How many questions are in Series 6?

Variable contracts products representative qualification examination has 55 multiple-choice questions. Five questions are unscored. They are distributed evenly in the exam. The passing score is 70%. That means you must score 35 out of 50 questions to pass this FINRA exam.

What does Series 6 allow you to do?

The Series 6 exam allows you to sell: - Variable annuities - Variable life insurance - Unit investment trusts (UITs) - Municipal fund securities - Mutual funds The catch is that you must also pass the SIE exam to earn the Series 6 license.

How many times can you take the Series 6?

The Financial Industry Regulatory Authority gives test-takers an unlimited number of times to take the Series 6 exam. If you fail the exam, you'll have to wait 30 days before you take it. This applies to three successive failures. If you fail again, you'll have to wait 180 days.

Is the Series 6 exam hard?

The Series 6 exam is moderately difficult. It's difficult for those without experience in the securities world. However, with the number of free Series 6 exam prep courses, it's easy to revise and adequately prepare for the exam.

Is Series 6 or 7 harder?

The Series 7 exam is harder than the Series 6 exam. The Series 7 exam is more comprehensive, testing candidates on many types of securities products. This registered representative exam has 135 questions, which is significantly higher than Series 6, which has 55 questions.

How much time will I need to study for the Series 6 exam?

You need between 40 and 60 hours to prepare for the Series 6 exam. Start reviewing your Series 6 exam prep materials as soon as your company enrolls you for the exam. Leverage study materials such as Series 6 cheat sheets, study guides, flashcards, and practice exams.

What is the passing score for the Series 6 test?

The passing score for the Series 6 exam is 70%. That means you must score 35 out of 50 scored questions. If you fail in the first attempt, you have 30 days waiting period. You'll pay the full exam amount to retake the exam.

What is the format for the Series 6 exam?

Series 6 exam is a multiple-choice exam. The exam has 55 questions that test-takers must answer in one hour and 30 minutes. You have around a minute and a few seconds to answer each question. The FINRA Series 6 exam has a pass rate of 59%.

Are the Series 6 questions difficult?

Series 6 test questions are not difficult if you've done proper preparation. First, purchase the best Series 6 exam prep course. Use the materials provided to cover the exam content. Particularly, use Series 6 flashcards and practice exams to reinforce the exam content.

FREE Series 6 Practice Exams 2023 - 650 practice questions

Hello! Welcome to the fourth article in our Series 6 articles series.

You’ll find five free full-length Series 6 practice exams in this article.

We also have practice questions for each of the four sections of the FINRA Series 6 exam.

Once you’ve taken the full-length practice exams and identified your weak points, you can focus on the practice test in the specific section you are weak in.

We’ll discuss:

FINRA Series 6 practice exam questions
How the Series 6 practice exam and practice quizzes work
Tips to get the most out of the Series 6 Practice Exam
Why take the Series 6 exam?

Let’s jump right in.

Other free series 6 study materials:

Series 6 exam prep
Series 6 study plan
Series 6 study guide
Series 6 practice exam
Series 6 flashcards
Series 6 cheat sheet
Series 6 Exam FAQ
Best Series 6 study materials

Table of Contents

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FINRA Series 6 Practice Exams
Series 6 Practice Quizzes by Domains
Domain 1: Seeks Business for the Broker-dealer from Customers and Potential Customers
Domain 2: Opens Accounts After Obtaining and Evaluating Customers’ Financial Profile and Investment Objectives
Domain 3: Provides Customers with Information About Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records
Domain 4: Obtains and Verifies Customers’ Purchase and Sales Instructions; Processes, Completes and Confirms Transactions
Tips to Get the Most Out of the Series 6 Practice Exam
Why Take the Series 6 Exam?
Conclusion
Series 6 Practice Exam FAQs

FINRA Series 6 Practice Exams

We have five full-length Series 6 practice exams you can use to test your exam readiness.

We’ve also put together practice questions for each Series 6 exam domain.

The practice exams will help you identify the Series 6 exam domains that you are weak in.

From there, you can focus on the questions in that individual domain to better grasp its content.

Series 6 Practice Exam 1

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Welcome to your Series 6 Practice Exam 1

This test is designed to prepare you mentally for the actual Series 6 Exam with the same number of (50 questions) and the same time allowed (90 minutes) as the actual exam.

The Series 6 Exam is breakdown into four (4) Parts.

Here are the Four (4) Domains of the Series 6 Exam with the weightage and number of questions in this practice exam:

1. Seeks Business for the Broker Dealer from Customers and Potential Customers [12 Questions] - 24%

2. Opens Accounts after Obtaining and Evaluating Customers' Financial Profile and Investment Objectives [08 Questions] - 16%

3. Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records [25 Questions] - 50%

4. Obtains and Verifies Customers’ Purchase and Sales Instructions and Agreements; Processes, Completes, and Confirms Transactions [05 Questions] - 10%

Please click NEXT to start your Free Series 6 PRACTICE EXAM right away.

Best of Luck!

A railroad company pledges its railroad cars as collateral for a bond offering. This bond would be issued as

A) a sale-leaseback bond.

B) a collateral trust certificate.

C) a unit secured trust.

D) an equipment trust certificate.

An investor would like to make a long-term investment in a debt security whose duration is equal to its maturity. Which of the following AAA-rated bonds should her registered representative recommend?

A) XYZ zero-coupon bond maturing in 5 years

B) MNO zero-coupon bond maturing in 8 months

C) ABC 8% 10-year bond maturing in 5 years

D) DEF 10-year 8% bond maturing in 8 months

Which of the following is allowed during the cooling-off period?

A) Sales literature may be distributed with the red herring.

B) A preliminary prospectus may be given to prospective investors.

C) Tombstone advertisements may not be published.

D) Indications of interest received are with a specified deposit.

A customer requests information on a variable life insurance policy and asks her registered representative to circle the important information in the prospectus and information he thinks will be of special interest to her. This is

A) allowed if accompanied by an unmarked prospectus.

B) not permitted.

C) allowed if approved by a principal.

D) good customer service.

A securities firm that holds rather than sells stock is

A) pegging.

B) churning.

C) taking a position.

D) commingling.

Typically, no-load mutual funds are sold to the public in which of the following ways?

A) The fund sells to investors through their custodian bank.

B) The fund sells to a broker-dealer with which it has a selling agreement, which in turn sells to the investor.

C) The fund sells directly to the investor.

D) The fund sells to an annuity, which in turn sells to the investor.

A contractual plan company is what type of investment company?

A) Closed-end company

B) Unit investment trust

C) Face-amount certificate company

D) Mutual fund

The KPF Growth Fund charges no redemption fee. An investor brings 200 shares to your firm for redemption. The next quote on the fund is NAV $9.15, POP $10.00. If liquidated by the firm without charge, what would he receive for his shares?

