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Series 66 > S66 Crunch Time Facts > Flashcards

S66 Crunch Time Facts Flashcards

1
Q

Minimum work history for collecting full SS benefits?

A

40 Calendar Quarters

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2
Q

What is full retirement age for SS?

A

66 or 67 depending on year of birth

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3
Q

Is SS reduced for a retired person continuing to work?

A

Yes - if the person is under full retirement age and collecting benefits, SS benefit is reduced by 50% of earnings above the limit.

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4
Q

May a divorced person receive a spousal SS benefit?

A

Yes - If the person was married for at least 10 years, is not remarried, and spouses benefit is greater than their own.

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5
Q

Which federal covered securities are subject to notice filing with the administrator?

A

Investment Companies & Reg D Rule 506

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6
Q

Which securities are registered by coordination under the USA?

A

IPOs (interstate)

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7
Q

Which securities are registered by qualification under the USA?

A

Intrastate offerings, requiring much documentation

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8
Q

Under the USA what is a qualified purchaser?

A

Person with at least $5M of securities

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9
Q

Under the USA are bank holding companies exempt from registration?

A

No, but is exempt from 1933

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10
Q

Under the USA what securites are registered by Notification (ie., filing)?

A

Larger issuers with securities trading on a national exchange and previously registered with the SEC

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11
Q

What is an issuer transaction?

A

One in which the issuer receives the proceeds of the sale

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12
Q

How long must a BD maintain a surety bond after ceasing operations?

A

3 years

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13
Q

Is any person who accepts orders an agent?

A

Yes. A person who accepts orders is an agent but a person taking phone messages to buy or sell securities is NOT an agent

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14
Q

What registration rights are granted to Canadian BDs?

A

Transact business with existing clients (only)`` in the US temporarily

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15
Q

Who files a consent to service of process?

A

BDs, Agents, IAs, and IARs

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16
Q

Is there a de minimis exemption for BDs?

A

NO

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17
Q

Under what conditions may a BD operate in a state without registering in that state?

A

No place of business in a state and deals only with institutional clients or existing clients in the state temporarily

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18
Q

Define the LATE exemption

A

Lawyers, accountants, teachers, engineers as long as advice is incidental and a separate fee is not charged

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19
Q

When is advisory service impersonal?

A

When it costs less than $500/year, no brochure is required

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20
Q

Does an advisor’s net worth include homes, furnishings, and automobiles?

A

No, only business assets

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21
Q

Define forms ADV-E, ADV-W, ADV-NR, ADV-H

A

E - audit, W - withdrawal, NR - non-resident access persons, H - hardship

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22
Q

What is the de minimis exemption for IAs?

A

No place of business in the state and 5 or fewer retail clients

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23
Q

Who registers with form U4?

A

Agents and IARs

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24
Q

To whom can an IA charge performance fees?

A

Qualified clients: at least $1M under mgmt or net worth of $2.1M

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25
Q

According to IA 1940 when should an advisory client receive a brochure?

A

No later than the time of contract signing

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26
Q

What is form ADV? Parts 1 & 2?

A

Form for IA registration. Part 1 is business info. Part 2 is contractual info for clients, also called the brochure

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27
Q

What services are allowed and disallowed under soft dollar arrangements?

A

Allowed: research, analysis, conference tuition, trading software
Disallowed: travel, advertising, overhead, meals & entertainment

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28
Q

What are Exempt Reporting Advisors?

A

Venture capital advisers and Hedge Fund advisors with less than $150M under mgmt

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29
Q

How does an Investment Company adviser register?

A

With the SEC in all circumstances

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30
Q

What is reverse churning?

A

A wrap account with very little trading

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31
Q

Who may use testimonials in advertising?

A

BDs may, IAs may NOT

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32
Q

What may be commingled?

A

BDs may commingle cash but not securities; IAs may commingle neither

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33
Q

May an IAR share in a client account?

A

No

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34
Q

What are grounds for an administrator to deny registration?

