A) in a Recovery.
B) Lagging.
C) in a Recession.
D) in a Depression.
Answer: D) in a Depression.
A) Short interest.
B) Breakout.
C) Keynesian.
D) Supply side.
Answer: C
A) 2 consecutive quarters.
B) 3 consecutive quarters.
C) 4 consecutive quarters.
D) 6 consecutive quarters.
Answer: A
A) Inflation expectations.
B) Federal Reserve's monetary policy.
C) New housing starts.
D) Amount of loanable funds in the financial markets
Answer: C) New housing starts.
A) demand-side theory.
B) supply-side theory.
C) monetary theory.
D) Keynesian theory.
Answer: B) supply-side theory.
A) coincident indicator.
B) none of these.
C) leading indicator.
D) lagging indicator.
Answer: C) leading indicator.
A) Expansion, peak, contraction, trough.
B) Peak, expansion, contraction, trough.
C) Contraction, trough, peak, expansion.
D) Trough, contraction, expansion, peak.
Answer: A) Expansion, peak, contraction, trough.
A) increase in want ads in newspapers, decrease in nonfarm jobs.
B) increasing college enrollments and enlistment in military service.
C) increasing consumer demand for goods and services, increasing industrial production, and rising stock markets and property values.
D) higher consumer debt, rising inventories.
Answer: C) increasing consumer demand for goods and services, increasing industrial production, and rising stock markets and property values.
A) Stock prices as measured by a broad index such as the S&P 500.
B) Gross domestic product.
C) Corporate profits.
D) Industrial production.
Answer: A) Stock prices as measured by a broad index such as the S&P 500.
A) Lagging.
B) Coincident.
C) Leading.
D) Coterminous.
Answer: B) Coincident.
A) Natural gas.
B) Automotive.
C) High technology.
D) New housing.
Answer: D) New housing.
A) Level of inventories.
B) Personal incomes.
C) Building permits.
D) Expenditures on plant and capital equipment.
Answer: B) Personal incomes.
A) Orders for durable goods.
B) Duration of unemployment.
C) New housing permits.
D) Money supply.
Answer: B) Duration of unemployment.
A) Leading.
B) Coincident.
C) Coterminous.
D) Lagging.
Answer: A) Leading.
A) cuts taxes for businesses and the wealthy.
B) increases the money supply.
C) does not interfere.
D) increases aggregate demand.
Answer: D
A) Depression.
B) Recession.
C) Stagflation.
D) Inflation.
Answer: C) Stagflation.
A) Adam Smith.
B) Arthur Laffer.
C) Milton Friedman.
D) John Maynard Keynes.
Answer: D
Recovery.
Trough.
Decline.
Prosperity.
A) IV, III, I, II.
B) I, IV, III, II.
C) II, I, III, IV.
D) III, IV, I, II.
Answer: B) I, IV, III, II.
A) stagflation.
B) recession.
C) inflation.
D) depression.
Answer: B) recession.
A) downward by the balance of payments.
B) for inflation.
C) to match foreign GDP.
D) to include bank reserves.
Answer: B) for inflation.
A) Hours worked.
B) Corporate profits.
C) S&P 500.
D) Housing permits issued.
Answer: B) Corporate profits.
A) constant dollars.
B) the exchange value of the dollar, as compared with major foreign currencies.
C) international depositary receipts.
D) the current dollar price of gold bullion.
Answer: A) constant dollars.
A) stagflation
B) inflation
C) stagnation
D) deflation
Answer: C) stagnation
A) Duration of unemployment claims.
B) Industrial production.
C) S&P 500 index.
D) Gross domestic product.
Answer: C) S&P 500 index.
A) As a function of GNP.
B) Constant dollars.
C) Actual dollars.
D) Eurodollars.
Answer: B
A) deflation
B) stagnation
C) stagflation
D) inflation
Answer: C) stagflation
correlate to a specific index.
sell short.
be bought and sold on margin.
represent an entire portfolio, or basket of securities.
A) III and IV.
B) II and III.
C) I and II.
D) I and IV.
Answer: Unlike mutual fund shares, ETF shares can be traded on margin and sold short. They are similar in that they both represent an entire portfolio or basket of securities and both can have portfolios correlated to a specific index.
A) Preferred stock.
B) Gold.
C) Real estate.
D) Money-market funds.
Answer: D
A) guaranteed returns.
B) diversification.
C) current income.
D) tax deferral.
Answer: B
A) A retailer operating as a sole proprietor.
B) A 12-year-old movie star making $500,000 in the current year.
C) The American Cancer Society.
D) Microsoft, Inc.
Answer: B
a minor who has a valid U.S. passport.
a political subdivision.
an unincorporated association.
an inter vivos trust.
A) II, III and IV.
B) I and II.
C) II and III.
D) III and IV.
Answer: A
a limited partnership.
a political subdivision.
an unincorporated association.
the executor of an estate for a deceased individual.
A) I and IV.
B) II and III.
C) I, II, III and IV.
D) I, II and III.
Answer: C
An unincorporated investment club.
An individual who buys and sells securities only for his own account.
Associations and partnerships whether or not they issue certificates.
The U.S. government.
A) I, II, III and IV.
B) I and II.
C) II and III.
D) III and IV.
Answer: A
A) human being.
B) adult human being.
C) party that is subject to federal income tax.
D) individual or entity considered able to enter into an enforceable contract.
Answer: D
The Uniform Securities Act is not the actual law of any state or territory of the United States.
The National Securities Markets Improvement Act of 1996 requires states and the federal government to have identical registration requirements.
The state securities Administrator has responsibility for the enforcement and administration of a state's securities law.
A) I and III.
B) I and II.
C) II and III.
D) I, II and III.
Answer: A) I and III.
A) State judiciary system.
