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Question 1 of 10
1. Question
Which of the following statements is true regarding Private securities transactions of an associated person?
I. The NASD rule 3040 governs the private securities transactions of an associated person
II. An associated person must provide written notice
III. The notice details the proposed private securities transaction
IV. It’s following the participation in any private securities transaction
Correct
Private securities transactions of an associated person
According to NASD Rule 3040, which governs the private securities transactions of an associated person, an associated person must provide written notice detailing the proposed private securities transaction prior to participating in any private securities transaction.Incorrect
Private securities transactions of an associated person
According to NASD Rule 3040, which governs the private securities transactions of an associated person, an associated person must provide written notice detailing the proposed private securities transaction prior to participating in any private securities transaction. -
Question 2 of 10
2. Question
Which of the following statements is true regarding Private securities transactions of an associated person?
I. The notice must describe the associated person’s role in the transaction but keep it secret whether or not any selling compensation may be received as a result of the proposed transaction
II. If the transactions may result in selling compensation, the member firm must either approve or disapprove the person’s participation
III. When the member firm approves the person’s participation the transaction will be recorded on the books of the member firm
IV. If the member disapproves the transaction, the person may not participate in the transaction
Correct
Private securities transactions of an associated person
The written notice must describe the associated person’s role in the transaction and disclose whether or not any selling compensation may be received as a result of the proposed transaction. If the transactions may result in selling compensation, the member firm must either approve or disapprove the person’s participation and, if approved, the transaction will be recorded on the books of the member firm and the member shall supervise the person’s activities as if the transaction were executed on behalf of the member.
If the member disapproves the transaction, then the person may not participate, directly or indirectly, in the transaction.Incorrect
Private securities transactions of an associated person
The written notice must describe the associated person’s role in the transaction and disclose whether or not any selling compensation may be received as a result of the proposed transaction. If the transactions may result in selling compensation, the member firm must either approve or disapprove the person’s participation and, if approved, the transaction will be recorded on the books of the member firm and the member shall supervise the person’s activities as if the transaction were executed on behalf of the member.
If the member disapproves the transaction, then the person may not participate, directly or indirectly, in the transaction. -
Question 3 of 10
3. Question
Which of the following statements is true regarding Rule 156 of the Securities Act of 1933?
I. There are 2 requirements related to material facts
II. The first one is that investment company sales literature may contain an untrue statement of material fact
III. Investment company sales literature may omit to state a material fact that is necessary in order to make a statement made not misleading
IV. Investment company sales literature may not omit to state a material fact that is necessary in order to make a statement made not misleadingCorrect
Pursuant to Rule 156 of the Securities Act of 1933, there are 2 requirements related to material facts. The first requirement is that investment company sales literature may not contain an untrue statement of material fact. Additionally, investment company sales literature may not omit to state a material fact that is necessary in order to make a statement made not misleading.
Incorrect
Pursuant to Rule 156 of the Securities Act of 1933, there are 2 requirements related to material facts. The first requirement is that investment company sales literature may not contain an untrue statement of material fact. Additionally, investment company sales literature may not omit to state a material fact that is necessary in order to make a statement made not misleading.
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Question 4 of 10
4. Question
Which of the following statements is true regarding Omission of a material fact?
I. It could be in the presentation of performance information
II. An investment company’s past returns could have been primarily driven by one investment in a small-cap company
III. The fund may not have significantly underperformed its peers
IV. This needs to be communicated to potential investors to provide accurate informationCorrect
Omission of a material fact
One example of an omission of a material fact could be in the presentation of performance information. For instance, an investment company’s past returns could have been primarily driven by one investment in a small-cap company that significantly outperformed the rest of the market. Without that security, the fund may have significantly underperformed its peers and this needs to be communicated to potential investors to provide accurate information from which to make an informed decision.Incorrect
Omission of a material fact
One example of an omission of a material fact could be in the presentation of performance information. For instance, an investment company’s past returns could have been primarily driven by one investment in a small-cap company that significantly outperformed the rest of the market. Without that security, the fund may have significantly underperformed its peers and this needs to be communicated to potential investors to provide accurate information from which to make an informed decision. -
Question 5 of 10
5. Question
Which of the following statements is true regarding Omission of a material fact instance?
I. An investment company recently had significant turnover among senior executives and long-tenured portfolio manager
II. Without this information, an investor may believe that the same managers would be the same individuals managing the company moving forward
III. With this information, an investor may believe that the same managers would be the same individuals managing the company moving forward
IV. Potential investors mustn’t be made aware of thisCorrect
Omission of a material fact
Another omission of a material fact would be an instance in which an investment company recently had significant turnover among senior executives and long-tenured portfolio managers. Without this information, an investor may believe that the same managers who had achieved the past performance of the company would be the same individuals managing the company moving forward. However, this is not the case and potential investors must be made aware of this.Incorrect
Omission of a material fact
Another omission of a material fact would be an instance in which an investment company recently had significant turnover among senior executives and long-tenured portfolio managers. Without this information, an investor may believe that the same managers who had achieved the past performance of the company would be the same individuals managing the company moving forward. However, this is not the case and potential investors must be made aware of this. -
Question 6 of 10
6. Question
Which of the following statements is true regarding Untrue statement of material fact instance?
