Series 6 Practice 2

The front-end load on Class A shares and the back-end load on Class B shares makes them (attractive/unattractive) for short-term investors.

unattractive

Criminal penalties for insider trading can include a jail sentence up to ___ years

20

The Investment Company Act of 1940 requires that an investment company's assets amount to at least $_________ and that it furnish shareholders with at least (annual/semiannual) reports.

$100,000 ; semiannual

When a carrying firm receives the TIF from a broker-dealer that requests a transfer of securities to their firm, the carrying firm has __ business day to validate the information on the form, and then __ business days after validation to complete the transfer.

1 ; 3

Conviction of a felony or a misdemeanor involving money within the past ___ years may subject an individual to a statutory disqualification from the industry.

10

Retail communication is defined as "any written (including electronic) communication that is distributed or made available to more than ___ retail investors within any ___ calendar-day period." Emails sent to banks represent an institutional communication and the single letter to a prospect represents a ________________.

25 ; 30 ; correspondence

________ plans are specifically designed for nonprofit organizations (school systems or charitable or religious organizations) to permit their employees to make untaxed contributions for their retirement through salary reductions.

403(b)

According to the Act of 1940, if the investor cancels his variable contract plan within the free-look period (___ days from the execution of the contract or ____ from delivery of the policy, whichever comes later) he will receive all money paid.

45 ; 10

The high-yield bond fund is subject to the Name Rule and must invest at least ____% of its assets in high-yield bonds. The technology fund is a sector fund and must have a minimum of ___% of assets invested in technology companies as defined in the objective of the fund.

80% ; 25%

Which of the following violations could bar an agent from employment in the securities industry? A) Conviction for the misdemeanor of petty theft of money from a client B) Associating with a known felon C) Having a suspended driver's license D) Failing to qualify by examination as an agent

A) Conviction for the misdemeanor of petty theft of money from a client

All of the following communications may be filed with FINRA by an established firm within 10 business days after use EXCEPT A) literature on an investment company that includes a ranking prepared by the member firm B) literature on an investment company that uses a bond volatility rating C) a form letter sent to all the firm's clients about a new mutual fund family the firm will now be offering D) a research report that includes performance data on a mutual fund that is provided to retail investors of the firm

A) literature on an investment company that includes a ranking prepared by the member firm If literature uses a ranking prepared by an independent entity, the firm may post-file. If the ranking is generally not published or is the creation of an investment company or member firm, pre-filing is required.

Characteristics of money market mutual funds include all of the following EXCEPT: A) their beta tends to mirror the overall market. B) shares are offered on a no-load basis. C) dividends are earned on a daily basis. D) the net asset value falls within as narrow a range as possible.

A) their beta tends to mirror the overall market.

All of the following are true of negotiable, jumbo certificates of deposit EXCEPT: A) they are fully insured in any denomination by the FDIC. B) they are readily marketable. C) they usually have maturities of less than one year. D) they are usually issued in denominations of $100,000 to $1 million.

A) they are fully insured in any denomination by the FDIC. The FDIC insures only up to $250,000, any issue greater than that amount is an unsecured promissory note of the bank.

Marianne has a fixed premium variable life policy in which the separate account has been performing extremely well, and the face value has been increasing as a result of the investment performance. However, recently the separate account performance has been negative. If this continues, the face value could decrease: A) to the original face value. B) to 50% of the original face value. C) to 0. D) to 25% of the original face value.

A) to the original face value.

Qualified plans may not discriminate between eligible employees. They must have a set vesting schedule, the plans must be in writing, not voice recorded, and an employer must update the status of all employees at least ___________

Annually

An investor's portfolio includes ten bonds and 200 shares of common stock. If both positions increase by one point, what is the appreciation? A) $220. B) $300. C) $210. D) $100.

B) $300. The gain would be $100 for the bonds (one point for one bond is $10 × 10 bonds) and $200 for the common stock (one point is $1 × 200 shares). The total portfolio gain is $300.

Which of the following funds would be required to invest at least 80% of its assets in a particular type of security? A) ABC Special Situation Fund B) ABC High-Yield Bond Fund C) ABC Technology Fund D) ABC Go-Go Fund

B) ABC High-Yield Bond Fund

A company has negative operating revenues for the year. It would NOT be required to make interest payments on which of its following issues? A) Collateralized debt. B) Adjustment bonds. C) Subordinated convertible debentures. D) Mortgage bonds.

B) Adjustment bonds. Adjustment bonds are sometimes called income bonds because they only pay interest when the company has sufficient income (as determined by the Board of Directors.

The investment policy of a mutual fund can be changed by a majority vote of: A) the board of directors. B) the outstanding shares. C) the fund's managers. D) the number of shareholders.

B) the outstanding shares. Any changes in a mutual fund's investment policies or objectives must be made by a majority vote of the fund's outstanding shares, not a majority vote of shareholders.

An announcement of a new issue of a security that gives the name of the issuer, the price and the name of the underwriter is called a(n): A) red herring. B) tombstone. C) prospectus. D) offering memorandum.