B) Executive department.
C) Securities and Exchange Commission.
D) The Administrator.
Answer: D
A) Limited liability company.
B) Agent.
C) Estate.
D) Business trust.
Answer: B
A) Mark Spencer.
B) The estate of Mark Spencer.
C) Mark Spencer and Associates, a general partnership.
D) Mark Spencer Architects, Incorporated.
Answer: A) Mark Spencer.
A broker/dealer must be a firm or corporation (legal person) as opposed to a natural person (human being).
An investment adviser must be a firm or a corporation as opposed to a natural person.
An investment adviser representative (IAR) cannot, under any circumstances, be employed by a registered broker/dealer.
A) I and II.
B) I and III.
C) II and III.
D) I, II and III.
Answer: D) I, II and III.
A) A small unincorporated investment club.
B) Guelph, a small city outside of Toronto, Ontario, that maintains an investment account at a brokerage house to invest surplus funds.
C) A child prodigy for whom his mother, as custodian, opened an account at a major securities firm.
D) XYZ Dry Cleaners, Inc., whose shareholders all work on the premises and also offer financial advice to customers who request it.
Answer: C) A child prodigy for whom his mother, as custodian, opened an account at a major securities firm.
A) Transfer agent.
B) Registrar.
C) Issuer.
D) Administrator.
Answer: D) Administrator
A) forms requiring issuers selling securities in the state to comply with state securities laws.
B) a state securities law that grants state securities Administrators the power to deny or revoke a broker/dealer's or an agent's registration within its state.
C) the Securities Act of 1933 and Securities Exchange Act of 1934.
D) state laws that are designed to protect the public against fraud in securities sales within a state.
Answer: C) the Securities Act of 1933 and Securities Exchange Act of 1934.
A) registration of securities within a state.
B) regulation of securities transactions in a state.
C) registration of securities salespeople in a state.
D) regulation of securities trading in other countries.
Answer: D) regulation of securities trading in other countries.
A) prospectus requirements.
B) full and fair disclosure.
C) blue-sky laws.
D) liabilities for misleading filings.
Answer: C) blue-sky laws.
A) The number of shares to be offered.
B) The underwriter's discounts and commissions.
C) The public offering price.
D) Changes may not be made by amendment; filing of a new registration statement is required.
Answer: The number of shares to be offered.
A contract of sale.
A contract to sell.
The disposition for value of an interest in a security.
A warrant (for common stock of the issuer) given with the purchase of a bond.
A) II and III.
B) I, II, III and IV.
C) I, III and IV.
D) I and III.
Answer: I, II, III and IV.
A) violation because the adviser is required to execute sell transactions immediately after the order is placed.
B) permissible activity because the adviser is not permitted to guarantee a price to a customer.
C) permissible activity because the adviser is obligated to get the best price for the customer.
D) violation because the adviser acted without discretionary authority.
Answer: violation because the adviser acted without discretionary authority.
A) The agent has admitted to selling unregistered exempt securities to individual clients.
B) The agent is judged to be mentally incompetent.
C) The agent is the subject of an insider trading lawsuit.
D) The Administrator determines it would be in the public interest.
Answer: The agent is judged to be mentally incompetent.
the recommendation is suitable for the customer because the agent recommends a diversified stock portfolio.
high-risk penny stocks are not suitable recommendations for this low net worth customer.
the agent may be exhibiting a pattern of excessive commissions (churning) in his customer's account.
once the customer agrees to the agent's recommendation, it is no longer considered an unsolicited transaction.
A) II only.
B) III and IV.
C) II and III.
D) I and IV.
Answer: II only.
A security issued by a bank.
A Canadian government bond.
A security listed on the American Stock Exchange.
A security issued by a charitable or other nonprofit organization.
A) I and III.
B) I, II, III and IV.
C) I only.
D) II and IV.
Answer: B) I, II, III and IV.
A) $5,000 and five years' imprisonment.
B) $5,000 and three years' imprisonment.
C) $3,000 and five years' imprisonment.
D) $3,000 and three years' imprisonment.
Answer: B) $5,000 and three years' imprisonment.
A) if the investment adviser is not an individual, an officer or general partner must take the state's examination requirement (e.g., the Uniform Investment Adviser State Law Exam).
B) the adviser's registration expires on December 31 each year.
C) the initial application must include a consent to service of process along with Form ADV and the appropriate fees.
D) the annual renewal process involves payment of the appropriate fees and refiling of the consent to service of process.
Answer: the annual renewal process involves payment of the appropriate fees and refiling of the consent to service of process.
A) broker/dealers.
B) chief executive officers of companies listed on the NYSE.
C) savings institutions.
D) banks.
Answer: chief executive officers of companies listed on the NYSE.
I. XYZ Corp., a local manufacturing firm, offers its common stock to Investment Company Advisers, Inc., on an infrequent or isolated basis.
II. Joe Smith, an agent with ABC Securities, Inc., sells XYZ Corporation's 5-year fixed income securities, rated AAA by Standard & Poor's, on a daily basis.
III. Joe Smith, an agent with ABC Securities, Inc., sells XYZ Corporation's securities to a client on an unsolicited basis.
IV. Joe Smith had his sizable portfolio of stocks and bonds sold by the administrator of his estate upon his death.
A) I and II.
B) III and IV.
C) II and III.
D) I and IV.
Answer: III and IV.
A) A client sends a letter about an extended business trip stating that in her absence, she wants the agent to accept orders from her husband, which the agent does.
B) After a client's death, an agent receives instruction from a court-appointed administrator to liquidate the account; the agent sells all securities in the account at a loss.
C) A client asks the agent to buy 1,000 shares of a specific high-quality technology stock this week for her nondiscretionary account. The agent places an order promptly for 1,500 shares because the market has begun to take off. By the end of the day, the stock is 5 points higher than the purchase price.
