HESI A2: Chemistry (Quiz 1) Welcome to your Series 65 Practice Exam 3 This test is designed to prepare you mentally for the actual Series 65 Exam with the same number of (130 questions) and the same time allowed (180 minutes) as the actual exam. The Series 65 Exam is breakdown into four (4) Parts. Here are the Four (4) Domains of Series 65 Exam with the weightage and number of questions in this practice exam: 1. Economic Factors and Business Information [20 Questions] - 15% 2. Investment Vehicle Characteristics [32 Questions] - 25% 3. Client Investment Recommendations and Strategies [39 Questions] - 30% 4. Laws, Regulations, and Guidelines, including Prohibition on Unethical Business Practices [39 Questions] - 30% Please click NEXT to start your Free Series 65 PRACTICE EXAM right away. Best of Luck! 1. Gross Domestic Product (GDP) is increasing. Real interest rates are relatively high. Consumer sentiment is strong, as are auto and retail sales. Labor productivity is declining. What state of the business cycle is the economy likely experiencing? A) Expansion to peak B) Trough to recovery C) Peak to contraction D) Recovery to expansion None 2. Interest rates are declining. An analyst would be most likely to state that the business cycle is in which stage? A) Trough B) Peak C) Expansion D) Contraction None 3. Which of the following is considered the most accurate method of measuring GDP? A) As a function of GNP B) Eurodollars C) Actual dollars D) Constant dollars None 4. Interest rates are rising. An analyst would be most likely to state that the business cycle is in which stage? A) Contraction B) Trough C) Peak D) Expansion None 5. Economists have determined that the economy is slowing down. Orders for durable goods have been declining and unemployment, while not a reason for concern, has been steadily increasing over the past year. Given the information provided, what phase of the business cycle is the economy currently experiencing? A) Deflation B) Trough C) Contraction D) Expansion None 6. An investment strategy that is designed to minimize risk and preserve the investor's principal is A) a growth investment strategy B) a defensive investment strategy C) a market capitalization investment strategy D) an aggressive investment strategy None 7. While reviewing nationwide industrial production figures, an analyst notices that inventories have been rising. From that information, one would gather that the economy is most likely in which phase of the business cycle? A) Recovery B) Contraction C) Peak D) Expansion None 8. During the past 2 quarters, the GDP declined by 3%, unemployment rose by 0.7%, and the Consumer Price Index fell off by 1.3%; this economic condition is called A) inflation B) depression C) stagflation D) recession None 9. The contraction phase of the business cycle is least likely accompanied by A) decreasing inflation pressure. B) decreasing unemployment. C) decreasing business and consumer expenditures. D) low or negative economic growth. None 10. If the Consumer Price Index (CPI) is down but consumer demand is up, the economy is likely in which stage of the business cycle? A) Contraction to trough B) Peak to contraction C) Recovery to expansion D) Recovery to trough None 11. Which of the following is most likely to be regarded as a defensive stock? A) A stock selling at an extremely high PE ratio B) A stock with a strong cash position and little debt C) A food company stock D) An aerospace stock None 12. Which of the following would NOT be considered a defensive security? A) Steel company stock B) Tobacco stock C) Food chain stock D) Utility company stock None 13. If a customer purchases a food company stock and a utility stock, the customer's portfolio is A) balanced B) cyclical C) diversified D) defensive None 14. The gross domestic product (GDP) for the United States is composed of A) the national debt B) the sum of all consumer goods, capital goods, and services produced in the United States and net exports to other countries C) the sum of all goods and services, imports, and foreign investment D) the balance of payments None 15. Which of the following best describes the economic phase in which unemployment increases and businesses operate at their lowest capacity levels? A) Contraction B) Expansion C) Trough D) Peak None 16. To determine the amount of change in the GDP from 1 year to another, both years' GDP should be converted into A) the exchange value of the dollar, as compared with major foreign currencies B) the current dollar price of gold bullion C) international depositary receipts D) constant dollars None 17. To reflect a more accurate picture of economic results, gross domestic product is adjusted A) to include bank reserves B) for inflation C) to match foreign GDP D) downward by the balance of payments None 18. Expansions in the business cycle are characterized by A) higher consumer debt, rising inventories B) increasing college enrollments and enlistment in military service C) increasing consumer demand for goods and services, increasing industrial production, and rising stock markets and property values D) increase in want ads in newspapers, decrease in nonfarm jobs None 19. Which of these industries would be considered defensive in the face of a recession? A) Food producers B) Automobile manufacturing C) Trucking D) Real estate construction None 20. An investor purchasing gold bullion is most likely looking for an investment that is A) countercyclical. B) cyclical. C) income producing. D) exchange traded. None 21. A technical analyst would be most interested in which of the following? A) Working capital B) 200-day moving averages C) Capitalization ratios "D) Price-to-earnings ratios None 22. All