Ch 10. Practice Test Flashcards
The provision at certain mutual fund policies cannot be changed without shareholder approval is addressed in the
A. Investment advisors act of 1940.
B. Securities exchange act of 1934.
C. Investment company active 1940
D. Securities act of 1933.
C. Investment company active 1940
A major responsibility of FINRA is
A. Registering agents of broker dealers to do business with the public.
B. Developing rules and regulations for its members.
C. Establishing rules for issuing new securities in primary markets.
D. Ensuring customer accounts in the event of the liquidation of brokerage firms
b. Development rules and regulations for its members.
Which of these are provisions of the Sarbanes-Oxley act of 2002?
I. Requires an anti-money laundering compliance program to be in effect.
II. Requires chief executive officers of public corporations to certify financial information in the quarterly and annual reports.
III. Makes unlawful and extending of credit to any director or executive officer.
IV. Require requires investment companies to verify the identity of any person opening an account.
A. I and II
B. II and III
C. I and IV
D. I, III, and IV
C. I and IV
which act repealed a prohibition that had been in place preventing financial situations from offering a combination of commercial banking investment banking, and insurance services?
A. USA patriot act of 2001.
B. Commodity futures, modernization act of 2000.
C. Graham Leach Bliley act of 1999.
D. Securities act amendments of 1975.
C. Graham Leach Bliley act of 1999.
The employee retirement income security act (ERISA) was primarily passed because of concern regarding the integrity and safety of
A. Employee wages
B. Employee fringe benefits.
C. Employer, sponsored retirement plans.
D. Employee life insurance programs.
C. Employee sponsored retirement plans.
An investment professional who reads investment journals is complying with the
A. Duty to diagnose.
B. Duty to consult.
C. Duty to disclose.
D. Duty to keep current.
D. Duty to keep current.
You sell your client a GNMA based on your explanation that they are safe because they are guaranteed by the US government in which one of these ethical duties May you have failed your customer?
A. Duty to keep current.
B. Duty to disclose.
C. Duty to consult.
D. Duty to diagnose.
B. Duty to disclose.
The SEC commissioned the RAND study, which found that there was a great deal of confusion for investors as far as understanding the differences between
A. Insurance agents of broker dealers.
B. Advisors and insurance agent agents.
C. Financial advisors and broker dealers.
D. Broker dealers and investment advisor.
D. Broker dealers and investment advisors.
Amy a financial services professional implies to Ross that she is an expert in option trading and strategies, but in fact knows only the basic elements looking solely at Amy’s lack of competency in this area which fiduciary duty has not been met.
A. Duty of care.
B. Duty to consult.
C. Duty to keep current.
D. Duty to disclose.
A. Duty to care.
The fundamental duty of a fiduciary advisor is to look out for the clients. Best interest which fiduciary duty is most directly tied to making sure all actions are being made solely for the benefit of the client.
A. Duty of loyalty.
B. Duty to consult.
C. Duty to diagnose.
D. Duty to keep current.
a. Duty of loyalty.
Which one of these is least likely to lead to ethical conflicts
A. Monthly production quotas.
B. Reasonable compensation.
C. Unrealistic client expectations.
D. Mismatch of client and investment professional.
B. Reasonable compensation.
Which one of these statements comparing the suitability standard and the fiduciary standard is correct
A. Verbal disclosure may be adequate under the suitability, but not the fiduciary standard.
B. Both approaches are primarily solution driven rather than product driven.
C. The suitability standard at the fiduciary standard or essentially the same thing.
D. Both approaches required looking out for the best interest of the client.
A. Verbal disclosure may be adequate under the suitability, but not the fiduciary standard.
Fiduciaries have written disclosure requirements, whereas verbal disclosure may be all that is required under the suitability standard
The uniform prudent investor act identified five fundamental changes in the former criteria for prudent investing. All of these statements are correctly stated except.
