First Mock Exam Flashcards
What ETF can do that mutual fund can’t
Sell short and be bought and sold on margin
Least exposure to reinvestment risk: STRIPS, Treasury notes, preferred stock in growth company, common stock in electric utility
STRIPS - no interest so no income to reinvest during period
Tactical
Active
Strategic
Passive
Interest in a railroad equipment trust
Exempt security under Securities Act of 1933
ADR owners have these rights:
Right to sell in secondary market, right to receive the underlying foreign security, right to receive dividends in USD
ADR does not have this right
Right to sell ADR in the foreign market
Must file a Form 8-K when
Member of board resigns, control of company changes, significant amount of assets are disposed (only deals with domestic companies)
Number of subaccounts variable annuities can choose from
No limit
Who does not have preemptive rights?
Preferred stockholders
Investment strategy where higher price is paid for a stock based on expected returns
Growth investing
Required to open a margin account for a trust
Specific text in the trust agreement authorizing a margin account, approval of the account by the designated supervisory person, a margin agreement. A completed margin suitability form does not exist.
ADRs…
Are issued by large domestic commercial banks and facilitate US trading in foreign securities
Gross margin
Revenues - cost of goods sold
Statute of limitations for civil liability
Earlier of 3 years after date of sale or 2 years after discovery
True or false: broker dealer commissions must always be disclosed
True
Statute of limitations for criminal liability
5 years
A lawsuit against a BD or adviser can be avoided if…
Restitution, costs, and interest are paid to a client
True or false: payment of restitution to a client prevents the Administrator from prosecution for violating the provisions of the act.
False
TIPS adjusts principal value or return?
Principal value
True or false: a record by security showing each client’s interest and location thereof is required only by advisers with custody
True
Number of days customer has to respond to a rescission letter from a BD offering to buy back securities sold illegally
30
If individual accumulates more than 5% in voting stock of a publicly traded company, notification must be made to and in how many days:
10 days. Exchange from security is traded, SEC, issuer’s board of directors. Do not have to notify Administrator.
Writing an option provides all of the following:
Income, hedging, limited downside protection when long the underlying asset. Cannot offer maximum protection against loss.
Investor’s investing experience and knowledge is asked on new account forms for
Options, stocks, bonds, commodities (not margin, retirement, or discretionary)
Have specific net worth suitability requirements
Direct participation programs
Equity straddle option
Option buyer is looking for market volatility,
option seller is looking for market stability
When a pension consultant’s AUM reaches $200 milliion, who does it register with?
Can choose state or SEC
Method for determining appropriate market price of common stock based on present value of all future dividends to be paid on that stock
Dividend discount model
True or false: A right is a derivative
True
Advisor that relies on either the venture capital adviser exemption or private fund advisor exemption
Exempt reporting adviser
True or false: It is possible to receive distributions from a non-qualified annuity before age 59.5 without incurring tax penalties
True. Due to death or disability.
True or false: Annuity exclusion ratio applies to accumulation units only.
False. Applies during the payout period.
True or false: Security trades OTC if it trades anywhere other than on an exchange
True.
Defined the term “federal covered adviser”
National Securities Markets Improvement Act of 1996
Difference between the sum of the discounted cash flows that are expected from an investment and its initial cost
Net present value
Difference between Customer Identification Program and new account opening rules of regulatory bodies
CIP requires date of birth while regulators only require proof of legal age
True or false: IAs can charge both fees and commission
True (with disclosure)
True or false: Administrator can cite a witness in contempt for refusing to appear at a hearing
False
True or false: Administrator can issue a subpoena for the production of documents
True
Maximum contribution to a Keogh
Lesser of 100% earned income or $6000
True or false: BD must register in state if it has 1 retail client in it
True
BD does not have to register in state when clients are
Other BDs, banks, investment companies, existing customers temporarily in state
Registration filed with SEC must state
Biographies or board and officers, expected use of funds, expected range of offering price
True or false: Portfolio manager expecting a rising market would want to take advantage of that by increasing beta
True
True or false: Soliciting orders for unregistered, nonexempt securities is unlawful
True
Business fails bc of new technology. Systematic or unsystematic risk?
Unsystematic business risk that can be helped unlike market risk.
