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Question 1 of 10
1. Question
What does a central file should include?
I. record of what action, if any, has been taken by the member with respect to the complaint
II. date complaint was received
III. location of the file where it is placed
IV. Identification of registered representative servicing the accountCorrect
Rule no 2360. Options
At a minimum, the central file shall include:
(i) identification of complainant;
(ii) date complaint was received;
(iii) identification of registered representative servicing the account;
(iv) a general description of the matter complained of; and
(v) a record of what action, if any, has been taken by the member with respect to the complaint.Incorrect
Rule no 2360. Options
At a minimum, the central file shall include:
(i) identification of complainant;
(ii) date complaint was received;
(iii) identification of registered representative servicing the account;
(iv) a general description of the matter complained of; and
(v) a record of what action, if any, has been taken by the member with respect to the complaint. -
Question 2 of 10
2. Question
What is assets based sales charged?
Correct
Rule no 2341. Investments Company Securities
An “asset-based sales charge” is a sales charge that is deducted from the net assets of an investment company and does not include a service feeIncorrect
Rule no 2341. Investments Company Securities
An “asset-based sales charge” is a sales charge that is deducted from the net assets of an investment company and does not include a service fee -
Question 3 of 10
3. Question
Which of the following statements is/are true regarding cash flows?
I. Company’s ability to create value for shareholders is determined by its ability to generate positive cash flows
II. Cash flow is the net amount of cash and cash-equivalents being transferred into and out of a business
III. Positive cash flow indicates that a company’s liquid assets are decreasing
IV. Assessing the amounts, timing and uncertainty of cash flows is one of the most basic objectives of financial reportingCorrect
Rule no 2130. Direct Participation Program
Cash flow — cash funds provided from operations, including lease payments on net leases from builders and sellers, without deduction for depreciation, but after deducting cash funds used to pay all other expenses, debt payments, capital improvements and replacements.Incorrect
Rule no 2130. Direct Participation Program
Cash flow — cash funds provided from operations, including lease payments on net leases from builders and sellers, without deduction for depreciation, but after deducting cash funds used to pay all other expenses, debt payments, capital improvements and replacements. -
Question 4 of 10
4. Question
Which of the following statement is/are true regarding breakpoint sales?
I. Beyond the mutual fund’s maximum breakpoint level, investors will no longer incur sales load charges
II.A breakpoint sale is the sale of a mutual fund at a set dollar amount that allows the fund holder to move into a lower sales charge bracket
III. Breakpoint sales provide fee discounts to investors based on investment breakpoint levels determined by the fund company
IV. Breakpoint discounts often begin at $45,000Correct
Rule no 2343. Breakpoint Sales
No member shall sell investment company shares in dollar amounts just below the point at which the sales charge is reduced on quantity transactions so as to share in the higher sales charges applicable on sales below the breakpoint.
(b) For purposes of determining whether a sale in dollar amounts just below a breakpoint was made in order to share in a higher sales charge, FINRA will consider the facts and circumstances, including, for example, whether a member has retained records that demonstrate that the trade was executed in accordance with a bona fide asset allocation program that the member offers to its customers:
(1) which is designed to meet their diversification needs and investment goals; and
(2) under which the member discloses to its customers that they may not qualify for breakpoint reductions that are otherwise available.Incorrect
Rule no 2343. Breakpoint Sales
No member shall sell investment company shares in dollar amounts just below the point at which the sales charge is reduced on quantity transactions so as to share in the higher sales charges applicable on sales below the breakpoint.
(b) For purposes of determining whether a sale in dollar amounts just below a breakpoint was made in order to share in a higher sales charge, FINRA will consider the facts and circumstances, including, for example, whether a member has retained records that demonstrate that the trade was executed in accordance with a bona fide asset allocation program that the member offers to its customers:
(1) which is designed to meet their diversification needs and investment goals; and
(2) under which the member discloses to its customers that they may not qualify for breakpoint reductions that are otherwise available. -
Question 5 of 10
5. Question
Executive officer of covered member means?
I. The president
II. Any member of educational institution
III. Any officer of covered member
IV. A vice presidentCorrect
Rule no 2030. Engaging in Distribution and Solicitation Activities with Government Entities
Executive officer of a covered member” means:
(A) The president;
(B) Any vice president in charge of a principal business unit, division or function (such as sales, administration or finance);
(C) Any other officer of the covered member who performs a policy-making function; or
(D) Any other person who performs similar policy-making functions for the covered member.Incorrect
Rule no 2030. Engaging in Distribution and Solicitation Activities with Government Entities
Executive officer of a covered member” means:
(A) The president;
(B) Any vice president in charge of a principal business unit, division or function (such as sales, administration or finance);
(C) Any other officer of the covered member who performs a policy-making function; or
(D) Any other person who performs similar policy-making functions for the covered member. -
Question 6 of 10
6. Question
Which of the following statement is/are true regarding Investment Adviser?
I. Investment advisers are financial professionals that make investment recommendations or conduct security analysis in exchange for a fee
II. Investment advisers often have discretionary authority over their clients’ assets and are required to uphold standards of fiduciary responsibilities
III. An investment adviser with sufficient assets to be registered with SIPC
IV. The precise definition of the term was established through the Investment Advisers Act of 1940.Correct
Rule no 2030. Engaging in Distribution and Solicitation Activities with Government Entities
Investment adviser” means any investment adviser registered (or required to be registered) with the Commission, or unregistered in reliance on the exemption available under Section 203(b)(3) of the Investment Advisers Act, or that is an exempt reporting adviser, as defined in Rule 204-4(a) of that ActIncorrect
Rule no 2030. Engaging in Distribution and Solicitation Activities with Government Entities
Investment adviser” means any investment adviser registered (or required to be registered) with the Commission, or unregistered in reliance on the exemption available under Section 203(b)(3) of the Investment Advisers Act, or that is an exempt reporting adviser, as defined in Rule 204-4(a) of that Act -
Question 7 of 10
7. Question
Which of the following statement is/are true regarding fidelity bond?