A. The standard of prudence is applied to each investment individually.
B. Prudent investing requires that fiduciaries diversify their investments.
C. Delegation of the trust investment and management functions is permitted subject to safeguards.
D. The trade-off in all investing between risk and return is the fiduciary central consideration.
A. The standard of prudence is apply to each investment individually.
The administration of ERISA is divided about all of these government entities except the
A. Pension benefit guarantee corporation.
B. Securities and exchange commission.
C. Department of labor.
D. Internal revenue service.
B. Securities and exchange commission.
What was the approximate dollar amount of US retirement assets held in IRA accounts at the second quarter of 2023?
A. 5.1 trillion.
B. 13 trillion.
C. 500 billion.
D. 36.7 trillion.
B. 13 trillion
Which of these statements regarding the level of trust in the financial services industry is correct
A. According to a Pershing study, the financial services industry is more concerned about trust than investors.
B. Despite the overall stock market recovery since the market meltdown in 2008 trust levels of financial service remained low.
C. The Edelman trust barometer consistently ranked financial services is one of the most trusted sectors in our economy.
D. Investor trust has never been an issue for the financial services industry.
B. Despite the overall stock market recovery since the market melt down a 2008 trust levels of financial services remain low
the administration of a qualified retirement plan which of these individuals is considered to be a fiduciary
A. A CPA who prepares a plan’s form 5500 annual report of employee benefit plan.
B. A highly compensated employee who participates in the plan.
C. A financial advisor handling the investment of plant assets.
D. The marketing director of the plan sponsor.
c. A financial advisor handling the investment of plant assets.
Which of these is the most support area of concern that was addressed in the Dodd-Frank Wall Street, reform act
A. Fiduciary standard.
B. Derivatives trading.
C. Hedge fund regulation.
D. Systematic risk.
D. Systematic risk.
Concern over systematic risk of the need to maintain a stable financial system is the primary issue addressed by D Frank derivatives did contribute to the crisis in 2008 but the crisis spread will be on the derivatives market into other areas such as the commercial paper market hedge fund regulation was addressed, but was not the most important area of concern.
Roger Jones is considering recommending one of 2 mutual funds for a client although both father are generally appropriate for the client. One is a proprietary fond that pays Roger a higher commission and the other has a better risk return profile. Roger decides to recommend the ladder font to the client with which of these fiduciary duties has Roger complied.
A. Loyalty.
B. Confidentiality.
C. Suitability.
D. Disclosure.
a. Loyalty.
Which of the following statements regarding the fiduciary standard is correct
A. It would never apply to an assurance agent.
B. It is considered a higher standard than the suitability standard.
C. It is applied equally and consistently for all financial advisors.
D. The general approach is product driven.
B. It is considered a higher standard than the suitability standard.
What is the primary function of central clearing counter parties (CCP) that have been set up as required by the Dodd-Frank, Wall Street reform and consumer protection act of 2010
A. To develop guidance for investment advisors regarding the ‘know your customer’ rules.
B. To facilitate the netting of swap contracts
C. To eliminate counterparty risk.
D. To regulate hedge fund transactions.
B. To facilitate the netting of swap contracts.
Assume Tom’s area of expertise is in annuities and (Insurance) products one of Tom’s clients Mary comes to him with specific questions regarding the taxation of her 401(k) contributions based on new tax legislation that was passed earlier in the year Tom doesn’t know the answer to help Mary what duty should Tom adhere to in order to fulfill the duties owed to his client?
A. Duty to diagnose.
B. Duty to keep current.
C. Duty to consult.
D. Duty to disclose.
C. Duty to consult.
The obligation to ‘know your customer’ is specifically covered in the
A. Duty to diagnose.
B. Duty to disclose.
C. Duty to keep current.
D. Duty to consult.
A. Duty to diagnose.
The duty to diagnose includes gathering sufficient information to know your customer. The duty to keep current requires a fiduciary to stay on top of current industry changes and developments. The duty to disclose require requires disclosure of all and conflict of interest. The duty to consult is the duty to consult with other professionals when necessary.
Which of these statements comparing the suitability standard and the fiduciary standard is correct
A. Legal recourse under the suitability standard is normally through arbitration and the public courts.
B. Verbal or written disclosure is generally adequate under both standards.
C. The suitability standard is primarily principal based, whereas the fiduciary standard is primarily rules based.
D. Written disclosure is always required under both standards.
A. Legal recourse under the suitability standard is normally through arbitration and not the public courts.
