Series 66 Mix Questions Wrong
A REIT and a direct participation program are similar because they both A) are operated by a centralized management. B) can be described as a limited partnership. C) are traded actively in the secondary market. D) pass through losses to investors.
A
Which of the following statements regarding credit risk is not true? A) An A-rated mortgage bond has less credit risk than a AA rated debenture. B) Credit risk is the probability of the issuer defaulting on their payment obligations. C) Credit risk can be assessed by referring to the independent credit rating agencies. D) A rating downgrade may or may not result in a lower market price for a bond
A
With respect to safety of principal, of the following investments, the least risky is A) corporate AA debentures. B) equity options. C) common stock. D) exchange-listed warrants
A
XYZ Corporation's A-rated convertible debenture is currently selling for 90. If the bond's conversion price is $40, what is the parity price of the stock? A) $36.00 per share B) $44.00 per share C) $40.00 per share D) $22.50 per share
A
A prospect has primary investment objectives of current income and safety of principal. During the initial public offering of a closed-end government bond fund, an agent explains to the prospect that the fund invests in U.S. government-backed bonds, which are very safe as to principal, and plans to make monthly distributions. Little could therefore go wrong. Taken as a whole, this representation is A) accurate because the fund offers current income. B) misleading because closed-end fund shares are subject to market pricing. C) accurate because the fund invests in government bonds. D) misleading because government bonds experience considerable credit risk.
B
All of the following are considered to be equity securities EXCEPT A) warrants B) equity-linked notes C) exchange-traded funds D) unit investment trusts
B
An elderly widower explains to his investment adviser representative (IAR) that he requires his investments to provide the maximum current income. The IAR should recommend A) a widow fund, structured specifically for this type of investor. B) a growth fund. C) a mutual fund that matches the investor's stated objective. D) a zero-coupon bond
B
Long Range Planning (LRP) is a covered investment adviser doing business in all 50 states. Fred is an IAR with LRP and splits his time between an office in State A and State D. Fred has retail clients as follows: 16 clients in State A 12 clients in State B 6 clients in State C 4 clients in State D Fred would have to register as an IAR in A) States A, B, and C. B) States A and D. C) States A and C. D) States B and C.
B
Under the Uniform Securities Act, most books and records of investment advisers must be maintained for A) two years. B) five years, the first two in the firm's principal office. C) one year. D) three years, the first two in the firm's principal office.
B
What is true? A person with a place of business in the state who transacts business exclusively with banks and savings institutions is not an investment adviser under the USA. A person excluded from the definition of investment adviser under the IAs Act of 1940, who offers investment advice to individual investors residing in this state and has less than $25 million in assets under management, is subject to the jurisdiction of the state Administrator. A person included in the definition of an investment adviser under the IAs Act of 1940, who manages funds on a regular basis as a business headquartered in a state, is subject to payment of filing fees required by the state Administrator. BDs who supply incidental investment advice and make securities recommendations to customers who pay commissions for the execution of their trades are not IAs subject to state or fed registration. A) II,III B) III, IV
B
Which of the following is NOT registered with the SEC under the Investment Company Act of 1940? A) Open-end investment companies B) Exchange-traded notes C) Unit investment trusts D) Exchange-traded funds
B
Which of the following statements are not true? A broker-dealer must be a firm or corporation (legal person) as opposed to a natural person (human being). An investment adviser must be a firm or a corporation as opposed to a natural person. An investment adviser representative (IAR) cannot, under any circumstances, be employed by a registered broker-dealer. A) I and III B) I, II, and III C) I and II D) II and III
B
Which one of the following option positions would generally command the greatest time value? A) Straddles B) LEAPS C) Puts D) Calls
B
While listening to a commentator on cable TV, you hear the statement, "The flight to quality has ended." What would you expect the effect of this to be? A) Yield spreads are widening. B) Yield spreads are narrowing. C) Airline stocks are in for a beating. D) Pessimism is spreading.
B
An intrastate offering is exempt from A) all registrations. B) blue-sky registration. C) federal registration. D) state registration.
C
One of the potential effects of a mutual fund's portfolio manager having poor investment results might be A) failure to renew the bi-annual management contract. B) a restriction on the sale of new shares. C) net redemptions. D) the redemption price of the fund shares dropping below their net asset value per share.
