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| Section | Weight | Objectives |
|---|---|---|
| Topic 1: Seeks Business for the Broker-dealer from Customers and Potential Customers | 24% | - Telemarketing and solicitation rules - Prospecting and identifying customer needs - Advertising and sales literature regulations - Communications with the public and regulatory rules |
| Topic 2: Obtains and Verifies Customers’ Purchase and Sales Instructions; Processes, Completes and Confirms Transactions | 10% | - Error resolution and correction procedures - Order entry and processing procedures - Trade confirmations and account statements - Payment and settlement processes |
| Topic 3: Provides Customers with Information About Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records | 50% | - Investment company products: mutual funds, UITs, closed-end funds - Variable contracts: variable annuities, variable life insurance - Suitability rules and recommendations - Recordkeeping and disclosure requirements - Retirement plans and 529 savings plans - Product features, risks, costs, and tax considerations |
| Topic 4: Opens Accounts After Obtaining and Evaluating Customers’ Financial Profile and Investment Objectives | 16% | - Customer identification and verification - Anti-money laundering (AML) and compliance - Financial profile and investment objectives assessment - Account types and registration |
1. The MaxCharge fund has a 5% front-end load and a 12b-1 fee that is 0.25% of its average net assets.
Under these conditions, any rear-end load it may have is limited to:
A) 4.25%.
B) 2.00%.
C) 4.75%.
D) 3.25%.
2. 1 2b-1 fees refer to:
A) fees that some mutual funds charge to pay for certain of its marketing expenses.
B) the front-end or back-end load that a mutual fund charges.
C) fees that mutual funds pay the broker-dealers that execute their trades.
D) the management fees of a mutual fund.
3. Which of the following securities is not exempt from registration requirements?
A) a bond issued by the U.S. post office
B) a new issue of stock issued by a corporation that already has shares of its stock trading on the NYSE
C) private-placement variable universal life insurance
D) a revenue bond issued by the state of Florida to raise money to build an airport
4. MoeMoney Investments is a diversified management company. This means that:
A) it is a closed-end company.
B) it is a mutual fund.
C) it may invest no more than 5% of its investment monies in one issuer.
D) it must be invested in a variety of industries and geographic regions.
5. Mary is interested in buying shares of the Lambchops Corporation, which sells over-the-counter. The
market maker with the best bid price--$3.15--is Veggie Investments. The market maker with the best ask
price--$3.27-is Carnivor Investments. Mary conducts trades in NYSE-listed stocks through her broker,
Omnivor and Associates. Given this scenario, which of the following statements is true?
A) Mary can buy shares of Lambchops Corporation at the bid price of $3.15 by contacting Omnivor and
Associates.
B) Mary can buy shares of Lambchops Corporation at the bid price of $3.15 by contacting Veggie
Investments directly.
C) Mary can buy shares of Lambchops Corporation at the ask price of $3.27 by contacting Carnivor
Investments directly.
D) Mary can buy shares of Lambchops Corporation at the ask price of $3.27 by contacting Omnivor and
Associates.
Solutions:
| Question # 1 Answer: D | Question # 2 Answer: A | Question # 3 Answer: B | Question # 4 Answer: C | Question # 5 Answer: D |
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