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Question 1 of 10
1. Question
Which of the following statement(s) is (are) true about prospectus according to the Securities Act of 1933?
I. The act defines prospectus as “any prospectus, notice, circular, advertisement, letter, or communication, written or by radio or television, which offers any security for sale or confirms the sale of any security.
II. A notice, circular, letter, or advertisement is not considered to be a prospectus so long as it states from whom a prospectus can be obtained.
III. The purpose of the prospectus is to ensure that investors have access and are provided with, prior to the purchase of a security, a minimal level of information that is necessary for the investment decision-making process.
IV. The format of each prospectus is the same to enable investors to easily compare different investments.Correct
The act defines prospectus as “any prospectus, notice, circular, advertisement, letter, or communication, written or by radio or television, which offers any security for sale or confirms the sale of any security.” The act goes on to clarify that a notice, circular, letter, or advertisement is not considered to be a prospectus so long as it states from whom a prospectus can be obtained and does not do any more than identify the security and the price and state from which orders will be executed.
The purpose of the prospectus is to ensure that investors have access and are provided with, prior to the purchase of a security, a minimal level of information that is necessary for the investment decision-making process. Such information within the prospectus includes a mutual fund’s objectives, strategy, risks, fees and expenses, and past performance. The format of each prospectus is the same to enable investors to easily compare different investments.
Incorrect
The act defines prospectus as “any prospectus, notice, circular, advertisement, letter, or communication, written or by radio or television, which offers any security for sale or confirms the sale of any security.” The act goes on to clarify that a notice, circular, letter, or advertisement is not considered to be a prospectus so long as it states from whom a prospectus can be obtained and does not do any more than identify the security and the price and state from which orders will be executed.
The purpose of the prospectus is to ensure that investors have access and are provided with, prior to the purchase of a security, a minimal level of information that is necessary for the investment decision-making process. Such information within the prospectus includes a mutual fund’s objectives, strategy, risks, fees and expenses, and past performance. The format of each prospectus is the same to enable investors to easily compare different investments.
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Question 2 of 10
2. Question
Which of the following(s) relevant information related to the fund must be included to a security’s prospectus?
I. Investment objectives
II. Policies
III. Asset allocation
IV. Risk management restrictionsCorrect
A security’s prospectus must include certain relevant information related to the fund’s investment objectives, policies and asset allocation, or risk management restrictions.
Incorrect
A security’s prospectus must include certain relevant information related to the fund’s investment objectives, policies and asset allocation, or risk management restrictions.
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Question 3 of 10
3. Question
In a security’s prospectus, which of the following(s) may not be included with the applicable fees?
I. Maximum sales charge loads
II. Management fees
III. Distribution and service fees
IV. Custodial feesCorrect
Fees may include maximum sales charge loads, management fees, distribution and service fees (12b-1), and other expenses that are part of the cost of operating the fund.
Incorrect
Fees may include maximum sales charge loads, management fees, distribution and service fees (12b-1), and other expenses that are part of the cost of operating the fund.
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Question 4 of 10
4. Question
In a security’s prospectus, which of the following(s) relevant information related to each share class’s must be included?
I. Breakpoints
II. Rights of accumulation
III. Combination of accounts
IV. Letters of intentCorrect
A security’s prospectus must include certain relevant information related to each share class’s breakpoints, rights of accumulation, combination of accounts, and letters of intent.
Incorrect
A security’s prospectus must include certain relevant information related to each share class’s breakpoints, rights of accumulation, combination of accounts, and letters of intent.
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Question 5 of 10
5. Question
In a security’s prospectus, which of the following(s) certain financial information must be included?
I. Net investment income
II. A reconciliation of net asset values
III. Risk management restrictions
IV. Portfolio turnover rateCorrect
Financial statement information
The prospectus must include certain financial information such as net investment income, a reconciliation of net asset values, and portfolio turnover rate.Incorrect
Financial statement information
The prospectus must include certain financial information such as net investment income, a reconciliation of net asset values, and portfolio turnover rate. -
Question 6 of 10
6. Question
“Correspondence” consists of any written letter or electronic mail message and any market letter distributed by a member to:
Correct
“Correspondence” consists of any written letter or electronic mail message and any market letter distributed by a member to: (A) one or more of its existing retail customers, and (B) fewer than 25 prospective retail customers within any 30 calendar-day period.
