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Question 1 of 10
1. Question
Which of the following statement is/are true regarding “material change in business operations”?
I. adding business activities with higher minimum capital requirement
II. removing or modifying a membership agreement restriction
III. adding credible information about business operations\
IV. market making, underwriting, or acting as a dealer for the first timeCorrect
Rule no 1011. Definitions
The term “material change in business operations” includes, but is not limited to:
(1) removing or modifying a membership agreement restriction;
(2) market making, underwriting, or acting as a dealer for the first time; and
(3) adding business activities that require a higher minimum net capital under SEA Rule 15c3-1Incorrect
Rule no 1011. Definitions
The term “material change in business operations” includes, but is not limited to:
(1) removing or modifying a membership agreement restriction;
(2) market making, underwriting, or acting as a dealer for the first time; and
(3) adding business activities that require a higher minimum net capital under SEA Rule 15c3-1 -
Question 2 of 10
2. Question
Which of the following statement is/are true about sales practice event?
I. any customer complaint reported to Central Registration Depository
II. any event related to sales reported to FINRA
III. arbitration reported to Central Registration Depository
IV. civil litigation reported to Central Registration DepositoryCorrect
Rule no 1011. Definitions
The term “sales practice event” means any customer complaint, arbitration, or civil litigation that has been reported to the Central Registration Depository, currently is required to be reported to the Central Registration Depository, or otherwise has been reported to FINRA.Incorrect
Rule no 1011. Definitions
The term “sales practice event” means any customer complaint, arbitration, or civil litigation that has been reported to the Central Registration Depository, currently is required to be reported to the Central Registration Depository, or otherwise has been reported to FINRA. -
Question 3 of 10
3. Question
Which of the following statement is/are true about Prohibition on Soliciting and Coordinating Contributions?
I. No member can make any contribution to an official of government entity
II. No member can make any payment to any political party
III. No member can make contribution to any locality of the government entity
IV. No member can make any payment to educational institutionsCorrect
Rule no 2030. Engaging in Distribution and Solicitation Activities with Government Entities
No covered member or covered associate may solicit or coordinate any person or political action committee to make any:
(1) Contribution to an official of a government entity in respect of which the covered member is engaging in, or seeking to engage in, distribution or solicitation activities on behalf of an investment adviser; or
(2) Payment to a political party of a state or locality of a government entity with which the covered member is engaging in, or seeking to engage in, distribution or solicitation activities on behalf of an investment adviser.Incorrect
Rule no 2030. Engaging in Distribution and Solicitation Activities with Government Entities
No covered member or covered associate may solicit or coordinate any person or political action committee to make any:
(1) Contribution to an official of a government entity in respect of which the covered member is engaging in, or seeking to engage in, distribution or solicitation activities on behalf of an investment adviser; or
(2) Payment to a political party of a state or locality of a government entity with which the covered member is engaging in, or seeking to engage in, distribution or solicitation activities on behalf of an investment adviser. -
Question 4 of 10
4. Question
Which of the following statement is/are true about covered associate?
I. any general partner, managing member, executive officer of the Firm
II. any political action committee (“PAC”) controlled by the adviser or by any of its covered associates
III. any member associated with non profit organizations
IV. Any associated person of a covered member who supervises, directly or indirectly, the government entity distribution or solicitation activities of a personCorrect
Rule no 2030. Engaging in Distribution and Solicitation Activities with Government Entities
“Covered associate” means:
(A) Any general partner, managing member or executive officer of a covered member, or other individual with a similar status or function;
(B) Any associated person of a covered member who engages in distribution or solicitation activities with a government entity for such covered member;
(C) Any associated person of a covered member who supervises, directly or indirectly, the government entity distribution or solicitation activities of a person in subparagraph (B) above; and
(D) Any political action committee controlled by a covered member or a covered associateIncorrect
Rule no 2030. Engaging in Distribution and Solicitation Activities with Government Entities
“Covered associate” means:
(A) Any general partner, managing member or executive officer of a covered member, or other individual with a similar status or function;
(B) Any associated person of a covered member who engages in distribution or solicitation activities with a government entity for such covered member;
(C) Any associated person of a covered member who supervises, directly or indirectly, the government entity distribution or solicitation activities of a person in subparagraph (B) above; and
(D) Any political action committee controlled by a covered member or a covered associate -
Question 5 of 10
5. Question
What does a customer investment profile include?
I. Financial situation
II. Investment experience
III. Business experience
IV. Investment objectives and risk toleranceCorrect
Rule no 2111. Suitability
A member or an associated person must have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through the reasonable diligence of the member or associated person to ascertain the customer’s investment profile. A customer’s investment profile includes, but is not limited to, the customer’s age, other investments, financial situation and needs, tax status, investment objectives, investment experience, investment time horizon, liquidity needs, risk tolerance, and any other information the customer may disclose to the member or associated person in connection with such recommendationIncorrect
Rule no 2111. Suitability
A member or an associated person must have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through the reasonable diligence of the member or associated person to ascertain the customer’s investment profile. A customer’s investment profile includes, but is not limited to, the customer’s age, other investments, financial situation and needs, tax status, investment objectives, investment experience, investment time horizon, liquidity needs, risk tolerance, and any other information the customer may disclose to the member or associated person in connection with such recommendation -
Question 6 of 10
6. Question
What factors should be considered while buying or selling securities?
