HESI A2: Chemistry (Quiz 2) Welcome to your Series 65 Practice Exam 4 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. The economy has gone through 3 consecutive quarters of economic decline with no immediate end in sight, and therefore could be said to be A) in a recovery B) lagging C) in a depression D) in a recession None 2. If the Consumer Price Index (CPI) is up and consumer demand is also up, the economy is likely in which stage of the business cycle? A) Peak to contraction B) Contraction to trough C) Recovery to trough D) Expansion to peak None 3. The Conference Board releases information about the economy on a monthly basis. Included are a number of different indicators. Economic indicators can be leading, lagging, or coincidental, which indicates the timing of their changes relative to how the economy as a whole changes. Which of the following is a lagging economic indicator? A) Nonagricultural employment B) Manufacturers’ new orders for consumer goods C) Building permits (housing starts) D) Average prime rate None 4. Increases in which of the following indicators are regarded as predictors of the level of business activity? A) Levels of inventories B) Corporate profits C) Personal incomes D) Building permits None 5. Which of the following statements about the Consumer Price Index (CPI) is NOT true? A) The CPI is the most commonly used indicator of the inflation (or deflation) rate in the United States. B) The CPI measures the increase or decrease in the level of consumer prices with respect to the level of wholesale prices on which consumer prices depend. C) The CPI is computed monthly. D) The CPI measures the rate of increase or decrease in a broad range of prices, such as food, housing, medical care, and clothing. None 6. An economic condition where the rate of price increases reaches a stable equilibrium and stays there until a shock to the system occurs, at which time, the rate of inflation changes is known as A) price controls. B) stagnation. C) stagflation. D) inertial inflation. None 7. Which of these is a definition of inflation? A) An increase in purchasing power B) An increase in the value of the dollar C) A decrease in the value of the monetary unit D) A decrease in consumer demand None 8. The Conference Board, a nongovernmental nonprofit organization, regularly publishes a list of economic indicators. Which of the following would be included in their list of leading indicators? A) Manufacturing and trade sales (in constant dollars) B) Average prime rate C) Average duration of unemployment D) Average weekly initial claims for unemployment insurance None 9. A business reporter claims that we are suffering from inertial inflation. This means A) the economy is about to enter a deflationary period. B) the current rate of inflation will remain at this level until economic shocks cause it to change. C) the business cycle is heading towards a trough. D) prices are increasing at a steady rate. None 10. The Conference Board releases information about the economy on a monthly basis. Included are a number of different indicators. Economic indicators can be leading, lagging, or coincidental, which indicates the timing of their changes relative to how the economy as a whole changes. Which of the following is a lagging economic indicator? A) Nonagricultural employment B) Prime interest rate C) Manufacturers' new orders for consumer goods D) Building permits (housing starts) None 11. Under the concept of inertial inflation, A) prices tend to remain the same until the system receives an economic shock. B) inflation and deflation alternate at regular intervals. C) core inflation is a better measure of the actual inflation rate than the CPI. D) prices tend to increase at a steady rate until the system receives an economic shock. None 12. An investor regularly reads financial blogs on the Internet and they are filled with articles suggesting that the economy is headed for a slump. Some are even saying that there will be price deflation. If these projections are accurate, the best place for the investor to place funds would probably be A) U.S. Treasury bonds B) common stock C) commercial real estate D) gold None 13. The Conference Board releases information about the economy on a monthly basis. Included are a number of different indicators. Economic indicators can be leading, lagging, or coincidental, which indicates the timing of their changes relative to how the economy as a whole changes. Which of the following is a coincident economic indicator? A) Stock market prices as measured by the S&P 500 B) Industrial production C) Machine tool orders D) Agricultural employment None 14. Which of the following is a NOT a leading economic indicator? A) Orders for durable goods B) New housing permits C) Duration of unemployment D) Money supply None 15. The Conference Board releases information about the economy on a periodic basis. Included are a number of different indicators. These indicators can be used to predict how the economy as a whole might change. Which of the following would be considered a leading indicator? A) Industrial production B) CPI for services C) Stock prices as measured by a broad index such as the S&P 500 D) Gross domestic product None 16. All of the following are leading indicators for economic growth EXCEPT A) stock prices as measured by the S&P 500 index B) orders for durable goods C) average weekly initial claims for state unemployment compensation D) average prime rate None 17. What generally happens to outstanding fixed-income securities when the rate