STC Series 66 Greenlight exams
Securities that are registered through qualification may only be sold: - ANS-Once the
registration is declared effective by the Administrator
Securities that are registered through qualification may be sold once the registration is
declared effective by the Administrator. Note that in choice (c), the use of the term
approved is inappropriate. Securities that are deemed effective for sale by an
Administrator may not be described as having been approved by the Administrator.
The difference between a corporation's current assets and its current liabilities is the: -
ANS-Working capital
The amount by which a corporation's current assets exceed its current liabilities is
referred to as working capital.
Assuming an expected rate of return, a specific holding period, and a sum to be
invested, an IAR is able to determine an investment's: - ANS-Future value
The future value of an investment is based on the present value of the amount invested,
using a discount rate each year, and doing so over a given period of time. The
assumption is that the annual return is reinvested at the same rate, or is compounded
over the given time period, thereby resulting in a future value that exceeds the present
value.
Which of the following types of risk is MOST associated with the purchase of a five-year
T-bond? - ANS-Interest-rate
Interest-rate risk, which is also referred to as money-rate risk, is essentially the risk that
if interest rates rise, the prices of the debt securities will fall. If an investor needs to
liquidate her debt investment prior to maturity, rising interest rates reduce the value she
would receive if she sold the security in the secondary market. Market risk is primarily
associated with common stock. Since the secondary market for Treasuries is very
active, liquidity risk is not a factor. Although legislative risk (changes in the law) could
create diminished value for the instruments, it is not likely to occur.
Disadvantages of investing in a C Corporation include which of the following choices?
Shareholders are taxed on dividends that they receive.
The corporation is taxed on its income.
Shareholders may not deduct their share of the corporation's losses on their personal
tax returns.
Shareholders are paid last if the corporation liquidates. - ANS-I, II, III, and IV
,All of the choices are disadvantages of investing in a C Corporation
All the following are characteristics of passive asset allocation strategies, EXCEPT: -
ANS-Altering a portfolio in anticipation of an economic event
A passive asset allocation strategy (e.g., buy and hold) is characterized by low
transaction costs and minimal tax consequences. Systematic rebalancing, another
passive strategy, alters the portfolio on a monthly, quarterly, or annual basis to restore
an original strategic asset allocation if market movements have changed it. On the other
hand, active (tactical) asset allocation strategies effect changes to a portfolio's allocation
in anticipation of economic events.
A person has established an IA as a sole proprietorship and works as an IAR out of his
home office. To help promote and manage the IA, he has set up a website which
contains personal information about his clients. A few weeks after setting up the
website, the IAR discovers that the website has been hacked and his customers'
account information has been stolen. What is the primary regulatory concern? -
ANS-The IA did not prepare proper cybersecurity policies, procedures, and measures
before launching the website.
Both the SEC and state Administrators require IAs to establish cybersecurity policies in
order to protect their clients. Since the website was hacked, the regulator's primary
concern is the extent of the IA's cybersecurity measures. The regulations don't require
websites to be password protected, despite the fact that many IAs may find them
necessary to protect client information. Also, there's no requirement for an IA to be
federally covered before creating a website. Although websites are considered
advertisements and regulators must be notified, it's unlikely that this is the primary
regulatory concern.
A Nasdaq listed company is offering 1,000,000 shares of common stock in State A. The
Administrator in State A may:
Not require registration of the stock in State A.
Require the issuer to perform notice filing.
Require the issuer to pay a fee.
Investigate the underwriter for possible fraud in connection with the offering. - ANS-I
and IV only
Securities that are listed on a national exchange (e.g., Nasdaq, NYSE, or AMEX) are
referred to as federal covered securities and, therefore, are not required to be registered
at the state level. Additionally, if the federal covered security is listed on an exchange,
the state may not require the issuer to pay a fee, submit a notice filing, or provide a
consent to service of process. However, the state Administrator may investigate any
,broker-dealer (including the underwriter) that participates in the offering for fraud or
deceit and file an enforcement action if it is warranted.
According to the Uniform Securities Act, which of the following activities by an agent of
a broker-dealer is unethical? - ANS-Executing orders to sell securities in a client's
individual and joint account based on instructions from the client's spouse.
Unless the client's spouse has been given specific authorization, executing these orders
is unethical. An agent may exercise discretion over the price and/or time of execution,
based on verbal authorization from the client. Agents are allowed to accept unsolicited
orders to buy and sell securities. Agents are not required to send all clients a
preliminary prospectus, but they are required to send a final prospectus to clients who
purchase non-exempt securities.
If an agent of a broker-dealer is granted a durable power of attorney over a client's
account, all of the following statements are TRUE, EXCEPT - ANS-The client must be
an institution
A durable power of attorney provides the agent with the power to manage the grantor's
financial affairs even if the grantor becomes incapacitated. With this authority (which
must be in written form), the agent of the broker-dealer may make financial decisions on
behalf of the grantor (discretion). A standard power of attorney is terminated if the
grantor becomes incapacitated. (17178)
The factors that assist in determining a client's risk tolerance include:
Income
Age
Personality
Net worth - ANS-I, II, III, IV
A person's risk tolerance is based on income, age, personality type, net worth, as well
as any other relevant details. For instance, family considerations may also influence a
person's risk tolerance.
