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Series 66 > Overview > Flashcards

Overview Flashcards

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Series 66 flashcards
1
Q

Investment advisor Representative is any partner, officer, or other individual associated with an investment advisor who:

A

Makes recommendations or gives advice regarding securities, manages accounts or portfolios of clients, determines which recommendations or advice should be given, solicits/offers or negotiates the sale of investment advisor and services, supervises employees who perform any of these functions

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2
Q

Which is NOT a security

A

Fixed annuities, life insurance (term, while, universal), endowments, commodity futures contracts, an IRA/Keogh plan

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3
Q

Agents, issuers, and banks are not:

A

Broker dealers

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4
Q

Federal covered securities: require notice filing, consent to service of process, and payment of the fee?

A

Yes, if issued by a mutual fund. No, if issued by listed company (New York Stock Exchange, NASDAQ)

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5
Q

File Application (CRD or IARD) details:

A

Effective on the 30th day after filing, expires annually on December 31. Updated annually at renewal, amendments for material changes are filed promptly (30 days)

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6
Q

Consent to service of process

A

Filed once, not renewed. Grants administrator power of attorney to receive and process non-criminal legal complaints

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7
Q

Filing fee is paid (including successor firms?):

A

Paid annually. For successor firms, application must be filed, no additional filing fee for remainder of year)

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8
Q

Unacceptable soft dollar arrangements include:

A

Payment for marketing, travel expenses, meal and entertainment, salaries, accounting and licensing fees, computer terminals, correction of trading errors

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9
Q

To register with the SEC (or state), IAs must:

A

File Form ADV Pt. 1 and 2 through IARD (operated by FINRA)

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10
Q

Federal (IAA Act of 1940) exclusions from IA Definition:

A

Banks or bank holding companies (NOT SandLs or IA subsidiaries of banks or investment companies), professionals (lawyer, accountant,teacher, engineer), B-Ds and their REPS, bona fide publisher, US Government Securities Advisers

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11
Q

State exclusions from IA Definition (different ones)

A

Banks, S&ls, trust companies (NOT bank holding companies), B-Ds and their AGENTS, IARs, Federal Covered Advisers

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12
Q

State exclusions from IA Registration:

A

No place of business in state, institutional exemption, fewer than >5 non institutional clients over past 12 months

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13
Q

Federal exclusions from IA Registration:

A

Local exemption [all clients are resident of state] (remember no advice on EXCHANGE LISTED securities), insurance exemption, private funds with

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14
Q

US Mail or Telephone jurisdiction:

A

Two states max (originating state and state to which it is directed) NO forwarded mail

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15
Q

Television or radio jurisdiction:

A

One state only (state in which the camera/microphone is located)

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16
Q

Newspaper or magazine jurisdiction:

A

One state or no state (state in which the newspaper/magazine is published, unless more than two thirds of the circulation is outside the state)

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17
Q

Statute of limitations on taking action to recover damages made in violation of state registration:

A

Within three years of occurrence or two years of discovery, whichever comes first

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18
Q

One of the most common uses for a bypass trust:

A

Pass assets from the second deceased parents to his children

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19
Q

Both an offer and the sale:

A

Warrants, rights, gift of assessable stock (need disclosure of material facts)

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20
Q

State/Fed penalties

A

3 years/$5,000 state
5 years/$10,000 fed
5 for criminal violations (e.g. Fraud, state and fed)

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21
Q

Schedule 13D

A

Owners of more than 5% of company equity

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22
Q

Schedule 13F

A

Exercises discretion over $100,000,000+ must file on quarterly basis

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23
Q

Expected return (modern portfolio theory)

A

Possible return on the investment weighted by the likelihood that it will be realized

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24
Q

Futures details

A

Standardized quantity, variable quantity (as agreed), non-personal, may be offset

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25
Q

Forwards details

A

Variable quantity (as agreed), OTC traded with negotiable terms, personal, may NOT be offset

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26
Q

Which two types of insurance have fixed premiums?

A

Whole life and variable life (not universal or variable universal)

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27
Q

ERISA provisions apply to:

A

401 (k), 403 (b), SEP, SIMPLE

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28
Q

After tax dollar funded:

A

Non-qualified variable annuities, universal life policies, 529 plans

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29
Q

When looking up tax consequences of trading securities within a trust, trustee should look at:

A

Other taxable income generated by the trust

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30
Q

Investment advisor is required to record and keep a record of every transaction and security for a client account within:

A

10 days of the end of the quarter, excluding direct obligations of the US government

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31
Q

Which securities may have the registration denied or revoked by the administrator?

