Additional flashcards #2

1
Q

An investment adviser sends a notice offering a research report she has recently prepared to a group of 25 new members

A

a memorandum describing the list and its source

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2
Q

FAFSA

A

Free Application for Federal Student Aid

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3
Q

A dividend is considered qualified if

A

the shareholder has held a stock for more than 60 days in the 121-day period that began 60 days before the ex-dividend date. 2 The ex-dividend date is one market day before the dividend’s record date

For a dividend to be qualified, the investor must hold the underlying stock for a designated period, and the dividend must be paid by a U.S. corporation or a qualified foreign entity. Meeting these qualifications can result in significant tax savings, making it an important consideration for investors.

15% tax rate (ish)

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4
Q

Secured debt vs non secured debt

A

Secured debt has specific collateral pledged to protect the lender’s interest.

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5
Q

risk premium is

A

market rate minus risk free rate

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6
Q

Lamar is an investment adviser representative for Southeast Retirement Advisers (SRA), a wholly owned subsidiary of Southeast Retirement Solutions (SRS), a broker-dealer registered in a number of southeastern states. Lamar is also a registered agent with SRS. If one of Lamar’s advisory clients sends a check made payable to SRS for a stock purchase, under NASAA’s Model Rule on Custody,

A

SRA is considered to be maintaining custody of client funds and securities.

Under the NASAA Model Rule, when an investment adviser uses an affiliated broker-dealer as its qualified custodian, the adviser is considered to be maintaining custody. Therefore, receipt of a check made payable to the broker-dealer is acceptable (it does not have to be forwarded). Investment adviser representatives (IARs) would never take custody, and there is no bonding requirement for IARs.

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7
Q

Under the Uniform Securities Act, regarding private placements

A

They may be offered to an unlimited number of institutional investors.
Institutional buyers need not be purchasing for investment.
No more than 10 OFFERS to noninstitutional clients

With the exception mentioned shortly, private placements are transactions resulting from offers to no more than 10 noninstitutional persons (retail clients) in 12 months for investment purposes only. The offeror must be convinced that retail clients are purchasing for investment purposes. This means no immediate resale intentions are allowed on the buyer’s part. No commissions may be paid, directly or indirectly, for these transactions. The exception is that sales to institutional purchasers are exempt from the limitations regarding number of offers, immediate resale restrictions, and commissions. They may, therefore, be offered to more than 10 persons. (Remember that the term person is defined very broadly in the act.)

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8
Q

Non-exchange-traded structured securities products (SSPs) typically have

A

some form of embedded derivatives
no FDIC insurance
unless listed for trading such as an ETN, low or no liquidity
highly complex products and would not be suitable for the average conservative investor.

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9
Q

high water credit rating

An owner of an equity index annuity would be wise to use the high-water crediting method if the underlying index was expected to

A

An advantage of the high-water crediting method is that the interest is calculated using the highest value of the index during the term.

Therefore, in a volatile market, where prices are going up and down, it picks up the highest price.

VOLITALE is the answer

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10
Q

Which of the following are not investment advisers under the Uniform Securities Act?

Joe advises customers regarding the value of gold and silver coins.
The trust department of ABC Bank provides investment advice to its clients.
Tammy writes a newspaper column in which she analyzes and recommends securities.
Jack is an investment adviser representative

A

All of them

Joe’s advice does not concern securities. Banks are excluded from the definition of investment adviser. Tammy’s advice is neither specific nor based on the situation of each client (impersonal advice). An investment adviser representative (IAR) is specifically excluded from the definition of an investment adviser.

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11
Q

An investor inherits 1,000 shares of the ABC Global Growth Fund when the NAV is $9.50, the bid price is $9.00, and the ask price is $9.15. Two years later, the investor sells all shares when the NAV is $14.25, the bid is $14.50, and the ask is $14.60. What are the tax consequences of this sale?

A

Long-term capital gain of $5,500

When purchasing, buy at the ask & sell at the bid.
When inheriting, it is inherited at the BID price.

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12
Q

The prime rate

A

Is set by banks, not the FRB

Think about it - the prime rate is literally the rates we would get from banks..

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13
Q

A prospectus is a communication made

A

n writing or by radio or TV that offers a security for sale. An oral offer would therefore not be a prospectus. Tombstone advertisements are specifically excluded from the definition of prospectus

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14
Q

You are discussing features of qualified pension plans with a client. You state that in one type of plan “the eventual amount of pension benefits will depend upon the fund’s investment performance.” You must be referring to which of the following?

A

Defined contribution plan

defined contribution plan and the defined benefit plan. In the defined contribution plan, the employer and/or the employee defines the amount (usually stated as a percentage of salary) that will be contributed to the plan. The contributions are invested, and the retirement benefit to the participant (the employee) depends on the performance of the investments. Examples of defined contribution plans include 401(k) plans, 403(b) plans, and profit-sharing plans. In the defined benefit plan, the retirement benefit to the participant is defined: the employee knows what the payout will be and therefore, the investment risk is on the employer rather than the employee. A deferred compensation plan is not qualified, and an IRA is not a pension plan.

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15
Q

The quick asset ratio is also known as

A

quick ratio or the acid test ratio

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16
Q

Several entrepreneurs form an S corporation. Under which of the following circumstances will the entrepreneurs risk losing their tax benefits?

150 new investors buy into the corporation during the year.
1 new member is a nonresident alien.
50% of the corporation’s income is derived from passive investments in limited partnerships.
The corporation issues several classes of stock.

A

All of them

S corporations must not have more than 100 stockholders, and each stockholder must be a citizen or resident of the United States. The corporation can only have 1 class of stock, and no more than 25% of the corporation’s income can come from passive activities. If you were not aware of this last fact, a useful test-taking technique is recognizing that all the other choices are correct and there is no way to select them without this one.

17
Q

Under which of the following circumstances can an agent conduct customer transactions without the activity being recorded on the books and records of the broker-dealer employer?

A

The transactions are authorized in writing by the broker-dealer before execution of the transactions.

18
Q

The law does not permit IRA funds to be invested in life insurance or collectibles.

A

Municipal is OK but not reccomended

19
Q

An individual has been employed by a broker-dealer to solicit new subscriptions for the firm’s free monthly stock market report. The individual is paid a salary plus bonus based on his success rate with signing up subscribers. Under the USA, this person would

A

not have to be registered as an agent of the broker-dealer.

Free report isn’t a security… therefore doesn’t have to be registered

20
Q

Ms. Abbot has a joint account with her sister. She enters a sell order in the account and instructs that the proceeds check be made out to her only. If your firm sends the check but makes it payable to both Ms. Abbot and her sister, this is an example of

A

In joint accounts, either party may act. However, by law, all checks must be made payable to all owners, so the firm is following required procedure.

21
Q

the maximum tax rate on estates is the same as that on.

A

gifts

22
Q

Keogh plans

A
23
Q
A