Series 66
Tactical asset allocation
An active allocation strategy based on the anticipation of future trends/changes in economic events
During a recession, the sectors that perform the best are:
Consumer staples, utilities, service and financial industries
In order for an individual to be eligible for an HSA, they must be:
- covered under a high deductible health plan (HDHP) - cannot be enrolled in Medicare - cannot be claimed on another individual's income taxes
Broker-Dealer Registration Requirements
- do they have an office in that state? - do they have a retail client residing in that state? - no de minimus exception
When do agents need to register in the state?
- if they originate an OFFER in that state, or - directs an OFFER to that state * based on offers, not retail vs. institutional
Agent of an Issuer
- non-clerical individual who represents an issuer in effecting securities transactions with the public involving the issuer's securities - employee of an issuer is NOT an agent of a BD
Index Strategy
- passive management strategy - IA attempts to match or mirror the performance of a specific index
A federal covered adviser is NOT required to provide a brochure to the following clients:
- registered investment companies, or - clients whose contract is limited to impersonal advisory services for which the client pays less than $500 per year
Broker-Dealer Registration
- registers with state & feds - submits form BD - state registration effective: @ noon, 30 days after filing - renewal @ state: Dec 31st
Section 15 of the Securities Exchange Act of 1934 regulates:
- requires broker-dealers to register with the SEC
What is a 457 plan?
- retirement plan used by many public sector workers - for non-governmental employers - grows tax-deferred - participants in plan can include: members of unions, hospital workers, employees of charitable organizations
Discretion is defined as the authority to decide
- which security - the number of shares or units - whether to buy or sell
For violations of the _____ , a person may be subject to: 1. Investment Advisors Act of 1940 2. Act of 1933 3. USA
1. $10,000 max fine and/or up to 5 years in prison 2. $10,000 max fine and/or up to 5 years in prison 3. $5,000 fine and/or up to 3 years in prison
What are the two main advantages of a limited liability company?
1. The owners cannot be held personally liable for the company's debts 2. The IRS treats limited liability companies the same way as partnerships for tax purposes
Advisory clients must receive a brochure, 1. Under the IA Act of 1940 (federal): 2. Under the USA (state):
1. either before or at the time it enters into an investment advisory contract with a client 2. At least 48 hrs before signing a contract or at the time the contract is being signed (if the client can cancel it without a penalty within 5 days)
As an investment adviser, you are required to record and keep a record of every transaction in a security for a client's account within:
10 days of the end of each quarter, excluding direct obligations of the U.S. government
Under the Uniform Securities Act, an Administrator may deny registration to an agent because of findings that indicate the agent had been convicted of a felony within the past:
10 years
The Dow Jones Industrial Average is considered an index of:
30 Large-capitalized stocks
Under the Uniform Securities Act, the statute of limitations for criminal violations of the Act is:
5 years
What is a Qualified Domestic Relations Order (QDRO)?
A QDRO is a court order that is entered as a part of a property division in a divorce or legal separation that splits a qualified retirement plan or pension plan by recognizing joint marital ownership in the plan.
Broker-Dealer vs. Investment Adviser testimonials
A broker-dealer may use testimonials as long as they disclose whether more than a nominal fee was paid for them. An investment adviser may not use testimonials in its advertising.
Inherited IRA distribution rules
A non-spouse who inherits an IRA & the decedent had not yet reached the age of 70 1/2, may take: - a lump-sum distribution - have the funds distributed over his expected lifetime - or have the funds distributed by the end of the 5th year following the IRA owner's death.
What is an Efficient Portfolio?
A portfolio that offers the highest expected return for the lowest level of risk
Under the Investment Advisers Act, which of the following forms must be filed if an investment adviser has custody of customer funds and securities?
ADV-E
What is the Russell 2000?
An index comprised of 2,000 small- to mid-cap companies.
Under the USA, which of the following choices is considered an offer of securities?
Any security that an investor receives as a bonus for purchasing another security is considered an offer of that security
The benefit of creating an irrevocable trust is that:
Assets will be excluded from the donor's estate
According to Sarbanes-Oxley, a public corporation's financial statements must be certified by the corporation's:
CEO and CFO of the corporation
Agents charge a... Principals charge a...
