Which of the following about the prospectus of open-end investment companies is CORRECT?
[A] The prospectus is subject to SEC approval.
[B] The RR may highlight the risks listed in the prospectus for the customer to read.
[C] The prospectus is identical t
D
...
C
The names and contact information for customers of a broker/dealer
[A] can be shared with the consent of each individual client.
[B] can only be shared with charitable organizations.
[C] may not be shared with anyone under any circumstances.
[D] may be sh
A
As inflation increases over time, the best hedge against it has historically been provided by which of the following types of securities?
[A] Common stocks
[B] Preferred stocks
[C] Government Securities (T-Bonds, etc.)
[D] Convertible bonds
A
Which of the following actions is NOT permitted by an RR when discussing investments with a client?
[A] Emphasizing to the client how variable annuities are essentially insured against loss.
[B] Outlining the risk/rewards of investing in a growth fund.
[C
A
In accordance with Regulation S-P, when must privacy notices must be sent by broker-dealers?
[A] With account statements quarterly
[B] Only when customers request the notice in writing
[C] With each trade confirmation
[D] Whenever a relationship is establ
D
Which of the following most accurately describes the figure that results from subtracting a mutual fund portfolio's cost from its current market value?
[A] NAV
[B] Appreciation
[C] Amortization
[D] Offering price
B
A registered representative wishes to put on a sales seminar. During the seminar, the RR intends to give out handouts related to a few investments and printouts of slides that will be part of the presentation. Which of the following is correct regarding t
B
A securities analyst or broker-dealer issuing a research report on a certain company may not provide any of the following information to the company prior to distribution of the reports EXCEPT:
[A] the stock price target
[B] the rating and recommendation
D
Federal Securities Laws define which of the following as "securities"?
I.Mutual Funds (Open-End Funds)
II.Municipal Bond UITs
III.Interests in Real Estate Limited Partnerships
IV.Variable Annuity Contracts
[A] I only
[B] I and II only
[C] I, II, and III o
D
The Investment Company Act of 1940 requires that certain transactions use "forward pricing" (the valuation of mutual fund share prices as of the next computation). Which of the following transactions require "forward pricing"?
I.Shares are purchased direc
D
A client decides to take a trip to Europe. The client asks the RR, in writing, at the firm to hold their mail while they are abroad. The RR in this case should inform the client of what?
[A] The RR should inform the client that the firm could only hold th
B
All of the following cover the sale of a call option under option exchange rules, EXCEPT:
[A] 100 shares of the underlying security
[B] A depository or escrow receipt for 100 shares of the underlying security
[C] One convertible bond that converts to 50 s
C
A registered equity-indexed annuity is sold with a prospectus by a registered representative. Of the following statements, which is TRUE regarding this situation?
[A] The sale is subject to the same supervision requirements that apply to transactions in o
A
All of the following are functions of a mutual fund's transfer agent EXCEPT:
[A] The transfer agent handles issues regarding lost, destroyed or stolen certificates.
[B] The transfer agent assists in the distribution of capital gains and dividends of the i
C
All of the following would be considered to be a plan fiduciary under ERISA except:
[A] the custodian in charge of plan assets
[B] the tax preparer for the plan
[C] the individual selecting the plan's IA
[D] the plan's IA
B
What is the tax treatment on payments received by an annuitant during the annuity period on a non-qualified annuity?
[A] Payments are subject to tax only on the annuitant's cost basis.
[B] Payments are taxed as ordinary income on the portion that is not a
B
Changes to the investment objectives of a mutual fund must be approved by the
[A] The fund's shareholders
[B] The fund's board of directors
[C] The fund's transfer agent
[D] Any changes to investment objectives must be approved by FINRA.
A
Broker/Dealer A does quite a bit of business with Broker/Dealer B, and registered persons at both firms are often familiar with one another. Barbara, a registered rep at Broker/Dealer A, is appreciative of assistance that she has received from Jackie, a r
C
When opening a new account a registered representative completes a new account report form for the purpose of
[A] providing data about customers to the exchanges
[B] providing the member firm with adequate information about customers opening accounts
[C]
B
An investor who is long a put option on ABC and wants to offset the position would enter:
[A] an opening sale
[B] a closing purchase
[C] a closing sale
[D] an opening purchase
C
Which of the following types of investments are subject to the prospectus delivery requirement when it is sold to an investor?
I.Variable annuities
II.Mutual Funds
III.UITs
IV.Contractual plans
[A] I and III only
[B] I, II, III only
[C] II and IV only
[D]
D
Which of the following are regulated by the Securities Exchange Act of 1934?
