Series 65 – FINRA (Exam Q/A)
1. A registered broker-dealer is under common control with a registered
investment adviser. An individual who is an agent of the broker-dealer and an
investment adviser representative (IAR) of the adviser has a client with $250,000
under an asset management program. The terms of the account call for
discretionary power to be given for the account, and all required forms have
been received. In the opinion of the IAR, the purchase of 500 shares of RMBM
common stock is an appropriate addition to the portfolio. The broker-dealer is a
market maker in RMBM, and the sale will be made as a principal, a fact that is
disclosed to the client on the trade confirmation. In this situation, the registered
person has acted
A. lawfully in that disclosure of capacity is not necessary when executing trades in
managed accounts.
B. unlawfully in that any stock the broker-dealer is a market maker in is probably not
suitable for a managed money client.
C. unlawfully in that investment advisers are required to make written disclosure as
well as receive the advisory client's consent prior to completion of a trade where the
firm or an affiliate will be acting in a principal capacity.
D. lawfully in that the disclose
Answer: Unlawfully in that investment advisers are required to make written
disclosure as well as receive the advisory client's consent prior to completion
of a trade where the firm or an affiliate will be acting in a principal capacity
2. Manhattan Brokerage Associates (MBA) specializes in bringing midwestern
companies public. Shortly after underwriting the IPO of a farm equipment
manufacturer, MBA publishes a research report that is highly favorable
regarding that company's growth potential. Doing so would require MBA to
A. disclose the potential conflict of interest.
,B. obtain permission from the administrator to issue a report on a new company.
C. refrain from underwriting any further issues of that company for a period of two
years.
D. agree to repurchase any shares tendered at the original offering price.
Answer: Disclose the potential conflict of interest
3. Under the Investment Advisers Act of 1940, an investment adviser that
becomes registered may
A. state on its stationery that it is registered with the SEC.
B. tell a client its qualifications have been approved by the SEC.
C. state in a brochure that its registration is approved by the SEC.
D. place the abbreviation RIA after its name on their business card.
Answer: State on its stationery that it is registered with the SEC
4. Antonia, a customer of Leroy (an agent of Gibraltar Securities), is considering
the purchase of 2,000 shares of Kansas Plains Gas and Electric Company
common stock. Antonia has stock in 10 other utilities companies in her
portfolio, and this stock trades on the New York Stock Exchange (NYSE). Leroy
tells Antonia that the company has been increasing its dividend for the past 19
years and will surely continue to do so. Which of the following statements best
reflects this situation?
A. Leroy has acted unethically because he made an unsuitable recommendation to
Antonia.
B. Leroy has acted ethically in recommending the purchase of a stock with a long
history of dividends.
C. Leroy has acted unethically, misleading Antonia by implying that increased dividend
distributions from Kansas Plains Gas and Electric Company are a sure thing.
,D. Leroy has acted ethically because he did not guarantee profits or the absence of
potential loss to Antonia.
Answer: Leroy has acted unethically, misleading Antonia by implying that
increased dividend distributions from Kansas Plains Gas and Electric Company
are a sure thing
5. Social media can be static or interactive. Examples of static content typically
available through social-networking sites include all of the following except
A. banner ads.
B. biographical information.
C. an online seminar.
D. video recordings of public appearances.
Answer: An online seminar
6. Under the USA, all of the following statements are true regarding investment
advisory contracts except
A. they cannot be assigned without customer approval.
B. they must be in writing.
C. they cannot allow for prepaid advisory fees.
D. they can allow fees to be performance related only under certain limited
circumstances.
Answer: They cannot allow for prepaid advisory fees
7. Schedule 13D is required to be filed with the SEC by any person, or those
acting together, who acquire more than 5% of the voting stock of a public
corporation. Which of the following statements is NOT TRUE regarding
Schedule 13D?
, A. It must be filed within 10 days of acquisition of the stock
B. A copy must be given to the current shareholders
C. It must be filed with the SEC, the issuer, and the appropriate exchange
D. It must disclose the purchaser's purpose for acquiring the stock
Answer: B
8. Which of the following statements is not true concerning the wrap fee
programs brochure under the Uniform Securities Act?
A. The disclosure document must contain the information required by Appendix 1 of
Form ADV Part 2A.
B. It lists the services provided under the program, including the types of portfolio
management services.
C. Nonmaterial changes to wrap fee disclosure documents must be filed with the
administrator within 90 days of fiscal year-end.
D. It contains a statement that the program will generally cost the client less than
purchasing these services separately.
Answer: It contains a statement that the program will generally cost the client
less than purchasing these services separately
9. Compliance with delivery requirements pertaining to an adviser's brochure
under the Uniform Securities Act would require an adviser to
A. furnish clients with a copy of the brochure at least 48 hours before entering into the
agreement.
B. furnish clients with a copy of the brochure on an annual basis even if there have
been no material changes.
C. furnish clients with a copy of the brochure within 120 days of the end of the adviser's
fiscal year unless there have been no material changes.