of the following statements regarding technical analysis are correct except A) technical analysts rely heavily on financial ratios in their analysis of stocks. B) technical analysts attempt to predict the future movement of stock prices based on past trends. C) technical analysts use terms such as trendline, support, and resistance in analyzing stocks. D) technical analysts rely on charts to predict the future prices of stocks. None 23. An analyst uses the dividend growth model to assist in determining appropriate stocks to recommend. This analyst would consider all of the following factors EXCEPT A) required rate of return B) growth of the dividend C) market capitalization D) current dividend None 24. A technical analyst would be least concerned with A) advance/decline B) short interest C) book value per share D) S&P 500 index None 25. Sortel Industries has preferred stock outstanding that pays annual dividends of $3.75 a share. If an investor wants to earn a rate of return of 8.5%, how much should she be willing to pay for a share of Sortel preferred stock? A) $31.88 B) $44.12 C) $42.10 D) $33.89 None 26. A client has a TIPS with a coupon rate of 3.5%. The inflation rate has been 4% for the last year. What is the inflation-adjusted return? A) 7.50% B) –0.50% C) 3.50% D) 4.00% None 27. The longest initial maturity for U.S. T-bills is: A) 52 weeks. B) 13 weeks. C) 39 weeks. D) 2 years. None 28. An investor purchases a TIPS bond with a 4% coupon. If during the first year the inflation rate is 9%, the approximate principal value of the security at the end of that year will be A) $1,040. B) $1,045. C) $1,092. D) $1,090. None 29. All of the following are true of government agency bonds EXCEPT A) older ones have coupons attached, new ones are book entry B) they are direct obligations of the U.S. government C) they trade openly D) they are considered relatively safe investments None 30. Which of the following is a direct obligation of the U.S. government? A) Bank for Cooperatives bonds B) Fannie Maes C) Government bond mutual funds D) Ginnie Maes None 31. A TIPS bond pays interest at the rate of 4%. If the annual inflation rate is 5%, what is the principal value after the 4th year? A) $1,169.86 B) $1,200.00 C) $1,171.66 D) $1,218.40 None 32. Which of the following agency securities is guaranteed by the U.S. government? A) Freddie Mac B) Federal Home Loan Bank C) Fannie Mae D) Ginnie Maes None 33. A TIPS bond with a par value of $1,000 has a coupon rate of 4%. During years 1 and 2, the inflation rate has been 6%. What effect will this have on the TIPS 2½ years later? A) The principal value will be $1,080. B) The next interest payment will be $23.19. C) The next interest payment will be $20.00. D) The next interest payment will be $46.37. None 34. Treasury bills are A) issued in book entry form B) callable C) issued in bearer form D) issued at par None 35. GNMA mortgage-backed securities are A) available to investors through a minimum purchase of $5,000 B) exempt from federal income tax for the interest payments received by the bondholders C) backed exclusively by a pool of mortgages D) a direct obligation of the U.S. government None 36. Which of the following U.S. government securities do NOT bear a stated interest rate but are sold at a discount through weekly auctions? A) TIPS B) Treasury bills C) Treasury notes D) Treasury bonds None 37. All of the following are true about GNMAs EXCEPT A) they provide funds for residential mortgages B) interest is paid semiannually C) they are backed by the U.S. government D) interest on GNMAs is not exempt from state and local taxes None 38. Which type of risk is a mortgage-backed security most likely to experience? A) Market risk B) Reinvestment risk C) Business risk. D) Exchange rate risk None 39. A TIPS bond is issued in the principal amount of $1,000, paying 3.5%. Over the security's 5-year term, the inflation rate is 4%. What is the amount of the final semiannual interest check? A) $42.66 B) $17.50 C) $21.33 D) $35.00 None 40. A respected analyst reports that last week's T-bill rate at 6% is lower than the rate for the preceding week and lower than the average for the past month. Which of the following is TRUE? A) The general level of interest rates is increasing. B) Investors are paying less for T-bills. C) Investors are paying more for T-bills. D) The yield curve is inverted. None 41. A TIPS bond is issued in the principal amount of $1,000, paying 3.5%. Over the security's 5-year term, the inflation rate is 4%. What is the principal value of the bond at the end of 5 years? A) $1,200 B) $1,440 C) $1,219 D) $1,000 None 42. An investor owns a TIPS bond with an initial par value of $1,000. The coupon rate is 6%, and during the first year, the inflation rate is 9%. How much interest would be paid for the year? A) $64.11 B) $90.00 C) $65.40 D) $60.00 None 43. All of the following debt instruments pay interest semiannually EXCEPT A) Ginnie Mae pass-through certificates B) municipal general obligation bonds C) industrial development bonds D) municipal revenue bonds None 44. Ginnie Mae pass-throughs will pay back both principal and interest A) monthly B) quarterly C) semiannually D) annually None 45. One of the ways in which U.S. government agency issues differ from those offered directly by the U.S. Treasury is that A) agency issues are taxable on the federal level while Treasury issues are not B) agency issues typically carry higher returns than Treasury issues because of the lack of direct government backing C) agency issues are more likely to be issued in larger amounts D) agency issues frequently trade on the NYSE while Treasuries never do None 46. A mortgage-backed security (MBS), such as