Which method of securities registration would most likely be used to register an initial public offering that is intended to be offered for sale in several states?
A)
Notice filing
B)
Qualification
C)
Coordination
D)
Registration by publication
Because the offering will be made in more than one state, registration with the SEC is required. Coordination is concurrent registration with the SEC and the state for public offerings. Notice filing pertains to certain federal covered securities, primari
Once the registrant is found guilty at a hearing, the Administrator is authorized to take any or all of the below actions against a person's registration.
Permanent revocation of a registration
Bar from employment with any registrant
Restriction on a regi
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Although there may be some slight differences in methodology, when S&P or Moody's evaluate a security in order to assign a rating, they would be least likely to consider the issuer's
A)
cash flow to debt ratio
B)
profitability ratio
C)
liquidity ratio
D)
The rate at which assets are turned over is not nearly as important to determining a rating as the other three.
U10LO7
Regardless of the recordkeeping requirements of other states, the only requirements that must be met are those of the state where the principal office is located. Among the items of advertising requiring maintenance of records is a firm's website. Persona
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Sharon Smith is an agent for Highwater Securities, a broker-dealer registered in all 50 states. Sharon receives an unsolicited order from a bank located in State X, a state in which she has no place of business. Under the Uniform Securities Act,
A)
becaus
Regardless of whether the security is exempt or the transaction is exempt, one must be licensed in any state that is the domicile of a client placing an order. One does not have to be registered as an agent in every state the BD is, only in those where sh
The statute of limitations for criminal offenses under the USA is
A)
5 years
B)
10 years
C)
2 years
D)
3 years
Remember the sequence 5-5-3: 5-year statute of limitations, $5,000 maximum fine, and imprisonment for up to 3 years.
U5LO4
The Uniform Securities Act excludes from the definition of broker-dealer, a person who has no place of business in this state if he effects transactions in this state exclusively with or through:
1. the issuers of the securities involved in the transactio
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Offers are not considered to have been made by a radio or television program originating outside the state, bona fide newspapers or magazines published outside the state, or bona fide newspapers or magazines published within the state if more than 2/3 of
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Under the USA, the least active review of registration documentation is performed by state Administrators before which of the following becomes effective?
A)
Application
B)
Coordination
C)
Qualification
D)
Notice filing
D. Under the NSMIA, the Administrator may request copies of the documents filed with the SEC by federal covered securities, but does not review them because of lack of jurisdiction. There is greater review of the information filed in a registration by coo
Under the USA, when a security is registered, the registration is valid for 1 year after the effective date. However, the act provides that if the issuer or underwriter still has unsold shares from the offering, the effective date may be extended, so this
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Under the Investment Advisers Act of 1940, it is legal for an investment adviser to
1. rebate the commission on a mutual fund sale to a client who has already paid a fee for investment advice
2. keep the commission on a mutual fund sale when the client wh
2&3. Rebating commissions on mutual fund sales is prohibited. However, because mutual fund commissions are not negotiable (as are secondary market transactions), the adviser may reduce the client's advisory fee by the commission or, with appropriate discl
A preorganizational subscription is an exempt transaction if there are no more than 10 subscribers and no commissions are paid, either directly or indirectly. The subscribers make no payments until they purchase the underlying security.
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A state-registered investment adviser who maintains custody of client assets must maintain net worth of at least $35,000 or a bond of the same amount (not both). If the net worth should fall below the minimum, by the close of the next business day after d
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It is the IRS who states the QDRO must contain certain specific information, such as: the participant and each alternate payee's name and last known mailing address, and the amount or percentage of the participant's benefits to be paid to each alternate p
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A participant in an ERISA qualified retirement plan is studying the investment policy statement (IPS) prepared by the plan's fiduciary. The contents of the IPS would not include
A)
specific security selection
B)
methods for monitoring procedures and perfo
One thing that could never be in an IPS is a listing of the securities that will be purchased in the future. Types of securities, yes, but not the specific ones.
U24LO5
A GRAT is an estate planning tool designed to pass assets to beneficiaries (usually children) in a way to minimize gift and/or estate taxes. Because incidents of ownership remain with the grantor, all income is taxed to the grantor.
U18LO5
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Under the Uniform Securities Act, if sent to 2 or more persons, a file must be maintained containing a copy of which of the following?
Bulletins
Newspaper articles
Notices
Websites
All of these types of communications, unless sent to persons connected with the investment adviser, require maintenance of a file containing a sample copy.
U1LO5
Open-end companies may issue only common stock. The prospectus must state the management fee, and an investment company needs only $100,000 to offer itself to the public. In addition, no more than 60% of the board of directors can be made up of officers o
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In accordance with current gift tax regulations, an individual may give a gift of up to $15,000 per person in 1 year with no gift tax liability. If the gift exceeds $15,000, it is the donor who is responsible for any tax. The gift tax is a progressive tax
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If general interest rates increase, the interest income of an open-end bond fund whose sales exceed redemptions will likely
A)
It cannot be determined from the information given
B)
increase
C)
remain unchanged
D)
decrease
Most mutual funds do not have 100% of their assets in securities, and they continually receive new money from investors. Any increase in the general interest rate would allow the fund to purchase new, higher-yielding instruments, which would increase the
Which of the following securities is NOT exempt from the registration procedures of the Uniform Securities Act?