D) An elderly client with an individual account is in the hospital and her daughter calls the agent to request a liquidation of assets to provide $10,000 for the payment of medical expenses. The agent refuses to place the order.
Answer: A client asks the agent to buy 1,000 shares of a specific high-quality technology stock this week for her nondiscretionary account. The agent places an order promptly for 1,500 shares because the market has begun to take off. By the end of the day, the stock is 5 points higher than the purchase price.
A) one year from the date of issue.
B) one year from the effective date.
C) one year from the previous December 31.
D) a period of time determined by the Administrator for each issue.
Answer: One year from the effective date.
I. sells securities on behalf of a broker/dealer in an exempt transaction without receiving compensation.
II. sells securities on behalf of a broker/dealer in an exempt transaction and receives compensation.
III. sells securities on behalf of an issuer in an exempt transaction without receiving compensation.
IV. sells securities on behalf of an issuer in an exempt transaction and receives compensation.
A) I and III.
B) II and IV.
C) I and II.
D) I, II and IV.
Answer: I, II and IV.
A) when so ordered by the Administrator.
B) when the offering is made effective by the SEC.
C) within 2 business days of the filing of maximum and minimum proposed offering prices.
D) by Noon of the 30th day following the filing of the application.
Answer: When so ordered by the Administrator.
A) prohibited because the investment is not suitable for the client.
B) permissible due to the disclaimer of future performance.
C) permissible if the adviser has performed due diligence on the stock.
D) prohibited as a likely exaggeration.
Answer: Prohibited as a likely exaggeration.
A) will most likely occur by qualification.
B) will most likely occur by coordination.
C) will most likely occur by notice filing.
D) is not required because of the de minimis test.
Answer: Will most likely occur by qualification.
A) An agent has a large number of clients in a security in which she trades frequently for her own account with no attempt to create an inaccurate impression of trading volume.
B) An agent knowingly sold a nonregistered security because he thought it would eventually become registered.
C) Using a private subscription to an online Internet legal records service, an agent discovers that a company is about to file for bankruptcy and immediately calls her clients recommending they liquidate their holdings.
D) An agent knowingly sells securities in a publicly traded company in which his family has a beneficial ownership.
Answer: An agent knowingly sold a nonregistered security because he thought it would eventually become registered.
Purchasing a convertible security and simultaneously selling short the underlying common stock for profit.
Purchasing a security on an exchange and simultaneously selling it on another exchange to improve trading volume.
Executing a trade for a customer at a price that is unrelated to the current market.
Executing a trade for a customer at the best available price without the customer's knowledge.
A) III and IV.
B) II, III and IV.
C) I, II, III and IV.
D) I and II.
Answer: II, III and IV.
A) All material facts.
B) All facts needed to assess the risks of an investment.
C) All facts in the prospectus.
D) All facts.
Answer: All material facts.
A) variable annuities or other variable insurance products offered by an insurance company.
B) bonds issued by a bank that is a member of the Federal Reserve System.
C) securities issued by a nonprofit organization.
D) debt securities issued by or guaranteed by an insurance company licensed to do business in this state.
Answer: Variable annuities or other variable insurance products offered by an insurance company.
A) The IAR makes a presentation at a seminar where the only topic discussed is fixed annuities.
B) Since the IAR understands how nervous a particular client is, he never admits a loss in the account to that client.
C) The IAR is also an agent of a broker/dealer and, in that capacity, makes a recommendation to a nonadvisory client.
D) In an effort to avoid possible conflicts of interest, the IAR only does personal trades through an account set up with a fictitious name.
Answer: The IAR makes a presentation at a seminar where the only topic discussed is fixed annuities.
A) Sale.
B) Gift.
C) Prohibited transaction.
D) Offer.
Answer: Sale.
A) the broker/dealer three days after public notice.
B) his best customers three days before a public announcement.
C) anyone three days before a public announcement.
D) anyone after public notice.
Answer: Anyone after public notice.
A) An equipment trust certificate for the Great American Railroad's newest locomotives.
B) Common stock issued by The First National Bank of Largeville.
C) A rights offering by ABC Corporation whose common stock is listed on the NYSE.
D) First mortgage bonds issued by XYZ Computers, a company whose IPO was issued under SEC Rule 147.
Answer: First mortgage bonds issued by XYZ Computers, a company whose IPO was issued under SEC Rule 147.
A) The sale of commercial paper with a 12-month maturity.
B) The sale of a preorganization certificate on which the agent receives no commission on the amount paid by the investor.
C) A private placement.
D) A solicited transaction in a small Canadian mining company.
Answer: A private placement.
An investment manager purchases 100,000 shares of XYZ on the NYSE.
An investment adviser sells a block of YYY Corp. shares to an overseas investor in a private transaction.
The president of Dot.com, Inc., sells his personal shares of Dot.com on the NYSE.
Dot.com purchases its own shares on the open market in order to place them in treasury.
A) I, II, III and IV.
B) III and IV.
C) I and II.
D) I only.
Answer: I, II, III and IV.
A) A client may purchase, at his own initiative, securities trading in the secondary market through an agent who otherwise is prohibited from soliciting the order.
B) Unsolicited orders are nonexempt transactions under the USA.
C) The state Administrator may not require the client to sign an acknowledgment that the order was unsolicited.
D) The state Administrator may not prohibit the solicitation of specific securities in the state.
Answer: A
A) filing of advertisements and sales literature.
B) filing financial information periodically.
C) renewal of registration semiannually.
D) keeping records for 3 years.
Answer: Renewal of registration semiannually.
A) An IAR with discretionary authority enters a buy order for a security when its price is rising.
B) Splitting commissions with a customer service representative who is not registered but works for the same firm.