1. A registered broker-dealer is under common control with a registered
investment adviser. An individual who is an agent of the broker-dealer and an
investment adviser representative (IAR) of the adviser has a client with $250,000
under an asset management program. The terms of the account call for
discretionary power to be given for the account, and all required forms have
been received. In the opinion of the IAR, the purchase of 500 shares of RMBM
common stock is an appropriate addition to the portfolio. The broker-dealer is a
market maker in RMBM, and the sale will be made as a principal, a fact that is
disclosed to the client on the trade confirmation. In this situation, the registered
person has acted
A. lawfully in that disclosure of capacity is not necessary when executing trades in
managed accounts.
B. unlawfully in that any stock the broker-dealer is a market maker in is probably not
suitable for a managed money client.
C. unlawfully in that investment advisers are required to make written disclosure as
well as receive the advisory client's consent prior to completion of a trade where the
firm or an affiliate will be acting in a principal capacity.
D. lawfully in that the disclose
Answer: Unlawfully in that investment advisers are required to make written
disclosure as well as receive the advisory client's consent prior to completion
of a trade where the firm or an affiliate will be acting in a principal capacity
2. Manhattan Brokerage Associates (MBA) specializes in bringing midwestern
companies public. Shortly after underwriting the IPO of a farm equipment
manufacturer, MBA publishes a research report that is highly favorable
regarding that company's growth potential. Doing so would require MBA to
A. disclose the potential conflict of interest.
,B. obtain permission from the administrator to issue a report on a new company.
C. refrain from underwriting any further issues of that company for a period of two
years.
D. agree to repurchase any shares tendered at the original offering price.
Answer: Disclose the potential conflict of interest
3. Under the Investment Advisers Act of 1940, an investment adviser that
becomes registered may
A. state on its stationery that it is registered with the SEC.
B. tell a client its qualifications have been approved by the SEC.
C. state in a brochure that its registration is approved by the SEC.
D. place the abbreviation RIA after its name on their business card.
Answer: State on its stationery that it is registered with the SEC
4. Antonia, a customer of Leroy (an agent of Gibraltar Securities), is considering
the purchase of 2,000 shares of Kansas Plains Gas and Electric Company
common stock. Antonia has stock in 10 other utilities companies in her
portfolio, and this stock trades on the New York Stock Exchange (NYSE). Leroy
tells Antonia that the company has been increasing its dividend for the past 19
years and will surely continue to do so. Which of the following statements best
reflects this situation?
A. Leroy has acted unethically because he made an unsuitable recommendation to
Antonia.
B. Leroy has acted ethically in recommending the purchase of a stock with a long
history of dividends.
C. Leroy has acted unethically, misleading Antonia by implying that increased dividend
distributions from Kansas Plains Gas and Electric Company are a sure thing.
,D. Leroy has acted ethically because he did not guarantee profits or the absence of
potential loss to Antonia.
Answer: Leroy has acted unethically, misleading Antonia by implying that
increased dividend distributions from Kansas Plains Gas and Electric Company
are a sure thing
5. Social media can be static or interactive. Examples of static content typically
available through social-networking sites include all of the following except
A. banner ads.
B. biographical information.
C. an online seminar.
D. video recordings of public appearances.
Answer: An online seminar
6. Under the USA, all of the following statements are true regarding investment
advisory contracts except
A. they cannot be assigned without customer approval.
B. they must be in writing.
C. they cannot allow for prepaid advisory fees.
D. they can allow fees to be performance related only under certain limited
circumstances.
Answer: They cannot allow for prepaid advisory fees
7. Schedule 13D is required to be filed with the SEC by any person, or those
acting together, who acquire more than 5% of the voting stock of a public
corporation. Which of the following statements is NOT TRUE regarding
Schedule 13D?
, A. It must be filed within 10 days of acquisition of the stock
B. A copy must be given to the current shareholders
C. It must be filed with the SEC, the issuer, and the appropriate exchange
D. It must disclose the purchaser's purpose for acquiring the stock
Answer: B
8. Which of the following statements is not true concerning the wrap fee
programs brochure under the Uniform Securities Act?
A. The disclosure document must contain the information required by Appendix 1 of
Form ADV Part 2A.
B. It lists the services provided under the program, including the types of portfolio
management services.
C. Nonmaterial changes to wrap fee disclosure documents must be filed with the
administrator within 90 days of fiscal year-end.
D. It contains a statement that the program will generally cost the client less than
purchasing these services separately.
Answer: It contains a statement that the program will generally cost the client
less than purchasing these services separately
9. Compliance with delivery requirements pertaining to an adviser's brochure
under the Uniform Securities Act would require an adviser to
A. furnish clients with a copy of the brochure at least 48 hours before entering into the
agreement.
B. furnish clients with a copy of the brochure on an annual basis even if there have
been no material changes.
C. furnish clients with a copy of the brochure within 120 days of the end of the adviser's
fiscal year unless there have been no material changes.
