vocab 4 Flashcards
May a firm conduct its annual compliance meeting via webcast?
Yes, provided participants have the ability to have questions answered on a timely basis.
Whose Social Security number is listed on a custodial account? (UTGM)
The minor’s
Hank is a 71-year-old who has a Roth IRA. What penalty is assessed if Hank has failed to begin taking distributions?
There is no penalty, since Roth IRAs do not have RMDs.
May an 85-year-old continue to contribute to a Roth IRA?
Yes, provided she has earned income.
What is the maximum annual IRA contribution for a 58-year-old who only has investment income?
$0, since he has no earned income
How much may a married couple earning $325,000 contribute to a Roth IRA?
$0, since the couple’s income exceeds the income threshold
What is the typical cost basis for a participant in a qualified retirement plan?
$0, since these plans are typically funded pre-tax.
Distributions from a qualified plan are taxed at __________________ rates.
at ordinary income
May clients invest in an out-of-state 529 plan?
Yes. Clients may choose to invest either in-state or out-of-state.
In an non-qualified annuity, how is a single distribution taxed?
Earnings first (LIFO)
What technique can be used to roll assets from one annuity into another without taxation?
A 1035 Exchange
Is switching between annuity sub-accounts taxable?
No
In a non-qualified annuity, how is a return of capital taxed?
Tax-free, since it is part of the client’s basis
What is the SEC-mandated period for advertising the yield of a money market fund?
7 days
What is the SEC-mandated period for advertising the yield of a bond fund?
30 days
For how long must mutual fund advertisements be kept on file?
Three years (but easily accessible for the first 2 years)
Must a photocopied magazine article on mutual fund investing be filed with FINRA?
No. Independently prepared reprints need not be filed, but must be approved by a principal.
May an aunt set up a 529 plan for her niece?
Yes. The donor is not required to be a parent.
True or False: Unrealized gains in a mutual fund are taxable.
False. Unrealized gains (paper profits) are not taxable.
May a person contribute to her own 529 plan?
Yes
Are variable life policies subject to IRS early withdrawal penalties?
No, but variable annuities would be subject to the penalty.
John turns age 70 1/2 in December. When must he begin the RMD from his IRA?
April 1 of the following year
Who disburses checks for capital gains distributions to mutual fund shareholders?
The transfer agent, who is typically the paying agent as well
What is waived for a first-time homebuyer in the event of an IRA distribution?
The penalty is waived, however, taxes are still levied.
May a firm advertise a hedge fund being offered through a Reg. D private placement to the general public?
No. This is prohibited.
Is there an income threshold for 529 College Savings Plan contributors?
No. There are no income limits imposed for these plans.
May a Series 6 registered person engage in option trades?
No
Which federal law created the SEC?
The Securities Exchange Act of 1934
Which federal law governs the registration of RRs and their firms?
The Securities Exchange Act of 1934
Which federal law governs the registration of new issues?
The Securities Act of 1933
Are CMOs exempt from registration under the Securities Act of 1933?
No. CMOs are corporate securities that must be registered.
What may an RR say upon passing her Series 6 exam?
She may state that she is registered with FINRA. Remember that registration does not imply expertise.
True or False: Interest and dividends are considered earned income.
False. They are considered unearned income. Wages, salary, and tips are earned income.
Is default possible on a municipal offering?
Yes. Only U.S. Government issues are considered free of default risk.
What is a specific risk that may be attributed to a GNMA fund?
Prepayment risk. This is the risk that mortgages may be paid off early.
What is Subchapter M?
A section of the IRS Code that defines regulated investment companies (conduit/pipeline theory).
The ___________ bears the investment risk in a defined benefit plan.
employer