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Question 1 of 10
1. Question
When is a security classified as short-term capital gains?
Correct
When a security is owned for less than one year, it is classified as short-term capital gains. Distributions that are the result of short-term capital gains as well as interest and dividend income are all taxed in the same way as dividends at ordinary income tax rates.
Incorrect
When a security is owned for less than one year, it is classified as short-term capital gains. Distributions that are the result of short-term capital gains as well as interest and dividend income are all taxed in the same way as dividends at ordinary income tax rates.
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Question 2 of 10
2. Question
To what does the term “holding period” refer?
Correct
The holding period of a mutual fund is defined as the time from the date of acquisition to the date of redemption of the fund. Additionally, the fund itself will have holding periods for each of its underlying securities, also calculated as the time from the date of acquisition to the date of redemption.
Incorrect
The holding period of a mutual fund is defined as the time from the date of acquisition to the date of redemption of the fund. Additionally, the fund itself will have holding periods for each of its underlying securities, also calculated as the time from the date of acquisition to the date of redemption.
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Question 3 of 10
3. Question
Which of the following rules prohibits the investor from claiming the loss as a deduction on his tax return?
Correct
Without the “wash sale rule,” which prohibits the investor from claiming the loss as a deduction on his tax return, an investor would be able to essentially capitalize on his loss position without changing his investment position.
Incorrect
Without the “wash sale rule,” which prohibits the investor from claiming the loss as a deduction on his tax return, an investor would be able to essentially capitalize on his loss position without changing his investment position.
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Question 4 of 10
4. Question
Which rule outlines the policies and procedures for removing a customer dispute from a member’s record?
Correct
Rule 2080 Obtaining an Order of Expungement of Customer Dispute Information from the Central Registration Depository (CRD) System: outlines the policies and procedures for removing a customer dispute from a member’s record.
Incorrect
Rule 2080 Obtaining an Order of Expungement of Customer Dispute Information from the Central Registration Depository (CRD) System: outlines the policies and procedures for removing a customer dispute from a member’s record.
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Question 5 of 10
5. Question
Which rule delineates the additional responsibilities imposed upon one acting in a fiduciary capacity?
Correct
Rule 2060 Use of Information Obtained in Fiduciary Capacity: delineates the additional responsibilities imposed upon one acting in a fiduciary capacity, specifically with respect to the use of information to solicit sales.
Incorrect
Rule 2060 Use of Information Obtained in Fiduciary Capacity: delineates the additional responsibilities imposed upon one acting in a fiduciary capacity, specifically with respect to the use of information to solicit sales.
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Question 6 of 10
6. Question
Which of the following is NOT an example of violating one of the Rule 2000?
Correct
The first example of a way in which a member could violate one of the Rule 2000 mandates is through the use of fraudulent activities as prohibited in Rule 2020. A member would be in violation of Rule 2020 if he used falsified financial statements in order to entice a customer to invest in a particular security. Another example of a violation would be a circumstance in which a member failed to properly know his customer, recommending a highly volatile security for an investor who had a short- term time horizon and need for principal protection. Simple due diligence and interviews with the customer would have revealed this information. The final example is the case of an investor’s fiduciary passing along confidential information that was obtained through his fiduciary duties to a salesman within his company who uses that information to develop a custom sales proposal, without the
customer’s consent.Incorrect
The first example of a way in which a member could violate one of the Rule 2000 mandates is through the use of fraudulent activities as prohibited in Rule 2020. A member would be in violation of Rule 2020 if he used falsified financial statements in order to entice a customer to invest in a particular security. Another example of a violation would be a circumstance in which a member failed to properly know his customer, recommending a highly volatile security for an investor who had a short- term time horizon and need for principal protection. Simple due diligence and interviews with the customer would have revealed this information. The final example is the case of an investor’s fiduciary passing along confidential information that was obtained through his fiduciary duties to a salesman within his company who uses that information to develop a custom sales proposal, without the
customer’s consent. -
Question 7 of 10
7. Question
What is the definition of variable contracts?
Correct
FINRA Rule 2320 Variable Contracts of an Insurance Company applies only to variable contracts, which are defined as “contracts providing for benefits or values which may vary according to the investment experience of any separate or segregated account or accounts maintained by an insurance company.”
Incorrect
FINRA Rule 2320 Variable Contracts of an Insurance Company applies only to variable contracts, which are defined as “contracts providing for benefits or values which may vary according to the investment experience of any separate or segregated account or accounts maintained by an insurance company.”
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Question 8 of 10
8. Question
Which of the following statements is true regarding FINRA Rule 2320 Variable Contracts?
Correct
FINRA Rule 2320 Variable Contracts of an Insurance Company applies only to variable contracts, and Universal life insurance policies have no cash value, and thus are not covered under this rule. In a variable universal life insurance policy, the policyholder has the ability to invest the cash value of the policy in a number of separate accounts. This is the only type of insurance policy that is covered by Rule 2320.
Incorrect
FINRA Rule 2320 Variable Contracts of an Insurance Company applies only to variable contracts, and Universal life insurance policies have no cash value, and thus are not covered under this rule. In a variable universal life insurance policy, the policyholder has the ability to invest the cash value of the policy in a number of separate accounts. This is the only type of insurance policy that is covered by Rule 2320.
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Question 9 of 10
9. Question
Which of the following terms means “the consideration paid at the time of each purchase or installment for or under the variable contract”?
Correct
As provided in FINRA Rule 2320 Variable Contracts of an Insurance Company:
The term “purchase payment” shall mean the consideration paid at the time of each purchase or installment for or under the variable contract.Incorrect
As provided in FINRA Rule 2320 Variable Contracts of an Insurance Company:
The term “purchase payment” shall mean the consideration paid at the time of each purchase or installment for or under the variable contract. -
Question 10 of 10
10. Question
What is the definition of the term “Non-Cash Compensation”?
Correct
“Non-Cash Compensation” is all other forms of compensation, including merchandise, gifts and prizes, travel expenses, meals, and lodging.
Incorrect
“Non-Cash Compensation” is all other forms of compensation, including merchandise, gifts and prizes, travel expenses, meals, and lodging.