a Ginnie Mae, makes a combination principal and interest payment to an investor. This payment will be A) partly taxed as ordinary income and partly a tax-free return of principal B) taxed as ordinary income C) taxed as a capital gain if underlying mortgage is prepaid D) tax free None 47. Which of the following usually does NOT pay interest semiannually? A) Treasury bonds B) Treasury notes C) Public utility bonds D) GNMA None 48. To protect against possible inflation, your clients purchase some TIPS with a 2.5% coupon. If, over the next 6 years, the annual inflation rate is 6%, the principal value of each TIPS will be closest to A) $1,150 B) $1,360 C) $1,161 D) $1,426 None 49. An investor owns a TIPS bond with an initial par value of $1,000. The coupon rate is 6% and, during the first year, the inflation rate is 9%. How much interest would be paid for the year? A) $90.00 B) $65.40 C) $60.00 D) $64.11 None 50. Which of the following are true of Ginnie Maes but NOT of other agency mortgage-backed securities? A) Yield more than T-bonds B) Collateralized by mortgage. C) Are pass-through securities D) Backed by the full faith and credit of the U.S. government None 51. All of the following statements regarding Government National Mortgage Association (GNMA) pass-through securities are true EXCEPT A) investors own an undivided interest in a pool of mortgages B) GNMAs are considered to be the riskiest of the agency issues C) investors receive a monthly check representing both interest and a return of principal D) the minimum initial investment is $25,000 None 52. A TIPS bond with a par value of $1,000 has a coupon rate of 6%. During year 1, the inflation rate is 8%. How does this affect the TIPS in year 2? A) The interest payment will be approximately $65. B) There is no effect until the 3rd year. C) The market price increases to approximately $1,080. D) The coupon increases to 8%. None 53. Alvin's spouse is a trustee of a trust established by Henrietta Flood, which directs income from the trust be paid to Alvin, for as long as he lives. Alvin's son, Floyd, will receive the principal upon Alvin's death. Floyd would like to receive some of the principal before Alvin's death, and Alvin does not object. How should his spouse, the trustee, act in this situation? A) Distribute part of the income to Floyd. B) Distribute part of the principal to Floyd. C) Distribute all of the principal to Floyd. D) Follow the trust terms, continuing to distribute the income to Alvin and the principal to Floyd upon Alvin's death. None 54. Because a trust account is managed for the beneficial interest of the beneficiary, the investment adviser representative can A) have a check drawn on the account payable to the trustee for expenses B) place the securities in the trust fund in a noncustodial brokerage account C) have funds withdrawn from the account at the direction of the beneficiary D) arrange to have the trust's funds pledged to support a loan for the trustee None 55. Your advisory client is an 86-year-old woman who is presently in the hospital, unable to communicate due to a severe stroke. For the past 6 years, she has followed the practice of making annual gifts of stock to her children and grandchildren on her birthday. Because her 87th is coming up later this month, her oldest son approaches you and asks you to continue the policy. A) With 6 years of prior history, you know this is what she would want you to do so you go ahead as in previous years. B) Without a proper durable power of attorney being produced, you cannot do anything. C) You should go to the hospital and see if she can blink her eyes to indicate yes or no. D) You may only follow the provisions of her will. None 56. In a trust account, the person who makes the account management decisions is A) the investment adviser representative B) the trustee C) the nontrustee custodian D) the beneficiary None 57. When a trustee is managing the trust assets, which of the following is the most important consideration? A) Preservation of capital B) Reasonable income C) Minimizing expenses D) The purposes, terms, distribution requirements, and other circumstances of the trust None 58. If a customer who has granted a durable power of attorney to her son dies, which of the following statements regarding the power of attorney is TRUE? A) It is canceled on the death of either principal. B) It remains in effect until the son cancels it. C) It remains in effect until the executor of the estate cancels it. D) It remains in effect only if the son is the sole heir to the estate. None 59. One of your longtime advisory clients has been critically injured in an automobile accident. The client is in the ICU at the local hospital, unable to communicate. You would be able to accept orders for the account A) from the client’s lawyer B) from the client by getting a squeeze of the hand for a “yes” C) from a person who has a written durable power of attorney over the account D) from the client’s spouse None 60. One of your existing clients wishes to open a new account in the name of his spouse and enter orders on her behalf. A) This action is prohibited unless the customer signs a trading authorization on behalf of his spouse. B) This practice is ordinary and acceptable. C) This action is prohibited unless the spouse signs a trading authorization. D) The agent could be liable if the stock declines in value. None 61. One of your customers has a substantial savings account at the local S&L. The customer has several grandchildren and wants the flexibility of being able to change the beneficiary allocations as their financial conditions change. You should recommend that the customer investigate the use of A) a durable power of