Which TWO of the following statements are TRUE regarding an investment adviser that
maintains custody of its clients' assets?
The securities must be deposited with a qualified custodian.
The securities must be held in a vault that is maintained by the firm.
A notice must be sent to the clients to indicate the secure location or custodian of the
securities.
Annual statements must be sent to each client of the investment adviser. - ANS-I and III
According to Rule 206(4)-2 of the Investment Advisers Act of 1940, it is a deceptive
trade practice to maintain custody (safekeeping) of client funds and securities unless
, they are held by a qualified custodian. When the IA opens an account with a qualified
custodian, the client must be informed of the name and address of the custodian.
Clients must be provided with account statements at least quarterly (NOT annually).
An investor is analyzing two bonds. Bond A has a 5% coupon and matures in three
years; Bond B also has a 5% coupon, but matures in 10 years. If interest rates decline
by 1%, what is to be expected? - ANS-Bond B's price will increase more than Bond A's
price
As interest rates change, prices of bonds with longer maturities will fluctuate more than
prices of bonds with shorter maturities. When interest rates decline, all bond prices will
rise; however, prices of bonds with longer maturities will increase more than prices of
bonds with shorter maturities. For that reason, the price of Bond B (the 10-year bond)
will increase more than the price of Bond A (the three-year bond).
***DURATION***
A person who invests in a variable annuity is most concerned with the performance of
the insurance company's: - ANS-Separate account
The performance of a variable annuity is related to the performance of the insurance
company's separate account. On the other hand, an insurance company's general
account backs the company's fixed annuities and other traditional (guaranteed)
insurance products. Although an investor may be concerned with the overall profitability
of the insurance company, it has no bearing on the performance of the variable
annuity's separate account.
Two friends are starting their own business and are trying to decide whether to organize
this new business as an S Corporation or a general partnership. What is a significant
advantage of an S Corporation compared to a general partnership? - ANS-Limited
liability
(original and wrong answer was favorable tax treatment, which is an advantage of a
partnership, S corp has limited liability due to more shareholders, general partners have
unlimited liability)
If they form a general partnership, both partners are fully liable for the partnership's
debts. (Limited partners are not fully liable; however, the question gives no indication
that one of the partners will be a limited partner.) In an S Corporation, the owners are
not fully liable for the company's debts—they have only limited liability. As for choice (a),
both entities receive favorable federal tax treatment. Since both business entities are
pass-through vehicles for tax purposes, all losses and profits are passed through to the
owners.
Securities that are registered through qualification may only be sold: - ANS-Once the
registration is declared effective by the Administrator
Securities that are registered through qualification may be sold once the registration is
declared effective by the Administrator. Note that in choice (c), the use of the term
approved is inappropriate. Securities that are deemed effective for sale by an
Administrator may not be described as having been approved by the Administrator.
The difference between a corporation's current assets and its current liabilities is the: -
ANS-Working capital
The amount by which a corporation's current assets exceed its current liabilities is
referred to as working capital.
Assuming an expected rate of return, a specific holding period, and a sum to be
invested, an IAR is able to determine an investment's: - ANS-Future value
The future value of an investment is based on the present value of the amount invested,
using a discount rate each year, and doing so over a given period of time. The
assumption is that the annual return is reinvested at the same rate, or is compounded
over the given time period, thereby resulting in a future value that exceeds the present
value.
Which of the following types of risk is MOST associated with the purchase of a five-year
T-bond? - ANS-Interest-rate
Interest-rate risk, which is also referred to as money-rate risk, is essentially the risk that
if interest rates rise, the prices of the debt securities will fall. If an investor needs to
liquidate her debt investment prior to maturity, rising interest rates reduce the value she
would receive if she sold the security in the secondary market. Market risk is primarily
associated with common stock. Since the secondary market for Treasuries is very
active, liquidity risk is not a factor. Although legislative risk (changes in the law) could
create diminished value for the instruments, it is not likely to occur.
Disadvantages of investing in a C Corporation include which of the following choices?
Shareholders are taxed on dividends that they receive.
The corporation is taxed on its income.
Shareholders may not deduct their share of the corporation's losses on their personal
tax returns.
Shareholders are paid last if the corporation liquidates. - ANS-I, II, III, and IV
,All of the choices are disadvantages of investing in a C Corporation
All the following are characteristics of passive asset allocation strategies, EXCEPT: -
ANS-Altering a portfolio in anticipation of an economic event
A passive asset allocation strategy (e.g., buy and hold) is characterized by low
transaction costs and minimal tax consequences. Systematic rebalancing, another
passive strategy, alters the portfolio on a monthly, quarterly, or annual basis to restore
an original strategic asset allocation if market movements have changed it. On the other
hand, active (tactical) asset allocation strategies effect changes to a portfolio's allocation
in anticipation of economic events.
A person has established an IA as a sole proprietorship and works as an IAR out of his
home office. To help promote and manage the IA, he has set up a website which
contains personal information about his clients. A few weeks after setting up the
website, the IAR discovers that the website has been hacked and his customers'
account information has been stolen. What is the primary regulatory concern? -
ANS-The IA did not prepare proper cybersecurity policies, procedures, and measures
before launching the website.
