Securities 6 Qbank Overall
Your client is interested in purchasing the Class A shares of the BACH Investment Company, whose maximum sales charge is 5%. Which of the following choices best describes the sales load she would probably be charged on her purchase of the BACH?
5% on each purchase; 0% deferred sales load Class A shares charge a front-end sales charge, also called a front-end load, and no deferred sales charge. Reference: 4.2.2.2 in the License Exam Manual
Taxation if 40(3) B Plans
A 403(b) plan is a qualified retirement plan; contributions to the plan are made before taxes and the growth of the contract is tax-deferred. Any distribution from a 403(b) plan is fully taxable to the participant at the ordinary income tax rate. Reference: 3.9.4 in the License Exam Manual
Which of the following statements regarding joint accounts is TRUE?
C) If an account has a joint registration, distributions must be made payable to all parties. In a joint account all distributions must be made payable to all parties and all parties can trade in joint accounts; in a TIC account, a deceased party's assets pass to his estate. Reference: 5.2.2 in the License Exam Manual
Question #2 of 40 Question ID: 614252 An investor redeems 200 shares of ABC Fund, which has no redemption fee. If the quote is $12.05 bid $13.01 asked, what amount will the investor receive?
Explanation If a mutual fund has no redemption fee, the investor will receive the bid price per share (net asset value) multiplied by the number of shares being redeemed. In this case, the investor would receive $2,410 ($12.05 × 200 shares). Reference: 4.2.3 in the License Exam Manual
Question #11 of 40 Question ID: 688927 An investor purchases $10,000 of the ABC Income fund. During the course of the year $500 in dividends are reinvested and $500 of capital gains are received in cash. The fund has a 5% front end load. What is the investors cost basis at the end of the year?
Rationale: the investor invested $10,000 into the mutual fund, which included a $500 sales charge. Cost basis includes any sales charge that was paid. Reinvested dividends are taxable and therefore increase the investors cost basis. A capital gains distribution was received in cash and has no effect on the cost basis of the investment. Reference: 3.7.2.5 in the License Exam Manual
Rules violations and FINRA/SROS
Rules violations can result in suspensions, barring from association with other FINRA member firms, expulsion, and fines of unlimited amounts; neither FINRA nor any other SRO has the authority to arrest, indict, convict, or impose a jail sentence. Reference: 5.4.1.6 in the License Exam Manual
Fourth market trading
The fourth market is for trading between institutional buyers only. It bypasses broker-dealers. Reference: 3.5.1.7 in the License Exam Manual
Which of the following securities documents are NOT prepared by a broker-dealer?
The prospectus and the preliminary prospectus are prepared by the issuer of a new security, not the broker-dealer who will sell it. Reference: 3.4.2.3 in the License Exam Manual