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FINRA Series 6 Exam
Investment Company and Variable Contracts Products Representative Examination (IR) (Page 12 )

Updated On: 26-Jan-2026
Page 12 of 66
PDF with 325 Questions

On which of the following items do mutual fund shareholders get to vote?

I). any change in the investment objective of the fund
II). the election of a new investment adviser
III). the renewal of the fund's 12b-1 fee
IV). the purchase or sale of real estate by the fund

  1. I, II, III, and IV
  2. I, II, and IV only
  3. I, II, and III only
  4. I, III, and IV only

Answer(s): D

Explanation:

Mutual fund shareholders get to vote on any change in the investment objective of the fund, the renewal of the fund's 12b-1 fee, and the purchase or sale of real estate by the fund. They do not elect the fund's investment adviser; they only vote to approve the investment adviser's contract.



Your 53-year-old client, Ms. Antsy, just inherited $80,000 from her aunt and has decided to retire immediately. She wants to invest in something that will allow her to begin making withdrawals immediately, and she wants to be certain that she will continue to receive payments at least until she turns 62 ½ and begins drawing social security. You should recommend Ms. Antsy invest in:

  1. a single-payment deferred annuity.
  2. a periodic-payment deferred annuity.
  3. a single-payment immediate annuity.
  4. none of the above.

Answer(s): D

Explanation:

If Ms. Antsy is 53 years old and wants to invest in something that will allow her to begin making immediate withdraws and continue to make withdrawals until she turns 62 ½, you should recommend none of the choices provided. They are all annuities, and Ms. Antsy will be subject to a 10% penalty for withdrawing any amount prior to turning 59 ½.



Which of the following statements regarding the required distribution of income by a regulated investment company are true?

  1. Both short-term and long-term capital gains earned by the company can be distributed only once a year.
  2. Under current tax laws, qualifying dividends distributed to the company's investors are taxable to those investors at a preferential rate-i.e., either 0% or 15%, depending on the investor's marginal tax rate.
  3. If an investor in the investment company has elected to reinvest his dividend and capital income in the company rather than receiving a check, then the investor is not required to pay taxes on the reinvested funds.
  4. Both A and B are true statements.

Answer(s): B

Explanation:

The statement regarding the required distribution of income by a regulated investment company that is true is that under current tax laws, qualifying dividends distributed to the company's investors are taxable to those investors at a preferential rate-i.e., either 0% or 15%, depending on the investor's marginal tax rate. This preferential treatment is due to expire on Dec. 31, 2010 unless it is extended. Only long-term capital gains earned by the company can only be distributed once a year. Short-term capital gains are generally distributed along with dividends-usually once a quarter. Even if an investor elects to reinvest dividend and capital gain income rather than receiving a check, the investor must still pay taxes on the income he would have received had he not made the election.



Ms. Newbie is a registered representative with Savvy Investments and has recently gotten married. (Her new name is Mrs. Newbie-Oldman.)Her husband has been a client of hers, and the couple now wants to put her name on the account. In this case:

  1. Mrs. Newbie-Oldman may only share in the account to the extent that she deposits funds in the account.
  2. Mrs. Newbie-Oldman must obtain written authorization from Savvy Investments to put her name on the account.
  3. Mrs. Newbie-Oldman's husband must provide written authorization to Savvy Investments for his new bride to be included on the account.
  4. Both B and C are true statements.

Answer(s): D

Explanation:

If Mrs. Newbie-Oldman and her new husband want her name on what was previously his account, she must obtain written authorization from her employer, Savvy Investments, and her new husband must provide his written authorization to Savvy. She is exempted from the proportional investment requirement as Mr. Oldman's spouse, but not from the written authorization requirements under FINRA Rule 2150.



Which of the following statements regarding the taxes associated with a variable life insurance policy is false?

  1. Earnings on a variable life insurance policy grow tax-free.
  2. Payments to beneficiaries upon the death of the policyholder are taxed as ordinary income.
  3. One variable life policy can be exchanged for another variable life policy without triggering any consequences under Section 1035 of the tax code.
  4. If a policyholder withdraws some of the cash value associated with the policy, taxes need only be paid on the amount that exceeds the total amount of the premiums paid to date.

Answer(s): B

Explanation:

The statement that payments to beneficiaries upon the death of the policyholder are taxed as ordinary income is false. When a policyholder dies, the death benefit received by the beneficiaries is tax-free. The death benefit will, however, be included in calculating any estate taxes that might be due. All the other choices are true statements. Unlike the tax treatment of variable annuities, the IRS uses first -in, first out (FIFO) accounting when determining whether the withdrawals have come from earnings or premium payments; therefore, when a policyholder withdraws some of the policy's cash value, it is assumed to be a withdrawal of premiums first, and that amount of the withdrawal is tax-free.



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