C) Telling a customer that the investment being recommended will be sold from the inventory of the investment adviser representative's firm.
D) Recommending securities that result in major losses in the customer's account.
Answer: Splitting commissions with a customer service representative who is not registered but works for the same firm.
investment adviser representatives.
broker/dealers.
investment advisers.
agents.
A) II and III.
B) I and II.
C) I, II, III and IV.
D) II and IV.
Answer: C) I, II, III and IV.
stock acquired through a merger.
the issuance of warrants or convertible securities.
the issuance of stock rights to existing shareholders.
A) I only.
B) I, II and III.
C) II and III.
D) I and III.
Answer: A) I only.
borrowing money from a customer without the customer's written permission.
failing to determine the suitability of an investment for a customer.
offering rescission.
telling a customer that past history of an investment is not indicative of future results.
A) II and IV.
B) II and III.
C) III and IV.
D) I and II.
Answer: C) III and IV.
A) $25,000.
B) $50,000.
C) $100,000.
D) $10,000
Answer: D) $10,000
A) National Security Agency.
B) Internal Revenue Service.
C) Department of the Treasury.
D) Federal Bureau of Investigation (FBI).
Answer: B) Internal Revenue Service.
A) over $5,000.
B) over $25,000.
C) over $10,000.
D) over $3,000.
Answer: C) over $10,000.
A) recognized the limitations of the client's ability to invest any further sum of money.
B) would violate those ethical standards by failing to disclose that adding a small amount to the purchase would save a significant amount of sales charge.
C) must explain the procedure for taking advantage of rights of accumulation on future purchases.
D) has violated the suitability standards by failing to explain the risks inherent in making an investment below a breakpoint.
Answer: B) would violate those ethical standards by failing to disclose that adding a small amount to the purchase would save a significant amount of sales charge.
A) open-end fund.
B) forward contract.
C) closed-end fund.
D) hedge fund.
Answer: C) closed-end fund.
A) net asset value plus commission.
B) current bid price.
C) current asking price.
D) net asset value.
Answer: C) current asking price.
no contract may be terminated with more than 60 days notice in writing.
the initial contract is for a maximum of 1 year and then may be renewed on either an annual or biannual basis.
unless a specific exemption applies, the fund may not engage in margin trading.
the contract must be in writing.
A) I and IV.
B) I and III.
C) II and III.
D) II and IV.
Answer: A) I and IV.
I. The board of directors has sole approval authority.
II. The majority of the outstanding shares has sole approval authority.
III. Both the board and the majority of outstanding shares must approve it.
IV. A distribution plan must be written.
A) III and IV.
B) I only.
C) I and III.
D) II and III.
Answer: A) III and IV.
borrowing from the fund (money or property).
buying anything from the fund, except shares of the fund.
selling anything to the fund.
A) II and III.
B) I, II and III.
C) I and II.
D) I and III.
Answer: B) I, II and III.
A) The contract must be established for a 1-year period and renewed annually thereafter.
B) The initial contract is effective once approved by the board of directors.
C) The contract may be in writing, or it may be oral if there are at least two witnesses to the agreement.
D) The contract may not be unilaterally assigned to another adviser.
Answer: D) The contract may not be unilaterally assigned to another adviser.
This is prohibited under the act.
Investment companies may employ outside advisers if a written contract is executed.
The initial contract must be approved by either the board of directors or a majority vote of the outstanding shares.
A) I, II and III.
B) II only.
C) I only.
D) II and III.
Answer: B) II only.
Only the board of directors needs to approve changes in the investment objective.
The majority of outstanding shares must vote to approve changes in the investment objective.
The SEC must approve all changes in the investment objective.
The investment adviser does not set, but tries to meet, the investment objective.
A) II and IV.
B) I and II.
C) I and III.
D) III and IV.
Answer: A) II and IV.
Persons who control, are controlled by, or share common control with the company.
Any officer, director, or employee of the company.
Persons who own or control 5% or more of the voting shares of the company.
A) I and III.
B) II and III.
C) III only.
D) I, II and III.
Answer: D) I, II and III.
A manager in an investment advisory firm who supervises 5 investment adviser representatives.
The individuals responsible for bringing new clients to an advisory firm.
A secretary in the advisory firm.
A) I and II.
B) I only.
C) I and III.
D) II only.
Answer: A) I and II.
A) a level playing field between investment advisers and broker/dealers.
B) standards at the federal level for the regulation of investment advisers.
C) standards among the various states for the regulation of investment advisers.
D) regulation for investment companies and their operations.
Answer: B) standards at the federal level for the regulation of investment advisers.
A) The renewal may be executed orally, provided it is done within 2 years of the initial contract.
B) The renewal must be approved by either a majority of the board or a majority of the shares.
C) The renewal must state the adviser's compensation.
D) The contract must be terminable upon not more than 60 days notice.
Answer: A) The renewal may be executed orally, provided it is done within 2 years of the initial contract.
A) a majority of the outstanding shares.
B) the fund's investment adviser.
C) a majority of the board of directors.
D) they do not need approval.
Answer: A) a majority of the outstanding shares.
A) Face-amount certificate companies, management companies, and open-end companies.
B) Face-amount certificate companies, management companies, and closed-end companies.
C) Unit investment trusts, closed-end companies, and open-end companies.
D) Face-amount certificate companies, unit investment trusts, and management companies.
Answer: D) Face-amount certificate companies, unit investment trusts, and management companies.
A) the majority vote of the board of directors.
B) the chief executive officer of the investment company.
C) the majority vote of the outstanding shares and the board of directors.
D) the majority vote of the outstanding shares.
Answer: C) the majority vote of the outstanding shares and the board of directors.
A) be approved by the SEC.
B) register by coordination with the SEC.
C) register with the state in which the investment adviser has a business.
