Chapter 3 Mastery Progress Exam
Which of the following statements is TRUE concerning the disclosure requirements in CMO correspondence?
A comparison between a CMO and a bank certificate of deposit is not permitted under any circumstances
An advertisement for municipal securities states the following: "15-year 10% tax-free bond priced to yield 12% to maturity. Call us now for more details." According to MSRB rules, this advertisement should also state that:
A portion of the yield to maturity is taxable if the bond is held to maturity, making the after-tax return between 10% and 12%
Regarding communications, which of the following statements is TRUE concerning the responsibilities of a principal of a broker-dealer?
A principal must approve retail communications prior to use.
Drysdale Securities has sent a third-party research report on Clinkscale Corporation to clients. Which of the following items is NOT a required disclosure?
A three-year price chart covering Drysdale recommendations
Retail communications that pertain to mutual fund shares must be:
Filed with FINRA within 10 business days of first use
A Web site is being designed for a registered representative of a member firm. Which TWO of the following statements are TRUE regarding the design of this Web site? I. The FINRA logo must be displayed II. The registered representative's firm name must be displayed III. A reference to FINRA membership is permitted IV. Links to other Web sites are not permitted
II and III
Which TWO of the following choices must a principal approve prior to use? I. An advertisement concerning the appointment of new managing directors II. An advertisement promoting a new type of CMO III. An advertisement regarding covered call writing IV. An email from an RR to a client concerning a security in her account
II and III
A registered representative is sending out electronic communication that has been prepared by her firm to 75 of her existing retail customers. The communication explains to the customers that their account statements are now available online. Which TWO of the following statements are TRUE? I. This is considered correspondence II. This is considered retail communication III. This activity requires principal approval prior to use IV. This activity should be reviewed
II and IV
When determining whether a CMO is suitable, an RR must offer to a client all of the following information, EXCEPT a:
Discussion on how changing currency rates may affect the value of the securities
The IPO of Symphony Music Inc. was registered on July 1st, 20XX. If the comanager of the issue wants to publish a research report on Symphony Music, what would the earliest date be that it could publish the report?
July 12th, 20XX
Promotional material made available to the public may compare collateralized mortgage obligations (CMOs) to:
No other investment product
In regard to recruitment advertising by member firms, which of the following statements is TRUE?
Recruitment advertising may not contain exaggerated claims about opportunities in the securities business
A registered representative invites 40 clients to an investing seminar, the sales script that's used for the presentation is considered:
Retail communication
A broker-dealer has established a page on a social media site which allows customers to post comments. The firm's responses to these comments are considered:
Retail communications
Which of the following statements is TRUE regarding the supervision of real-time communication through social networking sites?
This communication is regulated in a manner that's similar to correspondence.
A research analyst at a broker-dealer is preparing a research report recommending ABC common stock. Which of the following situations need not be disclosed?
The broker-dealer has a 1% or greater beneficial ownership in ABC nonconvertible bonds
A registered representative receives text messages on a mobile device from one of her customers. Which of the follow is TRUE?
The broker-dealer is required to maintain a record of all communication with customers regardless of the device used.
If a mutual fund has been in existence for 17 years, the longest average annual return that's required to be shown in an advertisement is:
10 years
Which of the following is NOT required to be filed with FINRA?
A retail communication that provides information on a broker-dealer
All of the following may be included in investment company advertising EXCEPT:
An application to invest
On behalf of her firm, a registered representative is holding a seminar and the audience will consist of registered representatives from other member firms. This type of communication is considered:
Institutional communication
Michelle Gladstone has noticed that many of her elderly clients do not bother to read the prospectus prior to making a purchase. They consider these documents much too confusing and far too time consuming to go through. They generally rely on Michelle's advice when pondering investment selections. Michelle is uncomfortable with her clients' lack of due diligence and is attempting to come up with a better way to educate them about the risks and rewards of investing in a particular fund. Under SEC rules, Michelle may engage in which of the following activities?
She may provide her clients with a summary prospectus obtained from the fund's wholesaler.
Which of the following communications would most likely contain the legend "This material must be preceded by or accompanied by a prospectus"?
Supplemental sales literature
What information would NOT need to be disclosed by a broker-dealer in a research report?
The analyst had owned shares in the company one year before writing the report
When making a presentation on 529 plans, what information is NOT required?
The name and contact information for the municipal securities principal who will approve the customer's investment in the plan
The ABC Growth Fund has been in existence for six years. An advertisement that refers to its ranking based on total return must refer to the total return for:
The one- and five-year periods by the same ranking entity
A client is reading a financial publication that contains an advertisement for a mutual fund. Under the "omitting prospectus regulations" of the Securities Act of 1933, which of the following statements is FALSE?
This advertisement can be accompanied by an application to invest.
When sent to a client, which of the following must be preceded or accompanied by a prospectus?
Supplemental sales literature for the bond mutual funds in the Flyer Group family of funds
A registered representative works for a brokerage firm that is a dealer for a mutual fund complex. The RR has prepared a script and a slide presentation for a seminar on the funds in the complex and also intends to hand out prospectuses for the funds and a brochure that was created by her firm. In this situation, all of the following should be filed with FINRA, EXCEPT:
The prospectus
Which of the following statements is TRUE concerning the use of bond volatility ratings when marketing a mutual fund?
These ratings may account for NAV changes due to currency fluctuations.
Which of the following actions is a firm permitted to perform when it publishes a research report?
Verify factual information with the subject company.