A) $1,000

B) $2,000

C) $915

D) $1,830

Your customer is interested in income that is as free of default risk as possible. Which of the following funds would you consider suitable to recommend to him?

A) The Ellis Government Bond Fund

B) A balanced fund that purchases only AA-rated bonds or higher

C) A fund that specializes in municipal revenue bonds

D) The Topley Investment-Grade Corporate Bond Fund

10.

Open-end investment company shares normally go ex-dividend on what date?

A) Two business days before the record date

B) The settlement date

C) The record date

D) A date determined by the investment company board of directors

11.

Which of the following is a key advantage of purchasing a variable annuity?

A) Tax deferral

B) Protection against market risk

C) Tax-free withdrawals

D) Minimal penalty for early withdrawal

12.

A retired public school teacher, age 65, has deposited a total of $10,000 into a nonqualified variable annuity, and her account's current value is $16,000. If she wishes to take a lump-sum withdrawal of the full amount, how much of this withdrawal is taxed at the ordinary income tax rate?

A) $6,000

B) $10,000

C) $0

D) $16,000

13.

John is the annuitant in a variable plan, and Sue is the beneficiary. Upon John's death during the accumulation period, Sue takes a lump-sum payment. What is her total tax liability?

A) The proceeds minus John's cost basis taxed as ordinary income at Sue's tax rate

B) The ordinary income on the proceeds over the cost basis plus 10% of the net gain (if any) if Sue is younger than 59½ years old

C) Entire amount taxed as ordinary income, because it is not life insurance

D) None, because it is the proceeds from a life insurance company

14.

If your customer, age 36, invested $1.2 million dollars with an insurance company to purchase an annuity that would begin payouts to him when he reached the age of 65, he would be purchasing

A) a delayed payment annuity.

B) a periodic payment, deferred annuity.

C) a single payment, immediate annuity.

D) a single payment, deferred annuity.

15.

Which of the following is guaranteed by a variable life policy?

A) No sales charge

B) Minimum separate account performance

C) Minimum death benefit

D) Cash value

16.

Which of the following statements describing the federal taxation of municipal bond fund distributions is true?

A) Dividend distributions are taxable; capital gains distributions are tax free.

B) Both dividend distributions and capital gains distributions are taxable.

C) Dividend distributions are tax free; capital gains distributions are taxable.

D) Both dividend distributions and capital gains distributions are tax free.

17.

Jim's Tech Fund receives $22 million in dividends and pays $2 million in expenses. At the end of the year the fund distributes $18.5 million as dividends to the fund's shareholders. The fund will pay taxes on how much of the net investment income?

A) $1.5 million

B) $22 million

C) $20.5 million

D) $20 million

18.

In order for an investor to realize a capital gain or loss,

A) a dividend must be distributed.

B) the investor must hold the security for more than one year.

C) a purchase must take place.

D) a sale must take place.

19.

In the prior year, your customer realized an $8,000 short-term capital loss and a $6,000 long-term capital gain. What are the tax results of these transactions?

A) No gains, and $2,000 in carry forward losses

B) They may reduce their income by $2,000

C) $2,000 in short-term capital losses to use against next year's gains

D) $2,000 long-term capital gain

20.

A non-qualified dividend will be taxed at what rate?

A) The investor's capital gains tax rate

B) The investor's ordinary income tax rate

C) Qualified dividends are not taxable

D) The same rate as interest payments

21.

Addison is interested in opening an individual account but is concerned about what happens to the money if she should die. Specifically she wants the funds to go to a particular grandchild and not be part of the general distribution of the estate. Which of the following accounts would best meet Addison's needs?

A) An individual account with a transfer on death (TOD) designation

B) A tenants in common account with the adult grandchild

C) An LLC account with the adult grandchild as a signatory

D) A joint tenants with rights of survivorship with the adult grandchild

22.

A client and his spouse own shares in the ACE Fund as tenants in common. If each has a 50% ownership interest in the account and the client dies, what happens to the shares in the account?

A) Ownership of the shares would be determined by probate court.

B) His spouse would automatically own all the shares.

C) The account would have to be liquidated.

D) Fifty percent of the shares would belong to his spouse and the remaining half would be distributed to his estate.

23.

Communication rules under the Employee Retirement Income Security Act (ERISA) require that statements of account be provided to employees how often?

A) Annually

B) Every three years

C) Quarterly

D) Semi-annually

24.

Under what circumstances must an employee be given an opportunity to participate in a nonqualified deferred compensation plan?

A) The employee has worked full time for the company for at least one year.

B) The employee is not covered by an individual plan, such as an IRA or an annuity.

C) The company is the employee's only source of income.

D) It is solely up to the company who may participate in this type of plan.

25.

When and how often is your firm required to provide a privacy notice describing its privacy policies to customers?

A) Only when the customer indicates a change be made in information previously supplied

B) When a new account is opened and annually thereafter

C) Every third year after the account has been opened

D) When a new account is opened only

26.

The child of one of your recently deceased clients comes to your office with several properly signed stock certificates inherited from a parent. The child does not have an account and wishes to sell the securities. An account is opened for the purpose of the liquidation. Regulation S-P would refer to this child as

A) a customer.

B) a covered person.

C) a consumer.

D) a beneficiary.

27.

Lightning Bug Transport Corporation has undergone a change of the corporation's name. What forms are needed to reflect this name change on the company's account?

A) A letter of authorization from the board to make the change

B) A new account will need to be opened and the funds journal transferred

C) A new account under a new tax ID number will be required

D) A new account will need to be opened and the funds transferred via ACATs

28.

A person wishing to grant a registered representative the right to make investment decisions for his account does so by

A) providing a full power of attorney to someone other than the registered representative who will then instruct the representative as to investment decisions.

B) providing a limited power of attorney giving discretionary powers.

C) calling the representative each time he wants to place an order.

D) providing a letter from an attorney.

29.

Which of the following is considered to be the order of the stages in a business cycle?

A) Trough, contraction, expansion, peak

B) Prosperity, expansion, contraction, trough

C) Expansion, peak, contraction, trough

D) Contraction, trough, peak, expansion

30.

Loss of purchasing power has the greatest impact on which of the following investor profiles?

A) An investor in his 20s who spends all of his paycheck on video games

B) A young married couple who have a comfortable income and have just purchased their dream home

C) A 35-year-old investor who owns a portfolio of high-yield corporate bonds

D) An elderly person living on a fixed retirement income with little savings

31.

When recommending an investment to a customer, one of the most important items to consider is

A) market capitalization.