Both the SEC and state Administrators require IAs to establish cybersecurity policies in
order to protect their clients. Since the website was hacked, the regulator's primary
concern is the extent of the IA's cybersecurity measures. The regulations don't require
websites to be password protected, despite the fact that many IAs may find them
necessary to protect client information. Also, there's no requirement for an IA to be
federally covered before creating a website. Although websites are considered
advertisements and regulators must be notified, it's unlikely that this is the primary
regulatory concern.
A Nasdaq listed company is offering 1,000,000 shares of common stock in State A. The
Administrator in State A may:
Not require registration of the stock in State A.
Require the issuer to perform notice filing.
Require the issuer to pay a fee.
Investigate the underwriter for possible fraud in connection with the offering. - ANS-I
and IV only
Securities that are listed on a national exchange (e.g., Nasdaq, NYSE, or AMEX) are
referred to as federal covered securities and, therefore, are not required to be registered
at the state level. Additionally, if the federal covered security is listed on an exchange,
the state may not require the issuer to pay a fee, submit a notice filing, or provide a
consent to service of process. However, the state Administrator may investigate any
,broker-dealer (including the underwriter) that participates in the offering for fraud or
deceit and file an enforcement action if it is warranted.
According to the Uniform Securities Act, which of the following activities by an agent of
a broker-dealer is unethical? - ANS-Executing orders to sell securities in a client's
individual and joint account based on instructions from the client's spouse.
Unless the client's spouse has been given specific authorization, executing these orders
is unethical. An agent may exercise discretion over the price and/or time of execution,
based on verbal authorization from the client. Agents are allowed to accept unsolicited
orders to buy and sell securities. Agents are not required to send all clients a
preliminary prospectus, but they are required to send a final prospectus to clients who
purchase non-exempt securities.
If an agent of a broker-dealer is granted a durable power of attorney over a client's
account, all of the following statements are TRUE, EXCEPT - ANS-The client must be
an institution
A durable power of attorney provides the agent with the power to manage the grantor's
financial affairs even if the grantor becomes incapacitated. With this authority (which
must be in written form), the agent of the broker-dealer may make financial decisions on
behalf of the grantor (discretion). A standard power of attorney is terminated if the
grantor becomes incapacitated. (17178)
The factors that assist in determining a client's risk tolerance include:
Income
Age
Personality
Net worth - ANS-I, II, III, IV
A person's risk tolerance is based on income, age, personality type, net worth, as well
as any other relevant details. For instance, family considerations may also influence a
person's risk tolerance.
Which TWO of the following statements are TRUE regarding an investment adviser that
maintains custody of its clients' assets?
The securities must be deposited with a qualified custodian.
The securities must be held in a vault that is maintained by the firm.
A notice must be sent to the clients to indicate the secure location or custodian of the
securities.
Annual statements must be sent to each client of the investment adviser. - ANS-I and III
According to Rule 206(4)-2 of the Investment Advisers Act of 1940, it is a deceptive
trade practice to maintain custody (safekeeping) of client funds and securities unless
, they are held by a qualified custodian. When the IA opens an account with a qualified
custodian, the client must be informed of the name and address of the custodian.
Clients must be provided with account statements at least quarterly (NOT annually).
An investor is analyzing two bonds. Bond A has a 5% coupon and matures in three
years; Bond B also has a 5% coupon, but matures in 10 years. If interest rates decline
by 1%, what is to be expected? - ANS-Bond B's price will increase more than Bond A's
price
As interest rates change, prices of bonds with longer maturities will fluctuate more than
prices of bonds with shorter maturities. When interest rates decline, all bond prices will
rise; however, prices of bonds with longer maturities will increase more than prices of
bonds with shorter maturities. For that reason, the price of Bond B (the 10-year bond)
will increase more than the price of Bond A (the three-year bond).
***DURATION***
A person who invests in a variable annuity is most concerned with the performance of
the insurance company's: - ANS-Separate account
The performance of a variable annuity is related to the performance of the insurance
company's separate account. On the other hand, an insurance company's general
account backs the company's fixed annuities and other traditional (guaranteed)
insurance products. Although an investor may be concerned with the overall profitability
of the insurance company, it has no bearing on the performance of the variable
annuity's separate account.
Two friends are starting their own business and are trying to decide whether to organize
this new business as an S Corporation or a general partnership. What is a significant
advantage of an S Corporation compared to a general partnership? - ANS-Limited
liability
(original and wrong answer was favorable tax treatment, which is an advantage of a
partnership, S corp has limited liability due to more shareholders, general partners have
unlimited liability)
If they form a general partnership, both partners are fully liable for the partnership's
debts. (Limited partners are not fully liable; however, the question gives no indication
that one of the partners will be a limited partner.) In an S Corporation, the owners are
not fully liable for the company's debts—they have only limited liability. As for choice (a),
both entities receive favorable federal tax treatment. Since both business entities are
pass-through vehicles for tax purposes, all losses and profits are passed through to the
owners.
