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Question 1 of 10
1. Question
A customer investment profile must include?
I. Liquidity needs
II. Risk tolerance
III. Customer’s marital status
IV. Investment objectivesCorrect
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 2 of 10
2. Question
For not foreign private issuers, current financial statements shall include?
I. a balance sheet as of a date less than 10 months before the date of the recommendation
II. all publicly available financial information filed with the SEC during the 12 months preceding the date of the recommendation contained in registration statements
III. a statement of profit and loss for the 12 months preceding the date of the balance sheet
IV. publicly available financial statements and other financial reports filed during the 12 monthsCorrect
Rule no 2114. Recommendations to Customers
For issuers that are not foreign private issuers,
(i) a balance sheet as of a date less than 15 months before the date of the recommendation;
(ii) a statement of profit and loss for the 12 months preceding the date of the balance sheet;
(iii) if the balance sheet is not as of a date less than 6 months before the date of the recommendation, additional statements of profit and loss for the period from the date of the balance sheet to a date less than 6 months before the date of the recommendation;
(iv) publicly available financial statements and other financial reports filed during the 12 months preceding the date of the recommendation and up to the date of the recommendation with the issuer’s principal financial or securities regulatory authority in its home jurisdiction, including the SEC, foreign regulatory authorities, and bank and insurance regulators; and
(v) all publicly available financial information filed with the SEC during the 12 months preceding the date of the recommendation contained in registration statements or SEC Regulation A filings.Incorrect
Rule no 2114. Recommendations to Customers
For issuers that are not foreign private issuers,
(i) a balance sheet as of a date less than 15 months before the date of the recommendation;
(ii) a statement of profit and loss for the 12 months preceding the date of the balance sheet;
(iii) if the balance sheet is not as of a date less than 6 months before the date of the recommendation, additional statements of profit and loss for the period from the date of the balance sheet to a date less than 6 months before the date of the recommendation;
(iv) publicly available financial statements and other financial reports filed during the 12 months preceding the date of the recommendation and up to the date of the recommendation with the issuer’s principal financial or securities regulatory authority in its home jurisdiction, including the SEC, foreign regulatory authorities, and bank and insurance regulators; and
(v) all publicly available financial information filed with the SEC during the 12 months preceding the date of the recommendation contained in registration statements or SEC Regulation A filings. -
Question 3 of 10
3. Question
Which of the following statement is/are true regarding breakpoint sales?
I. Breakpoint sales provide fee discounts to investors based on investment breakpoint levels
II. Breakpoint discounts often begin at $25,000, with discounts increasing incrementally to a maximum level
III. Beyond the mutual fund’s maximum breakpoint level, investors can incur sales load charges
IV. 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 bracketCorrect
Rule no 2342. 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 2342. 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 4 of 10
4. Question
Which of the following statement is/are true regarding “call”?
I. A call buyer profits when the underlying liability increases in price
II. Call options are financial contracts that give the option buyer the right, but not the obligation, to buy a stock, bond, commodity
III. Call options may be purchased for speculation or sold for income purposes
IV. They may also be combined for use in spread or combination strategiesCorrect
Rule no 2360. Options
Call — The term “call” means an option contract under which the holder of the option has the right, in accordance with the terms of the option, to purchase the number of units of the underlying security or to receive a dollar equivalent of the underlying index covered by the option contract. In the case of a “call” issued by The Options Clearing Corporation on common stock, it shall mean an option contract under which the holder of the option has the right, in accordance with the terms of the option, to purchase from The Options Clearing Corporation the number of units of the underlying security or receive a dollar equivalent of the underlying index covered by the option contract.Incorrect
Rule no 2360. Options
Call — The term “call” means an option contract under which the holder of the option has the right, in accordance with the terms of the option, to purchase the number of units of the underlying security or to receive a dollar equivalent of the underlying index covered by the option contract. In the case of a “call” issued by The Options Clearing Corporation on common stock, it shall mean an option contract under which the holder of the option has the right, in accordance with the terms of the option, to purchase from The Options Clearing Corporation the number of units of the underlying security or receive a dollar equivalent of the underlying index covered by the option contract. -
Question 5 of 10
5. Question
Under what circumstances the term “control” will be presumed?
