Finra Series-6 Quiz 1 Topic 8 Questions 1-5

Question: 1

Which of the following does not fall under the category of ''sales literature,'' as defined by FINRA?

Aa research report mailed only to a fund's existing clients

Ban announcement containing some biological information on a registered representative who has just joined the firm

CPowerPoint slides that have been prepared to use in a seminar

DReprints of an article that appeared in a financial publication about a specific mutual fund

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Question: 2

Mr. Cross wanders into your office with a $35,000 check that he has received from his recently-deceased wife's insurance company and wants you to advise him how to invest it, since that is your job, as he puts it.

You ask him to fill out a standard investor profile questionnaire, but he refuses to do so. You offer to fill it out for him, based on his answers to your verbal questions, but he still refuses and calls you a ''nibby-nose.'' Based on this, you can:

Aallocate the $35,000 any way you choose since you have an uncooperative client.

Badvise him to invest the money in a money market mutual fund instead of holding it as cash.

Cadvise him to invest the money in an S&P 500 Index fund.

DThe advice provided in either Choice B or Choice C would be appropriate.

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Question: 3

Mr. Schaker hasn't been seeing a lot of clients these days with the recent market downturn-which means he hasn't been generating any commissions, and commissions are his bread and butter. So, Mr. Schaker does some Googling on his computer and notes that a prominent family of load funds has just introduced a new global fund. Scribbling the name and contact information of the fund family on his notepad, he begins calling his existing clients and promoting the new fund, encouraging his clients to redeem some shares in their existing funds to invest in this fund.

Has Mr. Schaker violated any securities laws?

ANo. In FINRA's rules regarding fair dealing with customers, the SRO clearly states that ''This does not mean that legitimate sales efforts in the securities business are to be discouraged. . . ''

BYes. Mr. Schaker is recommending the fund to his existing clients to benefit himself, not them.

CNo. Research indicates that new funds tend to offer abnormally high returns for the first 12 months of their existence, so Mr. Schaker is doing his clients a favor even if he himself stands to profit.

DD. Yes. A registered representative should always refrain from recommending shares of a load fund; trades involving load funds should always be ''unsolicited.''

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Question: 4

The difference between a ''redemption fee'' and a ''rear-end load'' is that:

Athe redemption fee is another name for a 12b-1 fee, which is an annual expense associated with the fund.

Ba rear-end load is used to compensate a salesperson who has sold shares of the fund; a redemption fee is charged to offset the expenses a fund incurs in processing share redemptions.

Cthe redemption fee refers to charges incurred by the fund when it sells securities it owns; the rear-end load is a fee that is incurred by investors in the fund when they redeem their shares of the fund.

DThere is no difference. These are synonymous terms.

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Question: 5

Which of the following statements regarding the ''rights of accumulation'' is true?

AAll mutual funds that have front-end loads are required to allow their shareholders rights of accumulation.

BReinvested dividends and capital gain distributions count toward reaching a breakpoint under the rights of accumulation.

CA breakpoint must be reached within a 13-month period, at which point the accumulation period begins anew.

DA letter of intent must be signed to activate the rights of accumulation.

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Finra Series-6 Quiz:1 Topic:8 Questions:1-5