Exam 6 Wrong Answers

Question 1

Which one of the following statements regarding Coverdell Education Savings Accounts is correct?

Answer 1

Contributions are made with after-tax dollars and grow tax deferred

Question 2

Most stockholders vote by proxy. What does this mean?

Answer 2

They grant limited power of attorney to someone to vote on their behalf

Question 3

The Federal Act that established procedures for the protection of customer funds and securities in the event that a broker/dealer becomes insolvent is called

Answer 3

The Securities Investor Protection Act of 1970

Question 4

If a limited partnership interests are distributed in a public offering, what is the name of the disclosure document?

Answer 4

Prospectus

Question 5

When discussing CDSCs with a client, it should be pointed out that

Answer 5

Costs associated with each share class are fully disclosed in the prospectus

Question 6

Which of the following could be an open-end fund?

Answer 6

RTC Balanced with NAV of $12.50 and NAV of $12.50

Question 7

Which of the following is a function of depositories?

Answer 7

Move securities from one participant’s account to another participant’s account

Question 8

A client calls his registered representative (RR) to ask her to buy 500 shares of XYZ Corp because he heard a dividend has been declared, but not paid yet, and he wants to receive the dividend. How should the RR respond to the client?

Answer 8

Inform the client of the consequences and refuse the order

Question 9

Which of the following is true of restricted stock?

Answer 9

The purchase must be paid for in its entirety

Question 10

Why might the expense ratio of a no load mutual fund be lower than that of a mutual fund with a load?

Answer 10

No-load funds may not charge a 12b-1 fee that is greater than 25 basis points

Question 11

All of the following are differences between qualified and non qualified retirement plans except

Answer 11

Taxation on accumulation

Question 12

The options disclosure document of the Options Clearing Corporation (OCC) must be sent to the customer

Answer 12

At or prior to account approval

Question 13

Liability to contemporaneous traders for insider trading means

Answer 13

Insider traders may be liable to traders with no inside information who traded at the same time and lost money

Question 14

Which entity enforces MRSB rules that pertain to NYSE member firms?

Answer 14

FINRA

Question 15

With respect to the Securities Exchange Act of 1934, which of the following is false?

Answer 15

The act gave the SEC the right to set margin requirements

Question 16

Asset-backed securities are traded based on

Answer 16

Average life

Question 17

A bond’s call premium is defined as the amount

Answer 17

The issuer pays the bond holder to exercise the call

Question 18

An issuer who has at least $100,000 in average daily trading volume and $25 million in public float is planning to bring additional shares to market. What would the restriction period be?

Answer 18

1 day prior to the effective date

Question 19

Under Regulation T, the 90-day restriction applies to a customer who purchases and subsequently sells

Answer 19

Same stock in a cash account without having fully paid for the purchase

Question 20

The board of directors declares a dividend on Wednesday, Oct. 5, to shareholders of record as of Thursday, Oct. 20. If an investor purchased the stock on Thursday, Oct. 20, in a cash transaction, which of the following statements would be true?

Answer 20

The investor would be entitled to receive the dividend because the stock was purchased using cash settlement

Question 21

All of the following are duties of a transfer agent except

Answer 21

Holding customer’s securities for safekeeping