A

Felony or securities-related misdemeanor conviction in last 10 yrs, foreign country securities violation in last 5 yrs

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35
Q

Effective period for a letter of recision?

A

30 days

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36
Q

Criminal penalties under USA?

A

3 yrs / $5000

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37
Q

Criminal penalties under SEC?

A

5 yrs / $10,000

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38
Q

Statute of limitations for civil liability under the USA?

A

3 yrs from occurence or 2 yrs from discovery

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39
Q

Statute of limitations under 1933?

A

3 yrs of occurrence or 1 yr from discovery

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40
Q

What is schedule 13D?

A

Form filed by any person who acquires more than 5% of a company’s voting stock (FEDERAL)

Also called the Beneficial Ownership Report

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41
Q

Under 1933 how many non-accredited investors may be involved in a Reg D private placement?

A

35

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42
Q

12b-1 fee limit for no-load funds?

A

.25% of fund’s avg net assets per year

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43
Q

What is form 13F?

A

Form filed quarterly by advisers with more than $100M under mgmt as of the last day of the month

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44
Q

What is Section 404(c) of ERISA?

A

Requires a plan to offer at least 3 core investment options

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45
Q

Difference between per stirpes and per capita

A

Per stirpes: each branch of the family is to receive an equal share
Per capita: each beneficiary receives an equal share

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46
Q

How are alimony and child support taxed?

A

As ordinary income to the payer and not the payee

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47
Q

What is a TOD designation?

A

Transfer on death. Avoids probate but not estate taxes

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48
Q

How are non-qualified retirement plans taxed?

A

Upon distribution, only the earnings are taxed as ordinary income

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49
Q

What capital gains are excluded from taxation when selling a primary residence?

A

$250K single / $500K joint

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50
Q

What is the tax effect of reinvested mutual fund dividends?

A

Increase the investor’s cost basis

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51
Q

May alimony be contributed to an IRA?

A

Yes

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52
Q

Maximum # of employees and contribution for a SIMPLE 401(K)?

A

100 emps and $12,500 per emp

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53
Q

Describe a ROTH IRA deductible loss?

A

When all ROTH accts are closed and the amount received is less than the investment, minus distributions

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54
Q

How are trust beneficiaries taxed?

A

Taxed on income distributed by a trust but not taxed on the principal that remains in the trust

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55
Q

What non-cash assets may be contributed to an IRA?

A

Only US minted gold coins

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56
Q

May 529 distributions be used for a foreign university?

A

Yes

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57
Q

A 529 plan is also known as a…

A

Qualified Tuition Plan

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58
Q

What is the cost basis and taxation for inherited securities?

A

Cost basis is FMV at time of death, taxed as long term capital gains

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59
Q

To avoid taxation when distributing an estate what should be done with the amount exceeding the estate tax exclusion?

A

donated to charities

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60
Q

In a viatical settlement who pays the insurance premiums?

A

The investor

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61
Q

Define the arrangement and strategy for a short straddle

A

Write a call and put on same stock, same expiration and strike price. Stability

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62
Q

Define the arrangement and strategy for a long straddle

A

Buy a call and put on same stock, same expiration and strike price. Volatility

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63
Q

Is a UIT a derivative?

A

No

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64
Q

What is point to point in regard to an equity indexed annuity?

A

Compares the index value on two particular dates

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65
Q

What is the floor for an equity indexed annuity?

A

Zero

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66
Q

Does a REIT pass through gains and losses? Does a real estate limited partnership?

A

A REIT passes through only gains. A real estate limited partnership passes through gains and losses

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67
Q

Can an annuity be rolled into an IRA?

A

Not once it has been annuitized

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68
Q

Which metals are considered precious?

A

Gold, silver, platinum

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69
Q

Difference between hard and soft commodities?

A

Hard are mined; soft are grown

70
Q

In a futures contract who has obligations?

A

Buyer and seller

71
Q

What pays mutual fund trailers to a sales person?

A

12b-1 fees

72
Q

What happens to premiums when a term life policy is extended?

A

They increase

73
Q

What form is filed with the IRS on behalf of a limited partner?