D) register with the SEC.
Answer: D) register with the SEC.
A) Quarterly.
B) Semiannually.
C) Annually.
D) Monthly.
Answer: C) Annually.
A) Regulates the secondary market.
B) Governs the issuance of new issues.
C) Sets rules for the registration of investment advisers.
D) Prescribes procedures for the establishment of investment companies.
Answer: D) Prescribes procedures for the establishment of investment companies.
The vice president of finance of the company.
A registered agent of the company.
An office secretary of the company.
A) I and III.
B) II and III.
C) I, II and III.
D) I and II.
Answer: D) I and II.
filing an audited report with the SEC annually.
sending semiannual reports to shareholders.
notifying shareholders of changes in the portfolio as those changes occur.
A) I and II.
B) I and III.
C) II and III.
D) I, II and III.
Answer: A) I and II
I. Mr. and Mrs. Jones each purchase $5,000 worth of shares; the fund offers a volume discount for a single purchase of $10,000.
II. Neighbors Jan, Mickey, and Lee form an investment club; Jan places an order for $10,000 worth of shares to be held in their three names. The fund offers a volume discount for a $10,000 purchase.
III. Allen is the vice president of a firm under contract to provide investment advice to a mutual fund. He buys shares of that fund.
A) I and II.
B) II and III.
C) I, II and III.
D) I and III.
Answer: D) I and III.
A) face-amount certificate company.
B) management company.
C) unit investment trust.
D) public utility holding company.
Answer: D) public utility holding company.
I. no contract may be terminated with more than 60 days notice in writing.
II. the initial contract is for a maximum of one year and then may be renewed on either an annual or biannual basis.
III. unless a specific exemption applies, the fund may not engage in margin trading .
IV. the contract must be in writing.
A) I and IV.
B) I and III.
C) II and III.
D) II and IV.
Answer: A) I and IV.
I. mutual funds are only allowed to maintain TIC accounts with other funds that are members of the same family of funds.
II. no public offering may commence unless the fund has at least $100,000 in net assets.
III. no registered investment company may own more than 3% of the voting shares of another registered investment company.
IV. shares of the fund will not have any margin loan value until the 30th day after purchase.
A) II and III.
B) I and II.
C) I and IV.
D) II and IV.
Answer: A) II and III.
A) increase.
B) remain the same.
C) change as soon as the portfolio manager can take advantage of the higher rates now available in the marketplace.
D) decrease.
Answer: B) remain the same.
A) unit investment trust.
B) holding company.
C) face amount certificate company.
D) management company.
Answer: B) holding company.
I. file with either the state securities Administrator or with the Securities Exchange Commission as a registered investment adviser by filing the appropriate Form ADV.
II. file Form ADV with his current brokerage firm.
III. notify his current brokerage firm and receive permission to operate independently from the firm as a registered investment adviser.
IV. do nothing and begin performing investment advisory services without regard to his current brokerage firm.
A) I and IV.
B) II and III.
C) II and IV.
D) I and III.
Answer: D) I and III.
A) A member of the board of directors who is also employed as the investment adviser.
B) A shareholder who owns 10% of the fund's shares.
C) A person who holds a position with the fund's underwriter.
D) A member of the board of directors who does not hold another position within the investment company.
Answer: D) A member of the board of directors who does not hold another position within the investment company.
A) the CDSC.
B) breakpoints.
C) 12b-1 fees.
D) reinvesting distributions.
Answer: B) breakpoints.
A) A third-party solicitor who refers accounts to an adviser for a fee.
B) A senior officer of an investment adviser responsible for marketing as opposed to investment advisory services.
C) The parent broker/dealer of an investment advisory firm.
D) A graphic design consultant who prepares a broker/dealer's research publications.
Answer: D) A graphic design consultant who prepares a broker/dealer's research publications.
I. borrow money from a commercial bank.
II. invest funds in securities consistent with the fund's objectives.
III. change the objectives of the fund.
IV. change the nature of its business and cease to be an investment company.
A) II and III.
B) I, II and III.
C) I, III and IV.
D) I only.
Answer: C) I, III and IV.
A) broker who solely conducts agency trades.
B) person entrusted with the duty of acting for the benefit of another party.
C) person who sells securities to the public on a nondiscretionary basis.
D) principal in a broker/dealer who specializes in proprietary trading.
Answer: B) person entrusted with the duty of acting for the benefit of another party.
A) The board of directors contracts with an outside investment adviser or portfolio manager to invest the cash and securities held in the fund's portfolio.
B) No convicted felon or person convicted of a misdemeanor involving the securities industry may serve on the board of directors of an investment company.
C) An investment company's board of directors manages the portfolio on behalf of the investor shareholders.
D) An investment company's board of directors concerns itself with policy and administrative matters
Answer: C) An investment company's board of directors manages the portfolio on behalf of the investor shareholders.
A) registration of new issues of securities sold by investment advisers.
B) registration of individuals who are in the business of giving investment advice.
C) the establishment of standards of ethical conduct for investment advisers.
D) establishment of procedures for registration of investment advisers.
Answer: A) registration of new issues of securities sold by investment advisers.
A) prohibit any deceitful practice or course of business with respect to the purchase and sale of securities.
B) do not apply to conduct directly related to actual transactions involving the purchase or sale of securities.
C) apply to all conduct related to the purchase and sale of securities.
D) do not apply to activity related to prospective or actual advisory clients.
Answer: B) do not apply to conduct directly related to actual transactions involving the purchase or sale of securities.
A) Issuing reports on macroeconomic conditions.
B) Advertising investment services to the public and providing them routinely.
C) Advertising investment services but receiving no separate compensation for the services.
D) Giving specific investment advice only on rare and isolated occasions.
Answer: B) Advertising investment services to the public and providing them routinely.