C
Three years ago, an investor purchased 1,000 shares of stock in the Equity Protective Life Insurance Company (EPLIC). The purchase price was $53 per share. The current market value of EPLIC stock is $79 per share. If the investor is in the 24% federal income tax bracket, it is correct to state that A) the investor's tax liability is $3,900. B) the investor owes tax on a $26,000 long-term capital gain. C) no tax is owed by the investor. D) the investor owes tax on a $26,000 short-term capital gain.
C - unrealized
A European corporation seeking a short-term loan would probably be most concerned about an increase to A) the eurobond rate. B) the Fed funds rate. C) the U.S. Treasury bill rate. D) the SOFR.
D
A REIT is able to pass-through which of the following? A) Unrealized capital gains B) Losses from active activity C) Losses from passive activity D) Taxable income from operations
D
One of your customers received a $5,000 year-end bonus. You explain that the bonus is really worth $3,250 in after-tax funds. This is because A) the customer's effective tax rate is 35%. B) the customer's marginal tax rate is 65%. C) the customer's median tax rate is 35%. D) the customer's marginal tax rate is 35%.
D
The Uniform Securities Act authorizes the Administrator to make certain demands of broker-dealers. In general, the Administrator would not require a broker-dealer to A) promptly file a correcting amendment to any document on file with the Administrator that becomes inaccurate or incomplete in any material respect. B) file various financial reports. C) publish an announcement of the application for registration in a newspaper published in the state. D) post a surety bond if the broker-dealer does not have investment discretion over client accounts or does not maintain custody of customer funds and/or securities.
D
Which of the following are characteristics of commercial paper? It represents a loan by the holder to the issuer. It is a certificate of ownership in the corporation. It is commonly issued to raise working capital for a corporation. It is junior in preference to convertible preferred stock. A) II and IV B) II and III C) I and IV D) I and III
D
Which of the following would not be an issuer? A) A partnership selling partnership interests B) A governmental agency borrowing money for short-term needs C) An investment company D) A corporation selling certificates of interest in a mining lease
D
DERP Corporation has issued 5% convertible debentures maturing in 2040. The conversion price is $40 and the common is currently trading at $48 per share. One would expect the DERP debentures to be selling somewhat A) below $1,200. B) above $1,000. C) below $1,000. D) above $1,200.
D - convertibles trade a bit above their parity price (1200 in this case)
Components of a company's net worth would include all of these except A) goodwill. B) fixed assets. C) inventory. D) operating income.
Operating Income
A potential investor in mutual funds is bewildered by the different share classes. You are asked for advice. When comparing Class A, B, and C shares, it would be fair to state that all of the following are features unique to Class A shares except A) the method of calculating the redemption price. B) rights of accumulation. C) breakpoints. D) low or no 12b-1 charges
A
Advisers that manage $110 million or more in customer assets are required to do which of the following? Register with the Securities Exchange Commission. File notice with FINRA. Post a bond in an amount specified by the appropriate regulatory body. File notice with the state in which their principal office is located if notice filing is required by the Administrator. A) I and IV B) I and III C) II and III D) II and IV
A
An agent has recommended investments in the XYZ fund family to his customers for 10 years. He is referred by one of his customers to a prospect who has inherited $500,000 as beneficiary of a life insurance policy. The prospect tells the agent she has never invested in the market before, is risk averse, and wants safety of principal to be the first priority with liquidity second. The agent recommends the following investments: XYZ government bond fund, B shares $200,000 XYZ large-cap growth and Income B shares $150,000 Liquid reserve money market $150,000 The recommendation is A) unsuitable because it does not address the customer's two primary objectives. B) suitable because it addresses the customer's safety objective. C) suitable because he recommended conservative investments. D) suitable because it addresses the customer's liquidity objective.
A
An investor has a portfolio diversified among many different asset classes. If there was an immediate need for cash, which of the following would probably be the most liquid? A) QRS Money Market Mutual Fund B) XYZ International Stock Mutual Fund C) Cash value from a universal life insurance policy D) CDL Common Stock Mutual Fund
A
It would not be a violation of the Uniform Securities Act for an applicant for registration as an agent to do which of the following while the application is pending? A) Sell fixed annuities B) Use a preliminary prospectus to obtain indications of interest for a new issue but wait until he is registered before accepting any orders C) Limit his sales activity to immediate family members only D) Conduct seminars on asset allocation
A
Kapco Investment Advisers currently has $18 million in assets under management and has offices in Colorado and Utah. Kapco's only clients in Utah are two insurance companies domiciled in that state. Kapco has no office in Washington but does service the accounts of three middle-class individuals. Kapco recently opened an advisory account for a pension plan for a corporation located in Montana. Under the Uniform Securities Act, Kapco would have to register with the Administrator in which states? Colorado Montana Utah Washington A) I and III B) I and IV C) III and IV D) I and II
A
Prosperity Asset Partners (PAP) is organized as a general partnership. PAP is registered in four states. All of the following statements regarding the NASAA investment adviser brochure model rule are true except A) the disclosure brochure must be signed by either an officer or a general partner of Prosperity Assets Partners. B) the disclosure brochure must be delivered no later than 48 hours before entering into an advisory contract for there to be no requirement to offer a 5-day refund right. C) the disclosure brochure must contain essentially the same information as is contained in Form ADV, Part 2A and, if applicable, Part 2B. D) the brochure rule permits advisers to deliver the disclosure brochure when the client enters the contract, provided the client is allowed to cancel the contract without penalty within 5 business days.
