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Question 1 of 10
1. Question
Which of the following statements is true regarding Section 10 of the Securities Exchange Act of 1934?
Correct
Section 10 of the Securities Exchange Act of 1934, and specifically Rule 10b-5, state that it shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of a national securities exchange,
i. To employ any device, scheme, or artifice to defraud,
ii. To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
iii. To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.Incorrect
Section 10 of the Securities Exchange Act of 1934, and specifically Rule 10b-5, state that it shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of a national securities exchange,
i. To employ any device, scheme, or artifice to defraud,
ii. To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
iii. To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person. -
Question 2 of 10
2. Question
What is the impact of the lack of legislative protection of investors?
Correct
Without such protections, it is likely that larger, institutional investors and funds would try to take advantage of their informational advantages and economics of scale to gain an advantage over other smaller investors without access to that same information. This would lead to lower participation and increased skepticism among smaller investors. Additionally, without faith in an efficient marketplace, fundamental and technical analysis of securities would not be as reliable because of the manipulation of security prices by others within the market.
Incorrect
Without such protections, it is likely that larger, institutional investors and funds would try to take advantage of their informational advantages and economics of scale to gain an advantage over other smaller investors without access to that same information. This would lead to lower participation and increased skepticism among smaller investors. Additionally, without faith in an efficient marketplace, fundamental and technical analysis of securities would not be as reliable because of the manipulation of security prices by others within the market.
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Question 3 of 10
3. Question
Which of the following is one of criteria required for an issuer to be called an investment company?
Correct
“Investment company” is defined within the Investment Company Act of 1940 to mean any issuer that meets one of the following criteria:
1. Is or holds itself out as being engaged primarily or proposes to engage primarily, in the business of investing, reinvesting, or trading in securities
2. Is engaged or proposes to engage in the business of issuing face-amount certificates of the installment type, or has been engaged in such business and has any such certificate outstanding
3. Is engaged or proposes to engage in the business of investing, reinvesting, owning, holding, or trading in securities, and owns or proposes to acquire investment securities having a value exceeding 40 percent of the value of
such issuer’s total assets (exclusive of government securities and cash items) on an unconsolidated basis.Incorrect
“Investment company” is defined within the Investment Company Act of 1940 to mean any issuer that meets one of the following criteria:
1. Is or holds itself out as being engaged primarily or proposes to engage primarily, in the business of investing, reinvesting, or trading in securities
2. Is engaged or proposes to engage in the business of issuing face-amount certificates of the installment type, or has been engaged in such business and has any such certificate outstanding
3. Is engaged or proposes to engage in the business of investing, reinvesting, owning, holding, or trading in securities, and owns or proposes to acquire investment securities having a value exceeding 40 percent of the value of
such issuer’s total assets (exclusive of government securities and cash items) on an unconsolidated basis. -
Question 4 of 10
4. Question
What is the definition of a face-amount certificate company?
Correct
Face-amount certificate company: an investment company that is engaged or proposes to engage in the business of issuing face-amount certificates of the installment type, or which has been engaged in such business and has any such certificate outstanding.
Incorrect
Face-amount certificate company: an investment company that is engaged or proposes to engage in the business of issuing face-amount certificates of the installment type, or which has been engaged in such business and has any such certificate outstanding.
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Question 5 of 10
5. Question
When is a company NOT classified as diversified?
Correct
Management companies are classified as diversified when the following three conditions are met:
1. At least 75 percent of the company’s total assets are comprised of cash, government securities, and securities of other investment companies.
2. Securities from any one issuer do not represent more than 5 percent of the management company’s total assets.
3. Any securities held by the management company do not represent more than 10 percent of the outstanding voting securities of a given issuer.All management companies not meeting these three criteria are considered to be non-diversified.
Incorrect
Management companies are classified as diversified when the following three conditions are met:
1. At least 75 percent of the company’s total assets are comprised of cash, government securities, and securities of other investment companies.
2. Securities from any one issuer do not represent more than 5 percent of the management company’s total assets.
3. Any securities held by the management company do not represent more than 10 percent of the outstanding voting securities of a given issuer.All management companies not meeting these three criteria are considered to be non-diversified.
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Question 6 of 10
6. Question
Pursuant to the Investment Company Act of 1940, which type of companies is NOT exempt from registration?
Correct
The Investment Company Act of 1940 provides for five types of companies that are
exempt from registration, including:
1. Any company organized or created and having its principal office and place of business in Puerto Rico, the Virgin Islands, or any other possession of the United States. The exemption is not valid if securities of the company are offered to residents of any state other than that in which the company is organized.
2. Any company that has gone through a reorganization in the prior five years if
(i) the company was not an investment company at the onset of thereorganization, (ii) at the conclusion of the reorganization all outstanding securities were owned by creditors, and (iii) 50 percent or more of the outstanding voting securities are owned by no more than 25 persons.
3. Any issuer for which there is an outstanding writing filed with the Commission by the Federal Savings and Loan Insurance Corporation stating that the exemption is consistent with the public interest and the protection of investors.
