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

Updated On: 26-Jan-2026
Page 6 of 66
PDF with 325 Questions

A FINRA member who is a principal underwriter under the definition provided in the Investment Company Act of 1940 is permitted to sell variable contracts through another broker-dealer only if:

I). the broker-dealer is also a FINRA member.
II). there is a sales agreement in effect between the underwriter and the broker-dealer.
III). the broker-dealer is also a principal underwriter as defined by the Investment Company Act of 1940.

  1. either I or II is true.
  2. both I and II are true.
  3. all three statements-I, II, and III-are true.
  4. any one of the three statements-I, II, or III-are true.

Answer(s): B

Explanation:

A FINRA member who is a principal underwriter under the definition provided in the Investment Company Act of 1940 is permitted to sell variable contracts through another broker-dealer only if both statements I and II are true. The broker-dealer must also be a FINRA member, and there must be a sales agreement in effect between the underwriter and the broker-dealer.



The difference between an international fund and a global fund is:

  1. an international fund invests in both domestic and foreign securities while a global fund invests only in foreign securities.
  2. a global fund has more currency risk exposure than an international fund.
  3. an international fund invests only in stocks of foreign companies whereas a global fund invests in both stocks and bonds of foreign companies.
  4. None of the above is a true statement.

Answer(s): D

Explanation:

None of the choices is a true statement. An international fund is one that invests only in foreign securities, while a global fund also invests in domestic (i.e., U.S.) securities. Because of this, it would be the international fund that has more currency risk exposure. Both types of funds may invest in stocks and bonds.



Which of the following is an example of market risk?

  1. the risk that the nation will enter a recession
  2. the risk that a drug company will produce a pill that will cure cancer
  3. the risk that an automobile manufacturer will have to undertake a massive recall of its cars
  4. the risk that competing firms will enter the market when a firm's patent protection expires

Answer(s): A

Explanation:

The risk that the nation will enter a recession is an example of market risk. A recession will affect the prices of all securities to one degree or another. The other choices are examples of business risk-a risk that is tied to a specific firm. In finance, risk means uncertainty, so even the possibility that a drug company will produce a pill that will cure cancer is referred to as a risk.



Which of the following statements regarding a unit investment trust (UIT) is false?

  1. A UIT has a fixed number of shares.
  2. UITs are actively managed.
  3. Shares of UITs trade on exchange floors.
  4. All UITs are established with a termination date.

Answer(s): B

Explanation:

The statement that UITs are actively managed is the false statement. All UITs are passively managed. They do have a fixed number of shares that may either be redeemed through the trust or traded on exchange floors, and all UITs are established with a termination date.



Ms. Ears is an investment adviser representative. During lunch today, she overheard two men talking about a hostile takeover that their firm was preparing to undertake. Based on this information, Ms. Ears does not hesitate to advise the client she meets with immediately after lunch--Mrs. Clueless-- to invest a sum of money in the firm the men had named as the target firm. Ms. Ears remembers that the price of target firms, on average, increases significantly with an announcement of this sort, but she does not inform Mrs. Clueless of the reason underlying her recommendation.
Has there been any violation of insider trading laws in this scenario, as described?

  1. No. The scenario does not suggest that Ms. Ears herself made any investment in the target firm, and Mrs. Clueless was not made aware of the basis for Ms. Ears' recommendation.
  2. Yes. In making a recommendation based on information that was not publicly available, Ms. Ears has violated insider trading laws and is subject to both civil and criminal penalties.
  3. No. Ms. Ears is not considered to be an insider of the company preparing the hostile takeover.
  4. Yes. Both Ms. Ears and the two men have violated insider trading laws. The two men are prohibited from discussing such private information in a public setting, and Ms. Ears is prohibited from making a recommendation based on that information.

Answer(s): B

Explanation:

Yes. In making a recommendation based on overhearing news of an upcoming hostile takeover--information that was not publicly available--Ms. Ears has violated insider trading laws and is subject to both civil and criminal penalties. The men, although guilty of indiscretion in their conversation, have not violated any securities' laws.



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