I.Insider trading
II.The extension of credit for the purchase of securities
III.Required disclosures on publicly traded securities
IV.The Secondary Market for securities
[A] I &
D
A registered representative in your office accidently entered an order for a client using the wrong account number and the order was executed. When are you, the branch manager, required to approve the adjustment or cancellation?
[A] before the trade settl
C
An annuitant receives payment under a variable annuity for a number of years. At his death, his widow receives a lump-sum payment. The annuity is a
[A] variable life annuity.
[B] variable joint and last survivor annuity.
[C] variable unit refund annuity.
C
An investor's portfolio includes 10 corporate bonds and 200 shares of common stock. If both securities decline in value by � point the dollar loss is
[A] $110.00
[B] $50.00
[C] $105.00
[D] $150.00
D
When does settlement take place on cash transactions?
[A] The fourth business day after trade date
[B] The second business day after trade date
[C] The next business day after trade date
[D] The same day as the trade date
D
Advertising and sales literature concerning registered investment companies and variable annuities must be filed with the FINRA
[A] 10 days prior to use
[B] within 10 days of first use
[C] 15 days prior to use
[D] within 15 days of first use
B
Which of the following would be correct statements by a registered representative to a customer when recommending the purchase of a mutual fund?
I.Making purchases of funds under the same management may result in a lower overall sales load.
II.Capital gai
B
The custodian of a mutual fund is generally a
[A] stock exchange.
[B] bank.
[C] broker/dealer.
[D] market maker.
B
Which of the following would cause the net assets of a mutual fund to decrease?
[A] Dividends distributed to shareholders
[B] The securities in the portfolio have paid dividends and/or interest.
[C] The value of the securities in the portfolio is apprecia
A
In which of the following situations would it be UNACCEPTABLE for an operations professional to disclose client information?
[A] The operations professional has received a warrant from local law enforcement related to the assets of a particular client and
C
All of the following are TRUE of commercial paper EXCEPT:
[A] Commercial paper is considered a short-term instrument.
[B] Commercial paper is generally issued by corporations.
[C] Commercial paper is used by corporations in the financing of international
C
Which of the following BEST describes a market maker who acts in a "dealer" or "principal" capacity?
[A] A designated market maker working trades of buyers and sellers, typically on the floor of an exchange.
[B] A broker/dealer firm that trades into and o
B
If the general level of prices in the economy falls at a rate of 6% and investors' investment income falls about 9% the purchasing power of the investment has
[A] remained the same
[B] increased
[C] decreased
[D] no relation to these events
C
Of the following statements which are true about market orders made "at the opening"?
[A] Their priority is at parity with limit orders on the book.
[B] Their priority is above limit orders on the book.
[C] They are subordinate to limit orders.
[D] "At th
B
Justin has invested in regular stocks and bonds and is familiar with commissions, mark-ups, and mark-downs on those products. He has been considering buying some shares of a growth fund because he likes the mix of fund assets and the diversification that
C
Factors that affect the amount of an underwriting spread include which of the following?
I.The size of the issue
II.The type of security involved
III.The business history of the issuer
[A] I only
[B] II only
[C] III only
[D] I, II and III
D
One of your customers has a single premium variable life insurance policy. The customer needs some funds for an emergency and would like to take a loan out against his policy. How will this affect the policy?
[A] A 10% tax penalty may be levied against th
C
Mr. Brown invested $20,000 in a non-qualified variable annuity. His account value is now $30,000. He elects a lump sum settlement. How much of the proceeds will be taxable as ordinary income?
[A] $0
[B] $10,000
[C] $20,000
[D] $30,000
B
All of the following statements are true regarding the responsibilities of a fiduciary under the Employee Retirement Income Security Act (ERISA) EXCEPT
[A] the fiduciary must work in the interest of their participants.
[B] the fiduciary must act responsib
C
Which of the following is NOT required on new account applications according to FINRA regulations?
[A] The designation of a beneficiary
[B] The age of the customer
[C] The name and address of the customer/account holder
[D] The Tax ID Number or SSN of the
A
Which of the following is TRUE about the taxation of municipal bond funds?
[A] The investor will only pay taxes on capital gains when the fund is sold.
[B] Distributions of capital gains are subject to taxation at the federal level, but dividend from muni
B
An RR performs a transaction via wire order in a customer's account. What is TRUE of such situations under FINRA rules?
[A] A principal of the firm is required to review and approve such transactions.
[B] This type of order is acceptable for discretionary
A
Which of the following statements are TRUE concerning the separate account for a Variable Annuity?
