Corrections 4
#22. All of the following are necessary requirements for a broker/dealer to hold a customer's mail EXCEPT a) The name of an alternative person to receive important correspondence on behalf of the customer. b) A way to communicate with the customer in a timely manner to provide important notifications. c) Written disclosure to the customer of alternative ways to access account information. d) A written request from the customer.
a) The name of an alternative person to receive important correspondence on behalf of the customer. There is no requirement for an alternative person.
#36. An investment company can perform certain activities only with the approval of a majority of the shareholders. Which of the following is the board of directors allowed to do without a shareholder vote? a) Approve investment advisory agreements b) Change the fees c) Appoint officers of the investment company d) Change the fund's investment objectives
c) Appoint officers of the investment company The board is elected by the shareholders, but the board has the authority to appoint officers to perform the company's activities.
#45. Which type of investment company issues debt instruments that offer the investor a predetermined rate of interest? a) Open-end management companies b) Closed-end management companies c) Face amount certificate d) Unit investment trust
c) Face amount certificate Face amount certificate holders are entitled to redeem their certificates for a fixed amount on a specific date.
#31. Which type of investment companies do NOT charge a management fee? a) Closed-end investment companies b) Face amount certificates c) Unit Investment Trusts d) Open-end investment companies
c) Unit Investment Trusts The portfolio of a Unit Investment Trust (UIT) is fixed and does not require an investment adviser. The portfolio is supervised, not managed.
#18. Which of the following is/are correct regarding a qualified profit-sharing plan? I. Contributions are only required when the company makes a profit. II. The plan must be nondiscrimatory. III. Benefits are not paid until the employee reaches age 67. a) I and II only b) I, II and III c) I only d) II only
d) II only With a profit-sharing plan, employers allow their employees to share in the profitability of the company. The company, however, does not need profits in order to make contributions to a profit-sharing plan. All qualified plans must be non-discriminatory. Plan benefits are usually paid at age 65, or in some cases earlier, but not at age 67.
#48. Your client is interested in knowing the expected distributions of dividends and capital gains from their mutual fund investments. Which one of the following statements is correct? a) Dividends are distributed quarterly, while capital gains are distributed once a year, usually at the end of the year. b) Capital gains can be declared and paid monthly, while dividends are paid monthly or annually. c) Bond funds can pay capital gains monthly; however, stock funds must pay capital gains annually. d) Capital gains can be distributed quarterly or annually at designated times set by the mutual fund.
a) Dividends are distributed quarterly, while capital gains are distributed once a year, usually Long-term capital gains must be paid no more frequently than on an annual basis. Dividends are distributed quarterly.
#13. A variable life insurance policyowner took a loan against his policy several years ago. Because of poor investment performance, his policy's cash value has dropped to a negative value of $500. What are the policyowner's options? a) He has 31 days to pay back enough of the loan to bring the cash value positive. b) He can reduce his death benefit to make up for the short fall in his cash value. c) Do nothing and hope the performance improves in the near future. d) He has defaulted on his loan and must pay back the loan in full or surrender his policy immediately.
a) He has 31 days to pay back enough of the loan to bring the cash value positive. If poor performance causes the cash value to go negative, the policyowner has 31 days to pay back enough of the loan to bring the cash value positive again.
#19. A corporation may distribute dividends in the form of a) Company stock and stock of another corporation only. b) Cash, company stock and stock of another corporation. c) Cash only. d) Cash and stock only.
b) Cash, company stock and stock of another corporation. Dividends may be distributed as cash, company stock, or stock in a related or subsidiary corporation.
#42. With regard to sales breakpoints, any schedule changes must be communicated to existing shareholders within what period of time? a) Within 30 days b) Within 1 year c) Immediately d) Within 7 days
b) Within 1 year Investment companies have 1 year to advise existing shareholders of changes to breakpoint schedules.
#33. The death benefit payable during the accumulation period of an annuity contract I. Is based on the greater of the gross payments to date or the value of the account at the time of death. II. Is not payable after annuity payments have started. III. Is the annuity feature that guarantees payments for the life of the annuitant. IV. Is available only with fixed annuity contracts. a) II and III b) III and IV c) I and II d) I and IV
c) I and II The death benefit during the accumulation period protects the beneficiary in case the annuity owner dies before receiving annuity payments. After payments have begun, the annuity option chosen will determine what, if any, payments are made to the beneficiary upon the death of the annuitant.
#43. Which of the following terms would be used to describe a pre-offering solicitation under Reg A+? a) An omitting prospectus b) A preliminary prospectus c) Testing the waters d) Statement of additional information
c) Testing the waters Testing the waters is a term that is used when the issuer is gauging marketability of their offering. A preliminary offering circular is sent to prospective investors to determine the viability of the offering. This is done prior to the offering statement being filed. The other three statements are incorrect because a prospectus is used for a public offering and an omitting prospectus and statement of additional information are both used for an open-end investment company.
#17. Any retail communication relating to investment companies must be filed with FINRA within how many days after initial use? a) 3 days b) 5 days c) 7 days d) 10 days
d) 10 days Retail communication relating to investment companies must be filed with FINRA within 10 days after initial use.
#16. If a U.S. corporation was looking for maximum tax relief, which of the following investments should the registered representative recommend? a) Common stock issued by a foreign corporation b) Treasury stock c) Bond d) Common stock issued by another U.S. corporation
d) Common stock issued by another U.S. corporation Of these choices, a U.S. corporation would achieve the best tax relief by purchasing shares in another U.S. corporation. Dividends received from another domestic corporation qualify for the 50% exclusion from taxes. The investing corporation would only pay taxes on 50% of the dividend distribution.
#32. All of the following are features and requirements of the Living Needs Rider EXCEPT a) It is usually available at no additional charge. b) The remainder of the policy proceeds is payable to the beneficiary at the insured's death. c) It provides funds for medical and nursing home expenses to a terminally ill insured. d) Diagnosis must indicate that death is expected within 3 years.
d) Diagnosis must indicate that death is expected within 3 years. The Living Needs Rider provides for the payment of part of the policy death benefit if the insured is diagnosed with a terminal illness that will result in death within 2 years.
#38. When a member offers an investment analysis tool to retail customers, it must make the investment analysis tool available to a) FINRA and the SEC concurrently, within 10 business days of its first use by the public. b) FINRA and the SEC concurrently, 10 business days prior to its first use by the public. c) FINRA 10 business days prior to its first use by the public. d) FINRA within 10 business days of its first use by the public.
d) FINRA within 10 business days of its first use by the public. The analysis tool must be made available to FINRA within 10 business days of its first use, as well as reports that the tool generates and any other retail communicates related to the investment tool.
#3. Sally divorces Andrew at age 35 and collects distributions on their retirement plan as a result. What taxation/penalties will she have to pay? a) 10% penalty tax b) 15% penalty tax c) Age-based penalty stipulated in the contract d) None
d) None Under normal circumstances, a 10% penalty tax is imposed on distributions made before the age of 59½. There are exceptional circumstances, however, that are exempt from the penalty tax, including distributions made as a result of a divorce decree.
#47. An inexperienced conservative investor is selecting his first equity fund. He wants to limit his risk while acquiring equity exposure. Which fund is most suitable for this investor? a) Balanced fund b) Allocation fund c) Growth fund d) Value fund
d) Value fund Value investing is a conservative long-term strategy of investing in undervalued equities. Growth investing is an aggressive strategy of choosing young, unproven companies. Asset allocation funds and balanced funds hold bonds along with stocks, and the investor has not expressed interest in bonds.