A
The SEC requires investment advisers registered under the Investment Advisers Act of 1940 to maintain certain books and records for a minimum of A) five years. B) one year. C) three years. D) six years.
A
The issuance of a long-term debt instrument, such as a bond, by a company would have an immediate effect on which of the following balance sheet items? Total assets Total liabilities Working capital Shareholders' equity A) I, II, and III B) I, III, and IV C) II, III, and IV D) I, II, and IV
A
Under the NASAA Model Rule on financial requirements for investment advisers, unless an exception exists, investment advisers who have discretionary powers but not custody of customer funds are usually required to have a net worth in the amount of A) $10,000. B) $35,000. C) $5,000. D) $50,000
A
Under the Securities Exchange Act of 1934, which of the following statements regarding reports required to be filed with the SEC is true? A) Institutional investment managers who exercise discretion over accounts valued at $100 million or more of 13(f) securities must file reports quarterly. B) Institutional investment managers who manage accounts valued at $100 million or more of 13(f) securities must file reports quarterly. C) An investment adviser's access persons must each submit a holdings report no later than 30 days after the person becomes an access person. D) An investment adviser's access persons must submit to the chief compliance officer or other persons designated in the firm's code of ethics annual securities transactions reports within 30 days of the end of the year.
A
Under the Securities Exchange Act of 1934, which of the following would not be grounds for disqualification of a broker-dealer's registration? A) Being sued by a client B) Prohibition by court order from practicing as an investment adviser C) Violating a securities act D) Conviction of misappropriation of client funds
A
Under the Uniform Securities Act, a nonexempt transaction may take place in the state only if A) the security is registered, exempt, or federal covered. B) the security is sold in an exempt transaction. C) it is offered privately to no more than 10 individuals in any 12-month period. D) it is between institutions.
A
Which of the following is most likely to be the most important factor in determining whether market manipulation has occurred? A) The intent of the action B) The market in which the action took place C) The scope of the action. D) The type of security.
A
Which of the following statements correctly expresses requirements under the Investment Company Act of 1940? A) No investment advisory contract may be entered into that does not provide for termination with no more than 60 days' notice in writing. B) No registered investment company may acquire less than 3% of the shares of another investment company. C) Renewal of the advisory contract can only be done with majority vote of the fund's board of directors. D) A registered open-end investment company using a bank as custodian must choose one that has FDIC coverage.
A
An Administrator could use which of the following as a reason for issuing an order denying the registration of a security? The issuer's enterprise or method of business includes or would include activities that, although legal in the state of incorporation, are illegal in the Administrator's state. The company has not been paying dividends. The offering would be made with unreasonable amounts of underwriter and seller discounts. A) III only B) I and III C) I only D) I, II, and III
B
An agent who carefully evaluates a client's risk tolerance, financial situation, and investment objectives engages in an unethical practice when he A) underestimates a company's interest rate risk as a result of cautious accounting practices recently adopted by the company. B) automatically recommends securities that are highly regarded by other agents in the office. C) fails to discuss a company's working capital position (because the client does not want to be bothered by details) if the securities are fundamentally suitable for his portfolio. D) buys or sells securities with exceptionally high commissions or transaction costs.
B
An individual who has passed the NASAA examination for registration as an investment adviser representative may begin soliciting advisory clients A) within 48 hours. B) when informed by the investment adviser that the representative's registration is effective. C) immediately. D) when informed by the Administrator that the representative's registration is effective.
B
An investment adviser representative for ABC Money Managers, a wholly owned IA subsidiary of ABC Securities, Inc., sold 1,000 shares of registered securities traded on the NYSE owned by one of her advisory clients to another one of her advisory clients. ABC Securities charged commissions for both the buyer and the seller of these securities. This is known as A) a prohibited practice. B) an agency cross transaction. C) a fraudulent practice. D) an arbitrage transaction.