A) volume of new shares sold.
B) type of securities in the fund portfolio.
C) average annual net assets of the fund.
D) profit of the fund.
Answer: C) average annual net assets of the fund.
A) an investment company must have more than $100,000 capitalization to be offered to the public.
B) shareholders have the right to vote on a company's change from a closed-end to an open-end investment company.
C) an investment company's board of directors may be composed of up to 70% of the company's interested persons.
D) open-end investment companies must redeem securities within seven days after their tender.
Answer: C) an investment company's board of directors may be composed of up to 70% of the company's interested persons.
A) shares of other mutual funds.
B) stock on margin.
C) call options.
D) high yield bonds.
Answer: B) stock on margin.
A) An open-end investment company.
B) A corporation.
C) A custodian of an UTMA account.
D) A minor child with approval of a court-appointed guardian.
Answer: B) A corporation.
Divided liability to purchase securities from the issuer.
Undivided liability to purchase securities from the issuer.
Divided responsibility for securities that remain unsold.
Undivided responsibility for securities that remain unsold.
A) II and IV.
B) I and III.
C) I and IV.
Answer: A) II and IV.
A) Competitive bid.
B) Best efforts.
C) Negotiated.
D) All or none.
Answer: A) Competitive bid.
A) ½% of the market price.
B) ½% of the dealer's price.
C) a 50% commission split.
D) $5 per $1,000 of par.
Answer: D) $5 per $1,000 of par.
A) an elected official of a municipality having some decision-making authority regarding new municipal bond issues
B) employed by a municipality to oversee the issuance of municipal bonds
C) an employee of a broker/dealer engaged in municipal security representative activities other than retail sales or who solicits municipal securities business for the broker/dealer
D) an employee of the MSRB specializing in seeing that broker/dealers adhere to the MSRB rules and regulations regarding the sales of municipal bonds to retail customers
Answer: C) an employee of a broker/dealer engaged in municipal security representative activities other than retail sales or who solicits municipal securities business for the broker/dealer
An associated person of a broker/dealer engaged in municipal securities representative activities other than retail sales
A registered representative engaged in the retail sale of municipal securities to individual investors
Is subject to the political contribution rules as outlined in MSRB Rule G-37
Is not subject to the political contribution rules as outlined in MSRB Rule G-37
A) II and IV
B) I and III
C) I and IV
D) II and III
Answer: B) I and III
A) an employee of the Municipal Securities Rule Making Board (MSRB) responsible for broker dealer compliance regarding MSRB rules.
B) an associate of a broker dealer engaged in municipal securities representative activities, other than retail sales.
C) a registered representative engaged in the sale of municipal securities to public customers.
D) an elected official of a municipality with decision making responsibilities regarding municipal issues.
Answer: B) an associate of a broker dealer engaged in municipal securities representative activities, other than retail sales.
A) required to serve a 30-day apprenticeship and may not yet be promoted to sales training.
B) required to serve a 60-day apprenticeship and having fulfilled that time may be promoted to sales training.
C) required to have been in the position with the employing firm at least one year when previously employed in a clerical capacity only.
D) not required to serve an apprenticeship period and may be promoted for sales training.
Answer: D) not required to serve an apprenticeship period and may be promoted for sales training.
A) bank references.
B) employment record for the previous 10 years.
C) residences over the past 5 years.
D) date of birth.
Answer: A) bank references.
A) sell municipal bonds.
B) trade municipal bonds.
C) train other registered representatives.
D) participate in underwriting municipal bonds.
Answer: C
A) 1000.
B) 5000.
C) 250.
D) 100.
Answer: C) 250.
Regulation of municipal issuers.
Establishment of recordkeeping requirements for municipal broker/dealers.
Enforcement of any municipal regulations it adopts.
Creation of regulations for participants in the municipal securities secondary market.
A) I and III.
B) I and IV.
C) II and III.
D) II and IV.
Answer: D) II and IV.
A) The representative is not allowed to give gifts to customers.
B) No, the aggregate amount exceeds the permissible annual limit.
C) Only with written permission from the MSRB.
D) Yes, he is permitted.
Answer: D) Yes, he is permitted.
A) the MSRB.
B) the NYSE.
C) the SEC.
D) FINRA.
Answer: A
A) broker's broker.
B) investment banker.
C) municipal securities dealer.
D) mutual fund.
Answer: C) municipal securities dealer.
A) 100.
B) 200.
C) 25.
D) 50.
Answer: A) 100.
Issuers of municipal fund securities.
Broker/dealers that sell municipal fund securities.
Issuers of municipal bonds.
Banks that sell municipal securities.
A) II and III.
B) II and IV.
C) I and III.
D) I and II.
Answer: C) I and III.
A) Only with the verbal permission of a registered branch manager (sales supervisor).
B) Upon request to the broker/dealer; no restrictions exist.
C) Only by writing the MSRB directly with a specific question involving an MSRB rule.
D) Only with the written permission of a principal.
Answer: B) Upon request to the broker/dealer; no restrictions exist.
A) Offering to share in profits or losses resulting from the transaction.
B) Personally offering to buy the bonds back at a specified price and date.
C) Selling the customer a put or entering into a repurchase agreement.
D) Guaranteeing the customer against any loss.
Answer: C) Selling the customer a put or entering into a repurchase agreement.
A) sale of new issues to related portfolios.
B) regulation of municipal securities advertising.
C) information to be provided by municipal issuers.
D) form and content of price quotations.
Answer: C) information to be provided by municipal issuers.
A) refuse the order.
B) execute the order and mark it "unsolicited".
C) determine whether the transaction is suitable.
D) recommend a different bond of the same issuer with a higher rating.
Answer: B) execute the order and mark it "unsolicited".
A) sales representatives.
