Which of the following would not have to register as an investment adviser or an investment adviser representative under the Investment Advisers Act of 1940?I). an insurance agent who sells only whole life and term life policiesII). a commodity futures brokerIII). a bank employee who sells the bank's customers only CDs and other bank securities that are FDIC-insuredIV). a person that is registered as a broker-dealer with the SEC that also provides investment advice to its customers for additional compensation
Answer(s): B
Only the persons described in Selections I, II, and III would not have to register as an investment adviser or an investment adviser representative under the Investment Advisers Act of 1940. Whole life and term life policies, commodity futures, and FDIC-insured bank products are excluded from the definition of a security, and those persons selling these products need not register. Therefore, the insurance agent, the commodity futures broker, and the bank employee who sells only FDIC-insured bank securities need not register. Even if a person is registered as a broker-dealer with the SEC, if that entity also provides investment advice to its customers for additional compensation, it must register as an investment adviser.
Which of the following is true about treasury bonds?
Answer(s): A
Treasury bonds have no default risk. They do have interest -rate risk; their prices will fall with increases in interest rates, just like any other bond. Some Treasury bonds are callable, in which case the investor is exposed to prepayment risk.
Which of the following does not fall under the category of "sales literature," as defined by FINRA?
An announcement containing some biological information on a registered representative who has just joined the firm does not fall under the category of "sales literature," as defined by FINRA since it does not constitute a sales solicitation. All of the other choices are regarded as "sales literature" by FINRA.
Which of the following securities always sell at a discount from their face values?I). Treasury billsII). Treasury notesIII). industrial revenue bondsIV). banker's acceptances
Answer(s): D
Selections I and IV will always sell at a discount from their face values. Both Treasury bills and banker's acceptances are money market instruments that make no interim interest payments. They sell below their face values, and the investor earns the difference between their face values and the price paid. Treasury notes and industrial revenue bonds make interim interest payments, and they may sell below, above, or at their face values.
Which of the following statements regarding both a Uniform Gifts to Minors account (UGMA) and a Uniform Transfers to Minors account (UTMA) is false?
The false statement regarding both a UGMA and a UTMA is that the assets must be re- registered in the minor child's name when the child turns 18. The rule differs between the two types of accounts. The UGMA requires that the assets must be re-registered when the child reaches the "age of majority," as defined by the state, and the definition differs among states. Under the UTMA, the transfer of the account can be delayed until the minor child has reached the age of 25.
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