of inflation slows? A) Short-term securities are affected the most. B) Coupon rates go up. C) Yields go up. D) Prices go up. None 18. Which of the following is a coincident economic indicator? A) Machine tool orders B) Agricultural employment C) Stock market prices as measured by the S&P 500 D) Industrial production None 19. All the pundits are predicting bad times ahead—not only a recession but a period where prices actually fall (deflation). If they are right, the best place for your client would probably be A) real estate B) gold C) common stock D) U.S. Treasury securities None 20. Which of the following CORRECTLY defines the Consumer Price Index (CPI)? A) The average cost of goods and services (market basket) in domestic currency, compared to the cost of those same goods and services in another country B) The average cost of goods and services (market basket) purchased by consumers, compared to those same goods and services purchased during a base period C) The wholesale cost of goods and services purchased by manufacturers, compared to those same goods and services purchased during a base period D) The average increase in the general price level over a defined period of time None 21. Securities issued by which of the following agencies offer direct government backing? A) Federal Home Loan Mortgage Corporation (Freddie Mac) B) Federal National Mortgage Association C) Government National Mortgage Association D) Federal Intermediate Credit Bank None 22. A risk-averse investor, who had only invested funds in bank certificates of deposits, was informed by his investment adviser representative that higher returns with safety could be achieved by investing in U. S. Treasury notes with a 10-year maturity. The adviser representative assured his client that investment in federal government-backed securities is riskless. In this situation, the representative acted A) unethically, because the agent failed to disclose that the customer retains interest rate risk B) unethically, because Treasury notes are unsuitable for a risk-averse customer C) properly, because Treasury notes carry no risk of principal default D) properly because Treasury notes are suitable for a risk-averse customer None 23. An investor interested in monthly interest income should invest in A) utility company stock B) GNMAs C) Treasury bonds D) corporate bonds None 24. Which of the following debt instruments does not make periodic interest payments? A) T-bonds B) TIPS C) T-bills D) T-notes None 25. An investor purchases a Treasury note and the confirmation shows a price of $102.25. Rounded to the nearest cent, the investor's cost, excluding commissions, is A) $1,022.50. B) $1,027.81. C) $102.25. D) $1,020.25. None 26. Bond prices are quoted as a percentage of A) market value B) conversion value C) par value D) stated value None 27. Mr. Beale buys 10M RAN 6.6s of 32 at 67. What is his total purchase price? A) $10,200 B) $6,700 C) $6,600 D) $10,000 None 28. An investor purchases a Treasury note and the confirmation shows a price of $102.21. Rounded to the nearest cent, the investor's cost, excluding commissions, is A) $1,022.10. B) $102.21. C) $1,022.21. D) $1,026.56. None 29. A bond selling for $20 above par would be quoted A) 120 B) 1,020.00 C) 102 D) 1,200.00 None 30. The Straitened Corporation has filed for bankruptcy. One of your clients held a mortgage secured by the corporation's building. When the building was sold, the proceeds were less than the mortgage balance creating a deficiency balance. Where does this investor's claim stand? A) As a general creditor on a pro rata basis B) After the unsecured creditors C) There is no further claim once the building has been sold D) After the secured creditors None 31. Which of the following is the most significant difference between corporate secured debt and unsecured debt? A) Secured debt generally has longer maturities than unsecured debt. B) Secured debt has specific collateral pledged to protect the lender’s interest. C) Secured debt is rarely callable while unsecured debt is generally callable. D) Secured debt will carry a higher coupon than that issuer’s unsecured debt. None 32. Corporate bonds are considered safer than common stock issued by the same company because A) bonds place the issuer under an obligation but stock does not B) the par value of bonds is generally higher than that of stock C) if there is a shortage of cash, dividends are paid before interest D) bonds and similar fixed-rate securities are guaranteed by the FDIC None 33. An unsecured long-term debt security issued by a corporation is known as A) a debenture B) an equipment trust certificate C) a mortgage bond D) a collateral trust bond None 34. Corporate long-term debt securities that are issued on the general credit of the issuer and are NOT otherwise secured are called A) prior lien bonds B) debentures C) general obligation bonds D) preferred stock None 35. An investment in which of the following would expose the investor to the greatest capital risk? A) Preferred stock B) Debentures C) Common stock D) Mortgage bonds None 36. In general, from the choices given, the type of security offering the greatest degree of safety to an investor is A) common stock B) preferred stock C) a mortgage bond D) a debenture None 37. An advantage of being a bondholder compared with owning common stock in the same corporation is that A) income payments are more reliable B) there is limited liability C) the bondholder can select the optimum time to have the issuer redeem the bond D) common stock has priority over