Kaplan Section 3

Question 1

Deferred Compensation Plans

Answer 1

Deferred Compensation plans are not tax qualified and therefore may be discriminatory.

Officers and directors who are employees may also be covered

Employers only receive a tax deduction for the benefit AFTER it’s paid to the employee

Question 2

Per quiz question “whenever you see the word supervision, invariably registration as principal is required

Answer 2

“whenever you see the word supervision, invariably registration as principal is required”

Question 3

ERISA

Answer 3

Employee Retirement Security Act (ERISA) is the federal law designed to protect the rights and interests of participants in a tax-qualified retirement plan

Question 4

Regulation U

Answer 4

Regulation U is the regulation governing banks and the amount of money they can lend to customers using securities as collateral

Question 5

The securities exchange act of 1934 regulates the secondary market and it’s employees and firms

Answer 5

The securities exchange act of 1934 regulates the secondary market and it’s employees and firms

Question 6

Exchange Market

Answer 6

Listed securities traded on exchanges constitute the Exchange Market

Question 7

OTC Market

Answer 7

UNLISTED securities traded over the counter constitute the OTC(over the counter) market

Question 8

3rd Market

Answer 8

Listed securities traded over the counter(otc) compose the 3rd market

Question 9

4th Market

Answer 9

Securities traded directly between institutions constitute the 4th market

Question 10

Regulated Investment Company

Answer 10

Considered to act like a pipeline or conduit for dividend contributions

A fund that distributes more than 90% of it’s net investment income to shareholders. If they distribute more 90% or more they do not have to pay taxes on what they distribute

( this is under sub-chapter M of the Internal Revenue Code)

Question 11

SIPC

Answer 11

SIPC provides coverage for up to 500k of securities and cash held in a customers account(250k cash)

All types of securities are covered

SIPC protects customer accounts from Broker/Dealer failure

*precious metals(except for minted gold and silver) are Commodities (not securities) so they would NOT be covered by SIPC

Question 12

The Total return of a mutual fund assumes the total return of all dividends AND capital gain distributions

Answer 12

The total return of a mutual fund assumes the total return of all dividends and capital gains

Question 13

DBA’s

Answer 13

DBA’s(doing business as) are permitted as long as the name is filed with FINRA and the SEC

Question 14

If something states “under the guidelines concerning communication with the public”

Answer 14

They are referring to the same things that fall under or are considered retail communication.

i.e. Emails to 25 or more people in 30 days offering something is retail communication so it falls under the guidelines concerning communication with the public