Lana is registered as a limited representative and is employed by Everything Investments. Her duties include selling mutual funds and variable contracts products to the firm's clients. She has been particularly successful in selling variable contracts offered by OneLife insurance company. As a "thank you" for her hard work, OneLife has offered her a ticket to an upcoming play at a local dinner theatre.Given this scenario, which of the following statements applies?
Answer(s): B
Lana can accept the dinner theatre ticket offer as long as Everything agrees to it and as long as it is not an ongoing thing and/or preconditioned on her achieving a specified sales target. Occasional meals, tickets to the theatre, a sporting event, or a similar entertainment venue may be accepted as long as they aren't too excessive or too frequent and as long as the member firm with whom the representative is employed is agreeable.
Which of the following qualifies as an insider under the definition provided by the Securities Exchange Act of 1934?I). a member of the board of directors of a firmII). the vice-president of marketing of a firmIII). an investor who owns 5% of the voting stock of the firm IV). the daughter of the CEO of a firm
Answer(s): C
Selections I, II, and IV all describe individuals who qualify as insiders under the definition provided by the Securities Exchange Act of 1934. An insider is any director or officer of the firm or any member of their immediate family. An investor who owns 10% of the voting stock of the firm and his immediate family members are also classified as insiders; an investor who owns 5% of the voting stock does not fall within the guidelines of the definition.
Which of the following activities are prohibited by FINRA when a representative is selling shares of a mutual fund?I). recommending that a client purchase shares of a mutual fund prior to its ex-dividend date, so that the client will receive the dividends when they are distributed unless this recommendation is justified by the specific circumstances of the clientII). telling a client that a mutual fund that has only a contingent deferred sales charge is a no load fundIII). telling a client that the interest he earns on a municipal bond fund will be free from federal taxationIV). refraining from placing the customer's order promptly in order to profit himself as a result of having done so
The activities described in Selections I, II, and IV are prohibited by the FINRA when a representative is selling shares of a mutual fund. Representatives are prohibited from recommending that a client purchase shares of a mutual fund prior to its ex-dividend date, so that the client will receive the dividends when they are distributed-a practice known as "selling dividends"-- unless this recommendation is justified by the specific circumstances of the client; they are prohibited from telling a client that a fund that has only a contingent deferred sales charge is a no load fund; and they are prohibited from withholding an order- i.e., refraining from placing a customer's order promptly--in order to profit themselves as a result of having done so. There is nothing wrong with telling a client that the interest he earns on a municipal bond fund will be free from federal taxation since this is a true statement.
One difference between a unit investment trust (UIT) and a closed-end fund is that
A difference between a UIT and a closed-end fund is that the shares of UITs are redeemable, whereas the shares of closed-end funds are not. Shares of UITs also trade on exchange floors, like the shares of closed-end funds. Both UITs and closed-end funds have a fixed number of shares, but UITs are established with a termination date, while closed- end funds have no termination date.
An advertisement that provides performance data for which of the following mutual funds would not need to include a statement warning that the principal value of the investment will fluctuate such that the investor's shares may be worth either more or less when redeemed than what the investor originally paid for them?
Only a money market fund is exempt from including a statement warning that the principal value of the investment will fluctuate such that the investment may be worth either more or less when redeemed than what the investor originally paid for them. The principal values of both U.S. government bond funds and municipal bond funds will fluctuate, so the warning must be present in the advertisements for those types of funds.
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