attorney (POA). B) a Totten trust. C) an irrevocable trust. D) a Uniform Transfers to Minors Act (UTMA) account. None 62. If a client wishes the assets in her account to pass directly to specific beneficiaries after her death, her account should be titled A) TIC B) testamentary account C) JTWROS D) TOD None 63. One of the situations that investment adviser representatives may encounter is the death of a client. When that happens, orders may be accepted from A) the trustee in intestacy. B) an individual with a durable power of attorney. C) the deceased client’s spouse. D) the deceased client’s children. None 64. In the banking industry, the term POD refers to an account similar to the TOD designation used by broker-dealers. An old, but sometimes still used term to describe this kind of account, is A) demand deposit account (DDA) B) Totten trust C) revocable trust D) passbook savings account None 65. A wealthy individual has set up a GRAT. Should she die during the time the trust is active, how are the remaining assets in the trust taxed? A) No tax is due if the grantor should die during the term of the trust. B) The original value plus any appreciation passes to the beneficiaries but is subject to gift tax. C) The original value plus any appreciation is taxed as part of the grantor’s estate. D) The original value plus any appreciation passes to the beneficiaries and is taxed as ordinary income. None 66. When a will calls for property to be distributed per stirpes, it means that A) the property is divided into as many equal shares as there are surviving children of the designated ancestor and deceased children who left surviving descendants B) the property is divided into as many equal shares as there are surviving children and grandchildren of the designated ancestor C) all living descendants of the ancestor receive equal shares in the property remaining after all estate expenses are paid D) the property is divided into as many equal shares as there are surviving children of the designated ancestor, with nothing going to surviving descendants of deceased children None 67. A major benefit of a revocable trust is that A) the settlor cannot also be the beneficiary. B) the grantor retains control of the assets. C) the grantor saves on income taxes. D) the assets are not included in the grantor’s estate. None 68. A major benefit of a revocable trust is that A) the settlor cannot also be the beneficiary. B) the grantor retains control of the assets. C) the grantor saves on income taxes. D) the assets are not included in the grantor’s estate. None 69. Which type of individual account allows for investments held in that account to go straight to a named beneficiary outside of probate? A) Account titled JTWROS B) TOD account C) Testamentary account D) Advisory account None 70. If the Smiths want to open a joint account at AAA Securities Corporation and have their securities transferred to their 3 daughters upon the death of the last surviving account holder, their agent should recommend that the Smiths open A) a joint tenancy account with right of survivorship and execute a transfer on death (TOD) registration form B) a tenants in common account C) individual accounts in the name of each daughter D) a joint tenancy account with right of survivorship None 71. Mr. and Mrs. Williams are a retired couple receiving most of their income from a diversified portfolio of high-quality bonds and preferred stock. One of the reasons that life insurance might be a useful addition to their overall planning is that A) the premiums can be paid directly from their brokerage account B) upon the death of the insured, the insurance provides liquidity to preserve income-producing assets from having to be liquidated to cover death expenses C) the proceeds of a life insurance policy are free of income tax D) dividends received on a life insurance policy are tax free None 72. A client with a sizable estate would probably find it most efficient to pay estate taxes with A) cash B) proceeds from the liquidation of a tax-deferred retirement plan C) proceeds from a life insurance policy D) proceeds from the liquidation of a diversified portfolio None 73. A grantor retained annuity trust is a planning tool designed to pass assets to beneficiaries (usually children) in a way to minimize A) property taxes. B) income taxes. C) excise taxes. D) estate taxes. None 74. A client of yours is getting older and is concerned about having her wishes met relating to medical issues when she is no longer capable of communicating them. The most appropriate vehicle for her would be A) an incapacitation will B) a joint and survivors will C) a life support will D) a living will None 75. Rendering investment advice requires knowing certain information about your client. Which of these would be the least reliable source of that information? A) Your firm’s confidential planning questionnaire B) Client’s income tax returns C) Face-to-face meeting with the client D) Client’s Facebook page None 76. In general, the first step an investment adviser should take with a new client is A) information gathering. B) making suitable recommendations. C) monitoring the portfolio. D) explaining the risks of investing. None 77. In administering a joint account, a member firm's responsibilities concerning suitability determination and information disclosure apply to A) the person with the greatest capital contribution B) all persons who jointly own the account C) the person with trading authority for the account D) the person whose Social Security number is on the account None 78. An investment adviser would be least likely to gather information about a new client A) by using a questionnaire. B) on a