A

K-1

74
Q

What is a stop order?

A

A suspended market order

75
Q

What happens when a stop-limit order is activated?

A

It becomes a limit order

76
Q

What is form 8-K?

A

Form filed with SEC within 4 business days of occurrence of any event materially affecting a company’s share price or financial condition

77
Q

Formula for working capital?

A

Current assets - current liabilities

78
Q

What values are used for the debt to equity ratio calculation?

A

Market value or book value of the debt and shares

79
Q

What is standard deviation?

A

A basic measure of risk

80
Q

What is efficient frontier?

A

A line that graphs optimal portfolios

81
Q

What is BETA?

A

Measure of volatility relative to the market as a whole (S&P 500)

82
Q

How are present value and future value determined?

A

Pres Value: discounting

Fut Value: compounding

83
Q

Formula for after tax yield

A

Taxable Yield x (100% - tax bracket%)

84
Q

How many 10-Qs are filed each year?

A

3 10-Qs and 1 10-K

85
Q

Formula to calculate present value of payments in perpetuity?

A

Annual income desired divided by the rate of interest

86
Q

Formula for EPS? What does it measure?

A

Annual earnings / # of shares outstanding

EPS measures profitability

87
Q

What is a company’s market cap?

A

Stock price X # of shares outstanding

88
Q

What is the dividend discount model?

A

Forecasts future dividends and discounts those cash flows to determine current stock price

89
Q

What are the options for an inherited IRA?

A

If the decedent had not reached 70.5…

  1. Lump sum distribution
  2. Distribution over expected lifetime (stretch)
  3. Distribution complete by end of 5th year following decedent’s death
90
Q

Under IA 1940 when is a firm’s registration required to be renewed?

A

With 90 days of the end of the IA’s fiscal year

91
Q

Would a bank employee selling mutual funds to customers need to be registered?

A

Since the employee is selling securities s/he would meet the definition of agent. (Securities ISSUED by banks are exempt)

92
Q

What document is filed annually with the SEC and determines an IA’s continued eligibility for registration?

A

Annual Updating Amendment

93
Q

What is the dollar threshold for submitting a Suspicious Activity Report?

A

$5000 (and suspicion of wrongdoing)

94
Q

In what states must IARs of federal covered advisors register?

A

Only in states in which they maintain an office

95
Q

Is an equity indexed annuity a security?

A

No. EIAs are insurance products. However, they are still subject to many FINRA rules.

96
Q

What is a capital needs analysis for?

A

To determine how much insurance is required to fund future financial goals. Ex., how much life insurance will be needed to pay for children’s college if insured dies

97
Q

Who must distribute a prospectus to a client?

A

The selling agent/BD

98
Q

What are the reporting requirements for an ERA?

A

File form ADV Part 1 with the SEC
File amendment w/in 90 days of fiscal year end
Notice file with the administrator

99
Q

According to MPT the expected return of an investment is what?

A

Possible returns on the investment weighted by the likelihood that return will occur

100
Q

Define positive financial leverage

A

Investing borrowed funds at a rate of return higher than the interest paid on the loan

101
Q

Term for a stock that pays higher than average dividends?

A

Income stock

102
Q

How is basis determined for gifted securities?

A

Lower of the donor’s cost or market value at time of gift

103
Q

Over development and high leverage are risks associated with what?

A

New construction program

104
Q

What is the advantage of a corporation over a partnership?

A

Continuity beyond partners or shareholders

105
Q

Are all taxes deferred on a 401(k) contribution?

A

No only income taxes. Unemployment and medicare must still be paid in the current year.

106
Q

3 components of Modern Portfolio Theory?

A

Expected return, standard deviation, correlation

107
Q

Who operates the IARD?

A

FINRA

108
Q

What measures risk adjusted return?

A

Alpha and the Sharpe Ratio

109
Q

How long does IA registration with the SEC last?

A

Until withdrawn, cancelled. or revoked by the SEC

110
Q

Under USA when must an IA provide a balance sheet to a client?