B
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, A) Marjorie would be required to complete an application for IAR registration with State Z. B) Marjorie would automatically be registered as an IAR in State Z. C) because DEF is a state-registered investment adviser, Marjorie could only register in State Z if she is a resident of the state. D) Marjorie's registration as an IAR in State Z would become effective after passing the Series 65 or Series 66 exam.
B
In designing a client's portfolio, a registered investment adviser representative of Greater Wealth Advisory Services recommends the purchase of several stocks from the inventory of Greater Wealth's wholly owned broker-dealer. Under the Investment Advisers Act of 1940 this activity requires written: A) consent of and the disclosure to the client prior to execution of the transaction. B) disclosure to the client and consent prior to completion of the transaction. C) consent of the client. D) disclosure to the client.
B
Pontourny Advisory and Investment Services (PAIS) is a federal covered investment adviser. Its principal office is in State X. PAIS also maintains branch offices in States Y and Z. Brenda is the manager of the branch office in State Y. Some of the individuals being supervised by Brenda have clients in States X and Y, and others have clients in States Y and Z. Brenda must register as an IAR in A) States X, Y, and Z. B) State Y. C) States Y and Z. D) States X and Y
B
Shareholders of mutual funds have all of the following rights except A) voting proxies. B) the right to vote on the selection of specific securities for the portfolio. C) voting rights. D) receiving semiannual reports.
B
Three years ago, one of your clients invested $100,000 into the newly formed GHI Corporate Bond UIT. Another client invested $100,000 into the JKL Corporate Bond Fund, an open-end investment company. At that time, both investments were yielding about 7%. Today, the yield on corporate bonds of comparable quality is 5%. Therefore, one would expect that A) both investors are receiving approximately the same current income. B) the investor owning the UIT is receiving more current income than the investor owning the bond fund. C) the investor owning the bond fund is receiving more current income than the investor owning the UIT. D) the management fee on the GHI UIT is higher than that of the JKL fun.
B
Under federal law, an application for becoming an associated person of a broker-dealer would be denied for an individual A) who is not a citizen of the United States. B) pleading no contest to a misdemeanor involving a financial matter 65 months ago. C) convicted of a felony 122 months ago. D) accused of a securities-related felony 110 months ago.
B
Under the Uniform Securities Act, all of the following are exempt from state registration as investment advisers except A) investment adviser representatives. B) financial planners who provide fee-based investment advisory services to clients. C) investment advisers with no office in the state who only advise employee benefit plans with assets of more than $1 million. D) publishers of financial publications that are not addressed to clients' specific individual investment situations
B
Under the Uniform Securities Act, an exemption from registration is available to a security listed on any of the following except A) the NYSE American LLC (formerly known as the American Stock Exchange [AMEX]). B) the Montreal Stock Exchange. C) the New York Stock Exchange. D) the Nasdaq Stock Market.
B
Under the Uniform Securities Act, the definition of sale includes which of these? Bona fide gifts of securities Giving a security as a bonus with any purchase Exercising a right to convert one security into another Preliminary agreements between issuers and underwriters A) II, III, and IV B) II and III C) III and IV D) I and II
B
Washington, Adams, and Jefferson, Inc., (WAJI) is an investment adviser whose principal and only office is in Alexandria, VA. WAJI's sole business is advising institutional investors. Rutherford Buchanan is employed by the firm in the main office and has the responsibility of servicing the firm's bank and insurance company clients. Which of the following statements is correct regarding Rutherford's licensing requirements? A) Rutherford is exempt from registration because his only clients are institutions. B) Rutherford must register as an IAR of WAJI with the State of Virginia. C) Rutherford is exempt from registration because he has fewer than six retail clients. D) Rutherford cannot register as an IAR of WAJI because providing advice exclusively to institutions exempts the firm from registration.
B
What document must accompany an initial registration application for those individuals required to register as agents under the Uniform Securities Act? A) State photo identification B) Consent to service of process C) Proof of U.S. citizenship D) A birth certificate confirming the registrant is over 18 years of age
B
A federal covered registered investment adviser who receives compensation for advice and whose business is primarily as an investment adviser may describe his business as investment counsel if A) it receives SEC approval to use the definition. B) it maintains custody of customer funds and/or securities. C) a substantial part of his business is providing investment supervisory services. D) it maintains its registration by filing an updating amendment to its Form ADV annually.