A

Nonprofit, exchange listed, investment contract for employee benefit plans

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32
Q

Withdraw cash value from life insurance vs. take loan tax consequences:

A 
Withdraw= return of premiums first (FIFO), then taxable earnings
Loan= tax-free
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33
Q

Exception as an agent (as a broker dealer/issuer):

A

Broker dealer capacity: never

Issuer: exempt transactions only

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34
Q

Non-qualified annuity penalties/RMD structure

A

10% penalty for withdrawal before 59.5 (tax deferred earnings are subject to penalty, cost basis is tax-free). No RMD.

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35
Q

Qualified annuity penalties/RMD structure

A

10% penalty before 59.5 (100% subject to penalty). RMD by 70.5.

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36
Q

A nonspouse who inherits an IRA when the decedent died before age 70 1/2 may withdraw the entire account by:

A

Over his expected lifetime, by the end of five years, or a lump sum distribution

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37
Q

Universal life insurance:

A

All premiums deposited in general account. Flexible premiums and/or death benefit. Also has cash value that grows at minimum interest rate and an actual rate that can be higher. Good for unpredictable income.

38
Q

Requests for materials from an IA must be met within:

A

7 days

39
Q

Under USA, any transaction involving ‘x’ is private placement:

A

No more than 10 persons

40
Q

Whole life insurance:

A

Premium payments are invested in the general account. Guarantees owners cash value and provides fixed guaranteed death benefit.

41
Q

Sector rotation - when economy is headed towards recovery, best asset classes:

A

Tech, industrials, cyclicals

42
Q

Sector rotation - when economy is headed towards recession, best asset classes:

A

Consumer staples, utilities, service, financial

43
Q

Variable life insurance policy notes:

A

Included in the estate of the deceased, not taxable to the beneficiary. Beneficiary may elect to receive the death benefit as an annuity. There is a minimum guaranteed death benefit. Withdrawal of cash value is FIFO (tax-free return of premiums first).

44
Q

Firms let maintain custody of cost where assess must satisfy these guidelines:

A

1) customer funds must be segregated
2) location of assets must be disclosed in writing
3) Records must be audited annually

45
Q

NASAAs model requires an advisor to file a balance sheet whenever:

A

1) advisor requires the pre-payment of fees in excess of $500, six or more months in advance
2) adviser maintains custody (full discretion)

46
Q

A top-heavy retirement plan is:

A

Any nonqualified plan in which highly compensated employees may participate without limit of income (deferred compensation plans)

47
Q

Testamentary trust:

A

Used when donor wishes to control trust assets during her lifetime. Executor will before yes to fund trust with assets within the estate. Does not avoid probate.

48
Q

Living (inter vivos) trust advantages:

A

Avoids probate, control of assets

49
Q

When to send a balance sheet (fed/state):

A

Fed: only if collecting/soliciting a prepaid fee of >$1,200
State: maintaining custody, and above but with $500

50
Q

Money Purchase Plan:

A

Defined benefit plan in which employer must make mandatory contributions (tax deductible)

51
Q

When must Form 8-K be filed?

A

4 days after occurrence of event

52
Q

Alpha is defined as:

A

Difference between the expected return of an investment and it’s actual return

53
Q

An investment advisor must give a client or prospective client a disclosure document (usually Form ADV Part 2) at least:

A

48 hours before or at the time of opening (unless clients are investment companies/impersonal services for

54
Q

Reports must be made to the state administrator within:

A

10 business days from the end of the quarter

55
Q

The most important factor when attempting to diversify a stock portfolio is:

A

Correlation

56
Q

Retention requirements for the maintenance of books and records of investment advisor/broker dealers are:

A

5 for IA, 3 for BD (2 years in easily accessible location for both)

57
Q

Stating to a client that the offering price of a security is the current market price is prohibited if:

A

The broker-dealers the only marketmaker in that security

58
Q

An investment advisor that wishes to act as a principal for its own account must:

A

1) disclose the capacity in which it is acting prior to the completion of the transaction
2) obtain the clients written consent

This rule does not apply to broker-dealers when they are not acting as investment advisors

59
Q

Canadian BD can effect transactions for Canadian clients who are temporarily in US if:

A

They register with the appropriate state. Agent handling account must register as well.