Commission Markup
Investment instruments not defined as securities include:
Commodity futures contracts, currencies, collectibles, condos (as primary residence), IRAs or Keogh plans, insurance, endowment policies, fixed annuities
What is a money-market instrument?
Debt instruments that have less than one year until maturity
Which of the following statements is a disadvantage of investing in a C Corporation?
Double taxation of income that is paid to shareholders in the form of a cash dividend.
SEC Release 1092
Financial Planners, Pension Consultants, Sports and entertainment reps who provide investment advice to their clients are investment advisers and subject to the Investment Adviser Act.
Market Maker
Firms that act as dealers in offering to buy and sell securities in the secondary market at their own risk.
According to the Uniform Securities Act, investment advisers are required to maintain their books and records for:
Five years with the most recent two years in an appropriate office
One of the main differences between futures contracts and forward contracts is that:
Forward contracts may not be offset without permission (bought or sold)
If the NPV (net present value) of an investment is greater than zero, the investment will provide a return:
Greater than the discount rate used
What is the biggest advantage of investing in a general partnership?
Income is only taxed once
What is the benefit of discounting the cash flows of a fixed-income security?
It compares the price of a bond against the sum of the present values of the bond's future payouts
The major advantage of an S Corporation versus a C Corporation is that an S Corporation:
May elect to be treated like partnerships for federal tax purposes
Categorize stocks by market capitalization
Micro-cap= less than $300m Small cap= $300m and $2b Mid-cap= $2b and $10b Large-cap= more than $10b
According to the Investment Advisers Act of 1940, when must an access person submit a transaction report?
No later than 30 days after the end of each calendar quarter
Which of the following statements is a disadvantage of investing in a C Corporation?
Shareholders pay tax on income that was already taxed to the company
Balance Sheet
Shows a company's assets and liabilities
During recovery, the sectors that perform the best are:
Technology, Industrials and cyclicals
In which of the following situations does the registration of a broker-dealer result in an Administrator automatically registering an individual of the firm as an agent?
The individual is a director of the broker-dealer and is actively engaged in the business of the firm
When determining the risk premium on an investment, an investor would analyze the difference between:
Total return - risk-free rate of return = risk premium. The risk premium is the amount of return earned in excess of the risk-free rate of return (i.e., the return on a T-bill)
True or False: Any sale of securities to an institution (e.g., a bank) is considered an exempt transaction under the USA
True
When must the Annual Update Amendment to Form ADV be filed?
Within 90 days of the adviser's fiscal year-end
Under the Uniform Securities Act, an Administrator who requires the posting of a surety bond MAY:
accept a deposit of cash or securities in lieu of a surety bond.
Underwriter
any person who has purchased from an issuer with a view to selling. Does not include brokerage firms selling to the public for a commission.
Under the USA, it is unlawful for any person to offer or sell a security in a state unless the security is...
either registered or exempt from registration
Securities that are listed on the NYSE, Nasdaq, or other national exchanges are considered federal covered securities and...
exempt from registration with the Administrator
Schedule 13D
filed by any person who acquires more than 5% of the voting stock of a company
Schedule 13F
filed quarterly by advisers that control more than $100mil in equity securities as of the last day of any month
The Uniform Securities Act authorizes the Administrator to waive the surety bond requirement for a broker-dealer if the firm:
if a broker-dealer maintains a sufficient dollar amount of net capital.
Registration by Coordination
is used for interstate (within the state) offerings
According to modern portfolio theory, a diversified portfolio should be comprised of assets that are:
largely uncorrelated--i.e., do not move in the same direction.
What are the three elements required to project the lump sum amount that a person will need at retirement?
life expectancy, inflation rate, and investment return
Agent of a Broker-Dealer
non-clerical individual who represents a BD in effecting securities transactions; must be registered
An issuer's registration statement must be signed by:
the CEO, CFO and a majority of the Board of Directors
Under the Uniform Securities Act, an agent's license is effective for
the time remaining until December 31 of that year at which time it must be renewed. Registrations expire annually on December 31 unless renewed. The initial license will, obviously, be for less than one year