the bond in the event of liquidation None 38. Bright-Lite Incandescent Bulb, Inc., has recently suffered significant operating losses and is planning a bankruptcy filing. Which of the following debt issues have the most junior claim? A) Common stock B) Mortgage bonds C) Senior notes D) Debentures None 39. An investor is analyzing various risks related to corporate and government bonds. She is interested in finding a risk that is more specific to corporate bonds than to government bonds. Which of the following options correctly defines that risk? A) Purchasing power risk B) Default risk C) Liquidity risk D) Interest rate risk None 40. A corporation is capitalized with common stock, senior preferred stock, mortgage bonds, and subordinated debentures. Your client, who holds $10,000 of the debentures, is concerned about the future viability of the enterprise. You can inform the client that the debentures have a claim A) ahead of the common stock, but after the preferred stock and the bonds B) ahead of the common stock and the preferred stock, but after the bonds C) behind the bonds, the preferred stock, and the common stock D) ahead of the common stock, the preferred stock, and the bonds None 41. With respect to safety of principal, of the following investments, the least risky is A) equity options B) corporate AA debentures C) common stock D) exchange-listed warrants None 42. Many fixed-income investors are looking to avoid loss of principal. Which of the following would likely have the lowest degree of exposure to credit risk? A) Aa-rated corporate debenture B) Baa-rated municipal revenue bond C) A-rated general obligation municipal bond D) Ba-rated corporate mortgage bond None 43. High-yield bonds are frequently called junk bonds. Which of the following expresses the highest rating that would apply to a junk bond? A) CC B) BB C) CCC D) BBB None 44. One of the likely consequences of a rating downgrade on a bond is A) the call feature will be employed. B) the current yield will be reduced. C) an increase to the coupon by the issuer. D) a reduction in the market price of the bond. None 45. Which of the following would be least likely for an investment adviser representative to consider before recommending a municipal security to a customer? A) The customer's highest education level B) The customer's state of residence C) The customer's tax status D) The municipal security's rating None 46. Which of the following statements about municipal bonds is NOT true? A) Municipal bonds are generally considered riskier than corporate bonds. B) Municipal bonds generally carry lower coupon rates than corporate bonds of the same quality. C) The interest on municipal bonds is usually not subject to federal income tax. D) Municipal bonds are bonds issued by governmental units at levels other than the federal. None 47. If a resident of New York City purchases an Albany, New York, general obligation bond that yields $600 of interest during the course of the year, how is the interest taxed? A) Taxation is deferred until the bond matures. B) It is subject to state income tax at ordinary rates. C) It is not subject to federal income tax. D) It is subject to federal income tax at ordinary rates. None 48. As defined in the Securities Exchange Act of 1934, the term municipal security would include all of the following EXCEPT A) a State of Texas general obligation bond B) a city of Atlanta, GA public library bond C) an Illinois Tool Company debt issue backed by its full faith and credit D) a New Jersey Turnpike revenue bond None 49. Which of the following is a characteristic of an investment-grade general obligation municipal bond? A) The bond's main source of investment risk is financial risk. B) The bond retains a direct claim on specific property. C) The taxing authority of the issuing government or municipality backs the issue's repayment. D) The bond's periodic interest is paid to investors only when sufficient revenue is collected by the municipality. None 50. As defined in the Securities Exchange Act of 1934, the term municipal security would include all of the following EXCEPT A) a City of Chicago school district bond B) 50-year bonds issued by the Tennessee Valley Authority C) a U.S. Treasury bill D) a Province of Ontario library construction bond None 51. Which of the following statements represents an advantage of a municipal general obligation bond over a revenue bond? A) A GO bond is not charged against the municipality's borrowing limits. B) A GO bond issuer is required to conduct a feasibility study. C) Only a facility's users pay for a GO bond. D) A GO bond generally involves less risk to the investor. None 52. Municipal bonds are often called tax-exempts. This refers to the exemption of their income from A) federal income taxes B) federal estate taxes C) state income taxes D) state, federal, and inheritance taxes None 53. An investment adviser should develop an investment policy based on the needs and objectives of the client. When the client is a business entity structured as a general partnership, the investment policy would have to consider A) the liability of the general partner B) the mean requirement of the wealthiest and the poorest partner C) the number of limited partners D) the objectives of all the partners on a collective basis None 54. An individual's net worth is A) largely irrelevant in identifying the individual's investment objectives B) best determined by examining the individual's personal income statement C) another term for discretionary income D) the difference between