A

When $500 prepaid fees have been collected 6 months in advance

111
Q

What are the contents of an estate?

A

Total assets and liabilities of a decedent

112
Q

Are bank holding companies excluded from the BD definition under the USA? Under federal laws?

A

Not excluded under USA

Excluded under fed

113
Q

Definition of micro cap stocks?

A

Stocks of emerging companies generally suitable only for speculative investors. Market cap of $50-300M

114
Q

In what type of trust may the grantor not also be the trustee?

A

Testamentary trust – created at the death of the grantor

115
Q

May S Corporation owners be foreign residents?

A

No. All owners must be US citizens or resident aliens

116
Q

T/F: under ERISA business decisions are made by fiduciaries

A

False. Business decisions are made by settlors and are referred to as settlor functions.

117
Q

Is Registration by Filing used for IPOs?

A

No. And Registration by Filing is not accepted by all states.

118
Q

Are securities sold to qualified purchasers subject to registration with the administrator?

A

No. Securities sold to qualified purchasers (those w/ at least $5M in securities) are federal covered.

119
Q

Is a person who only provides quotes required to be registered as an agent?

A

No

120
Q

When and by whom must form ADV-E be filed?

A

Filed by the CPA within 120 days of completion of audit

121
Q

When may performance fees by charged by an IA?

A

When clients are qualified – having at least $1M under mgmt or $2.1M net worth

122
Q

Who must be notified of partnership changes?

A

Clients and the administrator

123
Q

Breakdown of assets that determine IA registration

A

$110M or more - SEC

$100-110M - SEC or state, IA choice

124
Q

When evaluating IRA holdings, municipal securities and other tax advantaged investments will require immediate suitability consideration

A

Yes

125
Q

Which has terms set by the buyer and seller – futures contracts or forward contracts?

A

Forward contracts. Terms for futures contracts are set by the exchange on which they’re traded.

126
Q

Can a buyer of a futures contract be forced to take delivery?

A

yes

127
Q

How long does a person have to appeal an administrator’s order?

A

60 days

128
Q

Define the differences between laws, rules, orders

A

Laws apply to everyone regardless of profession and situation.
Rules apply to defined persons, such as BD Agent.
Orders apply to a specific person, such as a cease and desist order.

129
Q

Can forward contracts be offset?

A

Yes with the agreement of both parties

130
Q

When are capital gains from a limited partnership recognized for partners?

A

When a partnership generates income, a tax liability is created for the partners in the year in which it is generated.

131
Q

What should an investment manager do when plan documents conflict with ERISA standards?

A

Ignore the plan documents

132
Q

What is the calculation for expected return?

A

Expected Return = Beta x Market Return

133
Q

If an IA has only insurance companies for clients, with whom must they register?

A

With the state in which they have a main office but not with the SEC.

134
Q

What is the difference between negotiable and non-negotiable CDs?

A

Negotiable CDs can be sold before maturity.

Non-negotiable CDs must be held until maturity or incur an early withdrawal penalty.

135
Q

Under IA 1940 when must access persons submit their personal security holdings reports?

A

No later than 10 days after becoming an access person and every 12 months thereafter.

136
Q

Under IA 1940 when must access persons submit their personasl security transaction reports?

A

No later than 30 days after the end of each calendar quarter.

137
Q

When will dollar cost averaging result in avg cost that is always less than avg price per share?

A
  1. When the price of the stock has fluctuated over a given period.
  2. A fixed-dollar amount is invested regularly.
138
Q

What is the purpose of a subscription agreement in regards to a limited partnership?

A

To determine the suitability of the investor as it relates to income, experience, and understanding of risk.

139
Q

In extenuating circumstances, may a firm take action in a customer’s account without discretionary authority?

A

No

140
Q

USA: what additional filing requirements are there for IAs with discretion and custody?

A 
Discretionary Authority (ie., Limited Discretion) requires the filing of a balance sheet.
Full discretion (ie., Custody) requires filing of ADV-E by an independent CPA within 120 days of completing the annual required audit
141
Q

Upon losing eligibility for SEC registration, how long does an IA have to file ADV-W and register at the state level?

