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Question 1 of 10
1. Question
What is the only information that needs to be collected for institutional accounts?
Correct
For these institutional accounts, or for purchases on securities on which no recommendation was made by the member, the member does not need to collect and retain the customer information relating to the customer’s tax identification or Social Security number, occupation and name and address of employer, or status as an associated person with another member firm. Essentially, the only information that needs to be collected in these instances would be the appropriate names, responsibilities, authorizations, and signatures for anyone acting on behalf of the account.
Incorrect
For these institutional accounts, or for purchases on securities on which no recommendation was made by the member, the member does not need to collect and retain the customer information relating to the customer’s tax identification or Social Security number, occupation and name and address of employer, or status as an associated person with another member firm. Essentially, the only information that needs to be collected in these instances would be the appropriate names, responsibilities, authorizations, and signatures for anyone acting on behalf of the account.
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Question 2 of 10
2. Question
Pursuant to FINRA Rule 4512, which type of information must be collected?
Correct
FINRA Rule 4512 requires that for each new account that is opened, the following information must be collected and kept in the account’s records:
1.Customer’s name, address, and age
2.The names and responsibilities of any persons associated with the account other than the customer
3.Customer’s signature, or the signature of an authorized representative in the case of an institutional customer
4.The names of any persons authorized to act on the customer’s behalf
5.For accounts that are not institutional accounts, the member must also collect the customer’s tax identification number or Social Security number, the occupation and name and address of the customer’s employer and whether the customer is an associated person of another member firm.Incorrect
FINRA Rule 4512 requires that for each new account that is opened, the following information must be collected and kept in the account’s records:
1.Customer’s name, address, and age
2.The names and responsibilities of any persons associated with the account other than the customer
3.Customer’s signature, or the signature of an authorized representative in the case of an institutional customer
4.The names of any persons authorized to act on the customer’s behalf
5.For accounts that are not institutional accounts, the member must also collect the customer’s tax identification number or Social Security number, the occupation and name and address of the customer’s employer and whether the customer is an associated person of another member firm. -
Question 3 of 10
3. Question
Which of the following is one of the exemption from the things that influence the purchase or sale of a security
Correct
FINRA Rule 5230 states that no one may receive anything of value in exchange for publishing something that will influence the purchase or sale of a security. This includes any publications that occur via the Internet, television, and in writing.
There are specific exemptions laid out in the rule, including the following:
A communication that is clearly an advertisement
A communication that includes a disclosure of the amount of compensation received
A research report, as specifically defined by NASD Rule 2711Incorrect
FINRA Rule 5230 states that no one may receive anything of value in exchange for publishing something that will influence the purchase or sale of a security. This includes any publications that occur via the Internet, television, and in writing.
There are specific exemptions laid out in the rule, including the following:
A communication that is clearly an advertisement
A communication that includes a disclosure of the amount of compensation received
A research report, as specifically defined by NASD Rule 2711 -
Question 4 of 10
4. Question
“Any advertisement of an investment company must include a statement that advises an investor to consider the investment objectives, risks, and charges and expenses of the investment company carefully before investing”, in which Rule is this requirement mentioned?
Correct
In order to comply with Rule 482 of the Securities Act of 1933, any advertisement of an investment company must include a statement that advises an investor to consider the investment objectives, risks, and charges and expenses of the investment company carefully before investing; explains that the prospectus and, if available, the summary prospectus contain this and other information about the investment company.
Incorrect
In order to comply with Rule 482 of the Securities Act of 1933, any advertisement of an investment company must include a statement that advises an investor to consider the investment objectives, risks, and charges and expenses of the investment company carefully before investing; explains that the prospectus and, if available, the summary prospectus contain this and other information about the investment company.
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Question 5 of 10
5. Question
Pursuant to Rule 482 of the Securities Act of 1933, which of the following information is included on performance data?