I. among all general partners to a partnership account
II. when accounts have common directors or management
III. shares in 5 percent or more of profits and/or losses of an account
IV. where a person or entity has the authority to execute transactions in an accountCorrect
Rule no 2360. Options
The term “control” means the power or ability of an individual or entity to make investment decisions for an account or accounts, or influence directly or indirectly the investment decisions of any person or entity who makes investment decisions for an account. In addition, control will be presumed in the following circumstances:
(i) among all parties to a joint account who have authority to act on behalf of the account;
(ii) among all general partners to a partnership account;
(iii) when a person or entity:
a. holds an ownership interest of 10 percent or more in an entity (ownership interest of less than 10 percent will not preclude aggregation), or
b. shares in 10 percent or more of profits and/or losses of an account;
(iv) when accounts have common directors or management;
(v) where a person or entity has the authority to execute transactions in an account.Incorrect
Rule no 2360. Options
The term “control” means the power or ability of an individual or entity to make investment decisions for an account or accounts, or influence directly or indirectly the investment decisions of any person or entity who makes investment decisions for an account. In addition, control will be presumed in the following circumstances:
(i) among all parties to a joint account who have authority to act on behalf of the account;
(ii) among all general partners to a partnership account;
(iii) when a person or entity:
a. holds an ownership interest of 10 percent or more in an entity (ownership interest of less than 10 percent will not preclude aggregation), or
b. shares in 10 percent or more of profits and/or losses of an account;
(iv) when accounts have common directors or management;
(v) where a person or entity has the authority to execute transactions in an account. -
Question 6 of 10
6. Question
Which of the following factors will FINRA consider in determining if the aggregation of accounts is required?
I. the degree of contact and communication between directors and/or managers of separate accounts
II. same patterns of trading activity among separate entities
III. the sharing of kindred business purposes and interests
IV. the degree of mental stability of managers of accountsCorrect
Rule no 2360. Options
FINRA will also consider the following factors in determining if the aggregation of accounts is required:
(i) similar patterns of trading activity among separate entities;
(ii) the sharing of kindred business purposes and interests;
(iii) whether there is common supervision of the entities which extends beyond assuring adherence to each entity’s investment objectives and/or restrictions;
(iv) the degree of contact and communication between directors and/or managers of separate accounts.Incorrect
Rule no 2360. Options
FINRA will also consider the following factors in determining if the aggregation of accounts is required:
(i) similar patterns of trading activity among separate entities;
(ii) the sharing of kindred business purposes and interests;
(iii) whether there is common supervision of the entities which extends beyond assuring adherence to each entity’s investment objectives and/or restrictions;
(iv) the degree of contact and communication between directors and/or managers of separate accounts. -
Question 7 of 10
7. Question
Which of the following statement is/are true regarding the disclosure document?
I. they shall contain general explanatory information relating to the mechanics of buying, writing and exercising options
II. the disclosure document shall mean those documents filed with SIPC
III. shall include tax consequences of trading options
IV. shall contain the risks involved, the uses of and market for the optionsCorrect
Rule no 2360. Options
Disclosure Document(s) — The term “disclosure document” or “disclosure documents” shall mean those documents filed with the SEC, prepared by one or more options markets and meeting the requirements of SEA Rule 9b-1. They shall contain general explanatory information relating to the mechanics of buying, writing and exercising options; the risks involved, the uses of and market for the options; transaction costs and applicable margin requirements; tax consequences of trading options; identification of the options issuer and the instrument underlying the options class; and the availability of the prospectus and the information in Part II of the registration statement.Incorrect
Rule no 2360. Options
Disclosure Document(s) — The term “disclosure document” or “disclosure documents” shall mean those documents filed with the SEC, prepared by one or more options markets and meeting the requirements of SEA Rule 9b-1. They shall contain general explanatory information relating to the mechanics of buying, writing and exercising options; the risks involved, the uses of and market for the options; transaction costs and applicable margin requirements; tax consequences of trading options; identification of the options issuer and the instrument underlying the options class; and the availability of the prospectus and the information in Part II of the registration statement. -
Question 8 of 10
8. Question
For foreign private issuers, current financial statements include?