B) commission generated.

C) name of the investment.

D) investment performance.

32.

Beta coefficient is the measure of which of the following?

A) A security's expected performance in percentage terms

B) A stock's performance in relation to expectations

C) A security's volatility in relation to its historical values

D) A stock or portfolio's volatility in relation to the overall market (systematic risk)

33.

BuyStuff, Inc., is a NYSE listed big box retailer. BuyStuff stock has a beta coefficient of 1.2. If the S&P 500 goes up 5% the expected return for BuyStuff stock is which of these?

A) 5%

B) 6%

C) 7%

D) 4%

34.

Which of the following statements regarding the suitability of investment recommendations are true?

A) Only the client is responsible for learning about the investments that are purchased.

B) Growth and income mutual funds are suitable for all investors.

C) A client's investment objectives, prior investment experience, financial profile, and risk tolerance aid in determining suitability.

D) Suitability will tend to be the same within a given demographic.

35.

Which of the following would be found on a customer's income statement?

A) The customer's risk tolerance

B) The customer's income

C) The customer's 401(k) balance

D) The value of the customer's primary residence

36.

During a fact-finding interview with a potential client, your client information sheet is used to list detailed financial information. Which of the following items would be relevant in determining a prospect's net worth?

A) $78,000 current IRA balance

B) $225,000 annual income

C) Recently paid off $3,000 credit card balance

D) A potential inheritance

37.

In a fiduciary account with stated investment objectives of preserving capital and generating income, which of the following investment trading strategies is the most suitable?

A) Margin buying in a rising market

B) Buying Treasury bonds

C) Short-term trading in a volatile market

D) Buying into a large-cap index fund

38.

Your customer, age 60, is retired and living at home with a fully paid-off mortgage. Her portfolio contains growth stocks and high-quality bonds, and she is a longtime investor and comfortable with moderate risk. Her objective is a moderate level of current income to supplement her corporate pension plan distributions and the earnings from her IRA. Which of the following mutual funds is the most suitable for this customer?

A) QRS Capital Appreciation Fund

B) ABC Equity Income Fund

C) XYZ Biotechnology Fund

D) LMN Stock Index Fund

39.

Filing at least 10 business days before first use is required for which of the following?

A) Literature prepared by the AGH Insurance Company highlighting the performance of its variable annuity separate accounts over the last 10 years

B) Retail communication that contains a ranking published by an independent entity

C) Correspondence

D) Mutual fund advertisements placed by a broker-dealer that became a member of FINRA 7 months ago

40.

Which of the following entities must receive a copy of retail communications to be used by a member firm in connection with the offering of investment company shares?

A) SEC

B) FINRA

C) FDIC

D) SIPC

41.

Which of the following entities must review retail communications for investment company shares prepared by principal underwriters?

A) Principal of the underwriting broker-dealer distributing the shares

B) OCC

C) SEC

D) NYSE

42.

Written recommendations prepared by a research department for dissemination to the public need prior approval of

A) a principal of the firm.

B) the DOE.

C) the appropriate SRO.

D) the SEC.

43.

How often are firms required to file a summary report of complaints that are withdrawn by the customer?

A) With FINRA every quarter

B) With the SEC annually

C) With the SEC quarterly

D) With FINRA annually

44.

When a registered representative receives a complaint the first step should be which of the following?

A) Provide the customer access to FINRA's website

B) Attempt to resolve the problem immediately

C) Forward the complaint to a firm principal

D) Wait for 24 hours to give the customer an opportunity to calm down

45.

How long after a written complaint is resolved must a record of the complaint be maintained?

A) Six years

B) Three years

C) Four years

D) Ten years

46.

To resolve a dispute FINRA prefers

A) arbitration before a code of procedure hearing.

B) arbitration before mediation.

C) arbitration before court proceedings.

D) mediation before arbitration.

47.

How long after termination must a member file Form U5?

A) Within 120 days

B) Within 60 days

C) Within 10 days

D) Within 30 days

48.

If a person unsuccessfully attempts the Series 6 exam, how long must they wait after the first attempt before attempting the exam again?

A) There is no waiting period

B) 60 days

C) 30 days

D) 180 days

49.

When filing a Form U5 a member must mark one of five reasons for the termination. Which of the following reasons would not require additional details surrounding the termination?

A) Permitted to resign

B) Discharged

C) Other

D) Voluntary

50.

When a representative terminates association with a member firm, the member files which of these to record the termination?

A) Form U4

B) Form U5

C) Form BD

D) Form ADV

1 out of 50

Time is Up!

Time's up

Series 6 Practice Exam 2

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Welcome to your Series 6 Practice Exam 2

This test is designed to prepare you mentally for the actual Series 6 Exam with the same number of (50 questions) and the same time allowed (90 minutes) as the actual exam.

The Series 6 Exam is breakdown into four (4) Parts.

Here are the Four (4) Domains of the Series 6 Exam with the weightage and number of questions in this practice exam:

1. Seeks Business for the Broker Dealer from Customers and Potential Customers [12 Questions] - 24%

2. Opens Accounts after Obtaining and Evaluating Customers' Financial Profile and Investment Objectives [08 Questions] - 16%

3. Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records [25 Questions] - 50%

4. Obtains and Verifies Customers’ Purchase and Sales Instructions and Agreements; Processes, Completes, and Confirms Transactions [05 Questions] - 10%

Please click NEXT to start your Free Series 6 PRACTICE EXAM right away.

Best of Luck!

When an option is trading, all of the following are fixed except

A) the premium.

B) the underlying security.

C) the expiration date.

D) the strike price.

Corporations issue commercial paper with maturities ranging from as little as one day to as long as how many days?

A) 365 days

B) 270 days

C) 7 days

D) 90 days

A resident of a state who acquires stock pursuant to Rule 147 (intrastate offerings) is prohibited from selling the stock to a nonresident of that state for how many months?

A) 18

B) 6

C) 9

D) 12

As a registered representative you know that red herring is another term for

A) a preliminary prospectus.

B) a final prospectus.

C) a tombstone advertisement.

D) a registration statement.

Listed securities primarily trade in which of the following venues?

A) Primary market

B) Over-the-counter

C) Third market

D) Exchanges

Which of the following funds would be most suitable for a customer with moderate experience and risk tolerance seeking a portfolio to provide current income?

A) Small-cap stock mutual fund

B) Global Equity stock fund

C) Biotechnology fund

D) Preferred stock mutual fund

Each of the following is considered an investment company except

A) unit investment trust.

B) bank investment advisory account.

C) face-amount certificate company.

D) open-end management company.

Under the 1940 Investment Company Act, an investment company may take all of the following forms except

A) a closed-end investment company.

