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FINRA Series 6 Exam
Investment Company and Variable Contracts Products Representative Examination (IR) (Page 38 )

Updated On: 7-Feb-2026
Page 13 of 66
PDF with 325 Questions

Tex Payor has invested in Invest4U Mutual Fund shares at various times over the last eight years. In the past year, he has sold some of the shares purchased. To determine the cost basis of these shares, Tex:

  1. can choose to sell specific shares in order to minimize or maximize his cost basis, whichever is more beneficial given his tax circumstances.
  2. must use last in/first out (LIFO) accounting to determine his cost basis.
  3. must use first in/ first out (FIFO) accounting to determine his cost basis.
  4. should use dollar cost averaging to determine his cost basis.

Answer(s): A

Explanation:

To determine the cost basis of share he has bought at various time over the last eight years, Tex can choose to sell specific shares in order to minimize or maximize his cost basis, whichever is more beneficial given his tax circumstances. If Tex doesn't specify shares, the IRS will assume the first shares purchased were the first shares sold (FIFO) in determining Tex's cost basis. The LIFO method cannot be assumed when determining the cost basis of the shares Tex owns, and dollar cost averaging is an investment strategy, not a method used in determining a cost basis.



A retirement plan under which the benefit to be paid upon retirement is specified when an employee is signed up for the plan is known as a:

  1. 401(k) plan.
  2. SIMPLE-IRA.
  3. defined benefit plan.
  4. defined contribution plan.

Answer(s): C

Explanation:

A retirement plan under which the benefit to be paid upon retirement is specified when an employee is signed up for the plan is known as a defined benefit plan. The 401(k) plan and the SIMPLE-IRA are types of defined contribution plans.



Joan is a customer of GetErDone Broker-Dealers. Her twin sister, Jean, has accompanied her to GetErDone's office and has gathered some information regarding opening an account with the firm, giving it her contact information at the same time.
Under Regulation S-P, which of the following statements regarding GetErDone's handling of Joan's and Jean's personal information is true?

  1. GetErDone must provide Joan with a notification of its privacy policies annually and provide her with information on how to mandate that it not share her nonpublic personal information with nonaffiliated third parties.
  2. GetErDone can disclose any information that Jean provided them to nonaffiliated third parties since Jean is not a customer of the broker-dealer.
  3. GetErDone is required to have provided Jean with a copy of its privacy policy when she inquired about opening an account with the broker-dealer.
  4. All of the above are true statements.

Answer(s): A

Explanation:

Since Joan is a customer of GetErDone, GetErDone must provide her with a notification of its privacy policies annually and provide her with information on how to mandate that it not share her nonpublic personal information with nonaffiliated third parties. GetErDone may not disclose any information about Jean, who is not yet a customer of the firm, unless the broker -dealer has provided Jean with its privacy policy and given her the opportunity to opt out of its ability to share her information with nonaffiliated third parties. GetErDone is not required to have provided Jean with a copy of its privacy policy when she inquired about opening an account, but it will need to provide her with one when/if she becomes a customer.



A feature that gives a bondholder or the owner of preferred stock of a corporation the option to exchange his security for shares of the common stock of the firm is called a:

  1. call feature.
  2. warrant.
  3. convertible feature.
  4. right.

Answer(s): C

Explanation:

A convertible feature on a bond or preferred stock gives the bondholder or the preferred stock owner the option to exchange the security he owns for shares of common stock of the firm.



SuperDOT is:

  1. an electronic communication network (ECN).
  2. an electronic system whereby trades are executed on NASDAQ.
  3. an electronic system used to place orders on the NYSE.
  4. both A and C.

Answer(s): C

Explanation:

SuperDOT is an electronic system used to place market and limit orders on the NYSE whereby the orders are routed directly to the specialist in the assigned stocks. It is not an ECN, which is an electronic network that is designed to allow buyers and sellers to interact directly with each other, thereby bypassing the middlemen.



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