Incorrect
“Correspondence” consists of any written letter or electronic mail message and any market letter distributed by a member to: (A) one or more of its existing retail customers, and (B) fewer than 25 prospective retail customers within any 30 calendar-day period.
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Question 7 of 10
7. Question
Which of the following FINRA Rule does set forth guidance on telemarketing activities?
Correct
FINRA Rule 3230, which sets forth guidance on telemarketing activities.
Incorrect
FINRA Rule 3230, which sets forth guidance on telemarketing activities.
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Question 8 of 10
8. Question
FINRA Rule 3230, which sets forth guidance on telemarketing activities, states that no member or person associated with a member shall initiate any outbound telephone call to: Any person’s residence before 8 a.m. or after 9 p.m., unless:
I. The member has an established business relationship with the person.
II. The member has received that person’s prior express invitation or permission.
III. Any person that previously has stated that he or she does not wish to receive an outbound telephone call made by or on behalf of the member, or
IV. Any person who has registered his or her telephone number on the Federal Trade Commission’s national do-not-call registry.Correct
FINRA Rule 3230, which sets forth guidance on telemarketing activities, states that no member or person associated with a member shall initiate any outbound telephone call to: Any person’s residence before 8 a.m. or after 9 p.m., unless:
The member has an established business relationship with the person.
The member has received that person’s prior express invitation or permission.
Any person that previously has stated that he or she does not wish to receive an outbound telephone call made by or on behalf of the member, or
Any person who has registered his or her telephone number on the Federal Trade Commission’s national do-not-call registry.Incorrect
FINRA Rule 3230, which sets forth guidance on telemarketing activities, states that no member or person associated with a member shall initiate any outbound telephone call to: Any person’s residence before 8 a.m. or after 9 p.m., unless:
The member has an established business relationship with the person.
The member has received that person’s prior express invitation or permission.
Any person that previously has stated that he or she does not wish to receive an outbound telephone call made by or on behalf of the member, or
Any person who has registered his or her telephone number on the Federal Trade Commission’s national do-not-call registry. -
Question 9 of 10
9. Question
The types of communications covered under FINRA Rule 3230 include:
I. Outbound calls from a member or associated person of a member to a non- broker dealer, including to wireless telephone numbers.
II. Outbound calls that have been outsourced to a first party.
III. Abandoned calls, which are those not answered by someone at the member within two seconds of the person’s completed greeting.
IV. Prerecorded messages.Correct
The types of communications covered under FINRA Rule 3230 include:
i. Outbound calls from a member or associated person of a member to a non- broker dealer, including to wireless telephone numbers.
ii. Outbound calls that have been outsourced to a third party.
iii. Abandoned calls, which are those not answered by someone at the member within two seconds of the person’s completed greeting.
iv. Prerecorded messages.Incorrect
The types of communications covered under FINRA Rule 3230 include:
i. Outbound calls from a member or associated person of a member to a non- broker dealer, including to wireless telephone numbers.
ii. Outbound calls that have been outsourced to a third party.
iii. Abandoned calls, which are those not answered by someone at the member within two seconds of the person’s completed greeting.
iv. Prerecorded messages. -
Question 10 of 10
10. Question
How an institutional account is defined under FINRA Rule 4512?
Under FINRA Rule 4512, an institutional account is defined as the account of:
I. A bank, savings and loan association, insurance company, or registered investment company
II. An investment adviser registered either with the SEC under Section 203 of the Investment Advisers Act or with a state securities commission (or any agency or office performing like functions)
III. Any other person (whether a natural person, corporation, partnership, trust, or otherwise) with total assets of at least $10 million
IV. Any other person (whether a natural person, corporation, partnership, trust, or otherwise) with total assets of at least $50 millionCorrect
Under FINRA Rule 4512, an institutional account is defined as the account of:
1. A bank, savings and loan association, insurance company, or registered investment company
2. An investment adviser registered either with the SEC under Section 203 of the Investment Advisers Act or with a state securities commission (or any agency or office performing like functions)
3. Any other person (whether a natural person, corporation, partnership, trust, or otherwise) with total assets of at least $50 millionIncorrect
Under FINRA Rule 4512, an institutional account is defined as the account of:
1. A bank, savings and loan association, insurance company, or registered investment company
2. An investment adviser registered either with the SEC under Section 203 of the Investment Advisers Act or with a state securities commission (or any agency or office performing like functions)
3. Any other person (whether a natural person, corporation, partnership, trust, or otherwise) with total assets of at least $50 million