60
Q

If agent discovers she has inadvertently sold an unregistered non exempt security, she can:

A

1) repurchase security through offer of rescission
2) pay customer 6% interest (or max legal rate) less dividend/interest income received [must respond within 30 days or right to sue is waived]

61
Q

State admins have jurisdiction over securities transactions that are:

A

1) directed to their state
2) originate in their state
3) paid for in their state

62
Q

Accredited investor thresholds:

A

Annual income of $200,000 ($300,000 with spouse) or minimum net worth of $1,000,000

63
Q

Qualified client threshold:

A

AUM of at least $1,000,000 or net worth of $2,000,000

64
Q

Roth IRA characteristics:

A

Funded with after tax dollars. Qualified distributions held more than five years may be withdrawn tax free after 59.5

65
Q

When advertising on the Internet, an agent of the broker-dealer must disclose:

A

1) name of affiliated BD and of BD that reviewed/approved content
2) fact that agent is working within scope granted by BD
3) legend stating he will not conduct business unless registered or exempt

66
Q

Listed securities are considered:

A

Federal covered securities and exempt from registration with the administrator. They are not subject to notice filing.

67
Q

Which federal covered securities are subject to notice filing?

A

Investment companies and Rule 506 companies (Reg D)

68
Q

Closed-end management company characteristics:

A

1) shares not redeemable-no fractionals
2) usually traded in open market/exchange
3) commission/markup charged (common, preferred, bonds)

69
Q

Short-term, corporate, fixed income securities such as commercial paper and bankers acceptance may qualify as an exempt security if:

A

1) minimum denomination of $50,000
2) rated and one of the three highest rating categories by a nationally recognized statistical rating organization
3) maximum maturity is nine months

70
Q

CAPM measures risk using:

A

Beta for systematic, Alpha for non-systematic

71
Q

NASAA Recordkeeping Requirements includes retention of all documents the IA files (state and fed) regarding:

A

Registration applications, fingerprint cards, amendments, renewal filings, correspondence

72
Q

Written materials defined as written materials distributed to:

A

35 or more persons who pay

73
Q

Felony vs. misdemeanor:

A

Felony: General court martial, at least 1 year/$1,000
Misdemeanor: special court martial,

74
Q

Inherited securities cost basis:

A

FMV of securities, automatic long term holding period

75
Q

An SROs penalty for minor rule violations is:

A

Fine of $2,500 or less

76
Q

IS registration renewal is required by (fed/state):

A

Fed: within 90 days of advisers fiscal year end
State: expire at end of calendar year and then must be renewed

77
Q

Form ADV-H, NR, W

A

H - seeking exemption for temporary hardship
NR - Nonresident general partner
W - seeking partial or full withdrawal

78
Q

Capital needs analysis used to:

A

Determine how much insurance the client need to fund future financial goals

79
Q

When the rules for exempt securities overlap:

A

The more restrictive rule applies. Securities can be exempt under federal but not state and vice versa

80
Q

An agent not registered in the state has how many days to do so:

A

60

81
Q

Advantage of Coverdell over 529:

A

Custodian has a greater control over the investments, not just college

82
Q

Zero coupon advantages:

A

They can be purchased at a deep discount, no reinvestment risk, no tax liability at maturity

83
Q

Criminal, Regulatory, Civil Judicial Action DRP:

A

Felony or misdemeanor charges, SEC or state or foreign financial regulatory authority, civil court

84
Q

Trustee is responsible for reporting income, gains, and losses of the trust on the form:

A

1041

85
Q

Form 1065 and K-1 used by:

A

Partnerships

86
Q

Form 1040 is used for:

A

Personal tax returns

87
Q

True or false: USA classifies agent of a BD who also manages wrap account as an IA

A

False. IAs are firms, NOT individuals

88
Q

Is an adviser to a mutual fund considered an IA under USA?

A

No, mutual fund advisers are federally covered

89
Q

In state law, individuals representing issuers and affecting securities trades are NOT deemed agents if;

A

It involves exempt transactions/securities

90
Q

Federal covered securities are:

A

Listed securities (NASDAQ, NYSE). these are NOT subject to notice filing

Series 66 (1 decks)

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