smartphone app. C) during a face-to face interview. D) from social media. None 79. One of the tasks of an investment adviser representative is gathering information to complete a client financial profile. Among the sources of this information would be all of the following except A) the client’s social media accounts. B) the client’s tax returns. C) the client’s life insurance policies. D) the client’s bank and brokerage statements. None 80. An adviser always inquires into her clients' investment objectives, financial situations, and needs. The investment adviser is A) violating her ethical obligation regarding confidentiality of client information B) determining whether she has any inherent conflicts of interest with her clients C) obtaining the information required to fulfill her professional obligation regarding suitability D) giving herself an unethical advantage regarding how much the client can afford to spend on an advisory fee None 81. An investment advisory firm requires all new clients to complete a 4-page questionnaire before conducting the first meeting. This would be known as A) the investment adviser’s brochure. B) the client disclosure document. C) fulfilling the requirements of the CIP. D) the information-gathering stage. None 82. John and his sister, Alice, open a margin account as JTWROS. John contributes $50,000, and Alice contributes $25,000. They have agreed that Alice will trade the account, and they will share in the profits and losses equally. As their agent, you would gather information regarding suitability for A) either, because in a JTWROS account the owners share equally B) Alice, because she will be trading the account C) John, because he has made the larger contribution D) both, because information regarding all owners is relevant None 83. Your firm onboards a new investment advisory client. Which of the following would be the most appropriate way to obtain information about the client's objectives and constraints? A) Interview with the client’s neighbors B) Monitoring the client’s Tweets C) Client’s LinkedIn page D) Face-to-face meeting at the client’s home None 84. If an investment adviser uses a client questionnaire to determine a client's financial situation, the adviser is A) acting unethically, as this information may be used to determine how large an advisory fee to charge B) acting ethically, as the information is necessary to determine the suitability of recommendations C) acting correctly to determine if a conflict of interest exists D) acting unethically, as client information is confidential None 85. Several investors open an account in joint tenancy. Financial information is required on which of the following investors? A) The majority of the investors B) All the investors C) Only the one authorized to trade the account D) The largest investor only None 86. An investment adviser would be least likely to gather financial planning information about a client from A) the client’s Tweets. B) a detailed financial planning questionnaire. C) a 2-hour lunch meeting. D) an hour-long WhatsApp chat. None 87. An individual's net worth is A) another term for discretionary income B) largely irrelevant in identifying the individual's investment objectives C) best determined by examining the individual's personal income statement D) the difference between the individual's assets and the individual's liabilities None 88. For which of the following business entities would suitability be based on the objectives of all the owners on a collective basis? A) Pension plan B) Sole proprietorship C) General partnership D) C corporations None 89. To maintain the proper portfolio balance for a client, it would be most appropriate to review the portfolio at least A) annually B) client and portfolio review is not necessary C) every 10 years D) every two years None 90. Which of the following items is NOT necessary to establish before helping a client open an investment account? A) Emergency fund B) Adequate life insurance C) Zero balance on all credit cards D) Established short- and long-term investment goals None 91. An investment adviser representative is preparing a financial plan for a new client. As part of the data collection process, the IAR needs to collect the relevant information to analyze the client's cash flow. Included in the cash flow statement would be all of the following EXCEPT A) assets B) interest on savings C) income taxes D) salary None 92. Alpha-Beta Advisers (ABA) has its principal office in State X. ABA limits its clientele to insurance companies that are authorized to do business in State X. Which of the following best describes the registration requirements for ABA? A) Both the SEC and State X B) SEC only C) State X only D) Neither the SEC nor State X None 93. Which of the following parties is most likely to be considered an investment adviser under the Investment Advisers Act of 1940? A) A CPA who manages investment accounts for 50 clients and charges hourly fees for the service B) Dow Jones, Inc., publisher of The Wall Street Journal C) An expert in fixed-income securities whose only clients are individuals and whose only recommendations deal with securities issued or guaranteed by the U.S. Treasury D) The trust department of Citibank, which handles billions of dollars in trust assets None 94. Which of the following would have to register as an investment adviser under the Uniform Securities Act? A) A retired aeronautical engineer who charges a nominal fee for holding seminars on opportunities in aerospace stocks B) An accountant who advises clients about investments as an incidental part of services C) An economics professor who occasionally gives a lecture to business groups about the stock