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Series 6 > All > Flashcards

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1
Q

How long do records of retail communications need to be maintained?

A

3 years from the date of last use

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2
Q

How long do records of independently prepared reprints need to be maintained?

A

3 years from the date of last use

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3
Q

How long do records of outgoing electronic securities business correspondence need to be maintained?

A

3 years

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4
Q

In an intrastate offering (under Rule 147), when may a resident purchaser of these securities resell them to a nonresident?

A

6 months after the investor’s purchase date

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5
Q

If RMDs do not begin by April 1 of the year after the individual turns 70.5 what is the penalty?

A
  • 50% insufficient distribution penalty

- ordinary income taxes

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6
Q

Which act determines a RR must sell primary offerings of no exempt issues with a prospectus?

A

Securities Act of 1933

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7
Q

Who has no liability in an underwriting for unsold shares in a firm commitment?

A
  • the selling group members
  • they act in an agency capacity-if they sell any shares then they get paid, and if they don’t sell anything they don’t get paid
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8
Q

What happens when the registration statement for corporate securities becomes effective?

A
  • the issuer amends the preliminary prospectus

- the final offering price is added to the red herring

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9
Q

What does Regulation D mandate?

A
  • a special inscription or legend on the stock certificate indicates that its transfer is restricted
  • if the offering is advertised, all purchasers must be accredited
  • investors agree to to terms by signing an investment letter
  • a maximum of 35 nonaccredited investors may participate in the purchase of securities under a Regulation D exempt offering
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10
Q

How does FINRA 2210 treat interactive electronic forum posts (such as social media status updates)?

A

As retail communications

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11
Q

What is a third market transaction?

A

When listed securities trade over-the-counter

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12
Q

Code of Procedure

A

-handles complaints filed with FINRA regarding violations of the Conduct Rules

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13
Q

Value funds

A

-focus on companies whose stocks are currently undervalued
•the earnings potential is not reflected in the stock price
-dividend yields tend to be higher than growth funds

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14
Q

A BD that purchases securities for or sells securities from its own inventory is acting as __________.

A

Principal

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15
Q

A BD facilitating a transaction between a buyer and seller is acting as an __________.

A

Agent

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16
Q

Principals charge ________ on sales from inventory.

A

Mark-ups

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17
Q

What will result from an unrealized loss?

A
  • a lower NAV per share

- reduction of the amount of proceeds payable to shareholders who liquidate their shares

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18
Q

What type of investment company can have an asking price below the NAV?

A

Only closed-end companies

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19
Q

What type of investment company security is most likely to have a NAV that is 90% of its offer price?

A

closed-end company share

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20
Q

What is the maximum sales charge on open-end shares?

A

8.5% of the POP

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21
Q

An open-end share’s NAV must be at least ___________.

A

91.5% of its offered price

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22
Q

Dividends from municipal bond funds are __________. Capital gains distributions are ___________.

A

Tax-exempt; taxable

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23
Q

Zero-coupon bonds have duration _________ maturity.

A

Equal to

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24
Q

A bond that makes interim payments has a duration _________ its maturity.

A

Shorter than

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25
Q

Management fees paid by an investment company are part of __________.

A

The operating expenses of the fund

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26
Q

What is a sales load part of?

A

Contained within the underwriting agreement

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27
Q

Fixed-time withdrawal plan (offered by a mutual fund)

A
  • end date of the plan is fixed
  • individual payment amount is uncertain
  • unspecified number of shares is liquidated each month based on the number of months left to distribute and the NAV of the investment
  • ex. $10,000/120 months = $83.33
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28
Q

On what form are dividend distributions reported on?

A

IRS form 1099-DIV

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29
Q

How are dividends paid?

A
  • as declared by BOD

- paid from the company’s NII (net investment income)

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30
Q

How are capital gains paid?

A
  • annually

- generated when an investor redeems appreciated shares of the investment company and when portfolio securities are sold

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31
Q

How soon does an open-end investment company have to redeem its shares (in any quantity)?

A

Within 7 days

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32
Q

Credit risk

A
  • involves possibility of issuer default

- danger of losing all or part of the invested principal as the result of the issuer’s failure

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33
Q

What is the maximum fee that can be charged for distribution and promotion under a 12b-1 plan?

A

0.75% of average net assets

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34
Q

What is the only form of communication with the public that is not required to include the name of the member firm?

A

Recruitment advertising

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35
Q

If the owner of a variable annuity dies during the accumulation period, what will happen to any death benefit?

A

It will be paid to a designated beneficiary

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36
Q

What are some features of Class C mutual fund shares?