the individual's assets and the individual's liabilities None 55. John and Jane have a net worth of $20,000 and total assets of $150,000. If their revolving credit and unpaid bills totals $8,000, how much are their total liabilities? A) $138,000 B) $122,000 C) $130,000 D) $150,000 None 56. Which of the following items would be found on a family balance sheet? A) Annual salary B) Spouse’s engagement ring C) Income taxes paid D) Dividends and interest received None 57. The Jones family has scheduled an initial visit with a financial planner. Mr. Jones has an annual salary of $70,000, and this is their first attempt at financial planning. Which of the following should be the first step taken by the financial planner? A) Establish an emergency fund B) Pay off credit card debt C) Set goals and dates for reaching them D) Determine a reasonable fee for designing the plan None 58. An individual owns assets worth $500,000 and has debts of $300,000. What is the individual's net worth? A) $500,000.00 B) $300,000.00 C) $200,000.00 D) $800,000.00 None 59. A business organized as a sole proprietorship wishes to open an advisory account. When preparing an investment policy statement, the IA would have to consider the objectives of A) the stockholders B) the sole proprietor C) the members D) the partners None 60. A client of an investment adviser excitedly calls the adviser with the news that he is now going to handle his own investments. "I just read some great investment books, and now I know what to do." Based on the study of behavioral finance, it would appear that this individual is A) conservative. B) overconfident. C) anchored. D) following the herd. None 61. Tactical Evaluation and Research (TEAR), a federal covered investment adviser, suggests the purchase of stock in a major tobacco company. The client explains that he doesn't want to invest in tobacco stocks because his father passed away from lung cancer. What kind of reason is this? A) Geographic B) Values C) Economic D) Environmental None 62. When it comes to creating a client profile, the information obtained is divided into 2 basic categories: objective and subjective. Which of the following is considered to be subjective information? A) Salary B) Attitude C) IRA value D) Net worth None 63. Carol is opening an investment account with her agent and will be expected to disclose all the following items of financial or personal information EXCEPT A) age B) investment experience C) annual income D) educational background None 64. Tactical Evaluation and Research (TEAR), a federal covered investment adviser, suggests the purchase of stock in a major tobacco company. The client explains that he doesn't want to invest in tobacco stocks because his father passed away from lung cancer. What kind of reason is this? A) Economic B) Values C) Geographic D) Environmental None 65. A new client indicates a desire to avoid investing in mid-cap stocks because of large losses suffered several years ago. What type of consideration would this be? A) Nonfinancial B) Financial C) Unsystematic D) Systematic None 66. Your client often makes irrational financial decisions because she bases her decisions on information that should have no influence on the decision at hand. The client's behavior is known as A) confirmation bias. B) herd mentality. C) overconfidence. D) anchoring. None 67. The study of why people often make decisions using rules of thumb rather than rational analysis, basing those decisions on factors economists traditionally don't consider, such as fairness, past events, and aversion to loss, is known as A) behavioral finance B) systematic risk C) risk tolerance D) irrational finance None 68. Tammy has a strong feeling about a particular investment's future performance. She is constantly seeking information to validate her belief that this investment will greatly appreciate. However, she is dismissing any information which is contradictory to this stance. This is an example of which of the following? A) Confirmation bias. B) Herd theory C) Anchoring effect D) Prospect theory None 69. Pemberton bought a stock share at $50 and wants to earn a profit, so he decided he will never sell it below $52. The company has now underperformed for multiple quarters as per street analysts, and the stock is down to $48. Pemberton continues to hold the stock in line with his original plan. In this case, Pemberton may be exhibiting A) herding bias. B) anchoring bias. C) overconfidence bias. D) regret aversion bias. None 70. An investment adviser cannot adequately advise a client without knowing the client's financial status. When determining that status, it is important to differentiate between financial and nonfinancial considerations. Which of the following would be considered a financial consideration rather than a nonfinancial one? A) Fact that both parents were smokers who died of lung cancer B) Client’s membership in Greenpeace C) Client’s marital status D) Client’s stamp collection None 71. One of your clients has a tendency to follow the actions of a larger group of people when making financial decisions, whether those actions are rational or not. The client's behavior is an example of A) herd mentality. B) overconfidence. C) anchoring. D) confirmation bias. None 72. All of the following statements regarding a client's attitudes, beliefs, and values are correct except A) values are attitudes and beliefs for which the client feels strongly. B) the IAR should pay little attention to a client’s attitudes, beliefs, and values during the information