C
A state-registered investment adviser maintains custody of client funds and securities. On Thursday, the chief financial officer of the firm informs the chief compliance officer that their net worth is $31,578. Under the provisions of the Uniform Securities Act, the firm would A) do nothing, as their net worth is far in excess of the minimum requirement of $10,000. B) need to increase its net worth. C) send a detailed financial report to the Administrator by the close of business Monday. D) send a detailed financial report to the Administrator by the close of business Friday.
C
According to the ethical guidelines set forth in the NASAA Statements of Policy and Model Rules, which of the following statements regarding discretion are correct? An agent of a broker-dealer must have written discretionary authorization prior to effecting discretion in a client's account. An agent of a broker-dealer must receive written discretionary authorization within 10 business days of the first discretionary transaction in the account. An investment adviser representative must have written discretionary authorization before effecting discretion in a client's account. An investment adviser representative must receive written discretionary authorization within 10 business days of the first discretionary transaction in the account. A) I and III B) II and IV C) I and IV D) II and III
C
An agent mistakenly sold an unregistered, nonexempt security to a customer. Which of the following actions should the broker-dealer take? Offer to buy the security back from the customer. Ask the customer to sign a customer agreement. Register the stock by notification. Offer to pay interest at an annual rate determined by the Administrator, less income paid, from the date the security was purchased. A) I, II, III, and IV B) I and III C) I and IV D) II and III
C
An individual has been hired by a person to assist in the selling of securities it is issuing to residents of State A. The individual would be defined as an agent under the Uniform Securities Act if the issuer is A) a trust company organized and supervised under the laws of State B. B) the city of Saskatoon, Saskatchewan (Canada). C) a credit union organized and supervised under the laws of State A. D) issuing commercial paper in minimum denominations of $100,000 with a AA rating and a six-month maturity.
C
An investment adviser runs an advertisement in the business section of the local newspaper. The ad describes the nature of the firm's model portfolio and indicates that it has outperformed the overall market by 800% over the past 10 years, and the firm therefore guarantees that clients will more than keep pace with inflation. At the bottom of the ad, in smaller print, is the following statement: "Results are not guaranteed. Past performance is not indicative of future results. These results are not normal and cannot be expected to be repeated." This is an example of A) a properly worded disclaimer. B) a violation of an investment adviser's fiduciary responsibility. C) an improper hedge clause. D) a wrap fee account.
C
An investment adviser to a private fund wishes to qualify for the exemption offered under the Uniform Securities Act when the fund has no more than 100 investors. In order to qualify, A) the private fund adviser must have less than $110 million in private fund assets under management. B) neither the private fund adviser nor any of its advisory affiliates have been convicted of a felony within the past 12 years. C) every investor must have either at least $1.1 million in assets managed by the investment adviser or a net worth, excluding the value of the primary residence, in excess of $2.2 million. D) the fund's outstanding securities are owned exclusively by persons who, at the time of acquisition of such securities, are individuals with at least $5 million in investments.
C
An investment adviser who has custody of customer funds and securities discovers that her net worth has dropped below the required minimum under the rules of the state Administrator. Under NASAA rules, the adviser must do which of these? Notify the Administrator by close of business after the day of discovery. File a report of its financial condition no later than close of business the day after notification. Include in the report of financial condition a statement as to the number of client accounts. Cease doing business. A) I only B) I and IV C) I, II, and III D) I, II, III, and IV
C
An investment adviser with no place of business in the state is exempt from registration with the state when making recommendations to all of the following except A) St. Amelia's college endowment fund. B) Amalgamated Bank. C) exclusively individual residents of the state who are accredited investors, specifically regarding new issues of exempt securities not registered in that state. D) AAA Manufacturing Co., with respect to the quality of investment bankers available for an underwriting of AAA securities.
C
Bail Bonds, Inc., might issue warrants in connection with a bond issue for which of the following reasons? As an inducement to make the bonds more marketable To lower their interest cost on the issue To increase the marketability of their common stock To increase the number of common shares outstanding A) I, II, III, and IV B) I and IV C) I and II D) I only
C
DERP Corporation's 5% convertible debentures maturing in 2030 are currently selling for 120. The conversion price is $40. One would expect the DERP common stock to be selling A) somewhat above $48 per share. B) somewhat below $30 per share. C) somewhat below $48 per share. D) somewhat above $30 per share.