I.The separate account must be registered.
II.The separate account need not be registered.
III.Capital gains, but not investment income, are currently taxab
D
Mutual fund custodians perform which of the following functions?
I.Redeem mutual fund shares
II.Provide safekeeping for mutual fund assets
III.Provide recordkeeping for mutual fund assets and portfolio assets
IV.Issue mutual fund shares
[A] I and II
[B] I
C
If there is no activity in a client's account, how often must the brokerage firm send a statement to its customer?
[A] Monthly
[B] Quarterly
[C] Semi annually
[D] Yearly
B
An offering of a new issue of securities purchased from the issuer and offered to the public is a:
[A] Refunding
[B] Secondary distribution
[C] Primary distribution
[D] Auction
C
When can hypothetical illustrations on a variable annuity be made?
[A] Never
[B] Only when the rate of return is guaranteed
[C] As long as past performance is not projected into the future
[D] Only if they reflect actual investment results
C
All of the following are characteristics of common stock EXCEPT
[A] shareholders may sue the Board of Directors for its negligence.
[B] shareholders may receive pre-emptive rights.
[C] shareholders have a right to part of the assets of the corporation sho
D
Which of the following is TRUE of the taxation on the payout of a non-tax qualified variable annuity?
[A] It is treated as ordinary income.
[B] The entire payout will be taxed as return of capital.
[C] it is considered a non-taxable event.
[D] It will be
D
An individual assumes which risk when purchasing a variable annuity contract?
[A] Investment risk
[B] Mortality risk
[C] Political risk
[D] Legislative risk
A
Regarding the lending and borrowing of money between customers and registered representatives, which of the following would NOT require written pre-approval?
I.The customer is the registered representative's brother.
II.An outside business activity, aside
B
When a mutual fund is inherited, what is the cost basis used by the individual who inherits the fund?
[A] When the owner dies, the cost basis is the average value of the fund over the past six months.
[B] The new owner uses the cost basis of the deceased
D
A Registered Representative notices that he executed a trade for an IPO in the wrong account and asks the branch manager to correct the error. When doing the cancel and rebill the manager notices that the account with the error trade in it had a change of
C
When working as a managing underwriter for a syndicate, the manager can act in either a principal or an agency capacity. When does the manager function as an agent?
I.When facilitating a stand-by agreement offering
II.When offering securities on an all or
C
SEC Rule 144A permits the resale of non registered securities to all of the following EXCEPT:
[A] insurance companies
[B] banks
[C] mutual funds
[D] individuals
D
Payout options of a variable annuity are guaranteed by which of the following?
[A] The pertinent state securities department or commission
[B] Securities and Exchange Commission (SEC)
[C] The insurance company that issued the variable annuity
[D] Securiti
C
Which of the following statements about call features found on securities such as preferred stock or bonds is CORRECT?
[A] Call features should not be a consideration as they do not impact the security's return.
[B] Call features are required on all long-
C
A fellow RR at your firm is looking to make some additional income by selling private securities transactions. The RR submits the appropriate notification to the firm and is waiting for the response. If the firm decides to give approval for such activitie
C
Your firm recently approved the sale of a group variable annuity that is not registered. RRs will be compensated for sales of the unregistered annuity. Once the firm has given approval for such transactions, what is the firm's responsibility?
[A] Only whe
D
All of the following statements about customer confirmations are true EXCEPT
[A] They must be sent to the customer at or before the completion of the transaction
[B] They may be sent electronically if the customer opts for it
[C] They don't have to be sen
C
When disclosing information to a client with regard to Class B shares, which of the following is true?
[A] A commission will be paid with each purchase.
[B] They are "no load" shares.
[C] There is the potential of a deferred sales charge.
[D] A sales char
C
According to FINRA arbitration rules, arbitration proceedings against a registered representative may be initiated by
[A] an employer.
[B] a customer.
[C] another member of FINRA.
[D] all of the above.
D
All of the following are defensive except:
[A] automobile repair service
[B] tool and die manufacturer
[C] natural gas supplier
[D] Supermarket chain
B
The ideal time to invest in a long-term bond fund would be when
[A] interest rates are rising
[B] interest rates are falling
[C] inflation is rising
[D] GDP has been rising sharply
B
An investment company that only offers non-redeemable shares is which of the following types?
[A] Variable Life company
[B] An open-end investment company
[C] A Whole Life company
[D] A closed-end investment company
D
A customer at the firm purchases a corporate bond that is both callable and convertible. The customer wants to know when the transaction will settle. Assuming the trade settles under normal circumstances, what should the customer be told?