gathering process. C) the client’s attitudes reflect the client’s opinions, values, and wants. D) beliefs are a type of attitude because they reveal the client’s understanding of some aspect of his life. None 73. Which economic concept attempts to explain why investors behave irrationally? A) Behavioral finance B) Efficient market hypothesis (EMH) C) Modern portfolio theory (MPT) D) Laffer curve None 74. When interviewing a new client, the discussion leads to the damage done to the environment by oil spills. The client mentions the names of some large petroleum companies and says that she does not want stocks like that in her portfolio. In so doing, she is expressing A) nonfinancial consideration; her values. B) financial consideration; she already has enough money. C) nonfinancial consideration; her knowledge. D) financial consideration; those companies don’t pay dividends. None 75. Caroline considers her investment skills to be much greater than they actually are. She takes credit for many decisions that have positive results but blames the economy when her investments do poorly. Caroline's behavior is an example of A) confirmation bias. B) overconfidence. C) regret aversion. D) anchoring. None 76. From your meetings with Avery, you realize there is a tendency to follow the actions of a larger group of people when making financial decisions. It makes no difference if those actions are rational or not. Choose the behavioral finance theory that explains Avery's behavior. A) Herding B) Anchoring C) Overconfidence D) Confirmation bias. None 77. A client excitedly calls his investment adviser with the news that he is now going to handle his own investments. "I just read some great investment books and now I know what to do." Based on the study of behavioral finance, it would appear that this individual is A) following the herd. B) overconfident. C) conservative. D) anchored. None 78. The tendency of people to follow the actions of a larger group when making financial decisions, whether those actions are rational or not, is known as A) herd mentality. B) overconfidence. C) anchoring. D) confirmation bias. None 79. Which of the following is the least significant consideration in making an investment recommendation to a client? A) Age B) Investment objectives C) Net worth D) Educational background None 80. You are onboarding a new client. Which of the following is the least important indicator of the client's risk tolerance? A) Attitude toward taking a loss B) Current age C) Highest education level D) Expected retirement date None 81. When developing a client profile, it is important to note both the financial and nonfinancial considerations. These can be categorized as those that are objective and those that are subjective. Included in the list of subjective considerations would be A) risk tolerance B) cash value of life insurance C) the family balance sheet D) balance on the home mortgage None 82. An IAR has set up the initial meeting with a prospective advisory client. An important part of that meeting is gathering client data. Of the following items, which is generally considered to be the most important for preparing suitable recommendations? A) Assets available for investment B) Age of the prospect C) Life stage D) Risk tolerance None 83. What is among the most important nonfinancial considerations in determining the suitability of investments for a client? A) Tolerance for risk B) Assets under management C) Rate of interest on Treasury bills D) Client's income needs None 84. Low risk tolerance and high liquidity needs are typical characteristics of which type of institutional investor? A) Defined benefit pension plans B) Trusts C) Banks D) Foundations None 85. Which of the following is a factor that must be considered when constructing a portfolio? A) Performance measurement B) Client’s risk tolerance C) Category of investment service required D) Verification of the client’s identity None 86. Among investor objectives is preservation of capital. Which of the following would be most appropriate for inclusion in the portfolio of this kind of investor? A) International funds B) U.S. Treasury bonds C) A money market fund D) Blue-chip stocks None 87. Many investment advisers prepare an investment policy statement (IPS) when counseling their clients. Which of the following should least likely be included as a constraint in an investment policy statement? A) Asset classes the client specifically forbids or limits based on past experience B) Constraints put on investment activities by regulatory agencies C) How the funds are spent after being withdrawn from the portfolio D) Any unique needs or preferences an investor may have None 88. An investment adviser using an insurance approach to capital needs analysis would A) only invest in securities guaranteed by the FDIC B) select securities based upon the customer's investment experience C) invest exclusively in insured securities such as insured municipal bonds or Ginnie Maes D) determine the insurance coverage needed to complete the customer's financial objective should the customer die before the objective is met None 89. If a customer's chief concern is to shelter as much of his portfolio earnings from tax as possible, which of the following securities would be most suitable? A) Municipal GOs B) Treasury receipts C) Money market instruments D) High-yield bonds None 90. Parker and Mary have recently divorced. For Mary to receive Social Security benefits based on Parker's earnings, which of the following conditions must exist? A) Parker must