B) issuers.
C) quotes.
D) dealers.
Answer: B) issuers.
A) a municipal securities employee of another dealer.
B) All of these.
C) a treasurer for an issuer of municipal securities.
D) a customer of the representative.
Answer: B) All of these.
A) submit to arbitration.
B) notify the examining regulatory authority.
C) accept the complaint and record the action taken.
D) refund any money to the customer making the complaint .
Answer: C) accept the complaint and record the action taken.
A) the underwriters may also be financial advisors to the municipality and receive both advisory fees and underwriting fees.
B) the municipality appoints an investment banker or broker/dealer to underwrite the offering.
C) the underwriter works with the issuer to establish the interest rate.
D) the underwriter works with the issuer to establish the offering price.
Answer: A) the underwriters may also be financial advisors to the municipality and receive both advisory fees and underwriting fees.
Bearer.
Registered as to principal only.
Fully registered.
Book entry.
A) I and III.
B) II and IV.
C) III and IV.
D) I and II.
Answer: C) III and IV.
A) requests for bids only
B) bona fide quotes
C) an unidentified nominal quote
D) requests for offers only
Answer: C) an unidentified nominal quote
A) the dissemination of price and yield quotes by municipal dealers.
B) information provided by municipal issuers.
C) municipal dealer recordkeeping.
D) dealers obtaining fair and reasonable prices for customers.
Answer: B) information provided by municipal issuers.
Bearer.
Book entry.
Registered.
Registered as to principal only.
A) I and III.
B) I and IV.
C) II and IV.
D) II and III.
Answer: D) II and III.
A) legal opinions.
B) the opening of new customer accounts.
C) each transaction in municipal securities.
D) the handling of written customer complaints.
Answer: A) legal opinions.
Auction rate securities are intended as long-term investments.
Interest or dividend rates are reset at established intervals based on a Dutch auction.
If the auction fails, holders of ARSs may not have immediate access to his funds.
The interest or dividend rate is set as the lowest rate to match supply and demand at the time of the auction.
A) II and III
B) II and IV
C) I and III
D) I and IV
Answer: C) I and III
A) A real estate investment trust
B) Municipal bonds
C) Non-investment-grade corporate bonds
D) A corporate blue-chip balanced mutual fund
Answer: B) Municipal bonds
A) they would require voter approval before a municipality could issue them
B) they are a form of municipal revenue bond
C) the holder of a COP could foreclose on the asset generating the revenue in the case of default
D) the holder of the COP participates in lease or loan payments from a specific piece of equipment or facility purchased or built by the municipality
Answer: A) they would require voter approval before a municipality could issue them
A) general obligation bonds.
B) income bonds.
C) debenture bonds.
D) revenue bonds.
Answer: D) revenue bonds.
Build America Bonds are tax exempt at all levels
Direct payment BABs provide the municipal issuer with payments from the U.S. treasury.
Build America Bonds are issued by the U.S. Treasury.
Tax credit or issuer BABs provide the municipal bondholder with a federal income tax credit.
A) I and III.
B) I and IV.
C) II and III.
D) II and IV.
Answer: D) II and IV.
A) a failed auction.
B) a Dutch auction.
C) a reset rate.
D) a clearing rate.
Answer: A
A) Collateralized Mortgage Obligations (CMOs).
B) Real Estate Investment Trusts (REITs).
C) American Depositary Receipts (ADRs).
D) Auction Rate Securities (ARSs).
Answer: Auction Rate Securities (ARSs)
is a stop loss system.
is a Dutch auction.
establishes a "clearing rate".
guarantees that every bidder will have their order filled.
A) I and IV.
B) II and IV.
C) II and III.
D) I and III.
Answer: C) II and III.
A) Corporate net lease payments.
B) State taxes.
C) Trustee guarantees.
D) Municipal taxes.
Answer: A) Corporate net lease payments.
A mutilated certificate.
A municipal bond without the legal opinion attached.
A bond trading ex-legal without a legal opinion attached.
Certificates delivered in par value denominations totaling the amount of the transaction.
A) III and IV.
B) I and II.
C) I and III.
D) II and III.
Answer: B) I and II.
A) delivered to customers on or before settlement date.
B) sent to customers on or before settlement date.
C) sent to customers on or before trade date.
D) delivered to customers on or before trade date.
Answer: A) delivered to customers on or before settlement date.
A) all retail purchasers of a new municipal bond issue must receive a final official statement.
B) a retail customer must receive an official statement no later than the settlement date.
C) the MSRB does not require the preparation of a final official statement for new municipal bond issues.
D) an official statement must be delivered only upon request of a retail customer.
Answer: D) an official statement must be delivered only upon request of a retail customer.
Debt to build a state office building within city limits.
Debt to maintain a county park district serving a municipality.
Debt backed by two states cooperating in the construction of a bridge.
Debt for a high school district within city limits.
A) I and III.
B) I and II.
C) II and III.
D) II and IV.
Answer: A) I and III.
A) Toll bridge fees.
B) Taxes.
C) Rental revenues.
D) Sewer and water fees.
Answer: B) Taxes.
A) A library district.
B) An airport district.
C) A school district.
D) A park district.
Answer: C) A school district.
A) 5000.
B) 50000.
C) $1 million.
D) 500000.
Answer: D) 500000.
A) secondary debt.
B) overlapping debt.
C) a double-barreled bond.
D) underlying debt.
Answer: B) overlapping debt.
It describes the disbursement of funds for revenue bond issues.
It describes the disbursement of funds for general obligation issues.
It is found within the official statement.
It is found within the bond contract.
A) II and IV.
B) I and IV.
C) I and III.
D) II and III.
Answer: B) I and IV.
A) a water pollution control facility.
B) corporate debt of the county's largest employer.
C) county general debt.