market D) A trust company None 95. Under the Uniform Securities Act, which of the following statements is TRUE about an investment adviser who does not have an office in a state and solicits no more than 5 clients in that state? A) He is not required to register as an investment adviser in that state. B) He is not liable for violations of the antifraud provisions. C) He is exempt from the advertising requirements in the state. D) He must file a consent to service of process. None 96. Under the Uniform Securities Act, an investment adviser would be exempt from registration in a state in which he has no place of business if he A) is registered as a broker-dealer B) had no more than 5 clients in that state within the past 12 months C) had no more than 10 clients in that state within the past 12 months D) had no more than 15 clients in that state within the past 12 months None 97. Under the Uniform Securities Act, which of the following persons has to register as an investment adviser? A) An agent of a broker-dealer who gives investment advice within the course of his duties with the firm for which a fee is charged B) A broker-dealer who gives advice for which he charges a specific fee C) A broker-dealer who gives investment advice that is incidental to the course of its business and for which no special compensation is received D) An attorney who writes a legal opinion for a municipal bond indenture None 98. Under the USA, a person who is in the business of providing advice on trading futures contracts in addition to advising clients on securities issued or guaranteed by the U.S. government is A) not required to be a registered investment adviser in the state B) required to be a registered investment adviser representative in the state C) required to be a registered agent in the state D) required to be a registered investment adviser in the state None 99. Which of the following persons must register as an investment adviser under the Uniform Securities Act? A) An investment adviser who only serves institutional clients and whose only office is in this state B) An accountant who makes no pretense of providing investment advisory services but gives incidental advice to clients as a small part of accounting services provided C) An investment adviser representative with no place of business in the state who has dealt with 7 retail clients during the most recent 12 month period D) An investment adviser whose advice is limited to securities issued or guaranteed by the U.S. government and who has 3 places of business in the state None 100. Who of the following is not exempt from registration as an investment adviser under the Investment Advisers Act of 1940? A) An adviser, with total AUM of $125 million, specializing in stocks listed on the New York Stock Exchange, whose only place of business is in State F and whose only clients are 110 State F resident individuals B) An adviser to seven private funds with total assets under management in the U.S. of $125 million C) An adviser whose clientele consists solely of insurance companies D) An adviser whose only office is in State G who deals only with State G residents, none of whom is a private fund, and does not deal in securities listed on any national securities exchange None 101. Reticent Asset Management (RAM) is claiming an exemption from registration with the state because it is an adviser to private funds. One of the requirements to qualify for this exemption is A) all investors must be qualified clients. B) private fund assets under management cannot exceed $110 million. C) all investors must be accredited. D) there can be no more than 10 investors during any 12-month period. None 102. Searching Out New Growth (SONG) is a venture capital fund. As such, all of the following statements are true EXCEPT A) SONG only issues securities which are, except in extraordinary circumstances, non-redeemable B) SONG’s investment adviser is exempt from registration C) SONG must have less than $150 million in assets in the fund D) SONG is not registered under the Investment Company Act of 1940 None 103. The term "private fund", as defined under federal and state law, would not apply to A) an issuer that would be an investment company, as defined in section 3 of the Investment Company Act of 1940, but for section 3(c)(1) or 3(c)(7) of that act. B) a hedge fund. C) a venture capital fund. D) a leveraged ETF. None 104. Form PF must be filed by A) SEC-registered advisers with at least $150 million in private fund assets under management B) SEC-exempt reporting advisers C) SEC-registered advisers with no more than $150 million in private fund assets under management D) state-registered private fund managers, regardless of the amount of assets under management None 105. The Investment Advisers Act of 1940 would consider each of the following investment advisers to be exempt from registration EXCEPT A) an adviser whose only clients are insurance companies B) an adviser whose only clients are venture capital funds C) an adviser whose only clients are banks D) an adviser who maintains an office in only one state, advises only residents of that state (none of whom is a private fund), and gives advice relating solely to securities not traded on any national exchange None 106. In which of the following cases is the exemption from registration with the SEC not based on the value of assets under management? A) An investment adviser that acts as an adviser solely to one or more national banks B) An investment adviser with assets under management of less than $25 million C) An investment adviser that acts as an adviser solely to one or more venture capital funds D) An investment adviser that acts as an adviser