already be at full retirement age. B) Mary must have worked at least 40 quarters to be eligible for benefits. C) The marriage must have lasted at least 10 years. D) Parker must not be remarried. None 91. A married couple in their early 50s saving for retirement would most likely have which of the following objectives? A) Moderate risk, moderate safety, low liquidity B) High risk, moderate safety, low liquidity C) Low risk, high safety, high liquidity D) Moderate risk, low safety, high liquidity None 92. A state-registered investment adviser suddenly incurs a liability that materially affects its net worth, causing it to drop below the required minimum. Which of the following statements is TRUE? A) The investment adviser must notify the Administrator promptly. B) The ​investment adviser ​must increase its surety bond to make up the deficiency. C) The​ ​investment adviser must notify the Administrator​ by the close of business on the following business day​. D) The ​investment adviser is not required to file​ ​an amendment to its registration with the Administrator. None 93. Registration with the state as an investment adviser would be required for a person with an office in this state who A) manages $13 million in assets for 4 clients B) only gives advice on securities issued by or guaranteed by the government of the United States C) manages the portfolio of the KPF Balanced Fund, a registered open-end investment company with $22 million in net assets D) serves as a pension consultant to the XYZ Employees Retirement Plan, covering 1,200 employees with total assets of $278 million None 94. Under the Uniform Securities Act, which of the following investment advisers with no place of business in the state must register with the state as an investment adviser? A) An adviser rendering advice to no more than 10 individual clients within a 12-month period B) An adviser rendering advice solely to broker-dealers C) An adviser rendering advice to employee benefit plans with at least $1 million in assets D) An adviser managing more than $110 million in assets None 95. If a federal covered adviser's fiscal year ends on October 31, 2017, it must file its annual updating amendment to its Form ADV no later than A) January 29, 2018 B) February 28, 2018 C) December 31, 2017 D) March 30, 2018 None 96. Long-Term Financial Solutions, Inc. (LTFSI), an investment adviser registered in five states, files a Form ADV-W indicating the business is closing. It is being acquired by another federal covered adviser, Gold and Sylver Advisers, LLC. Which of the following statements is correct? A) Gold and Sylver will not have to amend their Form ADV Part 1 until the filing of their annual updating amendment. B) Gold and Sylver must notify all clients of LTFSI that their advisory contracts have been assigned. C) LTFSI is responsible for ensuring that a copy of the LTFSI corporate charter is preserved for at least three years after the acquisition. D) As the successor firm, Gold and Sylver Advisers must keep copies of the LTFSI corporate charter for at least three years after LTFSI’s acquisition. None 97. USAAdvisers is registered in 10 Midwest states. Regarding financial requirements, USAAdvisers must meet those of A) each state in which it has a place of business B) the state in which its principal office is located C) the state with the most stringent financial requirements D) the SEC None 98. ABC Advisers changes its name to XYZ Advisers and also changes its location. Under the Investment Advisers Act of 1940, it must A) notify the Administrator B) notify FINRA within seven days C) amend Form ADV promptly D) amend Form ADV in advance None 99. Under the NASAA Model Rule on financial requirements for investment advisers, investment advisers who have custody of customer funds are usually required to have a net worth in the amount of A) $5,000 B) $10,000 C) $50,000 D) $35,000 None 100. The USA places a number of recordkeeping requirements on investment advisers. Records required to be kept by all state-registered investment advisers include all of the following EXCEPT A) a list of discretionary accounts B) emails C) bank records D) a record by security showing each client's interest and location thereof None 101. The SEC requires investment advisers registered under the Investment Advisers Act of 1940 to maintain certain books and records for a minimum of A) 3 years B) 5 years C) 1 year D) 6 years None 102. Under the Investment Advisers Act of 1940, for how many years must records be kept after the end of the fiscal year in which an entry was made? A) 1 year B) 5 years C) 10 years D) 2 years None 103. Defalcator Investment Advisers (DIA), registered in States A, K, and R, would be required to provide a balance sheet as part of its brochure if it charged fees of A) $500 for the next 3 months of advisory service. B) $1,000 for the next year’s advisory service. C) $500 for the next 6 months of advisory service. D) $1,000 for the next 3 months of advisory service. None 104. An agent and a broker-dealer maintain wrap fee accounts for several of their customers. Which of the following registrations is required? A) Neither the broker-dealer nor the agent is required to have any license other than their regular securities license. B) The agent must be registered as an investment adviser. C) Only the registered principal would need to be registered in the state(s) in which they do business. D) The firm must register as an investment adviser. None 105. Create A Large Legacy (CALL), Inc., is a state-registered investment