B) tombstone.

Which of the following is accurate with regard to using a summary prospectus for the sale of a mutual fund? I. A statutory prospectus must precede or accompany delivery of the summary prospectus. II. A statutory prospectus may be delivered after the summary prospectus. III. Electronic delivery of the statutory prospectus is allowed after the sale. IV. A paper prospectus must be delivered within 3 days of the sale. A) III and IV B) I and III C) II and III D) II and IV

C) II and III The summary prospectus may include an application for sale. The statutory or full prospectus must be available online.

General communications by a broker-dealer firm, such as customer orders and complaints, must be reviewed by which of the following? A) Chartered Financial Analyst. B) FINRA. C) Principal of a member. D) Member.

C) Principal of a member. A qualified principal of the firm reviews all customer orders, correspondence, and complaints for a broker-dealer.

When securities are inherited, what will be the recipient's cost basis? A) The cost basis can only be determined by an actuary. B) The market value of the securities at the time of purchase. C) The market value of the securities at the time of death. D) The market value of the securities using the FIFO method.

C) The market value of the securities at the time of death.

When must a mutual fund investor receive a statement of additional information (SAI)? A) Quarterly. B) With the semiannual financial report. C) Upon request. D) With the audited annual report.

C) Upon request.

An investor who purchases a fixed premium variable life contract on July 1 and cancels the policy four days after receiving notification of his free-look right would receive: A) all money invested in the separate account and 30% of the sales charges. B) no refund of the premium paid. C) a full refund of all money paid to date. D) 30% of the money invested in the separate account plus all sales charges.

C) a full refund of all money paid to date.

If a FINRA member firm suspends a registered representative, the firm must report the suspension to A) the Arbitration Board B) the SEC C) the FINRA D) the Administrator of each state in which the individual is registered

C) the FINRA The firm must report the suspension to its designated examining authority (DEA), in this case, the Financial Industry Regulatory Authority (FINRA).

In a variable annuity contract, the assumed interest rate (AIR) refers to: A) the rate used in the prospectus to show the potential growth of the contract. B) the rate at which purchases are required in the separate account to qualify for special tax treatment. C) the rate of return needed to maintain the annuity payments at a constant level. D) the amount of payments required by the investor to maintain the contract.

C) the rate of return needed to maintain the annuity payments at a constant level.

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? A) $10,000 B) $11,500 C) $11,000 D) $10,500

D) $10,500 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.

Which of the following describe a securities exchange? I. Prices are set by negotiation between interested parties. II. The highest bid and the lowest offer prevail. III. Only listed securities can be traded. IV. Minimum prices are established at the beginning of the day. A) I and IV. B) II and IV. C) I and III. D) II and III.

D) II and III. An exchange is not a negotiated market but an auction market in which securities listed on that exchange are traded. No minimum price is set for securities. Rather, the highest bid and the lowest offer prevail.

Which of the following statements regarding a unit investment trust is NOT true? A) It invests according to stated objectives. B) It charges no management fee. C) It is considered an investment company. D) Overall responsibility for the fund rests with the board of directors.

D) Overall responsibility for the fund rests with the board of directors.

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) signature. C) membership in professional organizations. D) date of birth.

D) date of birth. The customer's date of birth is required, but his signature is not. There is one required signature: a principal of the firm that accepts it.

A customer who participates in a FINRA arbitration hearing would expect that A) an award that is disputed could be appealed to the National Adjudicatory Council B) the maximum amount awarded would not exceed $10,000 C) a majority of the arbitration panel would comprise industry personnel D) the award is stated in writing and rendered to the claimant within 30 days

D) the award is stated in writing and rendered to the claimant within 30 days

Cash settlement for a trade in a customer's account must settle: A) three business days after the trade. B) five business days after the trade. C) the next business day following the trade. D) the day of the trade.

D) the day of the trade. Cash settlement occurs on the day of the trade.

An insurance company offering a variable annuity makes payments to annuitants on the 1st of each month. The contract has an assumed interest rate of 3%. In July of this year the contract earned 4%. In August the account earned 6%. If the contract earns 3% in September, the payments to annuitants in October will be: A) less than the payments in August. B) the same as the payments in August. C) less than the payments in September. D) the same as the payments in September.

D) the same as the payments in September. When actual separate account earnings are equal to the assumed interest rate, the payment to the annuitant is the same as the previous month.

Dividend distributions from a bond fund would be taxable: A) at the state level only. B) at the federal level only. C) only if the dividends were received in cash. D) whether the dividends are received in cash or reinvested.

D) whether the dividends are received in cash or reinvested.

T/F The Conduct Rules apply directly to all transactions between FINRA member firms and members of the public.

True

The face value in an insurance policy is the death benefit. In a variable life policy, the face value will fluctuate with the separate account's performance, and it (can/cannot) decrease below the original minimum face value.

cannot

A shares (do/do not) convert to B shares.

do not

Awards under arbitration are binding on all parties and (may/may not) be appealed.

may not