Exam 2 Wrong Anwers Flashcards by leo Gottlieb

Under the Investment Advisers Act of 1940, which of the following would be excluded from the definition of an investment adviser?

A bank that charged a fee for providing investment advice

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States may require investment advisers who are registered with the SEC to do which of the following except?

Maintain net capital requirements

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Although many advisers to private funds are exempt from registration, larger ones generally register with the SEC, SEC registered investment advisers with at least $150 million in private fund assets under management use which form to report information about private funds that they manage?

Form PF

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Under the Uniform Securities Act, an investment adviser is exempt from registration if he has no place of business in a state and his only clients are any of these except

Individuals meeting the accredited investor standard

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When an investment adviser representative begins or terminates employment with a state registered investment adviser….

Only the investment adviser must notify the Administrator

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If an agent holds a seminar in a certain state, the agent must…

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Great Research & Analysis Brokers (GRAB) is an SEC registered broker dealer with its principal office in State X. One of GRAB’s clients vacations for 3 months during the winter in State Y. Under the registration requirements of the Uniform Securities Act,

GRAB is not defined as a broker dealer in State Y if it does not have a place of business in the state

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The Adminstrator, with proper notice, may examine the financial records of which of the following persons registered in his state?

Broker dealers and investment advisers

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A publicly traded corporation offers its employees an opportunity to purchase shares of the company’s common stock directly from the issuer. A specific employee of the company is designated to process any orders for that stock. Under USA, the employee…

Must existent as an agent if sales related compensation will be received by the employees either directly or indirectly

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During the application process for registration as an agent, the Administrator may request information about the applicant’s

Citizenship

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A security issued by a life insurance company issuing stock in a state in which the company is authorized to conduct its insurance business is…

Exempt from registration

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A customer requests information on a new mutual fund and asks her agent to circle the important information in the prospectus and information he thinks will be of special interest to her. This is permitted…

Under no circumstances

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Which of the following is not an accredited investor?

An individual with a net worth including primary residence, that is greater than $1 million

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An investment adviser is sued by a client. If the client is successful in the civil proceeding, under the Uniform Securities Act, the client may be awarded

The money paid for advice, any losses resulting from the advice plus interest, costs, and attorney’s fees, less any events gained from advice

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An administrator has jurisdiction over an offer to sell securities if it is made in a newspaper published out of state

Under no circumstances

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Under which of the following circumstances may an Administrator revoke a state registered investment adviser’s registration?

The adviser has been convicted of a non securities related felony

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If an investment adviser representative commits a criminal violation of the Uniform Securities Act, she is subject to legal action for…

5 years after the alleged violation

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Under the USA, an agent may file for a review of an Administrator’s revocation order within how many days of revocation?

60 days

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A broker dealer sends an email to all of its clients that anyone purchasing at least 100 shares of an IPO that has just become effective will receive, at no additional cost, a bonus of 10 shares of a Nasdaq traded stock. Under the Uniform Securities Act, delivery of this stock to a qualifying client would represent…

A sale

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Under NASAA’s Model Rule dealing with Unethical Business Practices of Investment Advisers, Investment Adviser Representatives and Federal Covered Advisers, an investment adviser would have to disclose that the firm was acting in principal capacity when

Shares held in the account of an advisory client are purchased by the investment adviser

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Likes on Facebook, where a discount is given would…

Not be considered a testimonial and would therefore be permitted

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The agreement between an investment adviser and client is the advisory contract. To be in compliance with the law, contracts under the USA differ from those under the Investment Advisers Act of 1940 in that they…

Must be in writing

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Which of the following statements is not true concerning the wrap fee programs brochure under the Uniform Securities Act?

It contains a statement that the program will generally cost the client less than purchasing these services separately

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An agent had a conservative investor looking for income. The agent recommends a bond of a company the investor has never heard of. To allay the client’s fear of loss, the agent states that the payment of interest and principal is guaranteed by a well known blue chip company. Under USA…

The agent is describing a guaranteed security

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A fiduciary acting in accordance with the UPIA, would choose investments on the basis of all of the following except

Transaction costs

All of the following statements concerning an agency cross transaction for an advisory client are true except

An investment adviser may recommend the transaction to both parties to the transaction

One of the major differences between identity theft and physical theft is that in the case of identity theft,

It might not be discovered for some time

ABC advisers owns ABC securities, It would not be prohibited for the IAR to use securities owned in the advisory account to obtain a loan for this client because...

The 2 firms are affiliated

When it comes to safeguarding confidential information pertaining to the accounts of an individual customer or family, the rules deal primarily with what is called a covered account. A key factor in determining if an account meets the definition is...