Correct
In order to comply with Rule 482 of the Securities Act of 1933, any investment company advertisements including performance data must include the following:
A legend disclosing that the performance data quoted represents past performance; that past performance does not guarantee future results; that the investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost; and that current performance may be lower or higher than the performance data quoted.Incorrect
In order to comply with Rule 482 of the Securities Act of 1933, any investment company advertisements including performance data must include the following:
A legend disclosing that the performance data quoted represents past performance; that past performance does not guarantee future results; that the investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost; and that current performance may be lower or higher than the performance data quoted. -
Question 6 of 10
6. Question
What is the effect of fraudulent activities?
Correct
A member would be in violation of Rule 2020 if he used falsified, enhanced financial reports to entice an investor to purchase a certain security. In addition to being dishonest and illegal, such activities have significantly negative repercussions for the markets as they reduce market efficiency and drastically reduce market participation among smaller investors if discovered.
Incorrect
A member would be in violation of Rule 2020 if he used falsified, enhanced financial reports to entice an investor to purchase a certain security. In addition to being dishonest and illegal, such activities have significantly negative repercussions for the markets as they reduce market efficiency and drastically reduce market participation among smaller investors if discovered.
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Question 7 of 10
7. Question
What does NASD Rule 2420 state concerning dealing with Non-members?
Correct
NASD Rule 2420 states that members shall deal with non-members at the same prices, fees, and terms and commissions as in their dealings with the general public. Additionally, the rule states that no member shall:
1.In any transaction with any non-member broker or dealer, allow or grant to such non-member broker or dealer any selling concession, discount, or other allowance allowed by such member to a member of a registered securities association and not allowed to a member of the general public;
2.Join with any non-member broker or dealer in any syndicate or group contemplating the distribution to the public of any issue of securities or any part thereof; or
3.Sell any security to or buy any security from any non-member broker or dealer except at the same price at which at the time of such transaction such member would buy or sell such security, as the case may be, from or to a person who is a member of the general public not engaged in the investment banking or securities businessIncorrect
NASD Rule 2420 states that members shall deal with non-members at the same prices, fees, and terms and commissions as in their dealings with the general public. Additionally, the rule states that no member shall:
1.In any transaction with any non-member broker or dealer, allow or grant to such non-member broker or dealer any selling concession, discount, or other allowance allowed by such member to a member of a registered securities association and not allowed to a member of the general public;
2.Join with any non-member broker or dealer in any syndicate or group contemplating the distribution to the public of any issue of securities or any part thereof; or
3.Sell any security to or buy any security from any non-member broker or dealer except at the same price at which at the time of such transaction such member would buy or sell such security, as the case may be, from or to a person who is a member of the general public not engaged in the investment banking or securities business -
Question 8 of 10
8. Question
Which Rule of Regulation D provides definitions?
Correct
Regulation D
Rule 501
Business combination
Executive officer
Issuer
Purchaser representativeIncorrect
Regulation D
Rule 501
Business combination
Executive officer
Issuer
Purchaser representative -
Question 9 of 10
9. Question
According to Regulation D, what is the definition of an “Executive Officer”?
Correct
Regulation D
Rule 501
Executive officer – any president or vice president of a functional division of a company, or other policy making persons.
Issuer – any person who issues securities.
Purchaser representative – a person capable of making financial decisions and has a written agreement with the purchaser to represent them.Incorrect
Regulation D
Rule 501
Executive officer – any president or vice president of a functional division of a company, or other policy making persons.
Issuer – any person who issues securities.
Purchaser representative – a person capable of making financial decisions and has a written agreement with the purchaser to represent them. -
Question 10 of 10
10. Question
For which companies Rule 504 provides exemption?
Correct
Rule 504 provides an exemption for companies to offer and sell up to $1 million of their securities in a 12-month period. To qualify for this exemption, the issuing company must not publicly advertise or solicit for these securities and the investors will receive restricted securities, which limit their ability to sell the securities in the secondary market.
Incorrect
Rule 504 provides an exemption for companies to offer and sell up to $1 million of their securities in a 12-month period. To qualify for this exemption, the issuing company must not publicly advertise or solicit for these securities and the investors will receive restricted securities, which limit their ability to sell the securities in the secondary market.