A
  • typically charge no front-end load
  • typically impose lower CDSCs than Class B shares for a shorter period
  • no conversion to Class A shares regardless of how long they’re held
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37
Q

What is the exchange privilege?

A

Offers exchange without an additional sales charge, but the exchange is still taxable

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38
Q

What are Ginnie Mae pass-through certificates?

A

Investor receives principal and interest after the homeowner has made his monthly mortgage payment

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39
Q

What are some advantages of Section 529 plans?

A
  • account remains the property of the donor even after the beneficiary reaches legal age
  • few restrictions as to who may be designated first beneficiary
  • assets in the account are not regarded as part of the owner’s estate for tax purposes
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40
Q

What is the exchange privilege offered by open-end investment companies?

A

Allows investors to exchange shares of one open-end fund for another in the same fund family at a net asset value basis

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41
Q

If an annuitant dies during the accumulation period and the annuity goes to the beneficiary, what does the beneficiary pay taxes on?

A

The growth & accumulation portion of the total

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42
Q

Characteristics of commercial paper

A
  • maximum maturity of 270 days
  • exempt from registration
  • unsecured debt obligations of corporations in need of short-term financing
43
Q

12b-1 fees

A
  • may be charged by open-end management companies
  • FINRA permits members to charge 0.25% as a shareholder servicing fee which is not included in the 12b-1 limits
  • cover distribution costs
  • 0.75% maximum set by FINRA
44
Q

Speculative investor

A

Tries to earn higher than average returns by investing in securities that carry higher than average risk

45
Q

Money market securities

A

High-quality debt issues with maturities of 1 year or less

46
Q

Who could a 457 plan cover?

A
  • employees of a corporation

- city employees

47
Q

457 plan

A

Nonqualified deferred compensation plan for municipal employees as well as for independent contractors performing services for those entities

48
Q

When a fund is selling below its NAV, it must be a ________.

A

Closed-end fund

49
Q

What should you expect if you invest in a front-end load mutual fund and choose automatic reinvestment?

A
  • dividend distributions will be reinvested at NAV

- capital gains distributions will be reinvested at NAV

50
Q

When a customer receives payment during the annuity period of a variable annuity, how is it taxed?

A

-only the amount that represents investment income is subject to tax at an ordinary income rate

51
Q

How are units in a UIT sold and purchased?

A

Directly through the issuer

52
Q

Where can an investor expect to find closed-end investment company shares traded?

A
  • OTC market

- exchanges

53
Q

If interest rates in general are rising, the price of T-bills should _______.

A

Fall

54
Q

If an employee of a FINRA member firm wishes to open an account at another member firm, what needs to take place?

A

The member firm opening the account must obtain the employing firm’s permission to open the account

55
Q

A __________ payout provides the investor with the largest payments when the contract is annuitized.

A

Straight life

56
Q

SEP IRAs

A
  • allow employers to make contributions
  • usually set up at a bank or other financial institution
  • established for small-businessowners and their employees
57
Q

What can a 12b-1 fee be used for?

A
  • sales literature costs
  • advertising
  • promotional expenses
58
Q

What are 12b-1 fees used for?

A

Facilitating share distributions

59
Q

Reinvestment risk

A

Risk that between now and when the bond matures or is called, interest rates will fall

60
Q

Where can open-end investment company shares be purchased and sold?

A
  • from the open-end company

- in the primary market

61
Q

What is the maximum 12b-1 charge for marketing and promotion?

A

0.75%

62
Q

What additional 12b-1 percentage may be charged as a shareholder servicing fee?

A

Additional 0.25%

63
Q

For a nonexempt security, Regulation T requires payment be made in how many business days after regular way settlement?

A

2 days

64
Q

Who is the most common issuer of commercial paper?

A

Corporations

65
Q

In a variable life policy, the face value will fluctuate with the separate account’s performance, but it will never decrease below__________.

A

The original face value

66
Q

What is the open-end investment company share price quoted in the newspaper?

A

Bid price (always shows the NAV)

67
Q

After validating the transfer initiation form (TIF) from a BD, the carrying firm has _____ business day(s) to validate the information on the form, and then _____ business day(s) after validation to complete the transfer.

A

1, 3

68
Q

During the accumulation period of a variable annuity contract, an investor will receive _________ of tax liability on investment income and capital gains earned in the separate account.

A

A deferral

69
Q

To receive a dividend, the buyer must be on the issuer’s books as the owner on the _________.

A

Record date

70
Q

How long will a straight life annuity give monthly payments?