A

180 days

142
Q

The brochure is also called … ?

A

The Disclosure Document

143
Q

When is a brochure not required for IA contracts?

A

When the advisory services are impersonal, meaning less than $500

144
Q

Define conservationism and anchoring

A

Anchoring: attachment to the upside potential of an investment despite indications to the contrary, or believing an idea that has no basis in fact.
Conservationism: CLINGING to a long held belief or the value of a long held security.

145
Q

May options with expirations shorter than 9 months be purchased on margin?

A

No. Ie., they have no LOAN VALUE

146
Q

Differences in cost basis and holding period for gifted and inherited securities?

A

INHERITED: cost basis is FMV at time of death, holding period is automatically long term
GIFTED: cost basis is lower of donor cost or market value, holding period begins with donor’s purchase

147
Q

What is the difference between Discounted Cash Flows and Net Present Value?

A

“Discounting” is taking an investment’s future cash flows and calculating their present value (ie., discounted cash flow analysis).

“Net Present Value” takes the process a step further by subtracting the actual market price of an investment by the FMV found in discounting.

148
Q

If a firm acts in a principal capacity, does this need to be disclosed to a client in advance?

A

No. It must be disclosed on the trade confirmation.

However … if a firm is executing a cross-agency transaction, it must disclose and receive written client permission in advance.

149
Q

Always distinguish between unlimited amount of cash and unlimited amount without being subject to gift tax.

A

Yes

150
Q

Are gifts made to UGMA accounts revocable?

A

No

151
Q

What is asset correlation of … 1, 0, -1

A

1: Perfect positive correlation
0: uncorrelated
- 1: Perfect negative correlation

152
Q

How many general partners and limited partners are required to form a limited partnership?

A

One or more general partners

One or more limited partners

153
Q

Is a bank-issued CD a security?

A

No

154
Q

Is a rights offering an “offer to sell” a security?

A

Yes

155
Q

Difference between omitting, summary, and statutory prospectuses?

A

An omitting prospectus is like a tombstone ad but includes performance data. May not contain an application to invest. Must state from whom an investor may obtain a statutory prospectus.

A summary prospectus contains essential information regarding the fund and is usually given to investors when shares are purchased.

The statutory prospectus must be made available to investors upon request, usually after purchase.

156
Q

When must a mutual fund prospectus be delivered?

A

At solication to purchase

157
Q

According to 1933 when is a pooled investment fund considered a federal covered security?

A

When it registers with the SEC under InvCo 1940

158
Q

Which retirement savings vehicles have income limits?

A

Roth IRAs have income limits.

Traditional IRAs do not have income limits.

159
Q

Which education savings vehicles have income limits?

A

Coverdell accounts have income limits.

529 plans have no income limits.

160
Q

What is ERISA 404(b)?

A

Prohibits fiduciaries from maintaining indicia of ownership of plan assets outside the jurisdiction of US courts unless allowed by the Dept of Labor.

161
Q

What are parts 1a and 1b of form ADV?

A

1A is completed by all firms.

1B is completed only for state filings.

162
Q

Does business risk apply to sectors and multiple companies?

A

No. Business risk applies only to a single business.

163
Q

Are insurance companies exempt from registration as an investment advisor under USA?

A

No

164
Q

Is paying for computer hardware allowed under soft dollar arrangements?

A

No

165
Q

What durations are available for TIPS?

A

5/10/30 yrs

166
Q

Watch for category distinctions and qualifying words

A

Yes

167
Q

What categories of investments are not marginable?

A

Futures, Mutual Funds, Pink Sheets, OTCBB, new issues/IPOs, options

168
Q

How are dividends taxed?

A

As ordinary income

169
Q

How often may a 529 plan be rolled over (to another state’s 529)?

A

Every 12 months

170
Q

What are the various exercise styles for options?

A

American, European, and Capped

Series 66 (1 decks)

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