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Series 66 > Unit 14 (5) > Flashcards

Unit 14 (5) Flashcards

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Series 66 flashcards
1
Q

Is a holding company included in the definition of investment company?

A

No

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2
Q

How much of the board of an investment company must be disinterested parties?

A

At least 40 percent of the board of an investment company must be disinterested parties

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3
Q

What is the max amount of interested parties on the board of an investment co?

A

No more than 60 percent of the board can be interested parties

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4
Q

How much of the outstanding shares of another investment co can one investment co own?

A

No more than 3 percent

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5
Q

4 things investment cos can’t do

A
  1. Can’t purchase on margin
  2. Can’t have a join account with someone else
  3. Can’t sell short
  4. Can’t own more than 3 percent of another investment co
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6
Q

How can a strategy change be made by the board?

A

A majority vote of outstanding stock is required for the board to be authorized to change strategy of an investment co

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7
Q

Can an investment co make a public offering?

A

Yes, it must have a net worth of 100k to do so

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8
Q

Who is an affiliated person of an investment co?

A

Someone who owns 5 percent of the cos shares, or is a board member, principal, or employee

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9
Q

How much does a control person own of an investment co?

A

More than 25 percent of the outstanding shares

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10
Q

How soon must mutual funds redeem funds?

A

Within 7 days

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11
Q

How often does a mutual fund file financial reports with the sec?

A

Annually. Shareholders are sent info semi annually

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12
Q

When must mutual funds deliver a prospectus?

A

Before or during solicitation of a sale

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13
Q

What price is an open ended offered at?

A

POP

POP = NAV + Sales load

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14
Q

What type of securities can a closed end fund issue?

A

Common, preferred, and bonds

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15
Q

What is another name for a closed end fund?

A

Public traded fund

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16
Q

How is the price of a closed end fund determined?

A

By supply and demand. Closed end can trade at a price above or below nav.

17
Q

You can own fractional shares of an open ended fund

A

The sales load is taken out of your initial investment. That amount is then divided by the current market price to get your total shares which can be fractional

18
Q

How many investors can there be in a private fund under 3c1?

A

No more than 100 and under state law they all must be qualified clients

19
Q

How many investors can there be in a private fund under 3c7?

A

1,999 and investors must be qualified purchasers

20
Q

What is the max amount of investors in a hedge fund?

A

100

21
Q

What is tenure in terms of a mutual fund?

A

Tenure is the amount of time a manager has been managing the fund

22
Q

What sales load do class a shares have?

A

Front end sales load, but a low or no asset based sales charge

23
Q

What do you buy from a Unit Investment Trust?

A

Units, not shares like in a mutual fund

24
Q

Are REITS publicly traded?

A

Assume REITS are publicly traded unless stated otherwise

25
Q

What are the two main reasons for owning a mutual fund?

A

Diversification and professional management

26
Q

Is a hedge fund registered with the SEC?

A

Hedge funds are not registered with the SEC but their advisors are

27
Q

Who do hedge fund advisors register with?

A

The SEC

28
Q

If an investor has a short term horizon but wants to buy mutual fund shares, what do you do?

A

You explain that mutual funds are not meant to be traded short term. If he still insists you would sell him class C shares because they have the lowest front end sales load.

29
Q

What regulation are hedge funds and private equity funds exempt under?

A

SEC reg D

30
Q

Why do mutual funds offer different classes of shares?

A

To give their customers a choice on how they want to pay for the investment. Class a shares have a front end load while class b shares have a back end load. The operating and administrative expenses for class b shares are always higher, but management fees are generally the same. Class c shares have a level load.

31
Q

How often must investment companies send financial reports to shareholders?

A

Semi annually. First, think about what an investment company is, like a mutual fund. You know mutual funds must update customers semi annually

32
Q

A trade in the secondary market may be motivated by the desire for increased access to deals in the primary market

A

Secondary purchases can give an investor exposure to a general partner, which can create opportunities to gain access to future opportunities from that partner

33
Q

What is the most liquid?

  1. Foreign stock funds
  2. Common stock
  3. Money market funds
  4. Variable annuities
A

Money market funds because in almost all cases they come with check writing privileges

34
Q

What makes a money market fund more liquid than common stock?

A

Because money market funds come with check writing privileges

35
Q

If general interest rates increase, the interest income of a bond unit investment trust will?

A

Stay the same. Because the portfolio of a UIT is fixed, the income generated by that portfolio will not change. Remember a UIT does not have a portfolio manager

36
Q

Does a UIT have a portfolio manager?

A

No

37
Q

Do mutual fund shareholders have the ability to vote on the specific securities for the portfolio?

A

No. Choosing the specific securities is done by the investment advisor. Dont confuse this with voting for a change in the strategy of the fund

38
Q

Which of the following has the lowest asset based sales charge?

  1. Class a
  2. Class b
  3. Class c
  4. Class t
A

Class A. Class A has a front end load, but a low, or no asset based sales charge. Class B and C don’t have a front end load, but a higher asset based sales charge. Class T shares always have a 12b-1 charge.

39
Q

What type of charge do class T always have?

A

12b-1

Series 66 (22 decks)

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