A

For as long as the annuitant lives

71
Q

T-bills

A
  • trade at discount to par
  • maturities 1 year or less
  • noncallable
  • direct obligation of US gov
72
Q

Unless _______ of net assets is specifically mentioned, assume any 12b-1 fund is a loaded fund.

A

0.25%

73
Q

Class C shares carry a ________, often referred to as a ________.

A

12b-1 charge, level load

74
Q

What type of retirement plans would have to conform to the requirements of ERISA?

A

Private sector qualified plans

75
Q

Features of class c mutual fund shares

A
  • typically charge no front-end load
  • typically impose lower CDSCs than Class B shares for a shorter period
  • do not convert to Class A shares
76
Q

When does mortality risk turn out unfavorably for an insurance company?

A
  • when an annuitant lives longer than expected
  • when a life insurance holder dies sooner than expected (the insurance company would have to pay the death benefit sooner than expected-before receiving some of the expected premium payments)
77
Q

If the ask price is less than the NAV, the fund must be a ________.

A

Closed-end investment company

78
Q

What is the result of dollar cost averaging?

A

Obtain a lower average COST per share than average PRICE per share

79
Q

Death benefit clause of a variable annuity

A

If a client dies during the accumulation phase, his heir or estate will receive the amount of money invested or the current value of the account, whichever is GREATER

80
Q

Regulated investment company

A

Acts as a conduit for dividend distributions

81
Q

When a customer wants income from an annuity and chooses the option of life with 20-year period certain, how will distributions be taxed?

A

As ordinary income based on an exclusion ratio

82
Q

Which companies sell shares directly to the public?

A

No-load mutual funds

83
Q

A UIT does not have a board of directors, it has a _________.

A

Board of trustees

84
Q

What is the mutual fund exchange privilege?

A

Gives a shareholder the right to convert shares to a different mutual fund within the same family of funds on a dollar-for-dollar basis

85
Q

Which share classes typically have a higher expense ratio than Class A shares?

A

Class B shares and Class C shares

86
Q

__________ convert to Class A shares after the CDSC expires.

A

Class B shares

87
Q

When do Class B shares convert to Class A shares?

A

After the CDSC expires

88
Q

If an open-end investment company wishes to change its investment objective, it may only do so with _________.

A

Majority vote of the outstanding shares (not shareholders)

89
Q

What does a variable annuity contract guarantee?

A
  • fixed mortality expense

- capped administrative expense

90
Q

(Regarding interest rates and price fluctuations of debt securities), __________ prices fluctuate more than ___________ prices.

A

Long-term, short-term

91
Q

(Regarding interest rates and price fluctuations of debt securities), ___________ interest rates fluctuate more than ____________ interest rates.

A

Short-term, long-term

92
Q

If an annuity is cashed in before age 59 1/2, what are the taxes/penalties?

A

The growth and accumulation portion of its value is taxable as ordinary income and there is a 10% tax penalty on the growth withdrawn

93
Q

Discretionary order

A
  • authorizes a representative to choose the security, the amount of shares, or whether to buy or sell
  • time and/or price alone are not discretionary decisions
94
Q

Cash settlement for a trade in a customer’s account must settle _______.

A

The day of the trade

95
Q

Tombstone

A

An announcement of a new issue that includes the name of the issuer, the price of the security, and the name of the underwriter from whom it can be purchased

96
Q

What does a tombstone include?

A
  • name of the issuer
  • the price of the security
  • the name of the underwriter from whom it can be purchased
97
Q

How is a beneficiary taxed on a lump sum payment for a variable annuity?

A

The amount of the lump sum payment minus the deceased’s cost basis is taxed at the beneficiary’s ordinary income rate

98
Q

When is the record date for corporate securities?

A

1 business day after the ex-date

99
Q

An investor might expect to receive the greatest gain on an investment in a corporate bond by purchasing _________ bonds when interest rates are _______.

A

Long-term, high

100
Q

Antidilution feature

A

The issuer will increase the number of shares available upon conversion if the company declares a stock split or stock dividend

101
Q

If a fund distributes 90% or more of its NII to shareholders and therefore did not have to pay tax on what it distributed, it is a(n) _________.

A

Regulated investment company under Subchapter M of the Internal Revenue Code

102
Q

What kind of alpha is desired?

A

Positive

103
Q

Municipal securities do not have a preliminary prospectus or prospectus, but a(n) __________ and a(n) ___________.

A

Preliminary official statement (POS), official statement (OS)

104
Q

What does the expense ratio include?

A

•the expenses of operating the fund compared to fund assets

- expenses include management fees, administrative fees, brokerage fees, and taxes     * *underwriters may NEVER be an expense to the fund

Series 6 (8 decks)

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