B) a unit investment trust.

C) an open-end investment company.

D) a limited partnership with partners as passive investors.

When may a Series 6 registered representative sell shares of a closed-end fund?

A) Only when the shares are selling in the secondary market

B) In both the primary and secondary markets

C) Only when the shares are selling in the primary market

D) Series 6 representatives may not sell shares of a closed-end fund

10.

A shareholder has $800 to invest in the ABC Technology Fund. If the shares are currently priced at $21.15 each, he can purchase how many shares?

A) 37, with $17.45 in change

B) None because the minimum trading unit is 100 shares

C) 37.825 shares

D) 38 shares

11.

During the accumulation period of a periodic payment deferred variable annuity, the number of accumulation units

A) increases and the value per unit varies.

B) remains fixed and the value per unit remains constant.

C) increases and the value per unit remains constant.

D) remains fixed and the value per unit varies.

12.

A 28-year-old investor wishes to start saving for his daughter's college education. Which of the following would be the least appropriate investment vehicle for this plan?

A) Zero-coupon bond

B) 529 plan

C) Variable annuity

D) Coverdell ESA

13.

Who assumes the investment risk in a variable annuity contract?

A) The annuitant assumes the risk.

B) The insurance company assumes the risk.

C) There is no risk in a variable annuity.

D) The investment risk is shared between the insurance company and the annuitant.

14.

In promoting a variable life insurance contract to a customer, which of the following statements would be permissible?

A) This product is a good investment for anyone wishing to provide for retirement.

B) Variable life insurance gets you a higher death benefit for less money.

C) If you already have a variable annuity, you can exchange it for this type of insurance with no adverse tax consequences.

D) This product gives you the possibility of a greater death benefit in exchange for accepting investment risk.

15.

Once a variable annuity has been annuitized,

A) each annuity unit's value varies with time, but the number of annuity units is fixed.

B) the number of annuity units is fixed, and their value remains fixed.

C) each annuity unit's value is fixed, but the number of annuity units varies with time.

D) each annuity unit's value and the number of annuity units vary with time.

16.

A customer who sold a bond at a loss must wait how long before he can buy back a substantially identical bond and not have the sale classified as a wash sale?

A) 31 days

B) No waiting period

C) 5 days

D) 20 days

17.

The Windmill Balanced Fund holds a mix of stocks and bonds. In the current year they received $500,000 in dividends from stocks and $600,000 in interest from bonds. Over the year they have had $100,000 in expenses. What is the fund's net investment income?

A) $1 million

B) $900,000

C) $1.1 million

D) $2.1 million

18.

The Investment Company Act of 1940 requires that mutual funds pay dividends from their

A) gross income.

B) capital gains.

C) net investment income.

D) portfolio earnings.

19.

The cost basis of inherited shares are based upon which of the following?

A) The decedent's cost basis

B) The average of the value on the day of the decedent's death and the decedent's original cast basis

C) The average of the value on the date of death and the date the inheritor sells the position

D) The value of the stock on the day of the decedent's death

20.

SEC rules require that open-end management companies distribute dividends to their investors from the firm's

A) portfolio earnings.

B) net investment income.

C) gross revenue.

D) capital gains.

21.

Information received from a customer upon opening a new account must be confirmed with the customer when?

A) Within 30 days of account opening

B) No later than account opening

C) Within 60 days of account opening

D) Within 90 days of account opening

22.

A client and her spouse own shares in the ACE Fund as tenants in common. She has a 60% ownership interest in the account and her spouse has the balance. If the client dies, what happens to the shares in the account?

A) Her spouse would automatically own all the shares.

B) Fifty percent of the shares would belong to her spouse and the remaining half would be distributed to her estate.

C) Ownership of the shares would be determined by probate court.

D) Forty percent of the shares would belong to her spouse and the remaining balance would be distributed to her estate.

23.

Contribution limits for qualified plans

A) are established by the government and adjusted periodically.

B) are established by the employer and are adjusted periodically.

C) are established by the employer and may not change after the plan is established.

D) are not set; there are no such limits.

24.

Employee Retirement Income Security Act (ERISA) rules on participation require that employers include employees age 21 or older and with

A) two years of service (4,000 hours).

B) two years of service (3,000 hours).

C) one year of service (2,000 hours).

D) one year of service (1,000 hours).

25.

Under Regulation S-P, nonpublic personal information would not include a customer's

A) Social Security number.

B) information collected through an internet cookie.

C) alma mater.

D) account balance.

26.

When may a firm release nonpublic personal information to a nonaffiliated company?

A) When the customer has an opportunity to opt out

B) When the customer has chosen to opt out

C) When proper disclosures are made only

D) When proper disclosures are made to the customer and a customer has an opportunity to opt out

27.

Rowan and Rory have a joint tenants with rights of survivorship account with your firm. Unfortunately Rory has passed away. Rowan would like the funds to be in individual only. What paperwork will the firm need to accomplish the task?

A) Rowan will need to open a new account and complete a letter of authorization to transfer the assets.

B) Rowan will need to open a new account and request a journal transfer of the assets to the new account.

C) The firm may not make any changes to the account until estate paperwork is completed.

D) Rowan will need to provide a death certificate and a letter authorizing the removal of the decedent's name.

28.

Morgan and Mackenzie have a joint tenants with rights of survivorship account with your firm. Unfortunately Mackenzie passes away. Morgan would like the funds to be in his name only. What paperwork will the firm need to accomplish the task?

A) The firm may not make any changes to the account until estate paperwork is completed.

B) Morgan will need to provide a death certificate and a letter authorizing the removal of the decedent's name.

C) Morgan will need to open a new account and request a journal transfer of the assets to the new account.

D) Morgan will need to open a new account and complete a letter of authorization to transfer the assets.

29.

It is generally considered unsuitable to invest in securities using funds from which of the following?

A) Earnings

B) A defined contribution plan

C) An inheritance

D) Borrowing money against a home

30.

Industries that tend to be highly sensitive to inflation, deflation, and the ups and downs of business trends would best be described as

A) defensive.

B) growth.

C) cyclical.

D) Keynesian.

31.

An analysis of the existing portfolio is important when doing which of the following?

A) Selecting new investments

B) All of these

C) Understanding a customer's circumstances

D) Understanding a customer's tolerance for risk

32.

Which of the following explains that including noncorrelated assets in a portfolio can reduce certain risks?

A) Alpha coefficient

B) Beta coefficient

C) Capital asset pricing model (CAPM)

D) Modern portfolio theory (MPT)

33.

A representative that has reasonable grounds to believe that options are a suitable investment for a client should take which of these next steps?