solely to private funds and has assets under management in the United States of less than $150 million None 107. One of the exemptions from registration under state and federal law applies to investment advisers to private funds. One characteristic of all private funds is that A) they have assets of less than $150 million B) they are not registered as investment companies C) their advisers are exempt from filing reports on Form ADV D) they have no more than 100 investors None 108. On last year's annual updating amendment filed with the SEC, Alpha Investment Advisers indicated that it had more than $140 million in assets under management. Due to a reduction in the size of the firm, this year's annual updating amendment shows that assets under management have fallen to the $75 million level and are expected to remain there. Which of the following actions are required for Alpha? A) Withdraw from SEC registration within 180 days of the adviser's fiscal year-end B) Do nothing and continue as a federal covered adviser C) Withdraw from SEC registration immediately D) Withdraw from SEC registration within 90 days of the adviser's fiscal year-end None 109. Under current regulations, registration with the SEC is optional for all of the following investment advisers EXCEPT A) Midwestern Asset Managers, LLC, with $53 million in AUM, required to register in 17 states B) Grand Visions Advisers, a sole proprietorship with $104 million in AUM C) CEF Investment Managers, LTD., a partnership managing a small registered closed-end investment company traded on the OTC Bulletin Board D) Employee Benefit Specialists, Inc., a pension consultant with $225 million in AUM None 110. An investment adviser is registered in States A and B with its principal office in State B. The Administrator of State A can request to see A) internal communications regarding the company's participation in a local charitable event B) proof that the IA meets State A's financial and recordkeeping requirements C) advertisements run in State A D) sales records relating to clients who are residents of State B None 111. Which of the following firms would be a federal covered adviser? A) GHI Consultants, a sole proprietorship managing $15 million belonging to high-net-worth individuals B) ABC Money Managers, a partnership with $112 million under management C) DEF Fund Managers, a corporation managing an unregistered hedge fund with $20 million in assets D) XYZ Broker-Dealer with custody over $50 million of clients' invested assets None 112. A firm is registered as an investment adviser under the Investment Advisers Act of 1940. It has decided to raise its annual management fee from $1,500 to $1,800 and require that it be paid 1 year in advance instead of quarterly. The firm would A) continue doing business as before because the firm was already charging more than $1,200 per year B) be in violation of the law that prohibits pre-payments more than 6 months in advance C) need SEC permission to make this change D) now come under the requirement to include a balance sheet as part of its brochure None 113. Which of the following firms in the business of rendering investment advice for compensation would be considered a federal covered adviser? A) JKL Pension Consultants, a management firm providing services to employee benefit plans, and currently has $179 million under management B) DEF Fund managers, a corporation managing an unregistered hedge fund with $10 million in assets C) ABC Money Managers, a partnership with $115 million under management D) GHI Consultants, a sole proprietorship, managing $82 million belonging to high-net-worth individuals None 114. Under the Uniform Securities Act, Paul must register as a state-registered investment adviser if he A) opens an investment advisory business as a sole proprietor in New Jersey with the intention of advising individual clients on the advisability of investing in securities. Paul will have $100 million in AUM within 120 days of opening. B) opens an investment advisory business as a sole proprietor in New Jersey with the intention of advising individual clients on the advisability of investing in securities. Paul will have $90 million in AUM within 120 days of opening. C) becomes a full-time employee of AAA Investment Advisers, Inc., where he will advise clients whose assets under his discretion will exceed $200 million D) sells registered securities on a commission basis for a registered broker-dealer None 115. Which of the following statements is CORRECT? A) A state-registered investment adviser collecting fees of $500 for 6 months or more in advance, is considered to be receiving a substantial prepayment. B) State-registered investment advisers who have custody of clients' securities are required to provide audited balance sheets to their clients. C) Federal covered investment advisers who have custody of clients' securities are required to provide audited balance sheets to their clients. D) Both state-registered and federal covered investment advisers who have custody of clients' securities are required to provide audited balance sheets to their clients. None 116. A federal covered investment adviser is a person A) registered under the Uniform Securities Act B) registered with North American Securities Administrators Association (NASAA) C) registered, or excluded from the definition, under the Investment Advisers Act of 1940 D) exempt from regulation under the Securities Exchange Act of 1934 None 117. An investment adviser (IA) has its primary office in State A. They have branches in states B and C, and they advertise in states D, E, and F. What net capital requirements must they meet? A) Where its principal office is located B) All