adviser with offices in States X, Y, and Z. CALL currently does not have a place of business in State W, but does have 5 retail clients who are residents there. Opening an account for which of the following prospective clients domiciled in State W would now require CALL to register in State W? A) A trust having 4 minor children as beneficiaries with total trust assets of $5 million B) An insurance company account with an opening balance of $750,000 C) A county in State W desiring advice on investment over $250,000 of surplus funds D) A small community bank depositing $500,000 None 106. Which of the following is required to register as an investment adviser with the state securities Administrator? A) The author of a book on money and banking that was sold to residents of the state in which it is published B) An investment advisory firm that opens an office in the state with less than $100 million in assets under management C) A person with no office in the state whose only advisory clients are investment companies and banks in the state D) A newly formed investment advisory firm with $145 million in assets under management None 107. Judy is in the business of giving general investment advice, suggesting appropriate asset allocation percentages, but not recommending specific securities. George's business model is giving investment advice and recommending specific securities. Assuming that both receive compensation, who must register as an investment adviser under the Uniform Securities Act? A) Only Judy B) Both C) Only George D) Neither None 108. Perpetual Prosperity Advisers (PPI), a state-registered investment adviser, files an application to withdraw its registration as a registered investment adviser. Records pertaining to client accounts must be A) sent to the Administrator of the state in which PPI maintained its principal office. B) destroyed once the withdrawal has become effective. C) retained for the time period specified in the NASAA Model Rule on record keeping. D) sent to the Administrator of the state in which the client was a resident. None 109. Under the terms of the Uniform Securities Act, which of the following is an investment adviser for purposes of state regulatory jurisdiction? A) An accountant located in the state who offers general securities advice as an incidental part of his business B) A commercial bank with a place of business in the state that advises clients on banking matters C) An investment advisory subsidiary of a bank holding company located in the state that manages $20 million in assets D) A federal covered adviser with clients in the state None 110. Registration with the SEC as an investment adviser would be required for a person who A) limits the advice offered strictly to securities issued or guaranteed by the U.S. government B) acts as the investment adviser to an investment company registered under the Investment Advisers Act of 1940 C) acts as the investment adviser to an investment company registered under the Investment Company Act of 1940 D) limits the advice offered strictly to securities listed on the New York Stock Exchange (NYSE) None 111. Under certain conditions, the Uniform Securities Act provides that an Administrator may require a minimum net worth standard be met by an investment adviser. Which of the following would be an allowable asset in the computation of an investment adviser's net worth? A) Accounts payable B) Advances or loans to partners in the case of an IA organized as a partnership C) Accounts receivable D) Copyrights None 112. Which of the following would meet the USA's definition of federal covered adviser? An investment adviser who A) does business on an interstate basis B) is registered under section 203 of the Investment Advisers Act of 1940 C) serves as a consultant to pension funds with assets of $500 million D) gives advice on federal covered securities None 113. According to the Investment Advisers Act of 1940, for how many years must books and records be maintained for an account after the end of the year in which the last transaction occurred? A) 10 years B) 2 years C) 1 year D) 5 years None 114. Transparent Investment Advisers (TIA) is registered in 3 states and has $55 million in assets under management. TIA maintains custody of customer securities. TIA's chief financial officer reports that the net worth of the firm has suddenly fallen to $28,000. This would require TIA to A) borrow $7,000 from the owners. B) issue $7,000 of stock. C) obtain a surety bond in the amount of $10,000. D) obtain a surety bond in the amount of $7,000. None 115. A person may NOT engage in business as an investment adviser in a state unless A) the person is registered as a broker-dealer B) the person's only accounts are investment companies C) organized as a corporation or partnership D) the person is registered as an investment adviser or is otherwise exempt from registration None 116. Under the Investment Advisers Act of 1940, for how many years must an investment adviser maintain the records required by regulation? A) 1 year B) No requirement C) 3 years D) 5 years None 117. Under the Uniform Securities Act, which of the following must register with the state securities Administrator? A) Investment advisers without an office in the state whose clients are exclusively insurance companies B) Investment advisers who have $100 million or more under management C) Investment advisers with a place of business in the state and less than $100 million in assets under management D) Investment advisers to an investment company registered