A) Approve the account for option trading

B) Provide a suitable recommendation

C) Provide the customer an option disclosure document

D) Request approval for option trading for the account

34.

Which of the following activities are a registered representative's responsibilities?

A) Offering tax advice and assisting customers in completing tax returns

B) Determining the suitability of various investments for individual customers

C) Investing for customers based on their circumstances and objectives

D) Personally holding a customer's securities for a future transaction

35.

Selling which of the following is not a violation of the Conduct Rules?

A) Government bonds to a client who insists on high returns

B) AAA bonds to a client who has income as an objective

C) Options to a client who desires long-term growth

D) Selling the same mutual fund to all of your clients

36.

Your client, age 28, has just begun to consider investing outside of her employer's 401(k) plan. She's saved $25,000 to allocate toward some capital appreciation and some income. She prefers an investment with moderate risk and some downside protection if the stock market falls. With investing being new to her, she wants to note that she understands and is comfortable with moderate risk as stated, only. Given what has been conveyed, which of the following would be the most suitable?

A) Specialized fund

B) Equity index fund

C) Equity income fund

D) Balanced fund

37.

Your 45-year-old client is interested in obtaining the highest current income possible from his investment. If he is willing to accept fluctuations in investment principal, which of the following would best suit this client's investment objective?

A) Balanced fund

B) High-yield bond fund

C) Aggressive growth fund

D) Tax-free money market fund

38.

Your customer has $200 per month of discretionary income and currently invests $200 monthly into a mutual fund. His daughter plans to enter college soon, and he would like to send her $100 monthly. Which of the following actions should you recommend to him?

A) Invest $200 monthly into the mutual fund and send all dividends to his daughter.

B) Invest $200 monthly into the mutual fund and redeem shares when needed.

C) Invest $100 monthly into the mutual fund and send his daughter $100 monthly.

D) Begin a systematic withdrawal program of $100 monthly.

39.

Which of the following would not be considered institutional communications with the public?

A) A communication with an individual designated to act on behalf of your institutional customer

B) An internal memo promoting a new product that will be offered to your firm's institutional customers only

C) A letter to another broker-dealer

D) A letter to a municipality offering your firm's services as an underwriter

40.

Retail communications apply to all of the following except

A) a billboard.

B) a public appearance.

C) an email sent to 30 existing customers.

D) a website.

41.

All of the following would be subject to the Conduct Rules regarding public appearances except

A) an internet chat room.

B) a seminar discussing the products your firm has available for sale.

C) a presentation at a high school about mutual funds.

D) a radio spot saying that your offices have moved.

42.

If a registered representative wishes to place an advertisement in a local newspaper offering her services as a mutual fund representative for XYZ Funds, the advertisement must be approved by

A) the SEC.

B) FINRA.

C) her branch office manager.

D) a registered principal.

43.

If a member firm has a dispute with one of its registered representatives, which of the following is true?

A) The representative's predispute arbitration agreement is renewed every January 1.

B) The dispute must be resolved via mediation.

C) The representative signed a predispute arbitration agreement upon completion of the U-4.

D) The dispute will be resolved in a court of law.

44.

All of the following complaints have regulatory standing except

A) an email sent to a firm's general inbox.

B) a letter sent to a firm principal.

C) a letter sent to a firm registered representative.

D) a complaint delivered to a principal's voicemail.

45.

How often must a member firm provide a copy of the FINRA procedures to its customers?

A) Annually

B) Every three years

C) Upon opening an account

D) When the customer requests it

46.

FINRA issues a complaint against ALFA Securities, a FINRA member firm, charging that the firm failed to adequately supervise one of its employees involved in a private placement. Which body of rules governs how this complaint will be handled?

A) Conduct Rules

B) Uniform Practice Code

C) Code of Arbitration Procedure

D) Code of Procedure

47.

Which of the following persons would not need to be fingerprinted under regulatory requirements?

A) Devon, Alex's supervisor

B) Adrian, a file clerk handling new account paperwork

C) Blair, a new accounts specialist that opens accounts and processes initial deposits

D) Alex, a receptionist that processes incoming mail

48.

Which of the following is not information needed to complete a Form U4?

A) Employment history

B) Aliases

C) Residential history

D) Marital Status

49.

The registration of an associated person becomes effective after

A) passing the appropriate exam.

B) submission of Form U4.

C) successful completion of an interview with the member firm.

D) submission of Form U4 and passing the appropriate exam.

50.

Which of the following does not disqualify a person from associating with a member firm?

A) The person has been or is expelled or suspended from membership or participation in any other self-regulatory organization.

B) The person is under an SEC order denying, suspending, or revoking their registration.

C) The person is under an order of a foreign financial regulator denying, suspending, or revoking their registration.

D) The person was charged with felony fraud within the past 10 years.

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Welcome to your Series 6 Practice Exam 3

This test is designed to prepare you mentally for the actual Series 6 Exam with the same number of (50 questions) and the same time allowed (90 minutes) as the actual exam.

The Series 6 Exam is breakdown into four (4) Parts.

Here are the Four (4) Domains of the Series 6 Exam with the weightage and number of questions in this practice exam:

1. Seeks Business for the Broker Dealer from Customers and Potential Customers [12 Questions] - 24%

2. Opens Accounts after Obtaining and Evaluating Customers' Financial Profile and Investment Objectives [08 Questions] - 16%

3. Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records [25 Questions] - 50%

4. Obtains and Verifies Customers’ Purchase and Sales Instructions and Agreements; Processes, Completes, and Confirms Transactions [05 Questions] - 10%

Please click NEXT to start your Free Series 6 PRACTICE EXAM right away.

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Ms. Garcia sold 500 shares of Small Corporation stock short at $25 a share. The stock rose to $28 and she covered 200 shares. The stock then dropped to $22 and she closed the remainder of the short position. What is the result of the transactions?

A) $300 gain

B) $1,500 loss

C) $1,500 gain

D) $300 loss

Which of the following statements regarding Treasury bills is true?

A) They mature in 10 years or more.

B) They pay a fixed rate of interest semiannually.

C) They are issued at a discount.

D) They mature in less than 10 years.

If the SEC has released a security for sale, then the SEC has

A) decided the security is suitable for most persons.

B) determined that the prospectus accurately discloses material facts.

C) not approved the security but has cleared its sale to the public.

D) verified that all information about the issuer included in the prospectus is accurate.

The portion of the JOBS Act that eases the requirements for small and medium-sized companies to raise capital is known as

A) Small Company Relief Act.

B) Regulation A.

C) Regulation D.

D) Regulation BD.

According to the Conduct Rules, a member firm may give certain selling concessions to

A) member firms of other exchanges who are not FINRA members.

B) nonmember broker-dealers.

C) other FINRA member firms.