The ability of the customer to move funds out if he account on multiple occasions

An investment adviser representative of a federal covered investment adviser that provides advisory services to State A would not trigger the pay to play prohibition against the firm receiving compensation from that state for advice as long as the IAR contributed no more than

$350 per election cycle for a candidate that IAR was eligible to vote for

Unless an exemption applies, under the Investment Advisers Act of 1940, an investment adviser is required to...

Provide each advisory client with a brochure or a summary of material changes within 120 days of the end of its fiscal year

All of the following are tools that may be employed by the Federal Reserve in an effort to control the economy except

The prime rate

When investors tend to increase their investments in debt securities into those on the short end of the spectrum, it generally leads to...

A positive yield curve

An investor using yield curve analysis would expect to view bonds of...

A single issuer over varying maturities

Proponents of the concept of inflation inertia believe that

Prices will rise slowly and then begin to increase at a faster rate

You note that an article in the Wall Street Journal points out that the money supply has been increasing. This economic measure is

A leading indicator

With respect to the fiscal policy of the United States, the annual budget request is submitted by the

President

Under SEC rules, Form 8-K must be filed

Within 4 business days of the event

If the required rate of return is less than anticipated in a present value calculation, the effect would be that the

Present value would be higher

Which of the following attributes of common stock best describes why internal rate of return IRR is not generally used to determine the return on common stock?

Uneven cash flows, no maturity, date and price

The MNO Manufacturing Company headquartered in Springfield, has just filed for bankruptcy. Under federal bankruptcy law, which of the following would have highest priority with the bankruptcy trustee?

Holders of mortgage bonds

If your client is primarily concerned about the rising cost of living but wishes to limit his exposure to business risk, which of the following securities is most appropriate?

S&P 500 index fund

When the 91-day Treasury bill rate is 3%, an investor decides to purchase a 20 year corporate bond at pat with a coupon of 8%. If the corporate bond does not pay as expected, the investor’s potential loss is considered

Opportunity cost

Kapco common stock is listed on the New York Stock Exchange. If an executive Vice President of the company buys 400 shares of the company’s stock on the NYSE, she

May sell immediately subject to Rule 144 volume limitations

Ownership in a corporation is evidenced by holding share of the company’s

Common or preferred stock

The residual right of common stockholders refers to their right to

Claim company assets in bankruptcy after wages, taxes, creditors, and preferred shareholders have been paid

Investing in emerging market stocks is least likely to expose your client to which of the following risks?

Interest rate

One characteristic found in equity securities issued by a corporation is

Limited liability

In a portfolio containing common stock, straight preferred stock, convertible preferred stock and adjustable rate preferred stock, changes in interest rates would be most likely to affect the market price of the

Straight preferred stock

One of your customers noticed that the short interest on Kapco common stock is high. When she asks you for an interpretation, you should tell her that this signals

A bullish outlook

Which of the following projects is most likely to be financed by a general obligation rather than a revenue bond?

Public library

Which of the following would you not expect to see issued at a discount?

Bank jumbo CD

To secure the debt that a subsidiary is offering, a railroad holding company transfers to a trustee the common stock of another subsidiary. The offering is one of

Collateral trust certificates

A bank is advertising a no cost DDA. Your client asks you to describe what that is. You would respond that DDA stands for

Demand deposit account

Which of the following statements regarding US government agency securities is True?

They generally offer higher yields than direct US obligations

The best time for an investor seeking returns to purchase long term fixed interest rate bonds is when

Long term interest rates are high and beginning to decline

If an investor pays 95.28 for a Treasury bond, how much did the bond cost?

$958.75

In general, among the advantages to investing in Brady Bonds over those issued by countries classified as emerging economies is

Increased liquidity

Which of the following are general characteristics of negotiable jumbo CDs?

Issued in amounts of $100,000 to $1 million

When reading a research report about an investment company, you read that, in addition to common stock, the company also has a preferred stock issue outstanding. From this, you could conclude that this is

A closed end investment company

A customer notices that Gem fund has an net asset value (NAV) of $12 and an ask price of $12.50, and that ABC Fund has a NAV of $11.50 and an ask price of $10.98. The customer should conclude that

GEM may be an open or closed end fund and ABC is a closed end fund

Why do some mutual funds offer class A and class B share options?

To give investors the option of choosing how they wish to be charged for the purchase of their funds

All of the following are true of REITs except

They must take equity or debt positions, never both

A mutual fund must redeem its tendered shares within how many days after receiving a request for their redemption?

7 days

One reason that a private equity fund may operate under the Section 3 c 7 exemption of the Investment Company Act of 1949 is that

It would be able to have more than 100 investors

One way in which the method of capitalization of close end companies differs from that of open end companies is that the closed end company can

Issue more than 1 class of stock

When discussing the purchase of a scheduled premium variable life insurance policy with a client, it would be correct to state that

By surrendering the policy, its cash value may be obtained

All of the following are advantages of universal life insurance except

The policy is guaranteed never to lapse

Options positions can either create rights or obligations. In which option position has the investor created the possible obligation to purchase stock?