under the Investment Company Act of 1940 None 118. Which of the following investment advisers would be required to register with the state? A) An IA whose annual updating amendment showed a drop in AUM from $141 million to $99 million B) An IA who expects to have $132 million in AUM within 120 days C) An IA who is under contract to manage a registered investment company D) An IA whose annual updating amendment showed a drop in AUM from $109 million to $87 million None 119. Each of the following statements about postregistration provisions is true EXCEPT A) a correcting amendment to the Form ADV must be filed with the Administrator if any information filed becomes inaccurate or incomplete B) investment advisers must comply with recordkeeping rules C) the securities Administrator does not have the authority to conduct an onsite examination of an investment adviser registered in his state if the adviser does not have an office in that state D) a registered investment adviser may be required to file advertisements None 120. A state-registered investment adviser maintains custody of client funds and securities. On Thursday, the chief financial officer of the firm informs the chief compliance officer that their net worth is $31,578. Under the provisions of the Uniform Securities Act, the firm would A) need to increase the amount of their surety bond B) do nothing, as their net worth is far in excess of the minimum requirement of $10,000 C) send a detailed financial report to the Administrator by the close of business Friday D) send a detailed financial report to the Administrator by the close of business Monday None 121. Under the Uniform Securities Act, if not denied, an application for registration as investment adviser will generally become effective how soon after filing? A) 30 days B) 15 days C) Immediately D) 10 days None 122. With regard to the keeping of records, the Uniform Securities Act states that investment advisers must keep records for A) 5 years B) 5 years, the first 2 in the principal office of the adviser C) 3 years D) 3 years, the first 2 in the principal office of the adviser None 123. Under the Uniform Securities Act, which of the following statements relating to the registration requirements of investment advisers is TRUE? A) A registration becomes effective at noon, 30 days after the application has been filed, providing the registration is not in the process of denial. B) If an amendment to the registration is subsequently filed, the registration becomes effective 15 days after the amendment is filed. C) Registrations of securities professionals expire 1 year after their effective date, unless renewed. D) A registration is automatically effective at noon, 30 days after the application has been filed. None 124. Foster Advisers, based in New Jersey, manages $135 million in funds for New Jersey-based clients. As a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which of the following statements best describes the registration requirement for Foster Advisers? A) Foster Advisers is required to register as an adviser with the SEC and has no requirement to notify the Administrator of the New Jersey Department of Securities. B) Foster Advisers is required to register with both the SEC and the Administrator of the New Jersey Department of Securities. C) Foster Advisers is required to register with the Administrator of the New Jersey Department of Securities. D) Foster Advisers is required to register as an adviser with the SEC and notify the Administrator of the New Jersey Department of Securities of its operation. None 125. Which of the following is NOT included in Form ADV Part 2A? A) Types of investments made by the adviser B) A description of how the adviser is compensated C) Investment policy of the adviser D) States in which the investment adviser is registered or intends to register None 126. The powers of the Administrator include the ability to determine A) minimum net worth requirements for investment advisers B) maximum net capital requirements for broker-dealers C) minimum net worth requirements for agents who exercise discretion D) surety bond requirements for investment advisers who do not exercise discretion or maintain custody None 127. Included in the Investment Advisers Act of 1940 are a number of different recordkeeping requirements. Wealth Preservation Specialists is a covered adviser that is organized as a partnership. If the firm were to dissolve, partnership agreements must be kept for A) 3 years after the dissolution B) 5 years after the dissolution C) 5 years from the date of organization D) the lifetime of the firm None 128. Kapco Advisers, a federal covered investment adviser operating on a calendar-year basis, published a list of recommended securities in January 2015. A copy of this must be maintained until at least A) January 31, 2020 B) January 31, 2017 C) December 31, 2017 D) December 31, 2020 None 129. According to the Investment Advisers Act of 1940, the SEC must either grant investment adviser registration or begin proceedings to determine whether registration should be denied within how many days of filing? A) 45 B) 90 C) 60 D) 30 None 130. Under the Uniform Securities Act, if no denial or proceedings are pending, when does an investment adviser registration become effective? A) When the Administrator so orders, but not to exceed 90 days B) When the Administrator so orders, but not to exceed 30 days C) No sooner than 15 days D) 60 days after application or an amendment is filed None 1 out of 130 Time is Up! Time's upTime is Up!