D) the general public.

When an agent explains mutual funds to a prospective investor, which of the following statements may be made?

A) The redemption value of mutual fund shares fluctuates according to the fund's portfolio value.

B) Mutual fund shares are liquid and may be switched from fund to fund without tax liability.

C) Mutual funds must make payment within seven days of a redemption request and guarantee a return of the original investment.

D) A fund always redeems shares at NAV, with little chance of a financial loss.

The XYZ mutual fund company is introducing a new fund with an investment objective of appreciation in share price by means of capital gains. The portfolio will consist of a mix of both value stocks and growth stocks. This is most likely

A) a blend/core fund.

B) a balanced fund.

C) a preferred equity income fund.

D) a utility income fund.

An investor will pay a sales charge in all of the following marketing methods except

A) fund to underwriter to dealer to investor.

B) fund to underwriter to investor.

C) fund to investor.

D) fund to underwriter to plan company to investor.

A registered representative with a Series 6 registration can sell which of the following?

A) A closed-end management investment company selling just above its NAV in the secondary market

B) A REIT on its initial public offering

C) An ETF trading on the Nasdaq

D) A mutual fund that redeems its own shares

10.

If an investor starts to withdraw from a program that has $9,600 worth of funds, the first monthly payment of a 10-year self-liquidating program will be

A) $48.

B) $1,000.

C) $50.

D) $80.

11.

Your customer, 62 years old, has unexpectedly received a large inheritance. He would like to generate income from it now, with as little bother on his part as possible. Which of the following might you recommend to him?

A) Purchase a lump-sum immediate annuity

B) Purchase a lump-sum deferred annuity

C) Purchase a periodic payment deferred annuity

D) Invest in a diversified portfolio of corporate stocks

12.

The AIR on a variable annuity is 5%. In March, the separate account earned 5%, which resulted in an April payment of $300. In April, the separate account earned 9%, resulting in a May payment of $325. What must the separate account earn in May to generate a $325 June payment?

A) 9%

B) 5%

C) 3.25%

D) Between 5% and 9%

13.

When a customer wants income from an annuity and chooses the option of life with 20-year period certain, how will distributions be taxed?

A) As ordinary income based on an exclusion ratio

B) As capital gains based on an exclusion ratio

C) As ordinary income based on LIFO accounting

D) As capital gains based on LIFO accounting

14.

A widowed customer with no children has a portfolio invested in mutual funds valued at $250,000. The portfolio generates a monthly income of $1,600, an amount that exceeds her living expenses by $300. The investment portfolio is her sole source of income. Her agent recommends she sell $30,000 worth of her mutual funds and purchase a variable life insurance policy to take advantage of the tax deferral and death benefit features. This recommendation is

A) unsuitable, because she has no need of the death benefit.

B) suitable, because it offers a growth opportunity with a death benefit for a portion of her holdings.

C) unsuitable, because a fixed annuity would better meet her needs.

D) suitable, because it provides tax-deferral features.

15.

Bob Smith, who is in his 40s, has just been placed into an extremely generous defined benefit plan at his company. He has decided that he no longer needs his variable annuity for retirement purposes and wants to use the money for a trip to Africa. Over the years, he has invested $60,000 in the annuity, and its total value is now $80,000. How much will Bob owe in taxes and penalties if he cashes it in?

A) Capital gains tax on $60,000 and a $6,000 penalty

B) Capital gains tax on $20,000 and a $2,000 penalty

C) Income tax on $20,000 and a $2,000 penalty

D) Income tax on $60,000 and a $6,000 penalty

16.

A regulated investment company

A) is in court receivership.

B) acts as a conduit for dividend distributions.

C) offers only nonredeemable shares.

D) is managed by the SEC.

17.

A mutual fund that qualifies as a conduit under subchapter M of the internal revenue code will pay taxes on which of these amounts?

A) The amount of the net investment income

B) The net amount of the net investment income after expenses

C) The total of all dividends and interest received less any expenses

D) The amount of any net investment income not distributed to shareholders as a dividend

18.

An open-end investment company that does not distribute at least 90% of its net income

A) does not require a restricted type of management.

B) continues to qualify as a registered investment company based on interpretations of the IRS.

C) is unable to retain all or part of its realized capital gains.

D) is liable for federal taxes on its net investment income.

19.

Which of the following describes a wash sale?

A) Re-establishing a position in a security that has been sold for a loss within a period of 60 days of the date of the loss

B) Re-establishing the position in a security that has been sold for a gain within a period of 30 days of the date of the loss

C) Re-establishing a position in a security that has been sold for a loss within the same calendar year as the date of the loss

D) Re-establishing a position in a security that has been sold for a loss within a period of 30 days of the date of the loss

20.

ACE, an open-end investment company, operates under the conduit, or pipeline, tax theory. Last year, it distributed 91% of all net investment income as a dividend to shareholders. Therefore, which of the following statements is true?

A) ACE paid taxes on 91% of its net investment income last year.

B) ACE paid taxes on 9% of its net investment income and capital gains last year.

C) ACE paid no taxes last year because it qualified as a regulated investment company under IRC Subchapter M.

D) ACE paid taxes on 9% of its net investment income last year.

21.

Cam and Casey own C&Cs Flowers, a small, unincorporated florist. They are looking to open an account to invest for the business. What sort of account should Cam and Casey open?

A) Corporate account

B) Joint tenants account

C) Sole proprietor account in both names

D) Partnership account

22.

Which of the following government-issued documents would not be considered acceptable proof of identity?

A) A current U.S. passport

B) A current military identification issued by the U.S. Department of Defense

C) A current drivers license issued by the State of Ohio

D) A current birth certificate issued by Los Angeles County, California

23.

Employer sponsored qualified retirement plans

A) may be a trust.

B) must be sponsored by a corporation.

C) may not be a trust.

D) must be a trust.

24.

ERISA regulations apply to which of the following?

A) Public sector retirement plans

B) Armed forces retirement plans

C) Federal government employee retirement plans

D) Private sector retirement plans

25.

All of the following addresses are acceptable to open an account for a partnership except

A) any physical location.

B) a Post Office Box.

C) a principal place of business.

D) a local office.

26.

Firms are required to institute a customer identification program (CIP) under the provisions of which of these?

A) Securities Exchange Act

B) The Uniting and Strengthening America by Providing Appropriate Tools to Intercept and Obstruct Terrorism Act (USA PATRIOT)

C) Bank Secrecy Act (BSA)

D) Anti-Money Laundering Act

27.

Assets may be transferred from one account to a different account within the same firm by use of which of these?

A) Transmittal notation

B) Transfer initiation form

C) Journal letter

D) Transfer notice

28.