A)
Bonds issued by a church operating as a nonprofit organization under IRS Code Section 501(c)(3)
B)
Variable annuities issued by an insurance
B. Variable annuities are not exempt from state registration because the payments from the annuity are dependent on the performance of a segregated fund invested in securities. Municipal securities and regulated public utilities are exempt from registrati
Excluded from the definition of Securities are insurance contracts, endowments with fixed benefits, fixed annuities, Keogh or IRA plans, written confirmations of a trade, futures contracts, real estate held as a personal residence, currencies, precious me
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Although many 401(k) plans provide for daily reallocation of plan assets, Section 404(c) requires that plan participants be able to reallocate plan assets, through internet trading or other methods, at least once every 3 months.
U24LO5
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An agent making a sales presentation to a client about a mutual fund's historical returns is required to explain to the client the difference between the fund's
A)
current yield and holding period return.
B)
current yield and real return.
C)
current yield
C. When comparing to a benchmark, it is common to show various return computations. In connection with the solicitation of investment company shares, it is considered an unfair business practice to discuss returns without fully explaining the difference b
A signed loan consent agreement permits a firm to loan out a customer's margin securities. This is the only part of the margin documentation that is optional.
U22LO1
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One of your clients has recently turned 72 and has questions about RMDs. The client has a traditional IRA, a rollover IRA, and 401(k) plans from two previous employers. When computing the RMDs,
1. the RMD from each IRA is computed and may be made from one
1&4. For RMD purposes, each IRA is figured separately and the distribution can be made from one or all of them. That is not the case with a 401(k) plan. Each account has a RMD that can only be paid from that account.
U24LO4
Which of the following would not be unlawful for an investment adviser under the Uniform Securities Act?
A)
Signing an investment advisory contract that did not outline the compensation arrangements
B)
Failing to notify the Administrator that the adviser
C. Investment advisory contracts must outline compensation provisions and indicate the amount to be refunded, if any, if the contract is terminated. Nothing in the USA requires that there be a refund, only that the terms must be disclosed. The Uniform Sec
The SEC has determined that advertising regarding past recommendations made by investment advisers must reflect past performance for a minimum period of 1 year, not 3. All investment advisers' advertising must reflect deduction of fees; disclose the speci
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In the banking industry, the term POD refers to an account similar to the TOD designation used by broker-dealers. An old, but sometimes still used term to describe this kind of account, is
A)
passbook savings account
B)
demand deposit account (DDA)
C)
rev
The name comes from a 1904 decision in a New York case called In re Totten. The court ruled that someone could open a bank account as a trustee for another person, who had no right to the money until the account owner died. The account owner is the truste
If dividends are distributed to shareholders, the fund's assets will decrease and value per share will fall accordingly. Appreciation of the portfolio and dividends paid to the portfolio will increase the value. If issuers have made distributions to the p
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All of the following actions must be completed prior to customers entering their first option trade EXCEPT
A)
receipt of a completed options agreement
B)
approval by a designated options supervisor
C)
delivery of the options disclosure document (ODD)
D)
c
A. Customers do not have to complete (sign) the options agreement prior to entering an order; under current rules, the agreement must be signed and returned by the customer within 15 days of account approval.
U18LO2
Which of the following statements regarding a qualified profit-sharing plan is TRUE?
A)
It can permit regular direct cash payouts to participants before retirement.
B)
Contributions are required annually.
C)
It must be established under a trust agreement.
C. All qualified retirement plans must be established under a trust agreement. Contributions with this type of plan are not required annually, nor can the plan make direct cash payouts to participants before retirement.
U24LO2
One of the requirements of the Investment Company Act of 1940 is that the contract between a management investment company (open- or closed-end) must be in writing. The initial contract must be approved by a majority vote of the outstanding shares and the
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A support level is the price range at which a technical analyst would expect
A)
the demand for a stock to decrease substantially.
B)
the demand for a stock to increase substantially.
C)
the supply of a stock to increase substantially.
D)
the supply of a s
B. Generally, a support level will develop after a stock has experienced a steady decline from a higher price level. Technicians believe that, at some price below the recent peak, other investors who did not buy prior to the first price increase and have
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)
neither the private fund adviser nor any of its advisory affiliates
The 100 or less investors is technically known as advising a 3(c)(1) issuer. In that case, all the investors must be qualified buy meeting the net worth or assets managed by the adviser as stated. The $5 million is the requirement under federal law for an
An inverse ETF will almost always use derivatives, such as options and, in the case of a leveraged ETF, will use debt, primarily in the form of margin. Inverse ETFs do not engage in short selling; they are an alternative to selling short a specific index
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A Certified Financial Planner who prepares financial plans for commissions must register in the state as an investment adviser representative. An insurance agent who prepares comprehensive financial plans for insurance based products for commissions is al
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The Uniform Securities Act considers certain securities to be exempt from the registration requirements of the act. Under the USA, which of the following is an exempt security?