[A] The trade wi
B
The Net Asset Value of mutual fund shares is best defined as the
[A] closing market value of all the securities in the fund's portfolio plus any interest or dividend income received on the securities in the portfolio.
[B] value of fund shares based on the
A
Only employees of tax-exempt organizations may save for retirement in a:
[A] Sec. 401(k) retirement plan
[B] Sec. 403(b) retirement plan
[C] Keogh plan
[D] Individual Retirement Account
B
You are an RR at a firm and one of your customers calls you up and informs you that she wishes to exercise a long listed option that she currently holds. To whom would your firm present such an exercise order?
[A] Your firm would present the order to the
A
When a registered representative is determining suitability for a customer, all of the following are included in this determination EXCEPT the
[A] customer's net worth
[B] historic performance of a fund
[C] customer's risk tolerance
[D] customer's retirem
B
The Securities Act of 1933 regulates the distribution of new issues and requires a prospectus which must include all of the following except?
[A] A statement that the SEC does not approve or disapprove of the securities issued
[B] Stabilization clause
[C]
C
The main purpose of the Securities Exchange Act of 1934 is to regulate
[A] the sale of new issues, prospectuses, and disclosures
[B] the distribution and sale of investment companies
[C] the issuance of Treasury securities to the public
[D] broker/dealers
D
A mutual fund that invests a large percentage of the fund's assets into one industry sector would be subject primarily to which of the following types of risk?
[A] Market risk
[B] Legislative
[C] Credit risk
[D] Currency
A
The following are all types of underwriting commitments EXCEPT:
[A] Firm commitments
[B] Standby commitments
[C] All-or-none agreement
[D] Fill-or-kill agreements
D
An employee of a publicly-traded corporation would likely be eligible for all of the following types of retirement plans EXCEPT:
[A] An employer-sponsored 401(k) plan
[B] An individual retirement account (IRA)
[C] A 457 deferred compensation plan
[D] A Ro
C
Which of the following would NOT be an effect of fluctuations in a variable life insurance policy's separate account?
[A] Decreases in the cash value of the account
[B] Increases in the policy's death benefits
[C] Decreases in the policy's minimum death b
C
What type of order would an investor enter if they wanted to buy 1 ABC May 50 Call when the premium for the option declined from its current value?
[A] Buy at the opening
[B] Debit Spread
[C] Limit order to buy
[D] Market order
C
Of the following account types, which represents co-ownership with no rights of survivorship?
[A] Joint tenancy
[B] Tenants at will
[C] Tenants in common
[D] Transfer on death
C
An exchange privilege in a mutual fund means the investor can
[A] switch from an open-end company to closed-end company.
[B] exchange shares of one mutual fund for those of another.
[C] convert short-term capital gains into long-term capital gains.
[D] ex
B
Which of the following sanctions may be applied by a self-regulatory organization (SRO) on a registered representative for violation of the rules?
I.fine
II.expulsion
III.censure
IV.suspension
[A] I and II only
[B] III and IV only
[C] II, III, and IV only
D
Which of the following is an example of a 1035 Exchange of Contracts?
[A] An exchange of a convertible bond for its underlying common shares
[B] A tax-free exchange of annuities and life insurance
[C] The conversion of an ADR to its common stock
[D] The e
B
All of the following customer orders require written authorization by the customer EXCEPT:
[A] "Buy some shares of ABC"
[B] "Buy 100 shares of a good, safe stock"
[C] "Buy some shares of ABC at the market opening"
[D] "Buy 100 shares of ABC
D
Regarding outside business activities by an RR, the RR would have to give prior written notice to his firm EXCEPT in which of the following situations?
[A] An RR's parents established a trust for their children over which the children have no control and
A
Section 1035 exchanges permit
[A] an exchange from a life insurance policy to a mutual fund, free of taxes.
[B] an exchange of non-insurance products for variable annuities.
[C] an exchange between annuities or life insurance policies, free of taxes.
[D]
C
One of your customers is considering investing in a mutual fund that concentrates assets in investment-grade corporate bonds. What is the principal risk factor to consider?
[A] Interest rate fluctuations
[B] Possible default by the various corporations is
A
Which describes an open-end investment company that focuses its investments in a given industry or group of companies?
[A] Equity Income fund
[B] Balanced fund
[C] International fund
[D] Sector fund
D
Which of the following are characteristics of a Money Purchase Plan?
I.Employer contributions are mandatory
II.Employee contributions are mandatory
III.Employers must contribute regardless of how well or poorly the company is performing.