I. A fidelity bond is a form of business insurance that offers an employer protection against losses
II. Losses are caused by its employees’ fraudulent or dishonest actions
III. This form of insurance is considered a component of a company’s risk management strategy.
IV. Fidelity bonds are tradable securitiesCorrect
Rule no 4360. Fidelity Bonds
A fidelity bond is a form of business insurance that offers an employer protection against losses that are caused by its employees’ fraudulent or dishonest actions. This form of insurance can protect against monetary or physical losses. Fidelity bonds are often held by insurance companies and brokerage firms, which are specifically required to carry protection proportional to their net capital. Among the possible forms of loss a fidelity bond covers include fraudulent trading, theft and forgery. Although they are called “bonds,” fidelity bonds are actually a form of insurance policy. They are typically designated as either first-party or third-party; first-party fidelity bonds are policies protecting businesses from wrongful acts committed by employees, while third-party fidelity bonds protect companies from similar acts by individuals employed on a contract basis.Incorrect
Rule no 4360. Fidelity Bonds
A fidelity bond is a form of business insurance that offers an employer protection against losses that are caused by its employees’ fraudulent or dishonest actions. This form of insurance can protect against monetary or physical losses. Fidelity bonds are often held by insurance companies and brokerage firms, which are specifically required to carry protection proportional to their net capital. Among the possible forms of loss a fidelity bond covers include fraudulent trading, theft and forgery. Although they are called “bonds,” fidelity bonds are actually a form of insurance policy. They are typically designated as either first-party or third-party; first-party fidelity bonds are policies protecting businesses from wrongful acts committed by employees, while third-party fidelity bonds protect companies from similar acts by individuals employed on a contract basis. -
Question 8 of 10
8. Question
Which of the following statement is/are true regarding debt securities?
I. No interest rate is given on debt security
II. Debt security refers to a debt instrument, such as a government bond, corporate bond, certificate of deposit (CD), municipal bond or preferred stock
III. that can be bought or sold between two parties and has basic terms defined, such as notional amount (amount borrowed), interest rate, and maturity and renewal date
IV. most debt securities are traded over the counterCorrect
Rule no 2251. Processing and Forwarding of Proxy and Other Issuer-Related Materials
For a debt security other than a municipal security, the member, subject to paragraph (e) of this Rule and applicable SEC rules, shall make reasonable efforts to process and forward any communication, document, or collection of documents pertaining to the issue that:
(A) was prepared by or on behalf of, the issuer, or was prepared by or on behalf of, the trustee of the specific issue of the security; and
(B) contains material information about such issue including, but not limited to, notices concerning monetary or technical defaults, financial reports, information statements, and material event notices.Incorrect
Rule no 2251. Processing and Forwarding of Proxy and Other Issuer-Related Materials
For a debt security other than a municipal security, the member, subject to paragraph (e) of this Rule and applicable SEC rules, shall make reasonable efforts to process and forward any communication, document, or collection of documents pertaining to the issue that:
(A) was prepared by or on behalf of, the issuer, or was prepared by or on behalf of, the trustee of the specific issue of the security; and
(B) contains material information about such issue including, but not limited to, notices concerning monetary or technical defaults, financial reports, information statements, and material event notices. -
Question 9 of 10
9. Question
Which of the following statement is/are true regarding current market value?
I. the current market value (CMV) is the approximate current resale value for a financial instrument
II. the current market value is usually taken as the opening price for listed securities or the bid price offered for over-the-counter (OTC) securities
III. the current market value offers interested parties a price for which they can enter into a transaction
IV. Assets on markets that are liquid will have reliable and realistic current market valuesCorrect
Rule no 4210. Margin Requirements
The term “current market value” means the total cost or net proceeds of a security on the day it was purchased or sold or at any other time the preceding business day’s closing price as shown by any regularly published reporting or quotation service except for security futures contracts (see paragraph (f)(10)(C)(ii)). If there is no closing price, a member may use a reasonable estimate of the market value of the security as of the close of business on the preceding business day.Incorrect
Rule no 4210. Margin Requirements
The term “current market value” means the total cost or net proceeds of a security on the day it was purchased or sold or at any other time the preceding business day’s closing price as shown by any regularly published reporting or quotation service except for security futures contracts (see paragraph (f)(10)(C)(ii)). If there is no closing price, a member may use a reasonable estimate of the market value of the security as of the close of business on the preceding business day. -
Question 10 of 10
10. Question
Which of the following statement is/are true regarding mortgage related securities?
I. A mortgage-related security is an investment similar to a bond that is made up of a bundle of home loans bought from the banks that issued them
II. Mortgage related security is also called mortgage backed security
III. Investors in MBS receive periodic payments similar to bond coupon payments
IV. The MBS is a type of liability-backed securityCorrect
Rule no 4210. Margin Requirements
Essentially, the mortgage-backed security turns the bank into a middleman between the homebuyer and the investment industry. A bank can grant mortgages to its customers and then sell them on at a discount for inclusion in an MBS. The bank records the sale as a plus on its balance sheet and loses nothing if the homebuyer defaults sometime down the roadIncorrect
Rule no 4210. Margin Requirements
Essentially, the mortgage-backed security turns the bank into a middleman between the homebuyer and the investment industry. A bank can grant mortgages to its customers and then sell them on at a discount for inclusion in an MBS. The bank records the sale as a plus on its balance sheet and loses nothing if the homebuyer defaults sometime down the road