I. It would be the case of a company who conceals past performance based on back-testing of their current portfolio holdings
II. It would be the case of a company who hides past performance based on back-testing of their current portfolio holdings
III. It would be the case of a company who discloses past performance based on back-testing of their current portfolio holdings
IV. It would be the case of a company who discloses future performance based on back-testing of their current portfolio holdingsCorrect
Untrue statement of material fact
One example of an untrue statement of material fact would be the case of a company who discloses past performance based on back-testing of their current portfolio holdings.Incorrect
Untrue statement of material fact
One example of an untrue statement of material fact would be the case of a company who discloses past performance based on back-testing of their current portfolio holdings. -
Question 7 of 10
7. Question
Which of the following statements is true regarding Untrue statement of material fact instance?
I. It can be in the case of the qualifications of portfolio managers and company management
II. Suppose an investment company has stated in its sales literature that all of its portfolio managers have earned the CFA charter
III. Here several of the managers have passed the exams but have not yet been granted the charter
IV. It would lead potential investors to believe that the portfolio managers are more qualifiedCorrect
Untrue statement of material fact
Another example is in the case of the qualifications of portfolio managers and company management. Assume that an investment company has stated in its sales literature that all of its portfolio managers have earned the CFA charter. In fact, several of the managers have passed the exams but have not yet been granted the charter. This would lead potential investors to believe that the portfolio managers are more qualified than they actually might be.Incorrect
Untrue statement of material fact
Another example is in the case of the qualifications of portfolio managers and company management. Assume that an investment company has stated in its sales literature that all of its portfolio managers have earned the CFA charter. In fact, several of the managers have passed the exams but have not yet been granted the charter. This would lead potential investors to believe that the portfolio managers are more qualified than they actually might be. -
Question 8 of 10
8. Question
Which of the following statements is true regarding Investment Company Act of 1940? Registered investment companies must periodically provide
I. information, documents, and reports
II. copies of every periodic or interim report
III. reports to the company’s employees
IV. a balance sheet, an income sheet, a surplus statementCorrect
As outlined in Section 30 of the Investment Company Act of 1940, registered investment companies must periodically provide the following:
i. such information, documents, and reports as the Commission may require to keep reasonably current the information and documents in the registration
statement of such company
ii. copies of every periodic or interim report or similar communication containing financial statements and transmitted to any class of such company’s security holders within 10 days of such transmission
iii. reports to the company’s shareholders at least semiannually containing a balance sheet, amounts and values of securities owned, an income statement,
a surplus statement, a report of all remuneration paid to directors and officers, and a statement of the aggregate purchases and sales of investment
securities made during the reporting period.Incorrect
As outlined in Section 30 of the Investment Company Act of 1940, registered investment companies must periodically provide the following:
i. such information, documents, and reports as the Commission may require to keep reasonably current the information and documents in the registration
statement of such company
ii. copies of every periodic or interim report or similar communication containing financial statements and transmitted to any class of such company’s security holders within 10 days of such transmission
iii. reports to the company’s shareholders at least semiannually containing a balance sheet, amounts and values of securities owned, an income statement,
a surplus statement, a report of all remuneration paid to directors and officers, and a statement of the aggregate purchases and sales of investment
securities made during the reporting period. -
Question 9 of 10
9. Question
Which of the following statements is true regarding Section 35 of the Investment Company Act of 1940?
I. It shall be legal for any person, issuing or selling any security of which a registered investment company is the issuer
II. Such security or company has been guaranteed, sponsored, recommended, or approved by the United States, or any agency, instrumentality, or officer of the United States
III. Such security or company has been insured by the Federal Deposit Insurance Corporation
IV. Such security or company is guaranteed by or is otherwise an obligation of the governmentCorrect
Section 35 of the Investment Company Act of 1940 states the following: It shall be unlawful for any person, issuing or selling any security of which a registered investment company is the issuer, to represent or imply in any manner whatsoever that such security or company (A) has been guaranteed, sponsored, recommended, or approved by the United States, or any agency, instrumentality, or officer of the United States, (B) has been insured by the Federal Deposit Insurance Corporation, or (C) is guaranteed by or is otherwise an obligation of any bank or insured depository institution.
Incorrect
Section 35 of the Investment Company Act of 1940 states the following: It shall be unlawful for any person, issuing or selling any security of which a registered investment company is the issuer, to represent or imply in any manner whatsoever that such security or company (A) has been guaranteed, sponsored, recommended, or approved by the United States, or any agency, instrumentality, or officer of the United States, (B) has been insured by the Federal Deposit Insurance Corporation, or (C) is guaranteed by or is otherwise an obligation of any bank or insured depository institution.
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Question 10 of 10
10. Question
Which of the following statements is false regarding Rule 17(f)(2) of the Securities Exchange Act of 1934?
I. All partners, directors are required to be fingerprinted
II. Employees of every member of a national securities exchange are required to be fingerprinted
III. The fingerprints are submitted to the United Kingdom Attorney General to be processed and maintained on file
IV. The fingerprints are submitted to the United States Attorney General to be processed and maintained on fileCorrect
Under Rule 17(f)(2) of the Securities Exchange Act of 1934, all partners, directors, officers, and employees of every member of a national securities
exchange, broker, dealer, registered transfer agent, and registered clearing agency are required to be fingerprinted. The fingerprints are submitted to the United States Attorney General to be processed and maintained on file.Incorrect
Under Rule 17(f)(2) of the Securities Exchange Act of 1934, all partners, directors, officers, and employees of every member of a national securities
exchange, broker, dealer, registered transfer agent, and registered clearing agency are required to be fingerprinted. The fingerprints are submitted to the United States Attorney General to be processed and maintained on file.