IV.Employees must
A
A client is heavily invested in international mutual funds. He is concerned about fluctuations in foreign currency exchange rates. What should the RR advise him?
[A] No impact should be seen in the client's holdings as long as the portfolio consists of es
B
Which of the following securities would be brought to market using a competitive auction?
[A] Common shares of a US corporation traded Over-the-Counter (OTC)
[B] Corporate bonds of a US Corporation
[C] Municipal bonds of a municipality in the US
[D] Treas
D
What is the typical form of compensation that an investment advisor (IA) charges a mutual fund?
[A] It's considered a fee charged for investment advice and/or based on the fund's assets.
[B] It must be charged according to the SEC's guidelines for IA rate
A
Under Regulation D Private Placement Rules the restricted securities that are issued may be sold to a maximum of
[A] 35 accredited investors
[B] 35 non-accredited investors
[C] unlimited number of sophisticated investors
[D] unlimited number of accredited
B
Corey has held an account at a municipal securities dealer for several years. He will be retiring soon and fulfilling a life-long dream to travel to Australia and New Zealand for a two-month trip. He calls his registered representative, Ryan, and tells hi
B
Which of the following investment funds would typically see the greatest amount of appreciation if the stock market were to go up?
[A] Money market fund
[B] U.S. Government securities fund
[C] Balanced fund
[D] Large cap equity fund
D
When a variable contract annuitizes the number of annuity units which of the following is TRUE?
I.The value will fluctuate.
II.The value will remain fixed.
III.The number of units will remain fixed.
IV.The number of units will fluctuate.
[A] I and III
[B]
A
A customer alleges wrongdoing on the part of a registered representative and files a complaint with the broker/dealer. The broker/dealer decides to settle without going to arbitration/trial and pays the client a total of $18,000. What is required in this
D
Who would be permitted to sell ABC stock short?
[A] A director of ABC who owns 4% of ABC shares
[B] An officer of ABC who doesn't own any ABC shares
[C] A stockholder who owns 12% of ABC shares
[D] A stockholder who holds 3% of ABC shares
D
All of the following are exceptions to the principal pre-approval rule for retail communications EXCEPT
[A] The retail communication does not make any recommendations.
[B] The retail communication does not promote any product or service of the firm
[C] Th
D
Which two of the following describes the difference between a listed and unlisted security?
I.Listed securities are primarily traded on the floor of a stock exchange.
II.Unlisted securities are primarily traded on the floor of a stock exchange.
III.Listed
B
Which of the following would NOT be true about a Variable Annuity?
[A] The investment objectives may be changed after a vote by those holding the variable annuity.
[B] Management of such portfolios is performed by a professional in the industry.
[C] Holde
C
Which TWO of the following would be affected by a corporation's decision to declare a split in the corporation's common stock?
I.The corporation's working capital would be affected by such a decision.
II.The corporation's retained earnings would be affect
D
An investor has a large portfolio of Blue Chip common stocks and expects the market to remain stable or decline slightly. He'd like to increase the rate of return on his portfolio. Which of the following would be the best choice for this investor?
[A] Buy
B
Which of the following is CORRECT about a JTWROS Account (Joint Tenants with Rights of Survivorship)?
[A] Securities transactions may be placed by any individual listed on the account.
[B] The account must be limited to two individuals only.
[C] These acc
A
When does a policyholder have the right to convert a variable life insurance policy to a whole life policy without evidence of insurability?
[A] At any time upon request of the policyholder
[B] within 120 days after issue date
[C] within one year after th
D
A particular mutual fund focuses its investments in one state, and even more specifically, within a specific county of that state. Such a fund would primarily be exposed to which type of risk?
[A] Marketability
[B] Interest rate
[C] Capital
[D] Systematic
A
Who receives an annuity contract's surrender value?
[A] The beneficiary designated by the contract owner receives the surrender value.
[B] The owner of the contract receives the surrender value.
[C] The surrender value is forfeited back to the issuer.
[D]
B
The owner of a non-qualified variable annuity contract has invested $100,000 in the contract. The contract is now worth $115,000. The owner elects an annuity payout option. What is the dollar amount of the contract owner's cost basis?
[A] Zero
[B] $15,000
C
A registered rep is in the process of being hired with a new firm. The registered rep isn't sure whether it is required that he disclose a 'no contest' plea to a misdemeanor charge of petty theft which occurred over 15 years prior. Does this have to be di
A
The price at which a mutual fund's shares will be redeemed
[A] cannot be determined before the order is entered
[B] is the average of the previous day's close and the opening price of the day the order is placed
[C] can be ascertained by contacting the mu
A