C
Delta Advisers is registered in Alabama, Mississippi, and Louisiana. Billy Joe works for Delta Advisers rendering investment advice to individual clients. He works out of Delta's Jackson, MS office and has 3 clients in Mississippi, 6 clients in Alabama and 4 in Louisiana. Billy's friend, Bobby Ray, works for Biloxi Investments, a federal covered adviser with offices in several cities in Mississippi. Bobby Ray works out of the Tupelo, MS office and has 45 retail clients in Tennessee, 4 in Georgia, and 6 in Alabama. With regards to registration as an IAR, which of the following statements is TRUE? A) Billy Joe must register in MS and AL and Bobby Ray must register in MS, TN, and AL. B) Billy Joe and Bobby Ray must register in MS only. C) Billy Joe must register in MS and AL and Bobby Ray must register in MS. D) Billy Joe must register in AL and Bobby Ray must register in MS, TN, and AL.
C
Fast Execution Services (FES), a registered broker-dealer, provides investment advice as an incidental part of its commission business. Madeleine, an agent registered with FES, charges for investment advice as a freelance investment adviser outside the scope of her employment at the firm. Which of the following statements are true? FES must register as an investment adviser. Madeleine must register as an investment adviser. Madeleine need not register as an investment adviser. FES need not register as an investment adviser. A) III and IV B) I and II C) II and IV D) I and III
C
It is unlawful for a state-registered investment adviser to do any of the following except A) unilaterally transfer an account to another firm if the assets fall below a minimum level. B) share in the profits of an account in relation to the amount of time devoted to the account. C) take custody of a client's securities and funds, in the absence of a rule on custody by the state Administrator. D) fail to disclose the departure of a general partner of an investment advisory partnership who only had a minority interest in the firm.
C
Mountain High Securities is a broker-dealer registered in Wyoming and Colorado with its principal office located in Colorado. With reference to the Uniform Securities Act, it would be correct to state that A) it is required that any broker-dealer meet the recordkeeping requirements of each state in which they are registered. B) the Administrator of Colorado would have to approve of the broker-dealer's method of recordkeeping. C) Mountain High Securities must meet the recordkeeping requirements of the SEC. D) meeting the recordkeeping requirements of Colorado is sufficient even if those of Wyoming are more stringent.
C
One of the likely consequences of a rating downgrade on a bond is A) the current yield will be reduced. B) the call feature will be employed. C) a reduction in the market price of the bond. D) an increase to the coupon by the issuer
C
One reason for including commodities in an investment portfolio is because they have a high correlation to A) the U.S. dollar. B) the stock market. C) the inflation rate. D) the bond market
C
One type of alternative investment considered to be a pooled investment vehicle is the inverse exchange-traded fund (ETF). Inverse ETFs, also known as bear or short funds, are managed to A) be used only by professional traders and market makers. B) be profitable only when interest rates are rising. C) perform contrary to a benchmark market index such as the S&P 500. D) outperform a benchmark market index such as the S&P 500.
C
Which of the following are characteristics of negotiable jumbo CDs? Issued in amounts of $100,000 to $1 million or more Typically pay interest on a monthly basis Always mature in one to two years with a prepayment penalty for early withdrawal Trade in the secondary market A) II and IV B) II and III C) I and IV D) I and III
C
Which of the following are required in order to be in compliance with the recordkeeping requirements of the Uniform Securities Act? Broker-dealers must maintain customer ledgers for three years. Investment advisers must keep partnership records for three years after the partnership is terminated. Agents must keep customer records for three years. Investment adviser representatives must maintain records for five years. A) II and IV B) III and IV C) I and II D) I, II, III, and IV
C
Which of the following statements is true regarding the jurisdiction of the SEC under the Securities Exchange Act of 1934? The SEC has jurisdiction over exchanges and SROs. The SEC has jurisdiction over broker-dealers, investment advisers, and associated persons that are required to be registered under federal law. The SEC has jurisdiction over banks and savings and loans regarding their securities activities. A) I, II, and III B) II only C) I and II D) I only
C
Which of the following statements regarding the economics of fixed-income securities are true? Short-term interest rates are more volatile than long-term rates. Long-term interest rates are more volatile than short-term rates. Short-term bond prices react more than long-term bond prices given a change in interest rates. Long-term bond prices react more than short-term bond prices given a change in interest rates. A) II and III B) I and III C) I and IV D) II and IV
C
A client opens a discretionary account with an IAR over the phone and tells her to buy 3,000 shares of any technology stock that she thinks is suitable. One month later, the stock has dropped and the IAR determines that it is time to cut the losses and get out of the stock. In checking the records, the IAR discovers that the written discretionary authorization form has not yet been received. Under the NASAA Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, the IAR should A) sell the shares relying on the client's oral authorization to use discretion. B) attempt to get permission to sell from her supervisor. C) sell the shares immediately because that is in the client's best interest. D) contact the client and indicate that the firm cannot act with discretion until the authorization form is received.
