Wrong Answers

Question 1

The ABC Corporation would like to raise capital via a Regulation D private placement. In order to qualify for an exemption from registering with the SEC under rule 506, which of the following is true?2

Answer 1

Advertising is allowed if only accredited investors may purchase the securities

If selling to non accredited investors, general solicitation is not allowed

Question 2

TCB wants to offer $57 million worth of common stock in its home state and in three other states. To clear the offer for sale, TCB must file a

Answer 2

Registration statement

Question 3

The Securities and Exchange Commission regulates all of the following Except

Answer 3

Intrastate securities offerings

Question 4

If two customers are tenants in common in a joint account, which of the following statements are true of this arrangement?2

Answer 4

They need not make equal investments in the account

They need not have equal interests in the property in the account

Question 5

SEC regulations for securities issued by investment companies prohibit which of the following?2

Answer 5

Open end funds from issuing preferred stock

Open end funds from issuing bonds

Question 6

An investor has unexpectedly received $30,000 from an old debt he had written off. This money will come in handy for a business venture planned for three years from now. Meanwhile, he would like to generate some income on the money with as little risk and as little expense as possible. Which of the following recommendations is likely to be the most suitable for this customer?

Answer 6

Class C shares of the ABC Investment Grade Bond Fund

Question 7

As written in the Investment Company Act of 1940, Investment companies must do all of the following Except

Answer 7

Maintain adequate debt/equity diversification in the fund’s investments

Question 8

All of the following must be sold with a prospectus except

Answer 8

Closed end funds in the secondary market

Question 9

If a customer does not pay for a trade regular way, how much additional time does Regulation T give the broker dealer to deal with the problem?

Answer 9

Two business days

Question 10

According to the conduct rules, a Finra member must do which of the following?

Answer 10

Authorize a registered representative to share in a client’s profits or losses only in writing

Question 11

Institutional communication is defined as

Answer 11

Sales material sent only to an institutional investor

Question 12

If still employed beyond age 70 1/2, which of the following is True?

Answer 12

Contributions to the company 401 k are permitted, and the required beginning date for distributions from the 401 k is delayed

Question 13

Under he Employee Retirement Income Security Act of 1974 (ERISA), all of the following guidelines for the regulation of retirement plans are true except

Answer 13

A corporation in business for three years is required to establish a retirement plan for employees

Question 14

A prospectus must accompany or proceed which of the following?

Answer 14

A sales presentation held in person at the representative’s office

Question 15

During the time an S-1 filing was being reviewed, an omission was found which could affect the amount of listed debt obligations of the issuer. In determining the course of action, which of the following would most likely be responsible to correct the omission?

Answer 15

The issuer

Question 16

Which of the following have no liability in an underwriting for unsold shares in a firm commitment?

Answer 16

The Selling Group member

Question 17

If RMDs do not begin by April 1 of the year after the individual turns 70 1/2, which of the following is applicable?

Answer 17

Both a 50% insufficient distribution penalty will be assessed to the amount that should have been withdrawn and ordinary income taxes will be applied to the full amount

Question 18

When the registration statement for corporate securities becomes effective, which of the following are true?2

Answer 18

The issuer amends the preliminary prospectus

The final offering price is added to the red herring

Question 19

Under FINRA filing requirements and review procedures, which of the following statements are true?2

Answer 19

A new member firm must file advertising with FINRA at least 10 days before use for the first year

Retail communications must be kept on file for 3 years

Question 20

Under the intrastate offering rule (Rule 147), when may a resident purchaser of these securities resell them to a nonresident?

Answer 20

Six months after the investor’s purchase date

Question 21

While cold calling, a registered representative encounters an individual interested in buying open ended investment company shares. The representative and the client meet to discuss alternative investment choices. The individual then writes a check for the purchase of open ended investment company shares without receiving a prospectus. The registered representative is in violation of which federal act?

