Session 1 Quizzes

A financial reporter notices that the quoted price of one investment company's shares is at a 22% discount from the NAV. From this information, it can be deduced that the company must be a(n) A. closed-end investment company B. contractual plan of a mutual fund C. open-end investment company D. Unit investment trust

A.

A man owns 15% of the stock of a company. His wife owns 5% of the stock of the same company. If the wife wishes to sell the stock she owns, which of the following statements are TRUE? I. Both the husband and the wife are affiliates. II. He is an affiliate, but she is not. III. She must file under Rule 144. IV. She does not have to file under Rule 144. A. I and III B. I and IV C. II and III D. II and IV

A.

Alice Allison is the president of Podunk University and sits on the board of directors of KAPCO Securities, a broker-dealer registered with the SEC. President Allison A. would be considered an associated person of KAPCO B. would not be considered an associated person of KAPCO C. would be required to register as an agent of KAPCO D. must resign her position at Podunk University in order to remain on KAPCO's board

A.

The Investment Company Act of 1940 prohibits registered investment companies from engaging in any of the following practices EXCEPT A. issuing common stock B. selling short or purchasing securities for the company's portfolio on margin C. owning more than 3% of the outstanding voting securities of another investment company D. opening a joint account with another investment company

A.

The term issuer, as defined in the Securities Act of 1933, would include: I. a government entity issuing exempt securities II. a corporation issuing securities in an exempt transaction. III. an antique dealer selling items from a collection of rare books. A. I and II B. II and III C. III only D. I, II, and III

A.

Under the Securities Exchange Act of 1934, as amended, registration with the SEC would be required of I. a broker-dealer whose business is strictly municipal securities II. a broker-dealer whose business is strictly in non-Nasdaq over-the-counter securities III. a banking institution dealing in municipal bonds A. I and II B. I and III C. II and III D. I, II and III

A.

Which of the following would be considered investment companies under the Act of 1940? I. Face-amount certificate company II. Unit investment trust III. Management company IV. Holding company V. Insurance company A. I, II and III B. I, II, III and IV C. I, II, III and V D. I, II, III, IV and V

A.

A securities order that is initiated by a client is what type of order? A. Nondiscretionary B. Unsolicited C. Discretionary D. Solicited

B.

An agent receives instructions from a client to buy 100 shares of KAPCO common stock at what the agent thinks is the best price. Two days later, the agent enters the order. In this case, the agent has A. acted appropriately B. acted inappropriately C. failed to follow the customer's instructions D. potentially become subject to statutory disqualification

B.

ABC is a FINRA member broker-dealer. Among other functions, it serves as the principal underwriter of the XYZ Mutual Fund. Which of the following transactions of ABC would be prohibited unless exemptive relief was offered by the SEC? A. ABC tenders, from its investment account, 500 shares of the XYZ Mutual Fund for redemption B. ABC purchases, for its investment account, 500 shares of XYZ Mutual Fund. C. ABC purchases some securities directly from XYZ's portfolio. D. All of the above.

C.

All of the following statements regarding a 12b-1 company are true EXCEPT A. the plan must be initially approved by at least a majority of the outstanding voting securities of the investment company B. the plan must be renewed by a majority of the fund's directors C. the plan may be terminated by a vote of the majority of shareholders or a majority of the board of directors D. the rule only applies to open-end investment companies

C.

How do close-end investment companies differ from open-end investment companies? I. Closed-end companies register their shares with the SEC; open-end companies do not II. The only time a prospectus is used with the sale of a closed-end company is on the IPO; sale of open-end shares must always be preceded or accompanied by a prospectus III. Closed-end companies issue a fixed number of shares; open-end companies continuously issue new shares. IV. Closed-end companies may only sell shares to institutional investors; open-end companies can sell to any investor. A. I and II B. I and IV C. II and III D. III and IV

C.

Provisions under the Securities Exchange Act of 1934 include all of the following EXCEPT A. requiring that all issues listed on a national securities exchange be registered with the SEC B. prohibiting manipulative practices such as wash trades and misleading statements C. requiring full disclosure regarding an upcoming IPO D. requiring registration of transfer agents

C.

Under which of the following circumstances would a purchase of mutual fund shares at a price below the public offering price be allowable? I. The purchase is made by the designated agent of an incorporated investment club that reaches the breakpoint. II. A parent buys enough to reach the breakpoint but places half the order in his account and the other half in an account for which his wife is designated as custodian for their son. III. The receptionist for the XYZ Growth Fund purchases $100 of that fund. IV. A financial planner bunches his clients' orders and turns them in as one in an amount sufficient to reach the breakpoint A. I and II B. I and III C. II and III D. II, III and IV

C.

Under the Securities Act of 1933, which of the following is NOT a security? A. A convertible bond B. A stock warrant C. A stock right D. A term life insurance policy

D.

Which of the following statements about accredited investors is TRUE? A. Taxpayers who report an income in excess of $200,000 on a joint return in each of the last two years and who reasonable expect the same for the current year are included in the definition. B. An officer, director, or greater than 10% shareholder of any company listed on the NYSE would be considered an accredited investor for purposes of acquiring a private placement your firm is selling C. The term includes an employee benefit plan with assets in excess of $2 million. D. Purchases of securities by accredited investors do not count toward the 35-investor limitation found in Rule 506(b) of Regulation D

D.

Which of the following statements correctly expresses requirements under the Investment Company Act of 1940? I. A registered open-end investment company using a bank as a custodian must choose one that has FDIC coverage. II. If an affiliated person of a registered investment company wishes to borrow money from the fund, there must be at least 300% asset coverage. III. No investment advisory contract may be entered into that does not provide for termination with no more than 60 days notice in writing. IV. No registered investment company may acquire more than 3% of the shares of another investment company. A. I and II B. I and IV C. II and III D. III and IV

D.