PT 2 S66

Under IAA of 1940 - disclosures required

- Comp paid to advisor by issuer for recommendation - Comp paid to advisor by BD - Comp paid to advisory by insurance company - Ability of the customer to use any BD to execute recommended portfolio transactions (does not have to effect trades through BD favored by IA)

Referral fees may be paid to certain professionals (lawyers, accountants, insurance agents, etc.) as long as the fee is - AND -

- a nominal amount (up to several hundred dollars) AND - is the same amount for any referral

Under no circumstances may an adviser guarantee that a client will achieve any investment result

- either that a gain will be achieved or that no loss will occur

In a present value computation, the - - -

- future value - time period, and - earnings rate are known

An adviser's financial impairment must be disclosed to clients if the adviser: - - -

- has discretion or - has custody or - requires prepayment of more than $1,200 in fees, 6 or more months in advance

Investment advisers are generally prohibited from divulging any information about their clients unless - -

- required by law or the courts -if the client specifically approves -- the IA must act within the limits stated by the client

If the Consumer Price Index (CPI) rose 5% during the past year, during which time your client held a 6% bond, what would be the approximate annualized inflation-adjusted return?

1%

When a check is made payable to the investment adviser for deposit to the client's account, it must be returned to the sender within 3 business days or

it will be considered maintaining custody

Parker and Mary have recently divorced. For Mary to receive Social Security benefits based on Parker's earnings, they must have been married at least _______

10 years

qualifying dividends are taxed at a maximum rate of

15%

n order to charge a performance-based fee, investors must have a net worth in excess of ...

2.2 Million (7.1)

When a check made payable to a third party is received by the investment adviser, it will not be deemed to be custody under the Uniform Securities Act if the check is forwarded within

3 business days

Employees of public schools can legally maintain both a

403(b) plan and a 457 plan -In 2018, if both plan limits are contributed, that can be $37,000 ($49,000 if Mary is 50 or older and uses the $6,000 catch-up provision available with both plans)

The 5-day withdrawal provision applies to state-registered investment advisers when the brochure is not delivered at least ________________ the signing of the contract

48 hours prior to (not after)

The current yield on a bond with a coupon rate of 5.5% selling at 110 is

5% - it is the annual interest of $55 ($1,000 x 5.5%) divided by $1,100 and that equals 5%

the lower the coupon on the bond, the _______ the duration

longer

value investors look for stocks with lower price-to-earnings and ________ price-to-book value ratios

lower

a firm's endorsement of the content of a third-party site

Adoption

Money market funds (do/do not) require prospectus?

As with all mutual funds, a prospectus is required

the higher the YTM, the __________ the duration

lower (shorter)

the longer the duration, the ________ susceptible to interest rate movement

more

In adverse market conditions, not only do some investors stop putting money in, they liquidate their holdings If new sales fall while liquidations rise, the effect could be ______

net redemptions

when a firm (or one of its representatives) contributes to the third-party information and then posts it.

Entanglement

The USA specifically excludes _____ from its definition of investment adviser

IARs

Those who supervise the activities of investment adviser representatives are themselves defined as

IARs

Insolvency is not a cause for revocation under the________________________

Investment Advisers Act of 1940

DEF Investment Advisers, organized as a partnership, is currently registered with State Y. Marjorie is one of the partners and is registered as an IAR. If DEF were to register with State Z,

Marjorie would automatically be registered as an IAR in State Z.

The unethical business practice of purchasing and selling a security for the purpose of creating an appearance of market activity

Matched order - sometimes referred to as painting the tape

taxes where the tax rate increases as the dollar amount being taxed increases

Progressive

there (is/is not) a limit to the amount that can be contributed to an UTMA

is not

_____________ orders are the only orders that have triggers

Stop

True or False An agent must submit separate registrations for each broker-dealer with which he is registered

True

True or False Certain states prohibit agents from dual or multiple registration

True - an agent may be prevented from multiple registration in those states

Insolvency is cause for revocation under the __________

USA

Mutual funds do not receive the sales charges—they go to the

Underwriter

______ has an inverse relationship to a bond's duration

YTM

Under the Uniform Securities Act, If an adviser accepts more than $500 in prepaid fees, 6 months or more in advance of services, a ________________ must be included in the brochure (Part 2 of Form ADV) given to customers

a balance sheet

In general, an agent will only be registered with

a single broker dealer - the USA does permit registration with more than one under certain conditions

Under the Uniform Securities Act, an investment adviser is a person, corporation, partnership, or sole proprietorship who, in the regular course of business

advises others as to the advisability of selling securities

UTMA contributions are made with (pre/after) tax dollars

after

A civil suit may only be filed by an ____________

aggrieved purchaser - The Administrator could take administrative action against the broker-dealer (issuing a cease and desist order, for example) but has no civil powers.