the states combined C) Whichever state is the highest D) The state where the largest number of its clients reside None 118. Under the Investment Advisers Act of 1940, an adviser's registration usually becomes effective how many days after it is filed? A) 10 B) 45 C) 30 D) 20 None 119. All of the following statements regarding the registration of an investment adviser in a state are true EXCEPT A) the adviser's registration expires on December 31 each year B) the initial application must include a consent to service of process along with Form ADV and the appropriate fees C) the annual renewal process involves payment of the appropriate fees and refiling of the consent to service of process D) if the investment adviser is not an individual, any officer or partner active in the advisory business is automatically registered as an investment adviser representative None 120. Under the Investment Advisers Act of 1940, an adviser is required to be registered with the SEC if A) the adviser's clients are investment companies registered under the Investment Company Act of 1940 B) the adviser's advice relates solely to securities issued or guaranteed by the U.S. government. C) the adviser is the publisher of a news magazine of general and regular circulation D) the adviser's clientele is exclusively federal credit unions and the adviser has less than $100 million in assets under management None 121. Federally registered investment advisers are obligated to maintain certain books and records as specified by the SEC. Which of the following statements regarding adviser recordkeeping is NOT true? A) Records originally created on computer may be stored in electronic media. B) Records must be kept for 6 years. C) Written records may be reduced to microfilm. D) Records are subject to surprise audits by the SEC. None 122. A federal covered IA files a petition for bankruptcy. The firm must A) notify all of its clients immediately B) notify the Administrator immediately C) do nothing until the court decides the disposition of the firm's assets D) notify the SEC immediately None 123. A state-registered investment adviser with discretionary authority over client accounts discovered on Monday, that the firm's net worth is below the required amount. He must notify the administrator and then file a report no later than the A) close of business Tuesday, close of business Wednesday B) close of business Tuesday, close of business Friday C) close of business Monday, close of business Friday D) close of business Monday, close of business Wednesday None 124. Platinum Investment in Growth Group, Inc. (PIGGI) is registered in and has its principal office in State W. PIGGI has near-term plans to open offices in State A and B. In an effort to test the waters, PIGGI mails several hundred flyers to prospects in those 2 states. Under the Uniform Securities Act, A) these flyers could not be mailed until PIGGI was registered in States A and B B) as long as PIGGI did not maintain an office in either of these states, the flyers could be mailed C) as a federal covered investment adviser, the flyers would need filing with the SEC D) these flyers could be mailed, but no accounts can be opened until PIGGI is registered in States A and B None 125. Bulaan Advisory Services, Inc. (BAS), an investment adviser registered in 5 states, was found to have been untruthful in its performance reporting. Once this news was released, most of its clients terminated their advisory contracts. As a result, BAS shuttered its doors on July 18, 2018. Minutes of shareholder meetings must be preserved until at least A) July 18, 2023. B) December 31, 2018. C) December 31, 2023. D) July 18, 2021. None 126. Under the Uniform Securities Act, when must a consent to service of process be filed with the Administrator? A) With the original application and renewal B) With the original application only C) When a case is pending D) It need not be filed, unless requested by the Administrator None 127. If an investment adviser files an initial registration with a state on June 30, which of the following statements regarding the filing fee to be paid is TRUE? A) The full year's fee must be paid. B) The fee will be prorated from the filing date. C) The fee will be prorated from the effective date. D) No filing fee is required until December 31. None 128. The term "federal covered investment adviser" would apply to a person who A) is registered as such under the Investment Advisers Act of 1940 B) limits the advice offered strictly to securities listed on the New York Stock Exchange (NYSE) C) is registered as such under the Investment Company Act of 1940 D) limits the advice offered strictly to securities issued or guaranteed by the U.S. government or 1 of its political subdivisions None 129. Under the Uniform Securities Act, which of the following statements is TRUE regarding registration of an investment adviser if the application has not been amended? A) Unless specified earlier, registration becomes effective no later than 90 days after the application is filed. B) Unless specified earlier by the Administrator, the registration becomes effective at noon on the 60th day after application. C) Unless specified earlier by the Administrator, the registration becomes effective no later than noon on the 30th day after application. D) Unless specified earlier, registration becomes effective no sooner than 15 days after the application is filed. None 130. On April 15, ABC Advisers, Inc., made application for registration as an investment adviser with State X. Absent a denial or stop order, registration will become effective A) April 15 B) May 1 C) May 15 D) April 30 None 1 out of 130 Time is Up! Time's upTime is Up!