I. publicly available financial statements and other financial reports filed during the 12 months preceding the date of the recommendation
II. a statement of profit and loss for the 6 months preceding the date of the balance sheet
III. a balance sheet as of a date less than 18 months before the date of the recommendation
IV. if the balance sheet is not as of a date less than 9 months before the date of the recommendation, add a date less than 9 months before the date of the recommendationCorrect
Rule no 2114. Recommendations to Customers in OTC Equity Securities
For foreign private issuers,
(i) a balance sheet as of a date less than 18 months before the date of the recommendation;
(ii) a statement of profit and loss for the 12 months preceding the date of the balance sheet;
(iii) if the balance sheet is not as of a date less than 9 months before the date of the recommendation, additional statements of profit and loss for the period from the date of the balance sheet to a date less than 9 months before the date of the recommendation, if the issuer has prepared any such statements; and
(iv) publicly available financial statements and other financial reports filed during the 12 months preceding the date of the recommendation and up to the date of the recommendation with the issuer’s principal financial or securities regulatory authority in its home jurisdiction, including the SEC, foreign regulatory authorities, and bank and insurance regulators.Incorrect
Rule no 2114. Recommendations to Customers in OTC Equity Securities
For foreign private issuers,
(i) a balance sheet as of a date less than 18 months before the date of the recommendation;
(ii) a statement of profit and loss for the 12 months preceding the date of the balance sheet;
(iii) if the balance sheet is not as of a date less than 9 months before the date of the recommendation, additional statements of profit and loss for the period from the date of the balance sheet to a date less than 9 months before the date of the recommendation, if the issuer has prepared any such statements; and
(iv) publicly available financial statements and other financial reports filed during the 12 months preceding the date of the recommendation and up to the date of the recommendation with the issuer’s principal financial or securities regulatory authority in its home jurisdiction, including the SEC, foreign regulatory authorities, and bank and insurance regulators. -
Question 9 of 10
9. Question
The term “Specified Adult” shall mean?
I. a person who is 65 and above
II. a normal person who is 18 and above
III. a person who is 18 and above and is physically impaired
IV. a person who is 18 and above and is unable to protect his/her own interestsCorrect
Rule no 2165. Financial Exploitation of Specified Adults
For purposes of this Rule, the term “Specified Adult” shall mean: (A) a natural person age 65 and older; or (B) a natural person age 18 and older who the member reasonably believes has a mental or physical impairment that renders the individual unable to protect his or her own interests.Incorrect
Rule no 2165. Financial Exploitation of Specified Adults
For purposes of this Rule, the term “Specified Adult” shall mean: (A) a natural person age 65 and older; or (B) a natural person age 18 and older who the member reasonably believes has a mental or physical impairment that renders the individual unable to protect his or her own interests. -
Question 10 of 10
10. Question
Which of the following statement is/are true regarding discretionary accounts?
I. The client must sign a discretionary disclosure with the broker as documentation of the client’s consent
II. A discretionary account is an investment account that allows an authorized broker to buy and sell securities with the client’s consent for each trade
III. Advantages of discretionary accounts include quick execution of trades and expert services
IV. Disadvantages of discretionary accounts include higher fees and the possibility of negative performanceCorrect
Rule no 2354. Discretionary Accounts
Insofar as a member or person associated with a member exercises discretion to trade in index warrants, currency index warrants, or currency warrants in a customer’s account, such account shall be subject to the provisions of Rule 2360(b)(18). The term “option” as used there in shall be deemed to include such warrants for purposes of this Rule.Incorrect
Rule no 2354. Discretionary Accounts
Insofar as a member or person associated with a member exercises discretion to trade in index warrants, currency index warrants, or currency warrants in a customer’s account, such account shall be subject to the provisions of Rule 2360(b)(18). The term “option” as used there in shall be deemed to include such warrants for purposes of this Rule.