A)
Equipment trust certificate issued by a railroad that is regulated by a sta
A. Several types of securities are specifically exempt under the act, including equipment trust certificates issued by a state-regulated or federally regulated railroad. High-quality (receives a rating in one of the three highest rating categories from a
It is unlawful for a person to transact business on behalf of a broker-dealer unless that person is registered as an agent in the state. Only individuals selling on behalf of the issuer may qualify to be exempt from registration as an agent.
U3LO4
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Strategic Capital Asset Managers (SCAM) is an investment adviser that is registered in 5 states. In lieu of preparing a fancy brochure, SCAM is permitted to provide its clients with a copy of its
A)
Form ADV Part 2A and Part 2B
B)
Form ADV Part 1 and Part
A. The Form ADV Part 2 (both parts) is acceptable for use as the firm's brochure. Part 1 is for registration purposes, and Part 1B is only used by state-registered advisers (as this firm is). Part 2, Appendix 1 is used for investment advisers who offer wr
Regarding the use of testimonials in advertising, all of the following are true EXCEPT
A)
an investment adviser representative may only use a testimonial from an existing client
B)
a prominent celebrity speaking publicly about his relationship with the in
A. Testimonials are prohibited under any circumstances for investment advisers and their representatives. Agents and broker-dealers are permitted to use testimonials if they meet FINRA standards.
U6LO5
Under SEC Release 1A-1092, which of the following has (have) met the test of providing advice or analysis concerning securities?
1. A stockbroker calls a client and recommends the purchase of a certain stock.
2. A lawyer recommends against purchasing shar
All. Any person who gives advice (positive or negative, specific or general) or issues reports or analyses concerning specific securities meets the criterion of providing advice. This does not mean that these examples qualify for the definition of investm
The customer identification program (CIP) is mandated by the PATRIOT Act and requires that broker-dealers (and other financial institutions) obtain certain specified information about new customers. The "know-your-customer" rule was written many decades b
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Many fixed-income investors are looking to avoid loss of principal. Which of the following would likely have the lowest degree of exposure to credit risk?
A)
A-rated general obligation municipal bond
B)
Ba-rated corporate mortgage bond
C)
Aa-rated corpora
C. A bond's rating takes into consideration all factors, including collateral and tax base. The higher the rating, the lower the credit risk.
U13LO4
In the annual reset index method, interest, if any, is determined each year by comparing the index value at the end of the contract year with the index value at the start of the contract year. Interest is added to the annuity each year during the term. Us
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The SEC was created by the Securities Exchange Act of 1934 and has the responsibility of administering all federal securities laws. The SEC has jurisdiction over exchanges, SROs, and all persons required to be registered under federal law. The SEC does no
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An investment adviser registered in State A decides it wishes to maintain custody of customer assets. As long as the securities laws of State A do not prohibit custody, the investment adviser would have to promptly notify the Administrator by filing an am
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Structured Products:Have higher returns. As unsecured obligations, their safety is only as good as the financial strength of the issuer (Credit or default risk), and because these tend to be one-of-a-kind products, they do not have liquidity. A particular
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Capital Asset Pricing Model (CAPM)
The model is made up of two separate components. One component is known as the stock risk premium and is the part of the model reflected by the following formula: (market return ? the risk-free return) � beta of the stock. The other component is the marke
529 Plan vs. Coverdell ESA:
Funds in both plans are counted as assets of parents at 5.64% if owner is a parent or dependent student, so there is no difference. The 529 plan allows for far greater contribution levels and there is no income limitation on the donor as exists with the C
A disclosure brochure is not required to be delivered if the client is a registered investment company, or if the advisory service is of an impersonal nature and costs less than $500. A brochure is required when the service provided is an individual super
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Investment advisers must disclose the amount of compensation received or to be received from any third party in connection with recommendations made to a client. This includes compensation from any broker-dealer, compensation from any issuer, and compensa
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Under the USA, which of the following types of transactions can be entered into legally with unregistered, nonexempt securities?
A)
Solicited transactions with individual clients located within the state
B)
Rights offering to existing shareholders with un
C. Private placements involve the sale of nonexempt securities to investors without the need for registration. There is no numerical limit to the number of offers that may be made to institutional buyers. However, offers to noninstitutional buyers are lim
Which of the following activities would have an effect on the NAV of a mutual fund?
1. The sale of securities from the portfolio
2. Automatic reinvestment of dividends by the shareholders
3. Market appreciation of portfolio securities
4. Market decline in
3&4.
Currency transactions in excess of $10,000 are reported electronically on FinCEN Form 112 to the Department of the Treasury.
U7LO2
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