Answer 21

Securities Act of 1933

Question 22

Institutional communication is defined as sales material

Answer 22

Sent only to an institutional investor

Question 23

Which of the following requires that the communication was issued by an independent publisher and not materially altered by the member?

Answer 23

IPR

Question 24

A registered representative wants to send out an indecently prepared reprint to a prospective client. What guideline must be followed before sending the IPR to the prospect?

Answer 24

Any inaccurate content of the article may be changed prior to delivery to retail customers

Question 25

A registered representative would like to speak at a conference next month. The conference is delivered in the firm of a webinar and there are over 500 people enrolled to attend. Which of the following accurately defines responsibilities regarding this speaking engagement?

Answer 25

The registered representative must complete a training program prior to this type of activity

Question 26

Under FINRA filing requirements and review procedures, which of the following statements are true?2

Answer 26

An established firm must file investment company communications that include a ranking not independently prepared with FINRA within 10 days of first use Retail communications must be kept on file for 3 years

Question 27

Communications related to variable life and variable annuities must meet specific standards. Which of the following standards is not required?

Answer 27

If added as a feature of the product, there may be an implied guarantee within the communication of the principal value of the separate account

Question 28

The firm commitment is the most commonly used yep of underwriting contract. Which of the following can be said of this type of underwriting?

Answer 28

A firm commitment underwriting can be either a negotiated underwriting contract or a competitive bid arrangement

Question 29

All of the following statements about a red herring are true except

Answer 29

Registered representatives may send a copy of the company’s research report with it

Question 30

As part of the requirement to verify the identity of the person opening an account, all of the following are true except

Answer 30

Until the customer identification is verified, no transactions are allowed in the account

Question 31

When opening an account for a registered representative of another broker dealer, which of the following is necessary?

Answer 31

The registered representative must obtain the consent of the employing broker dealer prior to opening the account

Question 32

A deferred compensation plan

Answer 32

May not protect the employee from losing the deferred compensation should the employee leave the company prior to retirement

Question 33

How often can an IRA be rolled over to another IRA?

Answer 33

Once every 12 months

Question 34

If a preferred stock pays a stated dividend of 6% and the issuer calls the stock, which of the following is not related to the call?

Answer 34

If a preferred stock is going to be called, it must happen on the first available call date

Question 35

Your customer, age 29, makes $42,000 annually and has $10,000 to invest. Although he has never invested before, he wants to invest in something exciting. Which of the following should you suggest?

Answer 35

Your customer should provide more information before you can make a suitable recommendation

Question 36

Distributions from net investment income paid to shareholders by an investment company meeting the requirements to be a regulated investment company are

Answer 36

Non taxable to the fund but taxable to the shareholder as dividend income

Question 37

For a fund to charge the maximum sales load permitted under FINRA rules, which of the following features must be among those made available to shareholders?

Answer 37

Quantity discounts

Question 38

Which of the following would be directly involved in ending the collection of 12b-1 fees by a mutual fund?

Answer 38

The non interested members of the board of directors

Question 39

For which of the following investors are Class B shares generally best suited?

Answer 39

Small amount to invest with a long term view

Question 40

Which of the following statements regarding dollar cost averaging is True?

Answer 40

When the market fluctuates, it will result in a lower average cost per share

Question 41

A 60 year old male customer is interested in investing in a variable annuity. Which of the following would you consider the least important in the investment decision?

Answer 41

The customer’s sex

Question 42

A customer is considering the purchase of either a variable annuity or variable life insurance. In discussing the merits of the respective contracts, a registered representative may state that all of the following characteristics are common to both contracts except

Answer 42

Death benefits are received income tax free

Question 43

A 529 college savings plan offers all of the following to participants except

Answer 43

Before tax contributions to the plan

Question 44

Rules require that in any transaction for a customer, a member firm must

Answer 44

Use reasonable care to get the best price

Question 45

No public arbiters meet which of the following criteria?

Answer 45

Any person who worked in the financial industry for any duration