D
A mutual fund's computed NAV on April 24 was $100 per share. On April 25, the portfolio realized gains of $2 per share and enjoyed $1 per share in unrealized appreciation. What would the NAV be on April 26 assuming an unchanged market? A) $103 per share B) $102 per share C) $100 per share D) $101 per share
D
According to the Investment Advisers Act of 1940, which of the following statements regarding Part 2 of Form ADV are true? It must be filed with the state Administrator. A balance sheet must be submitted if the adviser collects prepaid fees of more than $1,200, six or more months in advance. Certain minimum business and education qualifications must be met before an investment adviser can file. It may be used to satisfy the brochure requirements of the act. A) I, II, and III B) I, II, and IV C) I and IV D) II and IV
D
An investor receives a prospectus for a management investment company. In the section on purchasing shares, it states that investors purchase shares at the next calculated net asset value per share (NAV). Furthermore, when shares are redeemed, the investor receives the next calculated NAV after receipt of the redemption request. The prospectus details a number of expenses, including management and custodial fees. There is also a 0.15% 12b-a charge. More than likely, the investor is reading the prospectus of A) a back-end load fund. B) a front-end load fund. C) a closed-end fund. D) a no-load fund.
D
An investor who is long XYZ stock would consider going long an XYZ call to A) hedge the long position. B) obtain income from the premium. C) protect against a decrease in the market price of XYZ stock. D) protect against an increase in the market price of XYZ stock
D
As an incentive to encourage clients to invest in a particular stock recommended by the broker-dealer, clients are told that anytime within six months after the purchase date, they may sell the stock back to the firm at original cost plus interest at the state's legal rate. This would be A) an offer that could only be made to accredited investors. B) a prohibited guarantee against loss. C) a violation of the antifraud provisions of the Uniform Securities Act. D) a right of rescission.
D
Based on the Investment Advisers Act of 1940, which of the following would be excluded from the definition of investment adviser? A lawyer who advertises financial planning services Persons whose advice relates solely to government securities An accountant who receives separate fees for providing investment advice A) I and III B) I only C) II and III D) II only
D
If Perfect Pasta, Inc., a privately held company in Illinois that owns four restaurants, wants to issue shares to public investors who are residents of Illinois, the company A) must register by coordination. B) is exempt from registration because there are fewer than 10 restaurants in the state. C) may issue shares under the notice filing procedure available for covered securities. D) must register by qualification.
D
KAPCO Securities is a broker-dealer registered with the SEC, doing business throughout the Midwest. KAPCO must meet the net capital requirements of A) the state with the highest net capital requirements of the states in which it does business. B) each state in which they do business. C) the state in which its principal office is located. D) the SEC, even if one or more of the states in which they are registered has a higher net capital standard.
D
Miranda is an employee of the First National Bank of State D. The bank is raising additional capital through an offering of 1 million new shares of common stock. Miranda will be paid a generous commission on all retail sales of the stock. Under the Uniform Securities Act, A) Miranda must limit her sales to existing customers of the bank. B) First National Bank of State D must register as a broker-dealer in order to pay employees a commission based on the sale of securities. C) Miranda must register as an agent in order to receive commissions. D) Miranda is excluded from the definition of an agent.
D
Rachel is an agent registered with a broker-dealer in this state. It would be prohibited for her to A) disclose to a client that a transaction in a thinly traded stock will result in a higher-than-normal commission. B) execute a transaction in a discretionary account after having received the necessary documentation. C) share in the profits and losses in a client account without a financial contribution to the account. D) solicit sales of a nonexempt security whose registration is not yet effective. Explanation
D
Sally is registered as an agent with ABC Securities Co., a major brokerage house with offices in most states. ABC recently introduced a fee-based asset management program and has asked Sally to devote one hour per day soliciting her existing clients for this program. Under the USA, Sally would A) only be permitted to solicit those clients who currently have discretionary accounts with ABC. B) not be required to obtain any additional licensing beyond her agent's registration. C) be required to obtain registration as a registered investment adviser. D) be required to obtain registration as a registered investment adviser representative.