D) a local power plant.
Answer: C) county general debt.
Tolls on roads
Real estate taxes
Revenue generated by a hospital
Liquor license fees
A) II and III
B) II and IV
C) I and III
D) I and IV
Answer: B) II and IV
A) overlapping.
B) statutory.
C) coleverage.
D) net debt.
Answer: A) overlapping.
A) Industrial development revenue bonds.
B) General obligation bonds.
C) TANs.
D) Special assessment bonds.
Answer: A) Industrial development revenue bonds.
A) TANs.
B) Private purpose bonds.
C) Original issue discount bonds.
D) PHAs.
Answer: B) Private purpose bonds.
A) taxed at the federal level only.
B) taxed at the state and local levels only.
C) untaxed.
D) subject to tax as would be any other capital gain.
Answer: D) subject to tax as would be any other capital gain.
A) they are backed by the full faith and credit of the issuing authority.
B) MSRB regulations prohibit short selling.
C) they trade over the counter.
D) thin markets may make it difficult to cover a short municipal position.
Answer: D) thin markets may make it difficult to cover a short municipal position.
A) the debt service reserve fund.
B) the optional call provisions.
C) the debt service.
D) the operations and maintenance.
Answer: B) the optional call provisions.
Adequate insurance on the property
An increase in property taxes if necessary to service the debt
Proper maintenance of the property
Statutory debt limits
A) I and III
B) I and II
C) II and III
D) II and IV
Answer: A) I and III
A) indenture.
B) offering circular.
C) prospectus.
D) syndicate letter.
Answer: A) indenture.
Feasibility of public works projects.
Creditworthiness of the issuing municipality.
Tax status of the municipal debt.
The constitutionality and legality of the municipal debt.
A) III and IV.
B) I and II.
C) I and IV.
D) II and III.
Answer: A) III and IV.
A) An officer of the Municipal Securities Rulemaking Board (MSRB).
B) An official or officials of the issuer.
C) An officer of the managing underwriter.
D) Independent bond counsel.
Answer: B) An official or officials of the issuer.
A) an often later maturity within a serial issue of bonds which contains a disproportionately large percentage of the principal amount of the original issue.
B) bonds comprising all of a particular issue which come due in a single maturity.
C) an obligation granting the bondholder the right to require the issuer to purchase the bonds at par at a certain time prior to maturity.
D) a serial issue of bonds on which the interest rate periodically changes over the life of the issue for all bonds remaining outstanding.
Answer: A) an often later maturity within a serial issue of bonds which contains a disproportionately large percentage of the principal amount of the original issue.
A) Syndicate manager.
B) Syndicate members.
C) MSRB.
D) Issuer.
Answer: D
A) state and local governments.
B) institutions.
C) commercial banks.
D) accredited investors.
Answer: A
A) A tax anticipation note (TAN).
B) A general obligation bond (GO).
C) Series EE bonds.
D) A Build America Bond (BAB).
Answer: D) A Build America Bond (BAB).
A) the costs to be incurred by the issuer in connection with the offering.
B) the issuer's obligations to bondholders.
C) covenants to which the issuer must adhere.
D) a description of the issue.
Answer: A) the costs to be incurred by the issuer in connection with the offering.
A) issuer and the MSRB.
B) issuer and the trustee acting for the bondholders.
C) issuer and the bond counsel.
D) bond counsel and the bondholders.
Answer: B) issuer and the trustee acting for the bondholders.
A) legal opinion.
B) official notice of sale.
C) "The" "Bond Buyer".
D) official statement.
A) bond resolution.
B) "Bond Buyer".
C) official notice of sale.
D) legal opinion.
Answer: A) bond resolution.
Marketability.
Legality.
Tax-exempt status.
Economic feasibility.
A) II and III.
B) I and III.
C) I and IV.
D) II and IV.
Answer: A) II and III.
A) compensation paid to the underwriters.
B) restrictive covenants that are binding on the issuer.
C) any call provisions that allow the issuer to redeem the bonds before their scheduled maturity.
D) an authorization to sell the securities.
Answer: A) compensation paid to the underwriters.
A) Underwriting agreement
B) Reporting requirements regarding revenues collected
C) Conditions of the maintenance covenant
D) Terms of the rate covenant
Answer: A) Underwriting agreement
It is required by the SEC for all new issues.
It is required by the MSRB for all new issues.
It is required to be delivered to purchasers at or before settlement.
It is generally used by underwriters to help sell the issue.
A) II and III.
B) III and IV.
C) I and II.
D) I and IV.
Answer: B) III and IV.
A) the disclosure that it was prepared by the underwriters.
B) the issues purpose.
C) the source from which interest and principal will be paid.
D) the creditworthiness of the issue.
Answer: A) the disclosure that it was prepared by the underwriters.
A) Securities Act of 1933 registration requirements.
B) U.S.A. state registration requirements.
C) Securities and Futures Authority (SFA) requirements.
D) Securities Exchange Act of 1934 antifraud provisions.
Answer: Municipal securities are exempt from federal and state registration.
A) legal opinion.
B) notice of sale.
C) agreement among underwriters.
D) bond contract.
Answer: D
A) the issuer has the authority to issue bonds that are legal, valid, and enforceable obligations of the issuer.
B) the bond is marketable.
C) the bond has passed the additional bonds test (parity test).
D) the issuer is creditworthy.
Answer: A) the issuer has the authority to issue bonds that are legal, valid, and enforceable obligations of the issuer.
A) must include information about the offering's call provisions.
B) can be used to review the issuer's creditworthiness.
C) meets disclosure requirements for purchasers of the new issue.
D) is also called a prospectus.
Answer: D) is also called a prospectus.
A) Official statement.
B) Notice of sale.
C) Trust indenture.
D) Bond resolution.