Section 2 Missed
Which of the following statements is NOT true of Regulation S-P? A) Consumers must be given an initial privacy notice. B) Customers must be given annual privacy disclosures on a separate piece of paper. C) Customers may be provided privacy information on internet web pages. D) Firms must establish procedures to protect customers' nonpublic personal information
B) Customers must be given annual privacy disclosures on a separate piece of paper. can be included in other documents
Which of the following statements regarding the withdrawals from a qualified retirement plan are TRUE? I. The employee will be taxed at the ordinary income tax rate on his cost basis. II. Funds may be withdrawn after retirement (as defined) with no tax on the withdrawn amount. III. Funds may be withdrawn early by the beneficiary if the covered person dies. IV. All qualified plan provisions must be in written form. A) I and II. B) II and III. C) I and IV. D) III and IV.
D) III and IV
Your customer, who has been making pretax contributions to her IRA, decides to take a well-earned vacation to celebrate her 30th birthday. If she withdraws $4,000 from her IRA to pay for a cruise, in addition to income tax, what penalty must be paid on the amount withdrawn? A) $400.00. B) $0.00. C) $2,500.00. D) $240.00.
A) $400.00 10% penalty on withdrawals before 59.5
ERISA allows the fiduciary of a corporate retirement plan to write covered calls on the securities in the portfolio: A) if this strategy is consistent with the objectives of the plan. B) if specifically approved by the SEC. C) under no circumstances. D) if specifically approved by the covered employees.
A) if this strategy is consistent with the objectives of the plan
A customer who has just started an IRA will be vested: A) immediately. B) at age 70. C) in five years. D) in two years.
A) immediately
If a corporation begins a nonqualified retirement plan, which of the following statements is TRUE? A) Employee contributions grow tax deferred if they are invested in an annuity. B) Employer contributions are tax deductible. C) The employer must abide by all ERISA requirements. D) Employee contributions are tax deductible.
A) Employee contributions grow tax deferred if they are invested in an annuity
All of the following statements about SEP IRAs are true EXCEPT: A) SEP IRAs allow employers to make contributions. B) contributions to SEPs are made with after-tax dollars. C) SEP IRAs are established for small-businessowners and their employees. D) the retirement account is usually set up at a bank or other financial institution.
B) contributions to SEPs are made with after-tax dollars employers make pretax contributions to SEPs
To open a new account, it is necessary to complete a new account form. That form must include the client's: A) educational background. B) date of birth. C) signature. D) membership in professional organizations.
B) date of birth signature not required
If the owner of a $1 million IRA leaves it to his daughter, which of the following best describes the income tax treatment to the daughter? A) She will pay income taxes on the full amount she withdraws each year. B) She will pay no income taxes because the estate taxes have already been paid. C) She will pay income taxes only on a portion of the withdrawals that exceed $1 million. D) She will pay income taxes on the full $1 million immediately.
A) She will pay income taxes on the full amount she withdraws each year
All of the following actions are violations of the Conduct Rules EXCEPT: A) opening a cash account for a customer without the customer's signature on the new account form. B) recommending a growth fund to a customer whose sole investment objective is income. C) delivering a prospectus 48 hours after the sale of a mutual fund. D) offering mutual fund shares to a customer at a discount from the appropriate POP.
A) opening a cash account for a customer without the customer's signature on the new account form. only require signature of principal
The rules for ensuring that money will be available in a retirement plan (for paying out to participants during their retirement) are covered by which of the following types of requirements? A) Beneficiary. B) Participation. C) Funding. D) Vesting.
C) Funding
Under ERISA, all of the following retirement plans must set standards for vesting, eligibility, and funding EXCEPT: A) corporate pension plans. B) deferred compensation plans. C) profit-sharing plans. D) Keogh plans.
B) deferred compensation plans can discriminate
A 54-year-old client is in the highest tax bracket and seeks a conservative investment for retirement. If his investment adviser representative recommends a general obligation municipal bond for the client's IRA, the IAR has: A) recommended a suitable investment because GOs are good long-term investments. B) made an unsuitable recommendation, since a municipal revenue bond would have been more appropriate. C) made an unsuitable recommendation based on the client's needs and objectives. D) committed no violation because municipal bonds are well suited for the market's volatility.
C) made an unsuitable recommendation based on the client's needs and objectives. municipal bonds are unsuitable for IRAs
An investor has been found guilty of making a stock sale on the basis of insider information. Which of the following persons could make a claim against him as a contemporaneous trader? A) A person who sold the same stock a day before the trade. B) A person who bought the same stock a day before the trade. C) A person who sold the same stock at about the same time. D) A person who bought the same stock at about the same time.