D
Sarah has passed her Series 6 qualification exam but not the Series 63. As Jack's assistant, Sarah has frequent telephone contact with Jack's customers, to whom she provides account information and current stock quotes. In this situation, Sarah is A) in violation of the Uniform Securities Act. B) in violation of the Securities Exchange Act of 1934. C) in violation of the Securities Act of 1933. D) not in violation of any applicable statutes.
D
The bond document that states the issuer's obligation to pay the investor a specific rate of interest for the use of the funds as well as any collateral pledged as security for the loan and all other pertinent details might be referred to by all of these terms except A) the bond contract. B) the deed of trust. C) the indenture. D) the debenture.
D
Under NASAA's Model Rule on Unethical Business Practices of Investment Advisers, Investment Adviser Representatives, and Federal Covered Advisers, which of the following statements regarding investment advisory fees is true? Advisory fees may be any amount, provided the client has agreed in writing to the fees and disclosure has been made that the fees may be much higher than those charged by other advisers for the same service. Advisory fees are not regulated for sophisticated clients. Advisory fees must bear a relationship to the amount of time the adviser devotes to the client's account. Advisory fees may be considered unreasonable if they are not comparable to fees charged by other advisers for the same advisory services. A) I and II B) II and III C) I, II, and III D) IV only
D
Under the Uniform Securities Act, the Administrator is empowered to do all of the following except A) issue a cease and desist order. B) publish information relating to violations committed in the state. C) require an agent to submit a written statement relating to an investigation. D) file a civil suit against a broker-dealer who has sold an unregistered nonexempt security to a resident of this state.
D
Under the Uniform Securities Act, which of the following types of transactions can be entered into legally with unregistered, nonexempt securities? A) Public offering of stock in a new corporation B) Solicited transactions with individual clients located within the state C) Rights offering to existing shareholders with underwriting compensation of $0.05 per share to the soliciting broker-dealers D) Private placement offered to more than 50 institutional purchasers in the state
D
Which of the following best describe the balance sheet formula? Assets minus liabilities equals net worth. Sales minus expenses equals operating income. Liabilities plus equity equals assets. Dividends plus retained earnings equals net income. A) I and IV B) II and IV C) II and III D) I and III
D
Which of the following must register as a broker-dealer under the USA? A) A broker-dealer with no place of business in the state that effects transactions exclusively with issuers of securities in that state B) A broker-dealer with no place of business in the state that deals exclusively with broker-dealers with offices in that state C) A broker-dealer with no place of business in the state that has directed offers to clients who have more than 30 days' temporary residency in the state D) A broker-dealer with a place of business in the state that effects transactions exclusively with broker-dealers registered in other states
D
Which of the following persons must register as an investment adviser under the Uniform Securities Act? A) An investment adviser representative with no place of business in the state who has dealt with seven retail clients during the most recent 12 months B) An investment adviser whose advice is limited to securities issued or guaranteed by the U.S. government and who has three places of business in the state C) An accountant who makes no pretense of providing investment advisory services but gives incidental advice to clients as a small part of accounting services provided D) An investment adviser who only serves institutional clients and whose only office is in this state
D
Which of the following statements concerning international direct investing is correct? A) Foreign markets are usually mature and offer no growth advantages. B) The addition of foreign securities to a portfolio may result in increased portfolio risk due to the different movements of foreign markets and U.S. markets. C) The rates of return on foreign securities are generally less than those available from U.S. markets. D) Information is not as readily available on foreign investments as on domestic ones.
D
Which of the following would be included in the USA's definition of an agent? A) An individual employed by an issuer. B) A sales assistant of an agent who is responsible for mailing trade confirmations to the agent's clients. C) A broker-dealer selling nonexempt securities to its customers. D) A research analyst for a broker-dealer who maintains a limited retail customer base.
D
As written in the IAs Act of 1940, a "person associated with an IA" is any partner, officer, or director of such investment adviser (or any person performing similar functions), or any person directly or indirectly controlling or controlled by such IA, including any employee of such IA. Persons associated with an IA whose functions are clerical or ministerial are not included in this definition. Based on that definition, all of the following would be associated persons except A) an individual employed by an IA to solicit new advisory clients, compensated at a rate of $500 for each new account. B) a senior officer of an IA responsible for marketing the adviser's services as opposed to making inv. advisory decisions. C) a silent partner in an advisory firm organized as a GP. D) an employee of the firm with a degree in communications whose job is the graphic design of the investment adviser's research publications.
D - graphic design is a clerical function