A durable full power of attorney (FPOA) continues until

A) the grantor becomes incapacitated.

B) the grantor makes a verbal request to revoke the power.

C) the grantor dies.

D) five years later.

29.

Taylor is an active trader that believes they can achieve higher return by moving in and out of the market. Taylor is best described as which of the following?

A) Taylor is a buy-and-hold investor.

B) Taylor is a conservative investor.

C) Taylor is likely a mutual fund investor.

D) Taylor is an aggressive investor.

30.

Which of the following investments will require a specific disclosure regarding liquidation?

A) Exchange traded fund

B) Limited partnership

C) Class A mutual fund

D) Listed common stock

31.

The capital asset pricing model (CAPM) assumes

A) that no type of risk can be diversified away.

B) that prices are influenced by supply and demand only.

C) investors are averse to risk and expect to be rewarded for taking risk.

D) that those who participate in smaller transactions are generally wrong regarding timing purchases and sales.

32.

Which of the following is not a major asset class under asset allocation theory?

A) Options

B) Bonds

C) Cash

D) Stocks

33.

A security's actual performance versus expectations is known as which of these?

A) Delta

B) Gamma

C) Beta

D) Alpha

34.

A 78-year-old retiree had a $100,000 CD maturing and was dissatisfied with current yields on new CDs. Aside from Social Security and a small monthly pension, the $100,000 is his total potential source of income. The registered representative recommended investing the funds in a single premium immediate variable annuity, allocating funds to the separate account as follows: $10,000 Medical Technology, $40,000 High-Yield Corporate Bond, and $50,000 Growth & Income. The registered representative's recommendation is

A) unsuitable because of the aggressive nature of the portfolio choices.

B) unsuitable because of the lack of diversification of the portfolio choices.

C) suitable because the portfolio mix seems likely to offer increased income to the customer.

D) suitable provided the customer agrees with the recommendation.

35.

An investor has a portfolio diversified among many different asset classes. If there was an immediate need for cash, which of the following would probably be the most liquid?

A) CDL Common Stock Mutual Fund

B) QRS Money Market Mutual Fund

C) XYZ International Stock Mutual Fund

D) Cash value from a variable life insurance policy

36.

If ZB Invest Fund seeks capital appreciation, has a low dividend yield, and invests chiefly in the stock of large, well-performing companies that have earnings momentum, it is probably

A) a value fund.

B) a sector fund.

C) a special situation fund.

D) a growth fund.

37.

All of the following are financial considerations except

A) the size of a customer's mortgage.

B) the value of a customer's home.

C) the size of a customer's home.

D) a customer's debt service.

38.

Which of the following would be found on a customer's balance sheet?

A) The value of the customer's primary residence

B) The customer's monthly debt service

C) The customer's risk tolerance

D) The customer's income

39.

Correspondence—one of the three categories of communication with the public—is defined as

A) communication that is targeted only at individuals who currently maintain accounts with the broker-dealer.

B) written communications only that has been made available to 25 or fewer retail investors within the past six months.

C) any written or electronic communication that is distributed or made available to 25 or fewer retail investors within any 30-calendar-day period.

D) electronic communication only that has been made available to 25 or fewer retail investors within the past six months.

40.

If a registered representative wishes to distribute a copy of a national magazine article about the GAON Mutual Fund, which of the following statements is correct?

A) The article may be used without prior approval of a principal of the member firm.

B) This material meets the definition of an independently prepared reprint.

C) The article may be sent without prior or concurrent delivery of the GAON Fund prospectus.

D) Because this material is already in the public domain, it is excluded from the rules on communication with the public.

41.

There are retention requirements for certain records of a broker-dealer. One of those is the firm's retail communications files. Under FINRA rules, copies of retail communications must be retained for

A) 3 years after last use.

B) 6 years after last use.

C) 3 years after first use.

D) 6 years after first use.

42.

A registered representative has been doing some research on his own. He would like to share the information with some of his clients and sends an email to 15 of them. He also has some prospects he's been working on and sends the email to 12 of them during the same week. Under the FINRA rule on communications with the public, this would be considered

A) an electronic communication.

B) correspondence.

C) retail communication.

D) exempt from the principal approval requirements.

43.

Under the Code of Procedure, if an associated person is suspended from a FINRA member firm, he

A) may immediately continue in a clerical position.

B) may still keep an office but may not sell for the firm.

C) may not remain on the member firm's premises.

D) may continue to sell, but only informally.

44.

When must a FINRA member firm make a copy of the FINRA rules available to customers?

A) Annually

B) Every three years

C) Upon the customer's request

D) In response to a complaint

45.

Per FINRA, a customer could include all of the following except

A) an individual.

B) a trust.

C) a corporation.

D) a broker-dealer.

46.

If mediation fails, the dispute proceeds to arbitration. Under what circumstances may a mediator then serve on the arbitration panel?

A) None

B) If the panel consists of a minimum of three arbitrators

C) With SEC permission

D) If the panel consists of a minimum of six arbitrators

47.

How long does a person have, after the filing of a full termination Form U5, to associate with a member firm before they must requalify by taking an appropriate exam?

A) Ten years

B) Two years

C) Three years

D) One year

48.

Which of the following does not automatically disqualify an applicant for registration?

A) A misdemeanor conviction involving securities or money within the past 10 years

B) Court injunctions prohibiting the individual from acting as an investment adviser

C) Misstatements unwittingly made in an application for membership or registration as an associated person

D) A felony conviction, either domestic or foreign, within the past 10 years

49.

If a person unsuccessfully attempts the Series 6 exam three times in a row, how long must they wait after the third attempt before attempting the exam again?

A) 120 days

B) 60 days

C) 90 days

D) 180 days

50.

How long does FINRA retain jurisdiction after the filing of a Form U5 full termination?

A) 180 days

B) Five years

C) One year

D) Two years

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Series 6 Practice Exam 4

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Welcome to your Series 6 Practice Exam 4

This test is designed to prepare you mentally for the actual Series 6 Exam with the same number of (50 questions) and the same time allowed (90 minutes) as the actual exam.

The Series 6 Exam is breakdown into four (4) Parts.

Here are the Four (4) Domains of the Series 6 Exam with the weightage and number of questions in this practice exam:

1. Seeks Business for the Broker Dealer from Customers and Potential Customers [12 Questions] - 24%

2. Opens Accounts after Obtaining and Evaluating Customers' Financial Profile and Investment Objectives [08 Questions] - 16%

3. Provides Customers with Information about Investments, Makes Recommendations, Transfers Assets and Maintains Appropriate Records [25 Questions] - 50%

4. Obtains and Verifies Customers’ Purchase and Sales Instructions and Agreements; Processes, Completes, and Confirms Transactions [05 Questions] - 10%

Please click NEXT to start your Free Series 6 PRACTICE EXAM right away.