I. Market conditions
II. Price of the security
III. Profit generating from the security
IV. Reasons behind previous market shiftsCorrect
Rule no 2121. Fair prices and Commissions
In securities transactions, whether in “listed” or “unlisted” securities, if a member buys for his own account from his customer, or sells for his own account to his customer, he shall buy or sell at a price which is fair, taking into consideration all relevant circumstances, including market conditions with respect to such security at the time of the transaction, the expense involved, and the fact that he is entitled to a profit; and if he acts as agent for his customer in any such transaction, he shall not charge his customer more than a fair commission or service charge, taking into consideration all relevant circumstances, including market conditions with respect to such security at the time of the transaction, the expense of executing the order and the value of any service he may have rendered by reason of his experience in and knowledge of such security and the market therefor.Incorrect
Rule no 2121. Fair prices and Commissions
In securities transactions, whether in “listed” or “unlisted” securities, if a member buys for his own account from his customer, or sells for his own account to his customer, he shall buy or sell at a price which is fair, taking into consideration all relevant circumstances, including market conditions with respect to such security at the time of the transaction, the expense involved, and the fact that he is entitled to a profit; and if he acts as agent for his customer in any such transaction, he shall not charge his customer more than a fair commission or service charge, taking into consideration all relevant circumstances, including market conditions with respect to such security at the time of the transaction, the expense of executing the order and the value of any service he may have rendered by reason of his experience in and knowledge of such security and the market therefor. -
Question 7 of 10
7. Question
Which of the following statement is/are true regarding five percent rule?
I. The five percent rule requires brokers to use fair and ethical practices when setting commission rates on over-the-counter transactions
II. The “5% Policy” is a RULE, not a guideline
III. Stipulates that a broker may charge the commission percentage by 5%
IV. This rule also applies to other transactions such as riskless transactionCorrect
Rule no 2121. Fair Prices and Commissions
Since the adoption of the “5% Policy” the Board has determined that:
(1) The “5% Policy” is a guide, not a rule.
(2) A member may not justify mark-ups on the basis of expenses which are excessive.
(3) The mark-up over the prevailing market price is the significant spread from the point of view of fairness of dealings with customers in principal transactions. In the absence of other bona fide evidence of the prevailing market, a member’s own contemporaneous cost is the best indication of the prevailing market price of a security.
(4) A mark-up pattern of 5% or even less may be considered unfair or unreasonable under the “5% Policy.”
(5) Determination of the fairness of mark-ups must be based on a consideration of all the relevant factors, of which the percentage of mark-up is only oneIncorrect
Rule no 2121. Fair Prices and Commissions
Since the adoption of the “5% Policy” the Board has determined that:
(1) The “5% Policy” is a guide, not a rule.
(2) A member may not justify mark-ups on the basis of expenses which are excessive.
(3) The mark-up over the prevailing market price is the significant spread from the point of view of fairness of dealings with customers in principal transactions. In the absence of other bona fide evidence of the prevailing market, a member’s own contemporaneous cost is the best indication of the prevailing market price of a security.
(4) A mark-up pattern of 5% or even less may be considered unfair or unreasonable under the “5% Policy.”
(5) Determination of the fairness of mark-ups must be based on a consideration of all the relevant factors, of which the percentage of mark-up is only one -
Question 8 of 10
8. Question
Which of the following statement is/are true regarding breakpoint sale?
I. Breakpoint sales do not provide fee discounts to investors based on investment breakpoint levels determined by the fund company
II. A breakpoint sale is the sale of a mutual fund at a set dollar amount
III. If an investor is unable to provide the funds needed to qualify for the lower fee, he can sign a letter of intent
IV. Fund companies are responsible for structuring sales loads and breakpoint schedulesCorrect
Rule no 2342. “Breakpoint” Sales
A breakpoint sale is the sale of a mutual fund at a set dollar amount that allows the fundholder to move into a lower sales charge bracket. If, at the time of investment, an investor is unable to provide the funds needed to qualify for the lower fee, he can sign a letter of intent promising to reach the total amount, or breakpoint, in a set time periodIncorrect
Rule no 2342. “Breakpoint” Sales
A breakpoint sale is the sale of a mutual fund at a set dollar amount that allows the fundholder to move into a lower sales charge bracket. If, at the time of investment, an investor is unable to provide the funds needed to qualify for the lower fee, he can sign a letter of intent promising to reach the total amount, or breakpoint, in a set time period -
Question 9 of 10
9. Question
What does the term aggregate exercise price?
Correct
Rule no 2360. Options
Aggregate Exercise Price — The term “aggregate exercise price” means the exercise price of an option contract multiplied by the number of units of the underlying security covered by such option contract.Incorrect
Rule no 2360. Options
Aggregate Exercise Price — The term “aggregate exercise price” means the exercise price of an option contract multiplied by the number of units of the underlying security covered by such option contract. -
Question 10 of 10
10. Question
Which of the following statement is/are true regarding delta neutral?
Correct
Rule no 2360. Options
Delta Neutral — The term “delta neutral” describes an equity options position that has been fully hedged, in accordance with a Permitted Pricing Model as defined in paragraph (b)(3)(A)(ii)b. with a portfolio of instruments including or relating to the same underlying security to offset the risk that the value of the equity options position will change with incremental changes in the price of the security underlying the options position.Incorrect
Rule no 2360. Options
Delta Neutral — The term “delta neutral” describes an equity options position that has been fully hedged, in accordance with a Permitted Pricing Model as defined in paragraph (b)(3)(A)(ii)b. with a portfolio of instruments including or relating to the same underlying security to offset the risk that the value of the equity options position will change with incremental changes in the price of the security underlying the options position.