trade on margin is not a function of the management contract.

Jasper Whitlock is considered an affiliated person of the Tahor Clean Energy Mutual Fund. Under the Investment Company Act of 1940, Mr. Whitlock is prohibited from borrowing from the fund (money or property) buying anything from the fund, except shares of the fund selling anything to the fund, except shares of the fund A)II and III B)I and II C)I and III D)I, II and III

D)I, II and III Affiliated persons may not have any dealings with the investment company (outside of contractual obligations and the purchase or redemption of shares of the investment company), such as buying securities, furniture, real estate, or other property from the company or selling such property to the company.

Among the many definitions found in the Securities Exchange Act of 1934 is that of "associated person of a broker-dealer". Which of the following individuals would fall into that definition? A registered representative possessing a Series 6 limited registration A university president who sits on the broker-dealer's board of directors The newest member of the firm's research department who has not yet passed the licensing exam The receptionist at the front desk who directs visitors to the carousel where mutual fund prospectuses are available. A)I and IV. B)II and III. C)I, II, III and IV. D)I, II, and III.

D)I, II, and III. A person associated with a broker-dealer is any partner, officer, or director of the broker-dealer (or any person performing similar functions) including any employees of the broker-dealer, except that any person associated with a broker or dealer whose functions are solely clerical or ministerial (the receptionist), is not included in the meaning of the term.

Which of the following are regulated under the Securities Exchange Act of 1934? New issues. Broker-dealers. Transfer agents. A)I only. B)I and III. C)I, II and III. D)II and III.

D)II and III. The Securities Exchange Act of 1934 was designed to regulate securities transactions, securities markets, and the securities firms who do the trading. While the Securities Act of 1933 covers requirements relating to new issues, the Securities Exchange Act of 1934 covers almost everything else in the securities industry. Its greatest impact is on the securities firms and the people who sell securities (i.e., broker-dealers and their agents) in the secondary market. Of the choices listed, new issues would be regulated by the Securities Act of 1933.

Under the rules of the Securities Exchange Act of 1934, trading in a client's account would be considered excessive if: the agent receives a commission from trading. trading was conducted without considering the client's investment objectives. trading is inappropriate in view of a client's resources. A)I only. B)II only. C)I, II and III. D)II and III.

D)II and III. Trading is considered excessive if the agent induces a client to trade securities in transactions that are excessive in size or frequency in view of the financial resources, investment objectives, and character of the client's account.

Under the provisions of the Securities Exchange Act of 1934, the SEC may suspend trading on a national exchange by notifying the: A)chairperson of a joint House/Senate committee on banking. B)president of that exchange. C)board of governors of the Federal Reserve Bank. D)President of the United States.

D)President of the United States.

Under the Securities Exchange Act of 1934, which body regulates the extension of credit for nonexempt securities? A)The SEC. B)The Comptroller of Currency. C)The New York Stock Exchange. D)The Federal Reserve Board.

D)The Federal Reserve Board. The Securities Exchange Act of 1934 empowered the Federal Reserve Board (FRB) to set margin requirements and regulate the use of credit to purchase securities. The FRB determines what issues may be purchased on margin and what percentage of the purchase price must be deposited by the purchaser.

According to the Securities Exchange Act of 1934, who appoints the SEC Commissioners? A)The Federal Reserve Board governors. B)A Senate committee. C)The entire Senate. D)The President.

D)The President. SEC Commissioners are appointed by the President of the United States, with the advice and consent of the Senate, to staggered 5-year terms, with one term expiring each year. There are five Commissioners, and no more than three may belong to the same political party. SEC Commissioners may not engage in any outside employment or securities transactions.

An order is received from one of your clients to purchase 200 shares of GEMCO common stock at 45 GTC. Two days later, while at a luncheon meeting with a different client, you are informed by that individual that the inside scoop is that GEMCO is going to be the subject of an FBI investigation. An hour after you return from lunch, you see an execution report for the 200 shares at 44.90. Under the Insider Trading and Securities Fraud Enforcement Act of 1988, you A)are in violation because you should have canceled the order the moment you received the tip B)are not in violation because the trade was the result of an unsolicited order C)are in violation because you should have called the client immediately and had the ordered canceled D)are not in violation because the order was placed before you learned of the inside information

D)are not in violation because the order was placed before you learned of the inside information Violations of the insider trading rules can only happen when a person acts on the information. Because the order was placed on the books prior to the agent learning of the inside information, there is no violation. There is no obligation to cancel the order, and contacting the client would be making use of the inside information.

The SEC has jurisdiction over all of the following EXCEPT: A)the MSRB. B)the stock exchanges and broker-dealers. C)FINRA. D)the Federal Reserve System.

D)the Federal Reserve System. The SEC has jurisdiction over the MSRB, FINRA, stock exchanges, and broker-dealers. The Federal Reserve is not under the jurisdiction of the SEC.

An agent receives an order from a client to purchase $20,000 worth of stock in whatever company looks good. In what type of account could the agent accept this type of order? A)Custodial account managed by an administrator for the client's deceased cousin. B)Cash. C)Margin. D)Discretionary.

Discretionary If the agent has the ability to make the decision with respect to the specific security, even though the client specified the action (buy) and the quantity ($20,000), discretionary authorization is required.

pension plans are regulated by

ERISA

Securities information processor

Persons in the business of providing information on securities transactions or quotes of securities prices on a continuing basis through a computer network, wire service (ticker tape), or other publications

13D must be filed with

SEC, issuer, and exchanges

1934 Act - Section 13D

Section 13(d) of the Securities Exchange Act of 1934 requires filing of a Schedule 13D once a person becomes an owner of more than 5% of the outstanding voting shares of a reporting company

SIP

Securities information processor

SEC powers with regards to state laws

The SEC does not enforce state securities statutes

SEC has jurisidiction over

The SEC has jurisdiction over the MSRB, FINRA, stock exchanges, and broker-dealers

Face amount certificate companies issue

issue debt certificates

UIT's issue

issue trust units that provide the holder with a share of ownership in a fixed portfolio of securities

Why do TV stations and other news sites not count as SIPs

They just get their info from SIPs and republish them

Who/what (other than single person and corporations) qualify for breakpoints

employee benefit plans, directors, officers, partners, employees, or sales representatives of the fund, its investment adviser, or its principal underwriter.

SEC has jurisidiction over

exchanges, SROs, and all persons required to be registered under federal law

SEC administers __ laws, and has jurisidiction over which group

federal securities laws. MSRB.

Can corporations qualify for breakpoints

formed for a purpose other than obtaining such a discount and employee benefit plans

What is needed for a corporation to open an account to trade on margin

if provided for in the charter and authorized in the bylaws

Contracts between funds and their advisers may not be terminated (how long)

more than 60 days advance notice in writing

Investment company adviser initial contract approval

must be initially approved by a majority vote of the outstanding shares and the noninterested members of the board of directors and

Are SROs SIPs

no

Are T-bonds considered munis

no

Are newspapers SIPs

no

1934 act gave FRB power to

set margin requirements and determine which issues can be bought on amrgin

Interested Person - 1940 Act

someone employed by or has a material business relationship with the fund, its adviser, or underwriter. Someone who owns 5% or more of the outstanding shares (an affiliated person) is also considered "interested".

1940 act require what of investment companies

to register with SEC as such, and be regualted under the act