Best of Luck!

Tocoma Coffee 5% preferred stock trades at $95 a share. What is the current yield?

A) 5.25%

B) 8.00%

C) 22.00%

D) 6.25%

A customer bought a bond that yields 6.5% with a 5% coupon. When the bond matures, the customer will receive

A) $1,000 plus a call premium.

B) $1,025.

C) $1,065.

D) $1,050.

After an issuer files an S-1 statement with the SEC, a cooling-off period begins that lasts for how many days minimum?

A) 20 days

B) 10 days

C) 30 days

D) As long as FINRA desires

Which of the following is not an acceptable reason to amend a Form D filing?

A) Removal of non-complimentary material information

B) Correct a factual error

C) Correct a typographical error

D) To reflect a change in the material facts

The first date on which the buyer would not be entitled to receive a declared dividend being paid by a corporation is

A) the payment date.

B) the record date.

C) the declaration date.

D) the ex-date.

Your client has a solid financial foundation, has additional discretionary income to invest, is bullish, and is willing to accept the higher risks that come with the potential for higher rewards. Which of the following might you recommend?

A) Sector funds

B) Value funds

C) Long put options

D) Asset allocation funds

Investors should consider all of the following when investing in a mutual fund except

A) the expense ratio.

B) the investment adviser.

C) the time horizon.

D) the underwriter.

The primary objective of a particular mutual fund is the payment of dividends, regardless of the market's current state. Capital growth is a secondary objective. Which of the following industry groups would be appropriate for the fund's portfolio?

A) Aerospace

B) Public utilities

C) Consumer appliances

D) Computer technology

From which of the following is the 12b-1 fee deducted?

A) Public offering price of a share

B) Assets of the fund

C) Investment advisory fee

D) Difference in POP and NAV

10.

An investment company portfolio manager who switches among investment classes based on anticipated market changes is using a technique known as

A) dollar cost averaging.

B) value investing.

C) asset allocation.

D) indexing.

11.

When evaluating the purchase of an immediate variable annuity for a retiree, the most important factor in determining suitability is

A) marital status of the annuitant.

B) the uncertainty of the amount of the monthly check.

C) tax status of the annuitant.

D) the guaranteed minimum check amount

12.

An investor purchased a variable annuity some years ago and has been making regular payments into it. He has encountered financial difficulties and asks his registered representative if he can arrange to delay his next few payments. The registered representative explains that

A) the customer may pay in as much or as little, as frequently or as infrequently, as he pleases, with no penalty.

B) the customer should exchange his annuity for a variable life insurance contract under Section 1035 to avoid tax consequences.

C) if he starts missing payments, there will be penalties.

D) if he cannot meet his commitments, he should not have invested in the first place.

13.

The value of a variable annuity separate account fluctuates in relationship to

A) the general account maintained by the insurance company.

B) the value of the separate account portfolio.

C) the Consumer Price Index.

D) the S&P 500 market index.

14.

An important basic characteristic of common stocks that makes them a suitable type of investment for the separate account of variable annuities is

A) the yield is always higher than mortgage yields.

B) the safety of the principal invested.

C) changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices.

D) the yield is always higher than bond yields.

15.

In a variable annuity contract, the assumed interest rate (AIR) refers to

A) the rate used in the prospectus to show the potential growth of the contract.

B) the amount of payments required by the investor to maintain the contract.

C) the rate of return needed to maintain the annuity payments at a constant level.

D) the rate at which purchases are required in the separate account to qualify for special tax treatment.

16.

Your open-end investment company customer has decided to take automatic reinvestment of dividends and capital gains distributions. This choice will

A) increase the taxes on these distributions.

B) lower the taxes on these distributions.

C) defer the taxes on these distributions.

D) not alter the tax due on the distributions.

17.

Which of the following statements describe the conduit theory of taxation?

A) Dividends and interest are passed through to the investor after the fund pays taxed.

B) Dividends and interest accumulate tax free to the shareholder.

C) Earnings distributed by a regulated investment company are taxed three times.

D) A fund is not taxed on earnings it distributes provided distributions equal 90% or more of net investment income.

18.

An investor sells EGH common stock that she has owned for six months at a loss of $2,500 on February 16. Two weeks later, she purchases preemptive rights to EGH common stock at a price of $1.50, exercisable at a price of $35. Which of the following best describes the tax treatment of this transaction?

A) By purchasing the rights, the investor reduces the cost basis of the shares sold at a loss by the full purchase price of the rights. The losses incurred are, therefore, reduced by the purchase price of the rights.

B) The purchase of the rights, according to IRS rules, increases the cost basis of the shares sold at a loss and allows for a greater write-off on the current year's taxes. The maximum, however, is $3,000 in net losses.

C) The purchase of the rights, according to IRS rules, represents the reestablishment of the investor's position in substantially identical securities, and any potential losses will be disallowed under wash sale rules.

D) The purchase of the rights reduces the cost basis in the stock acquired. The investor may write off the full $2,500 loss on the current year's tax return.

19.

Which of the following statements describes the pipeline theory of taxation?

A) Dividends and interest are passed through to the investor without the fund being taxed.

B) Earnings distributed by a regulated investment company are taxed three times.

C) Dividends and interest accumulate tax free to the shareholder.

D) A fund is not taxed on earnings it distributes provided distributions equal 80% or more of net investment income.

20.

If your customer sells, for a profit, a stock they have held for three years they will have

A) a short-term gain.

B) a long-term loss.

C) a long-term gain.

D) a short-term loss.

21.

An agent of a broker-dealer must obtain all of the following when opening a customer account except

A) investment objectives.

B) date of birth.

C) marital status.

D) occupational history.

22.

A transfer on death (TOD) designation may be made for all of the following account except

A) joint tenants with rights of survivorship (JTWROS).

B) tenants in common (TIC).

C) individual.

D) tenants in the entirety.

23.

To avoid tax and penalty, an IRA may be rolled over once every

A) quarter.

B) 3 years.

C) 12 months.

D) calendar year.

24.

All of the following statements concerning IRA contributions are true except

A) if you file your taxes on January 15, you may deduct your IRA contribution even if it is not made until April 15.

B) between January 1 and April 15, you may make contributions for the current year, the past year, or both.

C) you may make contributions for the past year after April 15, provided you have filed an extension on a timely basis.

D) you may contribute to this year's IRA from January 1 of this year until April 15 of next year.

25.

For a non-U.S. person, all of the following are acceptable documents for a customer identification program except

A) an alien ID.

B) a local school ID.

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