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Question 1 of 10
1. Question
Which of the following statements is true regarding the conduit theory?
Correct
The conduit, or pipeline, theory states that companies such as regulated investment companies and real estate investment trusts are merely pass-through entities for capital gains, dividends, and interest of the securities in which they invest, and thus should not be taxed at the corporate level. The purpose of this theory is to avoid the overtaxation of income, which would reduce the value of securities to investors.
Incorrect
The conduit, or pipeline, theory states that companies such as regulated investment companies and real estate investment trusts are merely pass-through entities for capital gains, dividends, and interest of the securities in which they invest, and thus should not be taxed at the corporate level. The purpose of this theory is to avoid the overtaxation of income, which would reduce the value of securities to investors.
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Question 2 of 10
2. Question
Pursuant to the Internal Revenue Code, a regulated investment company is required to…
Correct
Distribute to its shareholders at least 90 percent of its gross investment company taxable income and at least 90 percent of its tax-exempt interest income.
Incorrect
Distribute to its shareholders at least 90 percent of its gross investment company taxable income and at least 90 percent of its tax-exempt interest income.
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Question 3 of 10
3. Question
Which of the following statements is true regarding the requirements of the Internal Revenue Code?
Correct
Pursuant to the Internal Revenue Code, a regulated investment company is required to distribute to its shareholders at least 90 percent of its gross investment company taxable income and at least 90 percent of its tax-exempt interest income. It is important to note that these requirements do not apply to capital gains. The purpose behind this requirement is that the regulated investment company is receiving preferential tax treatment in that it is not paying taxes on capital gains, dividends, and interest income and is only acting as a pass-through entity, so the investors in the regulated investment company will be the ones who ultimately pay the taxes.
Incorrect
Pursuant to the Internal Revenue Code, a regulated investment company is required to distribute to its shareholders at least 90 percent of its gross investment company taxable income and at least 90 percent of its tax-exempt interest income. It is important to note that these requirements do not apply to capital gains. The purpose behind this requirement is that the regulated investment company is receiving preferential tax treatment in that it is not paying taxes on capital gains, dividends, and interest income and is only acting as a pass-through entity, so the investors in the regulated investment company will be the ones who ultimately pay the taxes.
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Question 4 of 10
4. Question
Which of the following statements is NOT true regarding the way regulated investment companies are taxed?
Correct
Regulated investment companies pay taxes only on an amount referred to as the investment company taxable income, which equals its taxable income offset by:
1. Capital gains
2. The amount of ordinary, taxable income distributed to its shareholdersRegulated investment companies are also taxed on their undistributed net capital gains and face an excise tax on certain amounts of undistributed income.
Distributions from regulated investment companies are typically treated by shareholders as dividends of ordinary income, and thus taxed at dividend rates.Incorrect
Regulated investment companies pay taxes only on an amount referred to as the investment company taxable income, which equals its taxable income offset by:
1. Capital gains
2. The amount of ordinary, taxable income distributed to its shareholdersRegulated investment companies are also taxed on their undistributed net capital gains and face an excise tax on certain amounts of undistributed income.
Distributions from regulated investment companies are typically treated by shareholders as dividends of ordinary income, and thus taxed at dividend rates. -
Question 5 of 10
5. Question
What is the definition of a “Governor”?
Correct
The member of the Board.
Incorrect
The member of the Board.
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Question 6 of 10
6. Question
Who is the “Public director”?
Correct
A director of the NASD Regulation Board.
Incorrect
A director of the NASD Regulation Board.
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Question 7 of 10
7. Question
FINRA Rule 1122 states that…
Correct
A member may not file information with FINRA having to do with membership or registration that is incomplete or accurate so as to be misleading. If a member does so, it is to be immediately corrected.
Incorrect
A member may not file information with FINRA having to do with membership or registration that is incomplete or accurate so as to be misleading. If a member does so, it is to be immediately corrected.
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Question 8 of 10
8. Question
Which of the following statement is true regarding FINRA Rule 1250?
Correct
FINRA Rule 1250 establishes the need for continuing education for a FINRA licensed broker. Unless otherwise instructed, individuals must complete their continuing education requirements within 120 days of the second anniversary of holding their license.
Incorrect
FINRA Rule 1250 establishes the need for continuing education for a FINRA licensed broker. Unless otherwise instructed, individuals must complete their continuing education requirements within 120 days of the second anniversary of holding their license.
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Question 9 of 10
9. Question
In which item of Section 15A does Form U4 contain a pre-dispute arbitration clause?
Correct
Form U4 contains a pre-dispute arbitration clause in item five of Section 15A. It states that most or all disputes must be resolved in arbitration if no agreement is reached in the less binding mediation.
Incorrect
Form U4 contains a pre-dispute arbitration clause in item five of Section 15A. It states that most or all disputes must be resolved in arbitration if no agreement is reached in the less binding mediation.
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Question 10 of 10
10. Question
Which FINRA Rule states the need for filing customer “statistical and summary information”?
Correct
Rule 4530 further goes on to state that customer “statistical and summary information” regarding customer complaints should be filed each quarter by the 15th calendar day following the end of the quarter.
Incorrect
Rule 4530 further goes on to state that customer “statistical and summary information” regarding customer complaints should be filed each quarter by the 15th calendar day following the end of the quarter.