Selling a put

The term sweetener would most often apply to

Warrants

A futures contract has...

Standardized terms

Derivatives can serve many purposes. However investors should be aware that there are positions which can result in

Unlimited loss

Your client has heard about investment opportunities in life settlements. Among the risks involved with this investment is

The insured may live well past the expected mortality date

Flow through is one of the features of

Direct participation plans

Investing in commodities could involve investing in any of these except

Consumer durables

A married couple wishes to open an account at your firm. Which choice of registration would you recommend if they insist that no trading be done without consent of both of them?

Tenants in the entirety

A deceased individual with 2 surviving children and a spouse had established a trust for his family. The trust document appointed both children as cotrustees. The surviving spouse is to receive current income and his 2 children will receive equal shares of the remaining principal upon the spouse’s death. As the adviser to the account, you

Follow the instructions of the trustees

The president of a business entity opens an account in the name of the business. When determining the suitability of recommendations to the account, knowing the president’s personal financial condition is necessary for each of the following forms of business structure except

A C corporation

Gloria wishes to set up a trust where income must be annually distributed to her daughter. She wants her daughter to pay any income taxes because she is in a lower tax bracket than Gloria is. What should Gloria do?

Use a simple trust with her daughter as irrevocable beneficiary

Which of the following accounts can only be opened by spouses?

Tenants in the entirety

Agatha has an account with her aunt, Sally, which is registered as TIC. If Sally predeceases Agatha, the assets in the account go to

Sally’s estate

Keisha has 3 married children, each with children of their own. She wishes to leave equal shares of her estate to each of her children. What happens if 1 of those children dies before Kiesha?

The share belonging to the deceased child is distributed per stirpes

If a new client had $200,000 to invest and wants to retire in 15 years, which of the following client information is least necessary for an advisor to recommend a suitable investment program?

Current income and cash flow requirements

One expect in which an investment adviser differs from an agent for a broker dealer is that of fiduciary responsibility to the client. Therefore the IA will have greater concerns about various non financial needs and attitudes of the client when making recommendations. Included to those concerns would be all of these except

A client’s retirement plan vested balance

One of the offshoots of the capital asset pricing model (CAPM) is the Capital Market Line (CML). The equation for the CML uses which of the following?

Standard deviation

Which of the following statements regarding a bond ladder stately is correct?

A bond ladder strategy is relatively easy way to immunize a portfolio against interest rate risk

Although there is no universal agreement in numbers, the minimum threshold for a stock to be considered large cap is

$10 billion

All of the following are examples of non diversify able risks except

Liquidity risk

Which of the following bond strategies is the least active?

Bullet

Sector rotation would most likely be employed by an investment adviser using which of the following investment styles?

Tactical

Which of the following describes an investment management style?

Large capitalization

According to the efficient market hypothesis, information found when reading the Wall Street Journal would be considered?

Weak form market efficiency

The use of futures to hedge against a price increase is best referred to as

Long hedge

One of the asset allocation classes is fixed income securities. When an IAR is determining which securities to fill that portion of the client’s portfolio, which of the following would not be included?

Preferred stock

Your client’s child is entering college next year. Which of the following would be the most appropriate recommendation?

A 5 year laddered portfolio of US Treasury notes

Each of the following could cause an investor to be subject to the alternative minimum tax except

Interest received on school district go bonds

An investor purchases 100 shares of ABCE common stock at $70 per share. Thirteen months later, the stock is sold when the market price is $50 per share. Which of the following activities made 20 days after the sale of the stock at $50 per share, would not violate the wash sale rule?

Purchasing an ABCE put option

If an investor is in the highest federal income tax bracket and is subject to the alternative minimum tax, which of the following securities should an agent recommend?

General Obligation Bond (GO)

The alternative minimum tax becomes a consideration when a taxpayer has so called tax preference items. Included in that definition is

Interest from private activity bonds

Trading securities involved certain expenses. Which of the following is not considered to be one of them?

Advisory fees

Which of the following statements about stop orders is not true?

A sell stop order is used to protect a short sale

When a security purchased on margin suffers a decline in market value, it may cause the equity in the account to fall to a level such that additional funds are required under the terms of the margin agreement between the client and the broker dealer. The term that describes the request by a broker dealer rather than an SRO for more money is

House call

A Nasdaq market maker buys 1,000 shares of stock from a customer at its bid to satisfy a customer order. This is an example of

A principal trade

In a margin account, broker dealers lend money to clients to enable them to leverage their investments. The account document that is evidence of the debtor creditor relationship is

The credit agreement

One measure of an investor’s total return is called holding period return. The computation includes both income and appreciation and is used for both debt and equity securities. An investor’s holding period return would exceed the bond’s yield to maturity if

Coupons were reinvested at a rate exceeding the yield to maturity

When a bond is selling at a premium, a bond callable at par will

Have a YTC that is less than the YTM

Which of the following is not an example of a non-qualified retirement plan?

