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FINRA Series 6 Exam
Investment Company and Variable Contracts Products Representative Examination (IR) (Page 5 )

Updated On: 26-Jan-2026
Page 5 of 66
PDF with 325 Questions

Which of the following statements regarding insider trading penalties is true?

  1. The SEC may seek both civil and criminal penalties against an individual who is found guilty of insider trading.
  2. Any contemporaneous trader who has lost money due to an illegal insider trade may sue the violator for both the amount of his losses and pain and suffering, as determined by the court.
  3. A broker-dealer who is found to have provided inadequate supervision over an agent who is found guilty of insider trading is also subject to insider trading penalties.
  4. Both A and C are true statements.

Answer(s): D

Explanation:

Both A and C are true statements regarding insider trading penalties. The SEC may seek both civil and criminal penalties against an individual who is found guilty of insider trading, and a broker-dealer who is found to have provided inadequate supervision over an agent who is found guilty of insider trading is also subject to insider trading penalties. Any contemporaneous trader who has lost money due to an illegal insider trade may sue the violator, but only for his losses, and not for pain and suffering.



Which of the following established the requirement that insiders report their trading activities to the SEC?

  1. the Securities Act of 1933
  2. Regulation D
  3. Regulation I-N
  4. the Securities Exchange Act of 1934

Answer(s): D

Explanation:

The Securities Exchange Act of 1934 established the requirement that insiders report their trading activities to the SE
C. The Securities Act of 1933 deals with new issues, and Regulation D deals with private placements. There is no Regulation I-N.



ion No: 172
One difference between a SEP-IRA and a SIMPLE IRA is that:

  1. Only employers can make contributions to a SEP-IRA; both employees and employers can contribute to a SIMPLE IR
  2. The contributions made to a SEP-IRA are tax deductible, which is not the case with a SIMPLE IRA.
  3. The SEP-IRA has a higher contribution limit than that allowed by a traditional IRA or a Roth IRA, but the SIMPLE IRA contribution limits are the same as that of a traditional IRA or a Roth IRA.
  4. There is no difference; both names refer to the same type of IRA that is available to a small business or a self-employed individual.

Answer(s): A

Explanation:

The main difference between a SEP-IRA and a SIMPLE IRA is that only employers can contribute to a SEP-IRA whereas both employees and employers can contribute to a SIMPLE IRA. In fact, employers are required to contribute to a SIMPLE IRA on the employee's behalf, even if the employee chooses to make no contributions. The contributions to both plans are tax deductible and both plans have higher contribution limits than those allowed by the traditional IRA and Roth IRA plans.



Ms. Newbie, a newly-minted registered representative with Savvy Investments, just had her first client walk through the door. Before she can do anything, Ms. Newbie must obtain which of the following pieces of information from her client?

  1. age
  2. occupation
  3. taxpayer identification number (TIN)
  4. investment objectives

Answer(s): A

Explanation:

Before she can do anything, FINRA requires that she ensure that her client is of legal age. Ms. Newbie must also make a reasonable effort to determine occupation, TIN, and investment objectives, and if her client refuses, Ms. Newbie must document the fact that she made an effort to obtain this information.



A brochure advertising the Stocks4U Mutual Fund contains an example illustrating how much an investor who had invested $10,000 with the fund ten years ago would have in his account today, using the fund's historical return data, to illustrate the principle of compound interest. An example of this nature:

  1. is expressly in violation of FINRA rules.
  2. may be used only if there actually was such an investor on record.
  3. may be used as long as there is a clear statement that the illustration in no way predicts or projects what an investor who invests $10,000 today would have in his account in ten years.
  4. may be used only if the fund is expecting to be able to duplicate these returns over the next decade.

Answer(s): C

Explanation:

The brochure may contain an example illustrating how much an investor who had invested $10,000 with the fund ten years ago would have in his account today as long as there is a clear statement that the illustration in no way predicts or projects what an investor who invests $10,000 today would have in his account in ten years. Hypothetical illustrations are permitted.



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