Under the Uniform Securities Act, the Administrator may require a broker-dealer to post a surety bond of

an amount not in excess of that set by the SEC

A viatical sale would generally involve

an individual with a terminal illness - and a life expectancy of 2 years or less - It is the sale of a life insurance policy, almost always whole life or another form of permanent insurance - rarely a term insurance policy

Making irrational decisions based on information that should have no influence on the decision at hand is known as

anchoring

earnings in an UTMA (are/are not) taxable

are - and, if over a certain amount, might be taxed at the parent's top marginal rate.

ESA withdrawals for other than qualified education expenses (are/are not) subject to any penalties

are -a 10% tax penalty on the earnings withdrawn for nonqualified educational expenses

there (are/are not) earnings limits for making ESA contributions

are -couples earning in excess of $220,000 per year are not eligible to contribute

UTMA withdrawals for other than qualified education expenses (are/are not) subject to any penalties

are not

there (are/are not) earnings limits for making UTMA contributions

are not

earnings in an ESA (are/are not) taxable

are not - if used for qualified educational expenses

The balance sheet formula is

assets − liabilities = net worth

Note also that by requiring prepayment of over $1,200 in fees, 6 or more months in advance, an adviser is required to include an _________________ with Part 2 of Form ADV

audited balance sheet - which must be filed with the SEC and made part of the adviser's disclosure brochure

A company's working capital equals its

current assets minus its current liabilities

Authority to withdraw funds or securities from the custodian or automatic deduction for fee payments are forms of

custody

A money purchase pension plan is a ___________ established by the employer

defined contribution plan - thereby making the contributions mandatory. -Voluntary employee contributions are optional - Employees who contribute to the plan usually contribute a percentage of their income.

Under the Uniform Securities Act, prepaid advisory fees prepaid fees are permitted if they are

detailed in the advisory contract and there is a refund of the fees if the contract is canceled prematurely

under the Uniform Securities Act, selling certificates of interest in mining leases or similar items

does not make one an issuer

If an investment adviser who otherwise would not qualify for SEC registration would be required to register in 15 or more states, the Dodd-Frank Act makes that adviser ___________

eligible for federal registration

Under the Uniform Securities Act. transactions between the issuer and a broker-dealer are ____________ transactions

exempt transactions

The capital asset pricing model (CAPM) is most commonly used to determine an investor's

expected return -expected return is a form of risk-adjusted return and is the more specific answer to this question

An IAR representing a federal covered investment adviser need only register in the state or states in which she (the IAR) _________________

has a place of business

A growth investor focuses on

high earnings-per-share, growth, and high profitability.

longer the time to maturity, the ________ the duration

higher (longer)

When it comes to a bond's duration, the bond's rating and par value are ______

irrelevant

there (is/is not) a limit to the amount that can be contributed to an ESA

is -a $2,000 per year per child limit

regarding nonqualified annuities, the exclusion ratio only applies during the

payout period

Under the IAA of 1940 Rebating commissions on mutual fund sales is

prohibited -However, because mutual fund commissions are not negotiable, the adviser may reduce the client's advisory fee by the commission or, with appropriate disclosure, keep the commission

Regressive taxes are those where the rate

remains the same

The NSMIA defines "federal covered adviser" as a person who is either - OR -

required to register with the SEC under the IAA of 1940 OR is specifically excluded from the definition of "investment adviser" under that act.

An advertisement describing a charting system or any type of formula must always

state that there are limitations and difficulties to using said system

regarding nonqualified annuities, it is possible to receive distributions from an annuity before age 59½ without incurring

tax penalties

regarding nonqualified annuities, withdrawals due to death or disability or taking substantially equal annuity distributions over the life of the insured can begin before age 59½ without being subject to a

tax penalty

The issuance of a stop order by a state securities Administrator requires

that the subject of the stop order be given an opportunity for a hearing

The percentage of the index's return the insurance company credits to the annuity is determined by

the participation rate

A client who wishes to have $50,000 available to help fund a 3-year-old child's college education in 15 years estimates that if the portfolio can earn 7%, a deposit of $18,122.30 will be required today. This deposit is referred to as

the present value

All qualified retirement plans must be established

under a trust agreement

Selling speculative or hot issues to a retired couple of modest means is an

unsuitable transaction

An individual who has passed the NASAA examination for registration as an investment adviser representative may begin soliciting advisory clients

when informed by the investment adviser that the representative's registration is effective

The Uniform Securities Act defines a guaranteed security as one

where the payment of interest and principal (bond) or dividend (stock) is guaranteed by a party other than the issuer

Money market funds are offered (with/without) sales loads or redemption fees

without