4. Any wholly owned subsidiary of a face-amount certificate company organized prior to 1940 and subject to the state insurance laws of the state in which it is organized.
5. Any company that is not engaged in the business of issuing redeemable securities.Incorrect
The Investment Company Act of 1940 provides for five types of companies that are
exempt from registration, including:
1. Any company organized or created and having its principal office and place of business in Puerto Rico, the Virgin Islands, or any other possession of the United States. The exemption is not valid if securities of the company are offered to residents of any state other than that in which the company is organized.
2. Any company that has gone through a reorganization in the prior five years if
(i) the company was not an investment company at the onset of thereorganization, (ii) at the conclusion of the reorganization all outstanding securities were owned by creditors, and (iii) 50 percent or more of the outstanding voting securities are owned by no more than 25 persons.
3. Any issuer for which there is an outstanding writing filed with the Commission by the Federal Savings and Loan Insurance Corporation stating that the exemption is consistent with the public interest and the protection of investors.
4. Any wholly owned subsidiary of a face-amount certificate company organized prior to 1940 and subject to the state insurance laws of the state in which it is organized.
5. Any company that is not engaged in the business of issuing redeemable securities. -
Question 7 of 10
7. Question
Which of the following statements is true regarding an individual retirement account?
Correct
An individual retirement account (IRA) is a form of retirement savings account. IRAs are a very popular retirement savings tool as they allow investors the opportunity to save for retirement while reducing taxable income, as deferrals into an IRA are tax-deductible to the investor. Additionally, IRAs allow investors the opportunity to supplement their 401(k) retirement savings with an additional source of tax-deferred retirement savings. Investors are limited to only contributing $18,500 to a 401(k) account in 2018 ($24,500 if age 50 or older), so an IRA allows that investor to invest an additional $5,500 ($6,500 if age 50 or older) on a tax- deferred basis.
Incorrect
An individual retirement account (IRA) is a form of retirement savings account. IRAs are a very popular retirement savings tool as they allow investors the opportunity to save for retirement while reducing taxable income, as deferrals into an IRA are tax-deductible to the investor. Additionally, IRAs allow investors the opportunity to supplement their 401(k) retirement savings with an additional source of tax-deferred retirement savings. Investors are limited to only contributing $18,500 to a 401(k) account in 2018 ($24,500 if age 50 or older), so an IRA allows that investor to invest an additional $5,500 ($6,500 if age 50 or older) on a tax- deferred basis.
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Question 8 of 10
8. Question
Which of the following statements is true regarding a traditional IRA?
Correct
In order to contribute to a traditional IRA, an individual who also participates in a company- sponsored retirement plan must fall below certain income limits (for 2018, permitted contributions begin to phase out at $63,000 for singles and $101,000 for married couples and are eliminated at $73,000 for singles and $121,000 for married couples). The 2018 contribution limit to traditional IRA accounts is $5,500. However, for those investors age 50 and over, the contribution limit is raised to $6,500.
Incorrect
In order to contribute to a traditional IRA, an individual who also participates in a company- sponsored retirement plan must fall below certain income limits (for 2018, permitted contributions begin to phase out at $63,000 for singles and $101,000 for married couples and are eliminated at $73,000 for singles and $121,000 for married couples). The 2018 contribution limit to traditional IRA accounts is $5,500. However, for those investors age 50 and over, the contribution limit is raised to $6,500.
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Question 9 of 10
9. Question
What is the difference between traditional and Roth IRA accounts?
Correct
In both traditional and Roth IRA accounts, distributions to participants before age 59½ are considered to be early distributions and they must pay an additional 10% tax. Roth IRAs differ in that no minimum or mandatory distributions are required prior to the death of the owner of the account.
Incorrect
In both traditional and Roth IRA accounts, distributions to participants before age 59½ are considered to be early distributions and they must pay an additional 10% tax. Roth IRAs differ in that no minimum or mandatory distributions are required prior to the death of the owner of the account.
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Question 10 of 10
10. Question
Which of the following statements is true regarding Keogh plan?
Correct
Much like a 401(k) plan, a Keogh is considered to be a “qualified” plan in that it is covered under Internal Revenue Code Section 401(a). In order to be eligible to participate in a Keogh, you must be self-employed, a small business owner, or a sole proprietor.Because participants are self- employed, the contribution limits to Keogh plans are higher than for many other qualified plans. Keogh plans limit contributions in a given tax year to 25 percent of your earned income, which is income less expenses arising from your self- employment activities.
Incorrect
Much like a 401(k) plan, a Keogh is considered to be a “qualified” plan in that it is covered under Internal Revenue Code Section 401(a). In order to be eligible to participate in a Keogh, you must be self-employed, a small business owner, or a sole proprietor.Because participants are self- employed, the contribution limits to Keogh plans are higher than for many other qualified plans. Keogh plans limit contributions in a given tax year to 25 percent of your earned income, which is income less expenses arising from your self- employment activities.