Practice Test 6

Question 1

Who is considered an INVESTMENT ADVISOR REPRESENTATIVE

Answer 1

person that :
- makes recommendations
- manages accounts
- provides advice
- negotiates the sale of advisory services
- supervises persons engaged in activities

Question 2

Who offers WRAP accounts

Answer 2

INVESTMENT ADVISER

(not IAR)

Question 3

Requirements for a salesperson representing an ISSUER to be EXEMPT of registering as an AGENT:

Answer 3

Debt securities must have
- maximum maturity of 9 months
- issued in minimum denominations of $50,000
- and be rated in one of three highest rating categories of a nationally recognized statistical rating organization

Question 4

INVESTMENT ADVISORS (IA) must renew ANNUALLY with

Answer 4

Form ADV filed with the SEC within 90 days of a FEDERAL covered adviser’s FISCAL year end or

with the state ADMINISTATOR within 90 days of CALENDAR year end

Question 5

What does the IRS define as compensation

Answer 5

Royalties
Long-term disability before the minimum retirement age

Question 6

EXEMPT TRANSACTIONS:

Answer 6

securities quoted on Nasdaq
done by guardian appointed by state court
bona fide pledges

Question 7

A portfolio of securities that’s registered as an investment company and can be bought and sold on an exchange

Answer 7

ETF - EXCHANGE TRADED FUNDS

Question 8

When are taxes collected for a ZERO coupon bond

Answer 8

ANNUALLY

Question 9

What must an IA provide if it violates the net capital rule

Answer 9

its balance sheet
client ledger
list of all customer-owned securities and
non segregated funds

Question 10

EXEMPT SECURITIES include:

Answer 10

issued by
- us federal, state or local goverment
- railroad
- common carrier
- public utility
- holding company
- debt of insurance companies (NOT SUBSIDIARIES)

Question 11

When acting as the trustee for a family trust, who does an investment adviser consider for termination benefits?

Answer 11

a CONTINGENT REMAINDER BENEFICIARY

(one who only has claims on the income but not the property in the trust)

Question 12

measures the amount by which an option’s premium will increase or decrease relative to a change in the underlying stock’s price

Answer 12

DELTA

Question 13

measures the rate of change of the option’s delta as the underlying stock price changes

Answer 13

GAMMA

Question 14

Email communications may need:

Answer 14

additional disclosures that are not included in written communications

Question 15

An agent is allowed to borrow money from or loan money to a client, if the agent’s broker-dealer has written procedures in place allowing for the arrangement, plus one of the following situations:

Answer 15

The customer and agent are both registered with the same firm,

The customer is a member of the agent’s immediate family

The customer and the agent have either a business or personal relationship that exists outside the brokerage relationship

Question 16

When selling stock to a customer, a markup

Answer 16

should be based on the lowest offer on the Nasdaq system, not the price the dealer paid to purchase the stock (dealer’s inventory cost)

Question 17

Long term capital gains tax rate is usually _____________ than the highest rate at which ordinary income is taxed.

Answer 17

LOWER