A SIMPLE plan

Which of the following has a “use it or lose” it provision?

Flexible spending account (FSA)

Those individuals who are considered parties in interest due to handling the assets of a corporate retirement plans are

Not permitted to use those funds to acquire company assets in an amount beyond the allowable limits

For which of the following employer sponsored qualified plans is it mandatory that annual contributions be made?

Money purchase pension plan

An individual has a substantial vested interest in his 401k plan at work. Which of the following is not an exception to the premature distribution penalty tax?

Distribution of up to $10,000 made to purchase a principal residence

Withdrawals during retirement from which of the following accounts would most likely be subject to the greatest amount of taxation?

Qualified variable annuity

In many cases, the exceptions from the early distribution tax penalty of 10% are the same for both IRAs and qualified plans. However a specific exception granted to those with qualified plans that is not available to IRA owners is distributions

Under a QDRO

Which of the following is a benefit to an employee of a business offering a safe harbor 401k using a non elective formula?

The employer is required to contribute on the employee’s behalf even when the employee does not contribute

Martha passed away recently at the age of 87. Among the assets in her estate was an IRA with a value of $150,000. Martha’s son Jerome, a 52 year old surgeon and a client of yours, was named as the beneficiary of the IRA. From a tax standpoint, which of the following options would you recommend to Jerome?

A separate inherited IRA should be opened in Martha’s name for the benefit of Jerome

An ESA may be used to...

Fund education at any level

Which of the following firm’s earnings are likely to exhibit the greatest degree of sensitivity to the business cycle?

Furniture producer

Under the Investment Advisers Act of 1940, which of the following would not meet the criteria of persons associated with an investment adviser?

An individual whose only function is posting trades to client accounts

When registering a security under the Uniform Securities Act, the registrant must indicate all of the following except

The effective date of the offering

After an investigation, the Administrator, wishes to have the registration of an investment adviser revoked. In order to do so, all of the following are true except

The investment adviser may elect to withdraw its registration

When an investment adviser representative begins or terminated employment with and adviser registered under USA...

Only the investment adviser must notify the administrator

When an investment adviser representative begins or terminates employment with a federal covered advisor...

Only the investment adviser representative must notify the administrator

If the yield curve becomes inverted, a likely cause would be that the Fed has...

Tightened short term credit

An investment adviser may borrow from all of the following clients except

A mortgage broker

ABC Securities is a broker dealer registered with the SEC and domiciled in state M. ABC securities would not be defined as a broker dealer in State N under the Uniform Securities Act if it had no offices in State N and...

It’s only clients were insurance companies

The registration requirements of the Securities Act of 1933 would not apply to which of the following?

Fixed annuities and other fixed insurance contracts

A broker dealer registered in multiple states must meet the record retention requirements of

The SEC

The Uniform Securities Act permits amendments to a registration statement after its effective date so as to change which of the following?

The number of shares to be offered

Whippet Bus Lines, serving most of the country, has been informed by the Surface Transportation Board of the United States that all of its buses must be retrofitted with expensive safety equipment. The effect of this will be a significant drop in Whippet’s net income. If one was an investor in Whippet Bus Lines, this would be an example of...

Regulatory risk

Which of the following qualifies under the Section 28(e) safe harbor provisions for soft dollar compensation?

Clearance and settlement services provided by the broker dealer

Federal covered securities as defined under the Uniform Securities Act, include shares of an....

Investment company registered with the SEC under the investment company act of 1940

An investor would be unlikely to use internal rate of return to analyze the portentously return for which of the following investments?

Common stock

XYZ Securities a Finra member broker dealer is registered in all 50 states. XYZ has its principal office in State C and a branch office in State A. If the State U Administrator wished to examine certain financial records of XYZs, the Administrator would be able to do all of the following except

Examine those records located in State U

An investment adviser representative may share in the profits and losses of a customer’s account

Under no conditions

The NASAA Statement of Policy on Dishonest or unethical Business Practice’s of Broker Dealers and Agents includes prohibitions against certain practices designed to manipulate market prices of securities. An activity that would fall within the spectrum of the prohibitions would be...

Wash trades

The investment advisers act of 1940 equines that investment advisers make certain disclosures to their customers through the delivery of the advisers brochure. However, there are instances where the act grants an exemption if the client is an investment company and...

A person receiving impersonal advice for which the annual fee is less than $500

Exam 2 Wrong Anwers Flashcards

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