FINRA-Investment Company and Variable Contracts Products Representative Qualification Examination Set 5

1.

Joe Treader is the owner of a small, state-registered investment advisory firm that is on the verge of becoming insolvent. One of his clients who has become like a mother to him is aware of his financial difficulties and has offered to sell off some of the assets that he manages for her and loan him the money to get him through this period of economic uncertainty until he is able to get on his feet again. Can Joe take her up on her offer?

Yes. Based on the facts presented, it is an unsolicited offer and, as such, Joe can (and should) accept it. Yes, but only if Joe draws up a formal loan agreement with a fair interest rate, based on the going market rates, stated in the agreement as well as a firm datefor principal repayment. No. As the client's investment adviser, he has a fiduciary relationship with the client. Entering a loan agreement with this client could lead to conflicts of interest. Both A and B are true.

2.

The state of Massachusetts has issued a general obligation (G.O.) bond that pays 3% interest. As an agent selling this bond, you can legitimately tell the investor that

the bond is guaranteed by the state of Massachusetts and is, therefore, a risk free investment. the interest income the investor receives from the bond will be free from federal taxation. all state general obligation bonds are also guaranteed by the federal government. all of the above statements are true.

3.

Jack and Jill are a newly married couple in their mid-20s. They are determined to retire by the time they are 50 and have arranged a meeting with a representative of Professional Investment Advisers to structure a financial plan that will allow them to achieve this goal. The representative, Mr. Hill, advises them to invest at least 60% of their money in bond funds to minimize the risk of loss on the way to their goal. Mr. Hill has

made an unsuitable recommendation for these clients and is subject to license suspension or revocation. advised Jack and Jill well with a conservative allocation of their money to preserve principal. committed fraud in indicating that bonds are less risky than stocks. has committed fraud in promoting their delusion that they can possibly expect to retire by the time they turn 50, regardless of their investment strategy.

4.

Finn Nance has recently passed his CFP exam and is now a certified financial planner. He has new business cards printed that have the words "Certified Financial Planner" printed under his picture. In doing so,

Finn has not violated any laws or engaged in any prohibited practices. Finn has violated a securities law. The Uniform Securities Act prohibits anyone from using the word "certified" on any advertisement for services. Finn has possibly violated a state securities regulation. The Administrator in many states prohibits the use of the word "certified" on any advertisement forservices. Finn is not in violation of any laws as long as he has notified the state Administrator of his new designation and his new logo.

5.

Elizabeth is the owner of Lizbeth Investment Advisers, a small, state-registered investment advisory firm. She has decided that her firm needs a niche and has learned that a consulting group is coming to the area and offering a 3-day seminar on asset allocation for senior citizens offered by Advantage for Retirement Persons (ARP). The seminar will cost $1,000 per individual, but after attending the seminar, each attendee will receive a certificate verifying their involvement in the program. Elizabeth decides this is the niche she has been looking for and signs up herself and her three investment adviser representatives for the program. After attending the seminar and receiving their certificates, Elizabeth and her team can

represent themselves as certified senior citizen investment advisers. have the words "Senior-Citizen Investment Specialists" printed on their business cards. indicate that they are certified by the ARP program since money was paid for their attendance. do none of the above.

FINRA-Investment Company and Variable Contracts Products Representative Qualification Examination Set 5

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FINRA-Investment Company and Variable Contracts Products Representative Qualification Examination Set 5

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