D) A person who bought the same stock at about the same time
A teacher has a 403 (b) tax-qualified deferred retirement plan. The school system she works for has deposited $20,000 for her into the plan during the past ten years. At retirement, the total value of the plan has grown to $29,000. If she withdraws the entire amount at retirement, what will be the tax consequences? A) She will owe tax on $20,000. B) She will have no tax liability. C) She will owe tax on $9,000. D) She will owe tax on the entire $29,000.
D) She will owe tax on the entire $29,000 qualified = contributions made with pretax dollars
If a company starts a pension plan for an employee who already has an IRA, this employee: A) may continue to make 100% deductible contributions up to the indexed maximum per year to his IRA. B) may continue to contribute to his IRA, but the contributions may not be 100% deductible, depending on his level of compensation. C) must stop contributing to the IRA, which will continue to accumulate on a tax-deferred basis. D) must roll over his IRA into the company pension plan.
B) may continue to contribute to his IRA, but the contributions may not be 100% deductible, depending on his level of compensation.
A teacher has a 403(b) plan and the school system he works for has deposited $10,000 into his plan over a 12-year period. At retirement, if the teacher withdraws the total value of $16,000, on what amount does he pay tax? A) $6,000.00 B) $10,000.00 C) $16,000.00 D) $8,000.00
C) $16,000.00 403(b) = qualified = pretax contributions
All of the following securities would be suitable investments for a traditional IRA EXCEPT: A) A corporate bonds. B) AAA U.S. government agency bonds. C) AAA municipal bonds. D) Blue chip common stocks.
C) AAA municipal bonds municipal bond would lose federal tax treatment
Under a qualified defined contribution plan, which of the following statements are TRUE? I. The participant is guaranteed a contribution based on an agreed-upon percentage or rate. II. The participant's retirement benefits are based on the balance in his individual account. III. The employer may discriminate among employees as to participation. IV. Employer contributions remain the property of the company until retirement. A) III & IV. B) I & III. C) I & II. D) II & IV.
C) I & II
Which of the following are discretionary orders? I. A customer sends a check for $25,000 to an agent and instructs the agent to purchase bank and insurance company stocks when the price appears favorable. II. A customer instructs an agent to buy 1,000 shares of ABC Corporation at a time and price determined by the agent. III. A customer instructs an agent to purchase as many shares of XYZ as the agent considers appropriate. IV. A customer instructs an agent to sell 300 shares of LMN, Inc., when the agent deems the time and price appropriate. A) II & III B) II & IV C) I & III D) I & IV
C) I & III time and/or price alone are not discretionary orders
If a customer wishes to open a cash account, who must sign the new account form? A) The customer, the registered representative, and the principal. B) Only the registered representative. C) Only the principal. D) Only the customer.
C) Only the principal
Each of the following is a defined contribution plan EXCEPT A) a 401(k) plan B) a money-purchase plan C) a stock option plan D) a profit-sharing plan (qualified)
C) a stock option plan
All of the following statements relating to a deferred compensation plan are correct EXCEPT: A) these plans may discriminate in favor of highly paid employees. B) it will be of greatest benefit if the employee's tax bracket is at a reduced level when the benefits are paid. C) the covered employee must receive reports on the status of the plan no less frequently than annually. D) corporate financial difficulties could lead to no benefits being paid.
C) the covered employee must receive reports on the status of the plan no less frequently than annually nonqualified = no requirement to report
All of the following statements concerning IRA contributions are true EXCEPT: A) if you file your tax on January 15, you may deduct your IRA contribution even if it is not made until April 15. B) you may contribute to this year's IRA from January 1 of this year until April 15 of next year. C) between January 1 and April 15, you may make contributions for the current year, the past year, or both D) you may make contributions for the past year after April 15, provided you have filed an extension on a timely basis.
D) you may make contributions for the past year after April 15, provided you have filed an extension on a timely basis
Which of the following statements regarding deferred compensation plans are TRUE? I. They are available to employees selected by the employer. II. They must be nondiscriminatory. III. Under no circumstances may officers or directors be included. IV. The employer does not receive a tax deduction for the deferred payment until actually made. A) I & IV. B) II & IV. C) I & III. D) II & III.
A) I & IV
Which of the following penalties apply to individuals who are guilty of insider trading? I. Criminal penalties of up to ten years in prison. II. Civil penalties of a minimum amount equal to the profit made or loss avoided. III. Civil penalties of a base amount that is indexed for inflation. IV. Criminal penalties of up to 20 years in prison. A) I & II B) I & III C) III & IV D) II & IV
C) II & IV
If your customer invests in a tax-sheltered variable annuity, what is the tax treatment of the distributions he receives? A) All capital gains. B) Partially tax-free, partially capital gains. C) Partially tax-free, partially ordinary income. D) All ordinary income.
D) All ordinary income
Which of the following could start a tax-sheltered annuity? I. A public school. II. A county government. III. A small law practice. IV. A research foundation. A) II and IV. B) II and III. C) I and III. D) I and IV.
D) I & IV 403(b) = nonprofit county gov - 457 plan