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Question 1 of 10
1. Question
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 is called-
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 2 of 10
2. Question
Which of the following is(are) the correct sub-classifications of management companies?
I. Open-end company
II. Closed-end company
III. Diversified company
IV. Non-diversified companyCorrect
Management companies: The Investment Company Act of 1940 provides for four subclassifications of management companies. Management companies can be subclassified as either open-end or closed-end companies and as either diversified or non-diversified companies.
Incorrect
Management companies: The Investment Company Act of 1940 provides for four subclassifications of management companies. Management companies can be subclassified as either open-end or closed-end companies and as either diversified or non-diversified companies.
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Question 3 of 10
3. Question
Which of the following statement(s) is(are) true about close-ended company?
I. A closed-end company is a management company that is offering for sale or has outstanding redeemable securities of which it is the issuer.
II. Securities of closed-end companies can only be purchased on the secondary market.
III. Securities of closed-end companies are not available directly from the issuing company.
IV. Any securities held by the closed-end company do not represent more than 10 percent of the outstanding voting securities of a given issuer.Correct
An open-end company is a management company that is offering for sale or has outstanding redeemable securities of which it is the issuer. All management companies not fitting this profile are classified as closed-end companies. Securities of closed-end companies can only be purchased on the secondary market and are not available directly from the issuing company.
Incorrect
An open-end company is a management company that is offering for sale or has outstanding redeemable securities of which it is the issuer. All management companies not fitting this profile are classified as closed-end companies. Securities of closed-end companies can only be purchased on the secondary market and are not available directly from the issuing company.
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Question 4 of 10
4. Question
When management companies are classified as diversified?
Management companies are classified as diversified when-
I. At least 75 percent of the company’s total assets are comprised of cash, government securities, and securities of other investment companies.
II. Securities from any one issuer do not represent more than 5 percent of the management company’s total assets.
III. Any company that is not engaged in the business of issuing redeemable securities.
IV. Any securities held by the management company do not represent more than 10 percent of the outstanding voting securities of a given issuer.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.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. -
Question 5 of 10
5. Question
According to the Investment Company Act of 1940, which of the following company (ies) is(are) exempt from registration?
I. 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.
II. Any company that has gone through a reorganization in the prior five years if the company was not an investment company at the onset of the reorganization,
III. 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.
IV. Any wholly owned subsidiary of a face-amount certificate company organized prior to 1970 and subject to the state insurance laws of the state in which it is organized.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 the reorganization, (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 the reorganization, (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 6 of 10
6. Question
Which of the following new factor(s) is(are) added to FINRA Rule 2111?
I. Investor’s age
II. Investor’s investment experience
III. Investor’s time horizon
IV. Investor’s marital statusCorrect
The new factors added to FINRA Rule 2111 include an investor’s age, investment experience, time horizon, liquidity needs, and risk tolerance.
Incorrect
The new factors added to FINRA Rule 2111 include an investor’s age, investment experience, time horizon, liquidity needs, and risk tolerance.
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Question 7 of 10
7. Question
Contemplated in FINRA Rule 2090-Know Your Customer, which of the following fact(s) is(are) essential concerning every customer?
I. Effectively service the customer’s account
II. Act in accordance with any special handling instructions for the account
III. Understand the authority of each person acting on behalf of the customer
IV. Comply with applicable laws, regulations, and rulesCorrect
The four “essential facts” contemplated in FINRA Rule 2090-Know Your Customer are those required to (i) effectively service the customer’s account, (ii) act in accordance with any special handling instructions for the account, (iii) understand the authority of each person acting on behalf of the customer, and (iv) comply with applicable laws, regulations, and rules.
Incorrect
The four “essential facts” contemplated in FINRA Rule 2090-Know Your Customer are those required to (i) effectively service the customer’s account, (ii) act in accordance with any special handling instructions for the account, (iii) understand the authority of each person acting on behalf of the customer, and (iv) comply with applicable laws, regulations, and rules.
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Question 8 of 10
8. Question
Which of the following statement(s) is(are) true about fixed annuity?
I. A fixed annuity provides for a guaranteed, level payment.
II. The fixed annuity will provide the investor with certain guarantees as to minimum rates and charges.
III. A fixed annuity is only guaranteed with respect to maximum charges.
IV. Without the investment performance guarantees, the fixed annuity is significantly riskier than a variable annuity and is better suited for an investor with a longer time horizon or flexible liquidity needs so as to manage peaks and troughs in performance.Correct
One of the primary differences between fixed and variable annuities, and the most notable to policy owners, is that a fixed annuity provides for a guaranteed, level payment, while a variable annuity’s payment will fluctuate based upon the performance of underlying subaccount investments. The fixed annuity will provide the investor with certain guarantees as to minimum rates and charges, so that an investor can plan a minimum benefit distribution. A variable annuity, however, is only guaranteed with respect to maximum charges. It does not, however, provide any type of guarantee of investment performance, since that is controlled by the investor and a function of the investment allocation he adopts. Without the investment performance guarantees, the variable annuity is significantly riskier than a fixed annuity and is better suited for an investor with a longer time horizon or flexible liquidity needs so as to manage peaks and troughs in performance.
Incorrect
One of the primary differences between fixed and variable annuities, and the most notable to policy owners, is that a fixed annuity provides for a guaranteed, level payment, while a variable annuity’s payment will fluctuate based upon the performance of underlying subaccount investments. The fixed annuity will provide the investor with certain guarantees as to minimum rates and charges, so that an investor can plan a minimum benefit distribution. A variable annuity, however, is only guaranteed with respect to maximum charges. It does not, however, provide any type of guarantee of investment performance, since that is controlled by the investor and a function of the investment allocation he adopts. Without the investment performance guarantees, the variable annuity is significantly riskier than a fixed annuity and is better suited for an investor with a longer time horizon or flexible liquidity needs so as to manage peaks and troughs in performance.
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Question 9 of 10
9. Question
Which of the following statement(s) is(are) true about Periodic payment annuities?
I. Periodic payment annuities are funded over a series of periodic payments and could only be utilized within a deferred annuity.
II. In a Periodic payment annuity the initial contribution is converted into accumulation units, which are not paid out until some specified period of time and continue to increase or decrease in value, depending upon investment performance.
III. Periodic payment annuities can be either immediate or deferred annuities.
IV. A Periodic payment annuity is one in which the initial contribution into the annuity is converted into annuitization units, which then increase or decrease in value depending upon the investment performance of underlying subaccount allocations and payments begin to occur immediately.Correct
Periodic payment annuities are funded over a series of periodic payments and could only be utilized within a deferred annuity.
Incorrect
Periodic payment annuities are funded over a series of periodic payments and could only be utilized within a deferred annuity.
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Question 10 of 10
10. Question
Which of the following is(are) not the key feature(s) of a variable annuity contract?
I. Tax-deferred accumulation
II. Ownership interests
III. Voting rights
IV. Distribution optionCorrect
The four key features of a variable annuity contract are tax-deferred accumulation, ownership interests, voting rights, and distribution options.
Incorrect
The four key features of a variable annuity contract are tax-deferred accumulation, ownership interests, voting rights, and distribution options.